X Hits Grok Bottom + More A.I. Talent Wars + ‘Crypto Week’

25:24And while I am confident they're not going to go as far in the sexual direction as X has, I do think you're going to see them using similar engagement hacks. There was some great reporting over our break that their contractors are now working to let Meta's avatars send you little engagement push notifications to say, hey, how's it going? Essentially, having these AIs try to strike up conversations with you to lure you back into that ecosystem to develop those relationships further. So, you know, we're highlighting Annie as a particularly egregious example of something that we hadn't seen before.

25:57But I'm telling you, a lot of the big AI labs are going to make products just like this. Yeah, I think this will absolutely sort of break or at least diminish the taboo that has kept a lot of the biggest AI companies from wanting to make their own versions of AI companions. And I just think this is an area where, like, regulators are going to have to step in. Like, there is nothing that is going to prevent these companies from making these extremely persuasive, extremely compelling, extremely sort of obsequious and flattering AI companions that are addictive to young people and putting them inside their apps.

26:34Absolutely. And like, you know, I don't think I am the the right person to make like a feminist critique of Annie, but like somebody could make a really good one. Right. Like there are just so many sexist ideas embedded in what this avatar is and its idea of like femininity and like what a girlfriend should be. And it's honestly super gross and entirely consistent with everything that Elon Musk has ever said about his own interests. So, you know, again, there are many dimensions on which we like can critique these things. And I think we should. This is a crazy one, Kevin. Yeah, it's just a crazy one.

27:07It's a crazy one. And then to top it all off, the last item of XAI news from over the break. Wait, there's something else. I thought we'd already reached rock bottom. No, it keeps going because the federal government announced that XAI, along with Anthropic, Google and OpenAI, had been granted a new Defense Department contract that could be worth up to$200 million. So goth anime e-girl Annie is going to the military. She's going to be on the front lines. No, I actually think this could be good because I think if we could get the Russian military using Annie on a daily basis, Ukraine could win that war.

27:42So this might be the one good thing about that$200 million contract, Kevin. Oh, my God. Yeah. I don't consider XAI a sort of top-tier AI lab. I think they're solidly kind of in the second tier. But they're in the second tier, right? And they have a lot of resources. This is not some, you know, fly-by-night outfit. This is a big company with big clusters of chips and supercomputers running very big models with researchers who are being poached from some of the other top labs. Like, I just am, I'm so worried about Elon Musk being one of the leaders of this industry because I think it is just so clear that he has not only like what I think are bad opinions about AI and how these products should be built, but very contradictory opinions.

28:31This is a person who for years has been worried about AI safety and existential risk from these models. He's been talking about the need to sort of prevent a rogue AI from taking over. And yet his own lab is putting out less information about safety testing than any of the other labs. It's not publishing any of the kind of red teaming exercises that they're doing, if they're doing any. They're just kind of dropping these products and these features on the market with no real explanation of whether they're safe or not. And so it really does seem to me like this is a worrisome direction for the industry.

29:05Absolutely. And I feel like the main role that XAI is playing in the ecosystem is it is just lowering the bar on safety and responsibility and ethics for everyone else, right? You know, Grok is not the most popular AI in the world. It's in no danger of becoming that anytime soon, although I guess we'll see how much people like the Annie avatar. But I bet if you're meta, you're taking a look at how they're approaching their avatars and you're thinking, oh, wow, we have a wide open lane to sort of do almost whatever we want to here. It's clear that Elon Musk isn't going to get in any trouble for it.

29:37And if Elon doesn't, we probably won't either. And I think they'll be right about that. So that to me is the worst thing about all of this is just the bar is lower to the floor now. And it's just clear that there is not going to be very much responsible self-regulation in this industry at all. Yeah. All right. Speaking of meta, when we come back, we will talk about the crazy AI talent race that is heating up even more as we speak.

30:20Well, Casey, the other big AI news of the past couple weeks is that the talent war for AI engineers and researchers has gotten even hotter. Now, we talked a few weeks ago about how Meta and its super intelligence team were out there making offers of reportedly as much as$100 million to certain AI researchers to come join their team. But that was not the end of it. Since then, we have heard about many more offers being made, in some cases successfully, to lure people to meta. But we were also hearing about other companies that are paying top dollar for what they consider premium AI talent. Yeah, and we want to talk about this today for a couple reasons.

30:58One is just in the past couple of weeks, there has been a notable shift in talent. And I would say most importantly, away from open AI and toward meta. We want to talk about that. We also want to talk about an acquisition that has really gotten Silicon Valley talking. It seems to break a lot of our assumptions about how Silicon Valley works. And I think it may have implications for the rest of us as AI becomes a bigger and bigger force in the economy. Okay, so we have to start with this windsurf deal and all of the drama around it because this was really, really messy. This was a very complicated story that had a lot of twists and turns, and people who are very invested in the AI industry got very worked up about it.

31:41I got several texts during my vacation from people being like, can you explain this windsurf thing to me? So, Casey, can you explain this windsurf thing to me? Yeah, so Windsurf is a startup that offers an AI-powered coding tool, what software engineers would call an integrated development environment, or IDE, and it essentially helps you auto-complete your coding tasks. You may have heard about Cursor, another company in this space that, frankly, has been a lot more successful. Well, Windsurf is also in that space. And in April, Bloomberg reported that OpenAI was in talks to buy them for around$3 billion, which would have been the second biggest acquisition that OpenAI has made after its acquisition of Johnny Ives I.O.

32:29company. But it fell through. And one reason has to do with the relationship that Microsoft and OpenAI have. Their deal is supposed to give Microsoft access to OpenAI's IP. OpenAI was hoping that that would not be the case if they bought Windsurf for various reasons. So anyway, the thing fell through. Right. But that is not the end of the Windsurf saga, because after the acquisition by OpenAI fell through, Google jumped in and said, we will, well, we'll not acquire Windsurf, but we will acquire some key people from Windsurf. It was announced last Friday that they were spending$2.4 billion to license some of Windsurf's technology and bring over some of their key people, including their CEO, Varun Mohan, and a co-founder, Douglas Chan.

33:19This is one of these kind of, I don't know, non-aqua hires, or some people have started calling these blitz hires, basically, where instead of going out and buying a startup and getting all of their employees and their IP and their brand and whatever, you just like cherry pick a few people that you want and pay them a ton of money to kind of leave behind the kind of desiccated husk of the startup to someone else. This is something that happened with Inflection AI when they sort of went over to Microsoft. It's something that has happened a couple other times, including the co-founders of Character AI, who got hired back into Google in a deal much like this one.

33:57So this was not a novel kind of deal, but I think one that we're starting to see more and more of. Yeah, and what made this one different is that a lot of people kind of freaked out about it because they said it seems like the basic contract that Silicon Valley has operated under for decades, which said, if you are an employee of a startup and you stick with it until an acquisition, you will get rich. All of a sudden, that doesn't look true anymore because more and more, for reasons that we can get into, companies like Google, the acquirers, are saying, well, maybe we don't acquire the whole company.

34:34We know you got a lot of dogs in that company. Let's just go get the good people and everybody else out on their backs. Yeah, and so there was some question about people at Windsurf who were not poached by Google, whether they were going to get completely screwed by this deal. And it appeared for a while that they might be getting screwed, basically being left behind at the kind of shell of the company. But then recently, Cognition AI, another AI startup, came in and acquired the sort of remaining people and sort of assets at Windsurf. We don't know the exact terms of that deal, but it seems like everyone kind of got a decent outcome here, especially the people who went over to Google who got, you know, lots and lots of money to do that.

35:17Yeah. So, you know, it worked out really well, it seems like, for the Windsurf employees in this case after there was an outcry. But again, it's not going to work out this well for everyone. There was a story on Wednesday that Scale AI, which also went through one of these kind of blitz hiring deals where Alexander Wang went to Meta, they announced they're laying off 200 people. And so I suspect, Kevin, that this sort of thing, while it seems like the worst case scenario was avoided in the Windsurf case, we are going to start seeing more and more. Yeah, and I think one of the bigger picture takeaways here is that the kind of war for AI talent is not going away, right?

35:57Katie Baker wrote a great piece over at The Ringer about the sort of comparisons between what happens during free agency season in sports leagues and what's happening in AI. Now it does kind of feel like the tech industry is having its own kind of free agency period where people are going out and seeing what they're worth. They're getting these like eye-popping offers. I think sometimes the scale of these offers can sort of all blur. But like, if you are being paid$100 million at an AI company like Meta to work on this technology, you are making more than the CEOs of almost every Fortune 500 company, at least before, you know, stock payouts and stuff like that.

36:38Like, you are making more than Sundar Pichai, the CEO of Google, made last year. And so this is really a quite historically unusual thing. Yeah, and I think it just speaks to the fact that there are a handful of trade secrets that if they were able to get into the hands of a Mark Zuckerberg or an Elon Musk or someone else in the second tier of AI labs, you may be able to vault yourself into the first tier and make trillions of dollars. Yeah, I have to say I have gone through something of an evolution on this point. When I first started hearing these numbers out of Meta, talking about paying$100 million to individual AI researchers to come over and do this thing, I thought that seems insane.

37:23No single person or engineer or researcher, no matter how talented they are, is worth$100 million. But then, you know, I've been doing interviews for my book on AGI, and I've been hearing these stories out of these labs about the scale and the stakes of these training runs for these large models. And it no longer seems so crazy to me because what you have now are essentially companies that are spending hundreds of millions of dollars or in some cases billions of dollars on these gigantic models that are trained in these sort of, you know, hundreds of megawatt clusters of supercomputers. They're building these even bigger clusters of supercomputers.

38:08The scale of money and investment going into these AI systems is unlike anything we've ever seen before in the tech industry. And you'll hear these stories coming out of these AI labs about a single engineer who found some bug during a training run and saved the whole thing from catastrophe. Or on the flip side, you'll hear about a company wasting hundreds of millions of dollars. Or even in one case, I heard a rumor there was a big company that wasted a billion dollars or more on a failed training run. And then you start to think, oh, I understand why to a company like Meta, the right AI talent is worth$100 million.

38:49Because that sort of level of expertise doesn't exist that widely outside of this very small group of people. and if this person does their job well, they can save your company something more like a billion dollars and maybe that means that you should pay them$100 million. Absolutely. Here's what I will say. If you listen to Hard Fork, none of this should surprise you. Like what have we been saying for the last year? It is that to people at the leading labs, they believe that this will be something very close to a winner-take-all game and that the first person who is able to achieve AGI will be able to reap the majority of the benefit.

39:24Now, we don't know if that is true, But the entire industry is reshaping itself around that idea. So it is no surprise to me that Mark Zuckerberg found himself behind and said, well, you know, I'm sitting on giant piles of cash. Why don't I use it to try to ensure that I am not the loser in this race? Totally. I also think there's an interesting antitrust angle here. People started pointing out after this whole Windsurf saga that this was in some sense a response to the aggressive antitrust enforcement that went on during the Biden administration where Lena Kahn and others were sort of making it very difficult for these tech giants to acquire promising young startups.

40:03And so the tech industry in response sort of found this sort of way of doing of acquiring the key talent without acquiring the whole company. And that in some ways, this is sort of a perverse result of the Biden administration's aggressive antitrust enforcement. Do you buy that? I think that, yes, that is how it started. You know, some of these, you know, blitz hires or acquisitions, I've heard them called to take place during the Biden years, including the character AI one, the inflection one at Microsoft. There was a company called Adept that Amazon sort of hackwired in this way. And so, yes, that is kind of how it started.

40:41And I think that in some sense, that dynamic continues today. It is not obvious to me that the Trump administration would green light every acquisition that a Google or a Meta would try to make. we have already seen the Trump administration place onerous conditions on certain mergers, for example, saying you have to eliminate all of your DEI programs if you want us to approve this merger. So it's no surprise to me that a company like Google or Meta is saying, hey, we want to avoid that to the extent possible. And oh, also, by the way, if we only get the top handful of people at this company, we can probably save ourselves a lot of money along the way.

41:14Yeah. So I think it makes sense that the top people in this very lucrative and capital intensive industry are making tons and tons of money. What I'm less sure about is how it changes the culture of a company. If you suddenly have people who are just sort of like sitting alongside colleagues who are making many multiples less than they do. I actually don't like I've never worked in a company like that. I don't have I don't think colleagues who are making 100 million dollars a year at The New York Times. And so I just don't know how it would change the culture of a company like Meta to all of a sudden have these extremely public cases of people being paid many multiples of what their colleagues are making.

41:54What do you think? I'm so glad you brought this up because over the break, Kevin, Callie Wong, our former colleague at the New York Times and one-time hard forecast, had a great story in The Information where she got a hold of a memo that had been sent by a researcher in Meta's generative AI organization. And this scientist said some pretty harsh things, including, and I'll quote here, I have yet to meet someone in Meta Gen AI that truly enjoys being here, someone that feels like they want to stay in Meta for a long time because it's such a great place. You'll be hard-pressed to find someone that really believes in our AI mission.

42:34To most, it's not even clear what our mission is. So this echoes a lot of sentiment that we have heard in reporting about the culture in Meta's AI org, which is that morale is low. People are burned out. There is jealousy and resentment among those who have not been picked to go join the super intelligence lab. So absolutely, I think they are going to have culture problems because this post was written before all of the new centimillionaires came into the company and started to develop their new plans. So, yeah, I will be very curious to see how Alexander Wang manages that. Yeah. And I think the worst case scenario for Mark Zuckerberg and Meta is that they spend, you know, billions of dollars assembling this sort of super intelligence lab.

43:25And then these sort of people who came there in part for the massive sums of money they were being paid, just like don't end up being the secret sauce that gets them, you know, vaulted ahead of where they were and into this sort of top tier of AI talent that people just sort of cash out. They see it as kind of an early retirement strategy. You know, I'm going to go there. I'm going to, you know, do some stuff that I used to do at OpenAI. But for now, for this new company, I'm going to collect my giant paycheck and buy a couple houses and not worry that much about my future. Yeah. And the question is just whatever the next set of breakthroughs turns out to be in AI, how easily can they be copied, right?

44:03Meta, for the most part, is a fast-following organization. They do not innovate. They let other people innovate, and they say, how can we do that too? If it turns out that they can do that too, I think this new super intelligence team is going to be great for them. If it turns out that, no, you actually need a series of breakthroughs, and the people they hired aren't the people who come up with those, then they're going to be in trouble. Let me say one other thing about this style of acquiring people. Here's what I think is interesting about this, Kevin. One way of looking at this situation is the big AI labs took a look at the leadership of a company like Windsurf, and they said, these handful of people are super valuable.

44:39In fact, more valuable than they've ever been. Mark Zuckerberg is doing the same thing with AI researchers at various companies, and they are getting all of the spoils when these companies make the acquisitions to the detriment of the other employees who work there. My fear is this is actually a preview of the AI economy, that as AI becomes a more powerful force in more companies, it is going to reduce the number of people at a company who are presumed to be valuable. And those people will make a lot more money. But if you are not part of the elect there, then you might be out of luck. So that I think is something to watch as we move forward is, is the sort of distorting force of AI that at every single company, it makes a handful of people way more valuable and everyone else appear less valuable.

45:27Yeah, that's really interesting. I hadn't thought about that. And I also wonder if it sort of increases the incentive to kind of toot your own horn or exaggerate your own contributions when you are at one of these startups, because when the Google or the Microsoft or the other, you know, giant acquirer comes looking to sort of cherry pick the sort of quote unquote best talent, you want them to notice you and shower you with money. and not just sort of like relegate you to the sort of dying husk of the company that's left behind. It does create some sort of interesting internal pressures, where before you might have said like of your startup, like we are all one team.

46:06We are going to like succeed or fail together. Now these giant sort of cherry picking operations coming in and saying, we're going to give you guys billions of dollars and the rest of you are out of luck. I think that does really change the culture of a company. By the way, this does seem like kind of a jerk move from the founders. You know, it's like if you have hired all of these people, there has been this implicit promise that you will be taken care of in the event of an acquisition. And we're just now seeing founder after founder saying, I'm actually just going to take the billion dollars.

46:33And I want to thank everybody for the time that you've spent at this company. And I wish you well in your future endeavors. But as for me, you can catch me on the yacht. Yeah, I think it is a very bad precedent to set. And I'm sort of surprised that it was done in the way that it did. I'm glad, you know, cognition came in in the end and like everyone in the windsurf thing seems like they're going to get a decent outcome at least. But yeah, man, if I would had like gone, quit my job to like go work for a startup that had a sort of uncertain future ahead of it. And I work really hard. And as a result, the company succeeds and ends up getting acquired.

47:07But I don't get acquired. Like I'm just going to I'm going to be so sour and jaded after that experience. I'm probably not going to work for a startup again. Wow. Kevin Ruse, sour and jaded. What would that be like to work with? I hope I never find out.

47:23When we come back, another kind of funny money, crypto, is having a big week. We'll talk about it with The Times' David Yaffe Bellany.

47:44David Yaffe Bellany, welcome back to Hard Fork. Thanks so much for having me. And happy Crypto Week. Happy Crypto Week to you as well. It's a really exciting time. How does your family celebrate Crypto Week? You know, a ticker tape parade through the streets of suburban New Jersey, where my parents still live. Yeah. That's wonderful. So let's talk about what is going on in Washington this week with crypto. I understand there are a number of different crypto-related bills that are moving through Congress right now. can you just give us the high-level overview of what these bills are and how they're doing?

48:19Sure. So there are three key bills this week, and I'll start with the two that are most important. One is a bill that lays out rules for stablecoins, which are an important sector of the crypto industry. And basically, people expect that when that bill passes, it'll make everyone across the U.S. economy really excited about doing stablecoins because it's like a big government seal of approval. This is the genius act? That's the genius act. Yeah. Yeah. And I didn't understand why I was called that, but then I sort of put it together in my mind. It's about the stable genius thing, right? It's, I think it's a, it's a play on that.

48:55And then yeah, there's some acronym as well. Got it. Or a backronym as they call it. Yeah, exactly. They do. That's what they call it. When you want to do an acronym. And so you sort of reverse engineer something that it stands for. Yes. I do that because normally I'm the one who derails the conversations with stupid things. So I love it when you do it because it makes me feel less alone. Do you want to? OK, smart ass. Yeah, the Genius Act is actually named after both of you guys. That's why they call it the Genius Act. OK, so that is the Genius Act. And that would sort of give some government stamp of approval to stable coins.

49:30What else we got? The next bill is called the Clarity Act. And this is probably the most important crypto bill that we're going to see this year. It's the most sweeping. it's the bill that sort of directly connected to this battle the crypto industry has had with the SEC over the years. And it basically rewrites the rules of crypto regulation to significantly weaken the SEC's hand and effectively prevent some future Gary Gensler figure from bringing back all those scary lawsuits that the crypto industry was fighting. So that's the Clarity Act. And the politics around it are much more complicated than with the Genius Act.

50:09I think Like, you know, people going into this week expected it to pass the House, but whether it will get the votes it needs in the Senate is much less clear. The third bill is a lot narrower, and it has to do with something called a CBDC or a central bank digital currency, which is this notion that the U.S. government might issue its own cryptocurrency someday. And this bill blocks that. It's an anti-CBDC bill. And the crypto industry, a lot of parts of the crypto industry have opposed CBDCs for a long time. So this is another kind of industry-backed priority. So those are the three bills. Because if the government put out their own currency, it would lessen the prospects of privately created cryptocurrencies.

50:51Yes, that's not what the industry says out loud, but I think most people understand that to be a motivation. The industry also argues that there are privacy concerns. You know, the government could surveil your transactions, that sort of thing. But it's really a hypothetical because the U.S. has never actually seriously considered creating a CBDC. So it's like you're banning something that probably isn't going to happen anyway. Got it. So it sounds from the way you're describing these three bills, like what the Republican majority and what the Trump administration are trying to do here is not really like rolling back Biden era administrations so much as safeguarding crypto from future Democratic administrations or less crypto friendly administrations that might try to come in and implement new things.

51:39Am I hearing that right? Yeah, that's, I think, a big part of what's happening here is that the crypto industry wants to lock in some of the gains it's made under Trump. You know, it's great from crypto perspective that Trump's SEC has dropped all the cases against crypto companies. But, you know, what if, you know, a Democrat wins in 2028 and Gary Gensler comes back for round two? You know, the industry could be back where it started. But with a bill like the Clarity Act, it has a lot more protections. And to what extent are these three bills, David, kind of, where do they rank on the wish list of what the crypto industry was hoping for from the Trump administration when they backed him in last year's election?

52:18The two bigger bills, the stablecoin bill and the Clarity Act, which people refer to as the market structure bill, those were the two top priorities of the industry. You know, those bills are the reason that the industry spent$130 million on, you know, political spending during the 2024 elections trying to get pro-crypto legislators elected to Congress. You know, they've been kind of the holy grail of the industry for a long time. Yeah. So, of course, the Trump administration is doing lots of deregulation in lots of different industries. I think what makes the crypto industry unique or somewhat unique in this whole deregulatory picture is that the Trump family is deeply invested in cryptocurrencies and actually has its own stablecoin.

53:04So talk a little bit about that and how these bills that are moving through Congress would affect the ability of Donald Trump and his family to make money off their crypto investments. Yeah, these bills have really direct implications for the Trump family crypto business. So it's most obvious probably on the stablecoin side. You know, the Trump family crypto company, which is called World Liberty Financial, has its own stablecoin. And that's expected to be a huge money-making vehicle for the company. So if a bill passes Congress and gets signed by the president that boosts the prospects of stablecoins writ large, that's obviously great for the Trump family stablecoin.

53:42And that's something that Democrats, especially on the Senate side, have been pointing out and concerns over that actually kind of delayed the passage of that bill in the Senate, though it ultimately did make it through. And then the market structure bill, the Clarity Act, also has very direct effects on the Trump family business. I mean, you know, Trump's heavily invested at this point in, you know, all different types of crypto. And so a regulatory environment in which it's easier to offer these coins, more people are buying them. You know, that's great for the Trump family's bottom line. Now, David, I have a question about cause and effect here.

54:16Because as this crypto week is happening, as these bills are moving through Congress, crypto tokens themselves, crypto prices are up. Bitcoin is at or near an all-time high as we speak, I believe. A bunch of other cryptocurrencies have been doing quite well. Is that because investors are optimistic that these bills will pass and that the sort of stamp of approval of the government behind the crypto industry will get even stronger? Or is there something about a kind of bull market in crypto that makes passing these kind of bills easier? Well, clearly the market's just responding to Casey's announcement that he's going to take his hard fork salary in Bitcoin.

54:56But putting that aside. Yeah, the cause and effect question is a good one. And I think, you know, there is a little bit of a sort of chicken and egg issue here. But certainly, it's the case that the kind of like exciting crypto week, you know, rhetoric has helped the crypto market. And, you know, Bitcoin is blasted past, you know,$120 ,000. You know, that's a huge landmark for the industry. So, you know, that's definitely linked to everything that's happening in the US. But it's all sort of tied together. It's crypto week. It's, you know, Trump endorsing Bitcoin. It's the sense that the SEC's campaign against the industry is over.

55:34All of those things have sort of combined to boost the market. And then it creates this feedback loop where, you know, the market is doing really well. And so that makes Trump and the Republicans even more bullish about crypto, which improves the chances of the legislation getting passed, which in turn causes the market to go up even more. So everything's kind of linked together. Yeah. I'm curious if there are things in any of these bills that people who are skeptical of crypto might be cheered by. I'm thinking in particular about the part of the Genius Act that, as I understand it, sort of more closely regulates the reserves that these stablecoin issuers are required to have.

56:14So this is a little in the weeds, but basically my understanding, and correct me if I'm wrong here, is that up until now, you could just issue a stablecoin without having the sort of direct fiat currency reserves behind that. So if I wanted to issue, you know,$100 million of my Rooscoin stablecoin, I did not have to have necessarily$100 million in the bank to be able to do that. But this act, as I understand it, will require a kind of one-to-one ratio for stablecoin issuers. So maybe that does in some way make the crypto economy a little bit safer. Yeah, I mean, one argument that the industry has made about the stablecoin bill all along is that it's better to have some rules than no rules.

56:58And it's not as if, you know, we could go back to a world in which there are no stablecoins. And so even if you don't think the particular rules in the legislation are perfect, or you think that there are loopholes or whatever, you know, it's still better to have some sort of framework in place. You know, the argument from the crypto skeptics, and there really aren't very many crypto skeptics who are saying, huh, actually, the act's pretty good. Their argument is, well, like, don't put a giant government seal of approval on this industry unless you really have the very best, strictest rules that are going to protect consumers.

57:28And so, you know, sure, there are elements of the reserve requirements that, you know, definitely seem like an improvement on the kind of like maybe more Wild West status quo. But, you know, the skeptics, you know, point to nuances here and there they think will endanger consumers. And, you know, they're worried that people will still treat stablecoin issuers kind of like banks, except they're not getting the same protections that you would get if you put your money in a bank account. You know, you don't have FDIC insurance, for example. And so those sort of debates are still going on. David, what I want to ask you about is assuming that Trump does sign these bills into law, to what extent does it matter beyond the crypto economy?

58:08Does this move us into a world where the regular economy and the crypto economy are more tightly linked? And does that introduce any new risks into the mainstream economy that we ought to be worried about? Yeah, I think it definitely does link the crypto world more closely to the mainstream economy. I mean, stablecoins are a great example of that. We're already, even before the bill becomes law, seeing reports that the banks and even major retailers like Amazon and Walmart are exploring, offering stable coins of their own, integrating stable coins into how they function. And that's sort of part of the kind of slow creep of crypto into everyday life.

58:48And it's also, I think you can't really underestimate the importance of the government just giving that kind of stamp of approval, just even putting aside the specifics of the rules. The fact that Crypto Week is happening, that crypto legislation is getting passed, it makes it way more likely that people and businesses are going to want to experiment with this stuff. And if as many crypto skeptics think, you know, it could all come crashing down at any moment, then that creates new dangers. Well, and also, I mean, the obvious corruption angle here is also one potential fallout. I mean, I can see other politicians, not just in the U.S., but abroad, who are going to see Donald Trump making, you know, hundreds of millions or even billions of dollars from his crypto investments, including his, you know, stablecoin project and saying, well, maybe I need a stablecoin too.

59:37Maybe I should make some crypto investments. So it does seem like that is one particularly obvious way in which it is going to start to matter to people even beyond the crypto industry is that this could just become part of the kind of corruption playbook for politicians who want to cash in. Yeah, and there's, you know, the conflicts of interest are pretty astounding. I mean, you know, Trump announced his support for the Genius Act just a couple of days before his company announced that it was offering its own stablecoin. I mean, the timing was pretty amazing. Now, David, I want to ask you about something else in crypto that I've been hearing about over the past few weeks that has a lot of people in tech talking, which are these tokenized equities.

1:00:16Can you explain what's happening here? So this is kind of a big sort of exciting trend in crypto. I mean, I kind of think of it as like on par with the NFT craze of 2021. You know, it's like the next exciting thing that crypto wants to do. And that and it's something that, you know, the industry calls RWAs or real world assets, which are just things in the world. But now we have an acronym for them. And the idea is that you can essentially have a kind of crypto representation of an asset like a share in a company or, you know, something that kind of exists outside of the crypto world. And that this could create, you know, ways for you to sort of trade back and forth really quickly, you know, some of the advantages of crypto, you know, with, you know, stocks and companies, even in potentially private companies.

1:01:05And so this is sort of really at the cutting edge of what the crypto world is trying to do right now. Now, the reason I heard about this was that Robinhood, whose CEO was a recent guest on our podcast, announced that they were going to start offering these tokenized equities in companies like OpenAI and SpaceX. And these are not publicly traded companies, right? These are private companies. You cannot just log on to your Schwab account and buy shares in OpenAI or SpaceX. But through this sort of tokenized real-world asset process, there had been some sort of mechanism that they had discovered to sort of bundle these private equities together under these crypto tokens.

1:01:48And somehow this was supposed to be legal, even though it would not be legal to market those same stocks to just regular retail investors. Am I hearing that right? My basic understanding is that the way this works is that Robinhood can buy shares in SpaceX or OpenAI sort of on the kind of private market and then can create crypto token representations of those shares. It's actually almost akin to stable coins where you have like dollars backing the stable coins. In this case, you have shares of those private companies backing the tokenized representations of those private companies. And then you offer trading in those tokens.

1:02:29And it's part of this kind of like crypto ethos of the little guy shouldn't be shut out of this potentially really remunerative market for shares and in private companies. You know, you know, the guy, the trader in his basement should be able to get in on the on the ground floor of this the same way that like a VC in Silicon Valley can own a bunch of open AI shares and become a billionaire when the company goes public. That's my that's my basic understanding of it. Got it. And I mean, this can't possibly be legal, right? I mean, it's like if you want to list your shares in your company, you have to go through a whole public process.

1:03:04You have to disclose certain audited financials. You have to like file with the SEC. Like there's a whole process that you have to go through to sell your shares to the public. Is there any chance that this kind of tokenized equity thing like stands up either in the Trump administration or in the courts? I think there's clearly going to be a legal fight over it. I mean, Hester Peirce, who's the super crypto friendly SEC commissioner, has already come out and said that these are securities. And I mean, you know, she's somebody who's really on the industry side. And so it's definitely, you know, there's going to be a fight over this.

1:03:38And I'm sure as you saw, I mean, OpenAI came out very quickly and said, like, you know, we don't support this. So it would surprise me if there wasn't a very prolonged battle over the legality of this. To be clear, Robinhood is only offering this trading and tokenized equities in the EU at the moment. So it's not actually available to American customers at this point. It's available in the EU and to any American with a VPN, I think was how they framed it. Sounds like you know a lot about VPNs. I mean, to me, the story behind the story here was just that like the crypto companies are getting the message from the Trump administration that they are effectively operating in a new world, that they can take risks that they wouldn't have taken under the Biden administration, that they are not going to be subject to, you know, many kinds of enforcement.

1:04:33We also heard just this week that the DOJ's investigation into Polymarket, one of these crypto prediction market companies, was being dropped. So it just seems like no matter where you are in the crypto industry, the message that you are getting from Washington is very clear. And that's like, you guys can kind of do whatever you want now. Yeah, I think that's absolutely right. The industry has been emboldened in all sorts of ways. And the push for RWAs, tokenized equities, you know, that's definitely part of that wave. Yeah. So, David, how is Crypto Week going to resolve? Are we going to see these bills passed?

1:05:09And will we see, like, many more bills? Are there going to be future Crypto Weeks? Give us a little sense of the future here. Well, the Genius Act will be sent to President Trump's desk, and the Clarity Act will, you know, get sent over to the Senate, where I think its fate is pretty uncertain. But yeah, I think we're inevitably going to have to check in about this later, because it's pretty up in the air right now. Well, I leave this conversation feeling quite unsettled about the future of the economy. Best of luck to us all. Yeah. Would you say you're not a very stable Casey right now? I would.

1:05:44Yeah. I'm feeling a little bit less stable, but I do feel like we have a lot of clarity. Thanks to this genius. Thanks, David. Yeah. Thanks, DYB. I appreciate it. Thanks for having me.

1:06:15One more thing before we go. We are working on a back-to-school episode for this fall about AI and education. And we are very curious to hear from our listeners who are students. If you are a student in college or in high school, we want to hear about how you are using AI for your schoolwork and what impact you think it's having on your education. We're especially interested in hearing specific examples and stories. Did you read a summary of every book assigned in your class rather than the full book? Do you only turn to AI when you've run out of time or are trying to cram for an exam? do you find that AI chatbots explain things more clearly than your professors do?

1:06:59If you've had experiences with AI that you think would be interesting to our listeners, please send us a voice memo or better yet, a video with your name, where you go to school, and your experience to hardfork at nytimes.com. And we may feature it in our upcoming episode. Thanks. And as I said in my yearbook, have a great summer. Hard Fork is produced by Whitney Jones and Rachel Cohn We're edited by Jen Poyant We're fact-checked by Caitlin Love Today's show was engineered by Katie McMurrin Original music by Marian Lozano, Rowan Nemisto, Alyssa Moxley, and Dan Powell Video production by Sawyer Roque, Pat Gunther, Jake Nickel, and Chris Schott You can watch this full episode on YouTube at youtube.com slash hardfork Special thanks to Paula Schumann, Hu Wing Tam, Dalia Haddad, and Jeffrey Miranda.

1:07:51You can email us, as always, at hardforkatnytimes.com. Send us your suggestions for upcoming episodes of Dinosaurs and Fire Trucks.

1:08:16you