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kleinbl00  ·  50 days ago  ·  link  ·    ·  parent  ·  post: Do AI Companies Work?

    Where is the business case in the first place?

I recognize this was rhetorical but it's worth digging into.

1) if it will take 24 months for AI to pay off, and your competitors have been losing money for 18 months on AI services, then your competitors are six months from creaming you. One need look no further than Apple Maps to find an example of a massive sunk cost that everyone else slept on.

2) It is better to be wrong together than right alone. If you're the only exec who thinks AI is bullshit you'll be explaining your reasoning at every single meeting you hold. On the other hand, if you're just one of the faceless mob going "I guess we're doing this now" you will face exactly zero blowback when the whole thing comes crashing down because who could have predicted? Even the lone correct voices get no real payback; Bernie Sanders was one of the very few people who opposed the Iraq War and yet he got absolutely zero foreign policy cred from being right.

3) If you are reporting EBITDA (Earnings Before Interest, Taxes, Depreciation & Amortization) instead of income, wages comes out of your topline number. Services do not. Let's say you have 100 people in the call center earning $45k a year. That's $4.5m (closer to $7m with all the stuff that the employees don't get) right out of your good numbers. If you replace them all with $12m a year in OpenAI server time your "profits" go up. Does it matter that they suck? Not this quarter it doesn't! See also: (2)

Note that (1) through (3) do not require the subject at hand to be artificial intelligence. They could be pet rocks, Transcendental Meditation, meal services, casual Fridays, whatever. It all comes down to "we're all doing it, anyone who isn't is a doodyhead, and the accounting rules allow us to report short-term gains."

This is fundamentally where all bubbles come from: small practitioners who are responsible only to themselves can go "this is a stupid trend" while large practitioners who have diffuse responsibilities must deal with "why aren't you following the trend." If you want to understand FTX, all you need to know is "this guy worked at Jane Street therefore crypto is now a trend."