[fsckboy]

if these companies go bankrupt, they will have spent (not lost) all their money, the large amounts of money that they got from investors. That money generated profits for other companies they bought stuff from, and income for their employees, and capital gains for other people if AIco acquired other companies.

the market cap of a company is computed by the current price of a company's shares, the last price paid; not all the shares of the company were bought at that price, the ones who got shares cheaper are showing paper profits, unrealized. Those who have already cashed out have money in their bank accounts that was transferred from people who wanted to get in. If the company goes bankrupt, their shares will be worthless, but the money they paid for them still remains in the accounts of people who sold their shares: the money was not lost even if some people lost money.

I'm not going to keep going through it but the reason it works to value things the way we do is that the values are comparable and they frequently work out, so snapshots of the economy and the participants are comparable. But "losses" are not like taking gold and feeding it into some deep fold in the earth where it will disappear into the molten middle of earth.

Stock valuations are "expectations for the future". Those expectations weren't money, they were lottery tickes where the lottery consisted of human creativity and human effort. People buying and selling share are moving real money around to trade the expectations. The money didn't go anywhere, it's still there, it's just that expectations for the future have been reduced. It all boils down to humans trading some of their time and potential on a bet that things work out. Some people's effort gets more rewarded than others. Not every team wins the world cup, but people like to play and like to watch.

[Retric]

That’s an overly simplified model. AI companies spending results in infrastructure beyond the company such as manufacturing capacity, power lines, software systems, and even individual expertise.

If they fail then the negative impact ripples through the economy due to misallocation of resources.

[fsckboy]

>infrastructure beyond the company

consider all the companies in a market and those that feed that market to be one virtual mega company, add up all the valuations and revenue streams, costs, etc and aggregate all the investors into one. Nothing changes about the picture I drew. We simplify models to make the real world understandable.

>negative impact ripples through the economy due to misallocation of resources

free or relatively free financial markets are the only way, the best way, the ne plus ultra of ways we know to allocate capital, we have no better way than for the owner of the capital and the reapers of the loss or reward to make a considered opinion that is risk "impedance" matched. By definition, the market does not "misallocate" capital, it optimally allocates it.

your theory is that we could somehow know the future, but that's a fallacy.

[Retric]

> one virtual mega company

Free market efficiency is inherently tied to having multiple companies. Treating the entire economy as a single company gives nonsensical results because it fundamentally differs from what actually occurs. You might as well compare the economy to a game of tick tack toe, inherent complexity isn’t something you can simplify it has meaningful consequences.

Your ideas like many other ideas are simply wrong.

> could somehow know the future

Perfect accuracy isn’t the only possibility here, there’s levels of error.

Our system involves intermediaries between the actual owners of capital and the allocation of that capital who have very different incentives. When the worst possibility is missing a bonus there’s little difference between losing 10% of an investors money and 100%. That results in inefficiency through the misalignment of incentives.

That is actually true, and thus there’s no way to gloss over that truth without simply being wrong.

[fsckboy]

>Treating the entire economy as a single company gives nonsensical results

trust me bub, I've studied much more econ than you. If a competitive market sets the prices (check, that's what is happening), and you want to analyze statistics of a sector (check, that's what we are doing), you can take those competitive prices as "given" and hold them constant, and consolidate the assets of in industry into one virtual entity. No claims were being made about competition, the claim is that "it is validate to consolidate statistic of what you are trying to study.

"how much did the AI sector make last year? how much will it make next year?" is not answered by running a simulation of competitive marketplace with production functions.

>>could somehow know the future

>Perfect accuracy isn’t the only possibility here, there’s levels of error.

if you deviate from the market's prediction of the future, you are increasing your levels of error; why do that?

[Retric]

> I've studied much more econ than you.

Then try and justify why you say shit this clueless:

> how much will it make next year?" is not answered by running a simulation of competitive marketplace with production functions.

Profits next year very much depend on the number of companies involved 1 vs 100 is not going to give the same results. Like I hope you realize how false what you just said was. Because if you actually believe this there’s literally no point in talking with you.

[fsckboy]

>That’s an overly simplified model. AI companies spending results in infrastructure beyond the company such as manufacturing capacity, power lines, software systems, and even individual expertise.

in a competitive marketplace, economic profit will go to zero. so whether an AI company buy or rents outside infrastructure, or builds it itself doesn't matter, it makes no difference. Therefore, if your argument is "outside infrastructure X", you can see the meaning of that by looking at "assume the company bought up the whole industry including outside infrastructure, then go back and look what I said and it still applies" A company monopolizing outside infrastructure for its own use would not abuse its monopoly against itself, but even if it did, makes no difference the extra profit and extra loss would balance out. Would it abuse its monopoly against downstream customers? if we use the existing market prices unchanged in our example, that is analyzing the case where it does not, which is the case that is comparable to the current situation.

or to put it another way, let's say these are all publicly traded companies competing. What if I told you "hey, i've investigated the ownership of all these public shares, guess what, Elon Musk owns them all, he owns every share of every company in AI, and all the infrastructure suppliers. Does that change the analysis from what we see in the marketplace? no, it doesn't. You want to draw a bigger circle around more affected parties, the suppliers to the infrastructure suppliers: OK, Elon owns those too it turns out.

nobody is analyzing the future here, we're talking about the case of AI going bust, not trying to predict AI going bust.

if were were going to project the future, we still would not do it with a simulation using functions to model companies to try to come up with meaningful profit numbers, we would project profits (and costs and revenues) based on margins of similar industries

[dwb]

Keep peddling that capitalist realism. “There is no alternative!” The market may not misallocate capital, by definition, but it very clearly and routinely misallocates resources. Let me guess: you’re doing relatively well for yourself?

[fsckboy]

>Let me guess: you’re doing relatively well for yourself?

Let me guess, you sit down next to Kobe Bryant and start by saying you're going to tell him about winning basketball?

[dwb]

Are you saying that you’re right because you’re rich? The equity of the economy is not very similar at all to a game.

[fsckboy]

I know what i'm talking about, and you don't. That does not come from me being rich, it comes from me being raised as a far left-socialist, and being on the spectrum, and then studying economics and finance in graduate school and realizing what was true and what was wishing. Capitalism and free competitive markets solve exactly the problem that centrally planned economies are explicitly trying to solve but always fail to. Not only that but with predictable results. As you can now see, I not only have a heart and I have a brain, and I have education. And I have the inculcated capacity to read the socialism no matter how its hidden and between what lines.

you tried to dismiss me by saying "oh but you're doing well" as if that meant anything. You brought it up, not me, but inasmuch as it does means anything, it suggests I'm winning the race that you purport to be an expert at.

I do not come from wealth, my family is largely working class. I have grown my wealth dramatically because I understand how the market works. I didn't know a priori what would happen, I just took what they taught me in school and applied it with extreme discipline and without fear. Turns out that works.

>The equity of the economy is not very similar at all to a game

the economy is about efficiency, and supply meeting demand, and fair exchange of factors and products for pareto optimality. that is what equity should mean but it's not what you mean by it. Your equity lifts only some boats and at the cost of lowering and even sinking others. Nobody can prove except by simple observation that your equity does not in fact lift boats.

[idiotsecant]

This is way, way more neat and tidy than reality. When these stocks start to sink there is going to be an enormous evaporation of value from the overall market because people in riskier investments will get scared that other people will get scared. This will scare people with slightly safer investments, on up the line. Capital will dry up and velocity of money will drop. The market is not made by rational robots, it's run by barely sentient apes just minutes from reverting to crushing things with rocks. The markets run on vibes and fever dreams of hitting the next big thing.

[conradkay]

That's one way to look at it, though it feels like you could say the same about the dot-com crash or 2008 which isn't too helpful. At the very least (extremely high-paying) jobs can be actually lost