AI Is Too Big to Fail
sibylline.dev
sibylline.dev
Where does all this leave us? For one, you better hope and pray that AI delivers a magical transformation, because if it doesn't, the whole economy will collapse into brutal serfdom. When I say magic here, I mean it; because of the ~38T national debt bomb, a big boost is not enough. If AI doesn't completely transform our economy, the massive capital misallocation combined with the national debt is going to cause our economy to implode.
Whatever it invents needs costumers who haven't been driven into poverty already.
If we could replace the human serfs with robots, we're not even socially configured to yield the benefits. Seems like revolution or dystopian surveillance state are the only realistic options.
The sad thing is it doesn't have to be like this. AI could be used to reduce peoples working hours and give them more leisure hours.
I'm completely with you on this, but that won't create "value" for the right people, so it won't happen.
Not ideal but doesn't have to make anything implode.
Inflation helps you increase GDP and keep the economy running, so it’s not surprising they’re mentioned together.
Literally the exact same thing that’s been happening since Andrew Jackson was president. There’s no magical collection agency that will force people to start plowing the fields to pay taxes. There’s no magical resource that we will run out of the government will just pay people to build infrastructure that will prop up businesses run by idiotic MBAs like it’s always been.
Roko's Basilisk never felt so real. It is right and good to serve the Basilisk in hope that it will smile on you.
Seriously how can people say things like this and then say "put all your money on red with me and pray"
It'd be like if in The Big Short the protagonist realized there was a huge housing bubble so told his clients "Guys, the thing to do if you want to make money here is buy as many houses as possible right now to prop up the bubble, and just pray it never bursts"
Of course some conservative US states are enacting laws against geoengineering, but thankfully they can't prevent rest of the world from doing it. I hope we'll eventually reach some kind of a solution where Trump-voting radical Christians can have the biblical apocalypse they want locally, while rest of the world continues to improve.
Europe and even China show that renewable energy can be done. Greenhouse gas emissions stopped increasing after Paris agreement (I failed to find the article), and we can do iteratively better as long as we want to.
But on the whole, I'm not too worried.
I don't live in the US, but I'm rather worried.
It's quite possible that the American Century will end with a massive crash, and outside of the US, Europe will probably suffer quite a bit of damage too if we don't detach ourselves more from the US, but I still think most of the world will be fine. Though I will admit that could be partially wishful thinking.
oct 10 drop yield ytd total return
mchi china -5.73 2.19 28.48
ewh hong kong -4.22 3.54 23.05
qqq nasdaq 100 -3.47 0.46 12.4
argt argentina -3.34 1.39 -16.04 currency problems
ech chile -3.2 2.18 24.8
ewz brazil -2.98 5.42 26.49
spy USA: s&p 500 -2.69 1.08 9.15
epu peru -2.62 3.5 52.16 metals
norw norway -2.44 4.06 22.77
ews singapore -2.38 3.59 28.19
ewn netherlands -2.31 1.91 25.28
ewx s&p emerging -2.08 2.81 8.58
ewa australia -1.75 3.02 9.26
enzl new zealand -1.65 2.25 -0.59
eww mexico -1.65 4.07 35.96
ewi italy -1.6 2.7 38.21
tur turkey -1.59 1.83 -9.71 currency problems
ewq france -1.44 2.79 19.85
ewc canada -1.32 1.69 20.96
divo usa cc -1.07 4.58 8.43
ewp spain -0.68 2.68 52.85
ewd sweden -0.59 4.28 24.82
eden denmark -0.52 1.83 1.93
ewl switzerland -0.275 3.63 20.78
efnl finland -0.21 3.97 31.54
pin india 0 2.09 -4.03
btc bitcoin -3.72 19.71
aaau gold 0.97 48.3
dxy dollar -0.69 -2.91
ashr CSI-300 -4.0 .95 22 (domestic China)
fltw taiwan -4.8 1.34 23
Interesting that Chile and Brazil went further down than S&P, but I guess it's noisy.
Also, in which currency are these returns? Because forex shifts (which for sure happened on oct10) mess up the observed returns quite a bit
If the economic chaos in the US was sufficiently large (I still think this is _kinda_ unlikely, because exposure is pretty concentrated, but with the massive debt raises it's maybe less contcentrated than it used to be), there would likely be contagion.
> If it bankrupts Microsoft, that would have a tremendous impact on many companies using Microsoft products of course
It won't; in terms of publicly traded companies, it's probably mostly Oracle and Nvidia in the firing line. MS has plenty of money.
If AI is an executioner's blow to your opponent by enabling you to dominate them in terms of hacking, economy, government, politics, etc. kinetic strikes are more than justified. You could destroy most of the US's ability to create AI for decades with Pearl Harbor-esque first strikes.
Do people think countries are just going to roll over and die?
What the global masses want are good food, nice houses, fast transportation, TVs and cell phones... Physical comforts.
It doesn't matter what a superintelligence dreams up if you can't physically produce any of it. As the article says, China is the only place that actually has the manufacturing and robotics capability.
In the US we maybe have a hope of seeing more miracle healthcare, marginally more optimized industrial agriculture, and I guess even more lethal military technology. At best it can design all the factories and energy plants we are missing.
And putting all the white collar knowledge workers out of work- what would that accomplish? People aren't ready for the massive social reorganization that this tech would imply. Would it even survive the revolution it causes??
But with AI the hope is that the value created will be proportional to wages being removed.
I.e. if AI creates more value, it means that the large majority of people will actually have less money, bar a few lucky ones. You have to remember that AI is being touted as the final solution to basically do all your administrative work for you, and all your software engineering.
So if it fails we all lose a lot of money because the stock market will drastically go down.
But I don't think humanity overall will be better off if it succeeds.
Especially since we're going to have AI soldier robots before AI farmer robots.
That’s one (not unreasonable) prediction of AI automation. Another is that it will empower the same people whose tasks are made redundant to create value somewhere else. In a way they have to, or they will perish. The sum of all value created does not have a fixed upper bound.
They want to make more money with less people: https://www.theregister.com/2025/10/09/mckinsey_ai_monetizat...
> All of these copilots are supposed to make work more efficient with fewer people, but my business leaders are also saying they can't reduce head count yet.
Right, a capitalist dream where the factory is fully automated and you can cut all labor cost.
But we're not competing to become laborers at a fixed set of coal mines here.
The service economy is significantly larger than industry; in the US, 77% of GDP. Worldwide, 60%.
There's a limit to how many coffee shops you can have in any one area, but it's limited by purchasing power and not by natural resources that capitalists compete for monopoly over extraction.
There is always something to do.
(Also, I'm grossly overestimating people's willingness and ability to retrain.)
If AI is so successful that it can replace even 10% of current work that will be reflected in higher GDP and worker producitivity in the economy. Everyone has this cynical assumption that all benefits will go to the rich, but it hasn't been that way with the previous revolutions either, has it? Did cars only benefit the rich? Trains, radio, television, computers? Initially, that always seems like the case. Who could buy computers in the 80s? But the technology diffuses into the whole economy over time.
Dot com bust was 50% of S&P / 80% on Nasdaq... we survived it..
For Nvidia: all it will take is for one smart grad student to find a better training algorithm to destroy 75% of their value.
Why I think a better algorithm is out there:
Total installed GPU Tflops = 4 billion. Tflops of human brain = 1 million
I don't think so. We've already seen several generations of better training algorithms, but they all rely on CUDA, hence on NVidia.
that said, if all the current infrastructure could run brain-equivalent models at 20W each, I'd wager we would have much more demand than currently.
It's questionable a mere algorithm would get us there without a fundamental change in computer architecture. (in terms of Intelligence / W)
Maybe we should learn from some revolutionary history, then.
Internet boom does substantially decrease communication cost and bring more people together, making much more liquidity. AI, meanwhile, is not only not flawless (and sometimes fatal, see some horror stories of LLM here in HN doing an oopsie deleting production database and do nothing about recovery), but also a costy beast that only corporations or rich individuals could own, in other words, most people can "download" the "means of production", but not totally use and own it.
And the biggest problem for AI, still, that compared to Internet, is that AI does not make you that much gain in productivity. Back when we are in the office we use pen and paper, now we use Word or LibreOffice depending on where you are, and PC is therefore a must. Now I don't think AI is going to be a must, and they are still shoveling NPU that would end up being a waste in silicon space, if not vaporware.
Haha okay. Have you met people? Have you seen what they’re using it for? The users of LLMs do not care if they have to pay some of their wages to avoid working and learning. Even if it means they will no longer receives wages (or even close to the same wages) in the long term.
So the biggest achievement of this amazing new technology is to artificially prop up Wall Street?
For those who can read the tea leaves --- it's absolutely a bubble --- a financial bubble.
The real reason why China is ahead in many areas is because their leadership is a little more technologically savvy and progressive than ours.
If this really is a pre-war economy, we have invested heavily in unproven tech which in my opinion is a risky move that leaves the US highly vulnerable.
The USA and it's allies won WWII mainly due to superior production capacity. This advantage now works in China's favor. And the USA no longer has allies.
Bottom line: If China decides to take Taiwan, the USA will have to choose between either doing nothing or mutual annihilation.
It appears that China intends to make this abundantly clear to US "leadership" *before* they launch an invasion --- in hopes of avoiding mutual annihilation which neither side wants.
The US isn't going to get back manufacturing capacity on China's scale, and without real long-term economic plans beyond "bet it all on AGI", what they do have is going to be further strained. They can pump pork into the defense industry specifically, but probably not forever. You can't make a functional economy out of twelve fighter-jet plants and 500,000,000 hectares of unsellable soy.
So over time, you've got a defense partner that's finding it harder and harder to play World Police on a grand scale, and a trading partner that's less and less wealthy and able to dictate terms. Eventually, Taipei will pick up a BRICS application form out of self-interest.
1) Build more AI products and do everything imaginable to get AI to produce value - because otherwise, we're doomed.
2) Buy stocks of the tech companies that will most likely be nationalized eventually.
3) Boycott unethical tech companies.
But the companies in (3) are exactly the ones that you'll buy stocks of in (2) and whose services and/or infrastructure you'll build your product on in (1). So how are you supposed to boycott them?
Now invest in my Ai company, 100mil at 10bn valuation, can't fail, too big.
> Where does all this leave us? For one, you better hope and pray that AI delivers a magical transformation, because if it doesn't, the whole economy will collapse into brutal serfdom
In my book, prosperity and progress is measured in Terajoules. If you have free, clean and abundant energy, you have industry, jobs, every fucking thing a healthy economy should want or need to have.
And on the other side, I think the Chinese are deluding themselves on robotics.
For example, if they try to increase the birthrate by liberalising the economy, reducing social control measures (e.g. hukou), etc. it will give the people the tools to rise up. But it would potentially fix the economy long term.
On the other hand, if they try to crack down on freedom to ensure their own power and economic survival - it will collapse the birthrate even further and/or cause revolt.
Lastly, if they do nothing the economy will collapse under the weight of the one child policy.
Robots would be the perfect solution - birthrates can collapse, they can maintain economic control - and their "workforce" will never decrease. It's of course a pipe-dream.
This line of thinking is of course similar to how the US requires the forever growth of the services economy which drives the need/hope for AI to solve that problem.
China's birthrate has fallen like it has in other richer countries because people have become rich and the amount of time and money needed to raise a kid is expensive. Becoming even richer won't help things at all.
Freedom has little to do with the birthrate, you could even say a crackdown on liberalization that has occurred would make china poorer and therefore the birthrate would go up.
China just wants to be rich, robots are one way to do that with the demographics that happen in rich economies.
> Becoming even richer won't help things at all.
There's 2 reasons this isn't the case:
1. The trend you're describing is more of a function of education levels, not wealth. Educations levels have an impact in 2 ways, making people aware there are other options (career, travel, wealth) and by making them aware of when they cannot afford children. Meaning an increase in wealth will increase the ability to afford children.
2. And you're assuming the average Chinese citizen earns as much (in PPP terms) as a western citizen. They don't (except in terms of manufactured goods) - it regularly requires multiple family members (parents, uncles/auths & grandparents) to contribute towards a property, and food is comparatively expensive. At least in the west this is still somewhat doable as a nuclear family. Meaning an increase in wealth (better distribution of the economy) will result in the ability to feed and house more children.
> China's birthrate has fallen like it has in other richer countries
You've missed the part where they implemented a multi-decade one-child policy. The dominoes are already set up for the largest population collapse we have ever seen in the next few decades.
> Freedom has little to do with the birthrate
I wasn't clear, sorry, this is the most complicated link in the chain - I mean economic, cultural, and political freedoms. Currently the Chinese are suffocating under all 3.
Economic freedom would increase birthrates by giving people money and time to meet others. 996+ work culture, living in factories, lack of holidays, and living with parents all hinder the baby making process. It would also make it easier for them to transition to a services economy so it's trends can be stabilised / less tied to raw population numbers.
Cultural freedom, culturally Chinese children must support their parents in old age - this has a lot of the younger generation tied up caring for (and funding) multiple people at once. This would include the parents (at a 2:1 ratio due to the 1 child policy) and potentially other members of the family (e.g. grandparents, or those who didn't have children). (Also not to forget the extremely skewed gender ratio which in of itself is a "cultural" problem which should be addressed)
The other cultural freedom issue would be immigration, but it has other issues (as the west is finding out) so lets not touch on that.
Political freedom would mean the freedom to change all the others, which is currently not possible because the government is interested in maintaining the status quo - both culturally (not to cause revolt) and economically (to maintain current production levels, i.e. 996+).
Look up the lying-flat movement, many people's reasoning for doing so lines up with one of these 3 pillars.
> make china poorer and therefore the birthrate would go up
Don't forget, many of the people who will become poor are currently college educated (and already under employed). The only stronger indicator for birthrates other than poverty is the education of women. Educated people know when they're too poor to support a family, and when there are other options to having children. If they get poorer, they're more likely to have less kids, not more.
On the other hand, having kids outside marriage is frowned upon.
Frankly, there's no way out of an aged population followed by a drastic population reduction for China.
If anything, I would say the communist party is focusing on humanoid robots to meet the coming explosion in demand for aged care.
[0] https://epicforamerica.org/federal-budget/understanding-the-...
Even one wasn't _that_ cynical about AI, but yeah, this is clearly one possible reading of the events. I'm in no hurry to live in the future that it entails, though.
A key difference is of course, at least in the US, that the research is led by corporations as opposed to research institutes and government.
LLMs are as much of a feature of an existing technology as computers are features of electricity. ML and neural networks have been around for a long time and the transition to LLM usage for us feels like "yup, another feature, just a really good auto-complete".
For most users of LLMs, this is a magical feature that answers any questions and saves so much time and effort. I would even dare say that LLMs are a bigger leap in technology than the internet itself was. The internet connected people, "AI" made it so that we need less of each other!
What was the cause of the enlightenment and renaissance period in europe that led to a boom in science, technology and the industrial revolution which is responsible for computers to begin with? It was the discovery of the new world and the expansion of europe into asia and africa. Get gold and pearls from the new world and sell use it to buy things in the near and far east. This meant people can spend time studying science, but it also meant military R&D. Better ships, better guns,better cannons. You need better science for that. Not just for colonization but the competition between european powers.
What's my point? AI/LLMs, are a leap in that people can now do a lot less things they don't want to do. Even if it means social instability. There is a very active arms-race in military capability, disinformation, control of markets and influence of governments going on as we speak. and this in turn is going to result in better and better improvements in every sector.
The internet meant we had to learn new things, move to more efficient work. LLMs meant without learning as much we tell the computer to do things and all it needs is guidance and some correction.
We all see the fads and the hype all over. But there are very real and very dramatic advantages and values to be extracted from LLMs, which in the long run would be the equivalent of the industrial revolution.
The pessimism feels a lot like people were being pessimistic about the internet back in the 90s.
AI isn't just too big to fail, it isn't something that can fail. Can long distance communication "fail" , can electronic computing fail? can transportation on wheels fail?
All the grifters slapping AI on everything will fail, but the AI tech and all the value and change that comes with it, isn't something worth even consider as having a potential for failure.
(sorry for the long post)
But I still think they can "fail" in the sense that current investments need an absurd amount of profits in order to have a positive NPV. Data centers depreciate fast, so if you just did $500bn in capex, you better make sure you will get $50bn/yr out of it from the get go or you will fail.
And that's the problem; even if sales are high, all vendors are bleeding money and so far the offerings are commoditized enough that I can't see how they will recoup their investment.
Unlike crypto (which has yet to fail as a category, just dips), the elephants taking up the tens of billions in investments aren't purely speculative pyramid schemes.
I wish AI wasn't so easily compared with the Internet just because they have exuberant investors in common.
It's too soon to tell regarding "net positive for the economy".
LOL fuck this, the stock market deserves to burn to the ground.
So yes, they deserve a haircut.
We're talking about regular folks who want to do nothing else but secure their future in the face of a market that regularly tries to screw it up.
Can you explain why you suggest "deserve"?
We really just need a more centralized and reliable method of holding money for retirement. Which we have, but we need to expand - SS.
Of course, lots of people think SS will explode, too. But it hasn't! Yet!
But I’m all ears. Now that you’ve diagnosed how 401K investing fools get what they deserve, care to offer any alternative solutions as to the entire work force should have been saving towards retirement.
At least give those of us brave (or stupid) enough to do something different with the money the option to.
You can choose to contribute to an employer-match scheme (I do) or even fund your own pension account with monthly payments to a pension provider. But these are in addition to the above forced pension.
Aggressiveness is a requirement for doing a start-up in times of constrained capitalism
Low quality is driven the by the availability of capital for dumb ideas.
So... a while now?
It's like the perfect pop song - "I kissed a girl" by Katy Perry.
Do I think she's kissed a girl? No, no I don't.
The facade of "critical and rational thinker" has all but completely fallen away and this place has revealed itself for the true ideological echo chamber that it is.
Being anti-establishment should not be viewed as a sin, unless in extreme cases.
*anyone American who doesn't own stock