AI delivers 'zero financial payoff' to most companies, Apollo economist says

I don't think that one has held up very well. A cynic might opine that they've realized how easy it is to grab headlines and attention by putting out research that feeds people who are hungry for negative stories about AI.

UPDATE: I'm going to take this one back a a bit: it turns out Apollo publish articles like this on a daily basis, so the occasional headline that appeals to the "hungry for negative stories about AI" crowd is less of a pattern than if they published less frequently than that.

This is a healthy corrective to the most insane AI maximalist takes (mass disemployment in late 2027, 10% GDP growth in a year), but it shows nothing about whether the actual economic impact of AI spending is.

First, to show that, you'd have to justify the counterfactuals (if those companies hadn't spent on AI, would their position be better or worse?)

Second, while AI spending is increasing rapidly, normal companies aren't spending 1% of their revenue on it. So how can you look at a noisy chart of revenue and expect that "oh, it's not up, the AI spending must be useless?" Those companies could be spending < 1% of their revenue on AI, deriving value from it, and it wouldn't be guaranteed to show in a chart like this.

Your company uses AI and it gets ahead a lot quicker. However, your competition does so as well.

Many areas of economy are zero sum game - so your $ ends up being the same as previously. However, now with a "tax" paid to AI model providers for being able to stay competetive.

Second, I'm getting huge value from it, but I'm not making any money and none of it is being redirected. It's simply value that wouldn't have existed otherwise because I would have just gone without the thing because it was prohibitively expensive or too much work. I'm quite sure many companies and people have been unlocked in this way. Plenty of value locked up in an overly expensive economy dedicated to maximum value extraction instead of value creation.

I'm seeing another behavior in my purely personal research...asking AI 'can I do the thing?' and it comes back with 18 pages of 'yes, and here's how you do it'. Often it's the discovery that produces the endorphin bump. It's cool to know I can jailbreak the Peloton...and now that I know I can...I'm not so motivated to actually do the thing.

I'm guessing "most companies" are actually selling something that isn't constrained by the types of things that AI code generators unlock.

Apollo's own argument that most AI spend is coming from non-S&P 493 (as per the last two charts) tells me it's hard to make any conclusions based on these charts.

The problem is most people don't know what makes them successful from a people perspective, except in the coarsest terms.

90% of the business outcomes are delivered by 10% of the people. The problem is they don't know which people. Therefore they also don't know which processes, if automated or augmented with AI, will achieve the target outcomes.

So instead they’re shotgunning. The problem is that the existing people-based system has built-in stabilizing mechanisms to prevent misalignment from taking the entire operation off course. AI stresses and often breaks those.

The result? Higher costs and chaos.

This needs to be treated like an org transformation. Traditionally that's most successfully done by starting a new small team that builds ground-up and eats the old team.

Bzzzt! Calculators do not hallucinate. AI bots and agents are nowadays jerry-rigged to use actual calculators for problems involving crunching.

1. Execs with no understanding how business operates on the low level are pushing buzzwords.

2. People who want to get promoted deliver on buzzwords and get promoted. Note that the goal is to deliver the buzzword, not use the buzzword to make the business better.

3. Buzzwords do not help vast majority of companies because the incentives and needs are misaligned.

4. Eventually buzzwords settle, some find niches, some die off, and some take over the world.

Last two decades alone - big data, blockchain, crypto, web 3.0, gamification, VR, and now AI. TL:DR - we should expect vast majority of early AI adopters to have net negative to neutral experience. Assuming that AI is like electricity and automobiles more than blockchain we should expect that eventually companies that find a way to apply the tech correctly will eat those who do not.

The system itself doesn't reward value creation. I've been saying this for years. I've seen many smart people waste their time on bureaucracy; their intelligence was being wasted; so I'm not surprised at all that now that we have AI, that its intelligence is being wasted as well.

The bottleneck is an allocation issue, not a capability issue.

The current reality is that a lot of very bright people are currently working for big tech in bureaucratic roles and not allowed to focus their attention on 'risky' problems which would deliver real value if resolved.

The current system prioritizes monopolization and is designed to try to ensure that all innovation happens within big tech. It is sacrificing potential innovation which could have occurred much faster outside of big tech in order to ensure that any gains are captured by big tech... But it's sacrificing an enormous about of efficiency.

I hope big AI companies can use their political leverage to try to open up opportunities for people who want to innovate outside of big tech. That's aligned with their long term interests.

I think AI companies are convenient structures which could allow big funds to benefit from decentralized innovation. Could create real win-win scenarios. But those AI companies have to stop pursuing the corporate and government money and prioritize small customers and support small tool makers (or at least lobby the government to stop hindering them with regulations). Also, bootstrapping should be prioritized because VC money mostly creates moats.

...says a representative of a massive PE firm, those models of trust, accountability, ethics, and fairness.

The people who know how to get AI to make usable and viable solutions are the only people who should be running anything and their employees should be all doing the same.

A company should be built around people who can vibe engineer real end user products that are deploy-able and high quality.

Non-coding people are simply done now that AI can replace all of their "ideas", but cannot replace the engineer making the real decisions with the ideas that actually matter.

Much less do they know the thing can build software and maintain it, manage complex tasks daily, automate things, etc.

Then there's a handful that do follow closely AI developments and agents and who have started using them.

A friend of mine this weekend who is an award winning photographer and who has been selling photography courses online forever has told me he's used Muse to: 1) Automate chopping up his long form videos, add captions, and post them as Reels to Instagram. Several of these have gotten over a million views. 2) Automate handling DM reachouts, converting them into sales. He's up to several tens of thousands of dollars in sales from AI direct message conversions that he would otherwise not have been able to convert (too many DMs to handle, he'd have to hire/train sales people to basically just do DMs full time at scale otherwise and it would make no economical sense) 3) Automate all his customer service for handling any issues, refunds, support, etc.

And I personally think he's still just scratching the surface of what he could do.

I feel we are really at the beginning of a new era. When the internet started most people were just using it for e-mail and news, maybe a newsletter chain here and there and some early forums. Social Media didn't appear for well over a decade, popular Web 2.0 apps like Google Maps, GMail, YouTube, Netflix, etc didn't appear for a long time.

Mainstream hasn't even really begun to adopt AI.

Anyone agreeing with this headline - I’m sorry in advance for your loss.

I am not an "AI booster", it seems like the current market leaders have dug a hole that they'll have a hard time getting out of. Just about everyone says something like "there's a bubble, it will burst, people will be hurt but the process will go on, like the Internet or railroads". But that ignore that the scale of this is beyond earlier bubbles (each bubble is larger than the last in our 30-40 year bubble-and-pop driven economy but that might not be comforting).

All that said, "some aren't benefiting" or "the average isn't benefiting" is a disingenuous argument if you want to say things are bad. AI companies have more of a real product people are paying than Google did. A large minority of companies (not all in the tech industry) are getting a boost. It's easy to say "the average is zero" when you exclude some. AI has boosted media companies that do a lot of transcription. Video generation serves half of advertising videos.

Reg: "All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, a fresh water system, and public health... what have the Romans ever done for us?" Attendee: "Brought peace?" Reg:"Oh, peace? Shut up!"

In some organizations, it doesn't matter whether you produce 1x or 10x as much work. If the process says reviews happen on Mondays and deployment decisions are made at the end of the month, getting your work done faster won't change much.

I'm at a much smaller company now, and we've doubled our feature delivery rate while increasing code coverage and overall product quality. We've also tripled our marketing content output, which was an area where we'd been falling behind.

AI can significantly improve individual productivity, but whether that translates into business results depends on how the organization operates.

That’s one job and I have several in the pipe.

The “financial payoff” for no more than a few 100 a month at absolute most is there and it’s real. If you aren’t seeing it then you’re doing it wrong.

I usually don’t even spend more than $20 a month each for chpt and claude, deepseek free is solid. I am about to switch fully local too so that should drop to basically cost of watts.

I dunno what yall are doing