Why are the ice traders celebrating the refrigerator?

For centuries, people have pursued the dream of creating synthetic gold. The myth of the philosopher's stone and other magical substances and devices have inspired thousands of stories all around the world. The desire for infinite wealth coming out of thin air is just so irresistible. There is only one problem with this dream scenario. Things are only expensive when they are rare and hard to acquire. Just like with printing too much money, creating too much gold will depreciate its value and in the end a kilo of gold will have the same value as a carton of eggs.

It’s a basic supply and demand principle and everyone will agree that if something is expensive, then probably it is difficult to make and requires rare materials and/or skilled labour. Products of intellectual nature, like software, for example, don’t depend on any materials but instead require skilled and talented engineers to produce them. The reason why software is (relatively) expensive is because it requires the continuous labour of (relatively) difficult to acquire personnel. In other words, software companies can afford to charge what they charge for their product, because the product is sufficiently difficult to produce, so the client is willing to pay the justifiably high price.

In a healthy economy, this is also where competition comes into play. Companies compete on quality and price, which leads to both higher quality and lower prices. However, the important point here is that better quality and unique features drive sales and dictate customer choice. If you happen to have better engineers in your company and they develop original features of high quality, then the customer will choose you over your competitor.

Let’s take a step back now and imagine the world has changed and the old rules don’t apply anymore. Let’s choose to ignore our common sense and believe in the “AI” hype and all its grandiose promises. I would like to clarify that I personally don’t believe in any of this, but let’s take it as mental exercise.

What will happen to the software industry if suddenly software is infinitely easier to make, and anyone can produce anything in an instant? According to the principle of supply and demand, software will become infinitely cheaper. An overcommoditized good. Something that you don’t even consider an expense. The prices of today will definitely not be justifiable anymore.

How much the ice cubes in your freezer cost? Nothing. Fraction of a cent. And to think that ice was transported on ships and was considered a high luxury before the invention of the refrigerator.

So why are the ice traders of today cheering and celebrating the invention of the refrigerator? Figuratively speaking. Sure, you can make some money by buying a refrigerator early, before anyone else. And then sell manufactured ice at the still high prices of natural ice. But very quickly the market will catch up with you. Very soon everyone will have a refrigerator at home, and nobody will need ice traders anymore.

So, what is up with all the software companies, big and small, pushing as hard as they can for the adoption of all sorts of chat-bots and coding agents, as soon as possible, as if their life depends on it?

Sure, you can fire a coder or two, save a bit of money and kid yourself and your investors that you have replaced them with “AI”. But this is playing the very short game. The catch with “AI” that nobody is talking about is that: “If it can do something for you, then it can also do it for everyone else”.

So, how do you justify the price of anything generated with “AI”? If you can do it, so can your former client. Why would they pay you money for something they can do themselves? In the same spirit we can say: If you can do it, so can your competitor! Will product value and competition in the white-collar sector from now on be hinged on who writes the better prompts? Good luck monetizing that!

On the other hand, the game our “AI” overlords are trying to play, in the face of Google, Meta, etc., whatever, is that they want the refrigerator to be invented, but it must be so large and so expensive that only they can have it. Nobody else shall be able to afford the mega refrigerator, and this will guarantee them an eternal ice monopoly. They already managed to convince everyone that having your own IT infrastructure is lame and outdated; this is the next step. “Labour as a service”, 10% off with Amazon Prime, who needs humans.

Let’s see how this will play out, so far, the mega refrigerator is a trillion-dollar water cooler that spews out room temperature water and leaks on the floor. It will also be severely outdated in 3 to 5 years' time. One might wonder, what happens when technical progress is no longer in the interest of large corporations, but against their interest? Will we be stopping the time sometime soon maybe? The good thing is that the world is big, and incentives change from west to east.