The memory makers will not expand demand drastically. It is in the nature of their business to keep the market under-supplied, otherwise the following oversupply will kill them. Instead, supply is just rerouted from less profitable segments such as mobile and personal computing.
China doesn't have EUV fabs... They've pushed DUV impressively far... but until they get EUV working industrially (and reasonable timelines are at least 2-4 years for that) it shouldn't be possible for them to compete for that market.
The future is here now, it’s just not evenly distributed. China will mass produce something to the point that it is widely distributed. That is how China acts as a great equalizer on a global scale.
Another way China is a great equalizer is their willingness to do business with anyone that can pay.
No, most of the rest of the large developed economies have some standards (e.g. against buying conflict minerals) and sanctions against certain regimes. China is quite happy to ignore that if they can get away with it.
China is willing to do business while giving zero fucks about the environment they are destroying and the global warming they are causing. It really blows my mind people support the china thing so much around here.
...why wouldn't it be? Who cares if e.g. Greenland has near-zero total emissions if nearly nobody lives there? Emissions are a cost of human existence, of course absolute emissions should scale with population.
> but until they get EUV working industrially (and reasonable timelines are at least 2-4 years for that)
Does this not count as soon? How often do you buy new computers? That seems pretty soon. I remember a year or few ago being told it'd never happen so they're already infinity years ahead of schedule if we accept that as reasonable. The rate they're pulling ahead of expectations appears to be so sharp there is a risk they leapfrog EUV to go on to the next big thing.
How much does the node size matter for dram? My understanding was that it’s been marginal gains on sram since about 7nm TSMC. I would naively expect the capacitor size requirements not to shrink as well as logic, does the smaller transistor make up for the lower capacitance, or do they have to run at higher frequencies and refresh more frequently?
Not an egalitarian society, but their companies have a honey-badger like mentality from what I have read, where they ruthlessly reduce costs and margin down past where non-Chinese companies cannot compete.
But they do build infrastructure, usable, infrastructure, ever already built that railway all the way to Tehran, and once the war is over between Ukraine and Russia, they almost certainly will build high speed rail all the way to Europe.
Would’ve been nice if the United States had built a rail system to north to Alaska or even a rail system to Chile to the south?
I guess doing things like that are hard to do when you’re busy fighting multiple wars since the early 1950s.
There are no egalitarian societies. Societies in the west favour the super rich and believing anything else is simply delusional. Sorry to burst the bubble.
If you think that South Africa is absolutely egalitarian, you're wrong.
If you think that Norway is absolutely egalitarian, you're also wrong.
But if you think that "South Africa is egalitarian" is as wrong as "Norway is egalitarian", then your views are more wrong than both of them combined.
To state that no country is absolutely egalitarian does not mean that "China is hardly egalitarian" has to be wrong. And even if some other country (say Norway) were to be as hierarchical as China, that would not disprove the claim that China is hardly egalitarian. It would just mean there exist other inegalitarian countries too.
The thing about China is that they will iterate and iterate some more until they get there and then once there, well like BYD they will disrupt the entire market the cozy days of resting on your laurels for the American/Korean memory companies is over.
The big three memory makers will probably face their last big payday. I hope they enjoy it, as China will dominate the global memory market in three-five years due to their short term greed.
Apple will likely bring memory in-house, like they did with CPUs and GPUs. Anyone questioning the time it took to replace Intel and Qualcomm should consider the Chinese expansion in the memory market, which makes it a long-term necessity.
Apple has the money, and while its competitors have spent/squandered $1 trillion on the AI data center fiasco. Apple made a decision to stay away from the blast crater.
Meanwhile Apple which also has the expertise in engineering and chip design can do what is necessary and bring memory in house. Note: Nvidia and Broadcom have also been replaced along the way by Apple also.
Who knows maybe Intel will condescend to do memory too?
There is a certain amount of capacity to produce memory. They are building new facilities but it takes a long time. They have been burned going down this route many times in the past (e.g., losing money, firms that are no longer in business).
They’ll also go out of business if they make a massive investment to increase supply, and then the “AI” bubble pops, cratering demand. It’s a tough spot.
The Korean memory makers are playing the same game as Micron and simply moving existing capacity up-market.
GP was referring to upstart Chinese memory manufacturers like ChangXin, who - if their yields manage to catch the wave - could not have asked for a more favorable market after the big 3 have abandoned the consumer segment. Consumers who would have otherwise turned up their noses at CXMT will not have the luxury.
Chinese manufacturers will probably takeover consumer ram that most of us use as current manufacturing contracts expire and Samsung SK and micron move all their production to HBM for data centers. Corsair recently released chinese chips based DDR5 sticks.
I've so far been anti-chinese memory in my recommendations, not because it's Chinese (I don't really trust any big organisation/govt other than the EU?) but because they've been very new, and it's not worth PC stability for saving $50.
However with corsair giving it their blessing, and their technology having matured a bit (a lot?), and more reviews showing good stability (longevity I suppose, is TBD) they're definitely worth recommending these days.
Right, so exactly two countries in the world control most of the memory market (US and Korra). As the person above said, more global competition would be great.
There is not much information about conditions in the the mining industry in most countries, because the situation is unremarkable and comfortable. I put it to you that you have no idea what mining conditions are like in China and the situation is overall good.
It seems that you believe 'no news is good news' in this situation. But I just say it's not. A tragedy just happened this week. You will never know. And you might know much less about the other side of China unless you aware that one day by reflection. God bless you.
The Chinese healthcare system is not so different from that in the US. It is primarily employer-sponsored insurance, with subsidized insurance programs for poor and rural folk.
Up until 2005, roughly 10% of the population couldn't even access healthcare, at which point the PRC built out more care centers and invested in training more doctors, but there's still a significant shortage, such that scalpers sell outpatient appointment tickets for 10-15x markup over the actual appointment cost.
There's plenty of ways the two countries are different, but healthcare seems like an odd choice to try to "one-up" the US on, even if its programs like medicare, medicaid, social security disability and others still leave gaps.
First of, even per capita, the USA is at 8th place while China is 74.
For sure China has a problem due to its gigantic size and amount of people to even be able to reach its people, but the health care costs are nowere as high as USA has. USA is actually the country with the highgest % of GDP spend for health care alone.
Just checkout a YT video from an US American going to a normal chinese hospital and then compare the bill.
And in parallel the USA is dismantling medicare, medicad and co.
This is also directly reflected in the life expetency: US Americans are getting less old than Chinese people.
Rural China has a per capita GDP 1/10th of the US adjusting for purchasing power; if their health care wasn't cheaper only the very richest could afford anything at all. Even the wealthy coastal areas are 1/3 of the US.
China and the US have the same life expectancy of 79 years, which is a very recent phenomenon due to the 2005-2018 changes I mentioned earlier. Obesity, lack of exercise and other cultural factors weigh down the US life expectancy compared to all other Western nations. China's use of abortion during the one child policy era also prevented a lot of people who would have had chronic medical conditions and disabilities from being born.
It is not yet true, however, that Americans are getting "less old", though it may soon depending on how China manages it's own growing obesity problem and tobacco use.
In a thread about China, I replied to a post about how American healthcare is bad.
My main argument, which is in my first comment, is that healthcare is a bad way to show the difference between China and the US, since they are actually have a lot of similarities, especially with access at the lower end of the income spectrum.
There's literally no reason to bring other countries into the conversation other than to say "US is bad", which does nothing to change the reality of healthcare access in China.
Why would I, as an American engineer and user of tech hardware from China for quite some time now, need to immerse myself in the Chinese factories as if they are somehow worse than other ones throughout the world?
It's not that I cannot see them; it's that I don't care. And I certainly don't entertain sanctimonious "le China bad" nonsense like that. You live in a country where every 5 years has been substantially better than the previous 5 for a while now. You don't understand your own "privileges" if you can't understand what it's like to live in a country on a free fall that has foreclosed on the possibility of ever building anything again unless it's the latest investor ponzi scheme.
I don’t object what you said. But I think it’s just naive to think the country which seems to keep on being better is a life saver. Surely I have my privilege, compared to my fellow citizens. But that’s just what makes me more disappointed if someone simply praise this country “oh your country is great. You gonna be the first place” or so. Because I know that does none business to me or most of the people like me on this land.
And I know you don’t care about it. It’s understandable because you have your own concerns to devote to. Never mind. But just don’t put all these stuff in a simple way. Please remember the problems beneath those achievements are much more and make a larger numbers of people suffered than those who are benefited through those achievements.
I guess we might have more similarities than disagreements if those issues are abstracted out the country level.
China can afford and has the political will and power to centrally plan parts of the economy it feels like planning. Cars are obvious examples and if dram is next, western manufacturers should brace for impact.
man i keep thinking. why cant india get into stuff like this. Do their own manhattan project to build factories and tech for this and immigrate experts with high salaries.
As an Indian, my quality of life would be improved more by the Indian state first figuring out how to make functional roads and garbage collection systems
India needs to first figure out the absolute basics
During Mao/cultural revolution for all the bad, two good things were great focus on K-12 education and reducing religious fundamentalism (curbing religious powerhouses). Both of them are now biting India, alongwith standard problems of corruption that plague most poor democracies.
I am typing this on my return flight home from a business trip in Delhi. There are many other areas the Indian government needs to be focussing on first.
I had a similar view to you ~2 weeks ago. Spending some time there very quickly made me realize that there’s a lot of other things that are much more pressing.
Thanks to Indian constitution and other laws, incompetence is heavily praised and promoted. Go to any public high/elementary schools, go to any private colleges, it is rampant. It has taken three generations to produce these bad results. Of course, I am not saying that students are dumb. It is just that many smart kids in villages if given an opportunity, will leave India in a heart beat because they don't see a bright future for their future kids.
Indian bureaucracy thinks extremely short term. The state prioritizes extracting revenue over all else. So many baffling short-term decisions over everything from corporate tax breaks to a incentives for global events like Formula 1.l
You really can’t expect the same bureaucratic setup to think in terms of the decade+ it would take to be competent at something like chips
Indian bureaucracy exists to enrich themselves for their next ten generations. The bureaucracy itself promotes, recruits incompetents. There is no way to reform such a bureaucracy.
The whole system needs to be dismantled while an alternative system gets built; given the nature of Indian politics (freebies/jobs/reservations to certain groups; monthly stipends to certain groups by borrowing money while at the same time looting public funds), it is impossible.
I suspect Chinese factories will get built first, but quality may take a few years to really nail down.
Basically:
China floods the market with cheaper but less QA'd parts, makes a gazillion dollars, is able to spend said money to fix yields / QA issues and streamline operations, by the time that happens Micron and maybe a few other existing players will have new memory production, and then we'll have a flood of cheap, reliable memory. 4yr, maybe?
How long would it take an aggressive company to expand production capacity? I always thought it takes a few years, at minimum, for even established players to stand up new fabs
As far as I can tell, Micron and SK Hynix are using EUV lithography and may be constrained by availability of the equipment, whereas CXMT does not have EUV machines. There were reports that EUV lithography is needed for high yields, but CXMT appears to be proving that wrong.
It is not a law of nature that Chinese products are lower quality (cf. electric cars) and I don't see why they would go for that. They can just bin what they produce like everyone else and sell their products for what they have been tested to deliver.
But it is a near law that the first to market attempts will fully embraces the deeply engrained culture of 差不多, until market forces beat it out of the product line.
The west absolutely loves enshitified products. So why not sell them what they want? If they wanted quality they would pay slightly more and do something about it.
Because we buy that stuff even without it. And if you make both good and crappy products, why sell the good stuff internationally?
The US did it when it was a bigger steel supplier, good steel was sold domestically, crappy steel was sold elsewhere. If you got crappy steel in Africa at the time you might have thought US steel was garbage with poor QA, but in reality US steel was great and they just shipped the crappy stuff because people still kept buying it.
China is a gigantic country where one in 6 humans live that either produce directly or indirectly, 70%+ of the world's goods.
It's quite difficult to make general statements at such a gargantuan scale encompassing every single sector.
China has an abundance of terrific QA in electronics and advanced technologies as much as it has an abundance of the opposite, just simply due to its sheer size.
Don't think they'll flood the market. Instead gov will subsidize entire vertical (gpu, memory and power) - you'll just buy deepseek tokens on the cheap, just like EVs, solar and batteries. In return you'll give away your data.
This is wrong. It is NOT in their nature to keep the market under-supplied -- eg, Samsung, the industry's largest company, was notorious for expanding their capacity during the industry downturn to gain market share while everyone else was cutting back to minimize loss.
I'm guessing you are also probably unfamiliar with the terms like "chicken game" which refers to the cutthroat, high-stakes price wars where dominant semiconductor manufacturers intentionally overproduce and slash prices. This is literally how the industry went from dozens to just three majors today since the 80's.
You're making the point for him. Undersupply in a boom, store cash to ramp up capacity in a downturn. Presevres capital and avoids overcapacity during the turning
This sounds like a plan to sell less when prices are high and more when prices are low. That is one of the stupidest strategies a company could adopt. I assure you, the RAM makers are pumping out as much as they can and increasing capacity as fast as they think the market can handle.
I'm not sure what world we live in when the scheming capitalists are all hunched around their table working out how to dodge selling their products into an enormous price boom. Do they not like money all of a sudden?
Building new capacity takes years. The idea is that the market is reliably cyclical, so you should expand when there is a downturn, when costs are low and you can afford the short-term capacity hits that expansion causes (fe. when you divide productive teams in two and fill both halves to full strength with new hires).
If you prefer. But we seem to have gone from "undersupply in a boom" to a strategy of oversupplying so aggressively that manufacturers would finish ramping up supply well before the boom before it even happens. And that would be a better strategy.
The industry is so naturally prone to oversupply that the only stable equilibrium is undersupply. Aggressive expansion kicks off a price war, which immediately undercuts the logic of the expansion.
This only changes with new entrants, which will come, especially from China. But it takes time to build fab capacity, so the medium-term modal outcome is consistent undersupply.
If the existing memory makers retains control of the market and don't defect from the optimal-long-term equilibrium for themselves, that's true. It just takes one player to defect for short term gains as we've seen with some past boom-and-bust cycles. Alternatively, it takes a sufficiently-resourced player with enough incentive to enter the market themselves (NVidia, Google, Amazon, the PRC government through one of many companies...)
CXMT is scaling up incredibly fast, they are on a clock (south koreans) their monopoly will end relatively soon, although I'm guessing that the AI companies will crash before that anyways.
I struggle to think of a line of business as cyclical as DRAM, maybe like certain kinds of mining would be my only thought.
The DRAM fabs have been on a roundabout for 40 years going from getting accused of price fixing and cartel behavior, to struggling to keep the lights on.
And imo it's not really their fault, it's all the lead time of advanced semiconductors, combined with the commodity dynamics of oil.
And the goal is to match that supply to the demand of everything from consumer electronics to more datacenters than you can shake a stick at.
It's maddening to try and solve that, so at this point I really don't fault them for prioritizing survival.
> from getting accused of price fixing and cartel behavior
"Accused" makes it sound like these things may still be up in the air, when they very much are not. I would choose instead the much clearer "A number of those involved in DRAM production have a proven history of cartel behavior and price fixing."
For those who may not be familiar with some of the history in this area:
I said accused mainly because the big 3 won their last antitrust suit in the US, sort of "what have you caught me for, lately?" approach.
For all I know, maybe they are dumb enough to try and actually coordinate again, my hunch would be no, or they've tried something new and inventive.
Like Matt Levine talked about how so many landlords were using the same software to set prices, that one was pretty shady.
But it is interesting where it is popping up at the moment, like power transformers is another area. These companies have lived through these cycles before, and know there is no one to save them if they overleverage and get it wrong.
What you described only works if the manufacturers agree to price fix. Otherwise, in a free market, they'll race to increase their earnings by meeting the demand.
> It is in the nature of their business to keep the market under-supplied
What?! If they did an anti competitive agreement sure. Otherwise no as each supplier is incentivized to produce more than its competitor and less than the demand, while divesting just enough to survive the oversupply risk.
Supply and demand always balance out. There is no way manufacturers aren’t going to compete away these inflated margins, as long as they feel like this demand is sustainable.
Increasing the availability doesn't mean decreasing the price ... people think those are intrinsically related - not so much.
You can get a prada shirt for $2,000 ... as many as you'd like, for $2,000 a piece. No problem. They'll make the factories go burr all night long. Still $2,000.sweeping
There's a bunch of things like this. $100 bills for instance ...
a new entrant might yield a price drop, or, it might not.
> why not? i'm sure they can jump into the hustle.
Not so quick. Critical difference is the relationship between enterprises and the state. In China, the state owns the enterprise, in one way or another. High costs of memory is a threat to the established Chinese electronics manufacturers. The Chinese state can optimize returns at a higher level than the one some petty chip manufacturer operates at, especially if doing so means it could gain coercive geopolitical strength, aka blackmailing.
There's very few manufacturers, I believe 3 globally? And there's a large moat. Nobody can compete with them in the next 10 years. It's really not hard to coordinate action between 3 companies.
There really aren't though. The reason there's only three is because memory is a commodity and margins are historically very low. It's not a very good business to be in, generally.
In the past when memory supply was short and then rebounded, many companies went out of business because making memory was no longer profitable.
And margins will continue to be low, otherwise they'll discover they don't have a moat. Commodity markets being competitive is a self fulfilling prophecy.
The companies have two choices. They either produce RAM cheaply and in large quantities, or they get replaced by someone who will produce RAM cheaply and in large quantities. Current incumbents are free to pick which of those two scenarios they prefer.
There used to be over 50 memory manufactures in the US alone. Everytime there was a bust (following a boom) there'd be bankruptcies. The lucky ones got bought out and consolidated. Empirically, attempting to capitalize on memory booms is a losing strategy.
If it costs you $1B and five years to build out new supply and you think demand will not sustain for more than three years, it does not make sense to expand supply.
Instead you will maintain your margins currently and await demand to decrease back to your current supply.
This is pretty common and as others have pointed out is even more common in markets where competition is slow and lead times are long.
Ammunition is a great example over the last decade or so as political turnover caused relatively short lived demand spikes and manufacturers didn't expand supply because they knew once political winds shift, demand would decrease.
That’s not the Apple way, but they might fund a supplier to build out capacity in return for priority access.
The thing is they tend to only do that when they can get a technological competitive advantage. The priority access gives them a locked in competitive edge, for a while. It’s not clear there is an opportunity like that in memory.
> Of course, like literally every other time this has played out in computing history, the companies focused on price performance will end up with more economic resources, and get to turn the upgrade crank more often and for longer.
The iphone is the best selling computing device in history and is among the most expensive in its category.
For most people Apple's main selling point is about showing off the cute devices and battery life, but that's not going to play a role when users are free to choose the tool that will call the models.
That Apple serves as a "Veblen goods" lifestyle brand is well established. Your amusement is what's weird.
Of course people show off their iPhone. It's a big reason of owing one, it's also a big reason behind slight/major redesigns (people are able to show they have the latest model).
Perhaps you take "show off" literally, like someone going "hey, look, I have an expensive phone"?
It's way more subtle than that, only someone totally crash would do it that way. It's done the same way people buy expensive sneakers and clothes, or how people buy Teslas (or used to) and similar stuff. As a consumer identity that signals you afford a higher cost lifestyle.
It's also one of the better performing. Is the value line (currently, the 17e, I guess) typically much more expensive than an android with comparable battery life, CPU performance, and OS support lifespan?
This year, things look pretty comparable according to this shopping guide. You can get slightly worse or last year's line for about $100 less, or something with comparable specs (some better, some worse) for about the same price:
Photonics used in AI is different to what you would expect. I can't see photonics replace the transistor and VLSI stack of computers. For networking however, high bandwidth photonics is well on its way to replace copper.
> Potholes are a visible manifestation of society saying it's more efficient to prioritize capital than care.
How though. Roads are a public good and fixing them should come from the governments pocket. How can you say the problem is private industry, when the government is doing such a good job collecting our tax money. You should be asking where is that money going. And then you will see its because of mismanagement by the government. Trillions in debt, for what?
Potholes are a visible manifestation of society saying it's better to vote for people who vibe with you, than people who can provide essential services.
You are assuming that the obsession with maximizing profit is limited to private industry, where the post you are replying to makes no such assumption.
I agree that the government ought to work for the public good, and not doing so is mismanagement and corruption. But following the logic of the parent poster, the postulate would be that the mismatch between what the government ought to do and what it does is an outgrowth of a society that values maximizing profit over satisfying needs. Which I find hard to deny if we are a bit flexible with the question "whose profit is maximized". This is just a different way to arrive at the word corruption, but it provides a frame for possible societal causes for that widespread corruption
The way greed applies to the public purse is mediated by zero cost accounting wherein a government agency is compelled to spend all of their year's allocation without completing their work so that they can justify getting more in the next budget cycle.
The tax rates in the US are low; that's why there is so much debt and so few services.
Anti-tax groups have long followed the 'Starve the Beast' strategy (and their opponents are completely incompetent and fall for it every time):
1) Cut taxes
2) Point out the resulting deficit, say we're spending
too much, and cut services
3) Repeat
Now we're at point 2. It's not spending, it's lack of revenue. Some large corporations pay no tax. The US has cut IRS enforcement even though it pays for itself many, many times over. The wealthiest people pay a much lower tax rate because their typical form of income (capital gains) is taxed at a much lower rate than other people's (salary), and because their taxes are cut over and over and they have endless loopholes - e.g., trust funds!
Looking at the stats, the US public spending is about 40 per cent of the American GDP, which, though lower than most of the EU, is not really "low". 40 per cent of something as huge as the American economy is huge as well. Given that the US economy is a quarter of the global economy, US public spending is one tenth of the economic output of the entire mankind. That is not low.
BTW Swiss public spending is lower (32 per cent), and Swiss sidewalks and roads are uniformly nice. At the same time, Germany is at 48 per cent and it has a big problem with aging infrastructure, railways, bridges etc. Swiss rail authority regularly refuses delayed German trains at the border in order not to cause chaos in the reliable Swiss railway network. Given the 32 vs. 48 per cent of public spending, you would expect it to be the other way round, but it isn't. The mapping between the volume of public spending and quality of public services is not that simple.
Maybe the problem in the US is that too much money gets siphoned away by various legal or illegal means. Famously, whenever places like California or NYC try to build something like a new subway line or a new high-speed rail, their project budgets balloon into absolutely insane volumes, much higher than comparable projects in France, Italy or Japan, and the main reason is that various special interests need to be satisfied, from the construction unions to various NIMBYs.
With such a flawed model of public spending, higher taxes will only result in higher waste.
I appreciate the the public spending statistic, which adds a dose of reality to the discussion. At the same time, a few cherry-picked examples (Swiss and German railways) is meaningless. It's true the US spends a lot in absolute terms, but a huge economy with 340 million people has a lot of roads and other expenses.
And the US is inefficient at building some things (subways) and probably more efficient at others. Again, it's cherry picking unless we have broader data.
> With such a flawed model of public spending, higher taxes will only result in higher waste.
As I said in the GP, there is waste (inefficiency) in everyone and everything, and larger organizations unavoidably have more. The cherry-picked examples don't prove the US and every local goverment in it are somehow less efficient, but certainly there is inefficiency.
But the statement "higher taxes will only result in higher waste" is logically wrong: higher taxes (and assumed higher spending) will lead to more waste - unavoidable for anyone and any org - but also more productivity; you can't have one without the other. E.g., if 15% of every dollar is wasted then higher taxes increase both waste and output. The US does have roads, schools, healthcare, sewers, etc., and even some urban light rail, paid for by taxes. The money does produce things, and many of those things can only be accomplished with taxes.
On the basis of what your comment, the US should cut all taxes because they are all waste. That's probably not what you mean but that's what some anti-tax groups say and what they do - cut everything regardless of outcome, which is what has been done on a national level recently. The simplistic answers are dangerous and not useful.
"On the basis of what your comment, the US should cut all taxes because they are all waste."
Nope, I didn't express a conviction that this is a linear function from 0 to 100. My statement should rather read as "If, at current, the American public sector is unable to provide good roads and sidewalks while redistributing 40 per cent of the domestic GDP, I find it hard to believe that the situation would improve much if it redistributed 45 per cent instead."
Good roads and sidewalks aren't that expensive. The Romans and the Incas could maintain them with a more primitive economy, and a well-run modern city should have no old potholes anywhere.
Many years ago a US friend told me that the way to tell the true state of a nation's finances is to look at its infrastructure, because when money is tight that's the first thing that gets cut. Don't look at the imaginary numbers in the stock market, look at the roads, sidewalks, bridges, railway lines.
I was kinda shocked, when working in South Africa, to find that the roads and sidewalks there were often in much better shape than ones I'd seen in the US. And from the other side, the only place I've ever seen roads as patched and potholed as ones in US cities was in rural Russia.
> The wealthiest people pay a much lower tax rate because their typical form of income (capital gains) is taxed at a much lower rate than other people's (salary)...
A different way to think about this would be to say that a lower tax rate for capital gains is a trick (incentive) to get the wealthiest people to invest their wealth in the market, which provides capital for people trying to grow the economy and provide jobs, rather than spend their wealth on luxuries for themselves. In this way, we have an economy focused more on the needs and wants of regular people, and less on producing what wealthy people want.
Low capital gains tax incentivizes investment and venture capital, so the rich can grow their wealth faster than the poor, while creating a job market. Compare that to spending wealth on luxuries, a money sink that also creates a job market and grows the economy (people have to make the luxuries). The former creates more liquid assets (stock) with no clear connection towards meeting the needs of regular people. The latter creates more solid assets with no clear connection towards meeting the needs of regular people.
I vaguely remember Adam Smith talking about directing the vanity of the rich towards spending great amounts of money on proper objects in exchange for recognition. 4:00 https://www.youtube.com/watch?v=ejJRhn53X2M
> Low capital gains tax incentivizes investment and venture capital, so the rich can grow their wealth faster than the poor, while creating a job market.
You forgot the most important part. Let me add it for you: "Low capital gains tax incentivizes investment..., while creating a job market, [and, more importantly, providing goods and services that are beneficial to society as a whole]."
> The former creates more liquid assets (stock) with no clear connection towards meeting the needs of regular people. The latter creates more solid assets with no clear connection towards meeting the needs of regular people.
These claims are demonstrably false. Paper assets provide no tangible benefits. You cannot eat a stock certificate, nor can you use it to heal an infection, nor can you ask it to repair your refrigerator. To receive a tangible benefit such as these, you must consume a good or service. And what is the economy but a machine that produces the goods and services that the people within it consume? Therefore, it is the mix of goods and services consumed (which equals that produced) that determines how society benefits. And, as you've already admitted, a low capital gains tax incentivizes the wealthy to buy paper assets instead of luxuries for themselves. But luxuries are real goods and services, aren't they? In other words, doesn't that policy incentivize wealthy people to consume less and, therefore, claim a reduced share of economic benefits? Consequently, doesn't an increased share of economic benefits go to "regular people"?
>[and, more importantly, providing goods and services that are beneficial to society as a whole].
I think enshittification, cost externalization, and rent-seeking behavior cancel this out, muddying the connection towards meeting the needs of regular people. For example, we needed cap-and-trade to internalize the costs of acid rain back onto power plants.
>These claims are demonstrably false. Paper assets provide no tangible benefits.
I think my rhetorical bait worked: you seem to agree with incentivizing luxury spending on real goods and services (instead of incentivizing capital gains)? Adam Smith argues to take that vanity and drive it towards public recognition. For example, many universities put the names of rich donors on the opulent buildings they donate to build. That's good! (My college's music building was amazing!)
>In other words, doesn't that policy incentivize wealthy people to consume less and, therefore, claim a reduced share of economic benefits? Consequently, doesn't an increased share of economic benefits go to "regular people"?
I thought trade doesn't make a zero-sum game? Money supply is a zero-sum game (I think), and I want money sinks to spread the money. We want them to spend their stored money to generate more tangible wealth for all. Luxury goods often push the limits to what can be done, advancing technology and generating wealth while also depleting their money stores. But while investments and venture capital might also advance technology and generate wealth, they continue to concentrate the money supply to the rich. Not good!
> I think enshittification, cost externalization, and rent-seeking behavior cancel [general societal benefits] out.
While I agree that the factors you cited are drags on the economy, I think historical evidence suggests strongly that they do not cancel out net benefit to society in general. The fact that poor people today benefit from refrigeration, air conditioning, electronic computers, vaccinations, safe anesthesia, cancer drugs, dialysis, HDTVs, cell phones, and a host of other things that the wealthiest people of yesteryear could not have purchased with all their wealth, suggests that the net trend of the economy has been to produce benefits for all of society, including regular people.
> you seem to agree with incentivizing luxury spending on real goods and services (instead of incentivizing capital gains)?
No, that is the opposite of my original claim. My claim, put simply, is that a low capital gains tax shifts the economy's output away from luxuries and toward meeting the needs of regular people.
> I thought trade doesn't make a zero-sum game?
But resource allocation is a zero-sum game. In any given year, there are only so many productively employable atoms and human hours. If less of those resources are being used to produce luxuries for wealthy people, they can be employed to produce goods and services for regular people.
Very interesting perspective. Let me try and repeat it back. Resource allocation is a zero-sum game within any given year, resource production increases yearly as technology increases, technology increases more as capital increases, so a low capital gains tax will increase resource production more than a high capital gains tax.
If I got that right, here's my best shot at a contradiction. If resource allocation is a zero-sum game, money (liquid assets) determines resource allocation, and low capital gains tax further concentrates money to the wealthy (I would need to prove this, and in recent years the distribution of wealth has increased towards the wealthy), then the wealthy gain a greater share of resource allocation next year.
This might not result in problems, as historically the increases in resource production have increased regular people's resource allocation in absolute terms, but I see no necessity in this trend. I might argue that the poor can lose resource allocation in the zero-sum game, but I'd need to prove that (something like, inflation hurts poor people more than the rich? incomplete thoughts). I could also argue that currents trends place financial assets (intangible) above production assets (tangible), slowing the benefit to regular people.
I claim that if the wealthy were to put their money in luxuries (things that don't give capital gains), they would control more allocation in a given year, but then they would decrease their share of resource allocation the next year. I also claim that resource production would increase just fine, as technology initially benefiting luxury production expands toward general production.
First, thanks for continuing this interesting conversation!
> Let me try and repeat it back. Resource allocation is a zero-sum game within any given year, resource production increases yearly as technology increases, technology increases more as capital increases, so a low capital gains tax will increase resource production more than a high capital gains tax.
Actually, this line of reasoning is tangential to the thrust of my argument. Let’s get to it now:
> If I got that right, here's my best shot at a contradiction. If resource allocation is a zero-sum game, money (liquid assets) determines resource allocation, …
Okay, here’s what I think you’re missing. Money does not determine resource allocation. But spending money does! Only by spending money do you get to consume goods and services. Therefore, by getting wealthy people not to spend but to invest almost all of their wealth, we get them to give up their claim on where today’s resources are allocated. They control wealth but not resource allocations.
> … and low capital gains tax further concentrates money to the wealthy, …
I believe that this claim is more or less true.
> … then the wealthy gain a greater share of resource allocation next year.
But this claim does not follow. Wealthy people gain a greater share of the wealth allocation next year, but they do not spend that wealth, nor the new wealth they gain each year. They spend only a tiny fraction of it – and invest the rest. Thus, most of this “extra” wealth that wealthy people gain is invested, with resource allocations from that wealth to be determined by spending across the population in general, not by the wealthy who invested it.
> I claim that if the wealthy were to put their money in luxuries (things that don't give capital gains), they would control more allocation in a given year, but then they would decrease their share of resource allocation the next year. I also claim that resource production would increase just fine, as technology initially benefiting luxury production expands toward general production.
Let’s say that the wealthiest 1% of people control half of all wealth. If we forced them to spend that wealth, much of the economy’s resources would be redirected to provide goods and services to the top 1% of people. For a very long time, the remaining 99% of people, especially the lower 80%, would find it very hard to purchase goods and services, for their spending would be dwarfed. Resource production would increase, but I doubt it would be “just fine.” Factories producing mega-yachts, doctors providing exotic cosmetic surgeries, and master chefs preparing one-of-a-kind meals with luxury ingredients such as hand-massaged beef fed grasses from the richest soils on Earth… These are not easily adapted to produce things that regular people need.
By getting those wealthy people to invest their wealth instead, we get them to give up their ability to dictate where today’s resources go. In exchange, they (as a group) get the promise of earning more wealth tomorrow from their investments.
I agree, however, that concentration of wealth is a problem for society. When a small number of people can, in effect, buy the government with pocket change, that’s not good. But a low tax rate on capital gains is only one contributing factor to the concentration-of-wealth problem.
>thanks for continuing this interesting conversation!
Cheers!
>Money does not determine resource allocation. But spending money does!
Very good point. Investors have some say as to where the money goes, but you're right. Often said that the economy runs on debt.
>They spend only a tiny fraction of it – and invest the rest.
Well said. I suppose their wealth only represents a potential for resource allocation.
>If we forced them to spend that wealth, much of the economy’s resources would be redirected to provide goods and services to the top 1% of people.
Under most theories of value, this extreme demand and labor would cause the price of such luxury goods and services to skyrocket! The money would quickly distribute to the hands of those who provided such goods. Then the masses can spend the money.
I now see our discussion as a classic debate of supply-side vs demand-side economics. I'll steal "the unity of means and ends" from the anarchists for this: I fully believe that the masses must have the resource allocation potential in order to achieve greater wealth for all. That exists in a positive feedback loop with businesses, increasing technology and production, and increasing the general standard of living. But, investing gives the resource allocation power to the businesses. With enough wealth and power, large businesses can keep the investment cycle flowing between businesses and owners, underpaying the workers and buying out competitors. At the most extreme result, a vertically closed system where the workers must meet the needs of the business (company towns).
>These are not easily adapted to produce things that regular people need.
So many goods start out as expensive luxury goods. Refrigeration, commercial airlines, air conditioning, computers, HDTVs, cell phones...
>When a small number of people can, in effect, buy the government with pocket change, that’s not good.
Then they morph government policy towards further enriching themselves, hurting the masses in the process. Very bad!
Would you advocate for a 0% capital gains tax? Or a capital gains tax-break? How would you calculate the ideal number? (I would place capital gains tax included in income tax.)
> Would you advocate for a 0% capital gains tax? Or a capital gains tax-break? How would you calculate the ideal number? (I would place capital gains tax included in income tax.)
I wouldn't advocate for any particular tax rate for capital gains without it being part of comprehensive fiscal and government reform. The point I was trying to get across in my original comment was that, when people talk about raising the capital gains tax because they think it's an obvious way to tax the rich without affecting working people and that the only reason we're not already doing it is because the rich have rigged the system, the reality is way more complicated. There are no easy fixes. Changing the capital gains tax substantially (outside of more widespread reforms) is likely to have unwanted consequences. And even with widespread reforms, we're likely to suffer unwanted consequences.
I'm not taking a test (feel free to answer yourself) but my view is that it's the same old talking point: Help the wealthy, and the Nth order effects will benefit others. The only thing these policies deliver on reliably is the 1st order effect - helping the wealthy.
(I think that's a good way to analyse any policy - the 1st order effects are the ones you can count on; the Nth order effects are just BS that magically costs nothing, but gets others to go along - 'the people will pay for this stadium for my privately owned franchise (1st order) and it will bring business to the community (2nd order).' That's repeated over and over, and the 2nd order effect is well known to not happen, but it sometimes gets enough votes from those uneducated in the issue.)
I think in the 1980s the Reagan administration called it 'trickle-down economics', such an incredibly revealing name!
Okay, but you didn't refute the line of reasoning. You called it "the same old talking point" and then jumped to the conclusion that "the only thing these policies deliver on reliably is the 1st order effect - helping the wealthy." But you didn't show that your claim was true. Or that the claim you were responding to was false.
Can you offer a substantive argument that getting the wealthy to invest their wealth instead of spending it on themselves is a policy that benefits only the wealthy and makes life worse for everyone else?
If that's what you think is happening – tests and grades – when people come to a site whose purpose is to foster thoughtful and substantive discussions, and then on that site they share ideas and invite criticism of them, you might consider whether you're missing something.
I'm curious. What specifically about my comment made you believe it was a test and that I would be assigning grades to responses, as opposed to an idea for which I invited criticism?
> Can you offer a substantive argument that getting the wealthy to invest their wealth instead of spending it on themselves is a policy that benefits only the wealthy and makes life worse for everyone else?
Not gp, but if the investment is made in either a non-productive asset, or in the secondary market toi buy share in a company that is downsizing/stabilizing their investments (share buyback is very often a good tell), then the wealth does not benefit society in general but either inflate a bubble, or separate the owning class from the working class.
> Not gp, but if the investment is made in either a non-productive asset, or in the secondary market toi buy share in a company that is downsizing/stabilizing their investments..., then the wealth does not benefit society in general but either inflate a bubble, or separate the owning class from the working class.
That if is doing a lot of lifting. What percentage of investments do you believe satisfy that if condition? If that percentage is p, then do you agree that it's generally beneficial for society, for approximately 100% − p percent of the time, when wealthy people decide to invest in the economy instead of spend on themselves?
(Further, even when companies downsize, don't they release their resources, such as people and equipment, back to the market? And doesn't the evidence of economic history suggest that, on the whole, the market tends to take up resources, including those released from downsizing companies, and use them produce goods and services that benefit both the owning class and the working class? For example, for most of history, even the wealthiest of the owning class lacked electricity, air conditioning, refrigeration, radio, television, electronic computers, the internet, cell phones, HDTVs, antibiotics, vaccines, generic drugs, medical imaging, DNA testing, video conferences with health care professionals, and so on. Today, don't even working people benefit from these things? So, even when your if condition holds, the claimed consequence, that such investments "either inflate a bubble, or separate the owning class from the working class" seems hard to believe.)
More than two third of all public investments are on the secondary market, and this do not benefit investments or the 'real' economy. It's this beneficial to society at best 33% of the time (I'm counting MIC in 'benefic for society' only for the sake of the argument to be clear).
While a worker is beneficial to society 100% of the time.
In the US, the Republican party for the last 40 years has had a policy of starve the beast. They actively choose policies that provide worse services/break the governments ability to provide services/pile on unsustainable debt so that they can make the very same argument you are. Government is broken (yes, because Republicans have chosen to intentionally break it for 40 years. It is hard for a country to function when half of politics is intent on making the country worse in order to reach their political agenda).
No, burning models into hardware won't make them faster or reduce the cost. It will cost way more for similar performance as what you would get with a gpu. I am not telling you why, you can go figure that out on your own.
With some research, that chip appears like it would cost about $300-$400 to manufacture, die only.
For an 8B parameter model.
Opus is estimated at 500B-2T parameters. At that scale you’re past reticle limits and need HBM and multi-die packaging, which means you’ve essentially built an inference ASIC (like Groq or Etched) rather than something categorically cheaper than GPUs. The “burned into silicon” advantage mostly evaporates at frontier scale.
The cutting edge, max size models will likely stay in the GPU space for a long time.
But these models are not needed for most general requests.
With a fine tuned 30B quantisized model you can serve a large portion of requests with around 32GB of RAM.
Free users will likely only get these kinds of models.
At some point we will get these models in hardware and the cost per token will be minimal.
> With a fine tuned 30B quantisized model you can serve a large portion of requests with around 32GB of RAM. Free users will likely only get these kinds of models.
These are exactly the kinds of models that you can easily run locally by repurposing existing hardware. Depending on how much you're willing to wait for the answer, running local even gives you strictly better outcomes for simple Q&A queries.
(Long-context and agentic use cases are admittedly much harder to fit under that model, since non-AI uses for the high-end hardware you'd realistically need for those are rather more limited, and they're hit by the ongoing hardware shortage.)
For programmers maybe.
I do this too.
But think about all the regular users out there.
Your dad and your mum, maybe even your grandparents.
This is a huge marked too and for that we can use these special chips at scale.
Does the cost scale linearly/superlinearly? What does the $300-$400 price data point tell us with relationship to the parameter density?
No gotchas here. I genuinely don't know that 8B parameters is in a zone with significant decreasing marginal returns -- too far out of my knowledge area but genuinely curious.
Die size increases cost exponentially, by decreasing chips per wafer and decreasing yield.
I expect that this kind of burned-in model is also very difficult to verify (how do you know if some of the weights are off), and not amenable to partial disablement to increase yield. For CPUs, you just laser disable bad cores. Can't forego part of a neural net.
You can ablate surprisingly large chunks of a model with near to no effect, you can try this easily - download an open weight model in torch.
Obviously it’s not ideal but you could likely have single digit % of all weights affected and still have a useful model (many caveats here: e.g. locality of damaged weights matters, distribution of errors matters, fail high/low matters, …)
I mean, you probably can just turn off defective parts of the network. You better believe if this becomes popular they would salvage yields by selling "dumber" chips at a discount.
There’s a lot of tradeoffs to play with, those inference ASICs may not carry the gradient but they are still optimised for larger batches and to run any model. They need enough memory for the weights, wide batch inference, and ideally leftovers for kv cache efficiency.
For personal inference you’re given a lot more room to play in - much of it poorly explored today - enough to concern an argument of cost advantages evaporating
I just tried chatjimmy.ai for a bit and while it is absolutely blazingly fast, it's also not a very strong model. I suppose that with time, stronger models will be able to run on such hardware, too.
> The fact that these high prices are caused by an actual lack of resources and that the higher prices are driving a reallocation of resources to those who need them most (ie. most willing to pay for them) is not on the radar for many
Careful using words like "need". The resources are allocated to the economically most efficient sectors. Since if you are economically efficient, your profits are higher and can afford to pay more than others.
In most cases these are congruent ideas, though. If I have no choice but to drive, but someone can drive or take public transport or work from home, high fuel prices incentivise them to not use it, saving some for myself.
I'm sure there are plenty of people throughout an economy who just don't care, but on average it has substantial impacts, and it's common now for people to totally dismiss that.
> I think he's trying to make a point about technology enhancing the capabilities of people who are in any conflict with conventionally powerful forces
Which is absurd, since all the technology he used was manufactured by the conventionally powerful forces and they can decide to not sell you their stuff.
These small proxy wars are irrelevant. Scrappy drones are only used because that is all these small countries can produce. For superpowers, the goal isn't to stockpile mediocre equipment; it is to develop intellectual capabilities. During wartime, manufacturing can then be rapidly ramped up. You cannot invent and develop advanced tech overnight, but you can rapidly scale production.
Also fighter jets are capable of doing so much more than fpv drones, its actually funny that people think drones are the future.
I’m not saying scrappy drones are the key to victory in all circumstances.
But look at Iran - their air defenses and navy are destroyed. Yet they can inflict massive damage on their neighbors with drones within 10 minutes flight distance, making them hard to stop.
By doing so they’re keeping the price of oil high and are able to put economic pressure on the US completely disproportionate to their military capabilities.
So even though drones are not the full solution, without an answer to them you can’t win either.
Drones seem to have reached their zenith of operational freedom. I’m genuinely surprised the U.S. and Israel don’t field gun- and laser-based anti-drone demonstrators.
In China, engineers hold the most power, yet the country prospers. I don't think the problem is giving engineers power, rather a cultural thing. In china there is a general feeling of contributing towards the society, in the US everyone is trying to screw over each-other, for political or monetary reasons.
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