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- Hacker News
- It seem very unlikely AI will get a bailout. Politicians don’t want to touch that with a 100 ft pole. This is very different than 2008 in that regard.
This is going to be a “let it burn” scenario that will be absorbed by VCs and private credit markets.
Remember too though that even if a bailout does occur investors typically get wiped out. The companies live on but the investors and employee equity typically get reset to zero.
by cmiles8 - This doesn’t actually require anything like a law, it’s basically a verbal promise. Or am I misreading?
If AI companies were to go bankrupt, it’s possible they’d be nationalized. I don’t see any other feasible option besides that or a bailout (or one but it’s effectively the other, e.g. “nationalized” but the employees including leaders are the same, or bailed out but already subservient to the military). I think the best case is for the compute to be made effectively public: giving every citizen free access, since we’re paying taxes that prevent their bankruptcy.
- Too bad this is just pre-election grandstanding. It's a really good idea.
Usually we don't talk about a bailout until a catastrophe is underway. Then they say "We need to fix this now, because of systemic risk, and we'll worry about preventing future problems later". Declaring "we will not bail you out" before the bankruptcies tells everybody that they'd better protect themselves from moral hazard.
This is a good test case, too. The AI companies aren't nearly as intertwined with the rest of the economy as the banks are. They can fail without kicking off a domino effect. Let them.
by jfengel - For the people in the comments stating that this is just fluff for voters, that may be true. But consider that this memo has another target audience: Investors, Banks, and VCs.
I know that many people in those spaces are investing in AI precisely because they believe that should their AI investments fail, the industry will be bailed out by the federal government. Getting AI to be seen favorably by the administration and putting AI within civic government systems and inside defense contracts is a pretty big push towards that outcome.
by arn3n - This makes me think about a really interesting discussion on the awesome History of Business podcast with Adrian Wooldridge[0].
Adrian Wooldridge was essentially arguing that especially with the shift towards more privately owned companies (as in, non-publicly traded) that we've seen in the US, limited-liability companies give an incentive for a large amount of risk.
Essentially there's an asymmetry, because companies going bankrupt have no liability for debts, but they gain all profits if things go well. This has always encouraged risk (and often in a good way), but publicly traded companies are ultimately owned by retirement funds etc, which is not the case for private companies. So the risk of bankruptcy is still covered by the general public, but a lot less of the benefits are felt by the public.
I think we're in fairly uncharted waters for what this risk asymmetry means for the US and global economy. It doesn't sound like something that'll end well, I expect we'll see a lot of public fall out at some stage.
by benrutter - Is there any indication that such a bailout was even planned or is this just populist tilting at windmills?by Sol-
- A lot of comments read this is as fluff. And in some ways it is.
However, looking at the other side, I think what this might do is add some barrier or consideration when a bailout is considered.
The last time we did large scale bailouts (TARP[0], in 2008), It was rushed through and ratified in around two weeks following the sudden collapse of Lehman.
Any measures we can take to ensure that we don't fall into a situation where there is only one choice is sensible.
[0] https://home.treasury.gov/data/troubled-assets-relief-progra...
by bushido - Privatize the losses. These are the largest companies the world has ever seen, sitting on piles of assets like dragons. They have hyped AI endlessly to the point that everyone else is sick of it. If they haven't saved any money, and can't bail themselves out, they deserve bankruptcy.
Signed, the Silent Majority