Over the last half decade, I wrote and talked about the Age of Abundance. This was derived from some basic technological components that were set in motion over the last few decades. It is most evident in the digital world where things accelerate rapidly.
We are at the point where this is expanding into the physical world. While the digital realm has a 40 year head start, the "world of atoms" is going to catch up quickly.
One of the key drivers is Moore's Law. This is basically an observation where the amount of compute available for the same price doubles every couple years. It is something that held true for most of the past half century.
This is also what enabled such massive technological progress.
Sam Altman: Moore's Law For Everything
Sam Altman, the CEO of OpenAi, phrased this idea a bit differently. Nevertheless, it encompasses the same idea.
A few years ago, he wrote an article called Moore's Law For Everything. In it, he described technology's impact throughout history and what the AI revolution will do.
The deflationary nature of technology gets overlooked. This is due, in part, to where people focus their attention. When the price of housing and healthcare is going up, that is what makes the headlines.
If we are in a deflationary era, why does this happen?
There are a number of reasons. To start, we have governments and regulations involved. Some of this is naturally beneficial (and needed). But when the process becomes burdensome, often protecting incumbents who are nothing more than extractors. They are also not the ones who bring impactful innovations to the table.
The second point is wages. People want more money. They like to see the value of their assets go up. Few want to sell their house and bring a check to closing. Naturally, this is a higher price for the buyer. The same is true for other asset classes.
We want prices to go down except when we benefit from them going up. Unfortunately, it doesn't work like that.
Another issue is there are many areas, especially in the physical world, where technology hasn't made an impact. This is about to change.
Over time, we did see a number of areas, including in the physical, where digital trend hit.
In the last couple of decades, costs in the US for TVs, computers, and entertainment have dropped.
When we look at communications, music, and information, we see a massive change. This, of course, does not affect the cost of housing but we are seeing signs of how things are going to change.
AI: Penetrating All Industries
AI is going to penetrate all aspect of business. When it comes to products and services, it is only a matter of looking at the different layers to project the total effect.
AI will lower the cost of goods and services, because labor is the driving cost at many levels of the supply chain. If robots can build a house on land you already own from natural resources mined and refined onsite, using solar power, the cost of building that house is close to the cost to rent the robots. And if those robots are made by other robots, the cost to rent them will be much less than it was when humans made them.
Robotics, especially humanoids, are just gettting started. When Altman wrote this article, that was more of a projection. With the progress we see taking place, it is easy to envisions tens of millions rolling off the assembly line within a few years.
How will this alter the labor dynamic?
The same is true for AI. We can consider this the "brains" of the economy. It is here where the economic output tied to knowledge work explodes.
There are, however, real world impacts.
Let us look at real estate. This is something that most can identify with. It is also something that the headlines claims is exploding in price.
Certainly, this is true if we focus upon residential. Yet, the technological impact is being seen in the commercial sector.
Remote work became part of the terminology during the COVID lockdowns. This is a technological trend although it was stimulated by those decisions.
Since that time, major cities in the developed nations are confronting an office apocalypse. Occupancy rates are far below where they were in 2019. This is crushing valuation.
Here is a headline from the NY Times:
In 2006, the hulking office building at 135 West 50th Street in Midtown Manhattan sold for $332 million. Tenants occupied nearly every floor; offices were in demand; real estate was booming.
On Wednesday, it changed hands again, in an unusual online auction — for $8.5 million.
If this were an isolated incident, it would be one thing. It is, however, something that is happening in many major cities. Certainly there are other factors in play. The bottom line is that we can see how remote work is factoring into this.
Radical Change
If you are old enough, consider what life was like before digital.
Think about a time before smartphones. Personal computers. The Internet. Remember a time when photographs were taken using film, developed, then mails to people. Long distance phone charges were the norm. If you wanted to buy something, you went to a store unless you happened to use a mail order catalog.
The time I am referring to was only 40 years ago. The world was analog. Offices had filing cabinets. We were not far removed from copies being made with carbon paper and a typewriter. Invoices were received via mail and paid for with a check.
And if you wanted information about a product, it required getting a brochure.
We take for granted how much society changed in, relatively speaking, a spec of time in human history. This is going to be compressed even further in the next couple decades.
Altman obviously has insight that most of us do not. Whether one likes him or not, there is no denying his place in the industry. He is at the forefront of what is being developed.
This means we should pay attention to what he is saying. The pace of this advancement is stunning. We are seeing the amount of compute related to GPUs exploding. This is the engine that is driving a lot of this.
Robotics are the next phase. It is also the bridge between the digital and physical worlds. Again, this is not easy to see in the early stages. Nevertheless, if we consider what it is like when robotic production, especially humanoid, is scaled, it is mind blowing.
Economic productivity is going to skyrocket.
Altman sums it up as the Moore's Law for Everything. I call it the Age of Abundance.
Either way, the concept is the same.
Posted Using InLeo Alpha
There is nothing more interesting to me in this article than the aspect where you highlights that AI penetrating all facets of business will bring down cost of production. We are seriously wipe by inflation, I think we need such a system in place.
My preference is your tag for it.
I agree. It might not be a nice comparison, but just looking at Chinese made products, and we can see how lower labor costs affect the price. Since robots are more consistent, it is possible that they can offer higher quality products if they are trained well enough.
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