4 ms·
Commodification of Intelligence: Good, Bad, and Ugly Circular AI Deals
- cl42 2mo agoObserving how the US stock market is behaving this week (up-down-up-down...), I feel like many investors don't appreciate the distinction between good and bad circularity.
- gadflyinyoureye 2mo agoPart of the market issues this week are Korea imploding and Japan about to implode. Japan's bond rate moving up could mean the end of the carry trade. Korea apparently has many stock tickers but only two distinct companies behind them. This caused their market and their overly leveraged retail investors a lot of pain.
- cl42 2mo agoGood point. Do you think the NASDAQ selloff will recover once Korea stabilizes?
- gadflyinyoureye 2mo agoEventually. I'm a bit concerned about it right now. I think SpaceX showed that the AI story is weaker than promoted. This will make people wonder about all the money going into it. If the bubble pops, the blow back on that particular index will be huge. Maybe dotcom bursting huge. But after 15 years QQQ move positive.
- cl42 2mo agoSpaceX is a really interesting one, tbh, especially in the context of circular deals... they're making $2b/month leasing their data centers to Anthropic and Google, which is a huge markup. ... but then again... if they are leasing the compute then it implies their own AI work isn't paying off? In short: I agree with you.
- AlexCoventry 2mo agoSpaceX mainly showed how corrupt securities regulation has become in the US. It was already quite corrupt, but there's no way that IPO would have flown under the Biden administration.
- andiey 2mo agoIf healthy and risky circular financing deals look similar at first, how can investors or regulators tell when a circular deal has crossed the line into something dangerous...especially when it's off the balance sheets?
- cl42 2mo agoThis has been bugging me quite a bit. I think the more "off-balance-sheet" the deal is, the shadier it gets... But it's really hard to tell early on. I actually think Nvidia's deals have been above-board, generally speaking, because they are transaprent. Less true for Meta and Terawulf.
- firasd 2mo agoI think the real question in all sorts of financial setups is really “is the dollar actually worth a dollar”. So when company A invests in company B which buys from company A the actual question is whether the valuation of the investment and the valuation of the purchase is correct or are they getting high on their own supply
- dragontamer 2mo agoA recession is a cash/dollar bubble. First cash/dollars are considered bad so they collapse in price. When the psychology shifts, suddenly the dollar climbs in value and itself bubbles over, causing a recession.
- cl42 2mo agoNot sure if you're referring to dollars as an alternative to other forms of cash (e.g., treasuries, money market funds, etc.) or as an alternative to other currencies (e.g., Euro, Yen, etc.). If it's the latter, then I think we've seen recessions and booms where the opposite happens, depending on the balance of payments situation.
- dragontamer 2mo agoCash/dollars with respect to 10Y Bonds, Stocks, or other instruments. When Cash becomes king, for whatever reason, it behooves the economy to sell of all other assets and buy Cash. The closer to cash you get (1Y high grade commercial paper, 1Y Treasury, 3M Treasury, 1 month commercial paper, money market, savings account, dollars under a mattress...), the better you deal with such circumstances.
- Animats 2mo agoWhether inference hardware will be a commodity remains to be seen. We had twenty years of most servers being x86-64. That's commodity compute. Inference hardware isn't a mature architecture yet. There will be progress and obsolescence.
- asdf88990 2mo agoIt will be in less than 5 years. You can already buy second hand RTX3090 TIs and with most of modern Macs being able to run some mind of AU locally already, in 5 years, things will be very commodified once you get the Chinese start rolling out Cuda-compatible GPUs.
- rambambram 2mo ago> commodification of intelligence Is HN really this fast!? Everybody already skipped the hard questions whether LLMs are intelligent? 'It' can already be commodified? So how much time and effort it took from these companies? A couple of years and millions spent on PR? And LLMs are "intelligent" all of a sudden, is what everybody says nowadays? Especially applicable for programmers: naming things is not only hard, it's also important, and can be very insidious. Remember, marketeers also name things. For example, naming the internet 'the cloud', some 15 years ago. I can't stop thinking about a quote of one of my favorite authors (Theo Kars): "Progress can only be technical in nature, because knowledge is transferable and wisdom is not." [translated from Dutch]
- root_axis 2mo agoI'm pretty skeptical of the LLM hype, but I'd say it's fair to describe LLMs as displaying some form verbal intelligence.
- zormino 2mo agoExactly this. LLMs are already some form of useful, and have some kind/level of intelligence. We don't need to get to AGI before AI has uses. It isn't a step function and it isn't all or nothing. Even if LLMs get no better than they are today, we will still have valid practical applications that use them.
- Forgeties79 2mo ago> We don't need to get to AGI before AI has uses. Has anyone said otherwise?
- leptons 2mo ago> Even if LLMs get no better than they are today, we will still have valid practical applications that use them. That's only true when they are heavily, heavily subsidized. If that $200/month spend could or should be $2000/month, or maybe even as high as $20,000/month, would it still be "practical"? The truth is we don't really know what these tokens actually cost - the actual cost of the data center, the hardware in the datacenter, the fantastic amounts of electricity it uses daily, the warming of the planet, etc, etc... Are you sure you want to frame them as "practical"?
- WalterGR 2mo agoRecently: "Nvidia, CoreWeave, and Nebius: Inside the Circular Financing of the GPU Boom" (io-fund.com) https://news.ycombinator.com/item?id=48873836 https://news.ycombinator.com/item?id=48873836 370 points| 18 days ago | 182 comments
- stego-tech 2mo agoExcellent piece, but it does hinge on the idea that what we’re building is actual AI (still hotly debated), if it can be successfully commoditized like utilities (very unlikely given compute continuously evolves and the hardware cycles of datacenters relative to power plants or water filtration systems), and if such a healthy cycle - should it develop at all - survives the multiple decades needed to effectively provide ROI. Which is an awful lot of “ifs” to be hedging a bet on, especially at nation-state scales.
- jgord 2mo agoHas a competent economist modeled the circularity of these deals ? [ numerically or analytically ] It seems a healthy economy has a lot of wide circularity .. money circulating is a good thing, a result of a functioning market, tracking the flow of real goods / services. But large corps circulating paper 'self-deals' or debt-swaps seems like a bad thing - a creative accounting practice designed to pump up their stock price/valuation. How can we _quantify_ the difference ? I guess it would need to match the cash / debt flows against the movement of actual goods and services ?? Not an economist, feel free to weigh in, suggest links.
- cyanydeez 2mo agoyou'd need to look at prior work associated with the Dot com boom and Enron. Economists rarely look into today's actual activity because America makes it nigh impossible to actually understand who owns what around the fringes; contracts arn't required to be publically disclosed and a bunch of other dark interests make it impossible to really know. MLMs exist in the same murky waters and tread the same ephermal economics by pushing useless product but hiring people to hire people to hire people, etc.
- jgalt212 2mo ago> prior work associated with the Dot com boom and Enron The Enron deals weren't circular. Fastow signed both sides of the contracts. The deals were straight up fraud.
- cyanydeez 2mo agomany of the Nvidia deals involve equity in the company instead of cash for the gpu orders. thats basically one step removed from signing the deal themselves.
- torginus 2mo agoAlso these deals are not circular - NVIDIA has to pay a lot of money for chips and foundry capacity just as an example, so money leaves the circle and participants have to raise capital to replace it, which means if this were just a financialy trick, it would be very expensive to maintain.
- unjuno 2mo agoThe problem with circular transactions is that they can make companies look healthier than they really are, distort investment decisions, and cause widespread damage when the cycle breaks.
- Stitch4223 2mo agoSo, companies are just prepaying with seemingly large parts of their livelihood for (use of) potential value. Expecting demand to stay equal over longer stretches of time in IT is an interesting bet as both hardware and software tend to depreciate in value extremely rapidly, unlike oil from the example. Or water. Both are limited in nature. Commodifying something that is the fraction of its value the next year might be possible, but I don’t see how. Perhaps MS Windows or Office are such things, but might not compare. There are more limits to demand. For example what humans can process. The AI might write the finest prose and the best software but have nobody to read or use it.
- anon7000 2mo agoAs long as companies will pay for AI and providers can offer better models cheaper than others… there will always be a strong incentive to optimize to make the best value model. Companies can use harnesses that can swap models on a whim, and you could just buy whatever’s cheapest/smartest for your criteria on a particular day.
- doodlebugging 2mo agoWe don't have an Artificial Intelligence yet. It is not intelligent, yet. Here's a quick reality check. Several companies have formed with a goal of creating and AI engine that can think for itself and reason through difficult or previously intractable problems. In order to accomplish this goal they have used scrapers to hoover up content from a multitude of sources, many of which can be seen as being the ground truth source for their discipline. A lot of this content, most of it, was copied and is being used without attribution to the original sources, without permission from the content owners or publishers, and in violation of copyright laws. Look at all of this for what it is. It is a knowledge base, like a collection of Lego parts, each of which is important to the goal but none of which will get you there without the other parts in the proper relative position. Once you have collected all these parts and stuck them together you have an LLM. If you are careful in your parts selection, that LLM can be useful for answering specific questions that are properly framed so that the LLM can make use of the contextual information in formulating a response. There's nothing intelligent about being able to answer a question correctly when the answer is effectively right on the tip of your tongue. You're just drawing from your knowledge base and regurgitating. Glomming all of it together only gives you a huge knowledge base. There is nothing intelligent about that knowledge base. Knowledge is not intelligence. You have an AK today, an Accumulated Knowledge base. We may never reach the point where it is ever intelligent enough to reason alongside of, or better than those whose life's work went into the foundation of the AK base.
- ako 2mo agoWe’re way beyond that, LLMs are used for reasoning - plan, do, check, act. They will define a goal, decide how to get the info needed (run a script for example), and use these new insights to adjust the plan. This is way beyond just retrieving info from a knowledge base. And where the info comes from (scraped, or classroom books) does not influence if something is intelligent, Humans are also trained on pre-existing knowledge. Real intelligence is being able to use your stored knowledge to solve new problems, which both humans and agents+LLMs can do to different levels.
- jocelyner 2mo ago[flagged]