A bubble that knows it's a bubble

Greater fool theory: https://en.wikipedia.org/wiki/Greater_fool_theory

Oh, they know its a bubble. FOMO is kind of rational I guess. Seeing others profit wildly while you fall behind can be pretty motivational to enter the trade.

I think the allure of humanoid robots is that they are drop in replacements for agents in a world desgined for humans.

If you want your robot to be a helper around the general populations houses for example, you would aim to make a general purpose bot capable of stairs, ladders, lying down, reaching high, stepping over things, holding awkward weights and loads while doing all of the above. Pinch, twist, push, pull, in all degrees of motion a human has etc.

On the other hand, since Moore's Law has flattened a lot in general, does this apply anymore?

I think at least with CPU:s the depreciation has slowed down a lot compared to 15 years ago.

> however, the core infrastructural asset of GPUs tends to become rapidly obsolete after about 5 years.

Is it all about the actual GPUs though, is that the only "infrastructure" being built? A list from the top of my head of things that I'd say do last:

1. Data center buildings (take a while to build, contents completely aside).

2. Organisations and processes for running operations and procurement in said data centers - doesn't take decades to build for sure, but it's something worthwhile to already have.

3. Advances in the actual chips, i.e. more powerful processing units.

4. Advances in chip fabrication.

5. Chip fabrication facilities and organisations (similar to #1 and #2).

So sure, GPUs are highly temporary. But a lot of the things being developed and built around them much less so.

I do think one possible bubble burst scenario is that we'll have cheap compute available for decades but not a lot of great ideas of what to do with it. That is not unlike the 2000s I suppose.

The half-life of iron is pretty low too, the advantage of the rail system is what it allowed us to do when it was cheap enough.

All the investment in AI should help bring infrastructure up to a higher level, power distribution and cooling for example are at a much higher level than would have otherwise been.

Who knows what use that might have if it suddenly becomes incredibly cheap.

(this is my silver lining thinking)

Yes the thing that might be missed in the point about how the big buildout of GPU compute is going to be the backbone of the future etc is that, unlike railroads and dark fibre, the GPU compute gets obsolete really really quickly. So it's not the same.

I had a friend who got a Sun cluster for basically free when the 2000 dot com bubble burst. And when we were doing recreational math contests a couple of years later it was slower than our laptops.

So it is very likely that a load of today's GPU compute is very competitive next year or the year after?

The AI bubble bursting will kill investment in the next gen hardware in the west.

But china will come to market with its first gen that it is currently building to replace its dependency on the west and will leapfrog the west etc. China isn't really completely dependent on competing in our AI bubble, its using AI for its own things and will plough on even when the west bubble bursts. Seems obvious?

Still, there has been so much talk about the AI bubble bursting last week and this is the the best writeup.

Several paragraphs later, the article argues this time is different:

> Yes, retail can buy Nvidia, but they can’t access pre-IPO rounds where the real speculation happens. This concentration among professional investors won’t prevent a bubble, but it might prevent the kind of widespread financial devastation that followed previous crashes.

> Those fiber optic cables didn’t vanish when Pets.com did.

OTOH all the VR headsets gathering dust now didn't turn out to be quite as useful as those fiber optic cables. And I'm not sure what will remain after the AI bubble pops except for a massive matrix multiplication overcapacity ;)

I also wouldn't call all the money being funneled into a single technology a "Cambrian Explosion", it's the opposite of that, an organism being propped up that wouldn't survive on its own in a competitive environment.

We should just sacrifice more people's savings[0] to fund innovation. This is truly an efficient way of doing things.

[0] "millions of ordinary investors watched their retirement accounts and college funds evaporate. The same middle-class Americans who had been told they were foolish not to participate in the ‘new economy’ now faced financial ruin. Teachers’ pension funds were halved. Family savings meant for homes and education vanished"

And pray we don't enter a "lost decade" (which is closer to 30 years, now) like Japan.

Self-contradictory communication seems to become his style.

"AI is an existential risk for humanity, that's why we have to dump all resources we have into building it".

"It's critically important that AI as an industry is regulated, but also we'll pull out of the EU if they try to regulate us"

He’s saying it’s bubbly because he can’t get good prices to buy out startups. He’s a buyer, first and foremost. No one wants to have to pay $20bn for some of these companies. They don’t believe it’s a bubble on any level, and I do think anyone in involved sees it as an infinite investment until the very end of the world (not kidding). It’s the end-game for software tech, especially if you are willing to be humbled by what stuff like Genie3 will become.

There is absolutely nothing else left to invest in when it comes to software development, this is it.

Isn’t Anthropic worth hundreds of billions by now and their revenue is doubling every 6 months?

4.1 billion is nothing these days.

This raises the question: hasn't the market already priced in a ubiquitous AI future? The current valuations seem to reflect the assumption that AI won't just 2x developer productivity but will also automate a huge portion of the workforce/boot productivity across the board. And I believe it has, and it's the only way to explain the sky-high valuations for companies that are 1) still losing money and, more importantly, 2) have no moat.

If that's true, then we are in a bubble by definition. When AI development eventually stagnates, failing to deliver on these promises, valuations will correct fast (and painfully). What happens then to Nvidia and other hardware companies? And what about the massive AI investments currently propping up the economy [1]? These would also be slashed, messing up the entire supply chain that's gearing up to meet this demand.

While I agree the technology is great and useful, I believe we are in bubble territory. I believe it's unlikely to be as transformative as the CEOs and VCs funding these companies claim.

[1] https://sherwood.news/markets/the-ai-spending-boom-is-eating...

My ex boss read too much Ray Dalio and it ate his brain.

Money can be "lost", and "created". In fact, it regularly is by commercial banks; this is the cornerstone of the modern economy. The bank of England wrote a pretty accessible document on money being created and destroyed [1]. For a slightly deeper dive (but equally accessible) check out "Can’t We Just Print More Money?" by Rupal Patel, et al. [2] which describes the different kinds of money.

The 2014 doc was a pretty wild read for me when it came out - it changed my perspective quite a bit.

[1]:https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

[2]: https://www.goodreads.com/book/show/58796370-can-t-we-just-p...

> money is just a competitive resource we use to outbid each other for _real_ things

That's true, but the thing that's lost is the economic/productive capacity that the money was spent on, that could have been used for other (better) purposes.

For example, if I raise $100mn in a frothy market, and spend it on employing 100 Engineers on $1mn/yr salaries for 1 year before ultimately going bankrupt, it's true that the money doesn't disappear, as it was simply transferred from the VCs to the Engineers, but what's spent/consumed is the Engineers' time. Society can never get those 100 person-years back, and the VCs have to write their capital investment to 0.

The other comments are separately true - money is created by bank borrowing and destroyed by loans being repaid or going bad. Periods of speculation often result in increasing leverage (e.g. borrowing to buy stocks/houses), which does result in the destruction of money when it unwinds (as well as damage to bank's balance sheets, which can become problematic when it happens at a large enough scale - see 2008).

A stock price decreasing essentially "vaporizes" the wealth of owners, that is not a straightforward transfer. Stocks aren't cash.

"capital" in the economic sense isn't money at all - it's tools, infrastructure, knowledge; from this point of view, you're correct. A bubble bursting on the stock market doesn't destroy capital.

On the other hand, the monetary value of the stock market (and other assets) going up and down does create or destroy "money". From a financial point of view, it's not a zero sum game.

Well, you need to pay taxes on each step.

This is incorrect. https://en.wikipedia.org/wiki/Money_creation . A bubble bursting is the inverse process of money creation. Money isn't paper bills or metal coins. It is mostly numbers in a computer.

VR is good example of money being burned and middling adoption to a not that big population. For average person it has ended up something cool, but in the end not common and forgettable. And I am not sure if it even was a bubble, but selected players just investing in it.

Influencers, streamers, crypto …

Housing is back …

Dotcom came back…

Nothing was a bubble. Dotcom was into a new paradigm shift with mobile in less then a decade. These aren’t even significant timelines when you think about it.

So you pull out of the AI hype today, fine. These past recent bubbles show that everything ramps back up within five years.

AI-is-hype people are delusional. The computer has never been able to do what it’s doing today. We could only dream of it.