Anthropic v. DoW, Paramount wins WB, OpenAI raises $100B | Diet TBPN

0:01John Coogan:It was a massive weekend, so much news, but we missed you. We missed you on Friday. We were traveling. We went to Montana.

0:08Jordi Hays:Terrible day to be out. Terrible day to be out because it was - Every single time we've had an off day, it ended up being a massive news day. So lesson, never take a day off. Yes, never take a day off.

0:19John Coogan:Truly. What an absolutely crazy weekend. Of course, there's the war with Iran. the big news in tech was the US halts the use of anthropic AI after tension over guardrails so this is in the Wall Street Journal the federal government will stop working with artificial intelligence company anthropic president Trump said marking a dramatic escalation of the government's clash with the company over how its technology can be used by the Pentagon quote I am directing every federal agency in the United States government to immediately cease all use of Anthropics technology. We don't need it, we don't want it, and we do not do business with them again.

0:56John Coogan:We will not do business with them again.

0:59Jordi Hays:No, we don't negotiate with terrorists.

1:03John Coogan:Trump said Friday in a social media post, the Defense Department and other agencies using Anthropics Claude models will have a six-month phase-out period, the president said, adding that there would be civil and criminal consequences if the company isn't helpful during the transition. Six months to switch from one LLM to another feels like a long time. But I guess a lot of this has to do with like FedRAMP and actually getting new models.

1:27Jordi Hays:But this is a lot more than, you know, switching to a new model to run deep research reports. So you're involving classified systems. Sure. The context that people didn't have last week was that the United States was headed to war, right? And so even having that context, I feel like it's pretty important, right? It sort of explains the 5 p.m. deadline. Anthropic had taken issue with how their products were used in the Maduro raid. There's a new conflict that's unfolding. And so that makes the aggressive timeline make a lot more sense. It also makes the six-month phase-out make more sense because national security is on the line.

2:08Jordi Hays:This morning, Scott Bessent said at the direction of the president, the U.S. Treasury is terminating all use of Anthropic products, including the use of Claude within our department. The American people deserve confidence that every tool in the government serves the public interest. And under President Trump, no private company will ever dictate the terms of our national security. U.S. federal housing, Fannie Mae and Freddie Mac are also terminating the use of anthropic products, which was announced this morning.

2:32John Coogan:Yeah, which I think goes in line with the original direction. Trump said, I am directing every federal agency in the United States government to immediately cease all use of anthropics technology. So you would expect to see these statements come out from sort of every different federal agency as they sort of get their transition plan together, figure out what are the requirements for their particular agency. Because I imagine some agencies aren't operating in classified environments. It's going to be much easier for them to onboard to a Gemini or an OpenAI or a Grok very quickly. Some of them, it's going to be a longer plan.

3:06John Coogan:longer plan, but they're all getting on board. And there's been a big debate over how Dario has handled this. Where is he in the right? Where is he in the wrong? Where has the government potentially overstepped? Have they been too aggressive or are they doing everything appropriately? Everyone is weighing in and we're going to take you on a whirlwind tour of everyone's opinion, share some extra context, try and dig into what's actually at stake, what's actually going on. In many ways, Ben Thompson does a great job sort of painting the broadest picture around like what if this is really nuclear level technology?

3:39John Coogan:What should we expect in that scenario? And then there's the more minor side, which is, you know, you're talking about a$200 million contract for a company that does 10 billion in ARR. This is 2 % of revenue. In many ways, it's, you know, a bump in the road. And so I think a lot of people will be squaring how serious is this for Anthropic? What does this mean for the other foundation model companies? What does this mean for the future of the relationship between tech and Washington DC, but there's a lot more context. So the way I process this was interesting because I was very, I wasn't fully offline, but I was not surrounded by tech people over the weekend for the most part.

4:15John Coogan:And so I was following it and sort of wrestling with some of the same questions that people were wrestling with online. The big one was just how should a private company interface with the government? Like, I am an American, I've run businesses, I've never actually sold anything to the government, but hypothetically I could imagine the government coming and wanting to buy, I don't know, ads on TBPN or Lucy products or any other consumer packaged goods product that I've made. My assumption is that the private company should have very little say in how the government uses those products. And I was trying to zoom out and think about, like, AI is so complicated because it could be super intelligence, could be auto-complete, could be coding help, could be knowledge retrieval.

4:58John Coogan:There's a lot of different things that AI means. And in some scenarios, it's like super critical, really complex. And in other ways, it's just a product. It's just a service like an Excel sheet, like Microsoft Windows installation, like a car. Yeah. So I was thinking like, if I was the CEO of Ford and I make Mustangs and Ford Explorers and F-150s and the government comes to me and asks me to buy some cars, I should probably treat them like any other customer. I probably shouldn't say, no, no, no, I don't approve of this particular government, what the government's doing, so I'm just not going to sell you any Mustangs to drive around on the military bases because I don't like the military.

5:32John Coogan:Then if they ask me, hey, we love the Ford Mustang, we love the F-150, we love the Explorer, but we're going to war and we want you to put bulletproof glass on there and armor, that seems like a different discussion. That seems like I might need to, you know, set up a different manufacturing line, I might need a different assembly line, like the car's going to be heavier, and if I put bulletproof plating on all the cars, well, like a lot of families are going to be like, I don't want an armor.

5:56Jordi Hays:It's going to hurt my business.

5:57John Coogan:Yeah, it's going to hurt my business, exactly. And so that negative externality probably needs to be internalized by the government who's asking for that particular contract. And there's actually a history of this, like the Humvee, of course, the Hummer is owned by General Motors and that brand has separated and now most military vehicles are made by defense contractors, but there is some bleed over and there's sometimes when private companies do dual sourcing or dual use technologies. But all of that is just like a discussion and that cost should be part of a new contract effectively in my case.

6:29John Coogan:And this was loosely what was happening.

6:32Jordi Hays:Yeah, and Dario in the CBS interview, quote, we are a private company. We can choose to sell or not sell whatever we want. There are other providers.

6:40John Coogan:At the same time, and we'll get to the actual CBS interview, but he said, Anthropic has been one of the most proactive AI companies in working with the US government. We were the first to deploy models on classified clouds and the first to build custom models for national security, which is odd because I feel like this was predictable from a lot of the writing that has gone into the AI community broadly, like what happens at the edge. This was sort of predictable that you would get to this question.

7:06Jordi Hays:Yeah, this was the moment he had been waiting for.

7:09John Coogan:in many ways. And so it's weird that you would be able to predict that this would happen, that there would be this question of who gets to decide how the technology is used, and you wouldn't just be like, well, I know how it's going to play out, so I'm not even going to go in the lion's den. Instead, it was like, we're leaning in with the government, we're deploying on classified clouds, training custom models, but we still want authority over the final last sticking point on how these models are deployed, what they're used for. And that feels a little odd. In the Ford example, like if I sell them a Ford F-150 and they say, hey, we're going to take it to Iraq and go do a military mission, I'm going to be like, look, like it's not ready for that.

7:50John Coogan:It's not armored. You shouldn't do that. But if they do it, then it's kind of on them. I should be clear about the capabilities of the vehicle and how bad it would be in that situation. But it's on them to go retrofit it, figure out what's, you know, legal, what's most valuable to their strategy to their mission, what's aligned. Maybe they'll use it just to drive around the base. Maybe they won't actually take it out on on tours of duty, based on what you know about the capabilities of the model. I thought it was totally reasonable for Dario to say that anthropic models, in his view, are not capable enough to be deployed in certain Department of War contexts.

8:23John Coogan:Now it's bad salesmanship. Most salespeople would just be like, yeah everything's great. You can use it for anything. The over promise and then under deliver. He's doing the opposite, but it's certainly responsible if that's his true belief. Like if he believes that these models are not good for a particular use case, telling your customer that, hey, like it's just not ready for that. Like you're just going to have a bad time. It's not going to work. That's that's a fine thing to communicate as the CEO of a company who's selling a product. But at the same time, I still think the government has the freedom to assess the efficacy of those models, which are changing in capability rapidly.

8:54John Coogan:And then I think the government should be able to determine when and where they're effective. They can't break the law and Congress and the American people by extension are free to create new laws to restrict or encourage the use of technology in all sorts of ways. And that's like the way America works. That's the American project. It's not unreasonable to share the capabilities of your product with the government, which I think is totally fine. So there were two main sticking points that they went back and forth on. No mass domestic surveillance and no fully autonomous lethal weapons. And there's been a question as to why OpenAI was allowed to include that language in their contract.

9:25John Coogan:Well, here's the thing though.

9:26Jordi Hays:So we know that Anthropic took issue with the way that Claude was used in Venezuela. And the Department of War would have known that, hey, we're going to war, right? You can imagine that Anthropic, a private company, does not know that. And so they have this deadline. There's this information asymmetry. Yeah, this information asymmetry. They have this deadline. The Department of War knows that they're going to war. They're like, we need reliable AI systems for this conflict. We now know the war, the president said this morning, said the war is going to stretch four to five weeks, right? I think on Friday, we all assumed that it was going to be in and out super quickly.

10:00Jordi Hays:So the timeline is extending. And the Department of War is sitting there being like, we need to know that the provider of these AI systems is going to be reliable.

10:09John Coogan:Just a little bit ago, they took issue with it.

10:13Jordi Hays:Can we count on them? They start this kind of renegotiation process to try to build up confidence that, hey, we can rely on these systems in an active conflict. in a conflict that feels already much more serious and will have much greater implications than the Venezuela conflict, right? And so Anthropic is looking at this in a different way and clearly is like leaning in and like really in some ways felt like they were kind of like not respecting the process. So like when I, or even the deadline, right? So Emil Michael came out Friday night and said, it was 5.13, 13 minutes past the deadline. I'm trying to get in touch with Anthropic.

10:53Jordi Hays:I try to get on the phone with Dario. Dario says he's in a meeting. And I feel like in that situation, if I'm the Department of War and I'm about to lead the country into war, we can debate on whether or not the war is justified. Should we go? But the Department of War is sitting there being like, you won't even jump on the phone. You're telling me there's a meeting that you're in that's more important. And that just screams to me like, hey, we can't count on this. We can't count on this provider. Like we need to take drastic action. Now, this whole supply chain risk designation, we'll get into that later.

11:28Jordi Hays:That's a whole other thing. But I can see why the department war came out of last week and was feeling like, hey, we cannot rely on this provider. We need an alternative solution.

11:37John Coogan:Yeah, yeah. If I'm shipping cars and I'm like, oh, I actually, I disagree with the latest decision. I'm not going to put the cars on the transport. A lot of people were like really, really keen on boiling down the terms to like these two like buzzwordy lines. And Palmer Luckey did a great job explaining like how complex these terms are. What is autonomous? What is defensive? What about defending an asset during an offensive action or parking a carrier group off the coast of a nation that considers us to be offensive? And that's where you get into like the ideas of deals that stick. you can have the same exact contract line item or terms of a signed agreement with with with two different people and it can be a wildly different experience most entrepreneurs have felt this because they were like yeah I had a handshake deal with one VC it was 20 % and a board seat and I had another deal with another VC 20 % a board seat and the one VC was like suing me and threatening me the entire time and the other person was very flexible and clearly very aligned and so building up a relationship that shows that there's some trust reliability that when the hard decisions come that they will be made in a legal logical you know consistent with american values way is i think what you need to put forward if you want to work with the government effectively so semaphore reported that anthropic disapproved of its technology being used during the maduro raid and the joke was that the department of war was probably just asking basic knowledge retrieval questions like who is Nicolas Maduro but I don't know how much of a joke that is and I also I don't know how bad of a thing that is I actually think yeah

13:14Jordi Hays:Tyler what I was gonna say like next on that on the context of Venezuela like specifically like what is actually reported is is that after an anthropic employee inquired with Palantir about Claude's role in the raid yeah Palantir senior executive notified the Pentagon yeah so I think it is like kind of blowing it out of proportion to say that like anthropic is against using Claude in Venezuela right yeah it's an employee it's not an executive article about that

13:35John Coogan:too though?

13:35Jordi Hays:Maybe it's like Dario telling an employee to go check on that. But like, we don't know. It could just be like a random employee.

13:40John Coogan:I was thinking back to that viral interaction between Ted Cruz and Tucker Carlson, where, where Tucker asks Ted Cruz, like, what's the population of Iran? And Ted Cruz doesn't know. And it was framed as like, well, how can he possibly have a reasonable take on Iran if he doesn't even know the population? And that's like somewhat fair. You could go either way on that. But I just think like LLMs are good for that type of thing. Like expect civil servants, elected officials, military officials to be knowledgeable about the countries that they are operating in and LLMs can help with that and so I feel like that's just a good thing.

14:16John Coogan:Like if you just zoom out and just ask do we want a more knowledgeable and educated government workforce across everything that they do, it seems like absolutely yes and so there was a perception that this was like going to kill Anthropic because if NVIDIA has a government contract then they can't do any deals with with Anthropic whatsoever. And that's not true, apparently. The supply chain risk is specifically, if you are a company and you're working on a government contract, you would not be able to use anything that's labeled as a supply chain risk on that contract. But you could use that product in a different piece of your business.

14:49John Coogan:And so still dramatic. I think Dario said it was unprecedented. It's only been used for foreign countries.

14:54Jordi Hays:Yeah, Emil Michael was going through the timeline. He said, today at 9.04 p.m., no response yet to my calls or messages to Dario. Today at 8.25. 5.5. Anthropic writes, we have not received direct communication from the Department of War. Of course, Emil Michael is the Undersecretary of War. Today, 5.14's Secretary of War tweets supply chain risk designation. Today, I called Dario's business partner at 502, asking to speak to Dario because he hasn't gotten back to me. She is typing while we speak and likely has lawyers in the room with no notification to me. I called Dario at 501, no answer. I messaged Dario asking to talk as well.

15:27John Coogan:So speaking of Dario on CBS, he did unpack some more of his logic, which clearly resonated with some people. There was a lot of supportive posts. There were a lot of anti-posts, but it caused a discussion. I was left unsatisfied with his answer on one question. So he was basically arguing that LLMs as a class of technology hallucinate and should not be used for autonomous weapons, which is clearly a commentary on using AI at the Department of War broadly. But I thought it would have just been better, like much more stronger communication for him to say, hey, look, we're anthropic. We've built a system that's specifically good at answering questions, being friendly and helpful, writing code.