Fictional Story Tanks Stock Market & The iPod Making a Comeback?

0:00Dario Amodei:Good morning Brew Daily Show. I'm Neal Freyman and I'm Toby Howell.

0:05Toby Lenk:Today how a work of science fiction took down the stock market. Then Gen Z hates their phones but are obsessed with iPods. It's Tuesday February 24th. Let's ride.

0:21Dario Amodei:Good morning and happy Tuesday. I am back in the studio this morning, but Toby is still remote because of the storm. And that is a real shame because today is, drum roll please, Toby's birthday. Please send him some love in the comments, right on his Facebook wall, sent him bountiful gifts. Just tell him how much he cheers up your mornings. Toby, how's it feel to finally turned 21.

0:43Neal Freyman:Okay. My friend, Zach Pograb actually has a system for how old you feel at each age. 25 is old. 26 goes back to young. 27, you're young again. 28 is the last young year, which is what I am right now. 29, you become old again. And then when you turn 30, you become an unk. So that is a foolproof system. And I'm right in that old stage.

1:05Dario Amodei:Well, what is 34 then? Do I feel young or old.

1:09Neal Freyman:You're unk senior. You're actually, you're the wisest unk among us, Neil.

1:13Dario Amodei:All right. Well, happy birthday, Toby. I'm very glad you're not here to have to deal with all this snow. Okay. Let's hit our first story. The year is 2028 June. The economy is in a state of deep depression. The S and P has tanked almost 40 % from its highs and unemployment has spiked to 10.2%. The social fabric is fraying. This was a dystopian scenario laid out by investment analyst Citrini Research in an article on Sunday. The 7 ,000-word piece is purely speculative fiction. I repeat, fiction. But after going mega viral on social media, it caused a sell-off on the stock market yesterday, the real one.

1:51Dario Amodei:Many companies name-checked in the novella, such as Uber, DoorDash, American Express, MasterCard, and Visa, all fell at least 3%. In their essay, Citrini asked the question, What will happen when AI agents become ubiquitous? And their answer is the economy will collapse. When companies can write software themselves using agents, white collar workers will be laid off en masse. And that's just the tip of the iceberg. As these high earning knowledge workers hit the job market, they'll take lower paying positions, reducing their purchasing power and crushing the consumer-based economy. It gets worse from there, if you can believe it, because this process is a self-reinforcing feedback loop with no natural break.

2:29Dario Amodei:Facing lower demand, companies will invest more in AI rather than humans to prop up profits, sparking additional layoffs, shrinking consumer demand even more, causing more adoption of AI, and so on and so forth as we circle the drain. Citrini stressed that people should not interpret this as a prediction. They write, the sole intent of this piece is modeling a scenario that's been relatively underexplored. Still, Toby, this is the crazy world we live in now, a piece of horror fiction just wrecked the stock market.

2:57Neal Freyman:Yeah, and we can dive into that piece of horror fiction in just a minute, but I do think it underscores how shaky and trigger happy the market is right now, because I think back to a few weeks ago, transportation stocks had one of their worst days ever. And that was triggered by AI trucking efficiency announcement from a company that on its surface sells karaoke machines. But that pattern is something that we've seen emerge time and time again. A real disruption happens or a hypothetical disruption is presented in a sub stack piece. markets instantly kind of react to it. There's oftentimes a partial reversal after that.

3:34Neal Freyman:And then it repeats oftentimes in a new industry as well. It just shows how sensitive people are to the speed that AI represents. Usually changes in the economy happen over time. Now they can happen in hours and minutes even based off how people are feeling. And then you throw some terror policy and uncertainty into there as well. And you get what we got yesterday, which was downstream of a single substack piece.

3:59Pete Hegseth:Let's talk about one of the paragraphs or sections of the piece itself, DoorDash. So DoorDash tumbled nearly 7 % yesterday. There was a good amount of time in this work of fiction spent on what will happen to DoorDash and other delivery apps when AI agents are everywhere and will do your shopping for you. So why DoorDash tanked was the position of was that your AI agent, we're all going to have AI agents in a few years, of course, will basically comparison shop across all delivery apps, pick the one with the lowest fee, the fastest delivery. This agent of yours doesn't have any brand loyalty. It doesn't have any psychological things going on where it just needs to open up DoorDash because it's on a home screen.

4:45Pete Hegseth:And so DoorDash will basically not have the moat that it has now because of this particular brand. So this is the theory that was put out. DoorDash lost, you know, hundreds of millions of dollars in value because of this particular theory. And then Andy Fang, who is a co-founder of DoorDash, seemed to confirm what these risks were. He responded to this piece saying, we definitely believe agentic commerce will be transformative to the industry. No question we're going to need to adapt to it. The onus will be on us to create a compelling ecosystem for agents to participate in. The ground is shifting underneath our feet and the industry is going to need to adapt to it.

5:20Pete Hegseth:He didn't exactly put out the fire there.

5:22Neal Freyman:I know, but a lot of people did look at the DoorDash example and go, the moat that DoorDash has is not their technology. It's not the app itself. It's the physical resources they're able to marshal in the real world, the drivers that they're able to match with the restaurants that are able to match with the people doing the food. That is a very intense physical world logistical puzzle that DoorDash has solved. That's its moat, not the fact that it has a decently good tech. and that cannot be easily replicated by someone vibe coding a DoorDash alternative in a weekend. I also want to talk about this idea of ghost GDP.

5:58Neal Freyman:That was something that came up in Citrini's piece a lot, which is in the short term or in the near term, productivity is going to surge. Things are going to look really good at the top line because AI agents are going to supercharge everything. Corporate margins are going to go up. GDP is going to look very strong. But then wages are going to erode. Maybe retail and restaurants start to quietly wither away as well. Housing starts the weekend. So the economy is growing without paying people. That's the doomsday scenario that Satrini is putting forth. It's also a scenario that some people are getting uncomfortably close to right now, where maybe wages aren't keeping up with the productivity gains that we're seeing in a strong top-line economy.

6:40Pete Hegseth:I think it's worth mentioning as we wrap this up that many, many economists push back on the fundamental thesis of this Satrini piece. They said this would not fly in an econ 101 or a macroeconomics course because you're just getting fundamental things wrong with how you view the economy. So one by one, a lot of economists have come out and said this is extremely flawed. This is not going to happen. This is not even worth our time talking about. And yet, at the same time, it does have real-world impacts. And I think it highlights, as you said at the top, how jittery the markets are. Because yesterday, IBM had its worst day since 2000 because Anthropic released a tool that can modernize a programming language, COBOL, that mainly run on IBM computers.

7:28Pete Hegseth:So just down the line, whenever any sort of headline comes out about AI, these stocks are tanking. Everything is on – feels like it's on absolutely thin ice right now. But if you haven't read this piece, go read it. I mean, it's pretty interesting to think about, even if you think it's extremely wrong or extremely right. Moving on, the simmering bad blood between the Pentagon and Anthropic will reach its boiling point this morning when Defense Secretary Pete Hegseth will meet with Anthropic CEO Dario Amadei in a clash over so-called woke AI. This is not going to be a friendly chat over bagels.

8:00Pete Hegseth:More of Hegseth demanding, come see me in my office, rather than a, so how have the kids been lately? Hexeth's main problem with Anthropic concerns the terms of use for Anthropic's Claude chatbot at the Pentagon. Hexeth, an AI maximalist, wants carte blanche to leverage Claude for pretty much any kind of work that's legal. However, Anthropic wants other guardrails. Specifically, according to Axios, Anthropic does not want Claude to be used by the military for the mass surveillance of Americans or to operate lethal autonomous weapons with no humans involved. So they are at an impasse. And it's an impasse that's not easily resolved because the relationship between the two is like your middle school friend who you don't have much in common with anymore, but you still keep them around.

8:38Pete Hegseth:Right now, Claude is the only chatbot that's authorized to be used in the military's classified systems. Not Google, not OpenAI, not Grok. It's just Claude. And for Anthropic, it has a$200 million contract with the Pentagon. It definitely does not want to lose. Toby, this is a meeting that could definitely not have been an email.

8:54Neal Freyman:Yeah, there's clearly an ideological standoff here. Anthropic is a very ideological company, But they're also trying to say that there is a technical explanation for their reticence of giving carte blanche to the Pentagon. AIs make a mistake. Like, they still hallucinate. And Anthropoc is trying to say you don't want them being used to plan or deploy an attack without some serious guardrails here. So outside of the idealism, there is also just technical challenges to this. And then on the mass surveillance front, obviously, you know, America has the Fourth Amendment, but it wasn't built to address AI technology today in 2026.

9:32Neal Freyman:So Anthropik does not really want to be part of something where they feel like the laws have not caught up to a modern tech. So obviously, you can go through, you know, Anthropik's history as a company and realize that they usually take these stands. But you can also point to this as saying like, hey, the technology is not ready yet. We don't want to go into a war scenario where we have to have this technology be top of the line because it makes mistakes.

9:55Pete Hegseth:Let's go through Anthropics history as a company. It was actually founded by defectors from OpenAI in 2020. Anthropics, these guys wanted to build a more safe AI. That was the founding mission of Anthropics. They write constitutions to govern their use of AI. They've just promoted safety from the get-go. Also, their leadership has criticized the Trump administration, which has rankled people in the Trump administration. So they just don't really like each other, the U.S. government and Anthropic from the get-go. But things really came to a head in January when the U.S. military conducted that raid to kidnap Nicolas Maduro in Venezuela.

10:33Pete Hegseth:It was found out that Claude was used in that raid. And then one executive reportedly at Anthropic raised questions about what Claude was used for. They said, hey, did Claude, was Claude using this raid? What did it do? That raised alarm bells in the Pentagon that said that seemed to suggest that Anthropic was uncomfortable with Claude being used with this type of use case. So things really escalated after this Venezuela Maduro raid. There's just a lot of mistrust here. Hexed thinks that we need to use AI for literally everything because if we don't, China will take the lead. Anthropic wants guardrails.

11:09Pete Hegseth:So we'll see what happens with these two. But they clearly don't like each other.

11:12Neal Freyman:Yeah, and the Pentagon is considering a very intense option. They have threatened to detonate Anthropic as a, quote, supply chain risk that immediately voids existing contracts and potentially requires contractors to certify that they are not using Claude in any of their workflows. So supply chain risk is usually used for foreign adversaries. Applying it to a U.S. firm is not something that happens. It is a very big rebuke of what is going on here. So that is intense, to say the least, that you can go from using the product daily to now never use the product again within the entire Pentagon.

11:51Pete Hegseth:It's a threat. It's a big threat. But we'll see what happens at this meeting. The problem is they need each other, right? Anthropic has this huge contract with the Pentagon. It needs all the money it can get because AI is very expensive. And the Pentagon, the only chatbot that it can use in its classified systems right now is Claude. The onboarding process to get all those other ones on board is probably very complicated and takes a lot of time. So this is right now a marriage of convenience. We'll see if these threats can materialize into some sort of a working relationship.

12:20Neal Freyman:Let's move on. There's something lurking in the shadows of Wall Street that is keeping finance bros up at night. It's not a Zin shortage. is trouble in the world of private credit. Private credit firms act as a middleman, getting capital to companies that need it, but may not be able to meet traditional banking standards. While it sounds shady, oftentimes these are just non-public companies that have financing needs that banks don't really want to deal with. Enter private credit. They take money from big institutional investors like pension funds and insurance companies and make those relatively risky loans that offer higher returns.

12:55Neal Freyman:But alarm bells have been going off in this industry that mostly operates out of sight of retail investors. Blue Owl is a major player in this space with over$300 billion in assets under management. They are unique in the private credit space because they've opened up one of their funds to retail investors instead of the normal institutional players. And here's where the bells come in. Blue Owl also recently halted investors from making quarterly withdrawals and instead began selling assets to return capital. Management is framing the switch up as a good thing because it accelerates the return of capital, but others think it smells fishy.

13:31Neal Freyman:The red flags we are seeing in private credit today are strikingly familiar to those of 2007, said Orlando GME's chief investment officer of Foyer Investment Management. Neil, nothing bad happened after 2007, right?

13:46Pete Hegseth:This is one of those stories that your friend in finance tells you about over drinks or dinner. They go, I know this hasn't broken into the mainstream yet, but it's all anyone in our industry is talking about. Investors are not buying this Blue Owl story. They seem to be very concerned. Their shares are down 60 % over the last 13 months, and they just are having an 11-day losing streak. Even Treasury Secretary Scott Bessent came out on Friday and said, after these redemptions were halted, and said, we are concerned. And I even go back to last fall. That's when all these jitters sort of started in private credit.

14:21Pete Hegseth:There was the bankruptcy of those two auto companies, which was First Brands, which is an auto parts supplier, and Tricolor, which is a subprime auto lender. Private credit was exposed to them. There's sort of a lot of shady stuff going on there. There was even fraud. And Jamie Dimon came out. He lost his bank. He's the J.P. Morgan CEO. His bank lost$170 million on its loans to Tricolor. He said when you see one cockroach, there are probably more. TBD, whether Blue Owl is one of those cockroaches yet, but if so, it would be one of the biggest ones because it's become the face of private credit because it's just grown so much over the past few months.

14:57Neal Freyman:Yeah, this fund is notable or this company is notable for two reasons. One is the fact that they did open up one of their private credit funds to retail investors. These are high net worth retail investors. They're not just you and me, but they also aren't pension and insurance companies who generally have a better appetite for risk over the long term. They understand that these funds are going to go up and down. They can afford to have a few cockroaches in their portfolio because these are such massive pools of money and they invest over such long-term. Retail investors are not built like that.

15:35Neal Freyman:They're a lot more emotional, which is why you have people withdrawing their money if they see cockroaches on the horizon. So that is one reason why Blue Owl is different, that they did get into the retail game. And then the other reason why Blue Owl is a poster child for maybe some private credit jitters is the fact that they've gone very heavily into software. They're one of the largest lenders to software companies. They bought into these firms at 40x earnings. What is happening of recent times, AI tools like Claude and ChatGPT are causing a ruckus in the software market. Suddenly those bets are not looking as good as maybe they would a few years ago.

16:14Neal Freyman:So that is why you're going to hear your finance, bro, you know, go check out what's happening with Blue Owl. Those are two of the biggest reasons. All right, we're going to take a quick break and come back with Toby's Trends right after this.

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