In Markets, Rationality Doesn’t Always Pay
Morgan Stanley's Mike Wilson spends a considerable amount of time in his weeklies addressing "pushback" -- so, ostensible counterpoints to whatever his current outlook happens to be for US equities.
Typically, he brings up the pushback only to refute it in terms that suggest it had little merit in the first place. That's entertaining, even as it sometimes feels like Wilson's conviction is such that no pushback, irrespective of its merit, would be sufficient to dissuade him.
This week, he took
Has Wilson refuted the impact of generative AI yet? Generative AI will be one of the biggest productivity unlocks in a long time. I don’t expect it to impact margins this year, but maybe the market is already skating to where the puck is going? As I’ve said before, we might just be witnessing the effects of a right-tail event that’s counteracting what we might otherwise expect to happen under these market conditions. No reason generative AI can’t be the source of the next big bubble.
That being said, I’d encourage people to read this thread on the latest OpenAI product appropriately named Foundy: https://twitter.com/labenz/status/1630284912853917697?s=46&t=1y9VJgfxNRYk4rj2pgbc_g
I’m not super technical, but it’s pretty clear that the next generation of generative AI is already upon us and it’s likely going to be a significant upgrade over an already incredible GPT3. Don’t be surprised if customer service jobs start to disappear rapidly much like telephone operators of yore.
We are likely years away from Generative AI having even small P&L impacts for publicly traded companies and likely 5-10 years from meaningful impacts. The leading company’s product isn’t that good for more than playing around at the moment. They don’t even know how to monetize it yet. Adoption curves take time.
In the immediacy, we’re more likely to see small start-ups leverage Generative AI for meaningful use cases which minimize cash burn. Publicly traded companies will learn from these use cases and/or hire from these start-ups.
You do have a good thesis overall, but your timeframe seems unreasonable to me when compared to historic adoption curves.
Admittedly, I am a bit of a tech optimist, but I do think the customer service use case is one that isn’t very far away. Then again, I’m used to working for smaller tech companies where you can move a bit faster. Overall though, I do think we’ll move along the adoption curve much quicker than past innovations. I work with quite a few vendors in the SaaS space and many of them have generative AI functionality in the pipeline for the next two quarters. Monetization models and IP questions (among other societal questions) might take a while to settle, but that’s no different than the internet in its early days.
As an aside that I’d be remiss not to mention, I have no doubt these models will have more than enough Heisenberg material to continue penning missives long past the point where H is ready to hang up his digital quill. For all we know, he’s already pawned off much of his work on our new overlord (and not just the artwork), and spends his days searching for that perfect place to isolate himself 🙂
I have to agree with Hopium Dealer. In 1999 I was in the middle, trying to help a couple of major engineering firms understand and put the internet to good business use. Many of those early goals/uses have yet to be achieved.
It never occurred to me that H is using generative AI to produce the amazing artwork for these articles. The artwork has always been amazing even before the availability of the new AI.
If he is using AI for the artwork, you have here a great example of a productivity enhancing / monetizing use
Thanks
Completely off topic. H have you seen Jeffrey Sachs interview in the New yorker?
GenerativeAI is cool, but mostly hype. It doesn’t know truth from fiction. There will be content generated in order to trick ChatGPT into thinking what’s not true is true.
Employers are hoarding labor because labor was so hard to hire in 2021-2022. That’s why labor productivity growth is lagging and that is why unemployment is staying low. If employer tastes change, you would probably see a 6% unemployment rate. But tastes take some time to revert if at all