Dispatch from the Front June 14, 2023

Top

Revised 06/05/2023 Back to Contents

AI In the Market Place, Pt.1:
The Bull Runs While The Bear Comes Out of Hibernation

Everybody's got an AI
We could all die any day, aw
But before HAL wastes us all
I'll crypto all my cash away, oh-oh-oh
They say, 2023-23, bull's over
Oops, ain't got a dime
We're runnin' out of lies
So tonight we gonna party like it's 1995
— With Apologies, Prince

I had difficulty, at first, formulating a thesis that would prove the hypothesis that the entrance of Artificial Technology into the general economy is nothing like the boom that the introduction of the Internet connected multimedia World Wide Web was in the mid-1990s. Then along comes a perfectly puffy piece of drivel that appeared in Fortune, June 12, 2023, written by Will Daniel. The rather wordy headline proclaims, "Top tech analyst Dan Ives says the A.I. ‘gold rush’ is just like the dotcom boom but it’s a ‘1995 moment … not 1999."

Reporter Will Daniel's LinkedIn page says he graduated high school in 2012. So our Fortune reporter was either not in yet, or in diapers, circa 1995. Furthermore, when you have no personal experience with the past events about which you write, Mr. Daniels, you are writing history, not journalism. A good historian always cites his sources.

Will Daniel has little sense of business logic when he opines with a nauseating elitism that: "Hopes for a future with increased productivity and lower costs as A.I. tools are rolled out to the masses have helped to lift markets in 2023 despite stubborn inflation, rising interest rates, and consistent recession predictions from economists." Revealing a snobbery that has become the lingua franca of hi-tech hanger-on's, we can assume that in Will Daniel's Weltanschauung, "the masses" means "the consumer". Ah, Will, the great unwashed with their crisp new greenbacks just ain't gonna be a storming the Bastille or the shopping malls, or Amazon. They're just not a gonna drop them greenbacks on any AI enhanced digital equivalent of a Rube Goldberg machine.

The American economy is in nothing like "a 1995 moment," as Mr. Ives was quoted. The argument that both subject and reporter are making is "The parallels between the dotcom era that began in 1995 and the A.I. revolution of 2023 are quite striking. Both then and now, experts argued that a new technology was on the verge of rewiring the global economy." And surfing this incoming wave will be the IT sector. Mr. Ives contends that "we could be seeing a similar pattern now, arguing the development of A.I. represents something akin to the internet, calling it the “4th Industrial Revolution.” Missing from their rosy scenarios about the oncoming tech based economic boom, are the consumers that rushed to computers stores and ISPs during and the throughout the 1990s to buy equipment to get on the newly paved MULTIMEDIA Information Superhighway. And the consumer continued spending on IT products even as the Dot Coms crashed.

To me, none of this is history. The Internet Boom is in fact several chapters in my unwritten life story. The only parallel between the 1990s tech boom and AI is that both technologies have come to the consumer via some kind of video screen, and both work best on a broadband Internet connection.

The World Wide Web is a product the consumer understands. More than anything else, the World Wide Web most resembles that ultimate consumer product: television. The World Wide Web landed right in the consumer's wheelhouse. The benefits of the World Wide Web were immediate and obvious.

The boom in consumer sales of IT equipment helped spurn the boom of the mid 1990s. Along with this boom in sales, came an employment boom, both in front end workers in direct contact with consumers, and also in back end workers to administer this growing network of Internet users. AI is having the exact opposite effect, both within consumer sentiment, and on employment in IT.

In a post on May 8, 2023, using figures from layoffs.fyi, I reported there were 191,538 employees laid off from IT firms as of May 8, 2023. Five weeks later, as the graph below details, the layoffs continue with 206,224 employees laid off. Each employee laid off represents a consumer taken out of the overall economy. When there are fewer consumers without extra dollars to spend, then overall consumer spending slows.

IBM alone "expects to pause hiring for roles as roughly 7,800 jobs [that] could be replaced by Artificial Intelligence (AI) in the coming years." Furthermore, IBM expects that "30% of non-customer-facing roles could be replaced by AI and automations in five years." This is according to a report in Reuters published May 1, 2023.

A nascent AI hopped up market boom is beginning to form. In the view of "James Penny, the chief investment officer of TAM Asset Management and a veteran investor," is how Bloomberg identified Mr. Penny, unlike 1995, "the current boom has been fed by “just a few sectors,” in fact, just a handful of stocks, Penny said, reported Bloomberg's Lisa Pham.

As the chart on the left from McKinsey shows, consumer spending over the last 24 months has declined precipitously. This fact is born out by the statistics on consumer sales compiled by Shelley E. Kohan. In an article that appeared in Forbes, April 14, 2023, Kohan states that overall sales numbers are up a slight 4.5% over the same time period compared to those in 2022. This growth in raw sales numbers, as Ms. Lohan sees it, do not take into account the higher prices consumers are now paying for goods and services of all types.

Furthermore, Ms. Lohan, an experienced retail analyst, noted that consumers are also still reeling from the effects of the series of interest rate hikes of the past year. And no sector is feeling this more than the Retail sector. With wages increasing along with interest rate hikes, retailers are experiencing difficulty finding the funding needed to finance inventories and expansion. "Retailers must face decisions in the near future on how to fund a growing business if interest rates and product costs are higher." Lohan closed with the keen observation that with consumers already paying higher prices for all goods, therefore raising retail sales prices will not likely be an option for these struggling retailers.

So the brilliance of our current "1995 moment" tends to dim when the clear light of facts are applied. A chart on the right from macrotrends.net shows that the period of 1992-1997 was one of constant upward growth of consumer spending. When compared to our current financial statistical trends, we can clearly see how consumer spending drove the economy during the 1990s.

The adoption of the World Wide Web drove much of this consumer demand. A thing called a modem was now essential. Color monitors and graphic cards had also become necessary items. Routers to connect multiple onsite computers were not an item on many consumer's shopping list prior to the invention of Mosaic in 1993. The National Science Foundation, in its article about Mosaic, summed up well the tremendous impact that the first multimedia web browser had on almost every sector of the global economy.

Mosaic spurred a revolution in communications, business, education, and entertainment that has had a trillion-dollar impact on the global economy.

What the elites, who are telling anyone who will listen, that AI is the next thing to go boom ignore is that Artificial Intelligence has little if any real consumer demand. And, so far, the flood of FUD surrounding AI has barely registered a blip with the consumer. Sure, propeller heads like me, will play and experiment with the AI. The Digerati will continue to try various jailbreaks and then write about that. But there is nothing in the AI universe to motivate average people to spend their hard earned money on AI products that don't even really exist. That math just ain't a mathin.

As a recent poll from the Pew Research Center shows:

About six-in-ten U.S. adults (58%) are familiar with ChatGPT, though relatively few have tried it themselves, according to a Pew Research Center survey conducted in March. Among those who have tried ChatGPT, a majority report it has been at least somewhat useful.

AI is "at least somewhat useful," or so the poll found. In 1995, the World Wide Web offered to consumers everything from sex toys to pet toys; from gaming to God — all obtained from the privacy of their own homes (or so they thought). As much as the elites try to impress upon their lessors that "ya'll got to get on this AI bandwagon," their perceived lessors themselves perceive that this AI bandwagon has no wheels. There is no consumer onramp to this imaginary AI Superhighway. The WWW, however, offered something for everyone. And if some gear was needed to get up to speed on the newly paved Information Superhighway, then off to CompUSA they went.

Another historical analogy has been offered that is in stark contrast to the notion that we are experiencing a "1995 Moment." In an interview, Bob Michele, who is responsible for managing $700 billion in assets for JP Morgan, said our current financial Moment most resembles "an awful lot of that March-to-June period in 2008." That was when Lehmann Brothers, before its September 18, 2008, bankruptcy, was ranked as "the fourth-largest investment bank in the United States with 25,000 employees worldwide. It had $639 billion in assets and $613 billion in liabilities." MIchele sees a parallel with the current liquidity problems several banks now face.

Those who promote the AI as driving an economic boom are all preaching their AI sermons to their respective choirs. The puffy piece mentioned at the beginning herein details who Mr. Ives thinks will benefit from AI.

Ives said that Microsoft and Nvidia remain the “clear market leaders” in A.I., but he also believes Google, Oracle, Amazon, Salesforce, Palantir, MongoDB, Apple, IBM, Meta, Snowflake, C3.ai, and other tech stalwarts, along with smaller players in the industry, will benefit as the technology advances.

Industry players are not consumers. Few of the companies Ives listed make consumer direct products. Few consumers, who do not already have Microsoft 365 subscriptions, will now do so simply because soon they will get the AI CoPilot. Google may see increased ad revenue because of the Bard. These are the exceptions, though. It is not through increasing sales that most of these companies' bottom lines may benefit. These firms will benefit from the reduced labor costs that AI provides by making obsolete certain human powered jobs. And as long as the layoffs in tech continue, there will be no tech boom.

So come fourth quarter of 2023 will we party like it's 1995? Or will we sing the blues like in 1999? Or will we all just get scared out of our skins like in 2008? Of course, the questions are themselves moot. As reported in VentureBeat, June 12, 2023, the problem with all the prognostications about how AI will impact the global economy is "that no one knows the future of AI — let alone how, or when, artificial general intelligence will emerge." Right now, though, it is clear that AI is not driving the consumer to do anything. The title of the VentureBeat article cited above well defines the problem with so much of the Digerati's discussion about AI and all its future promises.

The future of AI is unknown. That’s the problem with tech ‘prophets’ influencing AI policy.

I was dreamin' when I wrote this
Forgive me if it goes astray
But when I woke up this mornin'
Could've sworn it was judgment day
— 1999, Prince

¯\_(ツ)_/¯
Gerald Reiff

Back to Top ← previous post next post →

AI In the Market Place, Pt.1: The Bull Runs While The Bear Comes Out of Hibernation
Everybody's got an AI We could all die any day, aw But before HAL wastes us all I'll crypto all my cash away, oh-oh-oh They say, 2023-23, bull's over Oops, ain't got a dime We're runnin' out of lies So tonight we gonna party like it's 1995 — With Apologies, Prince
I had difficulty, at first, formulating a thesis that would prove the hypothesis that the entrance of Artificial Technology into the general economy is nothing like the boom that the introduction of the Internet connected multimedia World Wide Web was in the mid-1990s. Then along comes a perfectly puffy piece of drivel that appeared in Fortune, June 12, 2023, written by Will Daniel. The rather wordy headline proclaims, "Top tech analyst Dan Ives says the A.I. ‘gold rush’ is just like the dotcom boom but it’s a ‘1995 moment … not 1999." Reporter Will Daniel's LinkedIn page says he graduated high school in 2012. So our Fortune reporter was either not in yet, or in diapers, circa 1995. Furthermore, when you have no personal experience with the past events about which you write, Mr. Daniels, you are writing history, not journalism. A good historian always cites his sources. Will Daniel has little sense of business logic when he opines with a nauseating elitism that: "Hopes for a future with increased productivity and lower costs as A.I. tools are rolled out to the masses have helped to lift markets in 2023 despite stubborn inflation, rising interest rates, and consistent recession predictions from economists." Revealing a snobbery that has become the lingua franca of hi-tech hanger-on's, we can assume that in Will Daniel's Weltanschauung, "the masses" means "the consumer". Ah, Will, the great unwashed with their crisp new greenbacks just ain't gonna be a storming the Bastille or the shopping malls, or Amazon. They're just not a gonna drop them greenbacks on any AI enhanced digital equivalent of a Rube Goldberg machine. The American economy is in nothing like "a 1995 moment," as Mr. Ives was quoted. The argument that both subject and reporter are making is "The parallels between the dotcom era that began in 1995 and the A.I. revolution of 2023 are quite striking. Both then and now, experts argued that a new technology was on the verge of rewiring the global economy." And surfing this incoming wave will be the IT sector. Mr. Ives contends that "we could be seeing a similar pattern now, arguing the development of A.I. represents something akin to the internet, calling it the “4th Industrial Revolution.” Missing from their rosy scenarios about the oncoming tech based economic boom, are the consumers that rushed to computers stores and ISPs during and the throughout the 1990s to buy equipment to get on the newly paved MULTIMEDIA Information Superhighway. And the consumer continued spending on IT products even as the Dot Coms crashed. To me, none of this is history. The Internet Boom is in fact several chapters in my unwritten life story. The only parallel between the 1990s tech boom and AI is that both technologies have come to the consumer via some kind of video screen, and both work best on a broadband Internet connection. The World Wide Web is a product the consumer understands. More than anything else, the World Wide Web most resembles that ultimate consumer product: television. The World Wide Web landed right in the consumer's wheelhouse. The benefits of the World Wide Web were immediate and obvious. The boom in consumer sales of IT equipment helped spurn the boom of the mid 1990s. Along with this boom in sales, came an employment boom, both in front end workers in direct contact with consumers, and also in back end workers to administer this growing network of Internet users. AI is having the exact opposite effect, both within consumer sentiment, and on employment in IT. In a post on May 8, 2023, using figures from layoffs.fyi, I reported there were 191,538 employees laid off from IT firms as of May 8, 2023. Five weeks later, as the graph below details, the layoffs continue with 206,224 employees laid off. Each employee laid off represents a consumer taken out of the overall economy. When there are fewer consumers without extra dollars to spend, then overall consumer spending slows. IBM alone "expects to pause hiring for roles as roughly 7,800 jobs [that] could be replaced by Artificial Intelligence (AI) in the coming years." Furthermore, IBM expects that "30% of non-customer-facing roles could be replaced by AI and automations in five years." This is according to a report in Reuters published May 1, 2023. A nascent AI hopped up market boom is beginning to form. In the view of "James Penny, the chief investment officer of TAM Asset Management and a veteran investor," is how Bloomberg identified Mr. Penny, unlike 1995, "the current boom has been fed by “just a few sectors,” in fact, just a handful of stocks, Penny said, reported Bloomberg's Lisa Pham. As the chart on the left from McKinsey shows, consumer spending over the last 24 months has declined precipitously. This fact is born out by the statistics on consumer sales compiled by Shelley E. Kohan. In an article that appeared in Forbes, April 14, 2023, Kohan states that overall sales numbers are up a slight 4.5% over the same time period compared to those in 2022. This growth in raw sales numbers, as Ms. Lohan sees it, do not take into account the higher prices consumers are now paying for goods and services of all types. Furthermore, Ms. Lohan, an experienced retail analyst, noted that consumers are also still reeling from the effects of the series of interest rate hikes of the past year. And no sector is feeling this more than the Retail sector. With wages increasing along with interest rate hikes, retailers are experiencing difficulty finding the funding needed to finance inventories and expansion. "Retailers must face decisions in the near future on how to fund a growing business if interest rates and product costs are higher." Lohan closed with the keen observation that with consumers already paying higher prices for all goods, therefore raising retail sales prices will not likely be an option for these struggling retailers. So the brilliance of our current "1995 moment" tends to dim when the clear light of facts are applied. A chart on the right from macrotrends.net shows that the period of 1992-1997 was one of constant upward growth of consumer spending. When compared to our current financial statistical trends, we can clearly see how consumer spending drove the economy during the 1990s. The adoption of the World Wide Web drove much of this consumer demand. A thing called a modem was now essential. Color monitors and graphic cards had also become necessary items. Routers to connect multiple onsite computers were not an item on many consumer's shopping list prior to the invention of Mosaic in 1993. The National Science Foundation, in its article about Mosaic, summed up well the tremendous impact that the first multimedia web browser had on almost every sector of the global economy. Mosaic spurred a revolution in communications, business, education, and entertainment that has had a trillion-dollar impact on the global economy. What the elites, who are telling anyone who will listen, that AI is the next thing to go boom ignore is that Artificial Intelligence has little if any real consumer demand. And, so far, the flood of FUD surrounding AI has barely registered a blip with the consumer. Sure, propeller heads like me, will play and experiment with the AI. The Digerati will continue to try various jailbreaks and then write about that. But there is nothing in the AI universe to motivate average people to spend their hard earned money on AI products that don't even really exist. That math just ain't a mathin. As a recent poll from the Pew Research Center shows: About six-in-ten U.S. adults (58%) are familiar with ChatGPT, though relatively few have tried it themselves, according to a Pew Research Center survey conducted in March. Among those who have tried ChatGPT, a majority report it has been at least somewhat useful. AI is "at least somewhat useful," or so the poll found. In 1995, the World Wide Web offered to consumers everything from sex toys to pet toys; from gaming to God — all obtained from the privacy of their own homes (or so they thought). As much as the elites try to impress upon their lessors that "ya'll got to get on this AI bandwagon," their perceived lessors themselves perceive that this AI bandwagon has no wheels. There is no consumer onramp to this imaginary AI Superhighway. The WWW, however, offered something for everyone. And if some gear was needed to get up to speed on the newly paved Information Superhighway, then off to CompUSA they went. Another historical analogy has been offered that is in stark contrast to the notion that we are experiencing a "1995 Moment." In an interview, Bob Michele, who is responsible for managing $700 billion in assets for JP Morgan, said our current financial Moment most resembles "an awful lot of that March-to-June period in 2008." That was when Lehmann Brothers, before its September 18, 2008, bankruptcy, was ranked as "the fourth-largest investment bank in the United States with 25,000 employees worldwide. It had $639 billion in assets and $613 billion in liabilities." MIchele sees a parallel with the current liquidity problems several banks now face. Those who promote the AI as driving an economic boom are all preaching their AI sermons to their respective choirs. The puffy piece mentioned at the beginning herein details who Mr. Ives thinks will benefit from AI. Ives said that Microsoft and Nvidia remain the “clear market leaders” in A.I., but he also believes Google, Oracle, Amazon, Salesforce, Palantir, MongoDB, Apple, IBM, Meta, Snowflake, C3.ai, and other tech stalwarts, along with smaller players in the industry, will benefit as the technology advances. Industry players are not consumers. Few of the companies Ives listed make consumer direct products. Few consumers, who do not already have Microsoft 365 subscriptions, will now do so simply because soon they will get the AI CoPilot. Google may see increased ad revenue because of the Bard. These are the exceptions, though. It is not through increasing sales that most of these companies' bottom lines may benefit. These firms will benefit from the reduced labor costs that AI provides by making obsolete certain human powered jobs. And as long as the layoffs in tech continue, there will be no tech boom. So come fourth quarter of 2023 will we party like it's 1995? Or will we sing the blues like in 1999? Or will we all just get scared out of our skins like in 2008? Of course, the questions are themselves moot. As reported in VentureBeat, June 12, 2023, the problem with all the prognostications about how AI will impact the global economy is "that no one knows the future of AI — let alone how, or when, artificial general intelligence will emerge." Right now, though, it is clear that AI is not driving the consumer to do anything. The title of the VentureBeat article cited above well defines the problem with so much of the Digerati's discussion about AI and all its future promises. The future of AI is unknown. That’s the problem with tech ‘prophets’ influencing AI policy. I was dreamin' when I wrote this Forgive me if it goes astray But when I woke up this mornin' Could've sworn it was judgment day — 1999, Prince
¯\_(ツ)_/¯ Gerald Reiff