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You know 2025 has really seen a surge in
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the interest and the investment around
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artificial intelligence and the
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expectation is that this technology will
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continue to grow and lead the way in how
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our country and realistically the globe
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will operate. But with so much
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investment so quickly there are those
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who wonder if we are not headed for a
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bubble that may see the floor taking
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right out from under the feet of
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artificial intelligence. Not everybody
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believes that though, or at least that
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the bubble should be a major concern.
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Uh, Lin Woo is an associate professor of
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operations, information, and decisions
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here at the Wharton School. Hi, Lynn.
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How are you today?
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>> Good. How are you? Thank you for having
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me.
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>> So, in reading some of your comments,
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correct me if I'm wrong, you believe
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there is a bubble, but maybe not a
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bubble that we should be all totally
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concerned about right now.
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Yes, I believe that is uh so that's that
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represent my sentiment. It is a bubble.
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I'm not going to dispute that. I mean
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the fact that OpenAI um are doing some
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kind of like one to two 1.5 to2 trillion
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dollar deals uh only having 13 billion
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dollars in revenue about it's like about
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hundred times less than was needed for
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their investment. So I'm not disputing
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as a bubble but I think um it's not a
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bubble such like the subprime loan where
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assets price gets inflated. Uh in this
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case the bubble is one of these bubble
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precedes most important technology
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evolutions we have in history. So with a
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technology such as artificial
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intelligence or genai
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that is quickly changing how the thing
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how our things are being done in every
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field every industry that needs to be a
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lot of investment needed to be for us to
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get there and that's investment in some
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sense that's kind of needed and that's
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bubble is representation of that so let
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me just give you an example by what I
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mean by this um For example, one of the
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first technology crash is actually the
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railroads, Madak in the 1840s, I
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believe, right? And uh it was a I
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believe one maybe one of the first tech
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bubbles out there and hundreds of these
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um maybe even thousands of these uh rail
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railway lines that has almost zero
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economic justification were added
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anyway, right? And the bubble bursted.
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But these railways are really important
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for Britain for the US became a major
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transportation network that fueled
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future economic growth. Right? So, and
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same thing with electricity and if you
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think about a dot uh bubble uh that's in
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most recent history that probably the
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closest one we have today, right? And
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it's the story is very similar. Do do
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then these large kind of transformative
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technologies when they kind of come on
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board do they lend themselves at least
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to the thought process of a potential
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bubble just because they're so new just
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because they are so different than what
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we are used to have been experiencing.
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Well, I think it's almost a necessity.
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People have to believe in this medic in
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order to make that enormous investment,
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right? So, in do, yeah, lot of company
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went belly up after, you know, the 2002,
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2003s, right?
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>> Right.
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>> But enormous telecom investment, the
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fiber optic cables were being built
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allow that pretty much allowed internet
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to be so cheap were almost free as we
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have today,
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>> right? And that's eventually as a result
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of that uh we have e-commerce we had
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Google and we have you know you know
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lots of like we have Netflix right we
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have lots of these amazing companies
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that born right after that because of
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this economic investment that B and that
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made on.com
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>> well and in in this instance with
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artificial intelligence we're still not
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at a point yet where we have maximized
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what AI could potentially do and so
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there's that uncertainty that's
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involved. Yeah, absolutely. And let's
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say in the the worst case, right? So it
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bubble bursts, right? But we have made
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so much investment data center in energy
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infrastructure that we just haven't been
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able to made as a country and even it b
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even if it bursted one day. Okay. Um you
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know and there might be some kind of
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short-term economic downside for the
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speculators but the fact is we have
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invested a ton of infrastructures that
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will have tremendous spillover effects
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on the breast of economy. Right? So if
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you just want to invest them on a very
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small factor of of uh of economy like
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for example just for housing right it
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may or just the asset inflation of
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housing it didn't really make any kind
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of infrastructure investment then it
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didn't really then then is a probably a
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bad bubble but in this case a bubble has
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made collective investment on the
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important infrastructure we all need and
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that positive spillover effects is going
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to be you know affecting rest of the
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economy in a very positive way and
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>> and you have so many companies that are,
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you know, m taking the time and making
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even a small investment in how AI could
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have a positive impact on their business
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or if it's not going to have that much
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of a business at least they have
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researched it and they've looked at it
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taking the time and understanding is
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part of this process.
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>> Absolutely. And this time is actually
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really hard and because the upside is so
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enormous,
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>> right?
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>> But the probability of success is so low
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right now, right? there's some recent
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statistics saying that you know 90 to 90
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95% of AI projects fail um depends on
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how you count it but they but they
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didn't but they didn't mention perhaps
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that the 5% or 10% that were successful
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are enormously successful they're
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hundreds of billions of dollar hundreds
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of millions of dollars in profit so
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people want to be the 5%
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>> how then does it play into this concern
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of a bubble that with something like
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chat GP BT you have updated versions of
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it seemingly coming out every month, two
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months, you know, and and just as a
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business or a person is getting used to
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one platform, they have to get used to
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something uh different as well.
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Yeah, that's a part of exciting part
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about like over like you know maybe
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Greenspan said rational exuberance right
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we are so excited about the technology
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is going the improve the capability is
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improving at an exponential rate that is
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why you see this uh you know every uh
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version a new version coming out every
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few months because they have to because
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Gemini is doing it and meta is doing
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Amazon is trying to do it it's a
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collective effort trying to achieve
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something like AGI that's great whether
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we're successful or not um is another
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story. But during that time, enormous
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investment for the future is being made
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and generated. I think we're all going
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to benefit from that someday. I
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>> it it's just unique that we have seen,
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as you alluded to before, instances of
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bubbles that obviously were negative and
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that we may be in a situation here where
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there might be a bubble developing or
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there is one, but it's not necessarily a
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bad thing. Yes, in long run for sure
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it's probably strictly positive because
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the enormous positive spillover from
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this particular race to do better AI
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that may made made a bet better energy
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access better you know uh data centers
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that's all going to power future uh you
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know economic growth
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>> does the speed at which this occurs is
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that factoring into
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people's concern about any kind of
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developing bubble
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>> well this I mean we rarely seen this
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kind of uh speed right I mean we have
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been experiencing Moore's law of you
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know doubling every two years or so but
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this is like data center uses a 100x
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right so well I think we're on a some of
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a new territory here and uh chat GBT's
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adoption is like the fastest ever for
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the consumer product so I think we're
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all in a brave new world in the wild
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west here to see what's actually going
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to h what's going to happen but but
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history you know tell us is not as you
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know as dire as some of them ne how some
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some some have uh you know postured.
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>> So as this continues to develop are
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there things you are watchful for to see
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play out and to be watching how that
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bubble kind of develops in the future.
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>> Um so I I'm really interested to see
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positive business use cases like how is
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it actually being used? What what are
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some best business cases in what
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industry? How they're being developed
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the problem associated with it. Once I
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see this positive cases, I'm my my
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concern for bubbles are alleviating. But
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I do but if I if I see a lot of company
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just you know um using we haven't
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quickly figured out how to use these uh
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technology in the positive effective way
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then that's when I get a little worried
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but but I have seen some really great
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positive cases in recent history. Yeah.
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>> Lynn, great to talk to you again. Thanks
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very much for your time today. All the
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best.
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>> Yeah, thank you. Lin Woo, associate
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professor of operations, information,
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and decisions here at the Wharton
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School.
