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> Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not? People make the same specious arguments about gpu produ

by paulmd 2y ago

> Suppose you built twice as many housing units as you had residents. Rents wouldn't decrease? Why not? People make the same specious arguments about gpu production during mining booms etc. Surely producing more gpus will lower the price, or reduce the profit per gpu at least? Are you saying prices don’t fall with increased supply!?!? that’s a counterintuitive statement, Mr Bear! it just also turns out to be a true one. Getting more people into the bubble etc, or building more hype around the bubble, often only drives the bubble higher even with increased supply. Macro and micro are different things and the forces can work very differently! now, ponder the way we’ve turned housing into a bitcoin-style money machine full of people who never want the number to go down… yeah there actually is all sorts of counterintuitive and hazardous second-order effects involved in housing, why would you ever think there aren’t? (The American housing market is basically the exact same kind of “deflationary asset” as bitcoin by design, in fact - if the system is built around the idea the number can never go down (can never be allowed to go down, in fact) that’s what you’ve got, regardless of any actual utility delivered in the process. We have turned housing into bitcoin instead of a place to live and that’s the overarching problem here.) Maybe increasing the supply only increases the supply of luxury condos, which if they are all consumed by wealthy individuals might push housing prices upwards etc. Such activity could, similar to bitcoin, actually stimulate enough economic activity in an area itself to sustain upwards trajectory on pricing, or merely crowd everyone else out without prices actually dropping “on older condos” as everyone blithely handwaves. These effects are observable in real towns - Colorado mountain towns have a massive worker shortage yet no workers able to afford housing, so the area has been wracked with crippling labor shortages for multiple decades now! Markets are weird and inefficient in all kinds of exciting ways! https://www.rmpbs.org/blogs/news/breckenridge-historic-home-preservation/ https://www.rmpbs.org/blogs/news/breckenridge-historic-home-... https://www.nbcnews.com/news/amp/rcna17970 https://www.nbcnews.com/news/amp/rcna17970 Basically economics 101 is barely sufficient for economics 101, and frankly every assertion you can pull from such content is somewhat incorrect and massively oversimplified, even one as simple as “prices will decline if production volume increases”. No, not always - and that’s not the only case I can think of where that simple, confident assertion is completely wrong, it’s not true of giffen goods either for example.

AnthonyMouse 2y ago
> Surely producing more gpus will lower the price, or reduce the profit per gpu at least? But that is what happens. The issue with GPUs is that a) there are only a small number of companies that make them b) fab capacity has to be booked in advance, and c) they know it's a bubble, so they're not going to commit to buying a large amount of future fab capacity when it could pop at any time. So then they don't actually increase supply, and prices don't go down. > Maybe increasing the supply only increases the supply of luxury condos, which if they are all consumed by wealthy individuals might push housing prices upwards etc. Only in the sense that the average cost might increase because the average unit is now larger, not in the sense that the existing smaller units would cost more rather than less. After all, their occupants no longer have to outbid the wealthy individuals who have put their money into the new luxury units instead. > Such activity could, similar to bitcoin, actually stimulate enough economic activity in an area itself to sustain upwards trajectory on pricing The premise here is that if you make an area more attractive then more people may want to live there. But that's fine. Suppose building 10 units increases demand by 5 units. So if you need 10 more units, build 20 more units. In some kind of hypothetical edge case or rare circumstance, building 10 units might increase demand by 11 units, but that is obviously not sustainable -- if you built 50 million units, there aren't 50 million people in the region to live in the city, so at some point it stops being true, if it even ever was. > Markets are weird and inefficient in all kinds of exciting ways! This isn't markets being weird. If prices are high then construction companies want that money, which they get by building new housing. Weirdness only occurs when regulations interfere with their natural market incentive.
- Macha 2y ago
  > they know it's a bubble, Especially for nvidia, who have been badly burned by crypto bubbles going from 100->0 very rapidly in the past and ending up with massive oversupply of both used and new GPUs. Especially given the AI people are buying dedicated business GPUs and not gaming ones like the crypto miners were, that's probably good news for gamers that nvidia haven't gone full bore AI only. If they were, it wouldn't make sense to spend fab time on a new series of gaming GPUs as they have leaked they're doing.

by paulmd 2y ago

AnthonyMouse 2y ago

> Surely producing more gpus will lower the price, or reduce the profit per gpu at least? But that is what happens. The issue with GPUs is that a) there are only a small number of companies that make them b) fab capacity has to be booked in advance, and c) they know it's a bubble, so they're not going to commit to buying a large amount of future fab capacity when it could pop at any time. So then they don't actually increase supply, and prices don't go down. > Maybe increasing the supply only increases the supply of luxury condos, which if they are all consumed by wealthy individuals might push housing prices upwards etc. Only in the sense that the average cost might increase because the average unit is now larger, not in the sense that the existing smaller units would cost more rather than less. After all, their occupants no longer have to outbid the wealthy individuals who have put their money into the new luxury units instead. > Such activity could, similar to bitcoin, actually stimulate enough economic activity in an area itself to sustain upwards trajectory on pricing The premise here is that if you make an area more attractive then more people may want to live there. But that's fine. Suppose building 10 units increases demand by 5 units. So if you need 10 more units, build 20 more units. In some kind of hypothetical edge case or rare circumstance, building 10 units might increase demand by 11 units, but that is obviously not sustainable -- if you built 50 million units, there aren't 50 million people in the region to live in the city, so at some point it stops being true, if it even ever was. > Markets are weird and inefficient in all kinds of exciting ways! This isn't markets being weird. If prices are high then construction companies want that money, which they get by building new housing. Weirdness only occurs when regulations interfere with their natural market incentive.

Macha 2y ago
> they know it's a bubble, Especially for nvidia, who have been badly burned by crypto bubbles going from 100->0 very rapidly in the past and ending up with massive oversupply of both used and new GPUs. Especially given the AI people are buying dedicated business GPUs and not gaming ones like the crypto miners were, that's probably good news for gamers that nvidia haven't gone full bore AI only. If they were, it wouldn't make sense to spend fab time on a new series of gaming GPUs as they have leaked they're doing.