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The Second Derivative: Why No One Understands the AI Boom

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Re: The Second Derivative: Why No One Understands the AI Boom

#21

Post by d4ng »

Schiendelman wrote: post #20
ilovecake1984 wrote: post #7

Earlier quoted context omitted.

I think in the long term AI will be a massive market. I just don’t think it will be massively profitable. The hardware will get better, the models will be even more commoditised. It’s useful and it will get even more useful.. it’s just not going be a licence to print money.

In the last year we've gone from "this is annoying but sometimes useful" to "I don't need to hire junior engineers". There are some 25 million software engineers worldwide today, and do not ignore Jevon's Paradox - there are far more people who would hire software engineers if the price of engineering was slashed 90% (which is likely an understatement). If you don't think this will be profitable, you're saying you do…

How much value in present terms was created by n hours of your time before LLMs, and how much value is created now by n hours of your time? If everyone is using LLMs, has that value calculation result changed?

People used to go to work by foot. The best runners would get to work first. Then the bicycle came along. The person who was the best runner before is now still getting to work first on the bicycle.

Re: The Second Derivative: Why No One Understands the AI Boom

#22

Post by Schiendelman »

d4ng wrote: post #21
Schiendelman wrote: post #20

Earlier quoted context omitted.

In the last year we've gone from "this is annoying but sometimes useful" to "I don't need to hire junior engineers". There are some 25 million software engineers worldwide today, and do not ignore Jevon's Paradox - there are far more people who would hire software engineers if the price of engineering was slashed 90% (which is likely an understatement). If you don't think this will be profitable, you're saying you do…

How much value in present terms was created by n hours of your time before LLMs, and how much value is created now by n hours of your time? If everyone is using LLMs, has that value calculation result changed? People used to go to work by foot. The best runners would get to work first. Then the bicycle came along. The person who was the best runner before is now still getting to work first on the bicycle.

Yes, that value calculation result has changed. The gap between building software and financial value is knowing which software to build and how to break into a market, not how much code you can write. There are not very many good product managers. Not that I'm necessarily good! But I try to be. :)

Re: The Second Derivative: Why No One Understands the AI Boom

#23

Post by d4ng »

Schiendelman wrote: post #22
d4ng wrote: post #21

Earlier quoted context omitted.

How much value in present terms was created by n hours of your time before LLMs, and how much value is created now by n hours of your time? If everyone is using LLMs, has that value calculation result changed? People used to go to work by foot. The best runners would get to work first. Then the bicycle came along. The person who was the best runner before is now still getting to work first on the bicycle.

Yes, that value calculation result has changed. The gap between building software and financial value is knowing which software to build and how to break into a market, not how much code you can write. There are not very many good product managers. Not that I'm necessarily good! But I try to be. :)

Please see the bicycle analogy. Resources available at a given time are finite. If everyone is now churning out software at a higher rate with LLMs, what changes in terms of the value gained?

Re: The Second Derivative: Why No One Understands the AI Boom

#24

Post by Schiendelman »

d4ng wrote: post #23
Schiendelman wrote: post #22

Earlier quoted context omitted.

Yes, that value calculation result has changed. The gap between building software and financial value is knowing which software to build and how to break into a market, not how much code you can write. There are not very many good product managers. Not that I'm necessarily good! But I try to be. :)

Please see the bicycle analogy. Resources available at a given time are finite. If everyone is now churning out software at a higher rate with LLMs, what changes in terms of the value gained?

You're making a bit of a category error there - the "everyone" is different after LLMs. You aren't comparing the same market.

Re: The Second Derivative: Why No One Understands the AI Boom

#25

Post by combilabs »

Schiendelman wrote: post #13
combilabs wrote: post #6

Earlier quoted context omitted.

The article addresses the mechanism in the "How It Breaks" section. The problem lies in the interconnected contracts, not debt financing. If OpenAI cannot get new financing, it will have to cut costs, and one of its big costs are forward compute commitments it will have to break. Those commitments are a significant share of revenue for other companies like CoreWeave and Oracle, so if OpenAI has to cut significantly,…

I'm extremely unconvinced. The article didn't at all address what OpenAI would really do if they couldn't get new financing. They'd sell the contracts for some of that compute to the fifty other companies desperate for it. With supply constrained, they'd likely make money on those sales, and there'd be little or zero downstream impact.

>They'd sell the contracts for some of that compute to the fifty other companies desperate for it.

And if OpenAI were an isolated case, that might be all there is to it. But the whole point of the article is that it isn't isolated. So if OpenAI can't raise the money to execute on those contracts, it's unlikely that another AI company will have the spare cash to buy them at anything like full value. Remember, everyone in that market is riding the same second derivative. OpenAI is just a bellwether.

Re: The Second Derivative: Why No One Understands the AI Boom

#26

Post by ilovecake1984 »

Schiendelman wrote: post #20
ilovecake1984 wrote: post #7

Earlier quoted context omitted.

I think in the long term AI will be a massive market. I just don’t think it will be massively profitable. The hardware will get better, the models will be even more commoditised. It’s useful and it will get even more useful.. it’s just not going be a licence to print money.

In the last year we've gone from "this is annoying but sometimes useful" to "I don't need to hire junior engineers". There are some 25 million software engineers worldwide today, and do not ignore Jevon's Paradox - there are far more people who would hire software engineers if the price of engineering was slashed 90% (which is likely an understatement). If you don't think this will be profitable, you're saying you do…

I’m not saying software will be unprofitable. I’m saying Ai models will be low margin businesses. I think AI is going to decrease the price of software and allow us to automate things we couldn’t. I just don’t see how this value accrues to AI companies.
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