Generative AI Is Not A Real Industry

26:31They also make it selling access to OpenAI's models on Azure, roughly a billion dollars in revenue, and people running their own models on Azure Cloud, Microsoft's cloud compute platform. For context, by the way, Microsoft made$69.63 billion in revenue in its last quarter. $13 billion of annual revenue, not profit, is about$3.25 billion in quarterly revenue, off of upwards of$200 billion of capital expenditures since 2023. The fact that neither Gemini nor Copilot has any meaningful consumer penetration isn't just a joke. It should be sending alarm bells through Wall Street. While Microsoft and Google may make money outside of consumer software, both companies have desperately tried to cram Copilot and Gemini down consumers' throats, and they have categorically, unquestionably failed, all while burning billions of dollars to do so.

27:19But Ed, Ed, what about GitHub Copilot? all right let's talk about github copilot shall we according to a report from the wall street journal from october 2023 microsoft was losing an average of more than 20 a month per user on the paid version of github copilot what with some users costing them more than 80 a month jesus christ microsoft said a year later that github copilot had 1.8 million paid subscribers which is pretty good except like all generative ai products it loses money like i just bloody said I must repeat that Microsoft will have spent over 200 billion dollars in capital expenditures by the end of 2025 in return Microsoft got 1.8 million paying customers for a product that like everything else I'm talking about is heavily commoditized basically every LLM can generate code that some are better than others by which I mean they all introduce security issues into your code but nevertheless and somehow Microsoft loses money even when the users use it paid am I getting through to you yet?

28:17Is this working? If you are working for a hedge fund, an investment bank, or anyone like that, please get in touch. I will protect your identity. Is anyone around you freaking out? Because they should be. They should be, man. I'm freaking out a little. And I just keep all my money in a big box under my bed. I don't have a bank. No, I do. Anyway, not going to do that joke. So one of the arguments people make is that AI is everywhere. But it's important to remember that the prevalence of AI, you seeing it in different apps, is not proof of its adoption, but the intent of companies to shove it into everything.

28:48And the same goes for businesses integrating AI that are really just mandating people dick around with Copilot or ChatGPT. And I'm really not kidding, no really. KPMG bought 47 ,000 Microsoft Copilot subscriptions last year, a significant discount, to be familiar with any AI questions their customers may have. Management consultancy PwC bought 100 ,000 enterprise subscriptions, becoming OpenAI's largest customer in the process, as well as their first reseller, and have created their own internal generative AI called chat PwC that PwC staffers absolutely hate. It's really cool that when you actually talk to the users, they just fucking hate it.

29:25And while you may see AI everywhere, integrations of generative AI are indicative more of the decision-making of the management behind the platforms and the demands of the market more than any consumer demand. Enterprise software is more often than not sold in bulk to managers or C-suite executives tasked less with company operations and messy things like doing stuff or making sure the company runs, more with seeming on the forefront of technology. In practical terms, this means that there is a lot of demand to put AI in stuff, and some demand to buy stuff with AI on it by enterprise buying software, but little evidence that this actually leads to significant user adoption or usage.

30:03I'd argue this is because large language models do not really lend themselves to features that would provide meaningful business returns. And I think everyone can agree on that. Like there are things like summarizing emails, which I'll get to get to that in a second. Look, in fact, let's do it now. Look, let's briefly talk about where large language models work, where they're actually good. And some of you are not going to love this, but I know there's one of you who's like, yes, yes, now I will get Ed. I've got him now. I have him in my sights. To be clear, this is really dealing with the am actually responses i'm not saying and really have never meant to say that large language models have no use cases or no customers people really do use them they use them for coding for searching defined libraries of documents for generating draft materials for brainstorming for summarizing and searching documents these are useful but they're not magical they're cool but that's about it and their coolness or usefulness is a tiny little ant compared to the costs and stealing from millions of people and damaging our power grid and our planet.

31:06Okay, okay, so you're probably wondering, I brought it up earlier, agents. You've heard about agents. Mark Benioff wanking off about agents. Sam Ullman talking about agents. They love talking about agents, right? They love saying agents of the future. When a company uses the term agent, they're intentionally trying to be deceitful because the term agent means autonomous AI that does stuff without you touching it. It goes off and does things for you with one command, and it knows what to do. Remember these models don't know anything? The problem with this definition is that everybody has used it to refer to what is actually a chatbot that can do some things while connected to a database, which I would regularly call a chatbot personally.

31:43In OpenAI and Anthropics' case, agents refer to a model that controls a computer. This is closer to the truth other than the fact that their agents are so unreliable as to be disqualifying, and the tasks they succeed at, like searching TripAdvisor, are very simple and did not need automating. Next time you hear the agent, actually look at what the product does and maybe flick a booger at the person. But Ed, Ed, you just burst into my door and having a nice diet coke and you're in my house. What are you doing here? Ed, what about artificial general intelligence? Aren't they going to turn this into artificial general intelligence?

32:12No, they're not. Get out of my house. Generative AI is probabilistic and large language models do not know anything because they are guessing what the next part of a particular output would be based on the input. In reasoning models, they might look at that a few times go maybe it's not this maybe it's this they are not making decisions generative ai does not make decisions they are probability machines which in turn makes them only as reliable as probability can be and as conscious no matter how intricate the system may be or how much infrastructure is built as a pair of dice we do not understand how human intelligence works and as a result it's completely laughable to imagine we'd be able to simulate it large language models do not create or resemble or they're not artificial intelligence they are at most the most powerful parrot in the world trained to respond to stimulus with what they guess is the correct answer and they're pretty good at it they're pretty good right it's pretty cool except we shouldn't be burning hundreds of billions of dollars to make them slightly better at this let me put it in simpler terms imagine if you made a machine that threw a bouncy ball down a hallway and it was really really you got really good at dialing in to throw the ball so it followed a fairly exact trajectory would you think the arm was intelligent would you think the ball was intelligent would you think that the ability to precisely do something or more reliably do something would make it smart the point i'm making about large language models is that they're a cool concept with some interesting things they can do but they've been used as a cynical marketing vehicle to raise money for open AI by lying about what they're capable of doing, starting with calling them artificial intelligence.

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36:57revenue is not the same as profit and even then google amazon and to an extent microsoft the companies making the most investments in ai do not want to state what the revenue is on ai i hypothesize the reason that they do not want to disclose it is that it's pretty goddamn small it is extremely worrying that so few companies are willing to directly disclose their revenue from selling services that are allegedly revolutionary why salesforce says they closed 200 AI-related deals in their last earnings. How much money did they make? Why does Google get away with saying that they have growing demand for AI and nothing else?

37:32Is it because nobody's making that much money? As a sidebar, I can find, and I've really, really looked, like one company that appears to be making profit from generative AI during a consultancy that helps generative AI companies find people to train their models that made$300 million in revenue in 2024 and reached an indeterminate amount of profitability. We don't know if it was like a million dollars or not. While Microsoft may disclose it made 13 billion dollars in AI revenue, that's annualized, so projected based on current contracts rather than actual money in the accounts, and does not speak to the specific line items like one would say if said line items were not going to make the market say, hey, what the fuck?

38:11Put aside whatever fantastical beliefs you may have about the future and tell me right now what business use case exists that justifies burning hundreds of billions of dollars, damaging our power grid, hurting our planet, and stealing for millions of people to train these models. Even if you can put troublesome things like morals or the basic principles of finance aside, can AI evangelists not see that their dream is failing? Can they not see that nothing is really happening? That generative AI at best can be kind of cool yet mostly sucks and comes at this unbearable moral, financial, and environmental cost?

38:42Is any of this really worth it? And where exactly does this end? Do you, AI evangelist, gun to your head, your life contingent on the truth leaving your lips. Believe that this goes much further than you see today. Do none of these AI people see that this kind of sucks? Do they not see that generative AI runs contrary to the basic tenets of what makes science fiction cool? It doesn't make humans better. It reduces their work to a stagnant, unremarkable slop in every way it can, and reduces the cognition of those who come to rely on it, and it costs hundreds of billions of dollars and a return to fossil fuels for some fucking reason.

39:17It isn't working. The users aren't there. The revenue isn't there. The best time to stop this was two years ago and the next best time to stop is as soon as humanely possible. Generative AI is a group delusion, its own kind of real-life hallucination. What you're seeing in the news is not the success of the artificial intelligence industry, but a runaway narrative created by and sustained by Sam Altman, OpenAI, Dario Amadei, and of course Satya Nadella. These fucking people. What you're watching is not a revolution but a repetitious public relations campaign for one company that accidentally timed the launch of chat gpt with a period of deep desperation and big tech one so profound that it will likely drag half a trillion dollars worth of capital expenditures along with it the bubble will only burst when either the markets or the hyperscalers accept that they've chased their own tails toward oblivion there is no justification for any of the capital expenditures related to generative ai we are approaching the limit of what transformer-based architecture can do if we haven't already reached it.

40:16No amount of beating off about test time compute and connecting large language models to other large language models is going to create a new use case for this technology. And even if it did, it's unlikely that it ever makes enough money to make it profitable. I will keep talking about this stuff until I'm proven wrong. I do not know why more people aren't more worried about this. The financials are truly damning. The user numbers are so small as to be insignificant. The costs are so ruinous that they will likely cost tens of thousands of people their jobs, and one of the hyperscaler CEOs their job along with it, although admittedly I'm a lot less upset about that.

40:48And they're going to inflict damage on tech valuations that may well rival the dot-com boom or worse. And if the last point feels distant to you, ask yourself, what's in your retirement savings? That's right, Google, Microsoft, and hundreds of other companies that will be hurt by the contagion of an AI bubble imploding. I should also not be the person saying this, or at least I shouldn't be one of the first. these numbers are horrifying and i have no idea why nobody else is worried there's no industry here there is no money there's no proof that this will ever turn into a real industry and far more proof that it will cost more money than it will ever make in perpetuity open ai and anthropic are not real companies they're freeloaders living on venture-backed welfare for an indeterminate amount of time because the entire tech industry has agreed to rally around the world's most unprofitable software and like any other free ride that doesn't actually produce anything when the money goes away they're fucked.

41:40Seriously, why are investors funding OpenAI? Do they seriously believe it's necessary to let Sam Altman and OpenAI continue to burn five or more billion dollars a year on the off chance he's able to create something that's... alive? This motherfucker can't create something that's profitable. What's the end point here? How many more billions? Where's the fucking money, Sammy? Where is it, Sam Altman? Where's my goddamn money? Where's my money, Sam? I say all this because generative ai is open ai the consumer adoption of this software has completely failed and it's going nowhere fast chat gpt is sustained entirely on deranged specious hype drummed up by a media industry that thinks it's more remarkable to write down the last lie that sam altman told than say that open ai has lost nine billion dollars in the last year to sorry they spent nine billion dollars to lose five billion dollars in the last year and they intend to more than double that number in 2025 for absolutely no reason.

42:36Look, look, it's time to stop humoring OpenAI and time to stop directly stating that it is a bad business without a meaningful product. We also really need to be clear that the generative AI industry does not really exist without OpenAI and thus this company must justify its existence. And let's be abundantly clear, OpenAI cannot exist any further without further venture capital investment. This company has absolutely no path to sustain itself, no moat, and loses so much money that it will need more than$50 billion to continue in its current form in the next year. I don't know how I'm wrong, and I've sat and thought through and researched a great deal on how I might be.

43:17I can't find any compelling arguments. I don't know what to do but tell you what I think and why I think that way, and hope that you, the listener, understand a little bit more about what I think is going on, because this really bothers me. As I've said before, I grew up on the computer. The computer It made me who I am. Seeing the tech industry like this sickens me because it's getting money away from people doing cool shit to the least cool people doing the least cool shit possible. And it's frustrating. But I'll leave you with one thought and one thing that particularly bothers me about generative AI.

43:46Regular people, for the most part in my experience, do not seem to want this. While there are occasionally people I'll meet who use ChatGPT to rewrite part of an email, most of the people I meet feel like AI was forced upon them. With that in mind, I believe that Apple is actually radicalizing millions of people against generative AI by forcing them to reckon with the terrible summaries, awful suggested texts, and horribly designed user interface choices from Apple Intelligence, one of the worst product launches I think I've seen in my life. Something about generative AI has caused the hyperscalers to truly lose their minds, and the intrusion of generative AI into both Microsoft Office and Google Docs has turned just about everybody I know in the business world against it.

44:24The resentment boiling against this software is profound because the tech industry has become desperate and violative, showing such contempt for their customers that even Apple will force an inferior experience upon their customers to please the will of the rot economy and the growth-at-all-cost mindset of the markets. Let's be frank. Nobody really needs anything generative AI does. Large language models hallucinate too much to be truly reliable, a problem that will require entirely new branches of mathematics to solve, and their most common consumer-facing functions like summarizing an article, practicing for a job interview, or writing a business plan are not really things people need or massively benefit from, even if these things weren't ruinously expensive or damaging to the environment.

45:05I believe Generative AI is turning regular people against the tech industry, thanks to how much they're trying to force it upon them and make them use the bad idea. And it isn't working. Nobody wants this shit. They're intrigued by the idea, then immediately bounce off of it in many cases once they see what it can or can't do. This software is being forced on people at scale by corporations desperate to seem futuristic without any real understanding as to why they need to do so and whatever use cases may exist for large language models are dwarfed by how utterly unprofitable this whole fucking fiasco is but i want you to do something if this whole thing has pissed you off if hearing about these companies has enraged you as it has enraged me i want you to tell your friends your family that open ai spent nine billion dollars to lose$5 billion.

45:52I want you to talk about the fact that large language models don't really have a market, that chat GPT is a marketing con, that Sachi Nadella of Microsoft has burned, probably will burn$200 billion chasing software that does the same thing as everyone else, that Tim Cook of Apple has forced Apple intelligence, barely functional software, on millions and millions of people because Apple has no more ideas, that Mark Zuckerberg of Meta has pushed AI on everything because he has no more ideas left, and it's going to burn so much money in meta and sam altman and dario amadei are two fucking liars two liars who will tell you that their software will turn into artificial general intelligence they're lying they're all lying and sundar pishay of google is the arc liar who went in google io and talked about a completely fictional ai agent returning some shoes the only reason that companies like this lie like this is because the truth is boring the truth is mediocre believe your goddamn eyes when you use chat gpt and you say, what the fuck is this?

46:51Why does this matter? You're not crazy. You're not an idiot because you can't see the magic of generative AI. The people pushing this stuff are either credulous, they're either bought, or they're making a shit ton of money and lying to you. I refuse to let them keep doing so. Better Offline exists to kind of explain this stuff as plainly as possible. You can reach out to me if I wasn't clear about something. I love feedback. Please be nice to me, I guess, is what I ask. But I love doing this. I am scared of how this ends. I think it's going to really hurt the markets. Could be three months, could be six months, could be 18 months.

47:26I don't know. And I don't really think it's the right thing to do to predict. But I'll tell you this. A better tech industry can come out of this collapse. I don't know how severe the collapse is. I don't think like Google's going to die or anything. It's going to hit tens of thousands of people's jobs. It's going to hit the markets hard. I don't know if a recession is possible. I'm not a financial guy, but I'll tell you this, the tech industry needs, they need to realize how bad this is. They need consumers to tell them. And honestly, consumers not using it should have told them, but they clearly haven't worked that shit out, have they?

48:00But I'll leave you with this. I think when this bubble pops, there's going to be a lot of people that need to apologize. A lot of people in the media, the Casey Newtons of the world, the Karaswishers of the world the people claiming this was the early days of the internet again but I think the thing we really need to do is make our displeasure known to these tech companies find the feedback forms go on go online and talk about them say their names say their names to the friends you have who are mad at this too which should be a lot of them say their names again and again and again you ask me how can things change these people only have their names they have more money than any of us combined.

48:39They have all of this power. And as a result, they actually only have their SEO, their names. How do you think Prabhagar Raghavan feels, by the way, when you Google his name and all you see is me, the smiling man? I believe that enough of us just talking shit on these people. And I don't mean being irate. I don't mean making stuff up. We're not them. We don't have to operate with lies. We can operate with truths, such as Microsoft is propping up open ai a venture welfare client all these people hate the poor so much but they love welfare when it means maybe making money or maybe burning billions of dollars so fuck their names up talk shit about them talk them to your friends i don't care if you mention better offline just tell people what they've done tell people that generative ai loses money on every single fucking move it's so sickening it's so boring and it's most decidedly not the future you are not crazy if you don't think this is amazing.

49:31You're being lied to. What you're seeing is a marketing campaign. And I will continue to walk you through this stuff. And if I'm wrong somehow, I will correct myself every goddamn time because I deeply care about giving you what I know and what I've seen. And the things I've reported in these two episodes scared the shit out of me, both for the markets and the fact that so many rich people are willing to be so goddamn stupid. And it made me really angry because it shows such contempt, content for the media and content for the user and i will not bloody accept it it's such a pleasure to do this show i'm very lucky to do so

50:15thank you for listening to better offline the editor and composer of the better offline theme song is matt osowski you can check out more of his music and audio projects at matt osowski.com M-A-T-T-O-S-O-W-S-K-I.com You can email me at ez at betteroffline.com or visit betteroffline.com to find more podcast links and, of course, my newsletter. I also really recommend you go to chat.wheresyoured.at to visit the Discord and go to r slash betteroffline to check out our Reddit. Thank you so much for listening. Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, visit our website, coolzonemedia.com or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

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