Seems like this is basically the same theory as what happened in the late 90s internet boom. Lots of speculative investment, over build out of core technology like fiber networks, then a crash, and an eventual recovery where that additional capacity was eventually put to use. Similar thing happened with railroads and the airline industry to some extent (pretty sure airlines as a whole had net negative investment returns until recently).
Speculative Growth and the AI "Bubble" [pdf]
31–40 of 71 posts
Re: Speculative Growth and the AI "Bubble" [pdf]
#32Earlier quoted context omitted.
But it’s not just GPUs that result from it but also a lot of other infrastructure including, prominently, energy. And beyond physical infrastructure there are the intangible assets: the learning and the process innovation across multiple fields. The upfront price for all that may end up steep, or fair, or even cheap… the truth is no one knows yet
Energy infrastructure for powering a data centre isn't the same as energy infrastructure for powering a city. One is a simple point-to-point link (power plant to data centre), the other is a grid. It's like comparing a railway line from a mine to a smelter with a city's road network.
Most data centres connect to the grid, they don’t connect to a single power station, except in scenarios where there’s a uniquely low cost power supply nearby, like a small Hydro Plant.
Utility scale power stations have outputs measured in GWs. Data centres are measured in MWs, although people are trying to build GW scale data centres at the moment. But even then a data centre will want a proper grid connection, otherwise they have a massive single point of failure in the form of the directly connected power station.
It’s also very unlikely that purpose built power station is capable of offering cheaper than grid power anyway, except in the very special situations like Hydro. So if you’re gonna build a datacentre, you will want a proper grid connection capable of providing all you needs. Even if you’re running on dirty gas turbines in car park initially while waiting the grid hardening happen. In the long term, that grid connection is always going to be the cheapest, most reliable source of power, ignoring it completely would be foolish.
Re: Speculative Growth and the AI "Bubble" [pdf]
#33This 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…
This is a well thought out macro-finance paper. The space of multiple equilibria models is understudied because it is hard to solve computationally (or rather, it is hard to say that you have actually found all of the equilibria computationally unless you get really creative with the model).
Re: Speculative Growth and the AI "Bubble" [pdf]
#34Earlier quoted context omitted.
> 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.
Can you tell us more?
Re: Speculative Growth and the AI "Bubble" [pdf]
#35If 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.
thank you for this comment, "wedge" has been one of the words that has been popping up in a lot of LLM writing i've seen lately. (source: it was me asking the LLM to summarize some features in a repo! the words "load-bearing" "wedge" "spike" "crux" and plenty others have been driving me crazy)
edit: as I keep reading the paper, I keep noticing some common sentence construction patterns, stylistic choices, and other little tics that I find frustrating because they are the very same things that I've been working on a few "writing-style skills" to get rid of
Re: Speculative Growth and the AI "Bubble" [pdf]
#36I have a hypothesis that the bubble in and of itself would not be so problematic if the United States was not in a war with Iran.
I am looking to test if there are several second order effects of rising oil prices and supply chain issues that can exacerbate financial contagion from an AI bubble (assuming we are in one) and, to the best of my understanding, it depends on what kind of mechanisms fail to contain the fall out.
I don't think it is reasonable to assume doom, but I would imagine there needs to be considerations from a much broader perspective as to discuss the possibility of 'a larger capital stock, higher wages, and a lower interest rate' that is paper is asserting.
I could be wrong (I am still trying to assess my hypothesis), but I am skeptical that the increased value/productivity from AI can overcome a rising cost of living if the war is sustained.
Re: Speculative Growth and the AI "Bubble" [pdf]
#37Earlier quoted context omitted.
Fair point. Yet, "we" will suffer the potential consequences.
Can you tell us more?
not OP, but i believe the commenter is referring to how GFC in '07 had wide ranging negative effects for a lot of people who had nothing to do with investments in mortgage backed securities
Re: Speculative Growth and the AI "Bubble" [pdf]
#38"Workers supply labor, hold no assets, and consume their wage." Ouch. There was a time in the US when most capital was the assets backing workers' pensions. We've seen speculative over-growth with a good legacy at least three times in the last three decades. First was the dot-com boom. Overpromotion made it necessary for every business to have a web site. That wasn't pre-ordained. The Web could have maxed out as a di…
> The Web could have maxed out as a distribution system for catalogs, data sheets, academic papers, and similar business to business info.
Strong disagree, demand for the internet was insatiable, all one had to do to see the future of the internet in the 90s was observe just one school age person using AIM or MSN Messenger.
Re: Speculative Growth and the AI "Bubble" [pdf]
#39This 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…
This is a well thought out macro-finance paper. The space of multiple equilibria models is understudied because it is hard to solve computationally (or rather, it is hard to say that you have actually found all of the equilibria computationally unless you get really creative with the model).
Right. "Multiple equilibria". Like the two branches of the "K" in the K-shaped economy: capital owners gaining, workers losing.
So we're trying to prove "mathematically" that the K-shaped economy is "rational", and trying to circumvent the fact that the mathematical rules of economics depend on the social, political, and behavioural substrate by which those rules derive their efficacy.
Which is fine if nobody has agency, politics is irrelevant, and we just accept everything we're told at face value if it's framed in sufficiently mathematical language.
Re: Speculative Growth and the AI "Bubble" [pdf]
#40Tl;dr is: A temporary overvaluation can build enough real capital that the economy lands in a permanently higher-capital equilibrium, even after the inflated valuations correct. The future for AI companies may look rather iffy, but the whole economy may not be as screwed as some fear.
> the economy lands in a permanently higher-capital equilibrium
Good for the economy, what about the value of the labor that it's currently screwing over?
I don't give a single damn if "the economy" grows if it means my skills become worthless and I become basically unemployable anywhere near my previous earning ability
Edit: even if the value of "the economy" does strongly in the future, is the value of "my labor" ever going to recover?
If no, then fuck it. Why should I care?