Tag Archives: hype bubble

AI boom or bubble (or both)?

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The Bank of International Settlements sums up the AI bubble concerns pretty well.

the optimism surrounding AI may not last, despite its promise of future productivity gains. The current surge in capital expenditure could prove unsustainable if supply bottlenecks restrain production. Intense competition for market leadership may fuel overinvestment further, as seen in previous innovation waves, increasing the risk of a sharp reversal if AI payoffs disappoint.

The positive economics effects we have seen from AI so far may be mostly due to economic stimulus effects. Spend a massive amount on construction, whether of public infrastructure with public dollars or private capital with private dollars, and you get a big multiplier effect. This raises growth and potentially also inflation. Productivity gains from AI are expected by most people/experts, but the question is really the timing. If they obviously show up while hype is still high, the train rolls on. If they show up on a lag of years or decades, the bubble bursts and there is a significant period of pain before things gradually and hopefully permanently pick up again. This doesn’t matter to the wealthy and immortal among us, but to those of us in our last decade or so of work before retirement, it’s our lives!

I also wonder how long-lived these capital goods are. Public infrastructure operates for decades even if it gets somewhat obsolete compared to the latest and greatest new designs, but computer hardware evolves so fast I wonder if these massive data center buildings and their appurtenances are going to be operable a decade from now.

August 2024

Obviously, there were plenty of goings-on in the U.S. presidential election campaign in August. I’ve talked about that elsewhere, and everybody else is talking about it, so I’ll give it a rest here.

Most frightening and/or depressing story: Human extinction, and our dysfunctional political system’s seeming lack of concern and even active ramping up the risk. We have forgotten how horrible it was last time (and the only time) nuclear weapons were used on cities. Is there any story that could be more frightening and/or depressing to a human?

Most hopeful story: Drugs targeting “GLP-1 receptors” (one brand name is Ozempic) were developed to treat diabetes and obesity, but they may be effective against stroke, heart disease, kidney disease, Parkinson’s, Alzheimer’s, alcoholism, and drug addiction. They may even be miracle anti-aging drugs. But really, it seems like the simple story is that most of us in the modern world are just eating too much and moving our bodies too little, and these drugs might let us get some of the benefits of healthier lifestyles without actually making the effort. Making the effort, or making the effort while turbo-charging the benefits with drugs, might be the better option. Nonetheless, saving lives is saving lives.

Most interesting story, that was not particularly frightening or hopeful, or perhaps was a mixture of both: I did some musing about electric vehicles in August. The hype bubble seems to have burst a bit, as they did not explode onto the international commercial scene as some were hoping/predicting. This is partly because public infrastructure has not kept pace with the private sector due to sheer inertia, but I always detect a whiff of the evil oil/car industry propaganda and political capture behind the scenes. Nonetheless, just as I see happening with computer-driven vehicles, the technology and market will continue to develop after the hype bubble bursts. In a way, this almost starts the clock (5-10-20 years?) for when we can expect the actual commercial transition to occur. It will happen gradually, and one day we will just shrug, accept it, assume we knew it was coming all along, and eventually forget it was any other way. And since I seem to have transportation on the brain, here is a bonus link to my article on high speed trains.