AI: The law of greed

The past 15 years have been an exceptionally great time for businesses to raise money. Since the major economies adjusted the interest rates in response to the 2008 financial crisis, the rates had remained close to zero. It was literally an age of easy money. Venture capital funds raised massive cash and exited their investments at high valuations. The US venture capital investment tripled between 2016 and 2021.

Psychologically and economically, the low rates distort the dimension of time. All of a sudden, the future seemed a lot closer than it actually was. The whole world was hyped with floating money, and the startups with wild ideas got financed without thoroughly conducted due diligence. Their valuations were vastly inflated, even though there weren’t any guaranteed profits in the near future. Some of them were real innovators with game-changing ideas, but the rest were hardly even real business. All they had was storytelling to create hype and convince people that the future is already here. Even so, the valuations kept going up beyond business fundamentals because we needed something to invest in, so we could keep feeding our greed.

Nothing lasts forever. In 2022, the Fed started to raise the rates. As Warren Buffett said, it was time to discover who’s been swimming naked. Businesses that aren’t self-sustaining went bankrupt. Many CEOs went to jail for investment scams, which were once justified under the slogan of “fake it until you make it”.

So, did we learn a lesson and stop chasing quick wins? Apparently not.

There’s huge hype about AI. Thanks to the GEN AI boom, NVIDIA has become one of the most valuable companies in the world. China’s Deepseek proved that the rest of the Magnificent Seven stocks also heavily rely on AI for their valuations.

Regardless of the interest rates, we humans are still the same greedy beings. When cash dried out, we got desperate to find a new theme that we could invest our cash, time, and even soul. Now we found that new theme and it’s called AI.

Generative AI is an impressive technology. There a plenty of opportunities that AI will improve productivity across a wide range of industries. Nevertheless, we are not certain how we can adopt this new tech into our daily lives. Some industries are proactively implementing it for automation, but such attempts only proved that AI is not ready to displace human workers. There are critical issues such as hallucination, power consumption, and government regulations that need to be fixed if we want to introduce AI to critical activities. AI also needs its own killer app, like WhatsApp promoted the use of smartphones.

AI is real, and sooner or later it will change the way we work. However, we shouldn’t handle it like a genie in the bottle, hoping that he will be the answer to all our problems, such as low birth rate, deglobalization, slowed economic growth, and so on.

The investors are pouring enormous money into the AI. But just like all new technology, there’s still a lot of work that needs to be done to commoditize AI. It needs to provide productivity gains with scale to customers who would happily pay for the cost. If you invest in AI blindly without such an economic mindset, then chances are you will find yourself let down and disappointed.

But who could blame? Human greed is endless, and we repeat the same mistakes over and over.