Wat? Capitalism knows exactly how to deal with this situation. People who still have faith in the companies will keep loaning them money or buying their stock or investing in them in other ways, and people who don’t have that faith will stop doing those things. Eventually each company will either succeed or run out of believers and die. It’s a very common scenario.
edit: answering the people who mentioned bailouts and government loans, as if to invalidate what I’m saying here.
Bailouts are infrequent special cases where governments intercede when there’s fear that corporate failures might cause widespread unemployment or other economic consequences. The entire AI industry isn’t even in that leage - it currently employs around 25-30,000 people. The largest one (OpenAI) only has about 8000. The largest of them could fail without disrupting their industry. This is nothing like a situation that would spur an industry-wide bailout.
Same goes for large government loans or loan guarantees. These aren’t handed out like candy whenever anyone asks. The scale of the consequences from company failures simply wouldn’t justify it.
The overwhelmingly likely scenario if AI companies fail is mergers and acquisitions. There’s even a class of investors known as “corporate raiders” who specialize in buying desperate companies and selling off the assets. None of this is new, it’s normal business activity that happens all the time, just part of the ecosystem. Believing AI companies are bulletproof because the government will simply hand them money simply isn’t supported by history. For a counterexample read up on the dotcom bubble of the late 90s, when tens of thousands of web startups went under without getting bailed out.
One problem with capitalism is that everything is for sale, including the government. The AI industry is intentionally positioning themselves as “too big to fail” so that they can guarantee a government bailout. As for the dotcom bubble, sure the smaller players were allowed to fail, but that just meant more room for the larger players like google and amazon to take over and now they’re definitely too big to fail. With AI, we already have a small handful of huge players and they’ve convinced the government that this is a matter of national security.
On top of that, people’s retirements are more tied to the stupid stock market than ever before, so the government will use that as an excuse to bail out these companies, hence the rush to IPO and enter indexes.
Ok, point by point: First, government corruption isn’t a function of capitalism. Officials in every system find ways to sell favors. I personally knew Russians who bribed their way out of the USSR, which was almost laughably corrupt. Secondly, the AI industry can’t “position” its own value - it is what it is, and as an industry it simply isn’t “too big to fail.” Thirdly, Google (founded in 1998) was still a startup during the dotcom bubble, not a “large player”. We have no “huge players” in AI yet - as I mentioned, the biggest AI company only has 8000 employees.
Based on all this I assume the prediction that the government will use retirement account stock market exposure as an excuse to bail out AI companies is something you heard or read - if you gave a link to that I’d be happy to look at the reasoning.
Wat? Capitalism knows exactly how to deal with this situation. People who still have faith in the companies will keep loaning them money or buying their stock or investing in them in other ways, and people who don’t have that faith will stop doing those things. Eventually each company will either succeed or run out of believers and die. It’s a very common scenario.
edit: answering the people who mentioned bailouts and government loans, as if to invalidate what I’m saying here.
Bailouts are infrequent special cases where governments intercede when there’s fear that corporate failures might cause widespread unemployment or other economic consequences. The entire AI industry isn’t even in that leage - it currently employs around 25-30,000 people. The largest one (OpenAI) only has about 8000. The largest of them could fail without disrupting their industry. This is nothing like a situation that would spur an industry-wide bailout.
Same goes for large government loans or loan guarantees. These aren’t handed out like candy whenever anyone asks. The scale of the consequences from company failures simply wouldn’t justify it.
The overwhelmingly likely scenario if AI companies fail is mergers and acquisitions. There’s even a class of investors known as “corporate raiders” who specialize in buying desperate companies and selling off the assets. None of this is new, it’s normal business activity that happens all the time, just part of the ecosystem. Believing AI companies are bulletproof because the government will simply hand them money simply isn’t supported by history. For a counterexample read up on the dotcom bubble of the late 90s, when tens of thousands of web startups went under without getting bailed out.
One problem with capitalism is that everything is for sale, including the government. The AI industry is intentionally positioning themselves as “too big to fail” so that they can guarantee a government bailout. As for the dotcom bubble, sure the smaller players were allowed to fail, but that just meant more room for the larger players like google and amazon to take over and now they’re definitely too big to fail. With AI, we already have a small handful of huge players and they’ve convinced the government that this is a matter of national security.
On top of that, people’s retirements are more tied to the stupid stock market than ever before, so the government will use that as an excuse to bail out these companies, hence the rush to IPO and enter indexes.
Ok, point by point: First, government corruption isn’t a function of capitalism. Officials in every system find ways to sell favors. I personally knew Russians who bribed their way out of the USSR, which was almost laughably corrupt. Secondly, the AI industry can’t “position” its own value - it is what it is, and as an industry it simply isn’t “too big to fail.” Thirdly, Google (founded in 1998) was still a startup during the dotcom bubble, not a “large player”. We have no “huge players” in AI yet - as I mentioned, the biggest AI company only has 8000 employees.
Based on all this I assume the prediction that the government will use retirement account stock market exposure as an excuse to bail out AI companies is something you heard or read - if you gave a link to that I’d be happy to look at the reasoning.
Are you seriously suggesting companies live and die by the free market?? Those poor failing companies need taxpayer bailouts.
Yeah, that would be true if there never was a public bailout, or a cheap government loan.