Mark Cuban on the AI Bubble: Who Actually Gets Wiped Out?

0:00You and I lived through a couple of bubbles. We've seen this movie before. And this wave seems very different than the dot-com wave. So let's talk about that. Are you concerned about a bubble? We're seeing bubbly like behavior people. It's not the traditional dot-com bubble, right? Because back then there were companies going public, getting crazy valuations and people are buying them. And the stock would go up, you know, 50%, 100 % with companies that had no revenue, no traffic, no nothing. And you'd go get a cab back then and people would be talking about them. And you don't see that at all today.

0:31So it's not a bubble that's going to impact most people in the room, right? Or most people across the US. But it could just destroy a lot of VCs and a lot of funds and a lot of PE, right? Because they're going all in. I'm going all in. AppLovin started with an$8 domain and no VC funding and became one of the largest ad platforms in the world. Now that same engine powers AppLovin ads for e-commerce. Your ads run inside mobile games, reaching over a billion people with full screen, distraction free attention. The platform finds buyers and optimizes for profit. You set the target, it does the rest.

1:11One cookware brand went from$4 million to$16 million, turned profitable and is on pace for$80 million this year. Visit applovin.com slash all in to launch your first campaign today. I'm doing all in. It used to be that product managers for brokerages had to outperform their numbers, right, for, you know, the SPX or whatever. But now you got to outperform to keep the money coming in. You got to outperform the fun next door. And they're all in Anthropik and getting their outcomes at SpaceX and celebrating. But if shit hits the fan. Yeah. It really is like I've only done venture for just over 10 years.

1:51And it is wild to watch so many people who deployed at the wrong time just out of business. They just invested at the peak. And entry price matters. And you and I have been in a bunch of deals together. And we used to get to investing companies at$5 million,$10 million as angel investors. And then all of a sudden, the request was$40,$50,$60. And the product's not launched. And you're like, how does this work? Yeah. And what's happening now is the market leaders, Google, et cetera, Meta, they're borrowing hundreds of millions, billions of dollars. Yeah, that's interesting. And there's already a private credit problem right now.

2:26Right. So you just layer on private credit, like Al Capital getting all the refunds. And then you, you know, you have these huge companies that have cash flow, but there's, you know, they're spending all their cash flow on CapEx, and then they're borrowing on top of that. 50 year bonds. Right. That's planning for perfection. Right. And that's going to be hard. and we're building these data centers. And if there's a price performance curve on AI that minimizes the power requirements, there's going to be a lot of data centers that are going to be turned into pickleball courts. Interesting. Because they just can't get the power turned on.

3:02No, no, just the power. Everybody thinks that, okay, there's going to be so much more utilization and there will be, right? It'll just scale like everybody expects, but there's going to be breakthroughs and technological breakthroughs as well. Just like we saw fiber back in the day, It was all about putting in fiber. Then it went from one gigabyte fiber to 10 to 100 gigabyte. And then there wasn't a fiber problem anymore. There wasn't a bandwidth problem anymore. Quite the opposite. We had dark fiber that people bought for pennies on the dollar. And just sitting there, right? And how is it not going to be the case that we don't get the same price performance improvements on the AI side and on the data center side?

3:37Yeah. And then with all the hate going against data centers, I think that could be protecting them. I mean, spending, committing tens of billions of dollars for 10, 20 years going out. Yeah. I mean, nobody can predict that well. I mean, you used the word pricing to perfection, I think, earlier in the conversation. And that's really what's happening. I mean, you have to have a thesis that we're going to put a hundred, you know, open AI, a hundred billion dollars to work. and that's going to come back, not just in revenue, but it has to come back in earnings. A margin dollars, yeah. Yeah, it has to be profitable.

4:16Yes, and you just don't know. And I'll tell you the other in terms, the corollary for bubbles, right, in this particular bubble, because it's so driven by private capital, there should be a lot more companies going public, not at the SpaceX level, not OpenAI, not Anthropic, but the$100 million dollar IPO. Because if AI does what AI knows, we all know what it'll do in terms of disruption, then you want to have some sort of currency that allows you to buy all those companies. You guys were talking about buying different legal companies. Well, if you don't have that currency, the stock is currency, you're going to have to go out and raise money to do it.

5:02And if anything happens and that money is not cheap, that money is really, really expensive versus if you go out and you do a hundred million dollar IPO or a 50 million dollar IPO and you can do a secondary or whatever as many times as you need if you're performing. But the minute that company that you're competing with, that is a legacy business can't keep up or there's some other company that has domain expertise that you need or data that you need, like you guys were talking about. Yeah. You want to be in a position to buy them. Yes. That is nobody's forward thinking. Yeah, no one is forward thinking like that at all.

5:33And I'm like trying to tell my portfolio companies, go public, motherfuckers, go public. They just don't think that's the right thing to do. Well, an M &A is, you know, not to make this political, but, you know, when you're an entrepreneur, you have to play the game on the field. M &A was off the table. Lena Khan had a certain perspective, which was we have to be like precogs in minority report. We have to predict who's going to be a monopoly in the future and stop them now. It's like, OK. Without consideration to compete with China and everything else that's going on globally. Yeah. Four years of no acquisitions.

6:09I mean, the people I talked to who were in corporate development were like, we've been told to stand down because it's not worth the breakup fees. But even so, right, it's, you know, with mergers and acquisitions at that scale, fine. But if AI does what we know it will do, the companies that are disruptive don't have to be enormous companies. No. You don't want to have to always raise cash to go out there and do that. Yeah, it's such a good insight. Right. Because back in the day, back with broadcast.com, we bought like five companies just from stock. And then there was always a bigger fish to come along.

6:41Yeah, which we were happy to be fished. Yahoo. Yeah. Yeah, the famous caller. If you were a Claude employee, if you're at Anthropic or at OpenAI, is it time to start thinking about the caller? Yes. Try to think about, yeah, pairing the position. You know, I colored my stock because how rich do I need to be? Right. You know, and if you're able to change your life, if I work for any SpaceX, any of them, whatever, I'd be like, you know, somebody put together a collar for me. Yeah. You know, because I just need to be protected, save part for my upside, but just cover my downside. Yeah. When you did it, you had to like actually orchestrate that, right?

7:21It didn't exist as a product. No, it didn't. So I had to actually create an index of internet stocks. I had Goldman Sachs create an index of internet stocks that I thought sucked. And then I shorted that index and we had to follow all the laws. And I just had to have that short in place until I was able to do a real caller in the market on my Yahoo stock. And I lost tens of millions of dollars on that short, but I made up for it. Yeah. I mean, one of the great trades of all time. What do you think this wave of capabilities in AI, I'm sure you play with it because you've always been a tinkerer.

7:59So maybe what are you tinkering with and what do you think is going to be the most world changing in the next five, 10 years for entrepreneurs, for society? Where do you look at it and go, hey, this is truly meaningful. Yeah. So AI is a lot harder to implement than anybody expected. For sure. Right. You know, you can do an agent pretty straightforward. Right. You can prompt away. You know, we cheated on tests. We cheated at work, you know, did projects, improved our productivity 100x. Right. All easy peasy. And we just assumed, you know, at the enterprise, it'd be just as easy. It's hard. Yeah.

8:37And it's terrifying and not terrifying for employees, because Dario and everybody saying 50 percent of white color. People are going to lose their jobs. Here we are two years later. They said within two years. And, you know, employment's still growing. People are hiring. We need more AI literate people. Right. So CEOs have no clue what is going on. None whatsoever. And that's not going to change. Right. And so, you know, trying to explain to them that you need to add a harness to this, you know, all the. Yeah. No chance. Right. And if you think about it from an AI perspective, if AI, we're talking about AGI and we're talking about taking over the world.

9:18If you need to have forward deployed engineers, that tells you all you need to know about AI. Because by definition, you should just be able to ask AI to do what I need you to do and ask and tell me how to implement it. Yet here you have Microsoft hiring 6 ,000 people. Right. You have Anthropic, OpenAI, all saying they're going to deploy to these companies, which tells you AI is hard. And then you have Alex Karp from Palantir freaking out saying, how can you give your alpha to these companies? When, in my opinion, he's just saying they're doing what we're doing. Right. Yeah. We're we're all about forward engineers at Palantir and they're doing the same thing.

10:01And again, it's a great insight because you can, if you're using it as a search engine or you're making your little agent to go do your cron job, okay, fair enough. It's going to work. You need to have a little bit of systems thinking. But when you start putting into the enterprise and this is mission-credible work. Let's talk about the little bit of systems thinking because that's the second part. Now, I'm not trying to shit on AI. I love it. I invest in it. It's going to be amazing. It's the most impactful technology that we've ever seen and may ever see, right? Right. But try going into cloud or chat GPT and saying, OK, I just want you to do this search for Jason Calacanis investments.

10:36And I want you to report and I want you to email it to me every week. Yeah, you can't do it. Can't do it. And then it says, OK, would you like for me to do an agent that gives you alerts? And then you say, sure. And then you have to know how to program because it either gives you a JSON file or it gives you code. And it comes out slop. Yeah. Then you have to not correct. You have to reiterate. Right. You know, if you want to say, you know, hey, let me load a picture in and you tell me if I'm hot or not. Or is this girl hot? What should I say to her? You know, we're business versions. Great. Yeah.

11:07Right. But A.I. is not going to, you know, take away 50 percent of the jobs. There's just so much it can't do that regular people need it to do. Yeah. Right. Now, does that create opportunity? Enormous opportunity. Yes. Right. So, like, I'm an investor in Lovable. and we were here this morning talking and um anton was saying that anton was saying that um they people are using lovable to create 770 000 applications a week a week yeah right and that only 30 of their business is in the u.s and only um 20 is engineers and what's happening is entrepreneurs to answer your question about where it's going right if you're an entrepreneur like Like he was saying before, there's no better time to be an entrepreneur.

11:58He nailed it, right? Because that's where AI is the most impactful. No matter where you are in the world, they have big utilization in Brazil, India, right? If you're in France, US, wherever. You know, like I gave it a prompt, like I said, because I wanted to see what it would take. I was like, okay, we're going to create an imaginary company that has a button that can record 24-hour video. and then I wanted to be able to send it to me every 24 hours. And I want you to create a patent and a business plan and tell me what licensing or whatever I need. 12 minutes. Yeah. Wow. Like, we've started tons of businesses.

12:38Yeah, six months to get a prototype, 12 months to launch it. Yes. And then you have to... And then I asked for a bill of materials and the source companies. Like, the basic stuff to be that, the blocking and tackling stuff that every company has to do at, you know, when you're setting it up and early in its life cycle. Done. Done. And even if it's wrong, so what? Because the one thing you and I both know, and everybody in the room should know, every single motherfucking business plan ever written in the history of business plans is wrong. Of course. Yeah. It's a thought exercise that at least gives you some sort of direction you're going.

13:17Yeah. And it's a guideline and a template it for you, right? But it's wrong. So what if the AI is wrong, if the model is wrong, you know, because you're going to learn and you're going to iterate, but it's still, again, all this talk about taking white collar jobs is ridiculous when it can't even do the basic shit, right? And you have to have, like you said, a programming mindset in order to be able to iterate and figure it out. and like even you would think if ai is advanced as we want to believe ai is right now all the errors that we get when we ask it to do a project it would learn from all those errors and even have hey i'm claude i see you have a problem with this right and it failed on these three attempts let me just tell you what 97.6 percent of the other people who ran into this did right and then it would fix it for you would tell you it doesn't even do that it just says failed right or says whatever.

14:13You know, again, AI is amazing. And particularly for programmers, it's game changing. When you have a narrow data set, like code or legal, tax, it's magic. And it's just math, right? Basic data, right? But when you want it to do, when normal people anywhere in the world want to use it for normal stuff, great. You start a business, great. But if you want to start getting advanced, it's like figuring out PowerPoint used to be or Excel, right? You always have to have your Excel expert, you know, or your PowerPoint. In your company. Yeah. Or whoever that you knew, right? Or there would be companies built.

14:54I've invested in like a company that's SlideShare, that all they did was have PowerPoint templates that you could download and redo. AI is not even that advanced for, you know, once you get to the second level. And so that creates so much opportunity for anybody to walk into a small, medium-sized, even large business and say, hey, I understand AI. I have a basic computer background or better. And so all these fails that you're running into across your company, big or small, I can help you fix them. Because what AI can do once those issues are fixed is phenomenal. But even better, if you're thinking as an entrepreneur to start a business, those things will eventually break.

15:40Agents get bored, right? And they drift. Because as the underlying large language model starts to change, the way it was originally programmed doesn't match what the large language model turned into. Right? You see what I'm saying? Yeah. And you even wrote something about this, right? Where it's taking more people to manage all this stuff. I'm going all in.

16:04starting a business usually means juggling a bunch of different services just to look legit not anymore with northwest registered agent you get a complete business identity all in one place a business address domain website phone number and more with privacy protection built in from day one don't spend hundreds or thousands on services you can get from northwest for free visit northwestregisteredagent.com slash all in free and start using free resources to build your business today. I'm trying to get the whole firm to be AI first. And even with young people, it's like one group embraces it. And, you know, they they solve, you know, I don't know, let's call it five or six really pressing issues.

16:52The other group is, you know, not embracing it. And the difference between those AI first employees and the non-AI first employees, the gap is like, whoa. It's almost like when we got into the industry and somebody knew how to use the office suite in a PC and then somebody else was like on legal pads. It's like that much of a difference. It's so stark. People who are AI literate, when do they run into a ceiling? Well, what I'm seeing is a lot of tool hopping, which is a good question because they started with open claw they started building it it got brittle does anybody still use open claw who's open claw anybody using hermes agent okay there you go who's on claude co-work and then oh whoa and perplexity computer anyone okay interesting those are the four that people have been bouncing around on and what i decided to do is i was just like hey token max it you can each spend a couple thousand dollars a month i don't care about that i just care about the gains and they all wound up going from open claw.

17:54All the agents started breaking. It's hallucinating. It's like too frustrating. They started using clawed co-work. Okay, great, but kind of limited. And then they started using lovable and they built intranets for the venture business that no venture business would spend a half million dollars and 12 months building an intranet. You'd just be like, I'm going to put it in Notion, Google Sheets, whatever. and then they just started building more and more software. So I have two or three people who are building software that I would say five years ago, we would have spent maybe two or three million dollars a year building this with that outsource company.

18:30You just would not have done it. Which means we wouldn't have done it. Right. You were just about the SaaS application that did it. And then we would have tried to like shoehorn it into a SaaS app and customize it. It wouldn't have worked. We would have given up. But how are you going to manage it now once they get there? Well, you know, again, to your company, Lovable, which man, congrats on that investment, because that company was going to go out of business four times. And I told Anton, every time they say you're going out of business, you add a hundred million in revenue, 600 million in revenue and four times, 200 million, 300 million.

18:57Oh yeah. It's going to be absorbed into the frontier models of the world, right? I mean, I've got lovable. I've got Synthesia.io. That was the first investor in 10 years ago, maybe that, that are just, it's just killing it. Right. I've got AMI, which is Jan LeCun's world model. We haven't even talked about world models versus LLM and transformers, right? Because everything we do is built on text and pictures. Nothing's going to be text and pictures in 10 years, right? But what's going to drive it? And people say, well, AI is so smart. It's going to change everything. I'm like, okay, if you show AI a video of a two-year-old on a high chair with a sippy cup, the two-year-old knows if you push the sippy cup over the edge, mom's going to come running and the kid's going to start laughing.

19:47AI's got no clue what's going to happen. None. If you're at a corner blindfolded and you have to cross the street, would you rather have your phone with AI or would you rather have a seeing eye dog? Yeah, dog. I'm taking the dog every time. Of course, yeah. It's not ready. Right? It's not ready. So just think about how far we have to go. Yeah. You know, and all this - Huge opportunity though. I mean, the world models are crazy because you have videos available on YouTube and just, we have the world there. So it's gonna learn - And that's still not enough. It's not enough. They have to wear gloves and now they've got people in Manila, like doing recipes.

20:27So I invested in the company, Matter.com and they're launching satellites just to take, And they do spectrography where they use the satellites to take videos of everything underneath them and use a spectrography. I don't even understand all this shit in order to be able to convert it into a world model that will provide algorithms that other world models can use. Yeah. Right? There's just no way that the future of AI doesn't include video. I mean, it's a huge part of it. And as the inference and the back to the build out of these data centers, as we wonder what's going to happen, people wanting to use more tokens and then these world building and video, man, that takes a magnitude.

21:13Yeah. Video, like if I'm going to be wrong on the data centers, it's going to be because of video. Yeah. Right. And world models and robotics, which is all related. Yeah. And robotics, you know, it's related, but we still got a long way to go. Yeah. Health. You look great, by the way. I don't know what's going on. You got the Reddit. What do you got? Reddit TrueTie? What's on the menu here? What's off the menu? Follow me on Instagram, mcubin. I just, I'm eating better. I mean, you look better now than 20 years ago. Oh, I appreciate that. Thank you. The TAM helps too, right? The TAM. But I mean, you look then and fit.

21:45And listen, we're getting up there now. We're not kids anymore. This is definitely going to help AI, all the work being done. And I use it too. Like I invested in a company called Open Evidence. Yes. Yeah. which is just for medical, right? And I used it. And I have one supplement I have to take because my iron levels are low and I have to take this one medication. And I was taking them at the same time and couldn't understand why I was having problems. I've run it through open evidence. And I said, here's everything I'm taking. Here's everything I'm eating. And they're like, no, you got to do this.

22:17When you get up to pee at three in the morning, take this medication. Oh man, getting old sucks. I was right there with you last night. What's going on? what's going on, right? And so, you know, but it's for health, it's going to make a huge difference, but it's not going to replace doctors. No. But I mean, it is pretty amazing. Are you on Whoop or your Apple Watch? I watch, yeah. Yeah. I mean, the Apple, the Whoop plus getting your blood test, just self-directed healthcare with AI, man, you're going to get some early wins. And then when you do go talk to your doctor. Oh, you have it right there, right?

22:53I get my blood tested. So now the friends are still up three to six months. Yeah. Right. And I've been doing it for 10 years. So I know all my trends. Wow. And so you were doing it before function and superpower. Oh, yeah. Like you could go look up Mark Cuban blood tests on Twitter, right? And I would get into it with doctors like eight, 10 years ago. And you're going to need this for your benchmarks. But it's only going to get better. Yeah. It's going to be really interesting. We had this big data moment. And it was like, okay, yeah, we're storing all this data. but we didn't have any intelligence against it.

23:24Now that's incredible when Apple is now putting that data, they're doing studies. I don't know if you've been invited to studies on your Apple watch. I'm like, well, this is going to get very interesting. Just added blood panels. So now your sleep data, your steps, your heart rate, your respiratory EKG, plus your blood work. Then if you can get your diet into it as well. Yeah. That's what iWatch has in iHealth, right? Yeah. So, yeah, you're just going to get smarter, you know, and that'll make your doctors able to be smarter because 95 % of medicine is guessing, you know, because you can't, there's no way a doctor can memorize all the new that happens every single day.

24:02You just can't. But a doctor using these tools, having, you know, the empathy and the ability to communicate and the ability to see. Yeah. Right. Because, again, there's you can't see. Yeah. You know, you could have doctor, you know, why am I bleeding? You got a blood, looks like you got a gunshot wound, right? AI is not going to tell you that. Yeah. When we look at the opportunity here, it's going to be a lot of change. A lot of talk about wealth disparity in the US. Invest America, our friend Brad Gerstner and our friend Michael Dell, another great Texan. And thanks for welcoming me. I'm enjoying my time in Texas.

24:45Yeah. I mean, it's great. I love Texas, man. Texas is fun. It's kind of like the heat's kind of like this, though. Yeah. We have air conditioning. We do have air conditioning. There's a record number of air conditioners coming from China to Europe this summer. You know, I looked at what companies installed them and everything. Oh, you always got to trade. You always got to trade. I'm curious, but there's no real... Sold out. They're all being shipped here from China at the moment. But really interestingly, you know, feels like entrepreneurship, which has been our shared passion for many decades.

25:19Hey, investing, another shared one, giving people access to public markets, invest America. We have this dueling narrative, socialism in America, capitalism. And it feels like this is the in our lifetimes, you and I are close in age. This is the most fevered we've ever seen it. I mean, we have states, maybe not since the 60s or 70s. I missed that. I was born in 1970. You were born, I guess, 1943? 23. 23. I always joke he's an older brother. I look good too, don't I? You look good for 1923. But, you know, this is pretty polarized. What's your take on the social? There's two things here. One, all the DSA stuff is local.