The AI supercycle is turbocharging investment as companies in virtually every sector accelerate their plans. Moving fast is an imperative when the entire market is enthusiastically pursuing its AI futures. Deliberation and discernment are the tools of careful planners. But when supply is short and the lines are long, the market forces its most careful actors to plan with precision at breakneck speeds.
In the best of times, this kind of harried activity is uncomfortable. How do you plan and execute fast enough to outmaneuver peers that seem to have more clarity or at least more conviction?
Developing comfort with the future
For most corporate planners, the future is a persistent part of the conversation. Visions are spelled out over three-year stretches. Strategy is delivered via three-year plans. Capital expenditures are amortized over three-year windows. When things are fast, having a plan that extends safely to a horizon that is a few years away provides salvation. Efficacy is not about the next few weeks; it’s about plotting a longer journey and staying the course over a multi-year period.
For strategists, the idea that success comes from dutiful execution against a proper plan over multiple years is comforting. It prevents upstarts from entering the market and getting lucky. When success is a function of sustained execution, the steady are insulated from the opportunistic.
When the future is unknowable
But what happens when the future is somehow unknowable?
Lebanese American options trader turned author Nassim Nicholas Taleb wrote the book “The Black Swan: The Impact of the Highly Improbable.”For centuries, the moniker black swan had been used to refer to something so rare it was considered an impossibility. In his book, Taleb builds on the idea, referring to black swan events — those events that are so rare as to be unpredictable but so significant that the world after the event is nearly unrecognizable from that which existed before.
In the high-tech arena, there have been a few.
The dot-com era and subsequent bust changed the world twice over. The 2008 financial crisis was a world-altering event. COVID-19 reshaped how the world views just about everything. Even the current AI supercycle has left its own indelible mark. All were unpredictable, all were seismic in impact.
Planning for next during the AI supercycle
The AI supercycle is more than just a technology wave. Long lead times driven by the buying spree have coincided with price shocks in the memory market. Together, these forces have accelerated purchase plans across the industry, making products scarce at precisely the time demand is highest. The result? Six-week lead times are now more than 52 weeks. Purchases are expensive, and the only way to secure capacity is to purchase further ahead.
Extending the planning runway when things are stable — when the next few years are certain — might be uncomfortable, but it is unlikely to change the ultimate outcomes much. When the market is working as expected, the deliberate can create an advantage through insight and oversight.
But what happens when in-flight projects encounter more than just a little turbulence?
The case for manufactured black swan events
When Taleb wrote about black swan events, he was talking about things that were unknowable in the present and only rationalized in hindsight. New markets are created. Entire industries are wiped out. These things are once-in-a-generation occurrences.
Or are they?
The amount of investment flowing into the AI arena, combined with the profound impacts on industry and the people who staff it, is serving as a beacon for investment. If an investor has money today and wants to put it into play, is there a better bet to place than on something related to AI?
That promise is attracting unprecedented amounts of fresh capital, pulling in talent from all over the planet to work in this space. Those people are applying existing technologies, but they are also inventing brand-new ways to address previously impossible technology hurdles. Whether it’s compute, storage, networking, power, cooling, packaging, optics or anything in between, the entire technology stack is being written and rewritten almost in real time.
What if all the unprecedented attention and investment are accelerating the conditions that would normally have to converge for a black swan event to occur? More simply, what if we are collectively brewing the next black swan event?
Planning for a future that never comes
So, what happens when the absolutely frenzied pursuit of AI forces people to execute in three- and four-year blocks, but the world changes on a dime when one of these technology-driven black swan events happens?
There’s a comfortable tale people tell themselves when they witness a monumental collapse. That company was a dinosaur. Leadership was a bunch of stodgy bureaucrats who failed to see the obvious ebbs and flows of the market. Or perhaps the failure was Darwinian in nature, the perfectly acceptable culling of the corporate herd.
Taleb would say that these are explanations in hindsight, but that the actual truth is deeper, more nuanced and perhaps a bit uncomfortable. Sure, the company might have ultimately been unprepared. But what were they actually unprepared for?
What if corporate planners and strategy architects put in place an objectively perfect plan but failed to account for the inherently unknowable? Maybe it’s not a failure of foresight so much as it is an unlucky turn?
Ground rush
There’s a concept in skydiving called ground rush. At sufficiently far distances, humans cannot discern depth. So, when someone is hurtling toward the ground from thousands of feet in the air, they do not experience the earth becoming larger. Rather, they see a static landscape off in the distance.
But at some point, the skydiver crosses the altitude at which they can detect distance, and suddenly the earth is rushing toward them with frightening pace. In these moments, people can become disoriented. They panic and fail to do the things they need to do to survive.
Corporations are not necessarily any different. When planning is done at a distance and the future is safely far off, there is no need to be precise or fast-moving. There is always time. But when circumstances change more suddenly and there is a pressing need to correct the course right now, even the best-trained corporate citizens can experience their own ground rush.
The bottom line
The AI supercycle has supersized everything. The bets are bigger, as are the stakes. Because of supply chains, the planning horizons are longer. The magnitude of change is larger. The pace of new technology is faster. The investments required to keep up are more significant.
And, importantly, the likelihood of change is higher as well. The concentration of time, effort, and money is so acute that the industry is incubating the next black swan event. But while Taleb would caution people that such an event is unknowable, that does not mean that insightful corporate operators cannot prepare for the uncertainty.
It is, after all, still planning, even if the tools are a bit different. Knowledge is replaced by learning, directives by options, and plans by principles. Being nimble never meant moving in a straight line anyway.