'AI should be hugely deflationary over 25 years': OpenAI investor Vinod Khosla predicts impact of AI on economy

Vinod Khosla, an early investor in ChatGPT-maker OpenAI, has made a big prediction: In the next 25 years, artificial intelligence (AI) is going to change the economy. He thinks it will cause deflation. This prediction came after Sam Altman triggered a discussion online about how interest rates might change with the increment or reduction in ‘new ideas’. The boss of OpenAI talked about how interest rates (the cost of borrowing money) might be really low when there are not many new ideas. But he wondered what would happen when there are more and better ideas than ever.

Altman said, “When the capitalists have run out of ideas, the interest rates will go to zero’ seemed like a very interesting observation to me over most of the last decade. But now I am interested in the inverse—when we have more and better ideas than ever before, what will happen to rates?”

In response to one of the tweets on Altman’s post, Vinod Khosla said that AI will make things cheaper in the next 25 years. He thinks this will change how we understand the economy, like how we use GDP (a way to measure how well a country's economy is doing). He believes we'll have a lot of things and services, but we'll need new ways to measure how the economy is doing.

Khosla said, “AI should be hugely deflationary over twenty five years. Capital should be scarce for a while, current measures of GDP and the economy will be less relevant but goods and services should be in great abundance. The key question is what are the right measures and the right questions.”

Khosla isn't just talking; he's putting his money where his mouth is. In 2019, he invested $50 million in OpenAI, showing he really believes AI will change things.

At a big AI conference, Khosla also said that we shouldn't worry too much about AI being dangerous. He thinks there are bigger things to worry about, like challenges from countries like China.

Also read: Investing is like a game of chess: Vinod Khosla

Also read: ‘Better ChatGPT, AGI, woke control’: OpenAI CEO Sam Altman reveals top user requests for 2024