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All I can say is, - the insane frothing hype behind AI is showing me a new kind of market failure - where resources can be massively misallocated just because

• Retric 11mo ago
  This is part of how free markets self correct, misallocate resources and you run out of resources. You can blame irrational exuberance, bubbles, or whatnot markets are ultimately individual choices times economic power. Ai, Crypto, housing, Dotcom etc going back through history all had excess because it’s not obvious when to join and when to stop.
  • Dylan16807 11mo ago
    Usually companies run out of resources before they screw up global prices in massive markets. If it was a couple billion dollars of memory purchasing nobody would care.
    • ben_w 11mo ago
      > Usually companies run out of resources before they screw up global prices in massive markets. It happens more often than you might expect. The Onion Futures Act and what led to it is always a fun read: https://en.wikipedia.org/wiki/Onion_Futures_Act https://en.wikipedia.org/wiki/Onion_Futures_Act
    • Aerroon 11mo ago
      The problem is that memory manufacturing is hard enough that there are essentially 3 major companies that do it globally: Samsung, SK Hynix, and Micron.
  • an0malous 11mo ago
    > This is part of how free markets self correct, misallocate resources and you run out of resources. Except that these corporations will almost certainly get a bail out, under the auspices of national security or some other BS. The current admin is backed by the same VCs that are all in on AI.
• epistasis 11mo ago
  It is a weird form of centralized planning. Except there's no election to get on to the central committee, it's like in the Soviet era where you had to run in the right circles and have sway in them. There's too much group-think in the executive class. Too much forced adoption of AI, too much bandwagon hopping. The return-to-office fad is similar, a bunch of executives following the mandates of their board, all because there's a few CEOs who were REALLY worked up about it and there was a decision that workers had it too easy. Watching the executive class sacrifice profits for power is pretty fascinating. Edit: A good way to decentralize the power and have better decision making would be to have less centralized rewards in the capital markets. Right now are living through a new gilded age with a few barons running things, because we have made the rewards too extreme and too narrowly distributed. Most market economics assumes that there's somewhat equal decision making power amongst the econs. We are quickly trending away from that.
  • ohsoSad 11mo ago
    [dead]
  • smallmancontrov 11mo ago
    If you get paid for being rich in proportion to how rich you are -- because that's how assets work -- it turns into an exponential, runs away, and concentrates power until something breaks.
  • automatic6131 11mo ago
    We need better antitrust and anti-monopoly enforcement. Break up the biggest companies, and then they'll have to actually participate in markets.
    • epistasis 11mo ago
      This was Lina Khan's big thing, and I'd argue that our current administration is largely a result of Silicon Valkey no longer being able to get exits in the form or mergers and IPOs. Perhaps a better approach to anti-monopoly and anti-trust is possible, but I'm not sure anybody knows what that is. Khan was very well regarded and I don't know anybody who's better at it. Another approach would be a wealth and income taxation strategy to ensure sigmoid income for the population. You can always make more, but with diminishing returns to self, and greater returns to the rest of society.
• Retr0id 11mo ago
  I wonder, is there any way to avoid this kind of market failure? Even a planned economy could succumb to hype - promises that improved societal efficiency are just around the corner.
  • smallmancontrov 11mo ago
    There is a way, and if anyone tells you we have to go full Hitler or Stalin to do it they are liars because last time we let inequality cook this hard FDR and the New Deal figured out how to thread the needle and proved it could be done. Unfortunately, that doesn't seem to be the flavor of politics on tap at the moment. Sam Altman cornering the DRAM market is a joke, of course, but if the punchline is that they were correct to invest this amount of resources in job destruction, it's going to get very serious very quickly and we have to start making better decisions in a hurry or this will get very, very ugly.
  • swatcoder 11mo ago
    > Is there any way to avoid this kind of market failure? There are potentially undesirable tradeoffs and a whole new game of cheats and corruption, but you could frustrate rapid, concentrated growth with things like an increasing tax on raised funds. Right now, we basically let people and companies concentrate as much capital as they want, as rapidly as they want, with almost no friction, presumably because it helped us economically outcompete the adversary during the Cold War. Broadly, we're now afraid of having any kind of brake or dampener on investments and we are more afraid of inefficiency and corruption if the government were to intervene than we are of speculation or exploitation if it doesn't. In democratically regulated capitalism, there are levers to pull that could slow down this kind of freight train before it were to get out of control, but the arguments against pulling them remain more thoroughly developed and more closely held than those in favor of them.
    • amelius 11mo ago
      > there are levers to pull that could slow down this kind of freight train before it were to get out of control Care to share some keywords here?
• ohsoSad 11mo ago
  [dead]
• fabian2k 11mo ago
  They're treating it as a "winner takes it all"-kind of business. And I'm not sure this is a reasonable bet. The only way the massive planned investments make sense is if you think the winner can grab a very large piece of a huge pie. I've no idea how large the pie will be in the near future, but I'm even more skeptical that there will be a single winner.
  • sixothree 11mo ago
    What's odd about this is I believe there does exist a winner takes all technology. And that it's AR. The more I dream about the possibilities of AR, the more I believe people are going to find it incredibly useful. It's just the hardware isn't nearly ready. Maybe I'm wrong but I believe these companies are making some of the largest strategic blunders possible at this point in time.
    • sokoloff 11mo ago
      Why would AR be particularly likely to have a single winnner?
      • sixothree 11mo ago
        While the technical features are what attract me, I'm convinced what most people are going to be interested in are social features.
• testartr 11mo ago
  why do you think allocating hardware to gamers is proper usage? maybe AI cures cancer, or at least writes some code
  • ptero 11mo ago
    For example: allocating the resources to only few industries deprives everyone else: small players, hobbyists, gamers, tinkerers from opportunities to play with their toys. And small players playing with random toys is a source of multiple innovations.
  • fzeroracer 11mo ago
    What do you think happens when the majority of consumers are priced not only out of bread, but also circuses?
    • natebc 11mo ago
      History has told us it won't be good for the lords when that happens.
  • XorNot 11mo ago
    Or you could look at reality where it generates fake social media posts s lot and we could all ask, why is this valuable?
  • deleted 11mo ago
    [deleted]
  • missedthecue 11mo ago
    Unless I get all the resources I want, when I want, all at low prices, the market has obviously failed.
    • selfhoster11 11mo ago
      Yes, except unironically. A market that cannot efficiently serve the vast majority of the population is a failed market.
• scotty79 11mo ago
  > resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns That's basically what the rich usually do. They command disproportionate amount of resources and misallocate them freely on a whim, outside of any democratic scrutiny, squeezing incredible number of people and small buisness out of something. Whether that's a strength of the system or the weakness, I'm sure some rearch will show.
• tonyhart7 11mo ago
  how is that market failure??? this is literally market of supply and demand at its core
  • amelius 11mo ago
    yeah but the demand is based on empty promises
    • tonyhart7 11mo ago
      You are overthinking things
      • deleted 11mo ago
        [deleted]
  • TinkersW 11mo ago
    OpenAI appears to have bought the DRAM, not to use it, as they are apparently buying it in unfinished form, but explicitly to take it off the market and cause this massive price increase & squash competition. I would call that market manipulation(or failure if you wish)--in a just society Sam Alton would be heading to prison.
  • 1718627440 11mo ago
    It is the market working as expected, but it still failed to allocate money diversely.
• shiandow 11mo ago
  It's not exactly a new type of failure. It's roughly equivalent to Riccardian rent, or pecuniary externalities for the general term. Though I suppose this is a speculative variant, which could be worse somehow.
• lazide 11mo ago
  New type? Lol. It’s a classic ‘tulip bubble’.
  • missedthecue 11mo ago
    Not even. Tulips were non-productive speculative assets. NFTs were what the tulip was. The AI buildout is more like the railroad mania in the sense that there is froth but productive utility is still the output.
    • lazide 11mo ago
      Tulips also grew and could be bred. The actual underlying models of productive output for these AI tools is a tiny fraction (actually) of the mania, and can be trivially produced at massive quantity without the spend that is currently ongoing. The big bubble is because (like with tulips back then), there was a belief in a degree of scarcity (due to apparent novelty) that didn’t actually exist.
      • fragmede 11mo ago
        Just like the beautiful woman who's luxury bag purchase she doesn't actually need, we can sit here and judge her for it, but at the end of the day it's not our money she's buying Louis Vuitton with, and we're not the one she's going home with.
        • lazide 11mo ago
          Non sequitur of the day? Anyone who owns shares in US companies (most people here) both are ‘going home with’ the companies involved, and are buying ‘the bags’. Not to mention all the people buying the bonds used to fund the whole AI data center buildout, which is a ton of probably pension funds and old folks planning for retirement (also probably more than a few millionaire/billionaires!).
          • fragmede 11mo ago
• christophilus 11mo ago
  Markets are voting machines in the short term and weighing machines in the long term. We’re in the short term popularity phase of AI at the moment. The weighing will come along eventually.
• parineum 11mo ago
  > where resources can be massively misallocated It's a little ironic but to call this a market failure due to resource misalocation because prices are high when high prices is how misalocation is avoided. I'm a little suspicious that "misalocation" just means it's too expensive for you. That's a feature, not a bug.
• noosphr 11mo ago
  I disagree. We have been living on the investment of previous centuries and decades in the West for close to 40 years now. Everything is broken but that didn't matter because everything that needed a functioning physical economy had moved to the East. AI is the first industrial breakthrough in a century that needs the sort of infrastructure that previous industrial revolutions needed: namely a ton of raw power. The bubble is laying bare just how terrible infrastructure is and how we've ignored trillions of maintenance to give a few thousand people tax breaks they don't really need.
  • lawlessone 11mo ago
    >AI is the first industrial breakthrough in a century Is it?
    • abalashov 11mo ago
      Yeah, I don't know about that.
  • incompatible 11mo ago
    Why not follow the time-honoured approach and put the data centres in low-income countries?
    • noosphr 11mo ago
      Because you only do that once the tech has been comodatized and you have wrung all the benefit for your country that you can. The British didn't industrialise Indian for a reason.
      • lenkite 11mo ago
        The British deindustrialized India. https://en.wikipedia.org/wiki/De-industrialisation_of_India https://en.wikipedia.org/wiki/De-industrialisation_of_India
    • BadBadJellyBean 11mo ago
• outside1234 11mo ago
  Going to be awesome tho when OpenAI et al fail because the market is going to be flooded with cheap parts.
  • haunter 11mo ago
    Or not cause inflation, rising cost of living etc. People said the same about crypto GPUs but it never really happened in the end. Those cheap pre-LHR RTX cards never really entered the picture.
• abalashov 11mo ago
  > the insane frothing hype behind AI is showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns. This resonates deeply, especially to someone born in the USSR.
• lovich 11mo ago
  > the insane frothing hype behind AI is showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns. As someone who advocates that we only use capitalism as a tool in specific areas and try to move past it in other, I’ll defend it here to say that’s not really a market anymore when this happens. Hyper concentration of wealth is going to lead to the same issues that command economies have where the low level capital allocations(buying shit) isn’t getting feedback from everyone involved and is just going off one asshole’s opinion
• xpe 11mo ago
  > … showing me a new kind of market failure - where resources can be massively misallocated just because some small class of individuals THINK or HOPE it will result in massive returns. Technically speaking, this is not a market failure. [1] Why? Per the comment above, it is the individuals that are acting irrationally, right? The market is acting correctly according to its design and inputs. The market’s price adjustment is rational in response. The response is not necessarily fair to all people, but traditional styles of neoclassical economic analysis deaccentuate common notions of fairness or equality; the main goal is economic efficiency. I prefer to ask the question: to what degree is some particular market design serving the best interest of its stakeholders and society? In democracies, we have some degree of choice over what we want! I say all of this as a person who views markets as mechanisms not moral foundations. This distinction is made clear when studying political economic (economics for policy analysis) though I think it sometimes gets overlooked in other settings. If one wants to explore coordination mechanisms that can handle highly irrational demand spikes, you have to think hard. To some degree, one would have to give up a key aspect of most market systems — the notion of one price set by the idea of “willingness to pay”. [1] Market failure is a technical term within economics meaning the mechanism itself malfunctions relative to its own efficiency criteria.
• elorant 11mo ago
  Games eventually will move to consoles and the whole PC industry will take a huge hit.
  • bongodongobob 11mo ago
    I don't know if the term console even makes sense any more. It's a computer without a keyboard and mouse. And as soon as you do that, it's a PC. So I don't see how this makes any sense or will ever happen.
    • yunnpp 11mo ago
      Actually, a console is worse than a PC. It's main reason for existence is to enforce DRM on the user to protect copyright/IP.
  • fooey 11mo ago
    console ram isn't magically cheaper
  • phito 11mo ago
    Consoles are increasingly becoming PCs, so I don't see this happening
• adastra22 11mo ago
  It’s maybe new to you (you’re one of today’s lucky 10,000!), but this kind of market failure has been going on since at least the south sea bubble and tulip mania, if not all the way back to Roman times.
• layoric 11mo ago
  This happens when you get worse and worse inequality when it comes to buying power. The most accurate prediction into how this all plays out I think is what Gary Stevenson calls "The Squeeze Out" -> https://www.youtube.com/watch?v=pUKaB4P5Qns https://www.youtube.com/watch?v=pUKaB4P5Qns Currently we are still at the stage of extraction from the upper/middle class retail investors and pension funds being sucked up by all the major tech companies that are only focused on their stock price. They have no incentive to compete, because if they do, it will ruin the game for everyone. This gets worse, and the theory (and somewhat historically) says it can lead to war. Agree with the analysis or not, I personally think it is quite compelling to what is happening with AI, worth a watch.
• Melatonic 11mo ago
  Just like some of the crypto booms and busts if you time it right this could be a good thing. Buy on a refresh cycle when AWS dumps a bunch of chips and RAM used or refurbished (some places even offer warranty which is nice). And if the market crashes or takes a big dip then temporarily eBay will flood with high end stuff at good prices. Sucks for anyone who needs to upgrade in the next year or two though !
• refurb 11mo ago
  > the insane frothing hype behind AI is showing me a new kind of market failure I see people using "market failure" in weird ways lately. Just because someone thinks a use for a product isn't important, doesn't mean it's a market failure. It's actually the opposite - consumers are purchasing it at a price they value it. Someone who doesn't really need 128GB of ram won't pay the higher cost, but someone who does need it will.
• immibis 11mo ago
  The market failure results from those people having way more money than logic and economic principles dictate they should. A person would normally have to make a lot of good decisions in a row to get that much money, and would be expected continue making good decisions, but also wouldn't live long enough to reach these extreme amounts. However, repeated misallocation by the federal government over the last several decades (i.e. excessive money printing) resulted in people getting repeatedly rewarded for making the right kind of bad economic decisions instead.
• rr808 11mo ago
  Prices going up 2-3x is not market failure, its just another commodity cycle. If it went up 10-100x you might have a point.
• 1718627440 11mo ago
  There is a reason why there used to be market regulation and breaking up of monopolies. We are now-a-days trying out changes to the stable state from centuries, because that would be so yesterday, and will soon find out, why that state was chosen in the first place.