Having lived through the dotcom boom and bust and some minor bubbles since then, I thought I’d review the current AI bubble from this perspective. My point is not to discuss the benefits of AI in general but rather the pros and cons of the bubble it has created. I also cannot answer the question whether it really needs a greed-driven bubble to achieve these benefits, or whether a more deliberate and careful approach could achieve the same results. (I’m guessing not.)
Innovation
Pro: The first of two primary arguments (the other is capital investment) for the current intense focus on AI is that it accelerates AI and related innovation like nothing else. Space is but one “final” frontier: Software and the virtual world is equally open-ended and an equally final frontier, if not more so, and AI is needed to expand it.
Con: We may not want this innovation and hence the human focus and attention spent on it is misdirected, leading to a dearth of innovation where it would have been needed more.
Capital investment
Pro: Without the human greed feeding the bubble, we would not have got the requisite investment. No buildout of data centers, no buildout of energy infrastructure. This benefit is easy to see by historical comparison: Without the dotcom boom and bust, the web, data centers, and fiber (global interconnectivity) would not have happened nearly as quickly.
Con: The money is missing elsewhere, of course, so it is always a trade-off. More specifically, however, the rapid buildout led to an explosion of prices, from local energy supply to citizens to simply buying technology. However, the prices will come down for this buildout will naturally lead to innovation that reduces costs and then hopefully prices.
Speed of change
Pro: The bubble and its opportunities not only creates innovation and channels capital investment, it makes people hyper focused and working harder, pushing limits faster, making a, if not the, future happen faster and earlier.
Con: The reckless speed creates destructive results, physically (data centers, resource consumption, destruction of nature) and psychologically (burnout, single-mindedness, uses and effects of AI).
Future investors
Pro: There will be a lot of major and minor cashouts by startup founders who timed it right and they will be set for life. Many of these will bring back entrepreneurial spirit, investment, and advice to spur the ecosystem.
Con: There will be a lot of major and minor one-trick-pony business angels and know-it-alls who improperly extrapolate from their one experience to future undertakings, annoying the heck of more experienced investors.
Retirement accounts
Pro: The AI bubble spilled over into a (mostly) good stock market, helping current retirees financially.
Con: The same cannot be said about future retirees whose retirement savings might loose mightily when the bubble bursts.
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