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Top economist warns that the AI math doesn’t make sense: 'Profits are currently being funded by investors rather than earned from customers' (fortune.com)
submitted 3 days ago by to c/technology@lemmy.world
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[–] 21 points 2 days ago* (2 children)

Why is it that almost all big financial situations in my lifetime are Ponzi schemes?

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  • [–] 17 points 2 days ago (1 child)

    This has Ponzi elements, but it's closer to a multi-company Enron in its structure. They're manufacturing fake revenues through circular investments. Nvidia invests in AI companies and increases their value while AI companies use that investment to buy Nvidia cards increasing its value so, so they invest more in AI, so they buy more cards....

    Enron did this by making fake companies to generate fake revenue. Right now the tech sector is all working together on this scheme, so none of the companies are fake, but the revenue is.

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  • [–] 4 points 2 days ago (1 child)

    The scheme requires an every increasing amount of new "investment" or the whole thing collapses. Is it more then a ponzi scheme? Sure, most normal schemes can't do what these companies can do but at the end of the day the scheme is still very much a ponzi structure.

    These (non hardware) companies are not relying on fake revenue, they all post massive losses in AI on the regular and yet like some sort of massive lost cost fallacy the markets still keep investing. Maybe next quarter (insert AI) will start making money, but more likely it will all pop before. And the hardware companies making money hand over fist? They are getting bodied on the market (see the South Korean situation).

    None of this is even unexpected or seen as odd anymore, the financial systems, markets, private equity and most funds seem to just treat the situation as normal. I have seen nothing but once in a lifetime financial fuckups every few years since I was in high school, and almost every one is in the end is just some ponzi style scheme that was always doomed to collapse.

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  • [–] 5 points 2 days ago (1 child)

    The key difference with a Ponzi scheme is that the Ponzi/Madoff investors weren't in on the schemes. They though they were investors in a legitimate enterprise. They had a central figure as the fraudster, wheras Enron and the AI bullshit are institutional-level fraud requiring multiple companies to be complicit.

    The new one is the most elegant, because they don't have to break the law to make money on the grift. It also makes it the biggest by far because everyone wants in on the action.

    This bursting of this bubble with be catastrophic. Maybe tens of trillions (there's estimated to be about 125 trillion dollars in assets total worldwide).

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  • [–] 5 points 2 days ago

    And the .com bubble the hosing crisis, the banking collapse etc. etc. It all seems like the same scam being redone over and over. Never the same but always alike. And now it seems crime is legal (if you have the capital backing).

    I really hope at some point in my life the fuck ups have some lasting consequences.

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  • [–] 6 points 2 days ago*

    Usually it’s because someone needs the line on a chart to go up… no matter what.

    American big tech hasn’t had a breakthrough technology equivalent to PCs, Smartphones, internet, etc. in ten years. Their latest forays into smart Watches, Smart glasses, VR that stupid virtual world Meta pushed… none of it has seen real adoption or growth.

    They needed AI to be a hit to continue justifying their stock prices. The only way they can justify their stock prices now is if sales for AI become a 2 or trillion dollar industry. The only way you do that is by replacing humans. Human jobs go away and corps pay for AI tokens instead.

    But it hasn’t panned out that way and so far and all you have are AI companies passing around the same dollar and booking it as revenue on their P&Ls. That will work for a little while but it isnt a industry.

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