If anyone wants to know why every tech company in the world right now is clamoring for AI like drowned rats scrabbling to board a ship, I decided to make a post to explain what's happening.
(Disclaimer to start: I'm a software engineer who's been employed full time since 2018. I am not a historian nor an overconfident Youtube essayist, so this post is my working knowledge of what I see around me and the logical bridges between pieces.)
Okay anyway. The explanation starts further back than what's going on now. I'm gonna start with the year 2000. The Dot Com Bubble just spectacularly burst. The model of "we get the users first, we learn how to profit off them later" went out in a no-money-having bang (remember this, it will be relevant later). A lot of money was lost. A lot of people ended up out of a job. A lot of startup companies went under. Investors left with a sour taste in their mouth and, in general, investment in the internet stayed pretty cooled for that decade. This was, in my opinion, very good for the internet as it was an era not suffocating under the grip of mega-corporation oligarchs and was, instead, filled with Club Penguin and I Can Haz Cheezburger websites.
Then around the 2010-2012 years, a few things happened. Interest rates got low, and then lower. Facebook got huge. The iPhone took off. And suddenly there was a huge new potential market of internet users and phone-havers, and the cheap money was available to start backing new tech startup companies trying to hop on this opportunity. Companies like Uber, Netflix, and Amazon either started in this time, or hit their ramp-up in these years by shifting focus to the internet and apps.
Now, every start-up tech company dreaming of being the next big thing has one thing in common: they need to start off by getting themselves massively in debt. Because before you can turn a profit you need to first spend money on employees and spend money on equipment and spend money on data centers and spend money on advertising and spend money on scale and and and
But also, everyone wants to be on the ship for The Next Big Thing that takes off to the moon.
So there is a mutual interest between new tech companies, and venture capitalists who are willing to invest $$$ into said new tech companies. Because if the venture capitalists can identify a prize pig and get in early, that money could come back to them 100-fold or 1,000-fold. In fact it hardly matters if they invest in 10 or 20 total bust projects along the way to find that unicorn.
But also, becoming profitable takes time. And that might mean being in debt for a long long time before that rocket ship takes off to make everyone onboard a gazzilionaire.
But luckily, for tech startup bros and venture capitalists, being in debt in the 2010's was cheap, and it only got cheaper between 2010 and 2020. If people could secure loans for ~3% or 4% annual interest, well then a $100,000 loan only really costs $3,000 of interest a year to keep afloat. And if inflation is higher than that or at least similar, you're still beating the system.
So from 2010 through early 2022, times were good for tech companies. Startups could take off with massive growth, showing massive potential for something, and venture capitalists would throw infinite money at them in the hopes of pegging just one winner who will take off. And supporting the struggling investments or the long-haulers remained pretty cheap to keep funding.
You hear constantly about "Such and such app has 10-bazillion users gained over the last 10 years and has never once been profitable", yet the thing keeps chugging along because the investors backing it aren't stressed about the immediate future, and are still banking on that "eventually" when it learns how to really monetize its users and turn that profit.
The pandemic in 2020 took a magnifying-glass-in-the-sun effect to this, as EVERYTHING was forcibly turned online which pumped a ton of money and workers into tech investment. Simultaneously, money got really REALLY cheap, bottoming out with historic lows for interest rates.
Then the tide changed with the massive inflation that struck late 2021. Because this all-gas no-brakes state of things was also contributing to off-the-rails inflation (along with your standard-fare greedflation and price gouging, given the extremely convenient excuses of pandemic hardships and supply chain issues). The federal reserve whipped out interest rate hikes to try to curb this huge inflation, which is like a fire extinguisher dousing and suffocating your really-cool, actively-on-fire party where everyone else is burning but you're in the pool. And then they did this more, and then more. And the financial climate followed suit. And suddenly money was not cheap anymore, and new loans became expensive, because loans that used to compound at 2% a year are now compounding at 7 or 8% which, in the language of compounding, is a HUGE difference. A $100,000 loan at a 2% interest rate, if not repaid a single cent in 10 years, accrues to $121,899. A $100,000 loan at an 8% interest rate, if not repaid a single cent in 10 years, more than doubles to $215,892.
Now it is scary and risky to throw money at "could eventually be profitable" tech companies. Now investors are watching companies burn through their current funding and, when the companies come back asking for more, investors are tightening their coin purses instead. The bill is coming due. The free money is drying up and companies are under compounding pressure to produce a profit for their waiting investors who are now done waiting.
You get enshittification. You get quality going down and price going up. You get "now that you're a captive audience here, we're forcing ads or we're forcing subscriptions on you." Don't get me wrong, the plan was ALWAYS to monetize the users. It's just that it's come earlier than expected, with way more feet-to-the-fire than these companies were expecting. ESPECIALLY with Wall Street as the other factor in funding (public) companies, where Wall Street exhibits roughly the same temperament as a baby screaming crying upset that it's soiled its own diaper (maybe that's too mean a comparison to babies), and now companies are being put through the wringer for anything LESS than infinite growth that Wall Street demands of them.
Internal to the tech industry, you get MASSIVE wide-spread layoffs. You get an industry that used to be easy to land multiple job offers shriveling up and leaving recent graduates in a desperately awful situation where no company is hiring and the market is flooded with laid-off workers trying to get back on their feet.
Because those coin-purse-clutching investors DO love virtue-signaling efforts from companies that say "See! We're not being frivolous with your money! We only spend on the essentials." And this is true even for MASSIVE, PROFITABLE companies, because those companies' value is based on the Rich Person Feeling Graph (their stock) rather than the literal profit money. A company making a genuine gazillion dollars a year still tears through layoffs and freezes hiring and removes the free batteries from the printer room (totally not speaking from experience, surely) because the investors LOVE when you cut costs and take away employee perks. The "beer on tap, ping pong table in the common area" era of tech is drying up. And we're still unionless.
Never mind that last part.
And then in early 2023, AI (more specifically, Chat-GPT which is OpenAI's Large Language Model creation) tears its way into the tech scene with a meteor's amount of momentum. Here's Microsoft's prize pig, which it invested heavily in and is galivanting around the pig-show with, to the desperate jealousy and rapture of every other tech company and investor wishing it had that pig. And for the first time since the interest rate hikes, investors have dollar signs in their eyes, both venture capital and Wall Street alike. They're willing to restart the hose of money (even with the new risk) because this feels big enough for them to take the risk.
Now all these companies, who were in varying stages of sweating as their bill came due, or wringing their hands as their stock prices tanked, see a single glorious gold-plated rocket up out of here, the likes of which haven't been seen since the free money days. It's their ticket to buy time, and buy investors, and say "see THIS is what will wring money forth, finally, we promise, just let us show you."
To be clear, AI is NOT profitable yet. It's a money-sink. Perhaps a money-black-hole. But everyone in the space is so wowed by it that there is a wide-spread and powerful conviction that it will become profitable and earn its keep. (Let's be real, half of that profit "potential" is the promise of automating away jobs of pesky employees who peskily cost money.) It's a tech-space industrial revolution that will automate away skilled jobs, and getting in on the ground floor is the absolute best thing you can do to get your pie slice's worth.
It's the thing that will win investors back. It's the thing that will get the investment money coming in again (or, get it second-hand if the company can be the PROVIDER of something needed for AI, which other companies with venture-back will pay handsomely for). It's the thing companies are terrified of missing out on, lest it leave them utterly irrelevant in a future where not having AI-integration is like not having a mobile phone app for your company or not having a website.
So I guess to reiterate on my earlier point:
Drowned rats. Swimming to the one ship in sight.
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“If buying isn’t owning, piracy isn’t stealing”
20 years ago, I got in a (friendly) public spat with Chris Anderson, who was then the editor in chief of Wired. I'd publicly noted my disappointment with glowing Wired reviews of DRM-encumbered digital devices, prompting Anderson to call me unrealistic for expecting the magazine to condemn gadgets for their DRM:
https://longtail.typepad.com/the_long_tail/2004/12/is_drm_evil.html
I replied in public, telling him that he'd misunderstood. This wasn't an issue of ideological purity – it was about good reviewing practice. Wired was telling readers to buy a product because it had features x, y and z, but at any time in the future, without warning, without recourse, the vendor could switch off any of those features:
https://memex.craphound.com/2004/12/29/cory-responds-to-wired-editor-on-drm/
I proposed that all Wired endorsements for DRM-encumbered products should come with this disclaimer:
WARNING: THIS DEVICE’S FEATURES ARE SUBJECT TO REVOCATION WITHOUT NOTICE, ACCORDING TO TERMS SET OUT IN SECRET NEGOTIATIONS. YOUR INVESTMENT IS CONTINGENT ON THE GOODWILL OF THE WORLD’S MOST PARANOID, TECHNOPHOBIC ENTERTAINMENT EXECS. THIS DEVICE AND DEVICES LIKE IT ARE TYPICALLY USED TO CHARGE YOU FOR THINGS YOU USED TO GET FOR FREE — BE SURE TO FACTOR IN THE PRICE OF BUYING ALL YOUR MEDIA OVER AND OVER AGAIN. AT NO TIME IN HISTORY HAS ANY ENTERTAINMENT COMPANY GOTTEN A SWEET DEAL LIKE THIS FROM THE ELECTRONICS PEOPLE, BUT THIS TIME THEY’RE GETTING A TOTAL WALK. HERE, PUT THIS IN YOUR MOUTH, IT’LL MUFFLE YOUR WHIMPERS.
Wired didn't take me up on this suggestion.
But I was right. The ability to change features, prices, and availability of things you've already paid for is a powerful temptation to corporations. Inkjet printers were always a sleazy business, but once these printers got directly connected to the internet, companies like HP started pushing out "security updates" that modified your printer to make it reject the third-party ink you'd paid for:
https://www.eff.org/deeplinks/2020/11/ink-stained-wretches-battle-soul-digital-freedom-taking-place-inside-your-printer
Now, this scam wouldn't work if you could just put things back the way they were before the "update," which is where the DRM comes in. A thicket of IP laws make reverse-engineering DRM-encumbered products into a felony. Combine always-on network access with indiscriminate criminalization of user modification, and the enshittification will follow, as surely as night follows day.
This is the root of all the right to repair shenanigans. Sure, companies withhold access to diagnostic codes and parts, but codes can be extracted and parts can be cloned. The real teeth in blocking repair comes from the law, not the tech. The company that makes McDonald's wildly unreliable McFlurry machines makes a fortune charging franchisees to fix these eternally broken appliances. When a third party threatened this racket by reverse-engineering the DRM that blocked independent repair, they got buried in legal threats:
https://pluralistic.net/2021/04/20/euthanize-rentier-enablers/#cold-war
Everybody loves this racket. In Poland, a team of security researchers at the OhMyHack conference just presented their teardown of the anti-repair features in NEWAG Impuls locomotives. NEWAG boobytrapped their trains to try and detect if they've been independently serviced, and to respond to any unauthorized repairs by bricking themselves:
Poland is part of the EU, meaning that they are required to uphold the provisions of the 2001 EU Copyright Directive, including Article 6, which bans this kind of reverse-engineering. The researchers are planning to present their work again at the Chaos Communications Congress in Hamburg this month – Germany is also a party to the EUCD. The threat to researchers from presenting this work is real – but so is the threat to conferences that host them:
https://www.cnet.com/tech/services-and-software/researchers-face-legal-threats-over-sdmi-hack/
20 years ago, Chris Anderson told me that it was unrealistic to expect tech companies to refuse demands for DRM from the entertainment companies whose media they hoped to play. My argument – then and now – was that any tech company that sells you a gadget that can have its features revoked is defrauding you. You're paying for x, y and z – and if they are contractually required to remove x and y on demand, they are selling you something that you can't rely on, without making that clear to you.
But it's worse than that. When a tech company designs a device for remote, irreversible, nonconsensual downgrades, they invite both external and internal parties to demand those downgrades. Like Pavel Chekov says, a phaser on the bridge in Act I is going to go off by Act III. Selling a product that can be remotely, irreversibly, nonconsensually downgraded inevitably results in the worst person at the product-planning meeting proposing to do so. The fact that there are no penalties for doing so makes it impossible for the better people in that meeting to win the ensuing argument, leading to the moral injury of seeing a product you care about reduced to a pile of shit:
https://pluralistic.net/2023/11/25/moral-injury/#enshittification
But even if everyone at that table is a swell egg who wouldn't dream of enshittifying the product, the existence of a remote, irreversible, nonconsensual downgrade feature makes the product vulnerable to external actors who will demand that it be used. Back in 2022, Adobe informed its customers that it had lost its deal to include Pantone colors in Photoshop, Illustrator and other "software as a service" packages. As a result, users would now have to start paying a monthly fee to see their own, completed images. Fail to pay the fee and all the Pantone-coded pixels in your artwork would just show up as black:
https://pluralistic.net/2022/10/28/fade-to-black/#trust-the-process
Adobe blamed this on Pantone, and there was lots of speculation about what had happened. Had Pantone jacked up its price to Adobe, so Adobe passed the price on to its users in the hopes of embarrassing Pantone? Who knows? Who can know? That's the point: you invested in Photoshop, you spent money and time creating images with it, but you have no way to know whether or how you'll be able to access those images in the future. Those terms can change at any time, and if you don't like it, you can go fuck yourself.
These companies are all run by CEOs who got their MBAs at Darth Vader University, where the first lesson is "I have altered the deal, pray I don't alter it further." Adobe chose to design its software so it would be vulnerable to this kind of demand, and then its customers paid for that choice. Sure, Pantone are dicks, but this is Adobe's fault. They stuck a KICK ME sign to your back, and Pantone obliged.
This keeps happening and it's gonna keep happening. Last week, Playstation owners who'd bought (or "bought") Warner TV shows got messages telling them that Warner had walked away from its deal to sell videos through the Playstation store, and so all the videos they'd paid for were going to be deleted forever. They wouldn't even get refunds (to be clear, refunds would also be bullshit – when I was a bookseller, I didn't get to break into your house and steal the books I'd sold you, not even if I left some cash on your kitchen table).
Sure, Warner is an unbelievably shitty company run by the single most guillotineable executive in all of Southern California, the loathsome David Zaslav, who oversaw the merger of Warner with Discovery. Zaslav is the creep who figured out that he could make more money cancelling completed movies and TV shows and taking a tax writeoff than he stood to make by releasing them:
https://aftermath.site/there-is-no-piracy-without-ownership
Imagine putting years of your life into making a program – showing up on set at 5AM and leaving your kids to get their own breakfast, performing stunts that could maim or kill you, working 16-hour days during the acute phase of the covid pandemic and driving home in the night, only to have this absolute turd of a man delete the program before anyone could see it, forever, to get a minor tax advantage. Talk about moral injury!
But without Sony's complicity in designing a remote, irreversible, nonconsensual downgrade feature into the Playstation, Zaslav's war on art and creative workers would be limited to material that hadn't been released yet. Thanks to Sony's awful choices, David Zaslav can break into your house, steal your movies – and he doesn't even have to leave a twenty on your kitchen table.
The point here – the point I made 20 years ago to Chris Anderson – is that this is the foreseeable, inevitable result of designing devices for remote, irreversible, nonconsensual downgrades. Anyone who was paying attention should have figured that out in the GW Bush administration. Anyone who does this today? Absolute flaming garbage.
Sure, Zaslav deserves to be staked out over an anthill and slathered in high-fructose corn syrup. But save the next anthill for the Sony exec who shipped a product that would let Zaslav come into your home and rob you. That piece of shit knew what they were doing and they did it anyway. Fuck them. Sideways. With a brick.
Meanwhile, the studios keep making the case for stealing movies rather than paying for them. As Tyler James Hill wrote: "If buying isn't owning, piracy isn't stealing":
https://bsky.app/profile/tylerjameshill.bsky.social/post/3kflw2lvam42n
If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:
https://pluralistic.net/2023/12/08/playstationed/#tyler-james-hill
Image:
Alan Levine (modified)
https://pxhere.com/en/photo/218986
CC BY 2.0
https://creativecommons.org/licenses/by/2.0/
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