Over the past few years, I've followed the Super Intelligence, SI (formerly known as AI) boom closely, with Grimes proposing SI is leading us towards communism, Citrini and Alap Shah painting horror stories regarding The 2028 Global Intelligence Crisis, and fanatic .com tech moguls arguing this time will be different. Meanwhile conservative veteran investors like Buffet reserved their cash for clearer opportunities. LLM providers such as OpenAI pitches to individuals as greater productivity, broader opportunity, and the chance to unlock their potential; while advertising to businesses as the greatest tool to cut your expensive, underworked employees.
While binging on these fiesta shows, I returned to the Amazon’s 2000 shareholder letter, which reported an 80% decline since the previous. It was effectively another fiesta that I was too young to watch in real time, except the clown was different. Today we know Amazon for its enormous success and delivery drivers urinating in bottles, but investors near its earlier peak had to endure the collapse without knowing that success was coming, or those who sold could later regret selling at a loss. Neither of them had the benefit of reading the next twenty years of developments, nor would their wives wait patiently for 20 years before leaving.
That is what triggers me about using today's winners to explain yesterday's opportunities. During the dotcom boom (or should I say bubble), random companies adopted internet related names just to associate themselves with the technology. Some failed, others were acquired, and some survived without becoming the giants we remember today. You could correctly believe that the internet would transform everyone’s life and still be wrong about which company would capture the profits, whether it would survive, or how much its shares were worth.
The financing could just be as hopeful; Alan Greenspan described how high telecom's valuation enabled their heavy borrowing to appear manageable, and the massive leverage also meant as soon as investor enthusiasm fades, issuing more shares can no longer repay the debt, causing share prices to collapse, and many firms going bankrupt. Global Crossing was another example, although it kept operating after restructure, its original shares were cancelled and investors received nothing under the reorganization. The resemblance is shocking if you compare the same borrowing spree to what the AI industry is doing today.
I think it is important for many retail SI investors, radical or conservative, to spend more time weighting that possibility, and truly understand the meaning of how an enormous future demands and comforting promises translate to the stocks they purchased.
In today’s fiesta, another few billion in spending can start to look like a success in itself, and the projected market is assumed to be big enough to finance this. Even then, it might arrive late, earn less than expected, or get stuck waiting for enough electricity. If revenues disappoint while the bills keep coming, we can enter another crab in a basket scenario, where companies fights to the death with competing prices, scrambling for funding and buying what remains of their less fortunate competitors. The BIS has outlined a lesser theatrical but probably a more mathematical reasoned version, but to just think about this logically, if SI is different enough to make historical comparisons less reliable, a sensible person should have less confidence in their predictions. while if the financing, competition and incentives look familiar, we should pay attention to history rather than giving it blue sky speculations.
For all the different-sounding narratives of the future, I read them with one eye on the argument and the other on what the author is selling. There are products to promote, investment positions to defend and audiences to entertain. Some predictions may turn out partly right, but when predictions contradict, some predictions are guaranteed to be wrong, and more importantly, non of these stories come with compensation for the shares you bought after reading it, and many click baity 'I told you' were simple statistical artifact of a lucky prophecy, who probably won't be right the next time.
I expect SI to remain important, embracing it is a necessity as ignoring useful tools can leave you behind. Buying shares in the companies selling them is a separate decision. Staying out can mean missing gains; buying in can mean paying too much. Before buying somebody else’s vision of the future, ask who gets paid, who keeps the profit, and how much optimism is already in the price.
Peter Wan is a postgraduate student and a writer at the Consilium, focusing on finance and investing.
