Deinvestment Causes Layoffs not AI
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There’s a common statement from executives; we invested in AI, and were able to layoff a bunch of employees.
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It’s true that some jobs become pointless when an LLM could do it, but there’s something unstated.
Investors moved from lockdown-proof tech to AI
This chart is for video games specifically (my field), but the same trend has played out in most of tech. During lockdowns, investors pulled money out of suddenly-illegal businesses like fast-casual food, commercial real estate, or tourism, and funneled money into the only businesses allowed to succeed – tech and entertainment.
This sudden rush of funding led companies to over-hire and over-acquire, feverishly bringing any talent in they could. However, this led to a lot of very low-quality talent being paid for ultimately doomed projects. In video games alone, there were dozens of $100m+ titles developed primarily in this time, which upon release in the last couple years, were complete failures. They were funded by people who had no idea what made games succeed, and they were staffed by people who had no idea how to make a successful game.
Once the lockdowns ended, the layoffs began. Not just in games, but across tech.
Around 2024, investors began a frenzy of investment into AI. Hundreds of billions of dollars poured into frontier labs and hyperscalers, companies creating a web of stakes in each other - a financial bubble so greatly talked about that it has its own wikipedia page.
De-investment in your company is causing layoffs, not AI itself. Investors pulled out of tech companies they’d flocked to in 2020, and they’ve moved that money to AI companies.
Since [[Models Have a Limit]] and [[Userland is Not Enough]], that means that LLM firms are going to have trouble justifying further investment. Why would investors fund models costing $10bn to train if they don’t expect to see a return out of it?
Just like the lockdown boom "popped" and resulted in mass tech layoffs, the AI bubble will "pop" once it becomes clear that the revenue over a few years will have trouble recouping the investment.
