The Generative AI Bubble is Over
Goldman Sachs agrees: Take those NVIDIA profits and skedaddle.
Welcome to your weekly Dark Markets news roundup on financial crime, tech fraud, and cryptocurrency. If you missed it, be sure to check out my weekend roundup of books that stare directly into the face of evil - poetic, imaginative windows into the souls of the criminals and psychopaths we cover here.
One programming note: You’ll see another episode of the Dark Markets podcast soon, and then the pod will go on a one-month hiatus to rest, retool, and build up a queue for season two!
News in Brief
SEC Sues Silvergate Bank for Facilitating FTX Thefts
The SEC claims Silvergate Bank (now defunct) is liable for letting FTX move customer funds into related entities and third parties. According to the SEC, this is a problem most of all because Silvergate lied about it, claiming to have good due diligence processes. Most parties to the suit have settled with the SEC for a mix of fines ($50 million to Silvergate itself) and bars from the finance industry of varying lengths for individual officers.
FTX: Parental Involvement Unit
Alexander Osipovich at WSJ has done the yeoman’s work of reminding the world that not all of the parties to the FTX fraud have been brought to justice: Barbara Fried and Joe Bankman, parents of Sam Bankman-Fried, are still walking around free and uncharged, despite serious evidence that they were directly involved in what amounted to political money-laundering.
Osipovich’s piece relies on newly-reported emails. Particularly given the embarrassing and self-incriminating deceptions we’ve seen in the New York Times’ reporting on the topic, Osipovich’s efforts are beyond laudable. Maybe, just maybe, they push us a little closer towards justice, and they cetainly re-affirm my belief that the Journal is the last trustworthy major newspaper in America.
I will admit, though, that I was disappointed not to see this email from Barbara cited, in which she specifically describes reasons she would like to conceal the real source of funds to her Mind the Gap PAC.
Generative AI is a Massive Fraud
Megakudos to Ed Zitron, whose latest Where’s Your Ed At newsletter is a lengthy, nuanced, but very accessible and entertaining rundown of the momentous failure of generative AI as a business proposition. More importantly, Ed details the outright false messaging that promoters of transformer-based generative AI models have spewed at the public like a fractured shitpipe.
Ed’s elevating rant is based on a new report from Goldman Sachs, bluntly titled “Gen AI: Too Much Spend, Too Little Benefit?” While it’s painful on an intellectual level to watch muppets like Sam Altman claim that a probabilistically queriable but fundamentally inert database can somehow attain superintelligence if we just make it big enough, the real issue here is that generative AI is immensely expensive and does basically nothing that’s economically productive.
The key quote, from MIT’s Daron Acemoglu: “Given the focus and architecture of generative AI technology today... truly transformative changes won’t happen quickly and few—if any—will likely occur within the next 10 years.”
Worse, though, as Zitron points out, is that the con artists running OpenAI and other even more bullshit grifts are repeatedly and knowlingly conflating Generative AI with other kinds. Because generative is the only thing that even kind of works right now.
Matt Levine loves to say that “everything is securities fraud.” But let’s be clear - once the water drains out of the bathtub they’ve stopped up with wadded lies, investors in OpenAI and other similar shams will have a genuine securities fraud case against Altman and other shameless liars, should they choose to pursue it.
I really like Where's Your Ed At. His blistering takes on Meta and Alphabet are spot on.
Avoiding the fruits of exploitation are hard when you yourself are likely exploited. Good luck finding a piece of land to live on that wasn't forcibly taken away from someone else at some point.
And when you, suffering the results of unethical practices of money in politics, have little other options to survive the Red Queen's race another day, then it's hard to say no to unethical options.
Any pizza you can buy with bitcoin can almost certainly be bought with trad tender.
But if you got a job where you need to do a little coding and you know you can't just ask your boss to allocate a coworker to help you, and you tried to find an online resource like a free code checker in the language and situation you need but they don't seem to exist (if I didn't think it so incredibly stupid, I'd think Google was making their results worse just so you might be forced to turn to--ideally their--AI, but Ed's explanation of ad-revenue-related growth addiction makes far more sense), and no code-checking (non-AI) plug-in in any IDE will work (assuming your work even pays for it), and you can't even properly debug it easily because it requires running the whole thing before you get an unhelpful error after a long time, and you can't really bother your programmer friends (who naturally make more money than you) for this, and you can't possibly get an upwork to do this in the time you need, and...
Then you remember you're underpaid, and you sanitize the data as best you can, and use your free personal demo account because of course you're boss won't pay for it... And how very probabilistic. You find it's basically a typo problem. But it works and you can finally get some sleep.
It would have taken hours of removing one piece of code at a time and MAYBE find it otherwise (definitely wouldn't have had sleep though).
You fill icky and realize that probably billions shouldn't be spent on something that's basically spellchecker. But no one would have spent investment capital if they knew that's likely all they were going to get because turning a spellchecker into Douglas Adams' Deep Thought will probably not be within their startups runway.
This completely hypothetical story that absolutely did not happen just two days ago has no point.
Now with crypto... I can get investment options I can't otherwise, yes. But let's just say you can understand crypto and still be an overleveraged idiot. And there aren't ever hypothetical scenarios like the aforementioned. If it's the middle of the night and I need a pizza, I can just use plastic. It's these hypothetical situations that I think happen to others as well that are the reason people aren't complaining about environment costs like they do with bitcoin. Or it could just because the bubble hasn't burst yet.