Speaker 1I think generative AI is at its heart con. And seeing these ultra-rich, ultra-powerful people lie through their f***ing teeth turns my stomach. The word con is a strong word. Well, what do you call something where from the very beginning they've sold it in the terms of magic, but it's just a half-arsery machine? They are misleading the entire world. You are the first person that I've spoken to that has that opinion. Well, the fact that this is happening is insane, and the fact it's not a scandal is insane. And I've been in the tech industry for 16 years now, and I love technology, and I'm enthusiastic about it, but I don't like being misled. And this is the largest non-consensual push of technology in history. So we're going to play
Speaker 2a game, Ed. I have the things that you consider to be myths about the AI industry. Let's play it.
Speaker 1The AI industry is creating enormous economic growth. No, it's not. All of these companies run at a horrifying loss. OpenAI lost $20.9 billion last year. None of these people can just say, yeah, we're on the path to making this profitable, because they can't. Next one. AI will replace all human jobs. That just isn't happening, and there's no economic data to support it. Next, the United States need to spend trillions to beat China in the AI race. What's the race to do? For us to constantly piss our pants worrying about China? But people keep saying, what if these models fall into the wrong hands? They're already in the wrong hands. Mark Zuckerberg, Sam Altman,
Speaker 2Dario Amadei. Mark Zuckerberg says, we'll continue to invest aggressively in infrastructure to meet
Speaker 1the demand. God matters a monstrosity. Makes me think of Shrek with Lord Farquaad. Some of you may die, but that's a risk I'm willing to accept. If only these people gave a fuck about poverty or actual problems in the world versus are we buying enough GPUs. If this continues, what does the future look like? Fuck.
Speaker 2Guys, I've got a favor to ask before this episode begins. The algorithm, if you follow a show, will deliver you the best episodes from that show very prominently in your feed. So when we have our best episodes on this show, the most shared episodes, the most rated episodes, I would love you to know. And a simple way for you to know that, is to hit that follow button. But also, it's the simple, easy, free thing that you can do to help us make this show better. And I would be hugely grateful if you could take a minute on the app you're listening to this on right now and hit that follow button. Thank you so, so, so much. Ed Zitron. There are a number of things that you believe that a lot of other people don't believe. Right. You have, I think, a couple of controversial opinions and opinions that contrast to the other guests that I've sat here with. What exactly are those opinions, Ed?
Speaker 1I think generative AI is at its heart con. I don't think it is sold as honest software. I think that they overstate both what it can do, what it will do, and the underlying financials to the point that they are misleading the entire world. And they're actively exploiting the weaknesses in journalism, in our economies, and indeed within the responsible parties with sell-side analysts, governments, and all over the shop.
Speaker 2The word con is a strong word.
Speaker 1Yeah. I mean, what do you call something where from the very beginning they've sold it in the terms of magic as this thing that will replace all jobs, that will cure cancer, as all of these things. And when you look at it, it's boring cloud software that's extremely expensive and unprofitable and also unreliable at its core. People will be asking, where are you drawing
Speaker 2from in terms of your references, your personal experiences, where will you educate, what you
Speaker 1study, what you write about, what you do, Ed? So that's the funny thing is people say, "Well, Ed's got experience. He's not going to tech." I've been in the tech industry 15, 16 years now, in PR, but still had practical experience. And I love technology and I'm enthusiastic about it. And this thing just comes along that everyone is telling me is the best thing since sliced bread. It can't even do the basics. It can't even do search. Well, whenever you ask an AI person, "Well, what's your setup?" They describe this Pee-wee's Playhouse thing of like, "Well, you've got a harness here and you've got to use the right prompt." Well, you don't want to use that prompt. You want to use this prompt here with this model, but don't use this model for the beginning. But at the end, you're going to use this model. And this is meant to be artificial intelligence. It's meant to be smart. It's meant to be autonomous. It's meant to be something that you set and forget.
Speaker 2We have the sort of six leading AI companies on the table here: Anthropic, Amazon, NVIDIA, Microsoft, OpenAI, Google. You're saying that their fundamental business model is a con.
Speaker 1Well, their revenues are not really coming from AI. Up until fairly recently, none of their revenues were coming from AI, like dribbles a bit. Right now, 70% of all AI revenues across those three companies are from OpenAI and Anthropic, two unprofitable, unsustainable companies that literally cannot afford to exist without these very same companies giving them money. Amazon sent $50 billion to OpenAI this year. They sent $5 billion to Anthropic. Google sent $10 billion to Anthropic. And in the next three and a half years, OpenAI and Anthropic, based on actual sell-side analysts' evaluations, their estimates that inform whether stock is going to go up or down after earnings, they're expecting $400 billion to go up or down after earnings. And they're expecting $100 or more billion of revenue, 30 or something percent of cloud growth, just from these two unprofitable companies that will need to be given the money from somewhere. And on top of that, these companies have such low respect for the average investor, for the analysts, for everyone really, that they don't even disclose their AI revenues. The few times they deign us worthy, they use something called a run rate, an annualized run rate, which means, well, nothing. They never define it. It can mean month times 12. It can mean month times 13. It can mean last four weeks times 13. It's different every time and they never define it. And then they sometimes just don't mention it. So you've got this big thing that is meant to be the biggest, most influential change to software ever. And whenever you ask them about it, when you say, how much are you making from this? They go, oh, I couldn't possibly say. I'm too shy. These are public companies, or at least the ones that aren't Anthropic and OpenAI. When they have good news, they'll tell you. And when they don't tell you something, well, that actually speaks volumes. Have you used these tools?
Speaker 2AI tools, Gemini, Anthropic, ChatGPT, et cetera. And you found no value in them?
Speaker 1There's some value, but it's not. They've spent over a trillion dollars in CapEx.
Speaker 2What does CapEx mean?
Speaker 1Capital expenditures. So when you are a business and you have operating expenses like electricity, for example, those come right off immediately. Capital expenditures are long-term investments that are theoretically one-off. So a data center or indeed the GPUs you put inside an AI data center.
Speaker 2Okay. So you've got a data center and then you have these GPUs, which are like computer
Speaker 1chips. So AI GPUs are much bigger, much more power intensive. They take a bunch of high bandwidth memory and they, because of how many of them you need, you need thousands of them, tens of thousands, hundreds of thousands. In some case, you need a bunch of power. So an example, OpenAI and Oracle are building a data center in Texas, in Abilene, Texas, 1.2 gigawatts called Stargate Abilene. Within that, with each one of the eight buildings, there'll be 50,000 NVIDIA GB200 GPUs. So city of Bristol takes about 780, 800 megawatts of power a year, right? Well, Stargate Abilene is condensing more power than that, 1.2 gigawatts into a space around 1,172 times smaller. City of Bristol is about 1.2 billion square feet. Stargate Abilene is about 998,000. So you're condensing all of this power, all of this money, all of this labor into this one spot. And all of these data centers cost billions of dollars. All of these companies other than Microsoft are now to take out debt. And the thing is, they've spent over a trillion dollars so far, and they want to spend another trillion dollars next year. And for what? To make tens of billions of dollars, most of which comes from two unprofitable companies, Anthropic and
Speaker 2OpenAI. One of the rebuttals to that would be that the adoption, the customer adoption of people using OpenAI and Anthropic has been absolutely insane. These are the fastest growing products in all of history, especially as it relates to technology. If we just focus in on technology, you know, hundreds and hundreds of millions of people, billions of people are using these tools every single day for things that they have subjectively decided are problems they need solving. So, you know, money is a lagging indicator of value. So one would argue that they're just investing ahead of the monetization options.
Speaker 1The first, let's start with this adoption. Is it honest adoption when you are forced to use generative AI when you load Google, when you load Google Docs, Gemini screams in your ear, when you load Word, Copilot's bugging you, when you use Amazon, whatever Rufus AI is, wants to has opinions on what socks you're buying. This is the largest non-consensual push of technology in history. ChatGPT, for example, every single media outlet has been screaming about this for three years. They've been saying this will take your job. You must use this. If you don't use this, you're going to be falling behind. So people are using it because they've been told to use it constantly and they're using it like search predominantly. And that's because Google fell behind search. And also because it's better ingesting queries sometimes. Sometimes if you use a generative search, it's like a trolling vessel. It's not very good at specifics. But if you're like, does this thing exist? Has this person ever said anything like this? It'll still probably get it wrong, but it'll scour the ocean for you. Nevertheless, that's not worth a trillion dollars. None of it is. The amount of money being sunk into this is just incomparable to anything. Railways, it blows everything out of the water because there post-bubble story even for this. AI GPU is not useful for other things either. It's a directionless egregore of capitalism, this headless beast that lumbers around, desperate to seek out growth everywhere in the hopes that if it harasses people and scares people and demonizes labor enough,
Speaker 2people will be forced to use it. The reason I pause is because I think about my own company. Obviously, everybody thinks about their own personal situation. So you have people listening don't use any AI tools, then you'll have people that are using it for everything from coding new software tools to everything they write to you know images whatever and when you look at the stats around enterprise adoption it says 88% of organizations regularly use AI at least once for one particular business function and I'd say in our company 95% of people use a one of these AI tools like Anthropic or ChatGPT or Gemini every day right and that exists on some kind of spectrum of like the super users that are using it probably you know every hour of every day for almost everything to you know someone maybe hiring the executive team that's using it less because their job doesn't require of it as much right and when you look out into the world you know at how the world is changing from a content perspective if we're looking at generative AI it is obvious that these tools are being widely adopted part of the symptom is the AI slop you see all over the internet right so I don't know this this this idea that it's not being used
Speaker 1I struggle with it's being used here's the thing with the slop before we had AI slop we had SEO slop because Google incentivized doing the lowest common denominator that would rank well on search and that's the whole story about how they pulled back spam guards thanks to Prabhugar Raghavan which get into where they made the internet worse by allowing worse content to rank higher it's why we had when you used to google our best washing machine there's 11 different horrible blogs that read like somebody got a concussion they are built to rank higher and they're not going to rank higher rather than be read by humans or built to be made good so AI helps weaponize that scale yeah you can make a bunch of generic slop we've had slop for years we've just found a slop machine but then also there's the problem of cost so when you use AI services you burn tokens and it's per million tokens so there's a token so it's around three quarters of a word so it's characters so the AI
Speaker 2companies have a currency in which they charge you like a taxi in New York has a meter yeah and they call it tokens yeah and every word let's just say for ease it's a word yeah you're paying per word
Speaker 1about a word yeah and it's per million tokens so you'll be charged per million input tokens the stuff you feed into it like a document or a bunch a code base and the output tokens are both the stuff it spits out at the end but also when it thinks so okay you've asked me to give you the best restaurants in this area of New York I should find the best restaurants in New York all of that's output tokens as well however when you're paying for a monthly service you don't see any of that but all that crap to the side they just have rate limits so you can use them a certain amount and then when you run out but they kind of obfuscate what that was now someone recently found semi analysis actually found this a big analyst group they found that on a $200 a month chat gpt subscription you can burn $14,000 worth of tokens and on anthropics you can burn $8,000 for 200 bucks that is how most and even on the 20 buck a month service you can burn $400 a month so that's why most people don't realize that most people have no idea what AI costs most people just think oh it's 20 bucks a month no all of these companies run a horrifying loss Open AI lost 20.9 billion dollars last year because people can burn as many tokens as they want and when they tried to move everybody on the enterprise side so companies bigger than 150 onto actually paying the cost of AI in around March of 2026 to quote Sam Orman they said uh people have a big problem with this issue which is not really what the heir apparent to takes history is meant to be saying but the point is enterprises immediately started freaking out uber burned through their entire annual token budget in three months so suddenly after everyone's saying AI is the most productive thing ever it's amazing it's changing everything the moment people actually had to pay for it they go oh I don't know actually um maybe it's it's obviously we all love it it's all great right but it's costing too much so we now need to reduce the cost of it so we need to reduce the cost of it because people are just dumping stuff into it being like what do I do here and getting whatever the median is out because that's what these things do they provide the median answer so essentially
Speaker 2someone like me who's a power user of these tools I could be costing anthropic or Open AI a thousand dollars but they're only charging me a hundred dollars let's say so they are having to subsidize nine hundred dollars of my usage because of the electricity costs and the costs at their data centers and so your assertion here is that that is unsustainable yes and just to be clear they're
Speaker 1probably not one for one dollar it might be 34 we don't we don't know I think it's unprofitable these companies don't disclose them even in their auditive financials they play funny games with how they categorize things but nevertheless yes and on top of that the way that you stand up inference which is the thing that creates the output within these data centers you're not just saying okay turn the inference machine on let's go you are standing up the GPUs necessary for the data centers to take in the demand and if you buy too much you've wasted the money you have to pay for the hourly GPU use regardless if you buy too few your customers can't use it they get pissed off at you they can't so they go with someone else but nevertheless yeah they would get demand selling twenty dollars or forty dollars for a dollar and that's what these services do and really the simplest way to explain it is they were actually profitable if they were actually just they believe that these services were worthwhile and that they were worthy of the cost they'd charge it regular people wouldn't be able to get a month of data so they'd be able to get a month of data they'd just be paying what it's worth unless of course there was an economic problem and it's very simple you pay when you use an LLM regardless of whether you get what you want when these things hallucinate say you're doing something you're coding something and they go through a code base and they fuck up a bunch of stuff they break a bunch of stuff you're paying for that you're paying for it whether it works or not unless of course you're using one of these subscriptions
Speaker 2I think that the really interesting point is are they spending a hell of a lot of money on head of the value showing up which is I imagine what they would argue or are they spending all of this money and subsidizing all of their users in a way that's unsustainable and that will never be justified like doesn't you know because you think back through the history of technology you often get people losing money to grab market share right and they're also focusing on bringing the costs down and making it more profitable for them as well but they can't afford to under invest
Speaker 1if they were bringing the cost down they would have brought the cost down which they have not it seems to be getting more expensive in fact everyone inference providers don't seem to be profitable even the companies renting out GPUs don't seem to be profitable I imagine that it wasn't like they started out and they were like shit this is unprofitable at the beginning we know screw it we'll keep doing it anyway we'll screw I don't think it's some big conspiracy they probably thought at some point yeah this will go profitable the chips will catch up customers will pay for the overwhelming value because you know they're not going to pay for it they're going to pay for it in 2023 where it's going to be in 2026 you assume it's going to go up that's the nature of venture capital they should have stopped in like 2024 when open ai lost over five billion dollars they should have been like yep this is not going to work but they kept going because it helped number go up so much it helped stock values pump it helped everyone pump it helped nvidia pump microsoft everyone and not from the revenues because here's the funny thing about google microsoft and amazon people for years have been saying their ai bets have paid off wow their ai bets have paid off as these companies refuse to say how much they're making from ai but because their existing businesses continue to grow and did so by the way through price increases changes to how google and meta did advertising amazon bumped up prices and changed how they did actually amazon started a remarkable ad business during this whole time as well and they're selling through amazon platform anyway nothing to do with ai but because number go up because revenue go up everyone it's ai because these companies wouldn't spend a trillion dollars for for no reason and they're not going to be able to do that because they're not going to be able to do that right except in fiscal year 2026 which just ended for microsoft annoying i know they made total according to bloomberg about 34.33 billion dollars 24.1 billion dollars of that was from open ai so that leaves them with about 10 billion dollars in a year when they spent 115 billion on capital expenditures and intend to spend 175 billion next year the math does not make sense i imagine their plan was okay this is just going to get exponentially more valuable and that's what's going to happen it's just going to get more valuable and that's what's going to happen the costs will be outpaced by the return problem is that large language models need a bunch of money to train them they need constant data flows through they need customized data it's just this big expensive monster and when you try and talk to people about it and you try and say hey look this is really bad nvidia has sold there's 215.9 billion dollars in the last fiscal year worth of gpus mostly and you try and go yeah that's the support like 22 billion dollars of revenue total in the entire world outside of these two companies that literally require money being fed into them sometimes by nvidia to keep alive when you tell people that they go well companies just lose money right companies because we have this quote ed elson from profitee markets we have this cult-like worship of the wealthy where we think that someone wouldn't spend all this money for no reason right because reconciling with that with this idea that the ultra wealthy the ultra powerful didn't get there through big brains they didn't get there through anything other than luck and opportunism and getting an nba perhaps with the right people that they just got there because they're regular people and they just happen to be in the right place at the right time reconciling with that and realizing that the world is not controlled by people like a meritocracy is kind of grim so it's easy to be like no they're not making a mistake i must be missing something and that's what they want so
Speaker 2you know i think back through the history of technological breakthroughs and i think about i mean you can look at different industries and one of my favorite books on this subject is the innovators dilemma i'll read it and one of the things it talks about is how the But the innovation that ends up taking out or transforming an industry often starts worse, doesn't make economic sense. None of your customers are asking for it. And this is typically why we end up ignoring it. So, like, you've got horse and carriages in the 1800s. Amazing form of transport, according to the 1800s. You know, people of the 1800s. And then you have this thing called cars come along. Now, the problem with cars is they broke down all the time. It's kind of like AI hallucinates now. They were more expensive and the economics of it didn't make sense. You might as well walk than buy a car. There was a law at the time that meant you had to walk in front of it with a red flag. And someone had to employ someone to walk in front of it waving a red flag. Obviously, it's worse. It's like a worse solution. However, these things that are disruptive innovations, they have a higher ceiling of growth. And so they eventually overtake the horse. And when I think about that analogy in the context of all of this, I go, OK, it's imperfect at the moment. The economic models aren't perfectly ironed out. They're still figuring. They're figuring out how to make it cheaper, the infrastructure, et cetera. But if you think about the rate of improvement versus other, you know, let's say coding, how much could I train a human coder to improve and to increase their output versus an AI agent? One would go, if you just imagine any rate of improvement in these AI tools, at some point, if you just imagine a 5% rate of improvement per month, at some point it's, you know, and then you imagine a 5% reduction in cost, which is what we did with the internet, what we did with cars. Yeah, but that's...
Speaker 1Moore's law. Moore's law is the theory, and Moore's law is not with GPUs. So let me actually explain. So, NVIDIA. NVIDIA invented, I think it was in the 2000s, they put out something called CUDA, which is the Underlying Software Library and the Way to Run Software on GPUs. Took them a solid decade or more to make it something where they could do data analytics, one of the early things, mapper and such. And then when AI came along, they'd had lots of experience with it. But nevertheless, this company has got more money, more attention, more geniuses behind them, more people focused on making their things more efficient than anyone could ever ask for. And NVIDIA, for anyone that doesn't know, makes the chips. So, and that CUDA thing I mentioned, they were the ones with CUDA, and CUDA allowed generative AI to grow. Okay, so they're chips.
Speaker 2Chips, yes. And chips are needed. Those are the things that go into the data centers.
Speaker 1And their specific chips are the ones where you can run AI software on it. So the training runs and also the inference. Now, here's the thing. The car example. Back then, you didn't have pretty much... You didn't have a mathematician and scientist going into the car industry. You didn't have the combined world's governments never shutting up about this. And by the way, giving them credit early, since 2023, they've been saying this is inevitable. Even in what you said, 5% improvement. I don't even know how you'd measure that because a junior software engineer can still experience things and learn things from context, from how people deal with problems. And the way that people deal with problems is not as simple as looking at the code or reading some emails. It's context cues from speaking to a person. It's being in different environments and there are uses for LLMs in coding. I don't dispute that. But even saying 5%, what does that mean? Is it better at Rust? Is it better at C++?
Speaker 2I'd say productivity. So just like, yeah, shipped. If we did it in the context of coding, it would be like shipped code.
Speaker 1That's the thing. That would be like, he's the best writer in the world because his newsletter's really long. That's an insane way of valuing it. With coding, it would be, I mean, it's even difficult to evaluate because it's, is the software out there? Better is actually a great way of evaluating it. And I would say uniformly, not, I would say the standard of software across Google, Microsoft, Amazon, Meta, especially God met as a monstrosity is worse. GitHub, GitHub, someone posted on Twitter earlier today, we should get a notification when GitHub is up rather than when it's down because that would be more reliable. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs.
Speaker 2Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs.
Speaker 1Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs.
Speaker 2Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs.
Speaker 1Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. Microsoft, one of the largest companies in the world, and they can barely wipe their own ass when it comes to GitHub, the quality of software is going down, weirdly enough, as more people use LLMs. but it's like it's Pee-wee's breakfast machine. from peewee's playoffs you have to do all these contrivances to mitigate the hallucinations even then at the end how much effort have you put in but so okay this is an extreme simplified example
Speaker 2if i went on my claude now and said what's my dog my dog's name uh it would know my dog's name jesus christ so this company raised 95 billion dollars this year i'm using an extreme simplified example to show that it can remember things from the past obviously it knows much more complex things as well but i just use that as an example so we we accept the fact that it can it does have
Speaker 1memory of the past it has files it can access that have stuff on it yeah but that's yeah the same as memory and it's also just okay so it remembers your dog's name it might remember your habits it might be able to read things you've said before does it know your moods does it know what's going on in the world around it does it have good days and bad days is it there for you because it's just a fucking text machine and the thing is the intern example an intern is something that can grow it's something that you invest in that's not something you do through feeding files and text to it the way that we store memories ourselves the way in which we accrue experiences is a a milestone of emotion and feelings and facts completely different so
Speaker 2i think there's two things here there's the process in which something happens and then there's the output so the process you were describing the process of how a human does memory right the way that an ai does memory is different but the thing that people care about is their value in the output i.e you know if i dump all of my files into claude i don't really care how it processes it as long as when i ask it what's my revenue it has the number and one could say the same thing about training someone you could say you teach them you put lots of effort into them you give them lots of context you educate them and give them experiences and then you might come and say to them by the way what's my revenue now the processes are entirely different but the outcome is what i care about do they know the revenue number when i ask them and so i think that's the part that we sometimes get lost and we get you know because i have i've heard this debate about like can ai be creative right i think like the way to answer that question is like it's about the output when i ask it to do a creative thing does it give me the answer not is the process the same as a human process because actually no no who cares what the people care about they pay
Speaker 1for the outcome the product i actually disagree about the process because matt hughes for example your editor yeah yeah watching him go down a rabbit hole and being there with him and actually vice versa him doing the same thing we wrote these well i mean we were working on the research i ended up sitting there for like the day-long session of writing 11 000 words and he he had given me a bunch of notes it was actually just even describing that process i feel so happy because it was like us being like i can't believe how fuck these jesus christ they can't like just like the misanthropy of just the horrible cynical people of asset managers like blackstone just learning about them being like it can't be this and having a back and forth with him that is because we were both learning together and the learning process was as much about creating the output as the output itself when you learn something you're not creating the average which really is what these things do of the documents it could find you're not getting particularly novel outputs if i needed a generic slop output sure but i've i've used some of the higher end llm harness machines that the hedge funds use and they all get the same shite it's oh we noticed this analysis things that you can find on any kind of ai slop out there what you
Speaker 2described to me there what i heard anyway is there's two points of value you're getting from your time with that i mean i mean there's many more but you said you're you're learning and then you're getting this book edited blog blog you're getting a blog edited which is the output and you're getting learning and you're also really getting connection and all these other things exactly but when i come to when people sort of think about the value of ai of course they could use it to learn but in the example i gave of like repeat my revenue number back to me or do this
Speaker 1output i could use it to learn i could say as far with what if the revenue number was wrong once you should have defined deterministic ways of knowing those numbers you should not rely on them even with the terminal running bql which i trust i will double triple triple check everything just to be sure partly because also the process of learning for me i don't want just a report i go like that i want something that i fully understand and also understand the context around it i don't think that llms do that and i just don't see them getting better in a way that does that because it's it's just not what they do and also there's the other problem of the more detailed the report the more likely there are things to be wrong with it if you are with matt hughes for example i can trust he's got it right i can trust he understood and i can trust that i can have a back and forth with him that will inform me if i've missed something i can read the stuff that he's read and actually trust him because there's a big trust part as well
Speaker 2what is the basis of your trust in matt could it be his
Speaker 1historical performance i mean yes okay and also the fact we've learned half of this stuff together
Speaker 2but but tenure tenure doesn't necessarily there's probably people you know for 15 years who you also don't trust yes so i think i was trying to figure out like what is the what is the thing that's causing humans to trust another thing and i guess it would be continual delivery of a commitment made of sorts and so with claude for example on simple tasks as we've seen from this hallucination leaderboard it continually delivers for people and that's why we've seen the fastest is that what that board says well it's saying like is it getting it wrong is it hallucinating
Speaker 1simple tasks simple tasks how are those defined i don't know that's the thing though because this is actually a very illustrative thing of the ai industry they are the what about his masters they have like well look we've got this we've got this benchmark that says we're good at this and look the number's higher what's the number mean what does that mean and i'm not using this as a critic against you it's when you can't give a direct answer you give a side answer when you as a the llm industry want to prove your worth you can't just be like just use the product when the first iphone came out because penn state at the time oh i felt like the uh apes at the beginning of 2001 fucking visual voicemail it was immediate and i showed it to tech friends i showed it to the most normal people in the world and everyone was like holy shit this is they were on razors they were on nokia 3210s it was obvious the value amazon web services same deal it wasn't obvious though yes it was i mean i bought it to you to you it was it was and i also bought it from a i also showed it to a bunch of people because i'm aware that i have bias when i just love gadgets
Speaker 2but i remember the famous steve balmer who was the ceo of microsoft interview where he was told
Speaker 3about the iphone and he bursts out laughing five hundred dollars fully subsidized with a plan i said that is the most expensive phone in the world and it doesn't appeal to business customers because it doesn't have a keyboard which makes it not a very good email machine you can get a motorola q phone now for 99 it's a very capable machine it'll do music it'll do internet it'll do email it'll do instant messaging so i i kind of look at that and i say well i like our strategy
Speaker 2i like it a lot he burst out laughing mocking me because it was so disruptive it was way more
Speaker 1expensive and it was way different no keyboard well phones used to be insanely expensive and the carriers would cover them but you had to sign a long contract you were still spending 500 bucks but the thing i'm getting is that it's a very capable machine and it's a very capable machine so i'm getting at is you didn't have to explain to someone what perhaps you'd have to get past the cost part but you could just be like look how good this is and then once the app was the iphone 3g with the app store people were like oh shit this could actually change things mobile web even though it was a monstrosity it was so bad at first even then you could get your emails you could just look at them but as blackberries were also expensive and was still actually kind of cool but the way they worked was not like consumer software they didn't have the classic gui iphones felt like that it felt like an a cell phone designed even like a computer it was obvious it was obvious in the beginning everyone i was i was dating a girl in the center of pennsylvania at the time and everyone i showed it to was like wow this is incredible that to me is the obvious thing with ai to this day when you're like okay why is it so amazing people still dither people are still like yeah you can't run a business fully with it without this weird system of pulleys and levers and such but how come then when you look at the stats around
Speaker 2chachi bt's growth 100 million active users in just the first 60 days after launching for comparison tiktok took nine months instagram took 2.5 years and the internet itself the world wide web took roughly seven years to reach that scale over 60 of the u.s adults are integrated into ai tools in their daily and regular routines within three years of the launch reaching 40 of the population and that same milestone took the internet five years and personal computers nearly 12 okay so like this is the i think this is the part that's giving me dissonance is like what i showed my fiancee chachi bt okay it was didn't really work but as a sole entrepreneur who english isn't her first language who has to write lots of text lots of copy and generate lots of images and was paying a graphic designer to help her make um certain images that she you know couldn't make herself because she doesn't have the skills she would describe it as being transformative for her business what i'm hearing from you is that it's not transformative and there's no value in it for people but she if she was like you know she could transformative it would she pay the per million
Speaker 1token rate would she pay the actual rate because that's the thing if this was sold at its honest cost yeah i would actually if and people were reacting like that and they were paying two three four dollars every time they did something and they were genuinely happy that might be an argument
Speaker 2what is the what would be the honest cost if they weren't the actual per million token cost the
Speaker 1actual api cost they should do you know how much that is relative to oh god it depends it depends on the model but there's actually kind of a point i want to make about the thing you said with the internet earlier so when i first got on the internet at 33% of the people who were on the internet at 33% of the people who were on the internet at 33% of the people who were on the internet at 33% of the people who were on the internet at 33% of the people who were Like, immediate, just like, if this was faster, because it was slow, you'd go on, like, Happy Puppy or something, download, take all bloody day waiting for shareware to download. Immediately, you were like, if I could do this faster, it would be better. And even back then, I'm like, man, you could probably do video camera stuff with this. Stuff that eventually happened. And actually, there's this guy called Jim Covello from Goldman Sachs in a report he did in 2024 that was Gen AI, too much spend for not enough return. Paraphrasing there. And he made the point that in the run-up to the iPhone, there was thousands of presentations that when GSM radios get smaller, when Bluetooth radios get smaller, when Wi-Fi radios get smaller, it is inevitable that we will get something like this. And then he said that there is no such path for AI. There was no roadmap to AI becoming this thing that they promised. And I must be clear, if these companies had gone out there and are like, yeah, this is interesting cloud software. It's generative. It's really expensive. We're not sure if we can fully. Not trust it. Not in the, oh, I'm scared way. I mean, just like we're not sure that this is going to be a disruptive, world-changing thing. It has potential, but we're going to go slow. It's really expensive. This is an R&D effort. We're not going to expose consumers to it and actually be like, I don't know, language models and no generative AI stuff. Not even call it because it isn't AI. It's not autonomous. It's not smart. I actually might respect it, but this is not. They've gone out there since 2023 and said, it was 2022. This is the best thing since sliced bread. This is changing everything. This is going to do all your work. This is going to take your job. You're going to talk to Bing and it's going to take to leave your wife. All of these crazy things. And what's funny is when the writer, Kevin Roos, I think it was, he was speaking to Kevin Scott, the CTO of Microsoft about it. And Kevin Scott goes, you know, I'm just glad we're having this conversation. Instead of being like, settle down, Beavis. It's a website. The website told you something. It's just LLMs. They talked it up. And that's because everyone is talking about what they wish. This was rather than talking about what it can actually do. This makes it scary to people deliberately. So it makes it environmentally destructive. Look at the gas turbines, poisoning, blank neighborhoods. I think it's in Louisiana. It's one of Musk's data centers. Look at the incredible energy draws. It is raising power bills. And also it is creating inflation across all consumer electronics because of the massive ramp.
Speaker 2You know, what's interesting. I almost feel like so much of what you're saying is true. And also. It can be true that this technology is going to profoundly change the world. And I think like, you know, I think back to the early days of the Internet is maybe the closest analogy we have of, you know, in the dot com bubble. You know, you write this great essay. Yes, yes. I wish I found really funny, especially the name, the rot economy. And you talked about the rot com bubble. Talking about how AI is less value than people think. And in that in this sort of dot com bubble, what you saw is huge hype. People overselling the capabilities of their websites and what they were building. But in the wake of the dot com bubble, yes, 90 percent of stuff went to zero. But you had generational companies born that changed the world. And so I do. I kind of. And that's what bubbles do. Right. But that huge high overinvestment. Investors get crazy delusional. They think it's everything's going to change. At the same time, you do have skeptics in these moments. The dot com bubble had. I mean, the. The Internet itself had the biggest skeptics in nineteen ninety eight Nobel Prize winning economist Paul Krugman said by 2005 or so it will become clear that the Internet's impact on the economy has been no greater than the fax machine in nineteen ninety five astrophysicist Clifford Stuhl famously wrote about this in my book, wrote famously in Newsweek. Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper. No CD-ROM can take the place of a competent teacher. Commerce and businesses will shift from offices and malls to networks and modems. Baloney. So how come my local mall does a roaring business and the cyber mall gets zero business? And then I'll give you one more from Krugman, who was the award winning economist. He said the growth of the Internet will slow drastically as it becomes apparent most people have nothing to say to each other. That's that.
Speaker 1That may actually be the worst one of those. Like to hang around any bar in Middle America. Well, honestly, the best. But it's just all the same. I actually. So Clifford Stuhl, actually, his piece was interesting because that there are some boner points in it. But he made points about how like an overwhelming amount of bad information out there is bad for society is completely right. Saying how online education would not be a great replacement for regular education. I think we've seen that. But there is an economic difference that's vastly. It's just completely different. So dot com bubble is actually two bubbles. There was the website bubble, which was just trash on trash on trash. It was just like. I think what was it? Excite at home bought a eager eating card company for like a billion dollars. It was insane crap happening. That was so small. The big thing that people are thinking about is the dark fiber. Dark fiber. Dark fiber was all of the wires that put in the ground thinking we're going to have all this demand for Internet. And it turned out that demand for Internet. I think the analyst estimate was it was doubling every 90 days when it was doing that every six to 12 months, maybe, maybe longer. And just thus there was a massive. There was a massive overbuild of fiber optic cable and indeed the transmission stations and such to simplifying to bring that to people's houses. And there was the assumption that, well, that would all get lit up and people would want it immediately. Didn't really happen. Now, the post dot com bubble thing people say is, well, but after that, there was demand from the Internet. That's the thing, though. That's very different to demand for generative AI. Right now, the demand we have for generative AI is predominantly subsidized. Just let's start there. Yeah, predominantly subsidized. And most people experience. And yet are not paying the real cost. I agree. On top of that, we already have all of the possible marketing in the world. We have the largest, most disingenuous marketing campaign in the history of man pushing this up the hill. We have the apex predator of cloud software, Microsoft. They can only get single digit billions from selling AI software. And Christ almighty, outside of open AI and anthropic, we better get $22 billion. And the thing is, $22 billion is a large amount. That's you and me. It's not a large amount of money when you spent a trillion plus dollars when you have anthropic and open AI with $1.1 trillion worth of cloud commitments. And on top of that, how does this turn into a post dot com bubble thing? A data center built today is going to be as expensive to run in 2050 as it is today, unless there's some breakthrough in electricity. But again, that's not happening with AI. AI is not doing that unless there's some breakthrough in GPU technology. But we already have Broadcom, NVIDIA etched. We have every major chip company arm trying to do something about this. And no one seems to magically be able to make this profitable or indeed even less costly. Even NVIDIA with Vera Rubin, their more expensive new GPU system, even then they're like, yeah, 10x more efficient. It's more dollars per megawatt. They're all coy about it. They don't just say, yeah, we worked with open AI and anthropic and we found it reduced their cost by 50%. Easiest thing in the world if it was true. And that's because it's not happening and this isn't a case
Speaker 2of where you're saying there's not going to be the demand for let's say, you know, there's different types of AI, generative AI.
Speaker 1Yeah. And actually, that's a good point. The reason they use the term artificial intelligence is so everyone would lump everything into it. They would lump protein folding, nothing to do with LLMs, robotics, not LLMs. Autonomous weapons, even horrible as they are, not LLMs because you couldn't trust them. But they've mushed everything into AI so that when you say, well, AI can't, they'll go, um, um, sir, you forgot to give us homework. And also AI, it's working on curing cancer when it's just like, no, that's not LLMs. Stop giving them credit. The similarity, though, is they all need GPUs. No, and that's the funny thing. All those data centers that we're building, all of them are for just generative AI. They're not for all of the other stuff. They're not for the cool shit. AI has been around for a long time. Google, a lot of the good stuff that comes out of Google from the search side is AI, but pre-generative.
Speaker 2How would you run the type of AI that sits in a robot, let's say one of the Optimus robots, if you didn't have a GPU?
Speaker 1So Matic, Matic is this cleaning robot, for example. That thing is not got a little GPU in it. What it has and may indeed have used some GPUs, but now a year as many as they need for generative AI to run the data feed draining data into it so it's able to clean a house. But when the little buggers going around cleaning the floor, it goes around mopping the floor. It's not like burning money the whole time, but when it comes to these massive amount of data centers, Sightline Climate said in February, there's 190 gigawatts of data centers under in planning. Don't know about under construction. That works out for about 12 million megawatts. Well, like one point six trillion to three trillion dollars a year in annual demand you'd need for that. We don't even have one hundred and thirty billion dollars worth of annual demand and people say, well, it will grow. How? When most of the demand is coming from Amazon feeding money to open AI or Anthropic, Microsoft feeding money to open AI and Anthropic, Google feeding money to open AI. Well, Google hasn't fed it to open AI yet, but they're a pretty big customer. Billions of dollars. The con side is that we are building these effigies to capitalism, these giant GPU data centers, and people are being told, well, it's for AI. You know, the thing that's done all this other stuff that's unrelated or the worst thing I've seen, it's like, oh, you don't like you like online banking. We do like data centers. There's a big difference between a data center for regular non GPU compute for standing up a server, a content delivery system like Akamai or something that brings the website to you or how meta runs Facebook. That is not the same. It takes way less power, mostly CPU driven compared to these giant
Speaker 2gpu data centers that are for one thing one thing but i was doing the research i'm looking at some of these notes here it does say that for tougher types of ai systems designed to solve concrete physics biology and spatial problems they require some of the most intense data center infrastructure on the planet yeah ai systems like deep minds alpha fold the protein folding company used for genomic sequencing and climate forecasting etc run on high performance computing clusters these require immense precision and continuous heavy compute and data centers yeah training the brains for self-driving cars requires billions of miles of simulated physics environments the ai isn't generating text it's learning to navigate 3d spaces and gravity and relies on data centers
Speaker 1right and the thing is those data centers they might have gpus in them we had gpus used for this hpc the high performance computing before generative ai and yeah that's how ai has been before that's how tesla did i believe they've had their own data centers when it comes to training the autopilot system for better or for worse that's how we've done it before again that is not why we're building these data centers these data centers are being built to sell to ai generative ai companies to either train systems or run inference these things are being built in this brainless way where it's just well actually maybe this is a good way of illustrating the con because everyone saw google microsoft amazon and meta give nvidia over call it 800 something billion dollars because everyone saw that they went well they wouldn't do that for no reason they went we've got to build more of these things there must be all this demand even though the demand 70 or more of all that demand comes from these two companies who are funded by these three companies and that's the funny thing the reason that they don't want to break out their ai revenues is because it will become alarmingly obvious that this was the case it turns out that the only real big customers because it's not like they're building a few data centers they're building trillion plus revenue potential they believe they'll get speculative highly speculative they're building it because they saw the biggest companies in the world buy a bunch of gps and they said i want in on that they must have diverse customers right they wouldn't just have two unprofitable fail sons that they're propping up with christ they've raised 217 billion dollars just in 2026 so
Speaker 2we know that some of the biggest companies in the world are using ai generative ai to write a lot of their code that is a great productivity gain for those companies right i mean have you used google
Speaker 1or facebook or instagram or github recently because they are catastrophically worse amazon web services went down multiple times because of their ai coding tool how is how is google worse well i'll tell the story of a real arsehole guy called propagar ragavan previously one of the heads of ads at google in 2019 google called something called a code yellow which is when they said we've got a problem and it was material weakness in query numbers which means the amount of times people were searching on google search a guy called ben gomes internal at google then the head of google search says wait a minute to increase this number of using google more we're gonna have to i mean what you're suggesting would mean we give worse answers because if someone got the answer quickly that would reduce the amount of queries right and people at google did shashi thakur was another engineer was saying yeah can we please tell sundar this because this doesn't seem good we can't just increase the amount of queries that would just mean that people would have to search more which make the product worse but but it would make them more money you're saying yes because you'd show them more ads so if you were spending more time on google because google's but is this linked to ai doing code i'll get there so this is the problem is is that this guy called propagar ragavan who's the head of ads at the time was pushing pushing and saying no we need to make more queries happen gotta make it happen nick fox who was there as well i believe he's actually taking over google search they've got to make them go up this is our new reality sometime in early 2020 propagar ragavan takes over google search from then and this is this is what i believe can't prove it if you go and look around the various seo sites such in journal on the various forums google stripped back a lot of the suppression of spammy sites so that people would be on google more and then over the course of time google wanted to create more queries and google search became much worse it's why people always do like plus reddit or from reddit or what have you it's because the actual underlying search results of google had got worse and then generative ai came along and propagar wouldn't you know it gets put to run part of gemini and google also was having trouble getting people back on google and what did they think they'd do well shit everyone's talking about this ai thing we'll just put it right at the top so people have to stay at google and actually they'll use it more because instead of searching websites and doing that annoying thing where they click away they'll use it more and they'll use it more and they'll use it more from google they'll just only use google instead of generating answers by which i mean giving you search results you click through now google is the answer is it right god no it might tell you to eat rocks might eat poisonous mushrooms maybe it'll give you a little few links you could click through but the ideal situation was that ai was the ultimate form of google's evil which was but
Speaker 2i'm saying here i'm saying here but that's not the fact that coders could code on google that's made google worse that's human decisions have made it worse yes and then there's the instability of
Speaker 1google's platform which is actually i should have probably led with that a problem across the whole
Speaker 2tech industry okay so you're saying that you're saying google is going down more yes google is
Speaker 1less stable google docs is a bug fest right now and has been for a while google sheets same deal and the thing is you're right i'm being a little unfair this is everyone it's the same with microsoft it's the same with amazon it's the same across how do we quantify that outside of anecdotes like is there a way to you're right i mean github downtime is the best example amazon web services went down two or three times this year because of ai tools and honestly you're right it's kind of hard to quantify outside of anecdotes but i challenge anyone listening to this go and use a website these days and tell me how well it works tell me how buggy it is tell me how many problems even with my iphone the supposed best ux in town even the iphone is a flipping mess these days
Speaker 2okay so the research says the short answer is yes tech downtime and software outages have increased over the last few years and industry data points directly to the explosion of ai assisted coding as a primary culprit the problem is hitting the tech industry from two entirely different directions the code itself is getting buggier and the sheer volume of ai activity is literally crashing the underlying infrastructure interesting yeah that's because github people are
Speaker 1just writing a bunch of code pushing it and thus there's just more code on there that's interesting yeah it's it's a real mess as well because sources have this problem as well because it's well-meaning people they're like i'll learn a bit of code with an llm i'm gonna go out and do some stuff i'm gonna make this project better and these people barely understand what they're shipping or maybe they understand a bit of code and they say i'll dunning kruger this motherfucker i'm gonna i'm just like i can understand some of this and now the code's all written and just push it right now so github is flooded with ai code this sounds
Speaker 2like it's making humans complacent it is because we're going okay look i'll let it write the the code for the last 100 lines and it was brought up by a lot of people and they're like oh my god so the next 100 lines i won't check them as much yeah yeah and that's human nature is to get sort of to take shortcuts to spend less energy on an activity if you can right but the ai is still
Speaker 1making the mistake and we're still making all the promises of ai that's the thing this thing is meant to be this autonomous perfect you say it can't be perfect i don't know based on what sam altman has been saying for the last few years clammy sammy's been promising the world saying this will replace software engineers dario amadei wario himself has been saying this will replace software engineers oh yeah 50 of white collar labor is going to go away in the next few years these people are promising the world again if they were saying it would be smaller and they were like yeah it does have issues and we must be none of this oh what if it wakes up and it's super powerful just like yeah it's probabilistic it's going to make mistakes and if you don't know what you're doing you don't really know what you're looking at you're going to miss those mistakes and it's going to get multiplicatively worse as you go when you don't know what you're doing so yeah human nature is part of it and it's going to make mistakes and it's going to make mistakes and it's but so is the marketing so are the promises one of the smartest things a business can do
Speaker 2is build like a bigger company without actually hiring like one but the problem we all face is that most companies don't have every skill in house so when i look at the businesses seeing real success today the consistent pattern with all of them is how quickly they move they bring in specialists with skills and emerging areas to keep themselves ahead even in our company we spent the last year pulling in talent across areas like ai native strategy no code builds and product workflows and we find this talent for our long-time partner fiverr pro their premium service only shows you vetted talent so you've always got the safeguard that anyone you pull in to help you with a complex project has the skills that you're after and will deliver to the same high standards as your internal team and most importantly they'll keep up with the pace it's a simple strategy but it lets us stay agile without compromising on quality so if you need these kind of skills in your business head to pro.fiverr.com to find a place where you can pioneering talent to fill your business's gaps that's pro.fiverr.com you know the little traditional sim card that goes inside of our phones they haven't changed at all since they were invented in the 90s you have this physical piece of plastic that means you're locked into one carrier one network and the second you cross a border that carrier can start charging you whatever they want but there are alternatives and today's sponsor saly is one of them it's an e-sim app that gives you a safe and secure data connection in over 200 destinations all of their e-sims have built-in cyber security which is great if you're traveling for work and looking at confidential material. I've been using Saley whenever I travel because the connection is always reliable and it saves me a ton of roaming fees. It also means I don't have to deal with all of the faff that surrounds sorting out a SIM everywhere I go. If you want to give it a try, download the Saley app from the App Store now and scan the QR code on screen. And if you want 15% off your first purchase, use my code DOAC when you get to checkout. That's DOAC for 15% off. Keep that to yourself. My car that drives itself, that is AI technology. I sat here with Dara from Uber and he was saying that I think in a couple of years time, we won't need drivers for Uber because the cars will drive themselves. They'll be fully autonomous. And I think if I'm not mistaken, driving is one of the biggest professions on planet earth. So when you hear people, when you hear the CEO saying that there will be job disruption, you say that they are... Oh, not telling the truth.
Speaker 1Yes. Or they're guessing in a way that's very good for them. Think about it from perspective of Microsoft, Satya Nadella. He's not going to be like, yeah, we're done. I have this going to work, mate. Of course, he's going to talk his book and he's going to say, yeah, this is going to replace all workers. It's going to be amazing. It's going to be so powerful. And then he'll change his tune and say, actually, it's not going to replace workers. It'll make them more powerful because the things aren't catching up. Dara from Uber, for example, of course, he's going to say, if this happens, then that would be good for Uber because, you know, he's going to say, yeah, this is going to replace all workers. It's going to be so powerful. Uber would just become an autonomous taxi service. There's a reason that Waymo has taken it. I find Waymo fascinating. I think that shit's really cool. I think there are socioeconomic problems that will come from it. I think there are actual real problems that will emerge. And also... What kind of problems? Well, I mean, socioeconomically, they're, like you said, one of the largest employment centers in the world. I mean, just the economics of cabs will fall apart. But again, we are nowhere, nowhere, nowhere near that. We're not even close. Waymo has had to do the smallest rollouts and the most controlled things because the problem with pretty much every AI system, but especially driving, is not the getting 95% of the way. It's those edge cases. It's raining, which is a big problem for them in San Francisco. It's a kid runs across the road, but they're wearing a high-vis thing. Doesn't even notice it's a child.
Speaker 2Again, this is a really interesting but very, very applicable example of the right comparison to be made shouldn't be autonomous vehicles versus perfection. It should be autonomous vehicles versus human drivers.
Speaker 1I mean, I don't know if I agree because the human driver might make mistakes, sure, but... Again, not an expert in autonomous cars. Just want to be clear. But if we're pushing autonomous cars out there willy-nilly and we're not doing so in extremely controlled environments, those edge cases will multiply and be dangerous. Yeah, they might be better at human drivers in some ways, but they might also... I was in Vegas the other day and I was in a hotel and I watched a bunch of Zoox cars just get fucking stuck. They're autonomous cars. Yeah, yeah. These weird boxy things. They just blocked the exit. They just all kind of lined up and just fell asleep. I saw the same thing actually happen outside of a hotel. I saw a hotel when it got out of a Waymo in San Francisco. It just stopped. And then a bunch of cars and another Waymo got stuck behind it. And these are kind of...
Speaker 2I've seen some human bad drivers as well.
Speaker 1I agree, but it's just we have control over deploying these bad or good drivers. We have an ability to roll them out slowly, which is exactly what we should do. I'm not saying autonomous cars are bad. I'm saying we need to be so, so, so careful and treat them as guilty until proven innocent because we can prove. And also they have people overlooking them. They actually have people monitoring the routes. It is something they cannot rush out and it doesn't seem like they're rushing it, which is good. And they're not promising the world.
Speaker 2I do agree. Listen, I'm a big fan of taxi drivers generally in part because I spend a lot of time in taxis and I think I'm not just getting in there because I want to get from A to B. I'm getting in there for lots of other reasons. However, when I look at the stats around what is more dangerous, driving myself or having an autonomous vehicle drive me, there's a 68% lower overall crash involved. When you're in an autonomous vehicle, autonomous vehicles experience roughly 2.1 police reported crashes per million miles compared to humans that are roughly 4.68 per million miles. So a 55% reduction when you get in an autonomous vehicle. And autonomous vehicles show an 80 to 81% reduction in crashes resulting in injuries versus human drivers. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. If you're an autonomous vehicle, you're less likely to be involved in a single vehicle crash, like hitting a
Speaker 1vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. So you're 85% less likely to be involved in a single vehicle crash, like hitting a wall or a tree. versus Are we buying enough GPUs?
Speaker 2Do you know what's interesting is some of what your narrative, one would argue, actually helps them. How? Because, you know, the AI doomers that have come here and told, you know, some of the original founding fathers of AI, like Geoffrey Hinton, have told me that what they're building is highly, highly dangerous and that it will be fundamentally disruptive to society. And it's interesting because some of the CEOs who you've mentioned, their historical narrative was also, by the way, this is really fucking dangerous. And there is a significant chance we could fuck up the planet. And what we've seen is this slow pivot away from it. Which is so strange. Because now they're getting booed and they're being attacked. Yeah. They've been this slow pivot away from it. And the pivot almost sounds a little bit like your narrative. It now sounds like, actually, no, it's not going to change anything. And you're all going to be fine. And it's now, it's just not, it's not dangerous at all. But that's the funny thing. And that's why I'm saying, like, I actually think there might be a couple of PR people at these big AI companies thinking, thank God for Ed. Oh, I don't know about that. Some of it. Some of it. Because you're like, you're saying, actually, don't worry. Everything's going to be fine. It's not going to take your job. It's not going to disrupt the economy. It's just a fad. There's no technology. And I think they don't think that.
Speaker 1Here's the thing. I think Altman and Amadei are some of the most deeply corrupt and cynical people in the world. I don't think, of course, they were going to say, from the, it was early 2023, Altman said, we're a little bit scared about what we're creating. Oh, shut up. I'm just, I hear that. And I feel so frustrated because I've met so many of these rich fucking liars. These people. And you know why he wants to say that? So you'll invest in his company and buy the software. So you'll be scared that if you don't use AI today, you'll be left behind in the future, which is their continual narrative. That if you don't get on the train today, then you'll be left behind. By the way, every single scam and con starts with rushing you. Every single trick in history begins with saying, you must do this now. And best piece of advice I ever got was, if anyone tries to rush you, and it's not literally a mortal thing, like you are bleeding or on fire or a house. On fire, slow down. And yet all of these companies say, so scary. And now they're talking about slowdowns. But you ever noticed that Amadei and Altman, they say, well, maybe we should slow down progress. And then they don't. Right now, Altman's saying, oh, we slow down progress because we're so delayed. No, they're out of compute. Now they're doing it. I can guarantee you, by the way, that PR people do not like me. I know for, I know, I don't think open AI's PR people are super fond of me.
Speaker 2But I bet there's elements of what you're saying, because you're calming people. You are theoretically calming down the general public. And you know what?
Speaker 1I hope I am, because the fear-based tactics is horrible. These companies don't want that. These companies want people scared. I'm 100% sure.
Speaker 2I just fundamentally disagree. I think it. So the timelines, and I sit here, and what I do is I log their quotes over time. Oh. And I read them out from 2015 to 2026. And the change you see is them going from, there could be extinction. That's the narrative, the early narrative. Elon said it himself. He says it's the single most dangerous thing. Elon says a lot of things. You track it over time, and it evolves to this age of abundance. We're all going to have unlimited stuff. And then the new slogan at TrackGPT is intelligence for everyone. It's suddenly, and whenever Dario comes out and says, by the way, it's really rockin' dangerous, they attack Dario. Yeah, that's right. They hate him.
Speaker 1That man, Dario is- They're like, Dario, shut the fuck up. Honestly, I've been saying Dario, shut the fuck up for years. But the thing is, I get your point, where it's like, I don't think they've changed to calm the public. I don't think they've changed to calm the public. I don't think they've changed to calm the public. I don't think they've changed to calm the public. I don't think they've changed to calm the public. I don't think they've changed to calm the public down so much as they're desperate to not get regulated, which is laughable. We don't regulate tech. We don't regulate shit. America doesn't regulate shit. We are still trapped in the hands of Milton Friedman, Margaret Thatcher, and fucking Ronald Reagan. We're still stuck in the neoliberalistic hellscape, which is growth at all costs, free market capitalism. So no, no one's regulating. The regulation of these companies should have been, I don't know, breaking up- It is, for sure. We shouldn't have companies this big. It makes things worse.
Speaker 2But these technologies are dangerous.
Speaker 1I mean, they're dangerous, but not in the ways they've been warning about.
Speaker 2Less if we think about cyber hacking.
Speaker 1Right. And just be clear, those cyber hacking things that happened were not a result of- They were like, break out of this sandbox. And then they set the sandbox up wrong. They set up the server they were on wrong.
Speaker 2But I mean, you know, advanced AI models could very easily, because they can go out onto the open internet as agents, they could very easily go and look at code bases of different websites, find- Vulnerabilities and exploit those vulnerabilities. Yeah. At scale and arguably at a higher intelligence and faster and wider than humans, a human hacker could theoretically.
Speaker 1So that's dangerous. Well, here's the funny thing. We don't know how much compute was spent to do the hugging face attack, the open AI one. We also do know that they improperly set up the server to keep it in. They thought they'd turn the internet off and they didn't. That's human error. And that's human error in a sense that, yeah, they threw about an indeterminately, large amount of compute. This is dangerous, but people keep saying, we can't let the Chinese get a hold of these models. We couldn't possibly, because what if these models fall into the wrong hands? They're already in the wrong hands. Mark Zuckerberg, Sam Altman, Dario Amadei. The wrong hands are the hands of those who are running these companies. We should not be training these models to do these things. I don't know why the fuck we're doing it. Other than they've run out of other things they can train on. There's a ton. And the fact that they can do it, it's kind of interesting. But yeah.
Speaker 2Would you agree that it's an intelligence, and I'll call it that, you might disagree with that terminology, but an intelligence that can go out onto the internet and click around and take actions, is inherently, there's risks associated with that.
Speaker 1Well, the second part I agree with, the risks. We've had people running automated scripts and hacking scripts for a while. We've had hackers doing that for years and years and years. This is brute forcing it with a bunch of compute. And yeah, it is dangerous. These companies are doing something dangerous. That is not what Geoffrey Hinton et al. have been warning about. They've been saying, oh, these things could destroy society. They could manipulate people. When you actually look at the underlying things, not so much. Geoffrey Hinton as well, talking his book, still got his Google stock, I think. And weirdly enough, he left Google because he was worried about the AI there, but then immediately made a comment being like, yeah, actually, though, Google's very responsible. Strange thing, that. But let's get back to the cybersecurity side. I agree. This is dangerous. These people should not have access to so much compute. They clearly don't know what to do with it. There's a really easy way of dealing with this. It's not letting them use so much compute. It's regulating that part out of existence. What if the Chinese do it? The Chinese were able to distill the models. And also, I don't know, regulate it and stop. I feel like with this particular thing as well, we got to this point and let the genie out of the bottle, to use an annoying Sam Altman term. We let this happen because we let these companies be unregulated and use as much compute as we want. We had these fucking enablers. Let's allow them to burn as much compute as they want. And also, for all of these dire warnings about AI dangers, no one seems to have fucking done anything.
Speaker 2Okay, we're going to play a game, Ed. Let's play it. On these cards here, I have the things that you consider to be myths about the AI industry. The challenge is I want you to give me one sentence on each myth. So just your first reaction. You're going to pick it up. You're going to read it. And then you're going to give me one sentence on your opinion of that. Um, belief.
Speaker 1Okay, let's go. Let's do this.
Speaker 2What does it say? And what's your one sentence?
Speaker 1It says the AI industry is creating enormous economic growth. No, it's not. It's nowhere in the data. Okay. May I do a second sentence? Go ahead. Pretty much all of the economics is either NVIDIA feeding money to its companies like CoreWeave, or these three companies feeding money to these ones to spend it with them.
Speaker 2Okay. And what evidence do you have that it's not causing economic growth?
Speaker 1Just to be clear, other than the spend on semiconductors, so the speculative investment in GPUs and data center infrastructure, that's happening. But as far as like spend on AI goes, barely cracking $100 billion, and most of that is just these two running their services and paying these three companies, Oracle, CoreWeave, and others.
Speaker 2But $100 billion is a lot of money for a relatively new technology.
Speaker 1Not when you've spent $300 billion in equity funding and, if we're going with just these three, I think $600 billion in capital expenditures. Yeah, I get that.
Speaker 2That means it's not profitable. But the $100 billion is an expression of consumer demand.
Speaker 1When the compute is mostly driven by subscriptions that are subsidized, no, it's not. When you're giving someone $20 or $40 for a dollar, they are going to use it more. If this was all on a per million token basis, we'd be having a different conversation. Okay, fair.
Speaker 2Fine. Cool. Next one.
Speaker 1The United States need to spend trillions to beat China in the AI race. Let's see. What AI race? That's actually my point. It's what AI race is there? Is it to make big, scary LLMs? They did that already. Without the NVIDIA GPUs. By the way, they've got Blackwell GPUs. Kakashi and Justario, two amazing analysts I love, they've been on this for years. It's like China's already had NVIDIA GPUs that they're not meant to have for years. But also, to do what? They already got the LLMs. What's the race to do? To make us spend more money than them? For us to constantly piss our pants? Piss our pants worrying about China? Because they won, if that's the case. Myth number three. AI will replace all human jobs. That just isn't happening. There's no economic data to support it. Will it replace some jobs? I mean, it's replaced some contract labor that would otherwise be replaced with cheap labor out in the global south. It's a digital globalization in that sense. But all jobs, most jobs, a lot of jobs, no. What about robotics? Robotics is not what we're talking about. talking about robotics is is a very different thing and even then robotics will be powered by ai i mean yes but there are tons of different kinds of ai we're talking explicitly about generative ai and that's what i this is for my myth busters piece that was definitely about generative ai okay but what
Speaker 2about robotics like the thing is the optimist robot that elon's working on it uh tesla the one
Speaker 1where even in the demo of the hand he did like they had to have a guy controlling it wasn't doing an autonomous thing here's the thing if they can beat all these challenges yeah robotics would be really cool i don't know how long that's that's what i'd actually be willing to believe in a
Speaker 2couple decades have you seen them them chinese robots i know you've seen them what's it called
Speaker 1the one that can dance and that but they can't really do human things well it's just it is pretty mind-blowing it's robotics are fucking cool i like i'm not gonna pretend i don't think robots are cool i wish they were building robots and actually doing cool shit i wish the tech industry still made fun stuff and interesting stuff instead we get these fucking large language models but we
Speaker 2ai plus robotics isn't you know i was in san francisco and i went to this massive um incubator there and when i'd gone there three years earlier it was all software startups right and when i went back three years later it was all these robot startups and i remember saying to the founder of the incubator i was like why is everything robots now there was this one robot where it was just the arm and it had a frying pan on it yeah and its whole thing is it cooks for you yeah so it was showing me it cooking whatever and he goes well you know the arm he goes the hardware part the it's always been fairly cheap yeah he goes the expensive part was the intelligence yeah and now that's come down to pennies so what you're seeing is this explosion in the robotics industry because robotics is a function of intelligence plus hardware we've always had and a ton of data
Speaker 1though as well like the data is very expensive yeah the thing is cybercabs rolled out real slow it's gonna take a long time it could be a threat if they do a robot that could replace a human job sure it could but that human jobs are multifaceted human jobs change with environments and also a lot of human jobs that you might think of like i don't know dishwashing robot for example yeah some guy at a restaurant isn't paying 10 20 grand for a robot to replace the job that they're already not paying enough for the point is yeah it could if you can replace the jobs that is not what we're
Speaker 2talking about with this yeah i just i just i ask these questions not because i'm trying to be like actually i'm trying to form my own opinion on these things and i i do think you know as it's all human jobs obviously not obviously that's bullshit but i'm trying to figure out if the truth is somewhere in the middle that there's a certain type of job which actually humans probably shouldn't have ever been doing really um if you think back through history there was someone's job just to sit in an elevator and press the buttons right that's an example of a job that humans probably shouldn't have been doing and as technology gets more advanced it takes on a lot of
Speaker 1that sort of automated monotonous stuff right the thing is with this particular thing that i know explicitly talking about generative ai though i was explicitly talking about people when they say this
Speaker 2they are referring to that so you're not talking about agentic ai which agentic ai is llms agentic
Speaker 1ai is just a fancy way of saying an llm talking to another llm with a harness on top that is still llms agentic ai is one of the the bigger lies they tell it's like when you hear agent you're meant to think autonomous ai can do what you want it's still llms it's still llms talking to other
Speaker 2llms yeah taking screenshots and putting them in llms oh god yeah okay but but you know i could i could make the case that i'm just thinking about my personal usage i definitely use agents to do things that i would have previously asked people to do it's not to say that i didn't i still don't hire because we're hiring like crazy yeah and i still in that particular function i'm thinking about like the chief of staff role so my chief of staff would have triaged all of my inboxes previously and put them somewhere and told me about them or maybe once upon a time showing me a piece of paper back in the day i guess now my chief of staff is no longer doing that job
Speaker 1you still have a chief of staff though this is what i'm saying they're doing other things right but the thing is again what you were describing is fairly basic automation i don't know what the tasks are triaging emails things about a trillion dollars on triaging email like that's the the promise if they'd spent 10 billion dollars and this was much smaller and you're like i go cool software yay a lot of the things that people are impressed with like script stuff as well it's just llms doing python you should be impressed by python code python is incredible you can scrape websites you can download shit it's awesome but the point i'm making is none of this would be anywhere near as much of a problem if they didn't ask for all the attention all of the money and promise the world it's their promises that are the problem and the journalists who went along with it and the analysts and the twitter people who went along with this saying that this would change everything and replace everything and leaving the realm of reality is there any
Speaker 2technological innovation through history that was really really game-changing where that didn't happen i mean the internet i mean people over promised that i mean they over promised on the
Speaker 1internet i mean they over promised that i mean they over promised that i mean they over promised on the internet a lot of people were excited but hesitant they were worried that there was not enough demand but they were still like oh yeah this could have potential ramifications if it happened people were not super negative about the internet a lot of the skeptics were saying we're worried about an overload of bad information look at where we are a lot of people were worried about the social consequences of everyone talking online which they were correct about with the economic things they were specifically talking about like the internet and the internet and the internet and like the globe which i think made hundreds of thousands of dollars and had like a think a
Speaker 2billion dollar market cap they were talking yeah there was massive hype in the dot-com era i read a
Speaker 1lot of those stories the hype was nowhere near you didn't have articles everywhere that were saying if you don't get online you'll be left behind you didn't have professional consequences nick suresh mentioned his blog earlier he described this thing global uh ai's of history and global decision making where he said that you have businesses you work at where if you don't say that you're not going to be able to do it you're not going to be able to do it you're not going to do it you're more productive with ai whether or not it's true it's irrelevant you have professional consequences you can get fired there are people having to ai wash their jobs by saying ai did it otherwise their bosses don't do shit will get mad at them this did not happen with the internet it was not present and part of the thing is social media was not like it is today the kind of uh was a decentralization of media in general has caused this as well and also the fact of day trading there's so many different things that are different it's crazy
Speaker 2i do think ai is different from the internet in part if you just measured it on the speed of adoption especially if we could just think about generative ai but the adoption of the internet
Speaker 1required physical connections to your house the adoption of generative ai involves having a web browser it took a vast amount of effort to bring internet to people even with dial-up connections
Speaker 2it still required the distribution that's why it was so slow and there was less you know there was less hype than i do agree that there's way more hype and we are again going back to this point that we're not going to be able to do it again we're not going to be able to do it again we're we're clustering ai in this big category of lots of different things there's generative ai there's
Speaker 1generative ai there's like real world ai generative ai is explicitly what i'm talking about here when bosses are saying you need to use ai they're not saying i need you to go and buy a unibeam robot they're saying use llms so that i and that's the thing they have this theory the era of the business idiot where it's like we are ruled by people that don't do work because nobody who actually does a bunch of work who really is productive is harassing someone who works for them for not being productive enough they're not they don't have the time they're doing work someone who is sitting there with the ingratiation machine that's telling them every beautiful idea out of their messy little skull is amazing yeah they're going damn this thing says i'm a genius why are you not using the genius machine to do more work and yeah if you're a boss that goes to lunch leaves lunch and sometimes
Speaker 2reads your emails llms are magic i do you know one of the most compelling arguments i have for the over hype of ai in a world where everybody has access to these tools whatever the tools can do would largely be commoditized and what the tools can't do which one could say is the human taste judgment you could say it's people skills whatever you want to say is now going to be the valuable thing because the scarce and the hard becomes the most valuable through history and the commoditized becomes the least valuable so the very nature that we're commoditizing the generation of content or whatever you want to call it code means that's actually not where the value will accrue for the user and actually if you're a boss you're not going to be able to do that because you're not if you think about what it takes to now make something that is objectively great if an ai can do it then it's not the great thing is not a value so i think a lot i've been thinking a lot actually about how how do you um avoid the temptation of slopification of the things you make the value you put into the world it's a very simple example that people will be able to relate to if you use chat gpt or anthropic you know claude to make your linkedin posts let's say we'll be shit linkedin posts because everybody else is using them and actually a great linkedin post now is someone who doesn't use them and make something that's like irreplaceably human right and deeper and more personal n of one lived experience yeah all these things that ai can't do and i think that's a compelling argument that actually the commodity tools produce commodity outcomes so everyone has access to these things and what's changed like really like what the
Speaker 1slopification of stuff we've we've got a bunch of slop but these people are half-arsed their jobs before it's just a half-arsery machine and it's just it's it's the thing it's what i'm talking about with the slop blogs it's like it's it yeah people that gave you dog shit before have now got the dog shit machine to pump out dog shit it's so there's a guy called carl brown uh internet bugs awesome guy great software engineer he he said i might have said this earlier so it makes the easy things easy the hard things harder when you know you're doing a really distinct small script for something and it can plop that out it's awesome i used claude the other day for something was trying to fix the fucking broken mod because he loves this wither storm it's awesome and it still took me half an hour and kept getting things wrong what do you use ai for generative i really don't i don't use it with bloomberg terminal i use ask b which is just when it's like requesting the consensus analyst estimates for nvidia otherwise you don't use it no so how do you know it's bad i've used it i've put it through its paces i've used it to try and do financial models and found one error and immediately be like ah i've never been particularly impressed the one thing i will defend it on is it's really good for like tech support like i have this thing called synergy in my new york new york place i go to i have this monitor where i have a macbook and a pc laptop and this thing synergy for using the same mouse and keyboard dropping a giant fucking troubleshooting log into this thing going what's wrong and it going this is wrong yeah it's super useful is that trillion dollars not is that a two trillion dollar company no better than google though right better than google no i mean uh yeah remember do you use google search still i try i have to fucking push the crap out of the way and oh my god i can't remember the last time i did a google search christ i find myself using bing sometimes i know i hate saying it too but i have to scroll past the ai crap because i want the good stuff i want the i want the actual links to stuff so that i can read the thing and go but you can ask the ai to
Speaker 2give you the links yeah and it doesn't do a particularly good job like my so say that the other day my ipad wasn't turning on and it was doing this funny little thing on the screen you think that it's better to type that into google oh no i must be clear that may be
Speaker 1the only llm use case i defend the troubleshooting thing is awesome for it i it's the the one weakness i have it's like genuinely being able to drop a log into it that's awesome again that is not what they're selling it as they're not selling it as a useful little tool they're selling it as the software as the thing that will change everything that will replace all jobs that will do this and that it's not like they sold it as a quirky bit of software no you are right they
Speaker 2are you know telling us that it is going to replace everything but funnily enough the critics are well which one i mean i mean oh like the jeffrey hintons of the world you know even people that have left the safety team in chat gpt who've who i've sat here with these are critics that are that are warning of the impacts it's going to have on the world it's weird how all these critics also
Speaker 1have uh vested interest in ai doing well though daniel former open ai guy ai 2027 written with the star codex guy that was nothing more than badly written science fiction that he's already
Speaker 2had to walk but you know he could have made more money by staying at chat gpt could he i mean it looks like if he had options early it sticking around the thing is did he lose the
Speaker 1options how much do you you're not saying that they're they're being critical they're not critical of the companies themselves they're not critical of the stealing they're not critical of the environmental damage they're not critical of the fact that you cannot rely on the answers they're critical of this big scary boogeyman out in the future where it's like oh i'm scared of when this becomes so powerful and everyone should talk to me about how scary and powerful it is they're not here are the things we're actually looking at today here are the social problems of having this automated way of spewing out slop of filling our feeds with crap of having information that will pop up that is presented even with the little disclaimer thing of saying yeah sometimes this gets shit wrong so in the tiniest words possible they don't talk about the fact that these things
Speaker 2are trained on stealing millions of people's work but on that last point where you say that it's going to get progressively more intelligent and when it does it'll be a danger yeah you agree with the statement that artificial intelligence has gotten more intelligent if you measure it based on any sort of measure of intelligence one might use it's got better on the
Speaker 1tests that are rigged for the models it's got better at tests where you can train for the test okay so it's got better it's got better at tests that they're intentionally trained for so if you
Speaker 2logged the rate of improvement on a graph it would look something like this right you agree in terms of what it's capable of doing oh that's there we go
Speaker 1yeah because it's not it's not got new features you'll notice that outside of open ai and anthropic the when you remove the coding startups there's basically no successful ai startup company so
Speaker 2we agree that it's got better it's got more capable at doing things yeah okay fine over time ai's got more capable if we imagine that trajectory will continue it will get more capable then at some point it does cross you know this is what they say to me it crosses human intelligence and at such time will it not start to do some of the jobs that
Speaker 1people are doing today outside of software engineering remove suffering because i will concede software engineering it's got better at that outside of software engineering yeah where
Speaker 2so the chief of staff things that admin okay so it's got better video generation photo generation okay text generation uh theoretically coding right but and then i'd say agentic workflows so what is an agentic workflow so automated workflows where you're doing the same i mean a good example is looking at the back-end data of the driver ceo summarizing looking at all of the data ingesting all of it going out onto the internet and searching who ed is
Speaker 1looking at every interview you've ever done ever uh-huh this is summarizing and generating making
Speaker 2a little model on you know the things people want to know from ed uh-huh producing a report sending that to my inbox uh-huh me getting a 20 30 40 50 page report on ed before he arrives this is all
Speaker 1basically the same thing it's been doing for years though it's not really new capabilities research it's it's it's still the search it's still the same things they've had web search for years they've had report generation for years
Speaker 2but we couldn't generate high quality videos that are like indistinguishable from cameras seed dance and these ones that look like movies i mean they are incredible so i'm saying the point i'm trying to make is that if we imagine that over the last 10 years there has been a rate of improvement in terms of capabilities and output and quality we've seen hallucinations drop we've seen the models get more quote-unquote intelligent get better at you know if you didn't give it an iq test it's getting higher scores than it was 10 years ago we agree that there's been a upward motion of improvement this is pretty much how machine learning goes when you feed it more data exactly and you put more compute behind it so if this continues what does the future look like so the rebuttal i was expecting to hear is that it won't continue and i actually don't think
Speaker 1it i think that there are hard limits that we're going to hit so you do believe in that there's a hard limit somewhere we've kind of already hit the diminishing returns level because for example we've got a lot of people who are going to have a lot of people who are going to have a lot of time on their hands and they're going to have a lot of time on their hands and they're going to open a eyes shut down sora i think you can still use the api but nevertheless look at look around you with the amount of stuff and the crew you need to get a shot people think the movies are just shot by shot by shot and they just magically happen when you've got my wonderful girlfriend of first ad's and so assistant directors you've got gaffers you've got lighters and also simulating light is insanely difficult there are so many magical things that happen in creating visual images that yeah you could create a one minute long video and you could create a one minute long thing that might fool someone how do you practically turn that into a movie because that movie i forget what the name is there was a movie that claimed it aired at can it didn't no one it aired in the city of can during the canfield festival it was not at the film festival when it comes to the practical creation of actual things at the end of it versus magic tricks the actual practical outcomes are not there the reason i keep coming back to the capabilities thing for the example is yeah they can do better at tests do better you number go up when it comes to can this actually do distinct tasks you can rely on it you can rely on it for summaries you can rely on it for generations the things it was doing it's getting linearly ish better at but again there's a ceiling to that like okay so it gets really good at research what does that actually mean you've already kind of got the automation there what is the next step of that because training it to be more autonomous for example that's not something that comes from training data that is actually a new gary marcus a neuro symbolic unit as you need to build a structure around the ai to make it work and even then it doesn't fix the problem so you're
Speaker 2saying that there will become a point where the rate of improvement will plateau we're already there and stop we've already hit that diminishing gary marcus said this in 2022 as well you know there's lots of people listening now that like they've had their workflows completely transformed by these
Speaker 1tools have they they'll be yeah there are yeah the thing is first of all every single one of them did you pay for the tokens that's the thing did you pay for the tokens and also how many tokens did you burn but putting all that aside what workflows because if it's yeah i did a bunch of web scraping just not impressed did you make an entire movie no you didn't is it speeding up your coding yeah i believe that i've heard that from multiple people but again how much can you trust this i
Speaker 2think i was getting at is you know when in the moment of any technological innovation people they extrapolate linearly or they view it as a static state i either think today is going to look like tomorrow or they think it's going to get better in this sort of straight line but what we end up seeing a lot of the time is this exponential improvement
Speaker 1all of the innovations we're talking about with you with like with compute and all that with fast processors those are hardware breakthroughs the hardware breakthrough companies don't seem to be fixing the llm problems despite the all the king's horses all the king's men we were nine ten generations of tpus from google now broadcoms building stuff with open ai their jalapeno chip and yet none of these people can just say yeah we're on the path to making this profitable because they can't if we fix the environmental problems and the profitability situation maybe i'd be more generous with them but they don't seem to be able to and you talk about these improvements and capabilities there's a certain point at which i'm saying okay can it do even a tenth of the stuff they're promising samuel and the other fucking week was saying it was going to be in like six months will be like a genie that you can ask wishes for from it's like motherfuckers never watched aladdin what's he talking about like also the genie was charming anyway long story short the promises do not line up with the capabilities or the capability improvement and they don't line up with the and exponential improvement in software... and software performance is always a result of direct hardware improvement we have all the gifted mathematicians all the gifted software engineers all the gifted hardware engineers and where are we trillion plus dollars in with the future great financial crisis in the world's greatest marketing
Speaker 2psyop i just think in the future i do think that all of the devices and the computers we use and the physical items in our world will be more intelligent i mean sure but is that llms and that'll be powered by the underlying ai infrastructure it'll be the data centers it'll
Speaker 1be energy coming down how does a gpu full data center translate to a nikon camera that can i don't know even what you'd think think like because what is the thing we're talking about here because the idea that devices will get smarter sure i can see that it's a very broad statement i could see it happening it's really kind of happening what does that have to do with the data centers because these data centers again are not being built to make your consumer electronics smarter they're not being built for anything other than speculating on the ability to capture demand for generative ai services but it's not just generative ai we went through that it is no but those data centers they are being built for generative ai they are not being built for anything else would you consider generative
Speaker 2ai to be the fact that on meta's earnings call like a couple of weeks ago mark zuckerberg said the big breakthrough we've had which has resulted in 15 basis points of increased retention i believe is that we now take anything you post on social media and we run it through an ai to get full context of what it is and because we can see guys sat in front of me called ed with blue shirt and coffee we now can train ai to serve whoever wants blue shirt adding with coffee to the right user which means people are retained longer because isn't 15 basis points like 0.15 yeah it's not
Speaker 1cool but it makes a difference at scale it makes a big difference at scale yeah but 100 and something billion dollars in and the best you've got is 0.15 if he could be fired i mean how much of a difference because there's a reason he's saying basis points versus dollars because think about it like this if mark zuckerberg was i take your point about scale i'm saying the point i was
Speaker 2making was that that is another application of these data centers because it needs a data center that is driving revenues but also that's not out that's outside of us thinking about just generating revenue and that's not what we're doing that's what we're doing that's what we're
Speaker 1doing and that's generate the gem their generative model again it was it oh muse spark is their llm gem is their generative it's as well well muse then then that's them doing the weird thing where it's like on instagram and it's like dave the cat why is dave the cat suffering like it's the weird pop-up things meta is fuck god damn that company sucks like every time i think about how they've ruined that product but that's the thing though again why can't he just say with his whole chest we've made a couple billion why can't he say that because he isn't because there's not actually a way of going i spent all the money i've spent on this product and i've spent all the money i've spent all this money i spent 14 billion goddamn dollars on scale by alexander wong and i made this much they can't it gets back to a very simple point of hey if it was going well you'd tell me how well it was going rather than i don't know doing this weird rain dance thing we're like well if we move all the pieces around in three years theoretically this will happen i've done almost 700 interviews
Speaker 2with some of the most interesting people in the world and one of the things you learn which is that vulnerability is the doorway to connection and after sitting here for two three hours with a guest i feel a deep sense of connection to them and as they leave what i get them to do is to write a question in the diary of a ceo we've taken all of the questions from the diary of a ceo we have put the question here on this card with the name of the person that wrote it so you can sit at home as i do with my fiancee and my colleagues at work and other people in my life whenever we get a minute we play the diary of a ceo conversation cards and it is incredible what happens these are great if you're in a romantic relationship and you want to connect your partner more these are also great if you're in a team and you want to bond your team together and i have to say they're also great for families that want to learn more about each other and that need a good excuse to spend some time in a digital world in the analog environment connecting human to human it is remarkable what the right question at the right time can do go to the diary.com and you can get these conversation cards right now i do think you're accurate and right when you talk about the fact that there's a lot of like is the word for gazy yeah where like there's a lot of people that have spent a lot of money and they kind of shouldn't have spent it and they fucked up and now they're thinking shit like we've spent all this invested money kind of like the metaverse was a bit of a oh my god that was a bit of a joke that's so weird a lot of money spent we kind of thought this dream was coming of this one i shouldn't say dream because it's not a dream that i've had but dream that they had yeah this sort of virtual world and actually it never transpired and there's no sign that it will in the near term ai and the dot-com boom in this regard are the same nfts were the same you know so crypto one
Speaker 1could argue that a lot of the crypto industry was the same it's weighing that is inflated by the media the difference is the reason the metaverse and nfts didn't escape this was there weren't stocks to speculate on there weren't big companies that you could invest in they had record earnings in 2021 there's a bunch of money flowing in the system thanks to post-covid uh the prdc that basically government federal money flowed in to the banks there's a bunch of easy money zero interest-free era money was easy to find then after that there was the hangover growth started to slow down dramatically this is actually my rock con bubble theory which is they don't have any hyper growth ideas anymore so suddenly they started buying gpus and when they bought gpus people went they're doing ai oh we better buy the stock and the stocks went on an incredible run there's like several hundred percent growth in the last few years their stock has grown by hundreds of millions of dollars and they've been growing for a long time and they've been growing for hundreds of percent despite zero proof and because the media was just saying yeah meta's revenue's growing because of ai right microsoft's revenue's growing because of ai right the fugazi you're talking about was the fact that everyone just gave them credit in advance and now we're kind of getting to the point where it's like hey you didn't spend that trillion dollars for no reason did you satcha amy amy hood just gonna take him out back send him to the glue
Speaker 2factory or something like i do think there's overspending i want to concede that but i do think there is and i think the reason why there's overspending ed is i think there is something here and what in terms of like i think there is practical uses for this technology and i think when people realize that through history they go crazy because they want to be the person that
Speaker 1owns the opportunity i'm gonna be honest i just i fundamentally don't agree you don't agree with which part you don't agree that this that the speculation is a result of actual demand i don't believe it's suspect i don't think private credit is sinking hundreds of billions of dollars into ai because of actual demand they are doing it because they saw the biggest companies in the world building data centers making a ton of money from two companies they feed money and went i want
Speaker 2some of that money i'm saying that i do think there is value in the underlying technology i think and so i think i'm not saying how much value right okay i get you meaning that's fair i'm not saying it's proportionate to the investment all i'm saying is that do you know what it's like it's if i take your example the rock economy essay that you wrote say that you're on a desert island and then someone says they found a banana tree right and there's there's ten thousand people on the island okay they are gonna stam fucking peed towards where they think the banana tree is they are gonna fucking claw each other to pieces and if if your essay here is right that there was desperation because they hadn't found an innovation in a while maybe that explains it maybe there is a bit of value here right and they're stam fucking peeding and killing each other and making irrational
Speaker 1decisions like hungry people would i actually think we're then we actually agree that is actually my point which is these three companies are matter their main business lines are running out of growth there's only so much they can grow and indeed in the next three and a half years analysts think that these two bastards these two open ai and anthropic are going to spend over 400 billion dollars on these people alone microsoft google and amazon and the crazy thing is is that's a large part of their future growth and if this money isn't spent their growth slows down okay so your point about bananas i actually agree that is the rock on bubble it's they don't have a new thing and they're desperate and indeed they got rewarded for buying the gpus they got when they bought these goddamn gpus from nvidia all the markets went rock hard overnight they loved it there were stories about how they were sending armored cars with the gpus to microsoft to make sure microsoft got the gpus and so everyone saw all that money flowing in even though they never disclosed their eye revenues they saw the expenditures and they went well i want to do what these people are doing
Speaker 2i want to get a little of that money don't i i think the area where we have a slight disagreement is that i think the underlying technology has a lot more promise over the long term than you do
Speaker 1so the thing i want to push back on there is to have progress with ai just on taking it in a vacuum to have progress for these two companies to keep going and to keep progressing they need to spend tens of billions of dollars a year on training the only way that that can happen is if these companies and venture capitalists and private credit firms and nvidia keep circulating money to them and they're not going to be able to do it because they're not going to be able to do it to them so the progress yeah that we've got so far is entirely a result of this circular system so it means that without killer you talked about vcs there venture capitalists who are by the way the majority of the funding that open ai got in the last six months yeah came from softbank nvidia and amazon okay yeah so just the point is is you're talking about progress continuing progress in llms can only continue as long as the money keeps flowing once the money once the money stops
Speaker 2flowing the progress stops which but isn't that most like at least like spotify didn't
Speaker 1make money for 20 years spotify didn't lose 20.9 billion dollars in one year they didn't need to raise 217 billion dollars in the space of six months yeah and uber's another example 33 billion dollars since inception before it became a messy kind of profitable amazon web services between 2003 and 2015 when it became profitable 29.7 billion dollars they'd spent the scale yeah that's the total capital expenditures and that's not just amazon web services that's the entire logistics operation normalized for
Speaker 2inflation so they all lost money for a long period of time as the tldr yes but the amount of money
Speaker 1they lost is completely just magnitudes different on a level where these three can i argue then that
Speaker 2the that's because the potential of intelligence permeates everything whereas amazon at the time was like selling books no that was bringing retail online when amazon web services grew
Speaker 1it was oh amazon web amazon web so the amazon cloud with amazon web services the reason i bring that up gonna repeat something but it's really important 2003 it was founded and it was founded mostly because amazon as a growing online store needed hardcore infrastructure 2006 i think is when they turned it client facing i may be wrong on the dates there but 2015 was the year it became profitable yeah the total capital expenditures normalized for inflation with 29.7 billion dollars across that 12-year period yeah and yeah it lost money but if we speak cold economics here amazon didn't have to go into the they were unprofitable in the in a way but their margins actually started improving because aws was a very margin heavy business it was great yeah these these two google cash flow negative amazon cash flow negative these businesses the reason you liked software businesses was they are meant to be cash heavy asset light these companies along with meta have added more than 700 billion dollars of new property plants and equipment so assets data centers gpus in the last four years they have gone from being these cash machines to these cash firms and they've gone from being these cash
Speaker 2businesses you said a second ago this can only continue if investors continue to invest yes and i was saying i think that investors are used to pumping money into things that are burning cash your rebuttal to me sounds like well this is burning more cash than ever and then so i would say well is the opportunity bigger than those other case studies you referenced like aws and one would say that the opportunity of intelligence permeates everything so the tam the total addressable market is enormous maybe the rebuttal back to me is about open source and all these
Speaker 1kinds no no no i i actually know what you're going at so what you were describing there is the argument that sachin adela or sam all would make but the theoretical opportunity of large language models and i could have bought that shit into any 24 from them when they were like oh we see the opportunity we've gone way past the point at which you can rationally argue that llms need this much money and when i say the money needs to keep flowing i am talking these two companies open ai just open ai clammy sam orton has said wall street general and isaac ardeezy reported a few weeks ago they plan to spend 750 billion dollars on compute through 2030 i think they're going to be dead before then but 750 billion dollars that is an insane amount of money it's crazy and a large chunk of that is training so when i say progress i mean literally to make the models better at stuff requires billions of dollars invested just in data and also tens of billions of dollars of taking that data and so training training is actually a really interesting thing because when you think of like for j control my trainers when i train with them i'll live with them i have a defined thing and when i do it and i eat right muscles get bigger they would and here's the thing when you train with an lm you're experimenting each and this is not actually a hit on the companies because they're still trying to work out how to do the thing because putting aside how i feel like they're trying to innovate i think there are people at these companies that actually want to do something interesting it's costing too much money so once the money tap turns off the money won't be there to buy the data or the feed the data into the gpus put aside all the thoughts i have just the raw capital to get them this far has cost increasingly larger amounts of money and increasingly larger amounts of training money for training runs that sometimes can fail gpt5 was meant to be this panacea for the ai industry they had at least one training run that cost half a billion dollars and did nothing and that's the thing if we are thinking about training for gpt5 we're not thinking about progress in a in a vacuum they need so much more money just to maybe get somewhere there's no guarantee there's never any guarantee but there's a reason that google and amazon are cash flow negative now there's a reason why oracle's probably going to die as a result of open ai because oracle's future depends on open ai spending 300 billion dollars over five years
Speaker 2it's absolutely fascinating because i was just reading through a list of quotes from the big ceos of the ai companies to see what they would rebuttal you yeah and they're all basically saying this is an actual an exact quote from sundar who's the ceo of google he says the risk of under investing is dramatically greater than the risk of over investing and you go down you go through this you know andy jassy ceo of amazon we're not investing approximately 200 billion in capex in 2026 on a hunch we're not going to be conservative in how we play this we're investing to be the meaningful leader and our future business operating income and free cash flow will be much larger than the risk of overinvesting and we're not going to be conservative in how we play this because of this investment then mark zuckerberg c of meta says we'll continue to invest aggressively in infrastructure to meet the demand i'd rather risk building capacity before it's needed than
Speaker 1being late makes me think of shrek with law fart quad some of you may die but that's a risk i'm willing to accept it's like you know i'm just going to spend all this money you can't fire me because mark zuckerberg can't be fired due to the unique board situation he's got going so yeah he's just going to piss the money away and hope he's right i don't know if the people know it matter he's not right the thing is he's not going to be fired because he's not going to be fired why might you be wrong i mean this is the thing the ai people who claim this is going to be the biggest strongest thing in the world did they ever get that i i mean this like it's a good question because it's like they don't and the thing is what would it take for me to be wrong a bunch of hardware breakthroughs to make this profitable a bunch of question new mathematics because the thing is when it comes to being a critic or a skeptic you are put on the hot seat not the people spending a trillion dollars not the people promising the world the person the the arsehole with a blog is the one who's like trust me trust me if they can't do it they can't do it i'm here they'll be on the hot seat too oh wow oh they they won't talk to me i don't know why it's because i call him clammy sammy um i think it's because my guests are quite quite critical that i don't think sam wants to come here mr allman hey go on steve show do it but this is the thing like of course they're going to say that and also if they thought they were right i don't think they do anymore if i was in their shoes and i thought that this was an existential thing sure but it gets back to the rock con bubble which is yeah this is the last thing
Speaker 2they've got but i really want to know that question it was one of the questions was really excited to ask you which is you have a different opinion we said this at the top yeah you have a very different opinion from a lot of people yeah i would categorize the the two most popular opinions as uh ai is gonna hurt everybody and it's gonna be catastrophic and we need to stop yeah the other opinion is age of abundance it's gonna be amazing let us crack on yours is different from both of those which is as you said in your words it's a con and it's in there's no real underlying value in the technology and it's overhyped yes and there's way too much spending i mean a few people agree on the spending part yeah but the other part so with you it's one of probably the first person that i've spoken to that's had this opinion so how what would it take for you to change your
Speaker 1mind about what you believe here there would need to be a hardware breakthrough that reduce the cost by like a thousand but it would have to be just a dramatic breakthrough that is not happening just be clear because they've all been trying so it's the cost for you that would have to change it's the cost and it's also the data centers i think the way they're building the data centers is reckless and damaging to communities the fact that you have communities like in vineland new jersey where the residents like i don't want this but the planning boards vote for it because they're all i assume having chummy lunches with the people doing it i think the use of gas turbines is fucking disgraceful i at the water situation i'm not super well read on so i'm not going to wade into it but the use of gas turbines and behind the beat of power is reckless and damaging to communities the noise that these things make and also generative ai is this egregious pornographic demonstration of how unfair the world is regular people try and get a loan for a business random business they want i have a good idea they go to a bank a bank of talent they'll go fuck themselves they'll say i'm not gonna you're gonna make a store that sells stuff screw you you want to build a data center jensen huang will back you jensen huang will give you 25 residual value you want to build a regular business that's even profitable fuck you no venture capitalists won't give you the money something that's just growing steadily but it's profitable screw that no i need 10 100 x turn try and get a mortgage you have to give the bank a full colonic but you want to get money for jensen huang to buy some gpus he'll give you a contract core weaves great example a neocloud which is just a company that builds data centers and puts gpus and rent people nvidia one of their first investors in 2023 signed a 1.3 billion dollar contract to rent back their gpus from core weaves so that core we've go to a bank and go i've got a customer yeah it's the guy i'm buying the data i'm getting from you if you want to buy gpus it's open season if you want to live a regular life we build a regular business or buy a house highest interest rates ever screw you up yours yeah you need to show us way more than i don't trust you regular folks but if you're an unprofitable neocloud you get billions from jensen it doesn't matter it's so interesting it's interesting because you
Speaker 2are the first person that i've spoken to that has that opinion i am pro user let's take another myth
Speaker 1i'm the first person that has that opinion i'm the first person that i've spoken to that has that opinion i'm the first person that has that opinion i'm the first person that has that opinion i'm the theories anyone saying this stuff will become this is just guessing and does not have proof okay and like that's really it okay okay let's take another myth ai systems are already blackmailing and escaping control so this is a really specific one anthropic there's actually two open ai's gpt 3.5 i realize this is more than the sentence i apologize in their system card and a bunch of media outlets cover this saying the open ai's model blackmailed a task rabbit into solving a capture what actually happened was a user of gpt doing the experiment got it to generate things to say to a task rabbit to make a task rabbit do stuff a task rabbit as in a person that you rent not even to do a capture it's something you rent to like nail that nail picture up in your apartment it's an insane example this was covered as if these things blackmailed someone and and they specifically said yeah we prompted it to do this and also the other note was that yeah ai systems can't do autonomous stuff like this then there was this other one where anthropic said oh yeah a model was blackmailing someone saying that if you don't do this i'll email proof that you slept with someone else other than your wife i think it was what actually happened was anthropic explicitly trained a model to do this and then prompted it to blackmail this keeps happening and the media just slop slop me up i don't need no thoughts put the story in the bag and it's frustrating because it scares people put aside the fact it's wrong it's scary it's scary to people people living their lives who have to work longer hours to make less money and their money doesn't go far and they turn on the fucking news and there's some asshole being like yeah you should be terrified it blackmailed someone
Speaker 2but this is this is so counterintuitive of their interest to some degree and they've
Speaker 1experienced it backfire well they have now like it's it's literally backfired it's backfired eric
Speaker 2schmidt getting booed at the commencement speech by 8 000 people every time he said the word ai but i mean this is this is i mean that these series are being attacked at home yeah which fucking sucks yeah which is
Speaker 1terrible i must be clear like he disliked the company don't fucking hurt people yeah don't
Speaker 2don't attack people at home but but the point here is that that narrative is backfiring in a big big
Speaker 1way for them i don't think they saw it coming because you have to remember you mentioned regulation earlier these tech companies have been glazed for their entire existence travis kalanick is like oh what people don't like me now and it's because uber was a horribly run place and he was kind of a monster also tons of articles about how great uber was at the time the point making is these companies are not used to push back they thought what would happen i believe just guessing they thought they'd do this scary stuff and they would just get floods of money and everyone would just be like i kneel before you i'll do whatever you want they didn't expect i think what has i i agree this has backfired on them because they were inarticulate they're disconnected from regular people sam altman drives a five million dollar car around san francisco so that that man's doing it like nine miles an hour it's hilarious but these people are disconnected from everyone else so they don't they don't experience real problems so they can't build the solutions for them and they think well if we scare people into doing what we want that'll work right it didn't they this was all of this blackmail stuff was an attempt to make it mystic it was a mysticism attempt it was to make it seem like this unknowable impossible to control just this powerful thing but we're the only ones we are the only us only these two angels could possibly control the beast we've created this is this is
Speaker 2quite a controversial statement but i think that for some reason i trust dario a little bit more because i think he's been the most balanced in his writing about the risk profile i whereas the others they they seem to kind of move with the wind i i do you know i get what you mean the
Speaker 1reason i don't like dario is dario was doing the scare tactics thing when he worked at open ai when came out it's too scary to release he's also gone on television and given ai psychosis to axios being
Speaker 2like 50 of jobs are going to go away because of ai what i respect is the consistency he's now being attacked by them good um but the thing is sorry i mean clarify the word attack dario is being verbally attacked by silicon valley and you know if silicon valley if powerful people in silicon
Speaker 1valley are attacking someone four months ago he wasn't though they were all saying he was the smartest boy ever but the point i want to make there as well is again wow you're so scared of how powerful this is you're so scared of it it's so scary what are you doing about it oh nothing like it's just like what are you doing well we have an alignment team so does every ai lab well i guess open ai cycles through those really quickly here's the thing if i'm dario amadeus and i'm scared of all things changing and i thought i had made a thing that would eliminate all jobs i'd be fucking terrified i'd be walking around with like like a 10 ton weight on my back the shot the responsibility the fact he doesn't the fact he wants to be this weird elder statesman that's too scared to hold sam altman's hand at an event just makes me believe that he's just saying it because it's convenient and he'll wind that back as he kind of already has whenever it's convenient for him i think open ai and anthropic are basically the same level of bad company i think anthropic is more cult-like i think it's so weird like jack clark over there one of the co-founders that fella used to be at the register he used to be one of the most critical journalists ever now he's it's like something took over him because they talk of these things in these highfalutin terms but then again maybe the people are anthropic by their shit maybe some of the people open ai by this year so going back to
Speaker 2the central question we asked at the top here was what would have to be the case for you to look back and say do you know i was wrong in 2026 and you said to me it would be mainly that the cost of production around ai drops dramatically and it would have to also do insane amounts of stuff it
Speaker 1does it would have to be a truly autonomous it would have to continue its improvement in terms of capability it would have to be a truly autonomous it would have to continue its improvement in terms of technology it would have to be it would have to be indistinguishable from magic and the reason i have these high standards is they set them okay it's interesting as well because all these myths and all these conversations it's about technology but it's also it's an information war it's literally narrative versus narrative everyone trying to escape the financials everyone trying to actually escape what the models can do and the big thing i always say about ai boosters is if i could regulate them i'd regulate them they can't speak in the future tense anymore just you've got to talk about today mate you get two weeks in the future max because if they were constrained to what was happening today it they would sound like insane people yeah no i think yeah most i guess most technology companies
Speaker 2would at the time like uber would sound insane but no it was basically the difference they were
Speaker 1pissing money away but the unit economics were the same just subsidized so you were still getting a service from a to b and paying a much lower cost it wasn't like you paid uber 200 sorry 20 bucks a hundred miles of uber and then one day you started paying by the mile because that's what's happening
Speaker 2with this have they they've changed their business model for customers like me now so that i have to
Speaker 1buy credits no so you well kind of with they asked me the other day so with the anthropics fable model yeah with some accounts you have to pay for usage and also adoption of fable has been pretty low because of this because of the cost but with enterprises so companies over 150 people you have to pay by the token now a per million token oh so they are moving to a token yeah but when they did that everyone went from being like this is the most impressive thing ever to being like we've got to control these costs uber's coo says andrew mcdonald i think he said that it's getting hard to justify because it's hard to connect spending money on tokens to actual useful outcomes he said the thing like he said the actual thing i've been saying and it's so we're in an ai
Speaker 2bubble yes and when we'll when this ai bubble collapses so much of the economy is resting upon it yeah it's gonna have downstream consequences so i got two questions for you i guess the first question is are we in an ai bubble
Speaker 1and what happens when the bubble pops yes and it's it depends so the big thing that people say is oh get bailed out donald trump scared of donald trump here's the problem with this it isn't just an ai bubble it's the rock con bubble so the ai bubble collapsing will probably be this company running out of money in the company and the thing is with open ai is they were meant to go public this year now it's been pushed to next year a week and a half after i released their auditive financials wonder where that was um but they've delayed to next year sarah fryer the cfo has now said well they'll do it earlier than 2027 or 2027 great answer there for anyone that doesn't
Speaker 2understand what going public means that means joining the stock market and at such a time when you join the stock market your investors can finally sell their equity that they got for investing in the company when it was private so oftentimes companies will flirt with the idea of we'll go public so we're going to go public so we're going to go public so we're going to go public someday soon because investors will have a moment in their head where they'll get their money back at a return so you kind of need to if you're in these guys shoes you kind of need to be flirting
Speaker 1with going public or investors won't want to invest open ai up until this point has been a private company and their last funding round they were valued at 865 billion dollars now when they tried to go public new york times mike isaac reported this they tried to list that well they wanted to go at a set a one trillion valuation apparently their advisors said no don't do that that is very bad for a number of reasons one open ai needs perpetual amounts of money they raised 122 billion dollars this year most of its cross there's some left but they are going to need to raise at least 100 billion dollars a year just to survive if they can't go public they will have to raise another funding round the problem is it's going to be difficult to raise even the same one they raise that so they're probably going to have to take a flat so the same amount they can't do that exactly but they need money they need to They need money so bad, Amazon sent them 35 billion dollars that was meant to be contingent on them going public early they did that because they need the money now open ai is the kind of catastrophe center here because anthropic is likely going to be it to go public and once anthropic goes public it'll be borderline impossible for open ai to do so because anthropic an unprofitable unsustainable ai lab but a better business that's growing faster than open ais i believe they have a ceiling they're eventually going to face perdition too i think sometime in 2027 things are going to start running out of steam because that thing i said earlier the only way these models get better is if you feed more money
Speaker 2tens of billions of dollars into them so you think open ai runs out of steam in 2027 i think
Speaker 1they're already running out of steam yeah but i think they run out of cash you think they run out
Speaker 2of cash yes and the sequence of events here will be they they go out and try and raise
Speaker 1and they have trouble raising another round i think maybe nvidia props them up a little maybe private credit blackstone blackrock and the like the ones and the reason that private credit is getting involved so asset managers is because they're investing in the data centers and they know this
Speaker 2companies most of the data center demand okay so they run out of steam in 2027 according to you
Speaker 1yep and maybe they try if they bum rush to go public they're going to have worse economics than anthropic they're going to get savage it we work was a great example another soft bank classic now i think open ai collapses there are many different ways it could happen there are many different ways it could end but the crucial thing is is that there are multiple companies that are existentially tied to open ai soft bank one of the largest companies in the japanese stock market a holding company with lots of investments they have on paper about 100 billion dollars worth of open ai stock if they can't go public they can't do diddly squat with them and so soft banks future their ability to continue paying the people around them and existing as a business relies on their ability to continually liquidate funds to be to take the things they've invested in and have value from them either by selling the stock or taking loans out on the stock if open ai can't go public soft bank can't do that soft bank probably won't run out of money if they can't go public they can't do they can't do that soft bank probably won't run out of money but we're going to see one of the largest holding companies in the world become much smaller we will also see amazon google and microsoft have to restate guidance they will have to say actually we don't think we're going to grow as fast and what happens then well i think we enter a tech depression because the rockcom bubble the core of my theory is that they're out of hyper growth ideas but the market doesn't think so the reason they're so maniacally spending is because buying ai gpus allows them to kick the can further it allows them to say we're still doing something we're working on ai don't think too hard and also their current businesses are still growing their current businesses will eventually slow there's only so many price increases there's only so many tweaks to ads only so many tweaks to google search only so only so many ways that amazon can screw merchants so in that tech depression which you
Speaker 2think you might be triggered in 2027 is that a cascading downstream economic depression because the stock market is heavily dependent on these companies and they're not going to be able to the stock market sees a pullback investors stop investing they get panicked yes i think that because what sort of downstream consequence the sort of domino effect there's so much to
Speaker 1imagine that it's difficult to capture everything but there are a few things that worry me first of all a ton of american money just regular people's money retail investors are in these companies and they bought into the magnificent seven thinking that number go up forever nvidia is the largest company on the fortune 500 nasdaq as well and like seven or eight percent of the s&p 500 that company when when the bottom falls out from nvidia and we haven't really got into it but nvidia is doing the most circular refinancing feeding companies money so that they can raise debt to buy more gpus i think nvidia's revenue could go 50 to 70 percent now i think that nvidia could put nvidia back in 2022 was making single digit billion dollars and what happens though i'm
Speaker 2thinking about like jenny and dave that are watching this right now and they aren't just
Speaker 1normal people with normal jobs people's retirements are going to contract severely and i don't believe they're going to return to those values and i don't think they're going to return to those values and i think that because so much of the value of the s&p 500 and russell 1000 index comes from these four companies and the rest of the magnificent seven so apple tesla matter as well and the thing is i don't know what happens after that because venture capital has also like more than half of venture capital last year went into ai i think most venture capital investments in ai are going to zero because when it comes to building a company on top of an llm all of those are unprofitable too and the thing is llm companies are going to go to zero because they're going to have not really been acquired the exception being cursor bought by elon musk for the coding side but you have cognition which is just another llm company raising a 26 billion dollar valuation that means that company has to go public because who's buying a company at 26 billion dollars other than elon musk and there are rumors that elon musk was trying to buy them as well is elon musk just going to pick off every like llm company like on a fucking tj max for ai like jesus christ so is that a recession you're describing it is a recession but it's also a depression within people's like i'm talking about 20 30 40 off the top of these companies stock value economic contractions
Speaker 2recessions consistently lead to job losses and rising unemployment when an economy contracts the mechanism driving job losses typically follows a predictable sequence falling demand consumers and businesses spend less money causing revenues across most industries to drop margin compression with lower revenue and often fixed overhead costs like rent or debt corporate profit shrink and lastly cost cutting measures to survive or protect profit margins businesses freeze hiring reduce hours and resort to late-night jobs so if you're a venture capital investor and you're a venture
Speaker 1off yes that's that would all happen but the thing is we're talking about equity values dropping and we're talking about they're not really being a home for that value or that money so much is riding on these companies but you can't bail it out you can theoretically bail out open ai i don't think it happens you could pump these dogs full of money and keep them alive for a bit but at some point they're gonna have to start they have between these two companies anthropic and open ai you have 1.1 trillion dollars of commitments just open ai oracle is building 7.1 gigawatts of data centers so over 400 billion dollars worth just for open ai there is not a customer on earth and oracle's revenue has been flat the last 15 years when you adjust for inflation so without
Speaker 2open ai oracle dies so you think open ai is going to crash and run out of money and that's going to cause this domino effect across these other big tech companies which is going to impact the stock market and impact the broader economy yes and also the tens of thousands of people
Speaker 1that will be laid off from the tech sector but also the venture capital thing is significant because venture capital has been having one of the most historic bad runs in history since 2018 the average return from venture capital a total value put in so the amount of money you get back for your dollar is between 0.8 and 1.21 meaning for every dollar you invest you get 80 cents to a dollar 20 paper gains well no that's just actual get like actual returns paper gains they'll give you but even an internal rate return which is a whole separate thing even that's not very happy but long story short very simple venture capital is not making money come out venture capital is not actually providing returns they're celebrating paper gains
Speaker 2they're celebrating paper gains and they're raising off paper gains and paper gains i mean just being able to say oh look the valuation of anthropic went up so that's that's what google
Speaker 1and amazon were doing google's last quarter they boosted their net profits profits on paper by 99 billion dollars because of the increased value of their spacex holding and their anthropic holding and again the fact that this is happening is insane and the fact it's not a scandal is insane but we live in this culture i guess but everyone is really benefiting right now it's really that it's that great twitter it's like when you're uh reaping it's like yeah fuck yeah this rocks sewing ah shit this sucks because right now they're all like yeah all the speculative gains are awesome the paper gains are awesome the theoreticals of anthropic being worth two trillion dollars wow the articles we can write the promises we can make then when the rubber meets the wood it's gonna be pretty rough on them because my the valuation of amazon google microsoft and meta is based on this idea that they will grow eternally that they will grow forever if that changes to quote ed elson from prof g markets again it's this they're all doing botox right now they're sinking money into it to make themselves feel young again and the market believes them when the market doesn't we're not just talking about depression i'm talking about the market valuing them like airlines and saying yeah you're real big and you make money off your revenue shit you're just going to be doing this forever and we're going to value you as such so
Speaker 2if it's jenny and dave should they do anything differently should they be conserving money if there's a recession or depression coming should they be a little bit more conservative should
Speaker 1i yes i actually i actually think it's i don't know i don't have money in the market i think it's a casino casino pumped up by the media should they invest in the s&p 500 should they invest in open ai oh god no i honestly i live in cash right now i you live in cash yeah i don't fucking trust the market man try and give me money i don't have money i don't have money i don't have money i don't get some gains here i'm like i'm not comfortable giving financial sure advice but it's like if you
Speaker 2like it's like you're gambling okay be conservative things might get volatile
Speaker 1yeah it really is it's going to be act as you would with volatility take the gains when you've got them don't sell everything but be suspicious of tech like that's actually the biggest thing it's like be suspicious of what they're promising if you're acting based on their promises don't trust the promises trust that they are going to say what will make the stock run rather than what's actually happening and that they will find every dodgy way to make you think something is happening rather than it's actually happening annualized run rate great example microsoft said that they had 38 37 billion dollars of annualized run rate in ai you hear that you go i made 38 37 billion dollars right wow that's so much run rate maybe month times 12 they don't even define it but it's built to manipulate and they do that because we don't have a functional sec and we don't have a that actually where skepticism is the priority and we're protecting the readers is necessary
Speaker 2what would they say there was say ed this technology is going to be so great and so transformative that we are investing a ton of money um in advance of the value and utility showing up that's what they would say right and i've heard your rebuttal but i just wanted to express i get that i think that's their sentiment i'm not defending them or anything i'm just i'm trying to provide enough like balance to see if we can dance between these two perspectives and a lot of people would say that there's going to be a bloodbath because they can't all win big in the way that they're kind of describing so someone's going to have to lose and when one of these players starts to lose big i think it could as you say there could be some kind of domino effect or contraction yeah and i think the thing
Speaker 1that people want to believe is they're the dot-com bubble thing it's like it worked out afterwards because amazon oracle they didn't die after the dot-com bubble they're actually fine you don't like these people do you no i actually why no again i ask this question purely because i want
Speaker 2an answer not because i agree or disagree but um why don't you like these these people i don't like
Speaker 1being misled and i don't think regular people are being misled either and i really don't think that the average person can get away with bullshit as much of these companies do and i don't think the average person gets anywhere near the level of affordance for failure and lying as these companies do and i think there is a real economic and human cost to allowing these companies to run rampant and promise the world and never really get called up on it the tepid nature of criticism these days is so frustrating there are some really great critics out there the really great people but it's like seeing these ultra rich ultra wealthy ultra powerful people life through their fucking teeth or misstate or whatever people want to call it it turns my stomach and i hate seeing people being misled and i feel like i write at such length because i really want people to see why i've come to a conclusion am i right am i wrong i think i am of course i do but i also i just find it loathsome i find these companies don't make good products anymore they don't care about their customers and and they treat their customers with contempt
Speaker 2if people want to go read more the
Speaker 1about your work um you have a great sub stack ghost actually it looks exactly like i'd moved
Speaker 2off of sub stack in 2024 oh okay and you also have a podcast you do yeah better off line um i'm gonna link both of them below so if anyone wants to read more get more detail and follow ed i think it's i would highly recommend it's it is fascinating and you know what one of the things people um sometimes struggle with when they listen to podcasts is you get lots of different opinions and weirdly i think they think of some people assume podcasts are going to be like one person saying the same thing as the next person and the next person yeah yeah yeah that's the thing that is just not the nature of information in the world and opinions and progress and discussion what happens is people have different opinions and i think my job but also the listener's job is to try and pass through it and over time collect more of these reference points from different people and and do your own research yeah whether it's on your health or whether it's on something like this is to watch and do your own research and to learn and i would say also never believe one person never believe one particular perspective religiously you know collect a body of evidence and follow follow the evidence yourself but i love watching your youtube um because it provides a different opinion and that challenges me to think beyond my current opinion about what might be possible so when i've heard you talking about how this is an economic bubble and i've heard you talk about the capex spend with these big sort of frontier ai labs it really did make me pause for a second and it really did make me consider that there could be a bit of fugazi going on here yeah and then it made me reflect on history and go you know through history there's always a bit of fugazi in these moments and oh that's an interesting take and what's going to happen in 2027 2028 when there's a bit of a market pullback and so i highly recommend people go watch because you do you challenge me to think differently um yeah and we need some of those contrarian voices to to have honest discussions so thank you for doing what you do really appreciate it and i find you to be a very compelling captivating communicator and i've i feel like i've learned a lot today so i appreciate that we have a closing tradition yeah the last guest leaves a question for the next guest not knowing who they're leaving it for and the question left for you is given that high quality relationships are important for health and longevity what should we be doing to improve our relationships and social connection so this is
Speaker 1actually connected to the ai bubble so i'm a critic i'm a skeptic what quote i have found the showing and appreciating and loving the people around you and uplifting them and raising them up i think the way we do that your success should be everyone around you it's not economic it's talking about matt hughes for a while made me really happy this whole thing has been at times quite grueling and quite negative and quite brutal but the love i found and the joy i found from community and the people right because even in the in the small groups of haters even like gary marcus and so the people i talked to edward on gueso jr molly white brian merchant there are so especially these very critical moments when you're like very much dialing in on how negative things are how bad things are finding the people who maybe find it repulsive to finding the people finding your people who can be and the people who will talk to you about it even like troy and jake my my trainers who's so excited about this um even talking to them about the shit as normal people knowing that there are people there going through their struggles but also to just give you the perspective and also remind you that you are human too and focus on i know this is kind of a all over the place point but it's just it's really easy to get hard locked in everything in life and to kind of get away from why you do things and focus too much on the work when the most important thing at times is just to know there are other people feeling the way you do and when i hear from my listeners my readers a lot the most common thing i feel is they feel like they have a voice and they feel like someone is there for you yeah and i don't think it can be understated how much it means when you just reach out to someone you love and tell them you love them tell them their shit rocks say that their shit bangs but i don't think it can be understated tell everyone you when you like an artist or a writer's thing or a podcast like this tell me you fucking love it we don't do this enough and we need to do it more well that's
Speaker 2a good closing message so if you do have you have enjoyed the conversation today with ed please do let ed know that you love it down below um but please do leave your opinions down below and i shall read all of them ed thank you so much i'll link to your website but also to your youtube channel where people can learn more and i would highly recommend you do because it is truly fascinating and i think we need more voices that are demystifying a lot of the fugazi and the tiv in this moment in time and you're certainly one of them i really enjoyed the conversation thank you so much you
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