{"id":360,"date":"2025-03-01T17:16:42","date_gmt":"2025-03-01T23:16:42","guid":{"rendered":"https:\/\/technoligarch.com\/?p=360"},"modified":"2025-03-01T17:16:42","modified_gmt":"2025-03-01T23:16:42","slug":"artificial-intelligence-is-like-artificial-flight","status":"publish","type":"post","link":"https:\/\/technoligarch.com\/?p=360","title":{"rendered":"Artificial intelligence is like artificial flight"},"content":{"rendered":"
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The economics of foundational AI models may resemble those of the airline industry<\/strong>.<\/p>\n

Most of the value created accrues to the manufacturers and the world at large<\/strong>\u2014while the entities actually running the flights capture very little.<\/p>\n

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  • NVIDIA & co.<\/strong> are like Boeing and Airbus<\/strong>\u2014building the machines that enable everything.<\/li>\n
  • Azure, AWS, and others<\/strong> sell the jet fuel<\/strong> (compute power) that makes it all run.<\/li>\n
  • The sellers of hardware and energy<\/strong> have relatively deep profit pools.<\/li>\n<\/ul>\n

    Who captures the most value?<\/strong><\/h3>\n
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    The biggest beneficiary of air travel is <\/span>society<\/strong>.<\/span><\/div>\n
    <\/div>\n<\/div>\n<\/div>\n
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    • People get to see the world.<\/li>\n
    • Entire economies are built on tourism.<\/li>\n
    • International business and geopolitics flourish.<\/li>\n
    • Companies like Expedia, Airbnb, and others emerge.<\/li>\n
    • Countless second-order effects\u2014from changes in culture to travel influencers on Instagram.<\/li>\n<\/ul>\n

      Meanwhile, the airlines? They capture almost nothing.<\/p>\n

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      • The airline industry generates over $1 trillion in revenue<\/strong> but has razor-thin margins (~3.6%)<\/strong>.<\/li>\n
      • It\u2019s a high-CAPEX business that often returns less than its cost of capital<\/strong>.<\/li>\n<\/ul>\n

        Sound familiar?<\/p>\n

        Again, the world benefits<\/strong><\/h3>\n
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        Like air travel, foundational AI models will generate <\/span>immense value<\/strong>\u2014but much of it will accrue elsewhere.<\/span><\/div>\n
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        • Hardware manufacturers<\/strong> (NVIDIA, AMD, etc.) and hyperscalers<\/strong> (AWS, Azure, GCP) will prosper.<\/li>\n
        • Society as a whole<\/strong> will benefit in ways that are both obvious and unpredictable<\/strong>.<\/li>\n
        • Meanwhile, foundation models themselves<\/strong> may have razor-thin margins<\/strong>\u2014likely even being value-dilutive in their current form.<\/li>\n<\/ul>\n

          Searching for margin<\/strong><\/h3>\n
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          Airlines had to innovate beyond selling flights\u2014venturing into:<\/span><\/div>\n
          <\/div>\n<\/div>\n<\/div>\n
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          • Higher-margin bundled vacations<\/li>\n
          • Credit card partnerships<\/li>\n
          • Loyalty programs<\/li>\n<\/ul>\n

            Foundation models will likely need to do something similar in the product layer. What is their equivalent?<\/p>\n

            Beyond the obvious<\/strong><\/h3>\n
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            Perhaps, like artificial flight, artificial intelligence is <\/span>destined<\/em> to be a <\/span>gift<\/strong> to society.<\/span><\/div>\n<\/div>\n<\/div>\n

            Unlocking flight made the world smaller<\/strong>\u2014distance was no longer a limiting constraint. This meant:<\/p>\n

            1) You can travel.<\/p>\n

            2) The Lakers can fly to play the Knicks\u2014and you can watch.<\/p>\n

            3) Sports betting booms.<\/p>\n

            What are the second and third-order effects of unlocking intelligence?<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

            The economics of foundational AI models may resemble those of the airline industry. Most of the value created accrues to the manufacturers and the world at large\u2014while the entities actually running the flights capture very little. NVIDIA …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"bgseo_title":"","bgseo_description":"","bgseo_robots_index":"index","bgseo_robots_follow":"follow","_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[10],"tags":[],"class_list":["post-360","post","type-post","status-publish","format-standard","hentry","category-reflections"],"_links":{"self":[{"href":"https:\/\/technoligarch.com\/index.php?rest_route=\/wp\/v2\/posts\/360","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/technoligarch.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/technoligarch.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/technoligarch.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/technoligarch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=360"}],"version-history":[{"count":1,"href":"https:\/\/technoligarch.com\/index.php?rest_route=\/wp\/v2\/posts\/360\/revisions"}],"predecessor-version":[{"id":361,"href":"https:\/\/technoligarch.com\/index.php?rest_route=\/wp\/v2\/posts\/360\/revisions\/361"}],"wp:attachment":[{"href":"https:\/\/technoligarch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=360"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/technoligarch.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=360"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/technoligarch.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=360"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}