Commodification of Intelligence: Good, Bad, and Ugly Circular AI Deals

you'd need to look at prior work associated with the Dot com boom and Enron. Economists rarely look into today's actual activity because America makes it nigh impossible to actually understand who owns what around the fringes; contracts arn't required to be publically disclosed and a bunch of other dark interests make it impossible to really know.

MLMs exist in the same murky waters and tread the same ephermal economics by pushing useless product but hiring people to hire people to hire people, etc.

Also these deals are not circular - NVIDIA has to pay a lot of money for chips and foundry capacity just as an example, so money leaves the circle and participants have to raise capital to replace it, which means if this were just a financialy trick, it would be very expensive to maintain.

So, companies are just prepaying with seemingly large parts of their livelihood for (use of) potential value.

Expecting demand to stay equal over longer stretches of time in IT is an interesting bet as both hardware and software tend to depreciate in value extremely rapidly, unlike oil from the example. Or water. Both are limited in nature.

Commodifying something that is the fraction of its value the next year might be possible, but I don’t see how. Perhaps MS Windows or Office are such things, but might not compare.

There are more limits to demand. For example what humans can process. The AI might write the finest prose and the best software but have nobody to read or use it.

We don't have an Artificial Intelligence yet. It is not intelligent, yet.

Here's a quick reality check. Several companies have formed with a goal of creating and AI engine that can think for itself and reason through difficult or previously intractable problems.

In order to accomplish this goal they have used scrapers to hoover up content from a multitude of sources, many of which can be seen as being the ground truth source for their discipline. A lot of this content, most of it, was copied and is being used without attribution to the original sources, without permission from the content owners or publishers, and in violation of copyright laws.

Look at all of this for what it is. It is a knowledge base, like a collection of Lego parts, each of which is important to the goal but none of which will get you there without the other parts in the proper relative position. Once you have collected all these parts and stuck them together you have an LLM. If you are careful in your parts selection, that LLM can be useful for answering specific questions that are properly framed so that the LLM can make use of the contextual information in formulating a response.

There's nothing intelligent about being able to answer a question correctly when the answer is effectively right on the tip of your tongue. You're just drawing from your knowledge base and regurgitating.

Glomming all of it together only gives you a huge knowledge base. There is nothing intelligent about that knowledge base. Knowledge is not intelligence.

You have an AK today, an Accumulated Knowledge base.

We may never reach the point where it is ever intelligent enough to reason alongside of, or better than those whose life's work went into the foundation of the AK base.

Two contradictory thoughts based on the article:

1. One thing you could do is look at free cashflow. The actual cash a company generates and keeps on its balance sheet would be a clear indicator of retaining profit or resources after circular deals.

2. The above doesn't preclude a company from committing to backstops and offtake agreements, so you still need to track those.

... so you'd want to look at how much cash a company is retaining and whether it is committing to act as a sort of lender of last resort.

Up until this week, I'd argue that Nvidia is was a pretty solid player in this space. If it's generating $10s of billions in cash, then who cares if it put $10 billion into a risky startup? It can afford it.

Now, however, it is also exploring committing $250 billion as a backstop for OpenAI's data center projects, which moves it to the riskier side of things.

I know I'm not providing you with data; I don't have that... But I think the above is a signpost to watch out for.