AI’s Dial-Up Era. The essay argues that AI is in its dial-up era for two reasons:
- AI is still in its infancy stage, where the benefits brought by the technology have increased productivity and jobs, rather than decrease/eliminate it. Looking at other industries, it’s because there is still demand and its growth hasn’t been saturated.
- AI is showing parallels to the dot-com crash, where a lot of companies jumped on the WWW hype. As the author points out, a lot of companies are becoming overvalued and do not show any Product Market Fit.
The article shows that Automation hasn’t reduced jobs (apart from the tech sector, but that’s a different story) for several reasons:
- real-world complexity
- regulatory/insurance hurdles
- Jevons Paradox: “economic principle that a technological improvement in resource efficiency leads to an increase in the total consumption of that resource, rather than a decrease”.
I feel like we’re back in the mainframe era. A lot of software can’t operate without an internet connection. Even if in practice they execute some of the code on your device, a lot of the data and the heavyweight processing is already happening on the server. Even basic services designed from the ground up to be distributed and local first - like email (“downloading”) - are used in this fashion - like gmail. Maps apps added offline support years after they launched and still cripple the search. Even git has GitHub sitting in the middle and most people don’t or can’t use git any other way. SaaS, Electron, …etc. have brought us back to the mainframe era.
I find the argument for the bubble to be extremely straightforward.
Currently, investment into AI exceeds the dot-com bubble by a factor of 17. Even in the dot-com era, the early internet was already changing media and commerce in fundamental ways. November is the three-year anniversary of ChatGPT. How much economic value are they actually creating? How many people are purchasing AI-generated goods? How much are people paying for AI-provided services? The value created here would have to exceed what the internet was generating in 2000 by a factor of 17 (which seems excessive to me) to even reach parity with the dot-com bubble.