AI is Awful
Exploring the Future of Entertainment in the AI Era
The Deload explores my curiosities and experiments across AI, finance, and philosophy. If you haven’t subscribed, join over 1,500 readers:
Disclaimer. The Deload is a collection of my personal thoughts and ideas. My views here do not constitute investment advice. Content on the site is for educational purposes. The site does not represent the views of Deepwater Asset Management. I may reference companies in which Deepwater has an investment. See Deepwater’s full disclosures here.
Additionally, any Intelligent Indices strategies referred to in writings on The Deload represent strategies tracked as indexes that are not investable. References to these strategies is for educational purposes as I explore how AI acts as an investor.
AI Reality Black Mirrors Fiction
Imagine Netflix made a TV show about how you were a terrible person. It captures all the moments where you were kind of a dirtbag. It recreates other events throughout your day that cast you in the worst light possible. It makes you a public enemy.
That’s the premise of a recent Black Mirror episode called “Joan is Awful,” and it’s not that far away from reality given two recent AI-related news items:
Universal Music and Google were reported to be negotiating a deal to license artist IP for songs and content generated by AI.
Zoom was under fire for apparently adding a clause to its terms of service that allowed the company to use customer data for AI training with no opt out.
We’re now living in the plot of the “Joan is Awful.”
Joan signs away rights to her likeness by agreeing to an online terms of service she didn’t read (like Zoom). A streaming service licenses the likeness of Selma Hayek to play Joan in an AI-generated video (like UMG/Google). Joan does progressively more awful things, which means Selma Hayek’s AI likeness does progressively more awful things, the real Selma objects, but she also signed away the rights to her image without scrutinizing her contract. War against the underlying AI ensues.
“Joan is Awful” offers a pretty good window into the future of entertainment.
AI will make us characters in the content we consume, giving us dynamic choose-your-own adventures. If you think TV and games are addictive now, just wait. AI will create the best movie we’ve ever seen every time we watch a movie, and the best game we’ve ever played every time we play a game.
AI might transform entertainment more, and more quickly, than any other industry.
Or will it?
A Suspension of Disbelief
A great movie makes the audience suspend disbelief.
When we watch Luke Skywalker use the force to battle Stormtroopers in Star Wars, we know the force is an unreal concept. Yet, our engagement with the characters and story allows us to set aside objections of reason to enjoy the story being told.
Samuel Coleridge, an English poet, coined the idea of suspension of disbelief in the early 1800s:
“…My endeavours should be directed to persons and characters supernatural, or at least romantic, yet so as to transfer from our inward nature a human interest and a semblance of truth sufficient to procure for these shadows of imagination that willing suspension of disbelief for the moment, which constitutes poetic faith.”
Willing suspension of disbelief is a required element for all great works of fiction. It’s also a required element to fantastic works of nonfiction and works that sit between.
Mr. Beast makes us suspend disbelief by doing insane things most people would never dream of trying. So did Evel Knievel several generations before. The WWE is built on a marriage of storytelling and physical insanity. We literally can’t believe the characters are doing what they’re doing.
Achieving suspension of disbelief depends on three things:
Delightful surprise.
Increasing tension that reaches a resolution.
Emotional investment in a character’s story.
The first two elements are mechanisms of storytelling. A delightful surprise — Luke, I am your father — doesn’t have to be a happy one. And increasing tension to resolution is screenwriting 101. Or motorcycle jumping 101 in the case of Evel Knievel. Whether he makes it or not, you get surprise and resolution.
Emotional investment builds on human connection. Mr. Beast seems like a personable fun kid who’d be a super-fun friend in high school. A major component to his success is his likable personality mixed with doing the crazy things he does. Mr. Beast himself adds a human touch that enables continued emotional investment in his journey creating insane spectacles.
As I wrote about last week in The Things AI Won’t Change, the “human touch” is something AI can literally never do. The same concept of the human touch will separate the types of content that are revolutionized by AI and those that are just enhanced.
The Things AI Won't Change
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The Scarcity of the Human Touch
Humans are attracted to people who can do things that they can’t. It's why we love athletes and daredevils and wild influencers. It’s also why we love actors and musicians. We innately know there’s something special about those people — a combination of talent and hard work — because we understand what it’s like to be a person.
We will always be attracted to special people because special people are scarce. That makes special people worth investing in emotionally, and that gives them a unique power to help audiences suspend disbelief. AI can’t make special people less scarce even if it makes special content less scarce.
Consider a pro wrestling event vs a pro wrestling video game. We’re awed by the Undertaker throwing Mankind from a 20 foot steel cage in real life. When the same characters do that in a video game, it’s just a means to winning the game.
AI can throw an infinite number of life-like human characters off of steel cages, but it can’t recreate the empathy created by the injury of another human in the name of entertainment.
That’s the most vicious human touch you can imagine.
If the human touch is the defensible part of entertainment, then as a rule, the more a content medium relies on the scarce human excellence of body and mind, the less AI will revolutionize it:
Live performances literally have life in the name. They require a person standing in front of you delivering a performance. AI can’t replicate that. Just as digital content has shifted how musicians get paid from album sales to live performances, AI will encourage the same for other artists. Theater, live music, pro wrestling, and sports will all persist in value in the age of AI.
Video games are most likely to be revolutionized by AI. Games will be infinite worlds that build on surprise and tension resolution while using game mechanisms to keep players engaged. The best games will have humans and AI collide in ways where it’s hard to tell the difference. Non-player characters will be as intelligent and entertaining as humans. Every game will feel like GTA 5 Roleplay where humans play as characters. GTA 5 is one of the most popular channels on Twitch despite it being a 10 year old game, averaging 140,000 viewers.
In the short term, writers will be creatively enhanced with better ideas from AI. In the longer term, Fiction writers are the creatives most in danger to be replaced by AI. Eventually we won’t be able to tell the difference between a story written by AI vs a human. Writing isn’t done live, and the writer is rarely a key factor in a fictional story, so the human touch is limited in fiction.
Live action movies probably fall somewhere between live performances and video games in the short term. But in the long run, it’s hard to see how it would make sense to spend millions of dollars, even hundreds of millions, to inefficiently film humans doing many takes of a script in the real world when a perfect, life-like alternative could be created by AI in minutes. The future of today’s actors is on a live stage, not a movie set.
Influencers are the celebrities and entertainers of the Internet era, and they’ll remain so in the AI era because of the human touch. Influencers invest their finite time and energy to make content. When we interact with them online, it’s them responding. The products they sell us come from their creative engagement with their audiences. If a machine were to replace those processes, it would destroy the investment of time that makes an influencer an influencer.
We’re back to the scarcity of the human touch, which is necessarily an investment of our scarcest resource of time.
Time of another human being will always have value. That value has shifted over centuries from physical labor to knowledge labor. Now in the Internet era, our time is best spent on creative labor where we can share ideas at scale. In the AI era, we’ll be free to spend our time honing our time to deliver the human touch to those ideas.
So, no, AI isn’t really awful. It’s wonderful. As long as it doesn’t make mean videos of you that go viral online.
Disclaimer: My views here do not constitute investment advice. They are for educational purposes only. My firm, Deepwater Asset Management, may hold positions in securities I write about. See our full disclaimer.
Intelligent Indices: Creating the Next Great Stock Index
I’ll tell you something that isn’t awful: Intelligent Indices.
For the past month plus, I’ve been building stock indices powered by AI. There are four Intelligent Indices that take on different legacy US stock indices:
The back tests suggest AI can outperform legacy indices over the long run, and here’s what’s even more exciting: Intelligent Indices will only get smarter over time. Persistent advancements in AI will create a compounding advantage for our indices vs legacy indices. Powered by increasing intelligence, these indices will yield better returns with less volatility for passive investors vs legacy indices.
But there’s a lesson beyond the promise of AI-powered indices: The best investors are super curious.
Curiosity doesn’t mean reading more. Certainly not in the age of AI. Curiosity means doing something with AI. Understand its flaws and drawbacks. Appreciate its power. If you’re a tech investor and you aren’t experimenting with AI every day, you’re not curious enough. You’re falling behind.
Building the Intelligent Indices has taught me more about the potential of ChatGPT than any article or video I could read about AI. And it’s been super fun.
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