[civilian]

> That's the logic of the whole market today. AI – the world's money-losingest technology – attracts investment at the expense of everything else.

I expect Cory to have skepticism about technology that can be exploited for dystopian purposes, but calling AI "the world's money-losingest technology" is out of touch. If AI can support/replace some intellectual work, it'll be revolutionary, and that's what the investment bet is about.

I get that the blog post is making a separate point about Musk's companies but it's dissapointing to see mistakes like this in Cory's thinking

[Grombobulous]

I share your feeling that LLM-based AI is a high-potential technology.

The issue is the objective dollars and cents financials of the situation. It’s literally the technology that is the money-losingest at this time.

The commercial utility of the technology can’t become viable just by being really useful.

There’s a good accounting argument to be made for AI IPOs happening out of a serious need for capital.

I wouldn’t bet money at a casino on this, but if OpenAI went completely out of business or was absorbed into irrelevancy within a calendar year, nobody with a finance background would be surprised. They objectively cannot exist in ~18 months without massive spending cuts or additional cash infusion. And they can’t make their models better and serve more tokens to build that future potential that justify their present valuation without additional capital, which becomes decreasingly efficient as data center build costs skyrocket.

AI has wonderful potential but no amazing product is guaranteed commercial viability. If Uber spends $1500 on tokens per employee they might as well spend $0 on AI and hire more real people to compensate.

I think about how the railroad barons went through a somewhat similar process. By the end of the American railroad buildout, numerous lines became financially unviable within a few short years or decades, some not even really making it into the automobile era. The only railroad business that ended up with any sort of long term profit viability was freight.

[Schiendelman]

The economy gets bigger every year. Therefore, any similarly proportioned large "thing" becomes the largest of all time. Uber lost tons of money for years, I remember the complaints about them. Investors made lots of money because they believe in future value. You're not being forced to make that bet - "money losing" is great for us if we aren't invested!

[Grombobulous]

IPO investors in Uber didn’t actually make a lot of money. The stock has only gone up by around 7% per year since going public. I can make over 4% guaranteed by putting the money into a CD.

Ironically, we are being forced to make that bet, thanks to NASDAQ’s new indexing rule changes made just for SpaceX.

I think what you’re describing is essentially a form of “inflate away the debt.”

Sure, if we wait enough decades SpaceX will be legitimately worth trillions of dollars.

Uber looks like a little baby loss leader compared to AI companies.

[Schiendelman]

I wasn't thinking about IPO investors - the funding rounds before that are where the real money is made.

I am not describing inflating away debt. I'm talking about returns.

[Grombobulous]

I figured you might be speaking about the pre-IPO investors.

Uber’s post-IPO stock performance has been a lot like “inflating away” the mediocre performance of the company. Its growth since IPO hasn’t been able to beat out any of the major indexes. Gaining only 7% value per year means that Uber’s valuation peaked at IPO in terms of real value against alternative corporate assets and considering currency inflation. There’s no real reason to have bought their stock on the public stock market in retrospect. The only winners are pre-IPO investors.

The problem is, pre-IPO investors are just a small group of people that aren’t really relevant to the long term viability of a company or the success of the economy that surrounds that company. Their success doesn’t really impact anyone else outside that small group of people. They have figured out a system for personal profit that doesn’t rely on building a viable company at the most basic level (and, at least, Uber eventually became viable, but the new wave of AI companies doesn’t look to be in the same financial realm).

The end result is a wealth transfer to the pre-IPO investors from post-IPO investors, employees, customers, etc.

When I say “inflate away” what I mean is that SpaceX leadership has pulled unusual levers in the IPO system itself to manufacture a high valuation to maximize wealth transfer from post-IPO investors to pre-IPO investors, and as a result the long-term best-case scenario is probably that the valuation will come back to earth slowly over time via below-market returns, with the worst case being a huge correction. If the stock was more fairly valued at IPO, there would be more actual investment potential for post-IPO investors. Instead, that potential is being captured almost entirely by pre-IPO investors, and not in the usual and more sensible way (higher risk = higher reward).

In other words, the usual formula is inverted: pre-IPO investors are shouldering the least risk for the greatest returns.

Tesla has been able to sidestep this dead economy theory by at least shipping a lot of cars and being a reasonably profitable automaker. They at least ran a real business. There wasn’t any pressing reason to sell your shares. Fast vehicle shipment growth at a profit was able to at least give Tesla some level of justification for their valuation.

[Schiendelman]

I'm not worried about any of that. I don't care whether SpaceX is successful or not, or whether those investors make money or not.

My only comment is that as time advances, "largest of all time" is common, because our world grows in population and both realized and potential value.

[bayarearefugee]

> calling AI "the world's money-losingest technology" is out of touch

In what way is it out of touch or wrong? It is objectively correct today.

It may very well not be correct 2 years from now, but his statement was about the present, not the future.

[lukol]

"money-losingest" -> AI already brings in billions and many AI companies could become profitable in little time if they'd stop R&D and simply keep selling what they already have.

yes, it's risky and investment-heavy but it's not a bottomless pit with no path to break even. there are many other recent technologies - NFTs? data centers in space? - that would be a better fit for this label.

[projektfu]

Is that true? If Anthropic stopped last November at versions 4.5, would people keep using it enough to recoup the investment?

[projektfu]

I think I posted this under the wrong comment.

[nelsonfigueroa]

> If AI can support/replace some intellectual work, it'll be revolutionary, and that's what the investment bet is about.

That's one big "If". From personal experience AI just tends to burn money. Time will tell if the investment pays off but I disagree that, at this time, it is out of touch to say AI is a money sink.

[pfraze]

“Losing” is a loaded word choice. If I buy something I’m really happy to have, I probably don’t describe it as losing the money.

Obviously the investment expense has been extremely high, which is what the replies are quibbling about.

[MaysonL]

AI is currently a massive money sink. Yes or No?

[kcartlidge]

There's a distinction.

- For the AI provider it is a massive money sink due to cost/revenue maths

- For the AI consumer it's not a massive money sink if you arrange things so your ongoing costs are lower than your savings

It isn't a simple yes or no overall, only per side of the fence.

[Schiendelman]

Not for me, it means I don't have to hire an engineer right now.

[ZionBoggan]

Obviously no...? The implications far outweigh the "money sink" notion...

[ggm]

Obviously yes. On evidence alone the path to profit doesn't exist for most of the massive capital sinks. A small number of players At best MAY return on investment, but in the cycle time capital needs a return, most are functionally incapable

AGI isn't happening. So, it's incremental improvements on LLM and Generative methods. Any advance which requires more tech inputs demands more capital. Any advance which requires less tech makes all the existing capex look stupid.

[HerbManic]

I have noticed that those that are the most optimistic about AI almost always talk in a future-tence.

It WILL do this, it COULD achieve that etc.

[inigyou]

I think Ed Zitron challenged us all to talk to an AI booster without letting them use future tense.

[bigbadfeline]

> I expect Cory to have skepticism about technology that can be exploited for dystopian purposes, but calling AI "the world's money-losingest technology" is out of touch.

Since when stating facts is "out of touch"? Currently AI is losing many billions of dollars, it's a fact.

> If AI can support/replace some intellectual work, it'll be revolutionary, and that's what the investment bet is about.

"replace some intellectual work" says nothing about the cost of doing it, the losses keep piling up and "revolutionary" pies in the skies come and go without real economic or financial improvement - on the contrary, the economic situation is getting worse mostly due to AI because of the fake urgency of the "AI race". A slower pace of development would cost a lot less and might be economically viable but that's not what we have.

> but it's dissapointing to see mistakes like this in Cory's thinking.

Again, what mistakes? He's stating facts, you're hyping expectations based on marketing propaganda - who and what is mistaken here?

[inigyou]

It can't. It can only provide the appearance of doing so. It's just the Eliza effect on steroids.

[amanaplanacanal]

if