AI Investment Returns Overstated? Tech Optimists Ignore Basic Economics
aiamblichus · x · 2026-08-29
This post offers an economic critique of the current AI investment boom and the inevitability of AGI.
Key Arguments:
- No Simple Extrapolation: Local and short-term returns on investment (e.g., Anthropic's earnings) cannot be assumed as global, long-term returns for the entire AI sector.
- The Scissors Effect: Diminishing marginal returns on investment and convex marginal costs of production act like two blades of scissors, squeezing profit margins—a reality often ignored by tech optimists.
- Logical Contradiction: If AI truly took over all knowledge work, the human income base needed to pay for AI tools would vanish, collapsing the business model.
- Rates and Capital: While AI development may drive up interest rates (fueled by high returns from hyperscalers), it also faces the challenge of rising capital costs. The discussion references the SpaceX-Google deal, noting that turning $1 into $2 is achievable, but not all investments yield exponential returns.
Related event: AI ROI Under Fire: Demand, Not Supply, Is the Real Constraint(3 posts)→
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