In my various and sundry travels over this desolate wilderness we call the internet, I’ve recently heard a lot of people talk about this thing they’re calling the “AI bubble.” The basic theory is that all of this AI development is being artificially propped up, that it isn’t nearly as profitable or as transformative as the AI proponents claim. When the music stops and the curtain gets pulled back, all of these AI companies will collapse, and all of this AI that nobody asked for will get scaled back to something normal. Or something like that.
But here’s the thing… the fact that so many people are talking about the “AI bubble,” to the point that it’s now a talking point, is pretty strong evidence that it’s not actually a bubble. When a true economic bubble happens, nobody calls it a “bubble” because everyone is so euphoric about it. Indeed, it’s that very euphoria that fuels the bubble. Housing prices only go up, donchaknow. AOL and Pets.com is totally the way of the future. So shut up and mortgage your house so you can buy the latest tulip.
With AI, though, it seems that all of the most vocal people are anti-AI and want it all to go away. Indeed, the main driver of all this “AI bubble” talk seems to be fear that AI will drive large numbers of people out of work. So what’s actually happening?
I do think there is a bubble in our economy, but I don’t think it’s being driven by AI. Rather, I think what we have is a debt bubble, which is very close to unwinding in a catastrophic way. The only way to stop that from happening is to grow the economy faster than the debt bubble is inflating, but at this point, the only way to do that is through some hugely transformative new technology, such as generative AI.
So all of the forces that want to keep propping up this debt bubble have turned to AI as the salvation of our economy, pumping billions and billions of dollars into it in the hopes that it will yield the sort of economic growth that will allow them to keep growing the debt. But for ordinary people, it’s a lose-lose scenario, since if AI succeeds, lots of us will be out of work… but if AI fails, the economy collapses and lots of us will also be out of work. Hence why so many ordinary people see AI itself as the problem.
Here’s what I think is ultimately going to happen: AI will prove to be super transformative in the long run, just like the internet, but it won’t save us from the debt bubble the way that our business and political elites so desperately hope that it will. The debt bubble is going to pop, and we are going to have to face up to the consequences of decades of very bad fiscal and monetary policy, with or without AI. But after the dust settles, AI will play a major role in the rebuilding of the economy, for good or for ill.