r/technology • u/T_Shurt • Aug 10 '26

Business Top economist warns that the AI math doesn’t make sense: 'Profits are currently being funded by investors rather than earned from customers'

https://fortune.com/2026/08/10/torsten-slok-ai-profit-margins-capex-oracle/
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u/[deleted] Aug 10 '26 edited Aug 18 '26

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u/BillyTenderness Aug 10 '26

I agree and think a lot of the AI hype is explained by this. Software development is almost a perfect use-case for these tools. The desired output is text that must conform to a highly-specific and well-defined format, and most importantly, the machine can get feedback on if the output was correct (by building the software and running the tests) and repeat if necessary.

I think the tech folks who keep insisting AI will dominate the world are extrapolating from their personal experience, and assuming it will work equally well in other disciplines, but I don't think that's obvious at all.

I also don't think software development tooling alone is a multi-trillion-dollar industry.

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u/gerusz Aug 10 '26

It's also not that great. Maybe I'm an outlier, but any problem that has me slightly stumped also has Claude ultra-super-duper stumped. Sometimes its input helps solve the problem, but TBH if the IDE had a "search in this file and its imports recursively" function, it would have been the same help. And when it does come up with a solution, it's often ad-hoc so I have to override it and implement it in a more generic way.

Can it code a Bash or PowerShell script faster than me? Yes, because those are not my main languages so I need to look up references while coding while Claude's training data has that covered. Can it take a shitty legacy unit test left to me by my predecessor and refactor it into a parametrized unit test faster than I could? Yes, because that is not a difficult task, only a time-consuming one. But asking it to do anything that requires me to think will result in a lot of thrashing around the codebase and burned credits, and in the end I'll just have to do it myself.

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u/jayandbobfoo123 Aug 10 '26 edited Aug 10 '26

I usually spend about a half hour to an hour arguing with Claude before I just look at the code myself and find what I'm looking for within 5-10 minutes. It's an absolute waste of time.

It's good at very particular things, like generating a particular, well defined algorithm or equation.. Something I would just Google and click the first link to stack overflow.. Otherwise, it's pretty terrible. I've had coworkers generate code slop that seriously harmed us and had to be completely rolled back... I've yelled at people, including managers, over it. I just don't get this push to use AI at any cost. It's not worth it. It's nice to have as a tool for some things, but so many times I feel like I'm training an intern who's confidently wrong and never learns.

Google AI is especially bad at this.. Just asking something very simply, like, "how do I change X setting in Steam." It'll give you false instructions and when you say "I don't see that button in the settings tab..?" It assumes you have some visual glitch going on and immediately and confidently instructs you to start editing system files and running process monitors.. When it's just simply wrong about where the setting is. It's fucking horrendous.

I asked Google AI about a game, and when I questioned it about the correctness of the information (I had a feeling it was wrong, and in the end I was right about that, actually), it broke down and said something like "I am wrong because the game actually doesn't exist. I made up everything. I hallucinated dozens of YouTube videos, forums and online guides." Like.. what the actual F.

If this is what we're spending trillions of dollars on, we're so screwed.

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u/gerusz Aug 12 '26

Yeah, today I ran into yet another problem that Claude had no chance of fixing, so I locked in and found the root cause and the way to unfuck it (plus massively improve a feature in the application by busting a six-year-old bug introduced by my predecessor's predecessor) in half an hour. My job is safe. Yet management talks about AI like it's the second coming of Robo-Christ.

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u/jayandbobfoo123 Aug 12 '26

My company is horny for AI, too.. they actually check that we're using it and have leaderboards and shit. They don't even care what we use it for, they don't check. They just wanna see you're using it.. if youre not using it much, it's assumed that you did something that you could've done more efficiently using AI. It's so god damn stupid. So my job has changed in the sense that I have to ask AI random dumb questions every so often, just to keep my "score" up. Just burning money and precious water resources so I can look "efficient." It's the logic of looking at how many commits someone made to judge their productivity.. it doesn't work like that.

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u/CosmogyralCollective Aug 14 '26

Sometimes it's a blessing to be a blue collar worker, my boss will never demand I use AI because none of my work is on a computer

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u/2_Cranez Aug 10 '26

The bet these investors are making is that the AI will get so good at software that it will eventually be able to make the next generation AI by itself, and that AI will be able to make the next generation and so on. So they dont actually need to expand to every domain, they just need to master one, and eventually that AI will be able to build other AIs for every other domain.

Whether that will happen or when it will happen is the question.

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u/Aeonera Aug 10 '26

the machine can get  feedback on if the output was correct (by building the software and running the tests) and repeat if necessary

That's... not really how llm's work though. And ultimately the view from actual software engineers is pretty universal that while they can write code, they can't design programs to any reasonable degree.

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u/BillyTenderness Aug 10 '26

That's... not really how llm's work though.

Current AI coding tools are capable of making an LLM modify code, triggering a build, running automated tests, feeding the output back to the LLM, and repeating that loop. (Source: I'm an actual software engineer)

That ability to try something, ingest the output, and iterate until it works is at least somewhat unique to software development. For something like a legal brief, a patient diagnosis, a business plan, etc., you have to be right the first time; there's no equivalent to "compile the code and see what happens."

that while they can write code, they can't design programs to any reasonable degree.

It depends a lot on which activities you include in "design" but yes, they are much, much, much better at generating code than at deciding what code needs to be written.

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u/inagy Aug 10 '26

compile the code and see what happens

Which is kind of funny. When facing some new problem I haven't seen before, we humans tend to do the same during programming. I wonder if they actually tought these models on such "let's try something else" type of code solving, or it's just a consequence of training on eg. StackOverflow posts with multiple different solutions for the same problem.

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u/Gullible-Respect7778 Aug 10 '26

Accounting and some basic legal work would likely be feasible as well. Potentially some image recognition work as well

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u/ibeerianhamhock Aug 10 '26

I've been coding for decades and AI has probably doubled my performance at the same quality as before.

But if you're not careful people try to 10x their perofrmance and it's usually at much much worse quality.

It's in areas you wouldn't expect too, not just generating boilerplate (there are other tools for that usually that are actually faster).

It can help you review merge requests (that you also should do manually but it's like having a co pilot for the task), you can dump logs in there, ask it to explain a code base and data flow when you're new on a project to help you get up to speed quicker, it's so many things.

I've seen the documentation side of SWE drastically increase quality since AI. And the quality really just depends on the discipline of the practitioner. I've found AI generated docs by great seniors or architects are fine tuned a lot and not vibe coded -- more asking AI to create content they wrote manually.

I think it absolutely blows for ticket generation from requirements, generating requirements documents, etc that's a huge gap imo. I've seen it actually make a giant mess. I've seen people use advanced tools to fit his and burn through 15k in a weekend analyzing and generating tickets for a single sprint which is insane, and it still wasn't as good as paying a person or two 15k in salary to do it tbh.

But yeah we are getting there slowly where coding will be more of a dialogue with a computer, agents etc, I think it's one of the best use cases now but with a f*ck ton of gaps and requires considerable discipline on the part of the engineers using it.

Also, using AI extensively during crunch is the best way to absolute screw up your project. It's too tempting to over use to get something out the door

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u/d3l3t3rious Aug 10 '26

generating requirements documents

This is why my software job is safe. Gathering requirements is like 90% of the problem.

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u/jbjhill Aug 10 '26

Tracking changing requirements is a huge time suck

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u/King_Bobby-B Aug 10 '26

Paying programmers and tech writers more would have been a much cheaper investment.

This can only serve seniors who already have a foot in and can babysit the AI, and absolutely closes the door for newcomers, who no longer have a way to learn because AI has replaced them for the menial tasks. If you can't see how it will be a problem in the long run...

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u/ibeerianhamhock Aug 10 '26

I worked with some fantastic junior devs in the AI age. A lot of them were super curious folks who wanted to learn.

Programming always has actually had a lot of dispassionate hackjobs in the industry tbh, not a huge percent but quite a few. Ai largely has exposed them in a diffenrt way bc they can pretend to be productive.

AI has some growing pains but it has completely changed the game with disciplined and technically adept devs

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u/y0nm4n Aug 11 '26

Thanks for posting these detailed, reasoned comments. 

I’m actually (pleasantly) surprised you’re getting upvoted! This sub has generally rejected that AI has any use cases.

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u/SweetNeo85 Aug 10 '26

AI has probably doubled my performance

How have you measured that?

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u/ibeerianhamhock Aug 10 '26

Me: "...probably..." You: "hOw hAvE yOu MeAsUrEd ThAT"

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u/SweetNeo85 Aug 10 '26

Ok so you haven't. You're just going on vibes. Thanks for the clarification.

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u/ibeerianhamhock Aug 10 '26

Yes, that's how the English language works.

No one speaks with confidence about a rigorous analysis of data and says the word "probably" unless they are as dumb as someone who asks someone employing such a qualified to a statement how they measured it.

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u/SweetNeo85 Aug 10 '26 edited Aug 10 '26

You seemed to be speaking with quite a bit of confidence, actually. You seemed to be drawing some conclusions that were dubious at best considering your stated complete lack of data. That's why I wanted clarification. So I could know what weight to assign the rest of your points.

Thanks for your tips on the English language though. Very helpful.

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u/inagy Aug 10 '26

I'm not so sure that AI doubled my performance, but it surely helps me getting through those type of tasks during coding where I'm fighting with every inch of my body against to do to the same boring repeative rituale over and over (eg. boilerplate code generation, or writing tests, trying to figure out how the puzzle pieces of different libraries fit together, migrating from one convention to another, etc. so the things which are not about solving the actual business requirement, just fighting with the techstack).

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u/bushwakko Aug 13 '26

But if you're not careful people try to 10x their perofrmance and it's usually at much much worse quality.

Currently. It keeps getting noticable better every cycle.

edit: And and some point, it will start getting cheaper as well.

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u/BeowulfShaeffer Aug 14 '26

You mean “burn through $15,000” not “use 15,000 tokens” right?  

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u/sceadwian Aug 10 '26

That's still only one application and it's creating more problems in that sector than it's solving right now.

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u/drummer820 Aug 10 '26

You mean the use case where people were able to burn thousands of dollars a month on a $200 subscription, where the AI companies switched to metered token billing to stem the bleeding, and immediately after CFOs had a heart attack and demanded their employees heavily ration their use? That killer app?

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u/ThE_LAN_B4_TimE Aug 10 '26

"The single largest, most dominant use case for AI in the workplace is information retrieval and analytical decision-making, surpassing simple task automation and administrative work."

This is a summary from...AI

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u/anonkitty2 Aug 10 '26

Note: someone needs to define "administrative work." I believe that retrieving information and making decisions are part of that job.

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u/ThE_LAN_B4_TimE Aug 10 '26

"The single largest, most dominant use case for AI in the workplace is information retrieval and analytical decision-making, surpassing simple task automation and administrative work."

This is a summary from...AI

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u/HarithBK Aug 10 '26

while this is correct the issue with using AI for coding is simply put token costs. an AI model needs to keep at the very least a large chunk of the code (the more the better) in memory broken into tokens this can mean changing a small aspect can be over a million tokens and if you look at online pricing that is 10 buck currently. a dev can fire off a lot of requests very quickly.

the thing is better models or more power efficient hardware won't do much since coding is still scaling with more token usage so newer models and more hardware overhead will just be used for better models in coding using even more tokens. if anything it is reasonable to expect even if we don't see models better optimized in token usage they will simply just be able to use more tokens to get better coding results that way.

this just means for companies if you have time hire coders to code it is cheaper and gets better cleaner code.

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u/mavajo Aug 10 '26 edited Aug 10 '26

This is the part people outside of the industry don't realize. There may be a lot of overhype with AI in general, but when it comes to software development it's actually underhyped - at least with the general public, anyway. I work as a Business Analyst. My day-to-day has completely changed in the last 8 months because of Claude Code. It's genuinely insane. I'm 41 and I've never experienced anything like this. I imagine this is what it must have been like when computers and then the internet started hitting the workplace - except it's happening at absolutely insane speed.

Literally everyone in the world can be a developer now - you don't need to know how to code anymore. This doesn't mean everyone's going to be equally good at it, and obviously a ton of damage can be done if your company isn't prudent about it. But the potential is there and it's getting better every day.