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I feel like the whole market at this point is just AI since big tech other than Apple are all massively invested into that. Everyone owns either the S&P or the

I feel like the whole market at this point is just AI since big tech other than Apple are all massively invested into that. Everyone owns either the S&P or the total world ETF which are both heavily skewed towards big tech and this trade - so literally everybody is in it. It might go well for a few more quarters/years but once something breaks or gets exponentially cheaper this will take down the whole market with it.

netcan 5mo ago
It's just hard to tell the difference between "real" demand and "circular." That's the concern. PG had an essay about this during the dotcom, when he worked at yahoo. Iirc...Yahoo's share price and other big successes in the space attracted investment into startups. Startups used that money to advertise on yahoo. Yahoo bought some of these the startups. So... a lot of the revenue used to analyze companies for investment was actually a 2nd order side effect of these investments. Here the risk is that we have Ai investments servicing Ai investments for other Ai investments. Google buys Nvidia chips to sell anthropic compute. Anthropic sells coding assist to Ai companies (including Google and Nvidia). They buy anthropic services with investor money that is flowing because of all this hype. Imo the general risk factor is trying to get ahead of actual worldly use. The Ai optimists have a sense that Ai produces things that are valuable (like software) at massive scale...that is output. But... even if true, it will take a lot of time, and lot of software for the Econony to discover this, go through the path dependencies and actually produce value. The most valuable, known software has already afy been written. The stuff that you could do, but haven't yet is stuff that hasn't made the cut. Value isn't linear.
- datavirtue 5mo ago
  I'm starting to transition how we build software at our company due to the power of AI. No more: five code monkey contractors under a lead. Two top-notch devs are all that is needed now, unrestrained by sprints and mindless ceremonies. There is going to be a giant sucking sound in India. I can't continue the current model. The dev that gets AI is done in five hours, the ones that don't are thrashing for the next two weeks. I have to unleash the good AI dev. I have the Product team handing us markdown files now with an overview of the project and all the details and stories built into them. I'm literally transforming how a billion dollar company works right now because of this. I have Codex, Claude and GitHub Copilot enterprise accounts on top of Office 365. Everyone is being trained right now as most devs are behind, even.
  - liendolucas 5mo ago
    And the day you don't have that drug what do you do? If anything you are training people to become dependent on one or more subscription services.
    - bethekidyouwant 5mo ago
      Like the drug of electricity and Internet, running water grocery stores?
      - nocman 5mo ago
        I don't think the likelyhood of "electricity and Internet, running water grocery stores" being pulled out from underneath you (either by long term failure or prohibitive cost changes) is anywhere near as high as it is for subscription-based AI tools (at least not in the US).
        TeMPOraL 5mo ago
        That was a factor with electricity early on as it was first put to use. The flip side of the infamous "does it make the beer taste better?" adage/nonsense is that, per the story, back then you had breweries build their own power plants, because electricity was just that useful. It took a while for the market to start feeling comfortable with reliability of electricity supply and price point.
    - throwaway173738 5mo ago
      Solidworks is also a subscription service.
  - netcan 5mo ago
    Ok... but extrapolating from this to "whole market" paradigms is speculative. The (imo) question isn't how you produce software, but what the value of this software is. Are you going to make make/better software such that customers pay more, or buy more? Are those customers getting value of this kind? The answer may be yes. But... it's not an automatic yes. Instead of programming think of accounting. Say you experience what you are experiencing, but as an accountant. 6 person team replaced by 2-3 hotshots. So... Maybe you can sell more/better accounting for a higher price. But... potential is probably pretty limited. Over time, maybe business practices will adjust and find uses for this newly abundant capacity. Maybe you lower prices. Maybe the two hotshot earn as much as the previous team. If you are reducing team size, and that's the primary benefit... the fired employees need to find useful emplyment elsewhere in the economy for surplus value to be realized. Mediating all this is the law of diminishing returns. At any given moment, new marginal resources have less productive value than the current allocation.
- jmalicki 5mo ago
  While value isn't linear, prejudgement of value for allocation of resources is very imperfect. A lot of stuff that doesn't make the cut is the the stuff that does have value. When you're lowering the bar, remember it's a noisy bar - so a lot more good stuff is going to come through as well.
  - netcan 5mo ago
    Yes.. I agree. .. and that entropy can be where all the ultimate value is. That said... considering the point at hand is the context, it's important to start with the diminishing marginal returns. To give a simple example... Google and FB do not have "invest able software opportunities" at hand. They've been searching everywhere for nails for their "build software" hammer. They are well resourced and risk tolerant. The diminishing returns curve for "more software" is steep. Good stuff coming through often starts with $100m markets becoming $1bn markets. That's not even noise at the scale they're thinking about. Long term, sure. Plausibility range is as wide at it has maybe ever been. But... systemic value is hard to make.
    - jmalicki 5mo ago
      Most places I've worked have roadmaps, i.e. investable priorities. If you can burn through lower priority experiments quickly it's great! They might be working on all of the super high level things they can think of, but there are always more A/B tests, more features, etc. that are just lower priority, and the chaos of scaling up the org to address them all is super linear whereas the return on going down the list is sub linear. So you end up with an equilibrium. If the cost shifts, just like in econ 101, the output will change.
dvfjsdhgfv 5mo ago
> literally everybody I personally make sure I really diversify, so that when I buy funds, I buy those with stocks of EU companies which pay dividends. AFAICT there are 0 European AI companies that pay dividends.
- twic 5mo ago
  There are zero US pure-play AI companies which pay dividends, right? You have to go pretty far down the list of holdings (under "Holding details") to find any big bets on AI: https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/portfolio-data https://www.vanguardinvestor.co.uk/investments/vanguard-ftse...
- bluGill 5mo ago
  For tax reasons most companies are avoiding paying dividends. It still happens but it's not nearly as common and companies are trying to get away from it because for many investors it is better not to have dividends paid.

netcan 5mo ago

It's just hard to tell the difference between "real" demand and "circular." That's the concern. PG had an essay about this during the dotcom, when he worked at yahoo. Iirc...Yahoo's share price and other big successes in the space attracted investment into startups. Startups used that money to advertise on yahoo. Yahoo bought some of these the startups. So... a lot of the revenue used to analyze companies for investment was actually a 2nd order side effect of these investments. Here the risk is that we have Ai investments servicing Ai investments for other Ai investments. Google buys Nvidia chips to sell anthropic compute. Anthropic sells coding assist to Ai companies (including Google and Nvidia). They buy anthropic services with investor money that is flowing because of all this hype. Imo the general risk factor is trying to get ahead of actual worldly use. The Ai optimists have a sense that Ai produces things that are valuable (like software) at massive scale...that is output. But... even if true, it will take a lot of time, and lot of software for the Econony to discover this, go through the path dependencies and actually produce value. The most valuable, known software has already afy been written. The stuff that you could do, but haven't yet is stuff that hasn't made the cut. Value isn't linear.

datavirtue 5mo ago
I'm starting to transition how we build software at our company due to the power of AI. No more: five code monkey contractors under a lead. Two top-notch devs are all that is needed now, unrestrained by sprints and mindless ceremonies. There is going to be a giant sucking sound in India. I can't continue the current model. The dev that gets AI is done in five hours, the ones that don't are thrashing for the next two weeks. I have to unleash the good AI dev. I have the Product team handing us markdown files now with an overview of the project and all the details and stories built into them. I'm literally transforming how a billion dollar company works right now because of this. I have Codex, Claude and GitHub Copilot enterprise accounts on top of Office 365. Everyone is being trained right now as most devs are behind, even.
- liendolucas 5mo ago
  And the day you don't have that drug what do you do? If anything you are training people to become dependent on one or more subscription services.
  - bethekidyouwant 5mo ago
    Like the drug of electricity and Internet, running water grocery stores?
    - nocman 5mo ago
      I don't think the likelyhood of "electricity and Internet, running water grocery stores" being pulled out from underneath you (either by long term failure or prohibitive cost changes) is anywhere near as high as it is for subscription-based AI tools (at least not in the US).
      - TeMPOraL 5mo ago
        That was a factor with electricity early on as it was first put to use. The flip side of the infamous "does it make the beer taste better?" adage/nonsense is that, per the story, back then you had breweries build their own power plants, because electricity was just that useful. It took a while for the market to start feeling comfortable with reliability of electricity supply and price point.
  - throwaway173738 5mo ago
    Solidworks is also a subscription service.
- netcan 5mo ago
  Ok... but extrapolating from this to "whole market" paradigms is speculative. The (imo) question isn't how you produce software, but what the value of this software is. Are you going to make make/better software such that customers pay more, or buy more? Are those customers getting value of this kind? The answer may be yes. But... it's not an automatic yes. Instead of programming think of accounting. Say you experience what you are experiencing, but as an accountant. 6 person team replaced by 2-3 hotshots. So... Maybe you can sell more/better accounting for a higher price. But... potential is probably pretty limited. Over time, maybe business practices will adjust and find uses for this newly abundant capacity. Maybe you lower prices. Maybe the two hotshot earn as much as the previous team. If you are reducing team size, and that's the primary benefit... the fired employees need to find useful emplyment elsewhere in the economy for surplus value to be realized. Mediating all this is the law of diminishing returns. At any given moment, new marginal resources have less productive value than the current allocation.
jmalicki 5mo ago
While value isn't linear, prejudgement of value for allocation of resources is very imperfect. A lot of stuff that doesn't make the cut is the the stuff that does have value. When you're lowering the bar, remember it's a noisy bar - so a lot more good stuff is going to come through as well.
- netcan 5mo ago
  Yes.. I agree. .. and that entropy can be where all the ultimate value is. That said... considering the point at hand is the context, it's important to start with the diminishing marginal returns. To give a simple example... Google and FB do not have "invest able software opportunities" at hand. They've been searching everywhere for nails for their "build software" hammer. They are well resourced and risk tolerant. The diminishing returns curve for "more software" is steep. Good stuff coming through often starts with $100m markets becoming $1bn markets. That's not even noise at the scale they're thinking about. Long term, sure. Plausibility range is as wide at it has maybe ever been. But... systemic value is hard to make.
  - jmalicki 5mo ago
    Most places I've worked have roadmaps, i.e. investable priorities. If you can burn through lower priority experiments quickly it's great! They might be working on all of the super high level things they can think of, but there are always more A/B tests, more features, etc. that are just lower priority, and the chaos of scaling up the org to address them all is super linear whereas the return on going down the list is sub linear. So you end up with an equilibrium. If the cost shifts, just like in econ 101, the output will change.

dvfjsdhgfv 5mo ago

> literally everybody I personally make sure I really diversify, so that when I buy funds, I buy those with stocks of EU companies which pay dividends. AFAICT there are 0 European AI companies that pay dividends.

twic 5mo ago
There are zero US pure-play AI companies which pay dividends, right? You have to go pretty far down the list of holdings (under "Holding details") to find any big bets on AI: https://www.vanguardinvestor.co.uk/investments/vanguard-ftse-all-world-high-dividend-yield-ucits-etf-usd-distributing/portfolio-data https://www.vanguardinvestor.co.uk/investments/vanguard-ftse...
bluGill 5mo ago
For tax reasons most companies are avoiding paying dividends. It still happens but it's not nearly as common and companies are trying to get away from it because for many investors it is better not to have dividends paid.