A Stork In Our Side

Thinks: AI adoption; Storks In Our Side or the bull/bear cases for real estate; Winds of Trouble or what the Right Stuff tells us about the IRA. Reads: Dynamism, Wrong Predictions, Builders, Boring Co

It’s Friday fly-day, which means a special edition of Random Walk Thinks and Random Walk Reads.¹

First, the Thinks:

• We love AI so much, we’re just about to start using it

• Storks on in our side or musings on the bear/bull cases for real estate, and which markets are actually “under-built”

• Winds of trouble or what the Right Stuff teaches us about the difference between ambition and hubris.

Second, the Reads:

• American Dynamo: the a16z partner fighting for hearts and minds in DC

• Jason Furman on what he got wrong predicting a recession

• Homebuilding boom lifts the biggest builders and leaves smaller rivals in the dust

• A rundown of the Boring Company

Thanks for being here. Read. Enjoy. Follow. Refer. Share. Gift. Do it all.

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Random Walk Thinks

AI: We love it so much, we’re just about to start using it

McKinsey did a big “state of AI” survey report and there’s some puzzling stuff. Plenty of people are very excited about both cost decreases and revenue increases using AI:

It’s not everyone, but nearly 60% of respondents claim to see at least some revenue benefits, and no less than a third, saw cost decreases. That is pretty exciting!

Naturally, at an organizational level, plenty of people report using AI more and more across larger shares of their organizations basically the same amount:

“We use AI about the same or less, but never more” is not what I would have expected.

Surveys are pretty so-so sources of information, but if I had to bet which response is more reliable—monetary savings/gainings or the number of functions actually using AI—I’d bet on the latter. “Are any departments actually using AI” is harder to fudge and easier to verify.

Big orgs move slowly for various reasons, both good and bad, so perhaps it’s not surprising. Also, you can make a lot of progress by improving a tool you already have, as opposed to simply rolling out more tools. Even a law firm is doing it:

Silicon Valley-based Gunderson Dettmer . . . launched an artificial intelligence application of its own making — an internal generative AI chat app called ChatGD.

The launch appears to make Gunderson Dettmer the first U.S.-based firm to develop a proprietary internal tool using generative AI technology and possibly also the first firm anywhere to launch such a tool . . .

Already in use by some of the firm’s attorneys and being rolled out more widely throughout the firm starting today, ChatGD allows attorneys to query and manipulate documents using a secure, enterprise instance of OpenAI’s models through Microsoft Azure.

Meanwhile, Paul Graham shares rumors:

And maybe there aren’t enough Nvidia H100 GPUs to go around?

Anecdotally, the founders I’ve spoken with have the GPUs they need, so I’m not sure if this is sound speculation or not. If it is, I’m curious as to what the substitutes will be, because it seems unlikely that companies will just sit on their hands.

Stork on in our side

I like this quote from TX real estate mogul, Trammell Crow (surfaced by Byrne Hobart) because it illustrates what was true, but is no longer true about Real Estate:

It’s not an overly complicated thesis: the more people you have, the more homes you need. But what happens when you stop having more people?

The stork used to be on our side, but it’s not anymore. We generally stopped having more home-buying people a few years back. Likewise, the home-buying people we have are less likely to make families, and when they do, they make them later and smaller. In that sense, the stork is decidedly not on our side.

We did however continue to build homes:

More homes (black), without more homebuyers (blue and green)

And, the price of those homes has likewise continued to go up (and then some).

That’s an odd thing. Normally, when the supply of something grows, but demand does not, prices come down. So why hasn’t that happened? Why has the exact opposite of that happened?