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Not everything has to be AI. You can run a small business infra for MUCH less than you did back then, especially if you adjust for inflation (!). Training AI m

Not everything has to be AI. You can run a small business infra for MUCH less than you did back then, especially if you adjust for inflation (!). Training AI models costs a fortune, but so far it's been just front-loading costs in hopes of a windfall. We'll see what actually happens.

boringg 3y ago
Front loading costs to eventually extract rents on usage with one hell of a capital wall protecting the assets. Its easier to spin up a business for sure -- also easier to unwind it - there not as sticky as they used to be.
- whatshisface 3y ago
  If the government can stay back far enough that more than one AI company can train their models, it will end up working like steel mills - barely enough profit to pay the massive cost of capital due to competition. If the government regulates the industry into a monopoly, all bets are off. Their investors are going to push hard for shutting the door behind them so watch out. The only question is - what tactic? I don't really know, but one trick I am aware of is "specifying to the vendor." In other words, the introduction of regulatory requirements that are at every step in the process a description of the most favored vendor's product. As the favored players add more features, potentially safety features, those features are required in new regulations, using very specific descriptions that more or less mandate that you reproduce the existing technology, to use a software engineer's term, bug-for-bug. If your product is better in some ways but worse in others, you might have a chance in the market - but to no avail, if the regulations demand exactly the advantages of the established suppliers.
  - woooooo 3y ago
    Funny example, US Steel was a textbook case for a monopoly achieved privately because it wasn't regulated against.
    - whatshisface 3y ago
      They were on top for a while, but later fell behind because they didn't invest. There were heavy tarrifs in place to "protect" the monopoly from foreign competition.
      - woooooo 3y ago
        All true, but the initial agglomeration was 100% private
        whatshisface 3y ago
        If privately arising monopolies could only be kept from buying out their regulators, they'd privately break down before they became too odious... for example Google, which for years was the only remotely good search engine, is now merely one of the better search engines. If there had been a "department of consumer information safety," staffed by the best industry professionals status can buy, that might have not happened.
- brookst 3y ago
  This is typically called a high fixed cost business, like airlines, hotels/apartments, SpaceX, etc. The dream may be barriers to entry that allow high margins (“rents” if you prefer the prejudicial), but all too often these huge capital costs bankrupt the company and lose money for investors (see: WeWork, Magic Leap). It is high risk, high return. Which seems fair.
  - boringg 3y ago
    I understand the economics concept. I'm not sure WeWork was a great example it had significant other challenges such as a self-dealing founder and, frankly, a poor long term model. I would wager that the concept needs a bit of a refresh as historically it has referred to high capital costs for the production of a hard good though in this case there is more than just a good produced theres a fair bit of influence and power associated with the good and a ton of downstream businesses that are reliant upon it if it goes according to plan.
    - renegade-otter 3y ago
      It's more like "disrupting the market". The problem is that it's a whole market. Uber just now turned its first profit since 2009, and I would wager that if not for the newly found appreciation of efficiency and austerity, it would still be burning through money like a drunken socialist sailor. Classic approach required basic math. "Here is my investment, here is what I am going to charge for rent". You actually can figure out when your investment starts paying off. This new "model" requires tall, loud, truth-massaging founders to "charm" VCs into giving away billions, with the promise of trillions, I guess. The founders do talk about conquering the world, like, a lot. I do not know what the WeWork investors were thinking when they expected standard real estate to "10x" their money while the tenants were drinking free beer on tap. The whole thing screamed "scam" even to a lay-person.
    - brookst 3y ago
      Agreed, and Magic Leap had its own problems. My point was just that “invest huge amounts of capital to create a moat and then monetize in the long run” Is an inherently risky strategy. Business would not work if society insisted that large, high risk investments could not product higher long term margins than less risky investments.

boringg 3y ago

Front loading costs to eventually extract rents on usage with one hell of a capital wall protecting the assets. Its easier to spin up a business for sure -- also easier to unwind it - there not as sticky as they used to be.

whatshisface 3y ago
If the government can stay back far enough that more than one AI company can train their models, it will end up working like steel mills - barely enough profit to pay the massive cost of capital due to competition. If the government regulates the industry into a monopoly, all bets are off. Their investors are going to push hard for shutting the door behind them so watch out. The only question is - what tactic? I don't really know, but one trick I am aware of is "specifying to the vendor." In other words, the introduction of regulatory requirements that are at every step in the process a description of the most favored vendor's product. As the favored players add more features, potentially safety features, those features are required in new regulations, using very specific descriptions that more or less mandate that you reproduce the existing technology, to use a software engineer's term, bug-for-bug. If your product is better in some ways but worse in others, you might have a chance in the market - but to no avail, if the regulations demand exactly the advantages of the established suppliers.
- woooooo 3y ago
  Funny example, US Steel was a textbook case for a monopoly achieved privately because it wasn't regulated against.
  - whatshisface 3y ago
    They were on top for a while, but later fell behind because they didn't invest. There were heavy tarrifs in place to "protect" the monopoly from foreign competition.
    - woooooo 3y ago
      All true, but the initial agglomeration was 100% private
      - whatshisface 3y ago
        If privately arising monopolies could only be kept from buying out their regulators, they'd privately break down before they became too odious... for example Google, which for years was the only remotely good search engine, is now merely one of the better search engines. If there had been a "department of consumer information safety," staffed by the best industry professionals status can buy, that might have not happened.
brookst 3y ago
This is typically called a high fixed cost business, like airlines, hotels/apartments, SpaceX, etc. The dream may be barriers to entry that allow high margins (“rents” if you prefer the prejudicial), but all too often these huge capital costs bankrupt the company and lose money for investors (see: WeWork, Magic Leap). It is high risk, high return. Which seems fair.
- boringg 3y ago
  I understand the economics concept. I'm not sure WeWork was a great example it had significant other challenges such as a self-dealing founder and, frankly, a poor long term model. I would wager that the concept needs a bit of a refresh as historically it has referred to high capital costs for the production of a hard good though in this case there is more than just a good produced theres a fair bit of influence and power associated with the good and a ton of downstream businesses that are reliant upon it if it goes according to plan.
  - renegade-otter 3y ago
    It's more like "disrupting the market". The problem is that it's a whole market. Uber just now turned its first profit since 2009, and I would wager that if not for the newly found appreciation of efficiency and austerity, it would still be burning through money like a drunken socialist sailor. Classic approach required basic math. "Here is my investment, here is what I am going to charge for rent". You actually can figure out when your investment starts paying off. This new "model" requires tall, loud, truth-massaging founders to "charm" VCs into giving away billions, with the promise of trillions, I guess. The founders do talk about conquering the world, like, a lot. I do not know what the WeWork investors were thinking when they expected standard real estate to "10x" their money while the tenants were drinking free beer on tap. The whole thing screamed "scam" even to a lay-person.
  - brookst 3y ago
    Agreed, and Magic Leap had its own problems. My point was just that “invest huge amounts of capital to create a moat and then monetize in the long run” Is an inherently risky strategy. Business would not work if society insisted that large, high risk investments could not product higher long term margins than less risky investments.