5 ms·

> since investor money is spent exactly once So I'm nitpicking here, but this seems to me to be an important nitpick: This is not true because money circulates

> since investor money is spent exactly once So I'm nitpicking here, but this seems to me to be an important nitpick: This is not true because money circulates. The distinction is, one should not stop looking at only the first level effects, but the entire fields the money streams flow through. It remains true that money flows in specific areas, but it is on a higher level than only the immediate first level spending, so the analysis has to be different too.

lqstuart 1y ago
Like, for example, NVIDIA investing billions back into OpenAI so that they can buy more of NVIDIA’s hardware
- nosianu 1y ago
  That money will still flow elsewhere.
  - llamatastic 1y ago
    Your house is in flames? Don't worry that energy will flow elsewhere
  - tylerhou 1y ago
    Money circulates but resources do not. A human hour spent constructing a data center can’t then be used to build an apartment building.
    - nosianu 1y ago
      Yes, and??? How is that relevant? We were talking about money, explicitly. Not the resources. When the economy still has room, i.e. people are available to do more, then any missing resources can be obtained by sooner or later by employing people. This is not about the body or the land, but about the blood or the water flowing through them.
      - teiferer 1y ago
        > Yes, and??? How is that relevant Because it describes exactly the point which GGP tried to make (source: that was me). The assumption is that AI growth is great because without it, look at how low the non-AI growth is! But that argument is flawed because the resources (manpower, materials, manufacturing, energy, ...) absent the AI hypr would not vanish but be used for something else, so the growth in those other areas would be bigger. Granted, perhaps not as big (marginal gains and all that), but the painted picture is still skewed.
        nosianu 1y ago
        I even quoted it! I respond3ed to what I quoted exactly. Again: > since investor money is spent exactly once In addition, I even pointed out that I was not posting about the main argument! Quoting myself, again: > So I'm nitpicking here
vlovich123 1y ago
That only works in the long term if the investments pay off, generating enough returns to then create a new generation of entrepreneurs and investors who simulate the economy further. If they don’t, that money kind of vanishes - it pays for salaries partially but those aren’t generally enough to stimulate meaningful amounts of angel investors. It also buys capex equipment that depreciates in value (and presents a fixed value amount of sales for the manufacturers of said equipment, not reliably repeating sales over a long time period ).
- nosianu 1y ago
  > That only works in the long term Eh... No? The money flows on pretty quickly, unless they keep it as cash under their mattress. Are you confusing it with any possible effects or work performed? > generating enough returns Ah I see the confusion. No, they don't have to wait for "returns". We are talking about THAT money, the exact investor money they got. Which they will spend again. Even if they just keep it at the bank, it will be available to that bank to do something with. The fate of that business does not matter, all that matters is that the investor money they took is going to continue to flow, outwards from them to whomever the company pays with that money. And so does everybody else. The flow only stops when the money is lying around somewhere, and since that's the bank then at least the bank can do something with it. The flows truly stop when the whole economy is going down, when everybody cuts back on spending, and investments dry up too, so that the money is truly just lying around and nobody wants it.
  - vlovich123 1y ago
    You're reasoning would seem to imply that because the initial investment cash always ends up circulating, no value is ever destroyed. But that's obviously not how things work because value can be destroyed. Specifically, the way it works is that for example $1B is used to buy a part of the company A. $1B is then put to use and starts circulating (but also not entirely - it does indeed just largely sit in a bank account because it's hard to spend $1B that quickly). Let's say this investment then raises the market cap of the company that was invested in by $5-10B. Loans are then taken out against that $5-10B of increased market cap. If the growth never materializes, then the investment ends up underwater and there's secondary effects that make the loan worth less than what was given; this is what the credit worthiness is supposed to measure, but with hyperinflated values and lots of money as collateral these loans are given great rates. Basically what ends up happening is extra virtual currency starts circulating mirroring the increased market cap due to that initial $1B investment. But if the return on investment doesn't materialize, this $5-10B of currency just vanishes into thin air and dwarfs the original $1B investment. Additionally, there's leveraged secondary and tertiary bets that get taken out that further magnify this circulating currency and magnifies the loss if things don't work out. This is precisely what happened in the dot com and banking crises bubbles. These things have secondary parasitic effects that are ballooned through leveraged investments into affecting the broader worldwide economy and crossing industries and whatnot.
datadrivenangel 1y ago
If I invest in lighting money on fire, there is no money to circulate. Paying my staff to light money on fire means that some of the money will circulate, and my brilliant idea to decarbonize the economy by replacing coal with printed currency will result in some benefits (much much less than the costs), but fundamentally it is not a productive endeavor. The AI Data center build out is much more useful than purely lighting money on fire, but if we overpay for more than it is actually ultimately worth, than it still was a bad idea.

lqstuart 1y ago

Like, for example, NVIDIA investing billions back into OpenAI so that they can buy more of NVIDIA’s hardware

nosianu 1y ago
That money will still flow elsewhere.
- llamatastic 1y ago
  Your house is in flames? Don't worry that energy will flow elsewhere
- tylerhou 1y ago
  Money circulates but resources do not. A human hour spent constructing a data center can’t then be used to build an apartment building.
  - nosianu 1y ago
    Yes, and??? How is that relevant? We were talking about money, explicitly. Not the resources. When the economy still has room, i.e. people are available to do more, then any missing resources can be obtained by sooner or later by employing people. This is not about the body or the land, but about the blood or the water flowing through them.
    - teiferer 1y ago
      > Yes, and??? How is that relevant Because it describes exactly the point which GGP tried to make (source: that was me). The assumption is that AI growth is great because without it, look at how low the non-AI growth is! But that argument is flawed because the resources (manpower, materials, manufacturing, energy, ...) absent the AI hypr would not vanish but be used for something else, so the growth in those other areas would be bigger. Granted, perhaps not as big (marginal gains and all that), but the painted picture is still skewed.
      - nosianu 1y ago
        I even quoted it! I respond3ed to what I quoted exactly. Again: > since investor money is spent exactly once In addition, I even pointed out that I was not posting about the main argument! Quoting myself, again: > So I'm nitpicking here

vlovich123 1y ago

That only works in the long term if the investments pay off, generating enough returns to then create a new generation of entrepreneurs and investors who simulate the economy further. If they don’t, that money kind of vanishes - it pays for salaries partially but those aren’t generally enough to stimulate meaningful amounts of angel investors. It also buys capex equipment that depreciates in value (and presents a fixed value amount of sales for the manufacturers of said equipment, not reliably repeating sales over a long time period ).

nosianu 1y ago
> That only works in the long term Eh... No? The money flows on pretty quickly, unless they keep it as cash under their mattress. Are you confusing it with any possible effects or work performed? > generating enough returns Ah I see the confusion. No, they don't have to wait for "returns". We are talking about THAT money, the exact investor money they got. Which they will spend again. Even if they just keep it at the bank, it will be available to that bank to do something with. The fate of that business does not matter, all that matters is that the investor money they took is going to continue to flow, outwards from them to whomever the company pays with that money. And so does everybody else. The flow only stops when the money is lying around somewhere, and since that's the bank then at least the bank can do something with it. The flows truly stop when the whole economy is going down, when everybody cuts back on spending, and investments dry up too, so that the money is truly just lying around and nobody wants it.
- vlovich123 1y ago
  You're reasoning would seem to imply that because the initial investment cash always ends up circulating, no value is ever destroyed. But that's obviously not how things work because value can be destroyed. Specifically, the way it works is that for example $1B is used to buy a part of the company A. $1B is then put to use and starts circulating (but also not entirely - it does indeed just largely sit in a bank account because it's hard to spend $1B that quickly). Let's say this investment then raises the market cap of the company that was invested in by $5-10B. Loans are then taken out against that $5-10B of increased market cap. If the growth never materializes, then the investment ends up underwater and there's secondary effects that make the loan worth less than what was given; this is what the credit worthiness is supposed to measure, but with hyperinflated values and lots of money as collateral these loans are given great rates. Basically what ends up happening is extra virtual currency starts circulating mirroring the increased market cap due to that initial $1B investment. But if the return on investment doesn't materialize, this $5-10B of currency just vanishes into thin air and dwarfs the original $1B investment. Additionally, there's leveraged secondary and tertiary bets that get taken out that further magnify this circulating currency and magnifies the loss if things don't work out. This is precisely what happened in the dot com and banking crises bubbles. These things have secondary parasitic effects that are ballooned through leveraged investments into affecting the broader worldwide economy and crossing industries and whatnot.

datadrivenangel 1y ago

If I invest in lighting money on fire, there is no money to circulate. Paying my staff to light money on fire means that some of the money will circulate, and my brilliant idea to decarbonize the economy by replacing coal with printed currency will result in some benefits (much much less than the costs), but fundamentally it is not a productive endeavor. The AI Data center build out is much more useful than purely lighting money on fire, but if we overpay for more than it is actually ultimately worth, than it still was a bad idea.