AI: The ROI Runway Could Be Long Outside the Tech Sector • Hacker News Board

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#61

Post by eru » Tue, Jul 07, 2026, 4:28 AM UTC

Animats wrote: post #16

> If token costs converge toward zero for most AI use cases... In the real world, token costs seem to be going up, as early stage pricing at a loss gives way to pricing that generates revenue. Compute costs might go down a little over the next five years, but there's nothing coming along in hardware that leads to huge reductions in price. NVidia says don't expect better price/performance before 2030. The models keep…

The following two things can be true at the same time:

- Frontier state-of-the-art performance keeps getting more expensive (and better).

- Any fixed performance level is becoming cheaper.

(And a third: if you still want to see improvements instead of a fixed level, you can trail the frontier a bit and still see price some reductions over time.)

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#62

Post by eru » Tue, Jul 07, 2026, 4:30 AM UTC

runako wrote: post #34

thegrim33 wrote: post #30

Earlier quoted context omitted.

From their profile, this person makes a living selling AI programming products, by the way. Who could have guessed. There's a pattern to be noticed, even.

Whether that person is talking their book or not, there absolutely has been an app explosion. Github & the app stores have all reported as much over the last year. I also have repeatedly experienced the phenomenon of nontechnical people having built custom software to run their businesses. A lawyer friend was first, sending me a link to his GitHub(!), where he has built a custom client intake/practice-management appl…

The closest parallel in history I can think of is the proliferation of spreadsheets in the 1980s.

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#63

Post by eru » Tue, Jul 07, 2026, 4:32 AM UTC

majormajor wrote: post #58

rybosworld wrote: post #22

One thing I can't square: if the cost to build an application goes to zero, we should see a proliferation of apps, especially from the AI labs. The fact that we aren't seeing an app explosion (I think) is evidence that building applications people will pay for is significantly more complex than just prompting claude/codex/etc

For a long time nobody knew how to monetize OSS outside of a few Linux vendors. There's a crapload of new repos and Github and similar things. And a lot of it is "hobby utility" stuff like you'd find everywhere pre-mobile/pre-app-store but kinda dried up a bit with the browserfication+phone-ificiation of everything. Everything had to turn into an app + an online service. Now, like OSS, freeware, and even most sharewa…

> But it's also unlikely that growing companies with big ambitions will want to base their business on vibe-coded free software for too long. It opens up too many unknowns/risks ("oh no, the disgruntled employee leveraged a misconfiguration in our in-house accounts payable system!") There will be a new middle ground model to be found.

I agree _iff_ vibecoding stayed roughly at today's level of competence.

If the models keep improving, perhaps you'll just tell them 'eh, and make sure to close all the security holes' and they'll do so.

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#64

Post by eru » Tue, Jul 07, 2026, 4:35 AM UTC

greggsy wrote: post #28

rybosworld wrote: post #22

One thing I can't square: if the cost to build an application goes to zero, we should see a proliferation of apps, especially from the AI labs. The fact that we aren't seeing an app explosion (I think) is evidence that building applications people will pay for is significantly more complex than just prompting claude/codex/etc

Anecdotally, Claude Code has prompted an explosion of open source projects and prototypes from self-starters. A lot of these are just hobby projects, but some of them genuinely fill a niche that was previously too complicated or unviable to develop otherwise. Some of them have half baked financial models, but nobody will invest dollars backing a SaaS offering that could easily be replicated, or that could be made red…

> [...] but nobody will invest dollars backing a SaaS offering that could easily be replicated, or that could be made redundant tomorrow.

Matt Levine wrote in his newsletter Money Stuff of some investment fund that has their employees vibecode replacements for software of potential investment targets. I guess the theory is exactly what you say: if the internal employees can replace the target's software in a few hours, that's a big signal on whether to invest or not.

(I wouldn't quite say you shouldn't invest at all; but you have to argue that the moat is in eg the sales process or the existing customer base or network effects etc. Even before AI, people famously build Twitter clones over the weekend for fun.)

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#65

Post by eru » Tue, Jul 07, 2026, 4:36 AM UTC

esafak wrote: post #52

nstart wrote: post #27

Earlier quoted context omitted.

Because, as the gp pointed out, if the cost is least to the labs, then why not reap the benefits too? Hypothetical. Assume you can in fact point agents at a tool and say "replicate it. Make no mistakes". You then have software being instantly copy-able. Assume these agents can then be pointed to a customer feedback board in perpetuity and they autonomously upgrade the software over time. They analyze usage patterns a…

There is more to selling software than writing it. You have market, support, and sell. Do you think their resources are well spent doing that across the gamut of software? Of course not; companies specialize.

Very similar to how cloud providers love renting servers to you to run your bank or software business; instead of running these businesses themselves.

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#66

Post by eru » Tue, Jul 07, 2026, 4:38 AM UTC

mikgp wrote: post #14

hyperpape wrote: post #3

Maybe there's an argument that a lack of rising profit margins in non-tech companies is a bad sign for AI, but this article doesn't make it. Why can't we have a red-queen's race where non-tech companies are implementing AI, but it's not increasing the total profits of those sectors, just meeting rising customer demands/fighting over the share of existing profits? (Never mind that if you look at that chart, profit mar…

> Why can't we have a red-queen's race where non-tech companies are implementing AI, but it's not increasing the total profits of those sectors, just meeting rising customer demands/fighting over the share of existing profits? But then if this happens - all of the stock market has risen in the promise of AI. If AI eats profits instead of grows them, then the economy shrinks right? So maybe that’s worse? That there is…

> If AI eats profits instead of grows them, then the economy shrinks right?

No, why? The economy is bigger than company profits. Eg there's workers' wages and customer surplus and investments etc.

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#67

Post by eru » Tue, Jul 07, 2026, 4:39 AM UTC

HardCodedBias wrote: post #2

The premise is flawed. "The first chart below shows that so far there are no signs of profit margins rising outside the tech sector. This is ultimately what we are waiting for, because the value of AI companies today rests entirely on the promise that margins in the S&P 493 will eventually climb." This is absolutely not necessary. The bull case is that AI will bring great efficiencies. The surplus profits from those…

With enough competition, the surplus will go to consumers (and workers).

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#68

Post by eru » Tue, Jul 07, 2026, 4:40 AM UTC

DrewADesign wrote: post #18

therobots927 wrote: post #7

Earlier quoted context omitted.

Well those efficiency gains have to show up somewhere. It would imply that consumers / customers of these companies are receiving cheaper or higher value services / goods. Thats at odds with current inflation trends to say the least.

Even aside from inflation, the prospect of efficiency-borne gains meaningfully benefiting the consumer rather than fattening corporate profit margins, frankly, seems like magical thinking. I’ve seen no evidence that our current corporate culture is capable of it (for any longer than it takes to dominate some market.)

What does corporate culture have to do with any of it? The surplus goes to the consumer not because of any benevolent corporate culture, but because of competition.

And (most) efficiency gains have benefited customers in the past.

Just check eg how much you are paying for excellent lighting of your house today vs 200 years ago.

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#69

Post by eru » Tue, Jul 07, 2026, 4:42 AM UTC

SoftTalker wrote: post #44

fc417fc802 wrote: post #39

Earlier quoted context omitted.

In a duopoly, probably yes. However in a more competitive environment where several incumbents have achieved a given optimization a race to the bottom is likely to occur because it only takes one of them preferring to increase their relative market share to kick the process off.

The cola market is effectively a duopoly.

Barriers to entry ain't exactly high.

Re: AI: The ROI Runway Could Be Long Outside the Tech Sector

#70

Post by eru » Tue, Jul 07, 2026, 4:44 AM UTC

pdimitar wrote: post #29

fc417fc802 wrote: post #21

Earlier quoted context omitted.

Do you have a constructive objection to the described market dynamic?

Yes: historically this is not what I have observed businesses doing. They'd fight tooth and nail to reduce expenses for the fatter profits; cost savings are seldom if ever passed to consumers.

Obviously they don't voluntarily pass on cost savings to customers. That's why competition is there for.

Btw, check how much RAM costs today per byte than eg 20 years ago. Even including today's AI driven price increases. Or check how much it costs to keep your house light up nice and bright compared to 50 years ago.