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Speculative Growth and the AI "Bubble" [pdf]

economics.mit.edu

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Re: Speculative Growth and the AI "Bubble" [pdf]

#21

Post by jaggederest »

altcognito wrote: post #15
Retric wrote: post #12

Earlier quoted context omitted.

Most of the cost in a fiber rollout is actual fiber in the ground which could be upgraded by simply swapping a few relatively cheap bits of equipment. Data centers and electrical infrastructure has a similar long term value, but most of the AI investment is in compute/manufacturing capacity for current nodes which doesn’t age nearly as well.

> compute/manufacturing capacity for current nodes which doesn’t age nearly as well I mean, compute depreciates, but I think there is zero chance that the value of inference or training is going to fall to zero. Market discovery will find the right price provided the market has the right degree of freedom. Given the type of market it is, I don't see how that won't be the case.

I'm a big fan stylistically of what https://taalas.com/ is doing, as far as models baked into silicon. If you haven't tried their chat it's absurdly fast (and also very very dumb)

That implies to me that in the future we'll have models as good or perhaps better than the state of the art at the moment, but on hardware chips that can be put in places where you can't currently locate a datacenter, and operating at hundreds of times better power efficiency, which sounds pretty great.

Re: Speculative Growth and the AI "Bubble" [pdf]

#22

Post by mctaylor »

This reads like a propaganda piece aimed at mathematically inclined knowledge workers to try to stave off risk perception as their economic and political power is undermined by the US shift towards kakistocracy.

"workers operate with a larger conventional capital stock and wages rise even as the worker share falls."

Liberal Democratic capitalism splits power into two primary buckets: political and economic.

Marx provided the critique of consolidated economic power. The Soviet union proved the dangers of consolidated political power and Hayek made the mechanism explicit.

The "election tampering" BS is their attempt to try to undermine plutocratic political power. This looks like an attempt to justify the insane concentration of economic power that clearly goes against Hayek's description of free markets as a mechanism to discover preferences. Whose preferences?

If worker share is falling, workers are losing their share of the economic voting mechanism. Whether or not the emerging capital ownership class chooses to keep rents and subscriptions affordable to the new working subclass if and when they accomplish this power grab is immaterial, no matter how much math they try to wrap the propaganda in.

Re: Speculative Growth and the AI "Bubble" [pdf]

#23

Post by andsoitis »

AloysB wrote: post #18

I won't pretend to fully understand the paper, but I did try to read it. A few notes: 1. This assumes that there is notable ROI on 'AI labor'. That is still up for debate. 2. This assumes that the interests are currently falling, unless I misread the paper. 3. This affirms that we are in an over valuated, speculative bubble which will inevitably correct; but it needs to "correct" at the exact right time defined by mu…

> What if we invested half of those trillions directly in socially impactful measures

There’s no real “we” in this case. The money is coming from private coffers, people looking for ROI on their hard-earned money. The money isn’t coming from a central planning process.

Re: Speculative Growth and the AI "Bubble" [pdf]

#24

Post by lambdaone »

altcognito wrote: post #15
Retric wrote: post #12

Earlier quoted context omitted.

Most of the cost in a fiber rollout is actual fiber in the ground which could be upgraded by simply swapping a few relatively cheap bits of equipment. Data centers and electrical infrastructure has a similar long term value, but most of the AI investment is in compute/manufacturing capacity for current nodes which doesn’t age nearly as well.

> compute/manufacturing capacity for current nodes which doesn’t age nearly as well I mean, compute depreciates, but I think there is zero chance that the value of inference or training is going to fall to zero. Market discovery will find the right price provided the market has the right degree of freedom. Given the type of market it is, I don't see how that won't be the case.

Algorthmic improvements in inference could make all that kit redundant very quickly - there are already moderately capable models that can be run on phones or laptops with specifications that are currently high-end but will be mainstream in another year or so.

This will lead to a superabundance of power-hungry compute power in the hyperscalers, and it's not entirely clear what can be done to consume it all and still run at a profit unless they manage to make ever greater gains for ever more compute-hungry models that cannot be run on consumer devices, unless they refresh their hardware at ever faster and more expensive rates.

The joke about data centers used to be that their core business was selling power at a loss; this may end up being true of the hyperscalers next.

Re: Speculative Growth and the AI "Bubble" [pdf]

#25

Post by nubg »

mctaylor wrote: post #22

This reads like a propaganda piece aimed at mathematically inclined knowledge workers to try to stave off risk perception as their economic and political power is undermined by the US shift towards kakistocracy. "workers operate with a larger conventional capital stock and wages rise even as the worker share falls." Liberal Democratic capitalism splits power into two primary buckets: political and economic. Marx prov…

high quality post

Re: Speculative Growth and the AI "Bubble" [pdf]

#26

Post by twothreeone »

fwlr wrote: post #19

If enough capital has been installed before learning removes the wedge, the economy lands in the high-capital state, I’m gonna need an honest caveat on the load-bearing assumption here.

I looked at the actual article and your instinct is exactly right: it's precisely the kind of hand-waving that makes clicking or not clicking a clear decision point.

Re: Speculative Growth and the AI "Bubble" [pdf]

#27

Post by zer00eyz »

Retric wrote: post #12
largbae wrote: post #9

Earlier quoted context omitted.

Do you believe that machine learning or even specifically LLMs will "bust" out of existence? The model in my head is more like DotCom telecom. The massive overbuild in fiber was eventually used and even used for the purpose that it was imagined for during the boom. It's just that the companies that built it mostly went under and new owners acquired it at a profit-supporting price.

Most of the cost in a fiber rollout is actual fiber in the ground which could be upgraded by simply swapping a few relatively cheap bits of equipment. Data centers and electrical infrastructure has a similar long term value, but most of the AI investment is in compute/manufacturing capacity for current nodes which doesn’t age nearly as well.

> but most of the AI investment is in compute

Some people thought that it was misguided when they extended the depreciation cycle of the current AI build out year(s).

In terms of raw performance, there is still some headroom (maybe) but those gains are going to be marginal when you look at the amount of compute per watt (if its more than 5 percent I will be shocked). And that push is going to create a whole other set of problems (cooling is going to be an issue, it already is).

It is fairly likely that this hardware buildout has more legs than one might suspect based on history.

Re: Speculative Growth and the AI "Bubble" [pdf]

#29

Post by rossdavidh »

So, some of the capital invested due to the AI boom may be for stuff like buildings, energy infrastructure, and other long-lasting stuff. I am reminded of all of the spending done in the runup to the Y2K, when I saw factories able to get all kinds of upgrades to equipment done, outside of the normal budgetary restraints, simply because the vendors were smart enough to say "not fixable, you'll have to buy the new model". It could happen.

However, GPUs and memory chips are some of the fastest-depreciating capital investments one can make. Overinvesting in this generation's GPU model will either be wasted (because the chips are worthless in a few years) or result in a lot of underinvestment in future years (because instead of replacing those GPUs with newer models you keep using them, unwilling to admit you bought several times as much as you should have).

If we have reached the point in the cycle where the boom's proponents are trying to argue that even if it was all a mistake, maybe it's ok, then one suspects were might be late in the boom part of the cycle.

Re: Speculative Growth and the AI "Bubble" [pdf]

#30

Post by AloysB »

andsoitis wrote: post #23
AloysB wrote: post #18

I won't pretend to fully understand the paper, but I did try to read it. A few notes: 1. This assumes that there is notable ROI on 'AI labor'. That is still up for debate. 2. This assumes that the interests are currently falling, unless I misread the paper. 3. This affirms that we are in an over valuated, speculative bubble which will inevitably correct; but it needs to "correct" at the exact right time defined by mu…

> What if we invested half of those trillions directly in socially impactful measures There’s no real “we” in this case. The money is coming from private coffers, people looking for ROI on their hard-earned money. The money isn’t coming from a central planning process.

Fair point.

Yet, "we" will suffer the potential consequences.

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