econofai · a Learn For Everybody field guide LFE Library econforeverybody.com ↗ Updated 7 August 2026
A living field guide · Learn For Everybody

The Economics of AI

Who gains from AI, who pays for it, and what India should do about the difference.

This page grew out of two talks delivered at the Takshashila Institution in June 2026. Both talks are preserved below exactly as delivered; this guide is the version that will keep growing over time. Feedback is always welcome, please feel free to leave a comment below.

Three ways in: The Ten Claims — 3 minutes The Talks as Delivered — 90 minutes each The Library — Choose Your Own Path
New 7 August 2026: Talk (SocioEconomicAI): tightened ten text-heavy core slides and two dense changelog slides for live presentation, especially the services-paradox slide; preserved the claims, figures, links, and argument while removing essay-like repetition from the canvas. changelog →
The TL;DR

Ten Big Ideas

  1. AI is a general-purpose technology, so the invention is not the story — the reorganization is. Steam, electricity, and the internet changed society by changing the production map, through complements built around them over decades.
  2. It is expensive to build and cheapening fast to use — and most bad AI arguments come from picking only one of these facts. Frontier training costs have compounded like a capital project while token prices collapsed by orders of magnitude. Both are true at once.
  3. The AI stack is a chain of required returns. Chip and power suppliers are already earning; compute operators must out-earn depreciation; token buyers must find ROI; the economy must show diffusion. Each layer's revenue is the next layer's cost — validation lives at the top.
  4. Depreciation is where the boom is actually decided. Whether a GPU usefully lives two years or five is the most boring number in AI, and it settles whether today's buildout turns a profit or becomes a write-off.
  5. Value created is not value captured. The ledger only sees what gets billed; consumer surplus leaks out of every layer. AI can enrich the world and still disappoint the people who financed it — ask the railway shareholders.
  6. AI changes tasks first; jobs, firms, and statistics move later. Productivity shows up when contracts and org charts change; adoption intensity matters because AI spend becomes labour-market evidence only when the firm reorganizes.
  7. There is no single AI jobs effect. Early-career workers in exposed occupations show stress, solo founders scale, and high-intensity AI adopters expand headcount. The sign depends on whether AI is a surface tool or a real reorganization of work.
  8. India is exposed where it earns. The IT-services arbitrage — many people per dollar of revenue — sits in AI's early blast radius, and the first shock will be local, urban, and occupational, not national and abstract.
  9. India is vulnerable, but has optionality. English, an IT base, digital public infrastructure, and a huge domestic market are real assets — if institutions make good experiments cheaper and turn them into ladders. Vulnerable is not doomed.
  10. The future is a coordination problem, not a forecast. Measure early, experiment fast, insure humanely — and read every AI headline by asking which ledger changed, and what evidence would prove it.
The guide

The six parts, and where each one lives.

This is the map. The ten ideas above are the argument; these six are the doors into it. Each part is being written up from the talks; until it moves in, its links take you to exactly where it lives in the talk — and Part 1's exhibit is already embedded below.

What kind of technology this is

The machine

A general purpose technology is actually the easy bit. Rearranging our civilization around it is the hard part. To better understand AI, you have to understand other general purpose technologies from the past: electricity and the internet are great examples. What those GPTs did to work, and the bargaining around work helps us understand what is likely to happen this time around... but with one crucial difference. This GPT's capability frontier moves very, very quickly.

Value created vs value captured

The money

Capex is expensive in AI. But the good news is that inference is becoming cheaper by the day. The real thing to keep track of when people talk about the AI stack is whether each stack's revenue generates enough for the whole thing to keep humming. And the thing that really decides this is... depreciation.

Tasks, firms, and the 2026 evidence

The work

AI changes tasks before it changes jobs, and contracts before it changes statistics. The evidence so far: broad usage, concentrated stress at the entry rung, high-intensity adopters expanding headcount, and firms changing shape.

Exposure, optionality, the next bargain

India

How will India be affected? Depends on which India you are talking about. The bad news is that India is exposed most right where it shines: IT and ITeS. The good news, on the other hand, is that India also has real options. But as always, there's an asterisk, and that's where the reading matters.

Dashboards, experiments, safety nets

The choices

Measure the shock before it is obvious, make good experiments cheaper, keep frontier access open, and treat the safety net as a state-capacity problem. Easier said than done? You bet!

The two-lens toolkit

Reading the news

There's economics, which is confusing but exciting. Then there is accounting, which is boring, but clarifying. The bad news is that you have to keep both stories on track in your head.

Parts appear here as they are written; the talks below remain the complete argument in the meantime. The library and the open questions are already live.

The library

The Reading List

Here's a curated, reasonably-frequently-updated (no promises!) reading list, related to this topic. Have I read every word in each of these? Hell no. Should you? Also hell no. Exercise judgment, and happily have your LLM of choice read the longer ones. But curate your reading, and never ask the LLM to choose for you — that'd be my way of going about it.

Core thesis

The AI Capex Ledger

GeometricInvestor · Substack

The frame the whole Money part runs on: AI as a chain of required returns, each layer having to earn enough to justify the one beneath it. Agrawal's two-year update is the same frame with numbers attached, so read them together. Both are written by investors in what they measure, and this one is pseudonymous, so position cannot be checked at all.

The money
Bubble debate

AI's $600B Question

David Cahn · Sequoia Capital

Superseded in magnitude, not in logic. Cahn asked in 2024 where the revenue was that justified the capex, and sized the hole at $600bn. Now it is about $443bn of hyperscaler capex against roughly $435bn of annualised AI revenue — which stacks the same end-user dollar up to three times. Keep the frame, replace the arithmetic. Sequoia is an investor in the buildout it questions.

The money
Value capture

AI Value Capture: The Shift to Model Labs

Daniel Nishball · SemiAnalysis

The library's sharpest live disagreement. Nishball says the profit pool is migrating from infrastructure to the labs. Agrawal (Altimeter) puts the app-and-lab layer at 7% of gross profit (assumed margins; revenue base double-counts — see Agrawal); Srivastava (Baseten) puts 90-95% of inference spend at frontier labs. Value moving to labs is not value moving to applications, which the 7% bucket hides.

The money
Market structure

Thinking through the Fable/5.6/GLM equilibria

Rohit Krishnan · X, July 2026

A live model-market equilibrium sketch: frontier labs keep a premium where capability really matters, but open-weight and Chinese models pressure routine enterprise work toward cheap-enough substitutes. The strategic response is full-stack ownership across energy, chips, cloud, models, applications, and the customer relationship.

“The future therefore splits between massive full stack labs and individual businesses which have to specialise in some layers.”

The moneyReading the newsOpen questions
Inference

Tiered Super-Moore's Law

Du · arXiv 2603.28576

Three figures, three quantities. Du's ~600x is a market-wide index, 2020-2026, and the only one documenting its basket: 62 milestone observations, OpenRouter plus Epoch AI. Agrawal (Altimeter) has $30 to $5 per million tokens — retail GPT inference, ~3 years, from the Stanford Review interview, not the essay. Gerstner (Altimeter) has ~99% over ~2.5 years on an undefined unit. Quoting one hides two.

The moneyThe machine
Energy

Energy and AI

International Energy Agency · IEA report

The best starting point on power, data centres, and grid timing.

The moneyIndia
Productivity — bull

Generative AI could raise global GDP by 7%

Goldman Sachs Research · Goldman Sachs

The optimistic macro case; pair with Acemoglu's task-based caution and let the reader hold both.

The work
Productivity — bear

The Simple Macroeconomics of AI

Daron Acemoglu · NBER w32487

The cautious task-based macro case — the disciplined counterweight to the 7% headline.

The work
Labour

The Labor Share Fell. So What?

Alex Tabarrok · Marginal Revolution

The counterweight that keeps the guide honest: a falling labour share is not a transfer from labour to capital, and real compensation is at an all-time high. The worry is the future Jevons world, not the present tense.

The workThe money
Agents

How Do AI Agents Spend Your Money?

Bai et al. · arXiv 2604.22750

Why agentic workflows change token economics: unit prices fall, total bills rise.

The moneyReading the news
Use cases

1,302 real-world gen AI use cases

Google Cloud · Google blog

A concrete catalogue of enterprise adoption — useful ballast against both hype and doom.

The work
Labour theory

Automation and New Tasks

Acemoglu & Restrepo · JEP 33(2), 2019

The vocabulary the whole Work part runs on: displacement vs reinstatement vs productivity, and so-so technologies that displace without big gains.

The work
Macro lens

Macroeconomics: Some Defects (PSST)

Arnold Kling · Substack

Patterns of sustainable specialization and trade: adjustment is a search process, so optimism should come from search capacity, not inevitability.

The workThe choices
Usage

Anthropic Economic Index

Handa et al. · arXiv 2503.04761

Task-level evidence from millions of Claude conversations — the augmentation/automation split is the number to watch.

The work
Usage

How People Use ChatGPT

OpenAI economic research · OpenAI

Scale and activity mix of consumer AI use — the diffusion baseline.

The work
Capability

GDPVal

OpenAI · openai.com

Economically valuable tasks as a benchmark target — capability measured in work products, not quiz answers.

The machine
Labour

Canaries in the Coal Mine

Brynjolfsson, Chandar & Chen · Stanford Digital Economy Lab

Early-career exposure evidence: a 16% relative employment decline for the 22–25 cohort in exposed occupations. The margin is jobs, not pay.

The work
India

India Employment Report 2024

ILO · ilo.org

Youth employment, skills, informality, and structure — the most-cited India source in the work deck for a reason.

India
Trade shock

The China Syndrome

Autor, Dorn & Hanson · AER 103(6), 2013

How to connect a national shock to local labour markets — the method the India part borrows for AI-exposed cities.

India
Policy

A compute tax is a REALLY dumb idea

Brian Albrecht · Economic Forces

Diamond–Mirrlees for the AI age: tax output, not intermediate inputs. I agree — and it does not reduce my worries about a post-AGI world. Hold both.

The choices
History

Learning from Ricardo and Thompson

Acemoglu & Johnson · Annual Review of Economics 16, 2024

The canonical this-has-happened-before brick: British real wages roughly halved 1806–1820 and shared prosperity took decades plus political voice. The productivity bandwagon is a choice, not an automatic.

The machineThe work
Labour

The task is not the job

Luis Garicano · Silicon Continent

Travel-agent employment fell over 60% from its peak, yet surviving agents' relative pay rose from 87% to 99% of the private-sector average. The machine took the separable part of the bundle and left people the strong part.

“Labour markets price jobs, not tasks.”

The work
Labour

What will be scarce?

Alex Imas · Ghosts of Electricity (Substack)

The demand-side complement to Garicano: Starbucks automated for years, concluded it was a mistake, and is re-hiring baristas for handwritten notes on cups.

“The relational sector grows precisely because it isn't automated.”

The workThe choices
Labour

You are not a horse

Brian Albrecht · Economic Forces

The optimist's structural-change rebuttal to humans-as-horses — my counter: the induction argument is just saying the sun will rise tomorrow because it always has. One day it won't. A ready-made dialectic.

The workOpen questions
Labour

Agentic coding and persistent returns to expertise

Dan Shipper · Every

Managers make good workers in an AI-first world: agentic tools amplify returns to judgment and allocation rather than flattening them. Verify the linked PDF before quoting specifics.

The work
Usage

The Shift to Agentic AI: Evidence from Codex

Johnston, Holtz, Ong, Tambe, Richmond & Chatterji · OpenAI economic research · arXiv 2606.26959

The freshest as-we-speak evidence of the shift to delegated production: 5× weekly users in H1 2026, ~10× more 8h+ delegations since January. Caveat: OpenAI-internal usage is the frontier, not the average firm.

The workReading the news
Value capture

Capital in the 22nd Century

Philip Trammell · Substack (with Dwarkesh Patel), Dec 2025

The cleanest mechanism for who captures value: while labour is a bottleneck (Baumol) its share can rise; once it isn't (Jevons), the capital share climbs toward one. A post, not a working paper.

“Piketty was wrong about the past. He's probably right about the future.”

The moneyThe work
Development

AI, Globalization, and Strategies for Economic Development

Korinek & Stiglitz · NBER w28453, 2021

The most uncomfortable, most India-relevant implication in the literature: when capital substitutes for labour, the engine of catch-up growth shuts off. Say it plainly.

The moneyIndia
Firms

AI-Native Firms

Kim (INSEAD) & Koning (HBS) · HBS WP 26-090 · SSRN, June 2026

Microdata for how firms reorganise: AI-native startups are 25% smaller, 13% more engineers, ~15% fewer entry-level workers and managers — comparable valuations, more value per employee. Cited in both talks; one treatment in the guide.

The work
Firms

A New Look at AI’s Impact on Jobs

Kharazian, Simon & Stevens · Ramp/Revelio Labs, June 2026

Firm-level spend linked to workforce records: high-intensity AI adopters grew headcount 10.2% over two years and entry-level headcount 12.0%; low-intensity adopters did not. The mechanism is not exposure alone, but reorganization intense enough to change the firm.

“AI adoption changes employment only when it changes the firm.”

The work
Firms

The Age of the Solopreneur

Tedeschi, Rama & Cruickshank · Stripe Economics, June 2026

The n=1 limit of the AI-native firm and the optimistic flip side of the canary: ~4m Americans earning $100k+ solo. The India question — solo-scaling on DPI rails — should be stated as a question, not a finding.

The workIndia
India

The Making of Indian Statistics

Alter Magazine · alter (drawing on Bhattacharya, Deaton, Rajagopalan)

Before asking what AI does to Indian jobs, ask whether we can measure Indian jobs. Bonus vignette: when the US blocked computer sales, the ISI built India's first computer in 1953 from war-surplus parts.

“A country that could not buy computing technology built its own from the debris of wars.”

India
India

The Making of China and India in the 21st Century

Bharti & Yang · World Inequality Lab, 2025 · SSRN

A century of human-capital divergence: China bottom-up, India top-down. Education inequality is ~25% of wage inequality in India vs under 12% in China — why India did services and China did factories.

India
Theory

The Allocation of Talent: Implications for Growth

Murphy, Shleifer & Vishny · QJE 106(2), 1991

The crisp backbone for engineers-vs-lawyers: talent that organises production innovates; talent that rent-seeks redistributes. Lands hard with an Indian professional audience.

IndiaThe choices
China

Breakneck

Dan Wang · W.W. Norton, 2025 (book)

The engineering-state vs lawyerly-society thesis, heavily highlighted in my copy. Pair with Hessler's Other Rivers and Ang's How China Escaped the Poverty Trap.

India
Development

A New Growth Strategy for Developing Nations

Rodrik & Stiglitz · The New Global Economic Order (Routledge, 2025)

The missing macro spine for the India half: manufacturing became an enclave, services must absorb labour but hit a home-market ceiling — and AI now threatens the services escape hatch too.

India
India

Economic troubles have eased, but foundations for long-term growth are still missing

Ishan Bakshi · The Indian Express, June 2026

Live baseline evidence for the India half: manufacturing exports are weak, high-skill IT services face AI pressure, finance will not absorb low- and mid-skill workers at scale, and gig platforms are becoming an urban employment sink. Use as a tracking source, not a clean causal AI claim.

“The gig economy is emerging as an urban employment sink.”

IndiaThe work
India

India's SaaS Story Hits Pause

The Morning Context · themorningcontext.com

The single most on-thesis India-AI-labour case: ~$50k revenue per employee vs a US benchmark near $300k. India's services-arbitrage model is the thing AI most directly erodes. (Original is paywalled; the headcount economics are corroborated in Lightspeed's open write-up.)

India
India

India's iPhone Factory Is Keeping Women Workers Isolated

Johanna Deeksha · Scroll.in

Ground-level texture for India climbing the manufacturing ladder: a dormitory-labour regime traced back to 1920s Shanghai cotton mills. The vivid counterweight to abstract labour-share macro.

India
India

Counting Manufacturing Jobs in India

Nandlal Mishra & Pramit Bhattacharya · Data For India

The rigour footnote for any manufacturing-employment claim: household surveys say 68.5M by 2022–23, enterprise surveys a static ~48M. Keep every claim defensible.

India
India

Layers within Telangana's Caste Pyramid

Praveen Chakravarty · The New Indian Express

Telangana's Composite Backwardness Index across 242 caste groups: the strongest predictor of backwardness is access to English-medium education, not land. The bridge from caste to who reaches the AI economy.

India
India

The Privilege of Exposure

Mishra · arXiv 2606.13314

AI exposure mapped onto caste — the working paper behind the inequality-layers section.

India
India

India's fertility has flipped (SRS 2024)

Jesús Fernández-Villaverde · X thread (with John Burn-Murdoch)

TFR already 1.88, projected to US levels by ~2031, Kerala 1.3 vs Bihar 2.9. The dividend window is closing faster and unevenly. Not a crisis yet, but it is coming.

India
Labour

ICE has not improved U.S. labor markets

Cox & East · NBER w35129

First causal national estimate: no positive spillover to US-born workers from immigration enforcement. The India parallel is sons-of-the-soil politics meeting internal migration.

IndiaThe choices
Policy

Public Finance in the Age of AI: A Primer

Korinek & Lockwood · NBER w34873, 2026

The careful framework behind the token-tax section: stock vs flow, and Diamond–Mirrlees as the spine — tax output, not the intermediate input. The steel line people quote is not in this paper; for that, see their Brookings piece.

The choices
Policy

The future of tax policy: A public finance framework for the age of AI

Anton Korinek & Lee M. Lockwood · Brookings, 8 January 2026

The public-facing version of the NBER primer, and the document where the steel line is actually in print under their own names. The deck's token-tax slide quotes it directly rather than at second hand.

“Taxing the fundamental infrastructure of AI development would be like taxing steel during the industrial revolution—a self-defeating policy that could slow the productivity growth needed to fund public priorities.”

The choices
Policy

Preparing for AI's Impact — Policy Responses

Anthropic Economic Futures · Anthropic

The policy-menu source: token taxes, sovereign wealth funds, automation adjustment assistance, the physical-vs-human-capital tax bias. My caveat: the scenario buckets are not well defined.

The choices
Policy

UBI: A Conversation With and Within the Mahatma

Economic Survey 2016-17, Ch 9 · Government of India

The UBI argument is really a state-capacity argument: a reliable cash floor plus portable benefits plus active placement, delivered by a state that can actually do those things.

The choices
Measurement

What we can’t measure about AI – yet

Carlo Cordasco · Aeon, June 2026

The mechanism behind Amara's law: visible costs are measurable inside the old practice, while the most important benefits often require new practices and concepts before they can even be named. The policy test is recoverability: preserve redundancy where losses may be irreversible, but prefer managed experimentation where costs can be contained.

“Measurability and importance are not the same thing.”

The workThe choicesOpen questions
Diffusion

Amara's Law

Shane Greenstein · Digitopoly, June 2026

The Hayekian reading of Amara: the short-run shortfall is mundane friction; the long-run surprise comes from dispersed experiments no planner could design. Exactly the PSST point, made rigorous.

“Anybody who says they predicted this is selling something.”

The workReading the newsOpen questions
Optimism

Plentiful, High-Paying Jobs in the Age of AI

Noah Smith · Noahpinion

The named optimist to argue with, not a strawman: finite compute means opportunity cost governs deployment. He concedes the three cracks — inequality, adjustment frictions, AI capturing its own means of production.

The workOpen questions
Development

Could development economics be more useful?

Noah Smith · Noahpinion

The honest caveat before prescribing India's next bargain: history only happens once, so there is no science of development. Humility on which lever is decisive.

IndiaOpen questions
India

Progress Without Change? — the India Story

Santosh Desai · Anil Dharker Memorial Lecture

A humanities-register frame for the close: India as a pattern of accommodating contradictions rather than resolving them. Use sparingly; it lands.

“India is about making sure we play the game forever, not about making sure we win it.”

IndiaOpen questions
Accounting

Big Tech Accounting Creates a Blind Spot in the AI Boom

WSJ · Wall Street Journal

Depreciation schedules are where the AI boom's profitability gets decided. The course pushes back: Lochmiller (Crusoe, which rents this hardware) showed H100 spot prices falling after launch, then rising above what the first buyers paid; Srivastava (Baseten) saw a B200 cluster requoted from $263 an hour to $510. Asked whether useful life runs past six years, Lochmiller said he does not know. Nobody does.

The moneyReading the news
Synthesis

State of the AI Economy 2026

Azeem Azhar · Exponential View

Above water, not ashore: trailing revenue about $110bn, about 19% depreciation headroom on stated assumptions. Agrawal's two-year update reaches much the same conclusion by a different route — bottom-up revenue and assumed margins by layer. But Azhar's figures are unverified here and carry much of the Money deck's depreciation arithmetic. Check them before they go on a slide.

The moneyReading the news
History

Industrial Revelations, and the lesson for AI

Ethan Mollick · X (on the BBC 'Industrial Revelations' series)

Mollick's one-line version of this guide's opening claim: steam changed nothing until thousands of skilled workers worked out how to apply it to their existing jobs. Swap steam for AI and that is the adaptation problem exactly — the technology is the easy part; the reorganization is the long grind. He points to the BBC 'Industrial Revelations' series as the illustration.

“Steam alone wasn't enough, it required thousands of skilled workers figuring out how to apply this new power to their old work.”

The machineThe work
Bubble debate

Some thoughts on the AI trade

Urbanomics · Gulzar Natarajan, July 2026

Useful reinforcement, not a view change: the right test is whether downstream applications prove enough commercial value before upstream margins, financing, power, and depreciation squeeze the story. Read it with Azeem Azhar, GeometricInvestor, and the talk's own ledger frame in mind: not agreement, but 'we shall see.'

“The critical place in the market to keep a close eye on may be the downstream side of AI applications and product development.”

The moneyReading the newsOpen questions
Firms

America’s Enterprising Spirit Is Booming After Decades-Long Slump

Sydney Ember · The New York Times, July 2026

Independent corroboration of the Stripe signal: 5.7 million business applications in 2025, with the rise skewed toward firms unlikely to hire. This is evidence that AI may be lowering the minimum viable firm, not proof that the Coasean singularity has arrived; applications are not operating businesses, and roughly 500,000 actual firms formed in 2023.

The work
Market structure

Who’s Afraid of Chinese Models?

Ben Thompson · Stratechery, July 2026

The clearest economic account of why open weights do not make inference free: the useful unit is the cost of completing a task, and rents migrate into serving efficiency, learning data and sticky harnesses. Thompson stops short of the counter-evidence — on Vercel's gateway in June, open-weight models ran 29% of tokens on under 4% of spend. Open weights do not cap model-layer rents. They concentrate them.

“Let the frontier labs win by being better; don’t let them define safety or security, or pull up the ladder of humanity’s collective knowledge.”

The moneyThe choicesOpen questions
Value capture

The Economics of Generative AI: Two Years Later

Apoorv Agrawal · Substack (Altimeter), April 2026

The headline the Money part leans on: $435bn of AI revenue, $285bn of gross profit, semis taking 79% against infra's 14% and apps-and-labs' 7%. Caveats: the margins are assumed, not measured; the $435bn stacks the same end-user dollar up to three times; and eight weeks later Agrawal sized the stack at $300bn / $150bn / $100bn, roughly 65/24/10. Altimeter's disclosed US book is 41.6% semiconductors.

“For the underlying data behind this analysis, ping me. Happy to share the full datasheet.”

The money
Value capture

The Economics of Generative AI

Apoorv Agrawal · Substack (Altimeter), 2024

The chain was already inverted in 2024: compute taking about 83% of revenue and 87% of gross profit while applications earned almost nothing. Agrawal (Altimeter) predicted the flip. Two years on it had barely moved, 87% to 79% (assumed margins; revenue base double-counts — see Agrawal), and the non-movement is the finding. It carries footnotes naming Coatue, Meritech and Intel/AMD; the update does not.

The money
Value capture

Economics of Generative AI

Apoorv Agrawal (Altimeter) · Stanford MS&E 435 course lecture 1, Spring 2026

Agrawal (Altimeter) teaches the course and wrote the essay behind its headline number; his fund's disclosed US book is 41.6% semiconductors — he is describing a stack he is positioned in. The gift is the ARPU ladder: Alphabet 4bn users at ~$100 a year, Meta 3.5bn at $70, ChatGPT 1bn at $10, 95% paying nothing. Note the hole: he promises slide 16, the profit-by-layer chart, and runs out of time.

The money
Energy

Building AI Factories

Chase Lochmiller (Crusoe) · Stanford MS&E 435 course lecture 3, Spring 2026

The course's most useful cost breakdown. Lochmiller (Crusoe, which rents this hardware) puts a site at ~$60M per MW all-in — $20M shell and power, $40M IT — against $15M per MW a year renting bare compute, a four-year payback. Then he says on tape that he may have double-counted, that engineering labour is missing, and that he assembled it that afternoon. For India: gas turbines went $1M to $3M per MW.

The moneyIndia
Inference

The Inference Cloud

Tuhin Srivastava (Baseten) · Stanford MS&E 435 course lecture 7, Spring 2026

The sharpest number in the course: about 90-95% of inference spend goes to frontier models, about 5% to custom or open ones. Srivastava (Baseten) sells the custom alternative and says so in the same breath — read the 5% as a pitch and the 90-95% as evidence. His B200 cluster was requoted from $263 an hour to $510. The East India Company exchange with a public-company CEO is positioning, not a finding.

The moneyOpen questions
Market structure

Infrastructure & Capstone

Sachin Katti (OpenAI) · Stanford MS&E 435 course lecture 5, Spring 2026

The dissent inside the course, from the buyer. Katti runs infrastructure at OpenAI, the largest customer of the layer he says will not keep the profits: value migrates up the stack, as in mobile. A gigawatt is roughly half a million GPUs and about $70bn — which sits beside Gerstner's (Altimeter) $50bn and the ~$60bn implied by Lochmiller's (Crusoe) $60M per MW, three numbers for the same unit, and nothing published reconciles them.

The moneyIndia
Firms

Enterprise AI and Service as a Software

Ali Ghodsi (Databricks) · Stanford MS&E 435 course lecture 4, Spring 2026

Reorganisation beats capability, from the buyer himself. Databricks went from nine months per connector, one engineer each, to seven connectors in a quarter shipped by seven engineers working together. The fix was process redesign, not a better model. Ghodsi sells the layer above the models and expects them to commoditise. The pull-quote is machine-caption text; verify against the video before a slide.

“The next GPT 7 or Opus 6 would not have helped us do this better.”

The workThe money
Inference

The GPU Economy

Brad Gerstner (Altimeter) & Sunny Madra (Groq, then NVIDIA) · Stanford MS&E 435 course lecture 2, Spring 2026

Two men long the answer, stating the paradox best. Gerstner (Altimeter) runs a book whose largest disclosed US position is NVIDIA at 28.6%; Madra came from Groq to NVIDIA. Their number: unit inference cost down ~90% in a year and ~99% over two and a half — while H100 prices went up. Cheaper intelligence and dearer hardware at once, from people long both halves. The $50bn per gigawatt figure is from here.

The money
Market structure

Open-weight models surge to 29% of volume, price per token flattens (AI Gateway Production Index)

Vercel · Vercel blog, July 2026

The best public read on where inference money actually goes, and it cuts against the commoditisation intuition. In June, open-weight models ran 29% of gateway tokens on under 4% of spend, while Anthropic took 61% of spend on 32% of tokens. Cheap models take the cheap work, which leaves the paid work more concentrated. The limit: one gateway's traffic, Vercel's own developer customers, not the market.

“Open-weight models ran 29% of gateway tokens, up from 11% in April, on under 4% of spend.”

The money
Disclosure

Altimeter Capital Management, LP — Form 13F-HR holdings, Q1 2026

Altimeter Capital Management, LP (CIK 0001541617) · SEC EDGAR, filed 15 May 2026

The disclosure the course does not make. Altimeter runs the seminar and writes the essay behind the 79% number; at 31 March 2026 it held $5.70bn across 13 US-listed longs — NVIDIA 28.6%, Meta 19.6%, semiconductors 41.6% of the book. Read that claim next to this book (assumed margins; revenue base double-counts — see Agrawal). 13F excludes shorts and the private book, so it understates the overlap.

The moneyOpen questions
Value capture

Inverting the Stack: Apoorv Agrawal on the Economics of AI

Apoorv Agrawal, interviewed · The Stanford Review, May 2026

Useful mainly as a check on the headline. Eight weeks after publishing $300bn semis, $75bn infra and $60bn apps, Agrawal (Altimeter) sized the same stack here at $300bn / $150bn / $100bn, roughly 65/24/10 rather than 79/14/7. Nothing was retracted; the numbers moved in conversation, as assumed-margin estimates do. This interview, not the essay, is where the $30-to-$5 per million tokens line lives.

The moneyOpen questions
Energy

AI Compute Demand (interactive bottleneck calculator)

MS&E 435 (Stanford), on Epoch AI estimates · Stanford MS&E 435 course site, Spring 2026 (Wayback snapshot, 20 July 2026)

A toy that makes one point stick: run the defaults and energy binds first, at 15% a year against chips at 45%, memory at 28% and interconnect at 35%, with demand at 310%. Effective supply is the minimum of the layers, so the slowest sets the ceiling: power. For India: grid and energised shell bind, not chips. The defaults are Epoch AI's, with the energy figure from Epoch and the IEA, under CC BY 4.0.

“This is a pedagogical toy, not a forecasting model.”

The machineIndia

Nothing matches — clear the search or pick another part.

Open questions

The questions I left with the room.

A field guide that only asserts is not worth rereading. These are the questions the talks ended on — verbatim — and the ones this guide is still working on. The question is not "Will AI help India?" The question is: which Indians, which cities, which firms, and which ladders?

01

If AI is better at many tasks, what should humans become relatively best at?

from The Economics of AI
02

If AI can do 40% of your tasks, which 60% becomes more valuable, and which 20% should never have been in your job?

from AI, Work, and India
03

If a hospital, bank, or startup can be unplugged from a frontier model overnight, what is that model worth on its balance sheet?

from The Economics of AI
04

If only approved institutions can touch frontier capability, who gets to decide what AI is for in Indian conditions?

from AI, Work, and India
05

Design education around projects where students must use AI, explain what they trusted, show what they rejected, and defend the final judgment. What would that look like in an Indian classroom?

from AI, Work, and India
06

When you hear an AI headline, which ledger changed — and what evidence would prove it?

the question to leave with
About this guide

A living document, not a post.

For ten years I wrote blogposts about economics. This is what I now believe replaces most of them: one growing, navigable document instead of a scattered archive — with the talks that seeded it preserved exactly as delivered, and every claim carrying its source.

The guide grows the way my reading works: I clip an article, argue with it properly, and then it earns a place here — as a library entry, as evidence inside a section, or occasionally as a new section. Updates follow my reading rhythm, not a publishing calendar; the changelog above is the honest record of both.

The register throughout: steel-man the optimists, keep the sharpest dissent, and hold two true things at once. Where the evidence is genuinely unsettled, the guide says so instead of picking a team.

Written by Ashish Kulkarni, built with Claude. Sources marked ✓ were checked against primary documents during talk preparation (June 2026). Single self-contained page; the only external call is to Google Fonts.

Changelog

What changed, and when.

A living document should show its work. Every meaningful addition lands here first, and the best of them become posts on the blog.

7 August 2026
  • Talk (SocioEconomicAI): tightened ten text-heavy core slides and two dense changelog slides for live presentation, especially the services-paradox slide; preserved the claims, figures, links, and argument while removing essay-like repetition from the canvas.
4 August 2026
  • Library: added thirteen sources from Stanford's MS&E 435 "Economics of the AI Supercycle" (Apoorv Agrawal, Altimeter Capital) — both of Agrawal's gross-profit-by-layer essays, six of the nine course lectures, the Vercel AI Gateway index, Altimeter's Q1 2026 SEC 13F, the Stanford Review interview, the course's compute-demand calculator, and Korinek and Lockwood's Brookings tax piece. 63 entries to 76.
  • Library: rewrote seven existing takes to carry the tensions the new evidence creates — SemiAnalysis on value migrating to model labs against Agrawal's 7% app-and-lab layer; the capex ledger and the $600B question now disclose that their authors are investors in what they analyse; Thompson's open-weight ceiling against gateway data showing open weights take 29% of tokens on under 4% of spend; and the three-way token-price conflict where only Du documents his basket.
  • Talk (EconofAI): split the four-row capex ledger into five — model labs and applications were previously dissolved into "token buyers" — and added a new core slide carrying Agrawal's profit-pool split (semis ~79%, infra ~14%, apps ~7%) with its assumed-margin and double-counting caveats. Extended "So is anyone actually making money?" from three verdicts to five. Replaced the "unknown" disclosure tile with the estimate and its limits. Reconciled the two NVIDIA revenue figures on slides 2 and 6. Added concentration evidence to the market-structure slide and a counter-case to the depreciation slide. Retired the third-hand 5.7% margin-cliff figure in favour of a transcript-sourced one.
  • Talk (SocioEconomicAI): rebuilt the services-paradox slide — revenue per employee now computed from TCS, Infosys and Wipro filings rather than resting on a Lightspeed piece about a different metric — and added Ghodsi's connector redesign as counter-evidence, with his commercial interest disclosed. Attributed the "taxing steel during the industrial revolution" line to Korinek and Lockwood directly.
  • Correction: an earlier draft of the services-paradox slide put Ghodsi's redesign gain at "twenty-one times the throughput." That was wrong — his old process ran one engineer per connector, so the like-for-like gain is about threefold. The slide now states the raw progression and no multiplier.
  • Records: `README.md` no longer claims the guide is unpublished; `tasks/todo.md` carries a superseded notice; `STATUS.md` created as the authoritative current-state record.
3 August 2026
  • Guide: removed the embedded falling-price-of-intelligence Pareto frontier from The machine; the interactive exhibit remains available as a direct link.
  • Talk: added two EconofAI Act III slides on the balance-sheet economics of a frontier-AI pause — why a unilateral pause is unstable, and why a coordinated pause must stand still contracts and credit support as well as training.
1 August 2026
  • Exhibit: refreshed the falling-price-of-intelligence Pareto frontier against Arena's August 1 Text overall leaderboard; added Claude Opus 5 High and Inkling, updated the July entrants' current scores, and preserved July as a dated comparison scene.
31 July 2026
  • Exhibit: refreshed the falling-price-of-intelligence Pareto frontier through July 2026 with Muse Spark 1.1, Hy3, Claude Opus 5, GPT-5.6 Sol, Kimi K3, Claude Sonnet 5, and Google’s latest Flash models; preserved the original default-overall Arena ruler, documented OpenAI’s July 30 Terra/Luna price cuts separately, and marked preliminary ratings.
21 July 2026
  • Talks/library: strengthened the EconofAI open-weight market-structure slide and the SocioEconomicAI frontier-access slide with Ben Thompson’s mechanisms—cost per completed task, rent migration into learning and harnesses, and diffusion/distillation as part of the social search process.
  • Library: added Ben Thompson’s “Who’s Afraid of Chinese Models?” to Money/Choices/Questions for its account of AI marginal costs, open-weight diffusion, and rent migration — while reframing its U.S.–China conclusion as a test of portability, forkability, and contestability.
19 July 2026
  • Library/talks: added Sydney Ember’s New York Times report to The work and updated the firm-formation treatment in both Takshashila decks with the broader Census signal: 5.7 million applications in 2025, while keeping applications distinct from the roughly 500,000 businesses actually formed in 2023.
9 July 2026
  • Talks: standardized presentation-mode navigation chrome across both June 2026 decks — left/right arrows advance/back as before, with a thicker blue progress bar at the top.
8 July 2026
  • Library: added Urbanomics on the AI trade to Money/News/Questions as reinforcement for the capex-ledger reading: downstream adoption over the next three years has to do real work before upstream margins and financing pressure decide the bubble question.
5 July 2026
  • Library: added Rohit Krishnan on Fable/GLM model-market equilibria to Money/News/Questions as live reading-list material; not promoted to the talks yet.
  • Talks/library: added Carlo Cordasco on what AI cannot yet measure as conceptual support for Amara’s law, productivity-statistics lag, and managed experimentation.
  • Talks/library: added Ishan Bakshi on India’s missing long-term-growth foundations as non-causal India baseline evidence for services fragility, gig-work absorption, and AI shock measurement.
  • Talks: updated both June 2026 decks with Ramp/Revelio firm-level AI spending and employment evidence, plus per-deck changelog appendix slides for August-readiness provenance.
  • Library: added "A New Look at AI’s Impact on Jobs" (Kharazian, Simon & Stevens) to The work; firm-level Ramp/Revelio data makes AI employment effects a reorganization threshold, not a one-sign jobs story.
3 July 2026
  • econofai begins. The hub: a ten-idea TL;DR, the six-part spine with the falling-price-of-intelligence chart embedded live, both June 2026 Takshashila talks preserved as delivered, a 55-source reading list with an outbound link on every entry, and six questions for the room.
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Feedback, corrections, and pointers to what I've missed all make this guide better. A threaded comment section is on the way; until it lands, the fastest line is email — ashish@econforeverybody.com.