[mrsilencedogood]

All I can say is,

- the insane frothing hype behind AI is showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns. Even if it squeezes out every single other sector that happens to want to use SDRAM to do things OTHER than buffer memory before it's fed into a PCIE lane for a GPU.

- I'm really REALLY glad i decided to buy brand new gaming laptops for my wife and I just a couple months ago, after not having upgraded our gaming laptops for 7 and 9 years respectively. It seems like gamers are going to have this the worst - GPUs have been f'd for a long time due to crypto and AI, and now even DRAM isn't safe. Plus SSD prices are going up too. And unlike many other DRAM users where it's a business thing and they can to some degree just hike prices to cover - gamers are obviously not running businesses. It's just making the hobby more expensive.

[epistasis]

It is a weird form of centralized planning. Except there's no election to get on to the central committee, it's like in the Soviet era where you had to run in the right circles and have sway in them.

There's too much group-think in the executive class. Too much forced adoption of AI, too much bandwagon hopping.

The return-to-office fad is similar, a bunch of executives following the mandates of their board, all because there's a few CEOs who were REALLY worked up about it and there was a decision that workers had it too easy. Watching the executive class sacrifice profits for power is pretty fascinating.

Edit: A good way to decentralize the power and have better decision making would be to have less centralized rewards in the capital markets. Right now are living through a new gilded age with a few barons running things, because we have made the rewards too extreme and too narrowly distributed. Most market economics assumes that there's somewhat equal decision making power amongst the econs. We are quickly trending away from that.

[torben-friis]

The funniest thing is that somehow the executive class is even more out of touch than they used to be.

At least before there was a certain common baseline derived from everyone watching the same news and reading the same press. Now they are just as enclosed in their thought bubbles as everyone else. It is entirely possible for a tech CEO to have a full company of tech workers despising the current plan and yet that person being constantly reinforced by linkedin and chatgpt.

[Loughla]

The out of touch leader is a trope that I'm willing to bet has existed as long as we've had leaders.

I remember first hearing the phrase "yes man" in relation to a human ass kisser my dad worked with in like 1988.

It's very easy to unknowingly surround yourself with syncophants and hangers on when you literally have more money than some countries. This is true now and has been true forever. I'm not sure they're more out of touch, as much as we're way more aware?

[ryandrake]

It's more than the fact they are surrounded by sycophants. It's also that, despite the mythology the executive-worship-industry tries to paint, CxOs and board members of companies are just not very creative or visionary people. They largely spend their time looking at their peers and competitors for hints about what they should be doing. And today, those hints all are "do AI". They're not sitting down and deriving from first principles that AI is the way--they're seeing their buddies steering other companies and they're all saying AI is the way, so they say AI is the way, too.

[mk89]

> They're not sitting down and deriving from first principles that AI is the way--they're seeing their buddies steering other companies and they're all saying AI is the way, so they say AI is the way, too.

I think you're underestimating a bit. We must implement AI because they were able to sell it so good that they got billion $ investors (see all the money coming from Qatar/saudi arabia etc). That's a lot of money coming in that allows to innovate/etc.

[ryandrake]

But that thing they all were peddling and getting investors over could be anything! For a while it was "blockchain." Everyone had to do blockchain because everyone was doing blockchain, and investors were giving you money if you say blockchain. I wonder what it will be once the AI bubble bursts.

I swear that every 5-10 years, corporate CEOs all get together in a secret meeting where they all agree on the next buzzword technology. They invite Harvard Business Review and the tech press to give them their marching orders. Then, finally, the white smoke comes forth from the chimney indicating the next bubble buzzword has been chosen, and the industry goes bananas over it for 10 years for no reason.

[nine_k]

Sounds quite a bit like stock market. The more sober and cynical of them see fads as fads, irrational but powerful movements, and ride the waves, selling to a greater fool.

[nine_k]

Out-of-touch leaders existed for millennia. The "Emperor's New Clothes" tale was published in 1837 as a reproduction of a much older folk take. Sima Qian criticizes out-of-touch lords and emperors in his book about ancient history, written in 1th century BC. Maybe there is even older evidence.

[ryandrake]

No surprise, the CxO class barely lives in the same physical world as us peasants. They all hang out together in their rich-people restaurants and rich-people galas and rich-people country clubs and rich-people vacation spots, socializing with other rich-people and don't really have a lot of contact with normal people, outside of a handful of executive assistants and household servants.

[automatic6131]

We need better antitrust and anti-monopoly enforcement. Break up the biggest companies, and then they'll have to actually participate in markets.

[epistasis]

This was Lina Khan's big thing, and I'd argue that our current administration is largely a result of Silicon Valkey no longer being able to get exits in the form or mergers and IPOs.

Perhaps a better approach to anti-monopoly and anti-trust is possible, but I'm not sure anybody knows what that is. Khan was very well regarded and I don't know anybody who's better at it.

Another approach would be a wealth and income taxation strategy to ensure sigmoid income for the population. You can always make more, but with diminishing returns to self, and greater returns to the rest of society.

[vlovich123]

Sorry, how did she stand in the way of IPOs? She was against the larger players providing easy off-ramps to smaller players but I don’t recall anything about IPOs. Indeed, Figma’s IPO is precisely because she undid the pending Adobe / Figma merger if I recall correctly.

[epistasis]

You're right, IPOs were not blocked by this. I wish I could still edit to add a correction!

[sharts]

a better approach might be to farming out shares to stakeholders. that seems a lot more dynamic and self-correcting than periodic taxation battles after the fact

[CamperBob2]

Khan was largely ineffectual. The current administration, if it can be blamed on SV at all, is more likely to be the result of Harris's insanely ill-timed proposal to tax unrealized capital gains just as election season was kicking into high gear.

[adgjlsfhk1]

IMO Khan was by far the best we've had in at least 2 decades. Her FCC even got a judge to rule to break up Google! The biggest downside Khan had was being attached to a 1 term president. There's just not that many court cases against trillion dollar companies you can take from investigation to winning the appeal on in 4 years

[CamperBob2]

All true, and I'm not making a value statement about whether her influence was good or bad. However, Khan only threatened the oligarchs' companies, while Harris point-blank threatened their fortunes.

Don't pick a fight with people who buy ink by the barrel and bandwidth by the exabyte-second. Or at least, don't do it a month before an election.

[aerhardt]

She was largely ineffectual because she was cock-blocked by the ruling classes. I lean libertarian-capitalist and still I think this. Although it's not a settled debate in the classic liberal or libertarian traditions, there are plenty of arguments in them against the excessive concentration of power.

[Aloisius]

Samsung lost a large percentage of market share to their competitors in the last couple years, so I'm pretty sure they already have to participate in markets.

Well, assuming they haven't revived the cartel.

[Melatonic]

Yea when I think of DRAM I think of SK Hynix and Micron with Samsung far behind.

[fpoling]

I think a better solution is exponential tax on a company size. I.e. once a company starts to earn above, say, 1 billion, it will be taxed by income by ever increasing amount. Or put it another way, use taxes to break the power law and winner takes effect all into a Gaussian distribution of company sizes.

[AnthonyMouse]

> I think a better solution is exponential tax on a company size. I.e. once a company starts to earn above, say, 1 billion, it will be taxed by income by ever increasing amount.

This is in the right spirit but you want two things to be different about it.

The first is that the threshold for a given industry doesn't make sense as a dollar amount, it makes sense as a market share percentage. Having more than 15% market share should be a thing companies don't want, regardless of whether it's a $100 trillion industry or a $100 million one.

And the second is that taxes create a perverse incentive for the government. You absolutely do not want the government to have even more of a financial incentive to sustain and create more of the companies of that size. What you want is to have fewer of them.

So, what you want is a rule that if a company has more than 15% market share, the entire general public is allowed to sue them into bankruptcy for the offense of market consolidation. Which also removes the problem where they buy off the government prosecutors, because if they commit the offense then anybody can sue them.

[chii]

> anybody can sue them.

who bears the costs of this suit?

And who determines what makes for a good market share size to be the threshold?

And by having such a rule, an industry that would have higher efficiency to when consolidated would not be able to (but you wouldn't know). It's a bad set of policy imho.

A better way would be for gov't to increase competition by adding supply, or demand, whichever one is the bottleneck to competition. If a company, such as AWS, is getting a lot of marketshare, but their profit margins is still high, then the gov't should incentivize competition by funding or giving loans to businesses that want to compete with AWS.

However, if AWS's profit margins, even at high market share, remains very low (e.g., amazon's commerce side), then there's no need for the gov't to "step in" at all, as there would be no incentive for any competitor to try enter the market due to low margins.

[AnthonyMouse]

> who bears the costs of this suit?

The goal is to not have it happen, because the company is going to see that they're only slightly below the threshold and voluntarily split themselves into smaller pieces and buy themselves a safety margin because if they don't everybody knows the lawsuits are going to vaporize them once they exceed the threshold.

> And who determines what makes for a good market share size to be the threshold?

Anything in the vicinity of 5%-15% would be fine.

> And by having such a rule, an industry that would have higher efficiency to when consolidated would not be able to (but you wouldn't know).

This is extremely rare and the circumstances where it happens aren't a mystery. It's when entering the market has extremely high fixed costs but then the unit cost of usage is negligible, e.g. it costs a huge amount of money to install water and sewer but then the incremental cost of someone washing their hands is insignificant.

For those things you either have the government do them, or if it's a private company then it's a regulated utility which is completely banned from anything that even vaguely resembles vertical integration as the price of being allowed to have more than the threshold amount of market share.

> A better way would be for gov't to increase competition by adding supply, or demand, whichever one is the bottleneck to competition.

The problem is generally caused by the incumbents capturing the government and then enacting rules that inhibit rather than increase competition. That's why you need anyone to be able to initiate the lawsuit, so they can't capture the government department which is supposed to be thwarting them because then it's the entire public.

[1718627440]

> And the second is that taxes create a perverse incentive for the government. You absolutely do not want the government to have even more of a financial incentive to sustain and create more of the companies of that size. What you want is to have fewer of them.

That's not really a convincing argument. The government is the body for setting up the economic rules, it is not bound by it. The government doesn't have revenue or profit. Money is created by the government, it doesn't have a value yet. The direct financing of actions through taxes is not done for the government, but a way for the government to project the costs of the governmental action into the economy. Sure, there are a lot of idiots now-a-days, that think a state should work like a business and make profits, but they are misled.

[AnthonyMouse]

> The government is the body for setting up the economic rules, it is not bound by it.

When a new law is proposed, the Congressional Budget Office prepares a report on the impact it will have on the budget.

Now suppose a new law is proposed that will remove an existing unfair advantage of large companies over small ones, causing more small companies to form and take market share from incumbent larger ones. If large companies pay a 50% tax rate and small companies pay a 10% tax rate, the CBO analysis will show tax revenue going down. Then in order to make up the shortfall at a given level of deficit spending, the government would have to raise taxes or reduce spending, both of which are unpopular, so instead the bill gets tabled and the huge companies retain their unfair advantage. That's the perverse incentive we don't want to see.

> Money is created by the government, it doesn't have a value yet.

If the government can create an unlimited amount of money with no drawbacks, why don't they just send everyone a check for a trillion dollars? If they can't then whatever they want to spend in excess of what they can get away with printing or borrowing has to come from tax revenues, and then what happens when you set up an incentive structure where the government gets more money to spend the bigger they allow companies to get?

> Sure, there are a lot of idiots now-a-days, that think a state should work like a business and make profits, but they are misled.

This is a straw man. The only people who think the government should make a net profit are the people trying to build some kind of sovereign wealth fund. The US government isn't doing anything even resembling that -- it has been running massive deficits for decades. It's to the point that interest on the debt is now a major component of the budget -- we're now spending about as much on interest as on Medicare.

[philipkglass]

This would permanently increase DRAM prices. Memory fabricators either earn billions of dollars in income each year or they can't keep going. There are no little Mom and Pop businesses that can do photolithography on leading process nodes.

[octoberfranklin]

Nonsense, it would force vertical de-integration.

Chip fabs used to be like book publishers; you don't have to own a printing press to be an author. Carver Mead even described his vision of the industry that way.

Nowadays you have to get your cell libraries and a large chunk of your toolchain from the fab. Of course it's laundered through cadence+synopsys, but it's still coming from the fab. You have to buy your masks from the fab (heck they aren't even allowed to leave the fab so do you really own them?). And on and on.

For the record I don't agree with the "exponential" part, but otherwise this is an underappreciated and powerful technique.

[zer00eyz]

> Chip fabs used to be like book publishers;

I can still make a book like that in my basement. People do this as a hobby now. You can still build chips like that in your garage. People do this as a hobby now.

These things DO NOT SCALE... you cant have 10,000 people running printing presses in their basement to crank out the NYT every day. A modern chip fab has more in common with the printer for the NYT than it does with what you can crank out in your garage.

Let's look at TSMC's plant in AZ. They went and asked intel "hey where are you sourcing your sulfuric acid from. When they looked at the American vendors TSMC asked intel "how are you working with this". Intels response was that it was the best they could get.

It was not.

TSMC now imports sulfuric acid from Taiwan, because it needs to be outrageously pure. Intel is doing the same.

Every single part, component, step and setup in the chain is like that. There is so much arcane knowledge that loss of workers represents a serious set back. There are people in the production chain, with PHD's, who are literally training their successors because thats sort of the only option.

Do you know who has been trying the approach you are proposing? China. It has not worked.

https://www.youtube.com/asianometry probably the best rough and ready education you can get on the industry.

[philipkglass]

In another comment you proposed a sane version of the parent proposal. I wouldn't have commented if fpoling had originally floated that scheme. I was mainly objecting to drastically increasing taxes "once a company starts to earn above, say, 1 billion" without regard for the minimum viable scale of different businesses.

[Terr_]

Is that revenue, or profit? If revenue, it'll slam certain kinds of high-volume low-profit businesses, and if it's profit then the company will just arrange to have big compensation "expenses" for executives.

The latter would have to be backstopped by taxes on individual income.

[octoberfranklin]

The sane version of this proposal omits the "exponential" part, applies to profits (net income), and makes the tax rate industry-specific (just like Washington State's revenue tax).

[silon42]

revenue, obviously, but maybe it would scale with employee numbers... if you have lots of employees, you get taxed less.

[thfuran]

So the policy goal is to minimize revenue per employee?

[Hikikomori]

Set limits so the top cant earn more than x times the lowest paid in the company then.

[steve_b]

Companies would then outsource their low-paying jobs to other companies.

[logancbrown]

Ah yes, the same tax mentality that is working great for EU innovation.

[wqaatwt]

Corporate taxes specifically were quite high by European standards until 2027 and are not relatively that low today either

[themafia]

> There's too much group-think in the executive class.

I think this is actually the long tail of "too big to fail." It's not that they're all thinking the same way, it's that they're all no longer hedging their bets.

> we have made the rewards too extreme and too narrowly distributed

We give the military far too much money in the USA.

[lotyrin]

Diversity is good for populations. If you have a tiny pool of individuals with mostly the same traits (in this case I mean things like culture, education, morality, ethics, rather than class and race - though there are obvious correlations) then you get what some other comments are describing as being effectively centralized planning with extra steps, rather than a market of competing ideas.

[PunchyHamster]

Sadly natural result of industries where economies of scale and price of entry make anyone not massive uncompetitive.

I don't think there is even a good solution for that. Govt could essentially sponsor some competition but that's easy to go from "helping to market" to "handouts for incompetent"

[makeitdouble]

> We give the military far too much money in the USA.

~ themafia, 2025

(sorry)

On a more serious note the military is sure a money burning machine, but IMHO it's only government spending, when most of the money in the US is deliberately private.

The fintech sector could be a bigger representation of a money vacuuming system benefiting statistically nobody ?

[wat10000]

It's around 3.4% GDP. That puts us in the top 10% or so worldwide, but it's not ridiculously high. It's on a similar level as countries such as Morocco and Colombia, which aren't known for excessive military spending. It's still kind of high for a country with no nearby enemies, but for the most part, US military spending is large because the US economy is large.

[themafia]

It's around 16% of the total federal budget. To be fair about 1/3 of "military spending" is actually Salaries, Medical, Housing and GI/Retirement costs.

It's also the case that none of the CIA, NSA or DHS budgets show up under the military, even though they're performing some of the same functions that would be handled by militaries in other countries.

We also have "black appropriations." So the total of the spending on surveillance and kinetic operations is often unknowable. Add to this the fact the Pentagon has never successfully performed an audit and I think people are right to be suspicious of the topline "fraction of GDP" number.

[nirav72]

Just want to point out that the NSA is part of the DoD. (Or DoW now)

[Melatonic]

I think the number is probably much higher than we think - there is probably a ton of not so obvious spending on research and development.

[Projectiboga]

Military spending is a type of wealfare for the wealthy it is one of the only forms of public or government spending that doesn't crowd out private investors, the way public housing or publicly funded hospitals do. The high military spending and the contractor class often vote more conservative than typical for their demographic and economic peers It's been high since WW2, with maybe a slight drop in the late 70s. The current stat of "3.4 times gdp" ignores the fact that a large part of our national debt is from the military and war budgets. I saw a statistic in the mid 1990s that if we had kept our military budget at inflation adjusted levels equal to 1976 our debt would have gone to zero as early as 1994.

[wat10000]

Our national debt is from our unwillingness to raise taxes to balance the budget. Federal spending is somewhat high historically, but not absurdly so. Relative to the economy, it's at about the same level as it was in the 1980s. Measured as a percentage of GDP, the current military budget is the lowest since before the Second World War, aside from a brief period at the end of the 1990s where it was slightly lower.

Comparing budgets by adjusting for inflation doesn't make any sense. A budget that served a country of 218 million in 1976 would, when adjusted for inflation, serve a country of 218 million in 2026. Percentage of GDP is what you want to look at.

[mrtksn]

Exactly. So instead of electing the people who will allocate the resources, the people who are successful in one thing are given the right to manage the resources for whatever they wish and they can keep being very wrong for very long time when other people are deprived from the resources due to the mismanagement and can't do anything about it.

In theory I guess this creates a demand that should be satisfied by the market but in reality it seems like when the wealth is too concentrated in the hands of the few that call all the decision the market is unable to act.

[wat10000]

This is why I think taxes on the very wealthy should be so high that billionaires can't happen. The usual reasons are either about raising revenue or are vague ideas about inequality. It doesn't raise enough revenue to matter, and inequality is a fairly weak justification by itself.

But the power concentration is a strong reason. That level of wealth is incompatible with democracy. Money is power, and when someone accumulates enough of it to be able to personally shake entire industries, it's too much.

[Aerroon]

You'll just get a different form of power concentration. Do you think the Soviet Union didn't have power concentration in individuals? Of course it did, that's why the general secretary of the party was more important than the actual heads of state and government.

[wat10000]

Do you think I’m proposing anything like the Soviet system?

[Aerroon]

No? I'm saying that power concentration is pretty much unavoidable. The question is more about what they can do with that power. I suspect that people getting more power through wealth in the modern world is better than people concentrating power through politics.

[1718627440]

> I'm saying that power concentration is pretty much unavoidable.

It's avoidable by formalizing the execution of power. The head of state is very powerful, but he can't create laws or anything. That all needs to be done be the parliament, which is several hundred people.

[wat10000]

I don't think it's unavoidable. I don't see why you couldn't have a relatively weak government that's otherwise pretty laissez-faire besides taxing the hell out of extreme wealth. And a strong government doesn't have to have extremely powerful individuals. Power can be divided, and representatives are ultimately accountable to the people.

What you're saying basically boils down to: kings are inevitable, might as well choose them by economic success instead of the more old-fashioned approaches. I reject the first part.

[aianus]

Someone needs to allocate capital, might as well be someone that has done it successfully in the past.

[Ray20]

> But the power concentration is a strong reason.

A centralized authority capable of so severely restricting the economic freedom of the most powerful people implies a far greater concentration of power than the one you're fighting against. You're proposing to cure the common cold with AIDS.

[1718627440]

> A centralized authority capable of so severely restricting the economic freedom of the most powerful people implies a far greater concentration of power

Yes. That's the idea. Make the largest concentration of power an elected body auditable by the commons and whose actions are formalized by a bunch of rules, that they can choose, but still need to stick to.

[Ray20]

> largest concentration of power an elected body auditable by the commons

So, billionaires are bad because they can use their money to enter into voluntary deals with other people, which can lead to them achieving goals we don't like. Therefore, we create a single point of concentration of power with totalitarian control and dictatorial powers, that can take resources from people they don't like and give those resources to others they do like.

And these people with totalitarian control over the commons and dictatorial powers over the commons and the most powerful lever on everyone whatsoever and especially on everyone with huge amount of money, will continue to be electable and auditable by the commons because... I don't know, probably because they feel like it, there is literally no other reasons or incentives for them to do so.

"Big money give a human to much power, so let's take all that power from EVERYONE, concentrate it in ONE PLAСE, and add to this power dictatorial powers and totalitarian control over society. Some might argue that this is the exact opposite of the stated goals of the whole undertaking, but they do not take into account the insurmountable protection in the form of MAGICAL RULES with the help of which society will be able to control all of this"

[wat10000]

Gotta love libertarian thinking. In a society where survival requires participating in the economy, transacting with a billionaire is “voluntary.” Paying taxes on vast wealth you chose to accumulate, leaving you merely fabulously rich instead of wealthy beyond comprehension, is “involuntary.”

What matters to power is people, not places. Having power concentrated in one place, made up of hundreds of people who are elected and can be replaced, is fine. Having power concentrated in one or a few people is where things go wrong.

[wat10000]

Why? We already tax people. This would be a difference of degree, not of kind.

[est31]

Centralized planning is needed in any civilization. You need some mechanism to decide where to put resources, whether it's to organize the annual school's excursion or to construct the national highway system.

But yeah in the end companies behave in trends, if some companies do it then the other companies have to do it too, even if this makes things less efficient or is even hurtful. We can put that onto the human factor, but I think even if we replaced all CEOs with AIs, those AIs would all see the same information and make similar decisions on those information.

There is pascal's wager arguments to be had: for each individual company, the punishment of not playing the AI game and missing out on something big is bigger than the punishment of wasting resources by allocating them towards AI efforts plus annoying customers with AI features they don't want or need.

> Right now are living through a new gilded age with a few barons running things, because we have made the rewards too extreme and too narrowly distributed.

The usa has rid itself multiple times of its barons. There is mechanisms in place, but I am not sure that people really are going to exercise those means any time soon. If this AI stuff is successful in the real world as well, then increasing amounts of power will shift away from the people to the people controlling the AI, with all the consequences this has.

[smallmancontrov]

If you get paid for being rich in proportion to how rich you are -- because that's how assets work -- it turns into an exponential, runs away, and concentrates power until something breaks.

[scotty79]

Every corporation is a (not so) little pocket of centrally planned economy.

The only saving grace is that it can die and others will scoop up released resources.

When country level planned economy dies, people die and resources get destroyed.

[PunchyHamster]

> The only saving grace is that it can die and others will scoop up released resources.

Ideally. Realistically in market with only few companies around it makes it even less competitive.

[scotty79]

Yea, ideally new companies should also be able to be born and have a chance to get a foothold. This sadly is not given and market economy must be regulated to provide this feature.

[xpe]

> Every corporation is a (not so) little pocket of centrally planned economy.

This is confused. Here is how classical economists would frame it: a firm chooses how much to produce based on its cost structure and market prices, expanding production until marginal cost equals marginal revenue. This is price guided production optimization, not central planning.

The dominant criticism of central planning is trying to set production quantities without prices. Firms (generally) don’t do this.

[1718627440]

> This is confused. Here is how classical economists would frame it: a firm chooses how much to produce based on its cost structure and market prices, expanding production until marginal cost equals marginal revenue. This is price guided production optimization, not central planning.

That's the case in a healthy competitive market. Once you have a monopoly or an oligopoly, you get into central planning territory.

[xpe]

Ok, but recall the context (see above): I’m saying one can understand how firms operate without making a connection to central planning (setting production targets and investment decisions from the top-down without prices).

Economists have concepts and models for monopolies and oligopolies — and the way they operate are quite different from the practice of central planning.

I’m talking from within the frame of economic concepts, and I’m striving to use words as understood in the field. At times I value metaphorical thinking, but here in the case of economics, we don’t need to bend words when other fitting concepts are readily available and battle-tested.

An example: If someone calls corporate consolidation “central planning,” they’ve lost the ability to analyze it properly. The relevant questions for oligopolies (strategic behavior, barriers to entry, tacit collusion) are completely different from central planning questions (calculation problems, information aggregation, incentive alignment).

When technical fields have already solved a conceptual problem through careful definition and model building, importing loose metaphorical language degrades analytical clarity.

If you want to point to or propose a different model than the usual economic dogma, I’m all ears, by the way.

[1718627440]

I agree, that this discussion isn't based on proper economic terms, but on laymen understanding.

The claim isn't that it is exactly like central planning like a state, but very similar through the view on the whole society. You have a powerful caucus, no longer bound by reality (competition), making decisions, that they think are good, which effectively set the pace for the whole economy field. Whether this caucus formed through rigged elections or by inheritance of companies isn't all that relevant. It would be quite a different story, if the state would enforce its monopoly on (political) power and governing, but it refuses to do so now-a-days.

> The relevant questions for oligopolies (strategic behavior, barriers to entry, tacit collusion) are completely different from central planning questions (calculation problems, information aggregation, incentive alignment).

The observation on these oligopolies, that are now larger than some states is, that they seem to lack in their strategic reasoning and are more built on vibes of their leader, which is subject to blindness due to sycophants, much like in an authoritarian regime. Also they tend to treat the whole market as their internal planning problem.

> but here in the case of economics, we don’t need to bend words when other fitting concepts are readily available and battle-tested.

I think a majority of commenters on HN are not as well-versed in Economics as you, so would value elaboration on modern monopolies. I think they differ a bit from classical monopolies in their amount of ties to the government and interference into elections. Not that lobbying isn't typical for monopolies, but modern monopolies seem to not need to lobby anymore, but simply do and dictate.

[scotty79]

Company prices resources within itself completely arbitrarily. How much the hour of work of an employee A is worth with the company and and how much using paperclip costs has no relation how much these things actually cost in the real money. Once they are acquired by company they are utilized not according to their value but to central plans instead. This way paperclip might get vastly overvalued and scarce while hour of work can be vastly undervalued and wasted.

[xpe]

To make sure we’re on the same page… In economics, “central planning” refers to a system where a central authority (typically the state) makes comprehensive decisions about production, investment, and resource allocation across an entire economy, replacing market mechanisms. This is associated with command economies like the Soviet Union’s Gosplan system.

And of course I will grant firms use hierarchical coordination mechanisms internally (managers allocate resources by command rather than prices).

I suppose my angle here is to be clear that firms are typically a kind of hybrid entity: they mix various coordination mechanisms (prices and hierarchy). This makes them quite different from centrally planned economies.

[scotty79]

There almost never are any markets within any single company. Which makes internals of any company a planned "economy".

[xpe]

> Company prices resources within itself completely arbitrarily.

I wouldn’t phrase it this way — to me, this implies unpredictability and/or a lack of rationale. Perhaps you simply mean “internal managers at companies do not necessarily price resources using market mechanisms” which I would agree with.

Many fields of study give insight to the various kinds of distortions that arise from human psychology and negotiation, etc.

[scotty79]

> "internal managers at companies do not necessarily price resources using market mechanisms” which I would agree with.

Exactly, same as in centrally planned economy.

[sharts]

how is this centralized planning? It’s a corporate decision making operating in a free market to optimize for what majority shareholders want (though the majority of shares are owned by few).

[wat10000]

Your parenthetical is how. It's not completely centralized, but it is being decided by a very small number of people.

[yunnpp]

A free market where the government participates with billions in investment and tax cuts, yes.

[xpe]

I think the implied thought (?) is there is a similarity between central planning and oligopoly bandwagoning. To my eye, the causes and dynamics are different enough to warrant bucketing them separately.

[1718627440]

It's centralized vs. decentralized not public vs. private. A centralized private planning committee is still centralized.

[gruez]

>It is a weird form of centralized planning [...]

It's a form of "centralized planning", except it's not centralized at all.

[someguyiguess]

And there’s no planning

[drysine]

>It is a weird form of centralized planning. Except there's no election to get on to the central committee, it's like in the Soviet era where you had to run in the right circles and have sway in them.

No, it's pure capitalism where Atlas shrugged and ordered billions worth of RAM. You might not like it but don't call it "centralized planning" or "Soviet era".

[noosphr]

I disagree.

We have been living on the investment of previous centuries and decades in the West for close to 40 years now. Everything is broken but that didn't matter because everything that needed a functioning physical economy had moved to the East.

AI is the first industrial breakthrough in a century that needs the sort of infrastructure that previous industrial revolutions needed: namely a ton of raw power.

The bubble is laying bare just how terrible infrastructure is and how we've ignored trillions of maintenance to give a few thousand people tax breaks they don't really need.

[lm28469]

Bridges can be used for decades, your brand new GiGaAiFaRm will be fully deprecated by 2030 already.

All the infrastructure will be useless when the data centers move to the next city/state offering a tax cut.

[noosphr]

A power line can be used for a century.

[lm28469]

Sure, if you have something worth powering at the end of it.

[noosphr]

The same is true of all infrastructure from roads to water pipes.

You are being obtuse for the sake of AI doomerism.

[lawlessone]

>AI is the first industrial breakthrough in a century

Is it?

[abalashov]

Yeah, I don't know about that.

[incompatible]

Why not follow the time-honoured approach and put the data centres in low-income countries?

[noosphr]

Because you only do that once the tech has been comodatized and you have wrung all the benefit for your country that you can.

The British didn't industrialise Indian for a reason.

[lenkite]

The British deindustrialized India.

https://en.wikipedia.org/wiki/De-industrialisation_of_India

[BadBadJellyBean]

I assume they don't have good enough power infrastructure.

[abalashov]

> the insane frothing hype behind AI is showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns.

This resonates deeply, especially to someone born in the USSR.

[Retric]

This is part of how free markets self correct, misallocate resources and you run out of resources.

You can blame irrational exuberance, bubbles, or whatnot markets are ultimately individual choices times economic power. Ai, Crypto, housing, Dotcom etc going back through history all had excess because it’s not obvious when to join and when to stop.

[Dylan16807]

Usually companies run out of resources before they screw up global prices in massive markets.

If it was a couple billion dollars of memory purchasing nobody would care.

[ben_w]

> Usually companies run out of resources before they screw up global prices in massive markets.

It happens more often than you might expect.

The Onion Futures Act and what led to it is always a fun read: https://en.wikipedia.org/wiki/Onion_Futures_Act

[Aerroon]

The problem is that memory manufacturing is hard enough that there are essentially 3 major companies that do it globally: Samsung, SK Hynix, and Micron.

[an0malous]

> This is part of how free markets self correct, misallocate resources and you run out of resources.

Except that these corporations will almost certainly get a bail out, under the auspices of national security or some other BS. The current admin is backed by the same VCs that are all in on AI.

[parineum]

> where resources can be massively misallocated

It's a little ironic but to call this a market failure due to resource misalocation because prices are high when high prices is how misalocation is avoided.

I'm a little suspicious that "misalocation" just means it's too expensive for you. That's a feature, not a bug.

[scotty79]

> resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns

That's basically what the rich usually do. They command disproportionate amount of resources and misallocate them freely on a whim, outside of any democratic scrutiny, squeezing incredible number of people and small buisness out of something.

Whether that's a strength of the system or the weakness, I'm sure some rearch will show.

[fabian2k]

They're treating it as a "winner takes it all"-kind of business. And I'm not sure this is a reasonable bet.

The only way the massive planned investments make sense is if you think the winner can grab a very large piece of a huge pie. I've no idea how large the pie will be in the near future, but I'm even more skeptical that there will be a single winner.

[sixothree]

What's odd about this is I believe there does exist a winner takes all technology. And that it's AR.

The more I dream about the possibilities of AR, the more I believe people are going to find it incredibly useful. It's just the hardware isn't nearly ready. Maybe I'm wrong but I believe these companies are making some of the largest strategic blunders possible at this point in time.

[sokoloff]

Why would AR be particularly likely to have a single winnner?

[sixothree]

While the technical features are what attract me, I'm convinced what most people are going to be interested in are social features.

[xpe]

> … showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns.

Technically speaking, this is not a market failure. [1] Why? Per the comment above, it is the individuals that are acting irrationally, right? The market is acting correctly according to its design and inputs. The market’s price adjustment is rational in response. The response is not necessarily fair to all people, but traditional styles of neoclassical economic analysis deaccentuate common notions of fairness or equality; the main goal is economic efficiency.

I prefer to ask the question: to what degree is some particular market design serving the best interest of its stakeholders and society? In democracies, we have some degree of choice over what we want!

I say all of this as a person who views markets as mechanisms not moral foundations. This distinction is made clear when studying political economic (economics for policy analysis) though I think it sometimes gets overlooked in other settings.

If one wants to explore coordination mechanisms that can handle highly irrational demand spikes, you have to think hard. To some degree, one would have to give up a key aspect of most market systems — the notion of one price set by the idea of “willingness to pay”.

[1] Market failure is a technical term within economics meaning the mechanism itself malfunctions relative to its own efficiency criteria.

[adastra22]

It’s maybe new to you (you’re one of today’s lucky 10,000!), but this kind of market failure has been going on since at least the south sea bubble and tulip mania, if not all the way back to Roman times.

[Retr0id]

I wonder, is there any way to avoid this kind of market failure? Even a planned economy could succumb to hype - promises that improved societal efficiency are just around the corner.

[swatcoder]

> Is there any way to avoid this kind of market failure?

There are potentially undesirable tradeoffs and a whole new game of cheats and corruption, but you could frustrate rapid, concentrated growth with things like an increasing tax on raised funds.

Right now, we basically let people and companies concentrate as much capital as they want, as rapidly as they want, with almost no friction, presumably because it helped us economically outcompete the adversary during the Cold War. Broadly, we're now afraid of having any kind of brake or dampener on investments and we are more afraid of inefficiency and corruption if the government were to intervene than we are of speculation or exploitation if it doesn't.

In democratically regulated capitalism, there are levers to pull that could slow down this kind of freight train before it were to get out of control, but the arguments against pulling them remain more thoroughly developed and more closely held than those in favor of them.

[thfuran]

We don't really seem to be shying away from government corruption.

[amelius]

> there are levers to pull that could slow down this kind of freight train before it were to get out of control

Care to share some keywords here?

[thfuran]

Taxes and/or regulatory approval processes.

[octoberfranklin]

A tax on scale.

Yeah I know HN is going to hate me for saying that.

If a big company and a few small companies all have identical costs for producing a product, society is better served by having it produced by the few small companies than the one big company.

Once "better served" is quantified, you know the coefficient for taxation.

Make no mistake, this coefficient will be a political football, and will be fought over, just like the Fed prime interest rate. But it's a single scalar instead of a whole executive branch department and a hundred kilopages of regulations like we have in the antitrust-enforcement clusterfuck. Which makes it way harder to pull shenanighans.

[zozbot234]

> If a big company and a few small companies all have identical costs for producing a product, society is better served by having it produced by the few small companies than the one big company.

Why? That's exactly the circumstances where the mere potential for small companies to pop up is enough to police the big company's behavior. You get lower costs (due to economies of scale) and a very low chance of monopolization. so everyone's happy. In the case of this DRAM/flash price spike, the natural "small" actors are fabs slightly off the leading edge, that will be able to retool their production and supply these devices for a higher profit.

[octoberfranklin]

the mere potential for small companies to pop up is enough to police the big company's behavior.

If that were true, "you're in Amazon's kill zone" wouldn't be something VC's say to startups. And yet, they do say that.

[Ray20]

And yet, startups exist.

[octoberfranklin]

because they stay out of the kill zone

[refurb]

> If a big company and a few small companies all have identical costs for producing a product, society is better served by having it produced by the few small companies than the one big company.

How so? Costs will be higher with multiple small products, resulting in higher costs for customers. That's the opposite of "society is served better".

We draw the line at monopolies, which makes sense.

[lenkite]

By the time a company becomes a monopoly, it is immensely powerful - politically and monetarily - getting rid of it or splitting it up is near impossible. Monopoly laws are near impossible to apply as the corporation has sufficient money and influence to turn politicians into servile puppets.

Best to nip corpos before they gain more revenue than a nation state and become "too big to fail".

[octoberfranklin]

> > all have identical costs

> Costs will be higher

Read it again, please.

[refurb]

We know large companies have volume efficiency, so it’s not a realistic scenario.

[duskdozer]

>society is better served by having it produced by the few small companies than the one big company.

well, assuming the scale couldn't be used for the benefit of society and not to milk it dry. but yes probably the best that can have a reasonable chance at success, eventually, maybe.

[smallmancontrov]

There is a way, and if anyone tells you we have to go full Hitler or Stalin to do it they are liars because last time we let inequality cook this hard FDR and the New Deal figured out how to thread the needle and proved it could be done.

Unfortunately, that doesn't seem to be the flavor of politics on tap at the moment.

Sam Altman cornering the DRAM market is a joke, of course, but if the punchline is that they were correct to invest this amount of resources in job destruction, it's going to get very serious very quickly and we have to start making better decisions in a hurry or this will get very, very ugly.

[testartr]

why do you think allocating hardware to gamers is proper usage?

maybe AI cures cancer, or at least writes some code

[ptero]

For example: allocating the resources to only few industries deprives everyone else: small players, hobbyists, gamers, tinkerers from opportunities to play with their toys. And small players playing with random toys is a source of multiple innovations.

[missedthecue]

Unless I get all the resources I want, when I want, all at low prices, the market has obviously failed.

[selfhoster11]

Yes, except unironically. A market that cannot efficiently serve the vast majority of the population is a failed market.

[eldenring]

There's a great way to express the utility something has to you to get it. You can spend more money.

[XorNot]

Or you could look at reality where it generates fake social media posts s lot and we could all ask, why is this valuable?

[fzeroracer]

What do you think happens when the majority of consumers are priced not only out of bread, but also circuses?

[natebc]

History has told us it won't be good for the lords when that happens.

[hakfoo]

Gamers at least enjoy their GPUs and memory.

The tone from the AI industry sounds more like a dependent addict by comparison. They're well past the phase where they're enjoying their fix and into the "please, just another terawatt, another container-ship full of Quadros, to make it through the day" mode.

More seriously, I could see some legitimate value in saying "no, you can't buy every transistor on the market."

It forces AI players to think about efficiency and smarter software rather than just throwing money at bigger wads of compute. This might be part of where China's getting their competitive chops from-- having to do more with less due to trade restrictions seems to be producing some surprisingly competitive products.

It also encourages diversification. There is still no non-handwavey road to sustainable long-term profitability for most of the AI sector, which is why we keep hearing answers like "maybe the Extra Fingers Machine cures cancer." Eventually Claude and Copilot have to cover their costs or die. If you're nVidia or TSMC, you might love today's huge margins and willing buyers for 150% of your output, but it's simple due diligence to make sure you have other customers available so you can weather the day the bubble bursts.

It's also a solid PR play. Making sure people can still access the hobbies they enjoy is an easy way to say you're on the side of the mass public. It comes from a similar place to banning ticket scalping or setting reasonable prices on captive concessions. The actual dollars involved are small (how many enthusiast PCs could you outfit with the RAM chips or GPU wafer capacity being diverted to just one AI data centre?) but it makes it look like you're not completely for sale to the highest bidder.

[shiandow]

It's not exactly a new type of failure. It's roughly equivalent to Riccardian rent, or pecuniary externalities for the general term. Though I suppose this is a speculative variant, which could be worse somehow.

[refurb]

> the insane frothing hype behind AI is showing me a new kind of market failure

I see people using "market failure" in weird ways lately. Just because someone thinks a use for a product isn't important, doesn't mean it's a market failure. It's actually the opposite - consumers are purchasing it at a price they value it.

Someone who doesn't really need 128GB of ram won't pay the higher cost, but someone who does need it will.

[rr808]

Prices going up 2-3x is not market failure, its just another commodity cycle. If it went up 10-100x you might have a point.

[layoric]

This happens when you get worse and worse inequality when it comes to buying power. The most accurate prediction into how this all plays out I think is what Gary Stevenson calls "The Squeeze Out" -> https://www.youtube.com/watch?v=pUKaB4P5Qns

Currently we are still at the stage of extraction from the upper/middle class retail investors and pension funds being sucked up by all the major tech companies that are only focused on their stock price. They have no incentive to compete, because if they do, it will ruin the game for everyone. This gets worse, and the theory (and somewhat historically) says it can lead to war.

Agree with the analysis or not, I personally think it is quite compelling to what is happening with AI, worth a watch.

[christophilus]

Markets are voting machines in the short term and weighing machines in the long term. We’re in the short term popularity phase of AI at the moment. The weighing will come along eventually.

[Melatonic]

Just like some of the crypto booms and busts if you time it right this could be a good thing. Buy on a refresh cycle when AWS dumps a bunch of chips and RAM used or refurbished (some places even offer warranty which is nice).

And if the market crashes or takes a big dip then temporarily eBay will flood with high end stuff at good prices.

Sucks for anyone who needs to upgrade in the next year or two though !

[1718627440]

There is a reason why there used to be market regulation and breaking up of monopolies. We are now-a-days trying out changes to the stable state from centuries, because that would be so yesterday, and will soon find out, why that state was chosen in the first place.

[lovich]

> the insane frothing hype behind AI is showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns.

As someone who advocates that we only use capitalism as a tool in specific areas and try to move past it in other, I’ll defend it here to say that’s not really a market anymore when this happens.

Hyper concentration of wealth is going to lead to the same issues that command economies have where the low level capital allocations(buying shit) isn’t getting feedback from everyone involved and is just going off one asshole’s opinion

[tonyhart7]

how is that market failure??? this is literally market of supply and demand at its core

[1718627440]

It is the market working as expected, but it still failed to allocate money diversely.

[amelius]

yeah but the demand is based on empty promises

[tonyhart7]

You are overthinking things

[TinkersW]

OpenAI appears to have bought the DRAM, not to use it, as they are apparently buying it in unfinished form, but explicitly to take it off the market and cause this massive price increase & squash competition.

I would call that market manipulation(or failure if you wish)--in a just society Sam Alton would be heading to prison.

[outside1234]

Going to be awesome tho when OpenAI et al fail because the market is going to be flooded with cheap parts.

[haunter]

Or not cause inflation, rising cost of living etc. People said the same about crypto GPUs but it never really happened in the end. Those cheap pre-LHR RTX cards never really entered the picture.

[lazide]

New type? Lol.

It’s a classic ‘tulip bubble’.

[missedthecue]

Not even. Tulips were non-productive speculative assets. NFTs were what the tulip was. The AI buildout is more like the railroad mania in the sense that there is froth but productive utility is still the output.

[lazide]

Tulips also grew and could be bred.

The actual underlying models of productive output for these AI tools is a tiny fraction (actually) of the mania, and can be trivially produced at massive quantity without the spend that is currently ongoing.

The big bubble is because (like with tulips back then), there was a belief in a degree of scarcity (due to apparent novelty) that didn’t actually exist.

[fragmede]

Just like the beautiful woman who's luxury bag purchase she doesn't actually need, we can sit here and judge her for it, but at the end of the day it's not our money she's buying Louis Vuitton with, and we're not the one she's going home with.

[lazide]

Non sequitur of the day?

Anyone who owns shares in US companies (most people here) both are ‘going home with’ the companies involved, and are buying ‘the bags’.

Not to mention all the people buying the bonds used to fund the whole AI data center buildout, which is a ton of probably pension funds and old folks planning for retirement (also probably more than a few millionaire/billionaires!).

[fragmede]

Not to blame the victim, but if you're not in control of how you spend your money, that's really on you. Don't try and put that on someone else.

[immibis]

The market failure results from those people having way more money than logic and economic principles dictate they should. A person would normally have to make a lot of good decisions in a row to get that much money, and would be expected continue making good decisions, but also wouldn't live long enough to reach these extreme amounts. However, repeated misallocation by the federal government over the last several decades (i.e. excessive money printing) resulted in people getting repeatedly rewarded for making the right kind of bad economic decisions instead.

[elorant]

Games eventually will move to consoles and the whole PC industry will take a huge hit.

[bongodongobob]

I don't know if the term console even makes sense any more. It's a computer without a keyboard and mouse. And as soon as you do that, it's a PC. So I don't see how this makes any sense or will ever happen.

[yunnpp]

Actually, a console is worse than a PC. It's main reason for existence is to enforce DRM on the user to protect copyright/IP.

[phito]

Consoles are increasingly becoming PCs, so I don't see this happening

[fooey]

console ram isn't magically cheaper