This of course hinges on the big if: does AI create wealth? I think yes, but maybe not $6 trillion of it in five years.
At a time when corporate CEOs are largely saying that they can't see that AI has improved office productivity at all, why should we believe that a killer productivity application of genai that's amazing enough to justify an order of magnitude increase in enterprise spending on productivity tools is just around the corner?
I think CEOs could honestly say it a year ago, but by now the numbers of those who say so should be dwindling.
Recent surveys by BCG and others suggest things have changed.
Personally, I know many people in different fields who’ve seen crazy speed ups in many of their tasks.
I'm using claude to make gaming mod apps I never would have bothered to code before, but they have zero monetizable value. There is demand for sure, but somewhat ironically, copyright/IP/TOS law stands in the way. The thing which committed the biggest copyright infringement in human history lets me make another thing which I can't release because of copyright law. I'd get cease-and-desisted instantly if I did so.
Many here are idiotic. Economic growth is measured via monetisation of output - not what you think is of value to you.
And employees self-reporting that they saved time doesn't necessarily mean they actually save time. Humans are famously crap at estimating that sort of thing.
Anecdotally, I've seen management using AI to produce more and more flashy looking dashboards and interactive displays of various metrics. Will this help our bottom line?
I see how useful AI tools are for myself and can't imagine it not changing the world over the next few decades.
If not then a) don’t diss the mba folks b) you don’t have as much conviction as you claim c) if you are then send a link so I can review?
Cheers
There is also the question of time scale. Growing a market takes time. Assuming the numbers above are the right order of magnitude, we are not going from 0.1 to 1 in a year. So even if the number would make sense over longer time frames, it can still be unsustainable for a significant amount of time before that.
Like the Internet at the end if the 1990s, basically.
But also the car business is far larger than the horse business ever was. It is not zero-sum; every time Henry Ford's factory spit out a new model T, real wealth was being created.
Money is just a standin for wealth. If we suddenly doubled the amount of wealth in the world, we could just print more dollars to match - or the existing dollars would just become worth twice as much.
For example, if I'm a landlord that uses AI to more intelligently price rental increases to maximize profit without attrition, I have created more revenue but not more wealth.
Play positive sum games.
That said, this came too late for investors in the dot-com boom. AI investors may find themselves in a similar situation.
Without smartphone, cellular networks etc you’d be miles off. Nobody had this in their thesis so they were plain wrong.
However, customers coming up with the money is the easy half of the problem. The hard part is having them pay you.
Wikipedia's valuation is on the small side of {number of people on the internet worldwide} * {peak price of Encyclopaedia Britannica} † despite containing a lot more content.
LLMs can only chase high margins while they're ahead of their competitors; the moment the investment stalls, open weighs catch up, they loose their edge. Cloud compute providers still win on supplying inference, but there too competition will likely lower margins, not justify huge valuations.
NVIDIA may remain as valuable as today, but their P/E ratio will likely shrink a lot even while keeping up the price.
Model makers still have a problem here even if the tech is so useful it rapidly grows the economy: "free" is right behind them almost immediately after they stop.
* under the assumption the tech is real; there's plenty of people here on Hacker News who still dismiss it as a "scam"
† that would be about 13 trillion USD, from what I read
If they keep replacing employees with AI, that is indeed the direction.
Eventually this merry-go-round runs into some issues if we don’t figure out a way to make this huge productivity boom work.
There's no hard and fast rule that humans need to be involved in the economy, it's just that until recently, you needed to pay them in order to have an economy that worked.
Corporations are legally people; give them enough brains, and they may become a real boy one day.
1) This would make stocks worth a lot more and produce more dividends so everyone owning stock would get money to spend.
2) Governments effectively indirectly own ~40% of all business profits via corporate taxes, capital gains taxes, dividend taxes, sales taxes. So governments would also have more revenues to spend/redistribute (this depends on governments not wasting it, spending it on wars etc.)
That doesn't mean the wheels won't fall off, they fall off pretty regularly as is.
The difference between this loop and the previous loops, is that people making the tech used to be pretty straightforward ("invest in me, your money will let me make a machine that lets me fire 90% of my peasants and we can share in the savings"), while today they're all "invest in me, either this will kill everyone or just make the concept of money irrelevant, either way rotflmao".
If this does or doesn't happen with AI kinda depends how fast it makes multiple different sections of the population unemployed, rather than just one group like "software developer" or "vehicle driver".
It took maybe a century and a half for the modern consumer economy to appear. And it didn't happen until money started being shared into the wider economy for political reasons, not technological ones.
Meanwhile the enclosure of common land was catastrophic for rural populations. Sources of food and pasture disappeared as the Big Houses took them over and turned them into huge single family estates.
Heh, got fired from my old company for reasons not connected to AI. Then couldn't find job. AI suggested one that is perfect for me, helped me put up webpage (I can do everything from electronics/firmware/backend/iot/cad, but nice webpage is not something I can do easily), then helps me every day to learn new things and make useful products I always wanted to make. And I found something safe for now from AI and big companies - making old equipment work with new systems. No one will touch it, because you have only small projects here and can't extract a lot of value at once, but a single person who can do anything with some help from AI can carve out a whole niche.
I think such solution - thousands of small niches by small entrepreneurs (1 person companies) who can use AI for some small skill they are lacking - are our future and they will absolutely extract a lot of money from people, who hope to make some more money with small optimisations of already working businesses. One example of such small optimisation - making a slightly better wood drying controller for small woodmill owner. He already put up small cabinet with cheap tuya controllers and needs to control them though atrocious app. Now I can make a small module that will add several more sensors, give him some simple dedicated control panel on webpage. Not even medium company would make such small product, because planning phase alone would cost more than what I can charge for whole system and do it in a week.
And it all started with one prompt - "Given my CV, what single person job would you recommend?"
The other factor that threatens the $6T required to justify... open source models crushing the pricing power of these companies. If I can use some open source agent management framework + self-hosted Qwen to basically replace my entire Product org for free, then why would I pay Microsoft/Google/Anthropic/OpenAI?
So, I have the following thoughts:
How much more productive can AI for knowledge work realistically make the global economy? 5%, 10%, 20%?
What if it also does robotics soon and can be deployed in manufacturing and construction? Can we get 50% more productive, or 200%?
Then there's science, medicine, and so on. Who is to say what happens if AI solves also that?
While I do not know if AI will be capable for these use cases, I see no reason to believe it unlikely that AI could be applicable to eg. robotics and speed up production by factor 3x.
Still though, the thesis seems based on an assumption that the companies would experience either major growth or major efficiency gain, neither of which really pass the smell test to me. Option 1 growth - money has to come from somewhere ultimately? Option 2 efficiency - put into profit rather than simple offset to AI provider?
Or the AI providers get companies hooked with subsidized pricing that unwinds later and you end up with the Uber/AirBNB situation of market capture and good product reverting to mean level of price/quality over time. Tinfoil hat thinks it ultimately gets squeezed out of retail investors in index funds.
They already figured they would need trillions revenue. So they paint an economic where such amount is plausible.
A ~40% reduction in employee compensation to source 6T, globally, seems a little more plausible.
Clearly, I'm eliding a ton of complexity/nuance.
Because spend on "enterprise productivity tooling" (or whatever category they want to place AI spend in) can now increasingly offset human labor cost.
AI is not a replacement for powerpoint and excel. You can't substitute those.
White collar worker salaries is ~$30T+ global.
LLMs can use PowerPoint, but also LLMs can write the raw document file directly without the software. One time I asked for a letter and what came out was it doing that.
What really matters with this though is reading other people's documents, whatever format they happen to be in. PowerPoint isn't the only game in town for creating slide decks, but if you want to be sure you can read all the ones sent to you, it used to be the case you'd need a copy.
Used to be. Now the AI can read and summarise the slides for you.
("AI, expand these bullet points into a slide deck" -> "AI, condense this slide deck into bullet points", as the meme goes).
I very much can.
That applies to most software.
This doesn't solve the problem of "Who gets paid now, and for what?" at all. If anything it makes it worse.
This "productivity" gain changes nothing. Software already optimized most of it in the past 20 years, the gains now are marginal, at best incremental.
The PowerPoint object is meant to be a package of one’s insights. If those insights are of zero value (the less time you spend the less value - correlation) - that time expended is a net negative for he firm’s productivity.
My point was that AI isn't some productivity software thing. The addressable market is white collar work that can be done on a computer.
You think its implausible for AI to replace some fraction of white collar workers? To me this is directionally exactly where this is heading?
Yes, it is. Software already did it. Better software (AI) can only marginally change what's already automated.
Either people don’t want to believe or they find it difficult to understand.
The only pipe dream AI has is to replace the human in totality. Otherwise it’s at best a complement.
But that's been conflated with "Actually a $2T Anthropic IPO makes perfect sense because they're going to replace white collar work."
As far as I can tell, it won't even accelerate a competitor who could bite off a piece of that. As far as I can tell, it won't even make the suite itself better, just buggier. Maybe MS themselves could fire %15 to %30 of the people who work on Office, but these companies have been vastly overhiring for years; they could have done that 10 years ago and they didn't.
- AI hype-mongers. We've dealt with these for decades in academia and industry, through countless boom/bust cycles. Yes, there's progress, but reality is boring and selective.
- Tech Bros. NFTs? The MeTaVeRsE? The CEOs of OpenAI, Anthropic, Meta, and SpaceX have proven repeatedly to be dishonest grifters chasing all and only money. They're like the tobacco industry of laughably dishonest at this point (and consistently wrong).
- Singularity grifters. The Kurzweil cultists flooding the ranks of lesswrong feel suddenly emboldened. They've been issuing batshit proclamations and navel gazing about AI alignment to anyone who will pay attention to them (and write them a check) for decades. It's no more connected to reality now than it was then.
- The LinkedIn hivemind. If you aren't transforming your organization to meet the new GenAI future, your company is BEHIND and you are FAILING AS A LEADER. Be the one firing white collar workers, not the one being fired. Make sure you look good on paper with bullshit performative AI initiatives or your ass is dust. Oh, no ROI? No problem. Read my book on NAVIGATING THE ENTERPRISE AI TRANSFORMATION. It's skin-deep and filled with empty platitudes and clip art, but it will make you look like a big brave tech leader, just like Steve Jobs or Dario.
- Investors. Yes, we're in a bubble. Yes, we've been in a bubble before. Yes, it's going to pop. Yes, that's going to be bad. Really bad, probably. Remember the financial crisis? Investors don't. And this time, there won't be a deep-pocketed government to bail anyone out, because debt is already sky-high and we're still recovering from COVID.
So while I get there's something there, and I'm keeping abreast of it and extracting the best and leaving the worst, it is an exhaustingly negative experience. My guard is up and I have absolutely run out of patience for bullshit. It's not funny or smart or interesting. It's not even fun to complain about. The forces in the mix are awful and I don't want anything to do with them.
because AI is gonna make them so much more productive of course. /s
productivity tooling replaces employees
Hard to see how Google or Facebook keeps their advertising models in that environment. There aren't enough construction workers and data scientists to buy everything.
which yes, will completely destroy the consumer economy and social structures and current forms of governance
That is hardly will be of any consolation. AI will probably destroy capitalism, but not because it will replace some useless f.ucks from their useless computer jobs (most of them will perfectly fine find another more useful job, if only way less paid), but because with surveillance and totalitarian control that AI capable of, socialists like Stalin or Hitler will build resilient and durable society where no member will have any way for resisting.
There will be, when two third of the office workers will be replaced by AI.
It is astounding why so many people does not understand how consumer economy works. I think it is more a matter of the copium, because, well, it is generally hard to accept the truth that in five years you will have to haul bricks as a job, and the guy who used to put that bricks on one another and make three times less than you in your tech job now will be your new boss.
And advertising models in that environment? Why should something changed for it?
Who re these people?