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> I’m still not seeing any equally compelling arguments as to why this is not the case. Zitron relies too heavily on how big the numbers are and not how workab

> I’m still not seeing any equally compelling arguments as to why this is not the case. Zitron relies too heavily on how big the numbers are and not how workable the numbers are. Further, he seems to think that it will all just implode, which is pretty unlikely. AI companies are making money. 1T in purchase negotiations is something that can be renegotiated if the numbers don't improve. And there's actually a pretty good chance that these AI companies sell the US federal government on AI being a strategic advantage which can ultimately gets a nice federal funding source. Even in the worst case of what ed predicts, the more likely outcome is that the AI companies slow rollouts and purchases. The general market takes a hit, but it's ultimately not the end of the world. But further, even with AI reducing their consumption, that doesn't mean chip manufacturers are hosed, we've already built up huge demand for things like RAM which are supremely supply constrained. That' has slowed the sale of consumer and enterprise electronics. Easing back on the AI market means those markets will likely pick up the slack again. Especially because I suspect businesses will be seriously thinking about things like "Why don't we deploy deepseek locally to save on compute cost?". I suspect that prices for AI will ultimately increase before any of this happens and with those price increases that's where I can see there being more a demand to break ties with the bigger AI companies. What Ed misses is that big business has much MUCH more flexibility when it comes to financing than even a midsize corperation. They have direct lines to bank presidents.

CoolestBeans 2mo ago
I agree the issue is not the scale but you're missing the reason the scale has allowed to inflate to these proportions is through purchase agreements that are enabled by other purchase agreements. Yes banks, other funders, and even the cash flow of the largest companies can provide lifelines, but why would they if the pullback begins? The problem with circular purchase agreements is the mechanism that allowed them to grow rapidly would also force them to shrink rapidly and most funders aren't going to want to catch that falling knife unless profit is near guaranteed, which it isn't. The numbers are still deeply in the world of speculative. Doesn't matter if you have a line to a bank president, they don't want to bail you out for free. The point is that the numbers as they exist now require the industry to shoot the moon. It's not impossible, maybe the technology really is that revolutionary. But the margin for error is microscopic.
crote 2mo ago
Well, how workable are they? Let's say a kid's lemonade stand increases its revenue from $1/month to $100/month in three months. Clearly that 100x revenue increase per quarter is sustainable, so it predicts a $100M revenue a year from now, raises money at a $1B valuation, and signs a contract to buy $10M in industrial lemon squeezing machines. The squeezer manufacturer then predicts that it'll see a $500M revenue from all the other lemonade companies, raises money, and spends $1B on expanding its factories. Meanwhile, the kid is actually losing money because they are selling gold-leaf lemonade for $1 / glass while it costs $100 / glass to produce. But the lemonade stand is making money! Worst-case scenario they'll just renegotiate the squeezer contract and slow down their growth, right? If the lemonade business goes bust they'll just sell hundreds of millions of dollars of squeezers to lime juice stands, right? The government will declare lemonade a "resource critical for national defense" and bail out the industry, right? Yeah, sure, AI isn't 100% bullshit. There is indeed some money there, it won't be a complete collapse. But the numbers we are seeing are absolutely insane. We're already at "AI is bigger than the entire internet" levels of investments! Either we are collectively burning hundreds of billions of dollars on pure hype, or somehow every single company on the planet is hiding a secret 10x AI-boosted productivity increase.
- pu_pe 2mo ago
  Be careful that you are not basing your argument on whether you personally like lemonade. If a kid's lemonade stand increased its revenue from $1B/year to $100B/year in two years, we would be paying serious attention to their product. People seem to love that lemonade! At this level of increased demand, maybe it's ok to let this kid borrow $1T over 5 years, because even if his growth slows down to 2x/year instead of 10x/year, he will still be covering that investment. That's hopeful and risky, but not at all insane in my view.
  - crote 2mo ago
    And what's going to happen to those hundreds of billions of investments in equipment that won't be needed until well after it has become obsolete and uneconomical to operate? What happens to the stock price of a company that missed its revenue targets by a factor of 5? Making extreme growth predictions and not realizing them is fine for small startups. Not so much when it comes to trillion-dollar companies - especially when they have taken on massive loans to pay for it. A 2x-instead-of-10x result? That's an economy-killing crash.

CoolestBeans 2mo ago

I agree the issue is not the scale but you're missing the reason the scale has allowed to inflate to these proportions is through purchase agreements that are enabled by other purchase agreements. Yes banks, other funders, and even the cash flow of the largest companies can provide lifelines, but why would they if the pullback begins? The problem with circular purchase agreements is the mechanism that allowed them to grow rapidly would also force them to shrink rapidly and most funders aren't going to want to catch that falling knife unless profit is near guaranteed, which it isn't. The numbers are still deeply in the world of speculative. Doesn't matter if you have a line to a bank president, they don't want to bail you out for free. The point is that the numbers as they exist now require the industry to shoot the moon. It's not impossible, maybe the technology really is that revolutionary. But the margin for error is microscopic.

crote 2mo ago

Well, how workable are they? Let's say a kid's lemonade stand increases its revenue from $1/month to $100/month in three months. Clearly that 100x revenue increase per quarter is sustainable, so it predicts a $100M revenue a year from now, raises money at a $1B valuation, and signs a contract to buy $10M in industrial lemon squeezing machines. The squeezer manufacturer then predicts that it'll see a $500M revenue from all the other lemonade companies, raises money, and spends $1B on expanding its factories. Meanwhile, the kid is actually losing money because they are selling gold-leaf lemonade for $1 / glass while it costs $100 / glass to produce. But the lemonade stand is making money! Worst-case scenario they'll just renegotiate the squeezer contract and slow down their growth, right? If the lemonade business goes bust they'll just sell hundreds of millions of dollars of squeezers to lime juice stands, right? The government will declare lemonade a "resource critical for national defense" and bail out the industry, right? Yeah, sure, AI isn't 100% bullshit. There is indeed some money there, it won't be a complete collapse. But the numbers we are seeing are absolutely insane. We're already at "AI is bigger than the entire internet" levels of investments! Either we are collectively burning hundreds of billions of dollars on pure hype, or somehow every single company on the planet is hiding a secret 10x AI-boosted productivity increase.

pu_pe 2mo ago
Be careful that you are not basing your argument on whether you personally like lemonade. If a kid's lemonade stand increased its revenue from $1B/year to $100B/year in two years, we would be paying serious attention to their product. People seem to love that lemonade! At this level of increased demand, maybe it's ok to let this kid borrow $1T over 5 years, because even if his growth slows down to 2x/year instead of 10x/year, he will still be covering that investment. That's hopeful and risky, but not at all insane in my view.
- crote 2mo ago
  And what's going to happen to those hundreds of billions of investments in equipment that won't be needed until well after it has become obsolete and uneconomical to operate? What happens to the stock price of a company that missed its revenue targets by a factor of 5? Making extreme growth predictions and not realizing them is fine for small startups. Not so much when it comes to trillion-dollar companies - especially when they have taken on massive loans to pay for it. A 2x-instead-of-10x result? That's an economy-killing crash.