AI Economics for Dummies
hubie writes:
As AI companies get ready to go public and we get a deeper look at their inner workings, it's only natural to have questions about their finances, like "Do they make money?" and "How?" Here are a few examples to help the average layperson understand the business side of AI.
1. Acquiring one grape costs Alex $2 billion. Alex offers to sell Mike one grape a month for the next 12 months for $1 billion per grape. Alex asks for the full $12 billion up front and provides Mike with one grape for the first month. Alex makes a $10 billion profit this month; his ARR is $120 billion, and his profits are trending up at an infinite rate. The Wall Street Journal's business editor moves into Alex's house, having accepted a part-time position as Alex's human footstool. He never asks to see the books.
2. Laura drives a taxi. Instead of charging her customers a fee for every ride, she charges them a $20/month subscription. Laura has 40 million paying customers, totaling roughly $13 billion in annual revenue. Laura spends $25 billion/year on gas. In a fit of late-capitalist bloodlust, hordes of tech and finance bros riot in the streets, firebombing every rideshare, bus, and pedicab they can find, declaring the transportation business officially "over." Also, Laura's taxi cost her $1 trillion to attain, and she'll have to replace it in four to eight years.
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4. Benjamin owns a farm. He employs 100 workers plowing his fields. His total payroll is $10 million/year. One day, he buys a mule, which provides the worker who uses it with a modest 10 percent productivity gain. Benjamin fires 99 of his workers and purchases 99 mules, expecting a 1,000 percent productivity gain. The driverless mules cause plow damage to his property in excess of $50 million. Benjamin loses another $5 million due to the loss of productivity from his one remaining employee, who no longer guides a plow but instead spends 100 percent of his time shoveling mule shit.
[...] We hope these examples help clarify the inner workings of AI economics. But if you're still confused, all you really need to know is that everything is totally working and everyone is making a lot of money, and you should just stop asking questions, luddite.
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