5 ms·

Imagine if LLMs didn't exist, tech companies hadn't massively invested in compute and money was put elsewhere, perhaps dividends. In that world, a tech company

by wrasee 2y ago

Imagine if LLMs didn't exist, tech companies hadn't massively invested in compute and money was put elsewhere, perhaps dividends. In that world, a tech company could arbitrarily invest in multibillion dollar high performance computers for no particular reason. Following the argument, with all that compute on site with nothing to do engineers would would find something interesting and all other companies that didn't invest would be missing out on that revolution. So by the argument, any tech company could gain a competitive advantage by any non-strategic investment on the assumption that it will always work out. But of course, this only works if you have infinite money and infinite opportunity to speculate. As soon as your resources are constrained, then strategic choice becomes the dominant factor and your CEO has a lot of explaining to do.

JonChesterfield 2y ago
What we have here though is the fear of being the company that didn't make that investment while your peers did. That has a completely different risk schedule on it. If it's a mistake, your excuse is that your competition did it too and you wanted to guard against being left behind. If it works, everyone is happy. If you're the only company making that speculative investment, it's great if it works and you might be fired by the board if it doesn't.
- wrasee 2y ago
  But the risk/reward is the same regardless of the frame of reference. It's the difference in the perceived risk between gaining $10 and not loosing $10, even when the odds are the same. And we know that while rationally its the same, _loss aversion_ is a cognitive bias that makes people behave differently in these two cases. But FOMO is something we should be mitigating against, since our fear alone doesn't change the actual odds. But I will take your point that you have more cover for making a bad decision if you know all your competitors are making the same bad decision. But you still missed the opportunity to not make a bad decision and therefore get ahead. The actual risk remains the same.
  - JonChesterfield 2y ago
    Funnily enough it kind of isn't. From the perspective of the company itself, it's performance relative to the competition that matters. Not buying the machine when others do is a win if the machines don't work out. From the perspective of the people running a successful company, it's much more important to make easily defensible reasonable decisions than to make ambitious ones. You protect the capital in preference to maximising returns. Major gains are somewhat rewarded and major failures severely punished, with a comfortable baseline if you maintain the current positioning. If you're not yet a successful megacorp, all the dials are turned in favour of risk because you need the reward. Lots of incomers doing riskier things seeking to overthrow the incumbent is roughly how we get a turnover of companies and a degree of overall progress. I think this round is interesting because the incumbents have seen substantial competitive risk which could otherthrow them on an alarmingly short timescale (i.e. while the current leadership are still there), and that has induced otherwise fairly unlikely massive capex spend.

by wrasee 2y ago

JonChesterfield 2y ago

What we have here though is the fear of being the company that didn't make that investment while your peers did. That has a completely different risk schedule on it. If it's a mistake, your excuse is that your competition did it too and you wanted to guard against being left behind. If it works, everyone is happy. If you're the only company making that speculative investment, it's great if it works and you might be fired by the board if it doesn't.

wrasee 2y ago
But the risk/reward is the same regardless of the frame of reference. It's the difference in the perceived risk between gaining $10 and not loosing $10, even when the odds are the same. And we know that while rationally its the same, _loss aversion_ is a cognitive bias that makes people behave differently in these two cases. But FOMO is something we should be mitigating against, since our fear alone doesn't change the actual odds. But I will take your point that you have more cover for making a bad decision if you know all your competitors are making the same bad decision. But you still missed the opportunity to not make a bad decision and therefore get ahead. The actual risk remains the same.
- JonChesterfield 2y ago
  Funnily enough it kind of isn't. From the perspective of the company itself, it's performance relative to the competition that matters. Not buying the machine when others do is a win if the machines don't work out. From the perspective of the people running a successful company, it's much more important to make easily defensible reasonable decisions than to make ambitious ones. You protect the capital in preference to maximising returns. Major gains are somewhat rewarded and major failures severely punished, with a comfortable baseline if you maintain the current positioning. If you're not yet a successful megacorp, all the dials are turned in favour of risk because you need the reward. Lots of incomers doing riskier things seeking to overthrow the incumbent is roughly how we get a turnover of companies and a degree of overall progress. I think this round is interesting because the incumbents have seen substantial competitive risk which could otherthrow them on an alarmingly short timescale (i.e. while the current leadership are still there), and that has induced otherwise fairly unlikely massive capex spend.