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As an economist that works with deep learning this is just false. Im willing to wager this will not happen even on on your low end of 7-8% for the US. I’m pretty poor but I would be happy to wager $10000 on this.
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With the current pace of development in AI and as demos turn into full featured products and services, I can see the overall US GDP growth rising from recent avg 2-3% to 20+% in 10 years This is a seismic shift, which is really hard to think and reason about 😳
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People have asked me to write a rebuttal to the original quote tweet, which I will do here. This tweetstorm represents a series of Fermi decompositions and napkin math which I hope will illustrate how difficult 7% growth is for a country like the United States. 1/n
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mentions China grew at 7+% a year, which is true but likely not much higher. Even though on paper China has grown 10+% a year a lot of this is inflated CCP reporting. The reason China was growing so fast was because there low initial GDP per capita unlike the US 2/n
There have been 3 industrial revolutions in history, mechanization, electricity and mass production, and IT and the internet. China went through all 3 at the same time and was barely able to go above 7% growth annually. 3/n
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The newest industrialization will be big, but will it be bigger than moving 95% of the population working in agriculture to working factories, not to mention all 3 combined? 4/n
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Given these growth rates, it seems unlikely that a single industrial revolution can move the needle to such an extent that US GDP growth accelerates from 2% to 7%. 7/n
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Perhaps you can argue that the industrial revolution on the horizon is going to be 3x bigger than any industrial revolution in the past. Let’s see what that would imply: 8/n
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7% growth implies 5% growth over our current trend rate of about 2%. This comes out to be about 1.15 trillion GDP additional growth this year and increasing as the base gets larger. 8/n
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To get to the 1.15 trillion additional growth you need 11.5 Facebook created every year. This comes out to a market cap of 5.5 trillion dollars created every year in tech to get something like a 5% growth. The market cap of the entire tech sector is 13.5 trillion dollars. 10/n
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Call adjacent markets another 6.5 trillion dollars. Thus a 20 trillion dollar market cap sector needs to add 6 trillion (5.5 + .02*20) dollars a year. Has the tech sector ever grown so fast that it is creating the equivalent of 12.5 Facebooks from nothing every year? No. 11/n
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Let’s think about this another way, assume the US is growing at 2% a year. The tech sector is 10% of the US economy. If the US were to grow 7% a year on all tech sector growth, the tech sector would have to grow at 52% a year. 12/n
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Even if you assume adjacent sectors (20% share) growing at 12% a year, you need 32% growth from the tech sector to just get 7% total GDP growth. This seems infeasible to me. But you say this is a revolution unlike any that we have seen. Ok let's talk about the tech: 13/n
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Just to get a sense of how massive innovation has to be to move the needle, I'm going to discuss three central innovations. Let me know if I missed something--more will be invented--but I plan on showing that these game changing techs will not drastically improve growth. 14/n
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The triumvirate of GDP impactful techs are 1) GPT-3 and other LLMs, 2) Self-driving cars and other robotic control, 3) and Alpha Fold. I don’t include text-to-image models like DALLE and other diffusion models because idk any commercial applications that move the needle. 15/n
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LLM: GPT-3 is good at a lot of NLP tasks, but versus specialists with fewer parameters it often performed worse. For example, BERT outperformed GPT-3 for word embeddings. Something like PaLM maybe outperforms BERT, but the improvement is incremental. 16/n
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Is there a space for people who are afraid to go to to download BERT and press run on their computer? Yes. If you want Open AI to hold your hand for a fee, there is a place for that, but outside of NLG GPT-3 isn’t really a category killer 17/n
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Codex: First I will start out with Codex, which to me seems like the category killer app of the category killer that is NLG. Assume that coders spend 2/3 of their time coding and 1/3 of their time doing other stuff. This is optimistic. 18/n
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Certain things don’t get more productive and as the productive things get more productive, the unproductive things take up more of your time. Coders would now spend 100% of their time on not coding, but that takes 33% of their time before coding. 20/n
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Let’s say the tech sector is 33% coders, again Baumol’s cost disease hurts us as that would imply that 66% more work is being done in the tech sector due to Codex. This is widely optimistic. 21/n
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...that comes out to about 3.5% growth a year for the tech sector, from Codex, and by fiat assumption 3.5% growth for coders in the 10% of the economy outside tech that has software engineers. 24/n
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At the same time, as Codex is improving efficiency, coders are losing their jobs. So there is a net increase in GDP there is also a drag on growth. I don’t know how much this is but someone losing their 100K-200K job will spend a lot less on the economy. I ignore this. 25/n
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NLG: Maybe other applications add additional impact from GPT-3, using the same logic maybe another 5% growth a year from other adjacent sectors (10% of the economy). You have robot therapists, robot financial planners, and robot CRMs. 26/n
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Again, not everyone will choose these options as some will prefer the human touch, you also have the same cost disease problem, and people losing their jobs. 27/n
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Since the US economy is 23 trillion dollars in size even if you have a 5x growth in the industry that’s still only a one-time growth of 1.7%. Businesses like Covariant and Boston Dynamics are niche businesses in a niche industry and do not move the needle. 28/n
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Even increasing the pharmaceutical industry by 5x would lead to an additional 11% one-time bump in GDP. Smoothed over fifteen years comes out to be less than a 1% increase in growth. 30/n
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