Yves here. This high level recap explains how the seemingly indefensible idea of an AI bailout is being packaged to make it look less appalling. Note that fresh news stories underscore the notion that this would be yet another looting of the public purse on behalf of the well-heeled and reckless, even in the face of pushback. One is that, as we flag in Links, that the Financial Times is warning that investors are starting to back away from AI connected debt\u2026particularly when the borrowers could just as easily fund these investments from cash on hand. Another is signs of political rebellion over rising electricity costs, which are being fobbed off heavily on retail consumers when AI power hogs are the big driver. In Georgia, Democrats won not just one but two seats on the state power commission board, the first Democrat success in a statewide constitutional position since 2006. Both upstarts campaigned on affordability. An account in Georgia Reporter noted<\/a>, \u201cA PowerLines\/Ipsos poll found that 3 in 4 Americans are concerned about rising utility bills.\u201d<\/p>\n By Kurt Cobb, a freelance writer and communications consultant who writes frequently about energy and environment. His work has appeared in The Christian Science Monitor, Resilience, Le Monde Diplomatique, TalkMarkets, Investing.com, Business Insider and many other venues. Originally published at OilPrice<\/a><\/strong><\/em><\/p>\n There\u2019s an old adage in Washington: Don\u2019t believe anything until it is officially denied. Now that the Trump administration\u2019s so-called artificial intelligence (AI) czar, David Sacks, has gone on record<\/a>\u00a0stating that \u201c[t]here will be no federal bailout for AI,\u201d we can begin speculating about what form that bailout might take.<\/p>\n It turns out that the chief financial officer of AI behemoth OpenAI has already put forth an idea regarding the form of such a bailout. Sarah Friar told\u00a0The Wall Street Journal\u00a0<\/em>in a recorded interview<\/a>\u00a0that the industry would need federal guarantees in order to make the necessary investments to ensure American leadership in AI development and deployment. Friar later \u201cclarified\u201d her comments in\u00a0a LinkedIn post<\/a> after the pushback from Sacks, saying that she had \u201cmuddied\u201d her point by using the word \u201cbackstop\u201d and that she really meant that AI leadership will require \u201cgovernment playing their part.\u201d That sounds like the government should still do more or less what she said in the Wall Street Journal<\/em>\u00a0interview.<\/p>\n Now, maybe you are wondering why the hottest industry on the planet that is flush with hundreds of billions of dollars from investors, needs a federal bailout. It\u2019s revealing that AI expert and commentator Gary Marcus predicted\u00a0<\/a>10 months ago<\/a>\u00a0<\/em>that the AI industry would go seeking a government bailout to make up for overspending, bad business decisions, and huge future commitments that the industry is unlikely to be able to meet. For example, in a recent podcast<\/a>\u00a0hosted by an outside investor in OpenAI, the company\u2019s CEO, Sam Altman, got tetchy when asked how a company with only $13 billion in annual revenues that is running losses will somehow fulfill $1.4 trillion in spending commitments over the next few years. Altman did NOT actually answer the question.<\/p>\n So what possible justification could the AI industry dream up for government subsidies, loan guarantees or other handouts? For years, one of the best ways to get Washington\u2019s attention is to say the equivalent of \u201cChina bad. Must beat China.\u201d\u00a0So that\u2019s what Altman is telling reporters<\/a>. But that doesn\u2019t explain why OpenAI, instead of other companies, should be the target of federal largesse. In what appears to be damage control, Altman wrote on his X account<\/a>\u00a0that OpenAI is not asking for direct federal assistance and then later outlines how the government can give it\u00a0indirect<\/em>\u00a0assistance by building a lot of data centers of its own (that can then presumably be leased to the AI industry so the industry doesn\u2019t have to make the investment itself).<\/p>\n Maybe I\u2019m wrong, and what we are seeing is NOT the preliminary jockeying by the AI industry and the U.S. government regarding what sort of subsidy or bailout will be provided to the industry. Lest you think that the industry has so far moved forward without government handouts, the\u00a0AP<\/em>\u00a0noted that subsidies are offered by more than 30 state governments<\/a>\u00a0to attract data centers.\u00a0Not everyone is happy with having data centers in their communities<\/a>. And,\u00a0those data centers have also sent electricity rates skyward<\/a>\u00a0as consumers and data centers compete for electricity and utilities seek additional funds to build the capacity necessary to power those data centers. Effectively, current electricity customers are subsidizing the AI data center build-out by paying for new generating capacity and lines to feed energy to those data centers.<\/p>\n The larger problem with AI is that it appears\u00a0to have several limitations in its current form<\/a>\u00a0that will prevent it from taking over much of the work already done by humans and preclude it from being incorporated into critical systems (because it makes too many mistakes).\u00a0All the grandiose claims made by AI boosters are dispatched with actual facts in this very long piece by AI critic Ed Zitron<\/a>.<\/p>\n I am increasingly thinking of AI as a boondoggle. A boondoggle,\u00a0according to Dictionary.com<\/a>, is \u201ca wasteful and worthless project undertaken for political, corporate, or personal gain.\u201d So far, the AI industry mostly fits this definition. But there is a more expansive definition which I borrow from Dmitri Orlov, author of\u00a0Reinventing Collapse<\/em>: A contemporary boondoggle must not only be wasteful,\u00a0it should, if possible, also create additional problems that can only be addressed by yet more boondoggles<\/a>\u2014such as the need for vast new electric generation capacity that will be unnecessary if AI turns out to be far less useful than advertised. AI boosters say that AI is going to have a big impact on society. I couldn\u2019t agree more, except not quite in the way these boosters think.<\/p>\n\n
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