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Sam: [2025] Three Observations

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Three observations about the economics of AI, focusing on compute, cost reduction, and societal impact.

Three Observations on the Economics of AI

Summary: This article explores three key observations about the economics of Artificial Intelligence (AI), emphasizing compute, cost reduction, and societal impact. These observations suggest that the rapid development of AI technology will have significant effects on society and the economy.

Key Observations

  • Compute and Intelligence: The intelligence of an AI model roughly equals the log of the resources used to train and run it (chiefly training compute, data, and inference compute). This means that continuous and predictable gains can be achieved by spending more resources.
  • Cost Reduction: The cost to use a given level of AI falls about 10x every 12 months, and lower prices lead to much more use. This rate of cost reduction is far stronger than Moore’s law.
  • Socioeconomic Value: The socioeconomic value of linearly increasing intelligence is super-exponential in nature. This implies that investment in AI is likely to continue to grow rapidly.

Impacts

  • Societal Change: AI will seep into all areas of the economy and society, leading to huge long-term changes.
  • Individual Empowerment: Agency, willfulness, and adaptability will become extremely valuable. AI will be the biggest lever ever on human willfulness, enabling individual people to have more impact.
  • Economic Effects: The price of many goods will eventually fall dramatically, while the cost of luxury goods and inherently limited resources may rise significantly.

Conclusion

If these three observations continue to hold true, the impacts on society will be significant. Ensuring that the benefits of AGI are broadly distributed is critical.