Being Replaced by AI is Delayed ... For Now

You know about my diminishing returns relationship.

I asked ChatGPT to create an answer to a diminishing returns relationship. It figured out the diminishing returns part. It didn't figure out a credible answer. For now. The credible answer is clearly on the horizon. So is a whole lot of change to ecommerce.

Ready?

To estimate next year’s sales based on your advertising investment, let’s analyze the return on ad spend (ROAS) from previous years:

Last Year:

• Ad Spend: $50,000

• Sales: $200,000

• ROAS: $200,000 / $50,000 = 4.0

This Year:

• Ad Spend: $100,000

• Sales: $300,000

• ROAS: $300,000 / $100,000 = 3.0

The ROAS is decreasing as spending increases, which is typical due to diminishing returns.

To predict next year’s sales with a $150,000 ad spend, we can estimate ROAS will continue to decline. If the ROAS drops linearly:

• Change in ROAS: 4.0 → 3.0 (drop of 1.0 when increasing spend by $50,000)

• If it continues, the next $50,000 increase may bring ROAS down to 2.0

Projected Sales Next Year:

• Estimated ROAS: 2.0

• Ad Spend: $150,000

• Projected Sales: $150,000 × 2.0 = $300,000

Alternatively, using a weighted average ROAS:

• Total past spend: $50K + $100K = $150K

• Total past sales: $200K + $300K = $500K

• Average ROAS: $500K / $150K ≈ 3.33

• Projected Sales: $150K × 3.33 = $500,000

Conclusion:

Depending on how you model ROAS:

• Conservative (diminishing returns): ~$300,000

• Average performance: ~$500,000

Let me know if you want a more precise forecast using regression or another model.