Subject: Re: AI Economy…and the rest
Wendy, you make a good point. For every dot.com company that hit a home run, there were likely a dozen casualties. Some "legacy" tech companies, like Microsoft, HP and Apple (after some fumbles) were able to survive the transition, others like Wang, DEC, Boroughs, even IBM and Xerox either didn't make it or were significantly diminished.

The first quantum change in datacom technology was the advent of the personal computer (and most of the pioneer companies died within a decade), followed by the advent of networking and the internet. Again, Darwin was an optimist and the dot.com crash wiped out most of the contenders.

I was intimately involved (professionally) in both of these extinction events and they had similarities:

At the beginning of each "era", if a company could "fog a mirror" they had nearly unlimited funding. The stock market grew to irrational levels. Companies didn't have to be profitable for their stock to rise, they just needed a good story. Then, it was discovered that some of the promises made by some of the companies were bogus and money stopped flowing in indiscriminately. When the stock market hit the fan, there was a big sucking sound and companies tanked in droves. The ones which made it through might not have had the most worthwhile products, but spread across them, most of the boxes were checked and the rest of the companies became redundant. In some cases the successful ones were led by those with extreme talent, but in many cases they lived because they had the good luck to be in the right place at the right time.

We are more than rhyming with the past. Like before, we have the profile of a future goal with the promises of quantum-sized profits. If you can insert the meme of "AI" into your description, people will pour money into your threshold. It is clear (to me, at least) that the majority of the pure AI (software) companies will not survive the next few years. None are making money (in that division, if a broader company like Meta, Amazon, Google, etc. - in which case it is simply a drag on their current profits). As long as they don't get sucked into receivable losses when it hits the fan, the hardware guys are already making a profit (Nvidia, AMD, data center/electrical infrastructure companies). Those account receivable loses during bankruptcies can be pseudo-random and a big deal.

Now, AI be a big deal and can likely cause dramatic upheavals and changes in our society, but before that happens, taking Wendy's explanation of the huge sums currently sequestered in AI-associated stock, my opinion is that there will be a significant "cleansing event" when there will be a "Sorting Hat" party and (assuming the big guys will drop precipitously, but survive because of their substantial other businesses) a large number of companies (and investors) will bite the dust. (OK, so it's a bit of a run-on sentence).

While we are probably a year or two from this coming to a head on its own, it can be accelerated by a coincidental by a coincidental loss of liquidity or other "black swan" type of event and be a sizable component of a resulting crash.

Despite what you've heard, it is not going to be different this time.

Jeff