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Comment by Aurornis | Hacker News Reader

> The goal is to be too big to fail and get bailed out by US taxpayers

I know this is the latest catastrophizion meme for AI companies, but what is it even supposed to mean? OpenAI failing wouldn’t mean AI disappears and all of their customers go bankrupt, too. It’s not like a bank. If OpenAI became insolvent or declared bankruptcy, their intellectual property wouldn’t disappear or become useless. Someone would purchase it and run it again under a new company. We also have multiple AI companies and switching costs are not that high for customers, although some adjustment is necessary when changing models.

I don’t even know what people think this is supposed to mean. The US government gives them money for something to prevent them from filing for bankruptcy? The analogy to bank bailouts doesn’t hold.

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I think what Altman is looking at is becoming so codependent with NVidia and Microsoft that they'll all go down together, meaning the US government would have to deal with the biggest software company and the biggest chip company both imploding together.

If you look at the financial crisis, the US government decided to bail out AIG, after passing on Bear Sterns, because big banks like Goldman Sachs and Morgan Stanley (and even Jack Welch's General Electric) all had huge counterparty risk with AIG.

>I know this is the latest catastrophizion meme for AI companies, but what is it even supposed to mean?

Someone else put it succintly.

"When A million dollar company fails, it's their problem. When a billion dollar company fails, it's our problem"

In essence, there's so much investment in AI that it's a significant part of the US GDP. If AI falters, that is something that the entire stock market will feel, and by effect, all Americans. No matter how detached from tech they are. In other words, the potential for the another great depression.

In that regard, the government wants to avoid that. So they will at least give a small bailout to lessen the crash. But more likely (as seen with the Great Financial Crisis), they will likely supply billions upon billions to prop up companies that by all business logic deserved to fail. Because the alternative would be too politically damaging to tolerate.

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That's the theory. These all aren't certain and there are arguments to suggest that a crash in AI wouldn't be as bad as any of the aforementioned crashes. But that's what people mean by "become too big to fail and get bailed out".

The closest analogy is the dot-com crash and there really wasn't any bailout for that, despite the short term GDP impact. And billion-dollar companies were involved back in the day too, like Apple, Microsoft, Amazon, Ebay etc. etc.

OpenAI isn't a publicly-traded company though, how will it going to zero affect the stock market?

Its about "animal spirits"

The stock market isn't rational, its a room full of people talking loudly, and moving to various tables.

All it takes is someone outside the room to shout something that triggers panic, and most of the people in the room will run for the exit.

Multiple publicly traded companies, including Microsoft, have invested significant amounts of money in OpenAI.

OpenAI collapses and MSFT tanks. Microsoft shareholders aren't quite that dumb.

And that's ignoring the dominoes of other AI firms being pulled out of because OpenAi falters.

> Microsoft shareholders aren't quite that dumb.

If they aren't dumb, why are they investing in MSFT now then if it's a bubble that's doomed to fail? And even in the worst case scenario, a 10-15% decline in the S&P 500 won't trigger the next Great Depression. (Keep in mind that we already had a ~20% drawdown in public equities during the interest rate hikes of 2022/2023 and the economy remained pretty robust throughout.)

Like I said, they aren't "that" dumb. They are playing a risky game, but when they see the number go down rapidly they will pull. Which will make the line go down even faster.

>And even in the worst case scenario, a 10-15% decline in the S&P 500 won't trigger the next Great Depression

Only if you believe the 10% decline won't domino and that the S&P500 is secluded from the rest of the global economy. I wish I shared your optimism.

> and the economy remained pretty robust throughout.

Yeah and we voted the person who orchestrated that out. We don't have the money to pump trillions back in a 2nd time in such a short time. Something's gonna give, and soon.

> Only if you believe the 10% decline won't domino and that the S&P500 is secluded from the rest of the global economy. I wish I shared your optimism.

So your hypothesis is that a 10% decline in the S&P 500 will trigger the next Great Depression, i.e. years of negative GDP growth and unemployment? I agree that it could cause a slight economic slowdown, but I don't think AI and tech stocks are a large enough part of the economy to cause a Great Depression-style catastrophe.

The problem is that the non AI economy is already in the toilet. The consumer and commodities markets are all flashing red. Consumer debt is all time high. Inflation is still punishing the bottom end of workers severely and the ACA cuts will cause a lot of financial stress (unless people of course discountinue their plans)

An expected outcome from a AI blowout is the uncertainty and everyone holding onto their assets and credit recalls plus interest rate hikes.

During the great depression it wasn't the stock market collapse that caused it as much as it was the credit crunch that followed. Prior to the blowout people literally bought stocks on credit.

>So your hypothesis is that a 10% decline in the S&P 500 will trigger the next Great Depression, i.e. years of negative GDP growth and unemployment?

Yup. I won't say it's the only factor, nor biggest. But I'm focusing on this topic and not 40+ years of government economic abandonment of the working class. It's the straw that will break the camel's back.

> If OpenAI became insolvent or declared bankruptcy, their intellectual property wouldn’t disappear or become useless

Yes but with all stock growth being in AI companies it would tank the market for one. Secondly, all of those dollars they are using are backed by creditors who would have a default. short of another TARP (likely IMO, the US NEEDS to keep pumping AI to compete with China) .... it could scare investors off too..

Plus with the growth in AI effecting the overall makeup of the stockmarket, something like this hurts every Americans 401k

> Someone would purchase it and run it again under a new company.

That happened a long time ago! Microsoft already owns the model weights!

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