Anthropic Blacklisted By US Government? & US-Iran War Disrupts Gulf Travel

0:29Neal Freyman:We'll see you next time.

0:31Toby McGarr:Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, how the Iran war could impact the global economy.

0:38Neal Freyman:Then Anthropic was blacklisted by the US government and OpenAI said, hey, remember us? It's Monday, March 2nd. Let's ride.

0:51Toby McGarr:Good morning. Welcome to the first full week of March, everyone. And welcome back, Toby. Toby, if it feels like things are a little more out of control lately, well, it's not a mystery why. A rare blood moon total lunar eclipse is coming early tomorrow morning, which will render the moon a deep and coppery red as the full moon falls behind the Earth's shadow. And by rare, I mean this is the last time the phenomenon will happen for another three years. Toby, are you feeling the disturbance?

1:17Neal Freyman:I'm going to get scientific with it before I get superstitious with it. The moon turns red because when the Earth blocks the moon from the sun's light, The light that does make it around the edges is filtered by our atmosphere. And our atmosphere scatters blue light more readily than red light. So that's the spectrum that you end up seeing more. If you want to see this phenomenon, then, and sort of ruin the moment by giving the explanation that I just gave above. The eclipse begins at 3.44 a.m. Eastern and ends around 6.30 a.m. So you kind of got to be on the podcast schedule to see it. And now a word from our new sponsor, Bland AI.

1:54Neal Freyman:We're two podcasters with one brain.

1:57Toby McGarr:I cannot do this for an entire episode.

1:59Neal Freyman:But think about how much easier it would be to podcast with one brain. That's the idea behind Bland AI. They created a unified interactive voice response across SMS, calls, and chat. That means no more fragmented tools.

2:14Toby McGarr:They help you move from clunky menu-based IVR to natural human-like AI voice that can actually resolve issues end-to-end.

2:20Neal Freyman:They're able to drive serious ROI across industries, and their 127 % net revenue retention rate means people keep buying more of Bland for their business.

2:30Toby McGarr:To learn more, head to bland.ai.mbd. That's bland.ai.mbd. The global economy is in a precarious moment after the United States and Israel launched a war against Iran this weekend, which has spiraled into a major regional conflict. On Saturday, the two countries attacked Iran with sweeping airstrikes and killed the supreme leader of 37 years in the hopes that the Iranian people will rise up and overthrow the autocratic government. Iran's military responded with strikes around the Middle East against the U.S. and allies, and three U.S. service members were killed, the Pentagon said yesterday. With the war spilling into its third day this morning, the consequences for the global economy are huge, spanning energy markets, global capital flows, and travel.

3:10Toby McGarr:The first thing everyone is watching is oil prices, which shot up 8 % last night, the most in four years, over concerns of disrupted supplies. Iran is not only an oil producer, but it sits next to the most important maritime choke point in the world, the Strait of Hormuz. One out of every five barrels of oil in the world flows through the strait, and a prolonged closure of tankers accessing the waterway could keep oil prices elevated and in turn cause a spike in inflation around the world, something we saw after Russia invaded Ukraine. Another potential economic casualty from the war is the Gulf.

3:41Toby McGarr:Nations like the United Arab Emirates, home to Abu Dhabi and Dubai, Qatar and Bahrain, have emerged as global economic hubs in the past decade, pitching themselves as a business-friendly, peaceful oasis in a region otherwise prone to conflict. That image was shattered this weekend when Iranian drones pierced glitzy Gulf hotels and tourist hotspots, as well as airports. Etihad Airways, Qatar Airways, and Emirates, the world's largest international airline, all suspended flights in an unprecedented move that stranded tens of thousands of passengers. Last night, President Trump said that combat operations will continue until, quote, all our objectives are achieved.

4:15Toby McGarr:Toby, one thing's for certain, there are no certainties.

4:18Neal Freyman:Yeah, let's start with the Strait of Hormuz, because that's the name that you're going to be hearing a lot when it comes to this regional conflict. How can the Strait of Hormuz be closed? That is a question that I saw floating around online yesterday in the Kabisi letter, which is a stock account, kind of explained how this actually happens because no country owns the Strait of Hormuz, so no one can effectively close it. But what happens is that when the ships travel through this region, they purchase war risk insurance, which protects their companies from the cost of being attacked. But insurers are looking at the risk of the region right now and saying, we are either not going to offer that anymore or we're going to charge you astronomical rates.

5:00Neal Freyman:And if that happens, then basically no ship is going to sail through that region because they know that they're going to be on the hook if they end up getting attacked. So insurers actually are playing a much larger role here than you would expect when it comes to so-called closing the Strait of Hormuz.

5:15Toby McGarr:And the Strait of Hormuz is effectively closed. I was just tracking this morning on my maritime shipping app, and there's just no ship. They're all kind of parked either on either end of this waterway because Maersk, MSC, Hatbag, Lloyd, these are these big shipping container companies that if you drive by a port that those are the companies that run all of these tankers and container ships, they're not traversing it. And it's so critical because on one side of the straight, you have Dubai, UAE. These are the big oil producing nations. And then on the other side of the straight, you have the rest of the world.

5:46Toby McGarr:So if no ships can traverse this straight, then there's going to be no supply coming on to the market. And we're already seeing a major reaction in oil prices. They're up 8 % this morning. That's going to have an immediate effect on your gas bill when you're filling up your tank because James DeHaan, who runs GasBuddy, is a very noted gas predictor, said we're already going to see gas prices climb above$3 per gallon for the first time in more than three months. He's predicting another 15 cent increase in gas prices. Meanwhile, just overall, we might see a spike in inflation. Remember when Russia invaded Ukraine, there was oil prices went skyward and everywhere around the world, including the United States, saw a huge spike in inflation.

6:32Toby McGarr:The question is, how high will oil go? Right now, Brent crude is at$78 a barrel. If it hits$100, that is when you'll see a lot of spookiness.

6:40Neal Freyman:But I do just want to put into context this move because Javier Blas, who's a Bloomberg reporter, posted yesterday that if Brent market closed at current levels, which is up around 7.5%, that one-day percent increase would rank as the 50 third largest. So it's not, you know, even a top 10 move, even though all this craziness happened in the region. And part of the reason why is that it might've been a little bit priced in because this attack was telegraphed a little bit, but also the U S makes a lot more oil now than it has in the past. Only 17 % of us energy is imported. That is the lowest level in 40 years.

7:18Neal Freyman:So yes, it's still exposed to global oil benchmarks, but a lot less exposed than it has been in the past.

7:24Toby McGarr:All right, let's talk about Dubai, UAE. I mean, this is the nightmare scenario. They had pitched themselves over the past decade as this safe haven for global capital. They've emerged as this huge player in investing AI, entertainment, just tried to fashion themselves into the center of the world and brought in a lot of foreigners. Nearly 90 percent of everyone living there are foreigners. Now, the images coming out over the weekend were unbelievable. You saw the Burj Khalifa, which is the biggest skyscraper in the entire world, seeing drone strikes around it. There were five-star hotels in Bahrain that were getting hit.

8:02Toby McGarr:And then people were leaving reviews on the Fairmont Palm Hotel in Dubai saying one star, no air defense systems. One person on X kind of summed up the vibe in the UAE in Dubai right now saying move to Dubai for tax shelter. and now I'm in a bomb shelter. And one of the biggest consequences here is air travel. These are the busiest international hubs in the world. They connect east and west. They connect north and south. And the fact is, right now, Qatar Airways, Etihad, and Emirates are not flying.

8:31Neal Freyman:No, Dubai is literally the busiest international hub in the world. 92 million international travelers flew through it last year. That is 13 more than Heathrow Airport in London. And it's not only the fact that, you know, commercial traffic has been disrupted, It's also the fact that logistics are disrupted because airports don't just fly people. They fly food. They fly other things. And according to Ryan Peterson, CEO of Flexport, which is a shipping logistics company, he said 18 % of global air freight capacity has been taken out of the market by the conflict in the Middle East right now. So if we were talking about the region of Strait of Hormuz disrupting maritime travel, same thing is happening on air travel as well.

9:10Toby McGarr:Yeah, this is a huge deal for the Middle East, for those Gulf countries trying to project safety at a time when it's not really safe there at all. Finally, the C-plot here is Polymarket, as it always is for any major world event. These prediction markets where you can bet on literally anything. Well, people were betting on a strike in Iran. A lot of people were betting on this particular market. These markets for when the United States would strike had amassed$530 million, making it one of Polymarket's largest ever. And once again, there were accusations and skepticism around possible insider trading here.

9:46Neal Freyman:Yeah, absolutely. Because you just looked at accounts posted online. One account turned$87 ,000 into$515 ,000. Six wallets made$1.2 million betting on a February 28th strike. So whenever you see these very outlier calls, yes, hypothetically, someone could have a lot of conviction and make that bet and place those bets. But also, they probably had access to someone with access to information around this, which is why you're seeing, again, a lot of people pointing out prediction markets and saying this is just a hallmark of what they do now. Anytime a big event happens, it looks like insiders knew before or ahead of time.

10:23Neal Freyman:All right, let's move on. Ananthropic and the Pentagon broke up over the weekend and OpenAI slid into the government's DMs faster than your ex's ex did when you broke up. The Pentagon and Ananthropic had been on thin ice all week. Claude had been the chatbot of choice for the military, including aiding the U.S. in its Maduro operation, but the Defense Department wanted full access to use the tech in any way they pleased. Ananthropic wanted some guardrails in place, namely that Claude could not be used for mass domestic surveillance or fully autonomous weapons. Defense Secretary Pete Hegseth issued an ultimatum to the company, promising to cancel its$200 million contract by 5.01 p.m.

11:02Neal Freyman:on Friday, unless it met its demands. After that deadline passed, the government took the very intense step of blocking Anthropic on Instagram and also designating it a supply chain risk, which bars any company with U.S. government contracts from doing business with them. Enter Sam Altman, who had been leaving fire emojis on the government's stories for months, waiting for the perfect moment to shoot his shot. By 10 p.m. on Friday, he announced that OpenAI had, quote, reached an agreement with the Department of War to deploy our models in their classified network, though Altman maintained that their agreement had similar red lines to Anthropics.

11:37Neal Freyman:Which brings us to today. Anthropics is a supply chain risk but is promising to take the issue to court. OpenAI is an opportunist who landed a deal but may have damaged its reputation in the process. And no one even really considered using Grok to deal.

11:50Toby McGarr:No, they didn't. You can get really deep with this, and many folks just say that this story, basically disregard anything else that's going on in the world. This story is the most important thing that's going to be happening now for decades in the future, because it really is a sign of how the government and the Pentagon and militaries are adopting AI and using it at scale for the first time. But going back to the narrow impact, I mean, the first thing you saw is a big brand boost for Claude. Claude overtook ChatGPT as number one app on the App Store. There seemed to be this upswelling of support for Anthropic and Claude for sticking to their guns and staying true to their principles and going at it with the Pentagon.

12:35Toby McGarr:Even Katy Perry posted that she upgraded to a higher tier of Claude. You saw many folks posting that they canceled their ChatGPT subscription. So they did get a lot of goodwill, especially from just the rank and file tech employees. Many folks at Google and OpenAI penned a letter saying, we stand with Anthropic. And even Sam Allman of OpenAI said that Anthropic took a principled stand, even though he disagreed with them. Very similar to what we saw back in 2016 when Apple took on the FBI. They refused to unlock an iPhone blogging to a terrorist suspect, and they also earned a lot of goodwill. So a lot of big picture questions you can ask here and talk about.

13:11Toby McGarr:But the most immediate effect is that a lot of people are supporting Claude over OpenAI.

13:17Neal Freyman:I was seeing some people say that technically everyone did come out of this deal a winner in a weird way because the government now hypothetically gets more control even if it now has to use what's probably the second best product on the market. OpenAI and Altman pulled off the power play that they love to pull off. it's a very cutthroat and a very bottom line focused power play and we'll see how that actually translates into brand equity down the line and then anthropic stood up for itself gets to and treads itself as like the very uh ethical ai lab in in the ai playing field right now and nate silver noted that this adds a political characterization of to the top ai labs he wrote among the general population anthropic now it gets more lib coded and opening i gets more conservative coded.

14:04Neal Freyman:But then he went on to point out that, hey, Tesla went down this rabbit hole as well. Look at what it did to its brand equity. A lot of consumers of these tech products probably are more left leaning and then right leaning. So again, when we're talking about big picture, yes, OpenAI now has a big contract with the government. What is that going to do down the line to its reputation?

14:22Toby McGarr:Yeah, some say certainly you could take that view. Some would argue that this sets a bad precedent for the Pentagon to be bullying its own AI champion that way. I mean, there are very few companies that have been blacklisted like this by the Pentagon, and they all come from either China or Russia, which are two huge geopolitical adversaries. Dean Ball, who is a former Trump administration AI advisor, called it a dark day in the history of American AI. The message sent to the business community and to countries around the world could not be worse for the Pentagon to essentially go to war with an amazing piece of American innovation and a company that is now worth, I don't know, hundreds of billions of dollars.

15:02Toby McGarr:It is another chapter in the battle between OpenAI and Anthropic. It cannot get any juice here. We were in India a couple of weeks ago with Dario and Sam. Everyone was holding hands, except those two guys, and they're all barreling toward an IPO later this year, both raising tons of money. It's just quite a heavyweight fight.

15:21Neal Freyman:All right, we're going to take a quick break and come back with our winners of the weekend.

15:51Neal Freyman:Book now at Hilton.com. Hilton for this day.

15:57Toby McGarr:If you're not using AI correctly, you're almost certainly falling behind your competitors. That's why there's NetSuite. It's a unified suite that brings your financials, inventory, commerce, HR, and CRM into a single source of truth.

16:09Neal Freyman:Now with NetSuite AI Connector, you can use the AI of your choice to connect your actual business data and ask just about every question you ever had.