[HN Gopher] The AI Replaces Services Myth
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The AI Replaces Services Myth
Author : warthog
Score : 59 points
Date : 2025-07-17 18:51 UTC (4 hours ago)
(HTM) web link (aimode.substack.com)
(TXT) w3m dump (aimode.substack.com)
| tuatoru wrote:
| The title is slightly misleading.
|
| What the article is really about is the idea that all of the
| money that is now paid in wages will somehow be paid to AI
| companies as AI replaces humans. That idea being muddle-headed.
|
| It points out that businesses think of AI as software, and will
| pay software-level money for AI, not wage-level money. It
| finishes with the rhetorical question, are you paying $100k/year
| to an AI company for each coder you no longer need?
| tines wrote:
| Not sure I quite get the point of the article. Sure, you won't
| capture $100k/year/dev. But if you capture $2k/year/dev, and
| you replace every dev in the world... that's the goal right?
| gh0stcat wrote:
| I don't think the value stacks like that. Hiring 10 low level
| workers that you can pay 1/10th the salary to replace one
| higher level worker doesn't work.
| RedOrZed wrote:
| Sure it does! Let me just hire 9 women for 1 month...
| aerostable_slug wrote:
| They're saying expectations that AI revenues will equal HR
| expenditures, like you can take the funds from one column to
| the other, are wrong-headed. That makes sense to me.
| tines wrote:
| I agree, but that doesn't have to be true for investors to
| be salivating, is my point.
| blibble wrote:
| that $2k won't last long as you will never maintain a margin
| on a service like that
|
| employee salaries are high because your competitors can't
| spawn 50000 into existence by pushing a button
|
| competition in the industry will destroy its own margins, and
| then its own customer base very quickly
|
| soon after followed by the economies of the countries they're
| present in
|
| the whole thing is a capitalism self destruct button, for
| entire economies
| Revisional_Sin wrote:
| > What the article is really about is the idea that all of the
| money that is now paid in wages will somehow be paid to AI
| companies as AI replaces humans.
|
| Is anyone actually claiming this?
| satyrnein wrote:
| It's almost more of a warning to founders and VCs, that an AI
| developer that replaces a $100k/year developer might only get
| them $10k/year in revenue.
|
| But that means that AI just generated a $90k consumer surplus,
| which on a societal level, is huge!
| jsnk wrote:
| """ Not because AI can't do the work. It can.
|
| But because the economics don't translate the way VCs claim. When
| you replace a $50,000 employee with AI, you don't capture $50,000
| in software revenue. You capture $5,000 if you're lucky. """
|
| So you are saying, AI does replace labour.
| warthog wrote:
| Maybe I should change the title indeed. Intention was to point
| to the fact that from the perspective of a startup, even if you
| replace it fully, you are not capturing 100x the previous
| market.
| graphememes wrote:
| Realistically, AI makes the easiest part of the job easier, not
| all the other parts.
| deepfriedbits wrote:
| For now
| DanHulton wrote:
| Citation needed.
| bgroins wrote:
| History
| th0ma5 wrote:
| Good thing we solved lipid disorders with Olean, Betamax
| gave us all superior home video, and you can monetize
| your HN comments with NFTs or else I wouldn't have any
| money to post!
| pjmlp wrote:
| Experience in industrial revolution, and factory
| automation.
| eikenberry wrote:
| So you mean in a hundred years it so? I don't think that
| is a good counter.
| pjmlp wrote:
| If you think the time is what matters from the history
| lesson, good luck.
| Quarrelsome wrote:
| Do execs really dream of entirely removing their engineering
| departments? If this happens then I would expect some seriously
| large companies to fail in the future. For every good idea an
| exec has, they have X bad ideas that will cause problems and
| their engineers save them from those. Conversely an entirely AI
| engineering team will say "yes sir, right on it" to every
| request.
| pjmlp wrote:
| Yes, that is exactly how offshoring and enterprise consulting
| takes place.
| eikenberry wrote:
| .. and why they fail.
| pjmlp wrote:
| Apparently not, given that it is the bread and butter of
| Fortune 500 consulting.
| crinkly wrote:
| The consultancies are successful. The customers aren't
| usually quite as fortunate from experience.
|
| A great example is the current Tata disaster in the UK
| with M&S.
| pjmlp wrote:
| Yet they keep sending RFPs and hiring consultancies,
| because at the end of the day what matters are those
| Excel sheets, not what people on the field think about
| the service.
|
| Some C level MBAs get a couple of lunches together, or a
| golf match, exchange a bit of give and take, discounts
| for the next gig, business as usual.
|
| Have you seen how valuable companies like Tata are,
| despite such examples?
| crinkly wrote:
| Yes and you allude to the problem: you can make a turd
| look good with the right numbers.
| pjmlp wrote:
| Doesn't change the facts, and how appealing AI is for
| those companies management.
| crinkly wrote:
| Yes. Execs love AI because it's the sycophant they need to
| massage their narcissism.
|
| I'd really love to be replaced by AI. At that point I can take
| a few months off paid gardening leave before they are forced to
| rehire me.
| Quarrelsome wrote:
| Idk I feel like execs would run out of make up before they
| accept their ideas are a pig. I worry this stuff is gonna
| work "just enough" to let them fool themselves for long
| enough to sink their orgs.
|
| I'm envisioning a blog post on linkedin in the future:
|
| > "How Claude Code ruined my million dollar business"
| crinkly wrote:
| Working out how to capitalise on their failures is the only
| winning proposition. My brother did pretty well out of
| selling Aerons.
| AkshatM wrote:
| > Need an example? Good. Coding.
|
| > You must be paying your software engineers around $100,000
| yearly.
|
| > Now that vibecoding is out there, when was the last time you
| committed to pay $100,000 to Lovable or Replit or Claude?
|
| I think the author is attacking a bit of a strawman. Yes, people
| won't pay human prices for AI services.
|
| But the opportunity is in democratization - becoming the dominant
| platform - and bundling - taking over more and more of the
| lifecycle.
|
| Your customers individually spend less, but you get more
| customers, and each customer spends a little extra for better
| results.
|
| To respond to the analogy: not everyone had $100,000 to build
| their SaaS before. Now everyone who has a $100 budget can buy
| Lovable, Replit and Claude subbscriptions. You only need 1,000
| customers to match what you made before.
| Sol- wrote:
| How much demand for software is there, though? I don't buy the
| argument that the cake will grow faster than jobs are devalued.
| On the bright side, prices might collapse accordingly and we'll
| end up in some post scarcity world. No money in software, but
| also no cost, maybe.
| kelseyfrog wrote:
| > You have to start from how the reality works and then derive
| your work.
|
| Every philosopher eventually came to the same realization: We
| don't have access to the world as it is. We have access to a
| model of the world as it predicts and is predicted by our senses.
| In so far as there is a correlation between the two in whatever
| fidelity we can muster, we are fated to direct access to a
| simulacrum.
|
| For the most part they agree, but we have a serious flaw - our
| model inevitably influences our interpretation of our senses.
| This sometimes gets us into trouble when aspects of our model
| become self-reinforcing by framing sense input in ways that
| amplify the part of the model that confers the frame. For
| example, you live in a very different world if you search for and
| find confirmation for cynicism.
|
| Arguing over metaphysical ontology is exemplified by kids
| fighting about which food (their favorite) is the best. It
| confuses subjectivity and objectivity. It might appear radical,
| but _all_ frames are subjective even ones shared by the majority
| of others.
|
| Sure, Schopenhauer's philosophy is the mirror of his own nature,
| but there is no escape hatch. There is no externality - no
| objective perch to rest on, even ones shared by others. That's
| not to say that all subjectivities are equally useful for
| navigating the world. Some models work better than others for
| prediction, control, and survival. But we should be clear that
| useful does not equate with truth, as all models are wrong, some
| are useful.
|
| JC, I read the rest. The author doesn't seem to grasp how profit
| actually works. Price and value are not welded together: you can
| sell something for more or less than the value it generates.
| Using his own example, if the AI and the human salesperson do the
| same work, their value is identical, independent of what each
| costs or commands in the market.
|
| He seems wedded to a kind of market value realism, and from this
| shaky premise, he arrives at some bizarre conclusions.
| harwoodjp wrote:
| Your dualism between model and world is nearly Cartesian. The
| model itself isn't separate from the world but produced
| materially (by ideology, sociality, naturally, etc.).
| nine_k wrote:
| A map drawn on a flat piece of land is still not the whole
| land it depicts, even though it literally _consists_ of that
| land. Any representation is a simplification, as much as we
| can judge, there 's no adequately lossless compressing
| transform of large enough swaths of reality.
| card_zero wrote:
| Urgh. I feel the stodge of relativism weighing down on me.
|
| OK, yes, all models (and people) are wrong. I'll also allow
| that usefulness is not the same as verisimilitude (truthiness).
| But there is externality, even though nobody can as you say
| "perch" on it: it's important that there _is_ objective reality
| to approach closer to, however uncertainly.
| neuroelectron wrote:
| I have yet to see LLMs solve any new problems. I think it's
| pretty clear a lot of the bouncing ball programming demos are
| specifically trained on to be demoed at a marketing/advertising
| thing. Asking AI the most basic logical question about a random
| video game like, what element synergies with ice spike shield in
| Dragon Cave Masters and it will make up some nonsense despite it
| being something you can look up on gamefaqs.org. Now I know it
| knows the game I'm talking about but in the latent space it's
| just another set of dimensions that flavor likely next token
| patterns.
|
| Sure, if you train an LLM enough on gamefaqs.org, it will be able
| to answer my question as accurately as an SQL query, and there's
| a lot of jobs that are just looking up answers that already
| exist, but these systems are never going to replace engineering
| teams. Now, I definitely have seen some novel ideas come out of
| LLMs, especially in earlier models like GPT-3, where
| hallucinations were more common and prompts weren't normalized
| into templates, but now we have "mixtures" of "experts" that
| really keep LLMs from being general intelligences.
| XenophileJKO wrote:
| I don't know, I've had O3 create some surprisingly effective
| Magic the Gathering decks based on newly released cards it has
| never seen. It just has to look up what cards are available.
| outworlder wrote:
| I don't disagree, but your comment is puzzling. You start
| talking about a game (which probably lacks a lot of training
| data) and then extrapolate that to mean AI won't replace
| engineering teams. What?
|
| We do not need AGI to cause massive damage to software
| engineering jobs. A lot of existing work is glue code, which AI
| can do pretty well. You don't need 'novel' solutions to
| problems to have useful AI. They don't need to prove P = NP
| sublinear wrote:
| Can you give an example of a non-trivial project that is pure
| glue code?
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