Are we inside an AI bubble?

TLDR; Every bubble claims the old rules no longer apply. Having lived through several bubbles in the tech industry I offer my perspective. The technology changes. Human incentives do not.

My bubbles

As someone who was born, as my kids tell me, in the last century I have had the personal pleasure of expereincing several bubbles first hand. I am not an economist but I can tell you what happened from my perspective.

Dot Com 1998-2001

When I started as a freshman at Drexel University at 18 in the fall of 1996 it was a pretty cool time. The internet which was just a small research project previously was just making its debut. I remember staring in wonder at some little website which showed traffic cam footage from another country! Live. It was incredible. My “smart” classmate was playing with something called Java. I can picture a stark difference in my life in 1997 vs 1999. In 1997 I was a poor college student, wondering if I had enough money to get something at the food truck on campus. By 1999 I had a season ticket to the opera and was familiar to some waiters at Philly’s “good” restaurants. I always loved computers, building them, programming them, making them do stuff, learning how to use different software. Towards the end of 1998 everything to do with computers was suddenly the most popular thing in the world. It was the new economy. The old rule book was gone. The world changed and we needed new rules. My more entrepreneurial classmates started buying serious cars. A local company gave employees a Porsche Boxster if you got three people to join. I myself put school on the back burner and started working for a startup making more than one of my parents who was a chemical engineer. And then it was over. The people who worked for the company with the Porsche giveaway came to work to find the office locked. My own startup CEO told us that he could not pay us starting this day but we can keep working for free. I chose to stay for a bit having nothing to lose at 23. I was young, had few responsibilities outside myself and was highly mobile. I ended up moving the the West Coast. Overall the decision was a good one, but that is a story for another post. The main takeaway for me was that the old rules still applied. That there is no magic in this world. The internet transformed everyday life on this planet for a great deal many of people. But there were still rules. And it did not do everything that people imagined it would do.

Real Estate 2005-2008

During this bubble I was living in California. As a young person living in an apartment my experience with this phenomenon was tangential at first. Older people were talking about how much more their houses were worth. At first everyone who had money was considering purchasing real estate. Then people who did not have money were also considering purchasing real estate. I remember in 2006 when my friend/mentor turned to me and told me that it would be a good idea to buy a house for 650k. That was 3x out of my price range at the time but he told me not to worry. He knew a guy who could do an interest only loan. I am glad I did not take him up on that. He pushed back a little. The old rules did not apply. This was the new economy. This was the new way. I did not buy the house. Later in 2008 when I moved back to Philadelphia I did end up buying a small condo in the city. Six months later the financial crisis happened. Many people lost their homes. I did not, though the value of my house ended up being 55% of what I purchased it for. The old rules did apply. The people giving out loans had different incentives for a period of time, but the principles of borrowing and repayment still held.

NoSQL 2009-201?

Ok this is not a great financial crisis like the other two. This is more for us, who are in the know. Once the social apps got huge people did not want to deal with pesky old SQL referential databases. There were new storage solutions which did away with all that clunky nonsense. Every tech conference had people talking about Mongo, Cassandra etc. And the NoSQL stuff was great. For Twitter. Because when you want to see posts for you or you want to find your friend John Smith, you don’t care if you find all John Smiths or see everybody’s posts. You just care that you find the John Smith that has social proximity to you. And that you see enough posts to enjoy twitter. The NoSQL stuff had a great place, but people wanted to use it for other stuff too to make the queries go faster. Well the ACID principles and CAP theorem still worked and several projects ended up doing a bunch of exploratory work only to have to switch to good old SQL.

Crypto 2016-2023

Hey, have you seen this NFT? Its worth 1.3 million dollars. The blockchain is the future and if you are not on it you are part of the old system. The old money stuff is out. The future is cryptocurrency. Invest now, you can’t lose. This was a tech adjacent bubble. Once again the old rules did not apply. There is a brand new world out there. In the interests of keeping the post manageable lets just all agree that while crypto did add some great things to our lives, we are still using our government issued money and a lot of companies around this ecosystem went bankrupt.

So whats up with AI

Well those are some of the bubbles that I have been through. So how do they relate to now. The current investment everyone is making into LLMs is indeed transformative. There are revolutionary and useful things you can do with LLMs. I am planning to do a series of posts about that following this one. But there is a limit of what the “next-word machine” can do. People are saying the old rules do not apply. Who cares what kind of code agents write. You don’t have to look at it. It just works. Well we will explore this in yet another post . But I have to make judgments based on my past experience. And while I think there are many great things we will get out of this amazing technology the old rules still apply. Good engineering principles and code quality matter. Good system design matters. This is a bubble. We survived and thrived through these things. Just keep focused on doing good work and remember that the rules are still the same.