The Real (Economic) AI Apocalypse Is Nigh  ## Metadata - Author: [[Podcast – Cory Doctorow's craphound.com]] - Full Title: The Real (Economic) AI Apocalypse Is Nigh - Category: #podcasts - URL: https://share.snipd.com/episode/7749a35f-2790-4dff-bef6-18c58a537002 ## Document Notes ## Highlights - **Cornell Q&A On The AI Bubble** - Cory Doctorow recounts giving a Cornell lecture where a student asked if the AI bubble will collapse and ruin the economy. - The student repeatedly asked “what can we do?” illustrating fear about graduating into economic collapse. Transcript: Cory Doctorow A week ago, I turned that book into a speech, which I delivered as the annual Nordlander Memorial Lecture at Cornell, where I'm an AD White professor at large. This was my first ever speech about AI, and I wasn't sure how it would go over, but thankfully, it went great and sparked a lively Q&A. One of those questions came from a young man who said something like, so you're saying that a third of the stock market is tied up in seven AI companies that have no way to become profitable, And that this is a bubble that's going to burst and take the whole economy with it. I said, yes, that's right. He said, okay, but what can we do about that? So I reiterated the book's thesis, that the AI bubble is driven by monopolists who've conquered their markets and have no more growth potential, who are desperate to convince investors That they can continue to grow by moving into some other sector, e.g. Pivot to video, crypto, blockchain, NFTs, AI, and now superintelligence. Further, the top-line growth that AI companies are selling comes from replacing most workers with AI and retasking the surviving workers as AI babysitters, humans in the loop, which Won't work. Finally, AI cannot do your job, but an AI salesman can 100% convince your boss to fire you and replace you with an AI that can't do your job, and when the bubble bursts, the money-hemorrhaging Foundation models will be shut off and will lose the AI that can't do your job, and you will be long gone, retrained or retired or discouraged and out of the labor market, and no one will Do your job. AI is the asbestos we are shoveling into the walls of our society, and our descendants will be digging it out for generations. The only thing, I said, that we can do about this is to puncture the AI bubble as soon as possible, to halt this before it progresses any further, and to head off the accumulation of social And economic debt. To do that, we have to take aim at the material basis for the AI bubble, creating a growth story by claiming that defective AI can do your job. Okay, the young man said, but what can we do about the crash? He was clearly very worried. I don't think there's anything we can do about that, I said. I think it's already locked in. I mean, if we had a different government, they'd fund a jobs guarantee to pull us out of it, but I don't think Trump will do that, so... But what can we do? We went through a few rounds of this, with this poor kid just repeating the same question in different tones of voice, like an acting coach, demonstrating the five stages of grieving Using nothing but inflection. ([Time 0:08:52](https://share.snipd.com/snip/40c6658c-3d97-45bb-92fd-866f57b0b2fe)) - **AI Bubble Driven By Bad Unit Economics** - Doctorow argues the AI economic apocalypse is inevitable because major AI firms burn cash and lack profitable unit economics. - He warns investors will stop funding losses and the sector will halt, causing wide economic damage. Transcript: Cory Doctorow I firmly believe the brackets economic AI apocalypse is coming. These companies are not profitable. They can't be profitable. They keep the lights on by soaking up hundreds of billions of dollars in other people's money and then lighting it on fire. Eventually, those other people are going to want to see a return on their investment, and when they don't get it, they will halt the flow of billions of dollars. Anything that can't go on forever eventually stops. This isn't like the early days of the web, or Amazon, or any of those other big winners that lost money before becoming profitable. Those were all propositions with excellent unit economics. They got cheaper with every successive technological generation, and the more customers they added, the more profitable they became. AI companies have, in the memorable phraseology of Ed Zitron, dogshit unit economics. Every generation of AI has been vastly more expensive than the previous one, and each new AI customer makes the AI companies lose more money. This week, no less than the Wall Street Journal published a lengthy, well-reported story by Elliott Brown and Robbie Whelan on the catastrophic finances of AI companies. ([Time 0:12:10](https://share.snipd.com/snip/54ae3faa-1223-4f77-8a3e-1a330b6bd287)) - **Rising Costs And Circular Accounting** - Doctorow highlights that each new AI generation increases costs and each customer worsens losses, calling it 'dogshit unit economics.' - He notes bizarre accounting and money cycling among related firms that mask true financial health. Transcript: Cory Doctorow AI companies have, in the memorable phraseology of Ed Zitron, dogshit unit economics. Every generation of AI has been vastly more expensive than the previous one, and each new AI customer makes the AI companies lose more money. This week, no less than the Wall Street Journal published a lengthy, well-reported story by Elliott Brown and Robbie Whelan on the catastrophic finances of AI companies. The WSJ writers compare the AI bubble to other bubbles, like WorldCom's fraud-soaked fiber-optic Bonanza, which saw the company's CEO sent to prison where he eventually died, and Conclude that the AI bubble is vastly larger than any other bubble in recent history. The data center build-out has genuinely absurd finances. There are data center companies that are collateralizing their loans by staking their giant NVIDIA GPUs as collateral. This is wild. There is pretty much nothing, apart from fresh-caught fish, that loses its value faster than silicon chips. That goes triple for GPUs used in AI data centers, where it's normal for tens of thousands of chips to burn out over a single 54-day training run. Talk about sweating your assets. That barely scratches the surface of the funny accounting in the AI bubble. Microsoft invests in OpenAI by giving the company free access to its servers. OpenAI reports this as a $10 billion investment, then redeems these tokens at Microsoft's data centers. Microsoft then books this as $10 billion in revenue. That's par for the course in AI, where it's normal for NVIDIA to invest tens of billions in a data center company, which then spends that investment buying NVIDIA chips. ([Time 0:13:04](https://share.snipd.com/snip/2de51b2e-9939-4fe4-9203-86b6997aa622)) - **Unrealistic Revenue Expectations** - Industry forecasts require AI to generate trillions quickly to justify current investments, an implausible demand. - Doctorow cites analysts estimating unrealistic revenue needs versus current reported AI income. Transcript: Cory Doctorow Sequoia, who says that for AI companies to become profitable, they would have to sell us $800 billion worth of services over the life of today's data centers and GPUs. Not only is this a very large number, it is also a very short time. AI bosses themselves will tell you that these data centers and GPUs will be obsolete practically from the moment they start operating. Mark Zuckerberg says that he's prepared to waste, quote, a couple hundred billion dollars on misspent AI investments. Bain and company say that the only way to make today's AI investments profitable is for the sector to bring in $2 trillion by 2030. The journal notes that this is more than the combined revenue of Amazon, Google, Microsoft, Apple, NVIDIA, and Meta. How much money is the AI industry making? Morgan Stanley says it's $45 billion a year. But that $45 billion? It's based on the AI industry's own exceedingly cooked books, where annual revenue is actually annualized revenue, an accounting scam whereby a company chooses its best single revenue Month and multiplies it by 12, even if that month is a wild outlier. ([Time 0:15:15](https://share.snipd.com/snip/b8eaf154-4bfc-480a-ba99-8d1079ab71fe)) - **Prepare For Post-Bubble Opportunity** - Doctorow advises institutions like universities to prepare to absorb productive residue after the bubble bursts. - He suggests buying cheap GPUs, hiring applied statisticians, and optimizing open-source models for future value. Transcript: Cory Doctorow During my stay at Cornell, one of the people responsible for the university's AI strategy asked me what I thought the university should be doing about AI. I told them that they should be planning to absorb the productive residue that will be left behind after the bubble bursts. Plan for a future where you can buy GPUs for 10 cents on the dollar, where there's a buyer's market for hiring skilled applied statisticians, and where there's a ton of extremely promising Open source models that have barely been optimized and have vast potential for improvement. ([Time 0:17:47](https://share.snipd.com/snip/bfa2efe4-69c6-4e85-82d8-ad5073e88785)) - **AI Is Ordinary, The Mania Is Dangerous** - Doctorow insists AI is a normal technology with useful tools, not a path to superintelligence. - He emphasizes the bigger threat is investor mania creating social and economic harm, not machine takeover. Transcript: Cory Doctorow But AI is, as Princeton's Arvind Narayanan and Sayesh Kapoor, authors of AI Snake Oil, put it, a normal technology. That doesn't mean nothing to see here, move on. It means that AI isn't the bow wave of impending superintelligence, nor is it going to deliver human-like intelligence. It's a grab bag of useful, sometimes very useful, tools that can sometimes make workers' lives better when workers get to decide how and when they're used. The most important thing about AI isn't its technical capabilities or limitations. The most important thing is the investor story and the ensuing mania that has teed up an economic catastrophe that will harm hundreds of millions or even billions of people. AI isn't going to wake up, become super intelligent, and turn you into paperclips. ([Time 0:18:25](https://share.snipd.com/snip/f32ca3e2-5f5e-4077-8ec4-058f5f44dcfa))