This also points out how the AI bubble is affecting the economy far beyond the tech sector.

Construction equipment used to be used for other things, not just building datacenters. But, since the start of the AI bubble, almost everything else has slowed down because they’re dedicating so much construction equipment and workers towards building datacenters.

https://futurism.com/future-society/data-center-spending-ai-bubble-construction

In just 1 year, construction work on DCs has gone up by 64.5%. And, that’s from 2025 to 2026. It’s not like it was at a standstill in 2025. Meanwhile, residential construction is down significantly. And, there has been a 25% cut in construction related to manufacturing.

Maybe not even that. The people who bought at the top might not be the ones who sold. The ones who sold might be long-term investors who are still in the black because of the stock’s huge growth in the last 5 years. Someone who bought the stock exactly a year ago is only down about 1.5%. Someone who bought 5 years ago has almost doubled their money.

All that has really happened is that the collective opinion of all Alphabet shareholders is that the company was overvalued by about 15% compared to what they thought it was a couple of days ago.

Ignore, for a second, the use of AI here.

How huge a screw up is it just to send a guy off to work on a project alone for 2 years. Can you imagine the amount of time that should be spent in code reviews looking at something someone has spent a full 2 years on? You’re now going to be asking senior devs to spend months of their lives doing nothing but code reviews. And, if you skip the code reviews that’s suicide.

We all know that in 2 years Cisco is still going to be using their legacy codebase. There’s not a chance in hell this will work. Just announcing this like it is a sane thing to do advertises their dysfunction.

It’s possible that he will find some low-hanging fruit and be able to rewrite some library code. But, really, when rewriting something old and bloated, the main thing you can do to add value is to remove code. And, AI agents are famous for their ability to generate vast amounts of code, not to get rid of it.

The absolute best case here is that this guy wastes 2 years of his life, and Cisco has some kind of deal where these “unlimited AI tokens” come at some fixed price so that this project costs Cisco only $1m or so. Then, the project’s a failure, they only lose a bit of money, and they can maybe learn from the experience. But, do you really make an announcement about a project that’s only going to run you $1m in costs? I doubt it. This is probably Cisco setting fire to $50m or more. And, given that they announced the project like it was a good idea, can they afford to just admit it failed? With that kind of sunk cost, they’re probably going to feel a lot of pressure to achieve something positive with the stunt… so something here is going to be integrated into their codebase.

But, when the word guessing program gains consciousness, it will be capable of doing the job of every worker in the world, and eager to do those jobs, and anybody who owns Anthropic shares will be a trillionaire in an economy that totally works and is healthy. So, better invest now!

She was arrested for “disorderly conduct”, for just standing there.

I’m sure they have a whole call center in India or something that gets reports when a vehicle isn’t able to move towards its delivery, so they check the cameras and then call the local cops if someone is in the way.

That’s always one of the tricks these companies pull. They take some communally-owned thing that used to have a clear purpose and start using it for their different for-profit use.

Take sidewalks. They’re surprisingly expensive to build, but they’re built from community tax money so that people walking don’t have to walk on the road. Now Uber is using them as a place where they can drive their robots. Are they paying anything? I assume not. Sidewalks have also become a favourite parking spot for rental scooters. Do the scooter companies pay for that? Of course not. Even when they’re parked well they reduce the space available for walking, and when they’re parked badly they can force pedestrians out into the street.

open AI has 1 billion

I don’t really believe that. Have 1 billion people used it at least once? Maybe? Maybe part of that 1 billion is the same people on different accounts. I definitely don’t think there are 1 billion regular users.

IOW, the plan is proceeding as “intended”. See: Airbnb, Uber, etc.

That’s where I disagree. Uber maybe has a viable business as long as they keep finding gullible or desperate people to drive for them. Their OpEx costs are tiny, it’s nothing more than a system that receives a message that someone wants a ride and sends out a bid to take that customer. Then it’s a pricing algorithm that drops the price that they pay to drivers as low as possible, while driving the cost of the ride as high as possible. They get whatever slim margin is left.

AirBnB is similar, virtually no OpEx costs, a very simple set of algorithms to match places for rent with people wanting to rent them, then fiddle with the prices and extract a middle-man fee. As long as they keep staying ahead of government regulations, there’s a business there.

But, nobody had to go out and explain to drivers why they might want to drive for Uber. “You drive people, we pay you money”, it’s a simple sales pitch. Same with AirBnB. Hotels and taxis were annoying enough that it was easy for consumers too. But, nobody has yet found a long-term justification for chatbots.

Sure, some companies are trying to use them. But, not successfully. Air Canada replaced customer service reps (presumably in a call centre in India or something) with a chatbot. But, when that chatbot hallucinated a policy when talking to a customer, the courts found that Air Canada had to honour that policy. That’s a massive risk long term, especially once people get good at figuring out how to talk to them.

People are using them to generate vast amounts of code… but code is a liability, not an asset. The things code can do might be an asset, but you have to be able to understand and maintain the code for it to work. If people are using AI to generate the code, and other people are using AI to review it, nobody actually understands it. This is just a time bomb waiting to blow up.

If there really were some kind of guaranteed money making thing that chatbots could do (other than online scams), the AI companies wouldn’t be out there trying to sell AI in general, they’d be buying companies and/or starting divisions that did that one thing.

IMO, the AI companies intended to hit AGI, and hand everything over to the machine god. Now they realize that it really just is a clever word-guessing machine with some vague capabilities that niche users might want (but not at the price they can meet), and they’re scrambling to find a seat before the music stops.

To put that in context, Alphabet (Google’s parent) is the biggest software company in the world. It’s the 3rd biggest company in the world after nVidia and Apple, but they’re mostly hardware companies.

Google’s annual revenues are creeping up towards $500b/year. So, the AI companies (Google included I suppose) would need 12x Google’s annual revenue just to break even.

There are 2 companies that have over $1b in annual revenue, Amazon and Wal*Mart. But, those are companies that sell goods to consumers, they’re not just digital services businesses. But, even then, you’d need 3x the revenue of Amazon and Wal*Mart combined to hit $6t.

Google, Apple, nVidia, Wal*Mart and Amazon each took decades to grow enough to capture hundreds of millions of dollars in revenue. So, somehow OpenAI and Anthropic are going to need to grow faster than any other company on earth to hit these trillion dollar targets.

Also putting this number into scale, there are about 8.3 billion people on the Earth. But, most of them are poor goat herders, subsistence farmers, sweatshop employees, and AI model trainers / reviewers living in Asia and Africa. These aren’t the kinds of people who are going to be buying a subscription to ChatGPT. There are maybe 1 billion people globally who have disposable cash they can spend on AI. So, to hit 6 trillion annually, each person living in a developed country would need to personally hit $6000 in AI spending on a yearly basis. Note, that includes children and the elderly. If you limit it to working-age people, that’s more like $10k per person per year.

Now, it doesn’t have to be that this is down to consumers. Maybe this is so valuable that Wal*Mart, the US government, and every other large employer pays for a ChatGPT subscription for each of their millions of employees. But, really, despite the fact that there have been very few actual successful AI deployments that saved companies money, or generated more profits, they’re suddenly going to be spending a significant fraction of each worker’s wage on AI subscriptions?

I think it’s pretty obvious that the AI companies thought that they were about to invent AI jesus. They thought they were just a few datacentres away from the machine god coming to life. They thought that AGI would change the world to such a degree that it might make the entire economy obsolete, so there was no limit on how much they should spend so either they would get there first (and maybe be seen as the god’s parents?) or out of some kind of altruism-type-feeling so that they could make a machine god which would align with their beliefs. But, that didn’t happen.

I saw a comment the other day about AI firms and CapEx vs OpEx. CapEx is Capital Expenditures – basically one-time costs for setting up a business. OpEx is Operational Expenses, basically ongoing costs for running a business. A good way to generate money from a business is to have a high CapEx and low OpEx. It’s hard for someone to set up a competing business because of the high initial costs, but once it’s up and running you can provide services for a low ongoing cost, and you can make a high profit on each customer. If CapEx is low but OpEx is high, sometimes it can work as a luxury business. Think an artist who hand-carves furniture. If both CapEx and OpEx are low, it’s basically a commodity business, think something like a nail salon. Cheap to set up, cheap to run, hard to fight off competitors.

The AI companies are stuck in a world where they have incredibly high CapEx (building DCs and training new models), and incredibly high OpEx (inference queries – basically talking to the chatbot, is also very expensive). Right now to try to hook customers they’re subsidizing the OpEx side of things, so each new customer costs them more money. Their paid tiers are even worse because people actually start really using the chatbots once they pay for them, and the money lost per customer goes way up for the paid tiers.

The only thing that would work is if the companies can somehow manage to get customers to pay incredibly high costs per token, so that not only are the OpEx costs covered, but the companies can start to pay down the initial CapEx. But, there’s just no justification for that yet. And the ruthless competition between all the AI companies means that if one of them starts trying to jack up costs to cover their OpEx, the others will keep theirs low to grab market share.

This is why the AI companies are doing all the things they’re doing. They’re talking about their models “escaping containment” and “hacking” other companies. Why? Because that makes it sound like these things are so powerful that they can’t be contained, rather than it being that the AI companies are incompetent and building a locked-down test environment, and how they are just running dumb scripts that they’re not even looking at before the execute. They’re boosting stories about the AIs being so powerful that they’ll destroy the world so that CEOs think they need to buy subscriptions to this powerful machine god for their companies. They’re inviting regulations and laws so that no new AI companies can enter the business, and so that they’re all forbidden from building new models, which is a massive CapEx (sorta) cost.

They can’t admit that the attempt to build a machine god has failed, because that will cause the bubble to pop. What they want to do is survive long enough to go public so that the costs they’ve spent can be foisted on the dumb retail investors – and at this point on pension funds and anybody holding index funds, because these companies are so huge that index fund managers would be obligated to buy them. So, they need to keep scaring people about how incredibly powerful and unstoppable their word-guessing-machines are until their investors have safely grabbed their profits and everything can be allowed to explode.

See, I very much liked the gear reset.

I didn’t start playing when the game first came out. By the time I hit level 60 people had been raiding for months, maybe even a year. Back then, a lot of raiding was about getting fire resist gear so that you could get a bit further in Molten Core. If you were behind, there was no real way to catch up unless you had people who were willing to do work on your behalf to get you the gear you needed.

The Burning Crusade launch basically reset everything, so people who hadn’t had a chance to do raids were on an even footing with people who had.

It was pretty amusing that heroes that were fighting the primal elements of nature were then having a difficult time with mutated boars. But, at least it was mutated boars on another planet. Eventually it was just “oh, you’re on a new island. I know you’ve previously killed a god on this same planet, but the birds on this particular island… they’re tough”. That was poorly explained, but the reason for the gear reset was clear.

To me, there were two big issues with WoW. One was that people constantly wanted new buttons to push, so classes just kept getting more and more complicated to the point that while a MOBA might have 6 ability buttons you use regularly, WoW might have 15ish, with another 20 that are situational.

The other one is just that the story keeps collapsing under its own weight. Increasingly it’s a personal story – it’s not that you’re an adventurer and participated in an event that saved the planet. You’re the individual person who saved the planet (and so is everybody else in the game). And then, because this expansion is over, you, the individual who saved the planet, has to go kill 20 boars on this newly discovered island where apparently boars are as tough as gods. Nobody on this island recognizes you as the hero who saved the planet, so you need to build your reputation up again, and eventually you get to fight the newest god who is destroying the planet.