Good question. Had exactly this conversation yesterday. There were two groups of opinions. Positive feedback usually does one of these two things:

1 - It will deflate

2 - It will explode

Deflation is where the output of system tends toward a fixed point (AI art gets blander and blander). As it feeds on it's own output (which becomes the dominant training material because its cheap and plentiful) each vector is compressed.

Chaos (explosion) is where the output gets less predictable and more crazy on each iteration. Who knows what emerges before the system breaks.

Positive feedback systems are generally bad. For example, in biology/food; we started feeding cattle on the rendered down remains of other dead cattle. The result was Bovine Spongiform Encephalopathy, a lethal prion that thrived within the feedback loop.

What happens when the people writing screenplays and books are getting their experiences from movies and books instead of living their lives?

You get anime

They create satire. Everything will be a joke, eventually.

That's been the case for large chunks of culture for quite a while now. (In part that's what post-modernism was about.)

Can you elaborate on the post-modernism comment?

At risk of exposing my rather shallow knowledge of the topic, one aspect of PoMo is "everything is an inauthentic quote of something else and everything has already been done to death - so embrace irony and self-reference and achieve sincerety by self-awareness of your own insincerity".

This sounds like pop art—which some see as a precursor to post-modern art, and some see as an early type of post-modern art.

To some extent this already happens right? Popular fiction has its own laws for pacing, style of dialogue, tropes, the way characters behave etc. that is highly influenced from the canon of fiction before it and totally different to real life. Readers expect and anticipate this.

You get InstructDallE2.