What In The World Is Going On With AI? – CleanTechnica

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On Monday, January 27, 2024, the spectacular run-up in the market valuation of Big Tech companies that are driving the AI revolution forward came to a screeching halt. In fact, it went over a cliff, with companies like Nvidia, Microsoft, Amazon, Oracle, Google, and several ancillary companies like Vertiv that supports the AI craze by providing cooling systems for data centers, and Constellation Energy, which is supplying electricity for them from its fleet of nuclear generating stations, ending the trading day with losses totaling over a trillion dollars.

According to Bloomberg, since OpenAI released its ChatGPT AI model in 2022, the underlying assumption has been that whoever spends the most to best exploit the new type of computing and parlays that into leadership will win big. Companies that have spent tens of billions of dollars have already pledged to do so again this year. Microsoft and Meta — which both report financial results Wednesday — have promised to deploy about $145 billion combined. And then there is the $500 billion Stargate initiative announced this week.

That all came crashing down on Monday. The dizzying decline on Wall Street was caused by a report from China that a company there had succeeded in duplicating many of the AI functions made possible by the sophisticated  computer chips from Nvidia at a fraction of the cost. Some of those chips cost $30,000 or more apiece and the tech companies have been ordering them by the truckload in a race to keep up with each other. The news that someone in China can do AI better and cheaper has shaken the tech world to its foundations.

Robert Reich On AI

Robert Reich is a college classmate of mine, although if asked, his secretary would disavow all knowledge of my activities. He is an economist who served as the Secretary of Labor in the Clinton administration. The only thing he and I share today — other than an unending stream of solicitations from the alumni office — is a presence on Substack. He has about a bazillion followers while I have a few dozen. In a blog post on Monday, Reich wrote that the lesson from Monday’s rout is that “Microsoft, Amazon, Meta, and Google became too big, fat, and musclebound to remain sufficiently innovative. Instead of out-of-the-box invention, they specialized in marginal improvements. By contrast, Chinese tech corporations compete fiercely with each other. This has put them on the cutting edge — and why China has been able to come up with startling innovations (not only in AI but in electric vehicles, batteries, even TikTok and much more). China’s secret sauce hasn’t been big subsidies from the Chinese government creating giant ‘national champions.’ It’s been intense competition.”

Reich is a big fan of Lina Khan, who was the chair of the Federal Trade Commission during the Biden administration. She is perhaps best known for bring antitrust law suits against Big Tech because, in her view, they have monopolized the market. In March, 2024, she wrote — correctly, according to Reich — that the United States could not stay on the cutting edge by relying on giant “national champions.” Here an excerpt from Khan’s remarks:

These days, the “national champions” argument often gets made in the context of our dominant tech firms. We often hear that pursuing antitrust cases against or regulating these firms will weaken American innovation and cede the global stage to China. These conversations often assume a Cold War-like arms race, with each country’s firms in a zero-sum quest for dominance…

History and experience show that lumbering monopolies mired in red tape and bureaucratic inertia cannot deliver the breakthrough technological advancements that hungry startups tend to create. It is precisely these breakthroughs that have allowed America to harness cutting-edge technologies and have made our economy the envy of the world. To stay ahead globally, we don’t need to protect our monopolies from innovation—we need to protect innovation from our monopolies. We need to choose competition over national champions.

So what happened to the stock market this morning, Reich asked? His response offers food for thought. “Much of its recent valuation has been based on gigantic bets on artificial intelligence — in which big tech has been investing hundreds of billions of dollars in data centers and energy capacity it assumed it needed to get to the next generation of AI. Wrong. America is going to have to rethink our entire approach to technology. We may also have to rethink our approach to capitalism.”

Rethinking Our Approach To Capitalism

Really? Nvidia suffers the biggest loss in the history of NASDAQ and suddenly we need to question everything we ever knew about capitalism, the engine that has driven the creating of wealth and lifted billions out of poverty ever since Columbus sailed the ocean blue in fourteen hundred and ninety two? According to Reich, the answer is yes. A year ago, he started an online course he calls Wealth and Poverty. It’s free and contains many contributions from noted economists and other thoughtful people. If you have time in your busy life, you might want to check it out, although be warned, it has a lot to say about inclusiveness, social justice, and other “woke” ideas that are anathema to some.

His thoughts are compatible with those of Naomi Oreskes and Erik Conway. In 2010, they co-wrote a book called “Merchants of Doubt” about how the fossil fuel industry has co-opted the tactics of Big Tobacco. Historian and science writer Naomi Oreskes is no stranger to CleanTechnica readers. In 2019, she penned a book called “Why Trust Science?” which described in exquisite detail how the fossil fuel industry has deliberately lied and cheated to prevent world leaders from taking human caused climate change seriously. Oreskes is professor of the History of Science at Harvard. The pair recently co-wrote another book entitled,  “The Big Myth — How American Business Taught Us to Loathe Government and Love the Free Market.”

In an interview with The Guardian, Oreskes said, “In a way, the myth isn’t just one thing; it’s a set of interconnected concepts that together support this larger ideology of market fundamentalism. The first part of the myth is the notion of the free market, the idea that you could even meaningfully talk about ‘the free market’ as a thing that exists. In reality, people make markets. Markets are human institutions.

“So that leads to the second part of the myth, which is the idea that markets have wisdom, that the invisible hand guides us and that if we all do our own thing, our own self-interest will somehow lead to this productive, efficient and happy outcome. And therefore we should just trust markets, that the government distorts markets and interferes with the wisdom of the marketplace. Then the third part of the myth is, in a way, the most damaging  — it’s the piece that really informed Merchants of Doubt. It’s this idea of the inextricable link between capitalism and economic freedom as a bulwark against totalitarianism.”

Conway adds, “We pick up the story with business leaders fighting against the regulation of child labor and workplace safety. We’ve all forgotten that there was a crisis of workplace accidents in the United States in the late 19th and early 20th century that killed and maimed hundreds of thousands of people. Business leaders in the United States were absolutely dead set against doing anything about these twin crises.”

And there is the case for The People Vs. Capitalism. It’s not that the basis of capitalism is wrong. The issue is that it has  been distorted to the point where it is unrecognizable. For capitalism to work, ALL of the economic inputs must be included in the process. Leaving out some of those costs — especially those associated with a warming planet — leads to a “heads we win, tails you lose” society in which a small fraction of the population benefits at the expense of everyone else. Or as Martin Luther King, Jr. once said, “We all too often have socialism for the rich and rugged free market capitalism for the poor.”

So Robert Reich is partly correct. We absolutely should be questioning the distorted form of capitalism prevalent today, not to destroy capitalism but to make it work for all members of society, not just a favored few. That is not something the favored few want to hear, but it is something that should be part of a national and global conversation.