Harvey’s Margins, Are Insects Worth More Than Humans?, Meta Tests Human Help for Muse | Diet TBPN

0:01John Coogan:Jordi, his hat game has evolved. He's now wearing the fedora with the blackstone cap on top, which I assume can only mean one thing. It means that your top priority is safety in financial markets and the financialization. But also safety as well. Oh, you care about both. I care about both. So you want to accelerate the AI build out safely. Safely. Yes. I thought it was, I thought it was, you're going to blend the two and you're like, look, I want insane private credit deals, trillion dollars of, of capital to flow into the AI buildup, but I wanted to do, do it safely. Every contract, the investment grade.

0:39I want to prioritize safety on the whole frontier.

0:41John Coogan:Okay. Safety around the models. The capital markets. Safety and financial markets. In the capital markets. Got it. Okay. Okay. I'm seeing, I'm seeing where you get there. Anyway, you want to do Harvey first? Let's. People are, people are taking shots at Harvey. It started with Samuel Rowling. I won't stand for it. I won't stand for it. No, I like Harvey. We've talked to some lawyers that use Harvey. Seems like a great product. We also had Lagora on the show just last week. Had a good time with them. Seems like a very competitive space. But the headline that grabbed attention, they say, track changes.

1:10John Coogan:Harvey's gross margin fell from about 50 % to negative 50 % by June as agent token use spiked 20-fold on rented open AI and anthropic models, Bloomberg reports. And so it seems really bad. Like you definitely don't want negative gross margins as a software company, as a tech company. As any company. Really as any company, actually. You don't want to be selling a dollar for 50 cents. And that's exactly what they did in June, basically. That's what they were doing. They were selling tokens at negative gross margins. Not good, but there's way more details in the actual reporting. So you should go read the Bloomberg report.

1:46John Coogan:So the first thing is like cost did explode, but it was on the back of more product usage, which is good. They're growing ARR. We'll get into that. And token consumption increased 20x this year. So basically, they are feeling the reasoning era, the agentic era. One job, one process in Harvey is generating a lot more tokens. Had seat-based pricing. Yep. And then AI got a lot better. So every seat was just using it way more. Yeah. Very simple. But it's not just using it more. It's that the lawyer might be saying the exact same thing as they did a year ago. They might say, review this. But instead of like one-shotting it with no reasoning, they went to reasoning, which generated way more tokens.

2:24John Coogan:And then they went to agents. So they were like, okay, it's actually going to fan out, look at everything across your firm, all the other records that you have, all your different policies and MD files. Like everything that you have is going to be worked through this agent. And so you're generating way more tokens. So that created negative gross margins. But the good news is that they're already back to positive gross margins, which is in the Bloomberg article. Kind of criminal not to repurpose that because it really makes it look like they are running at negative gross margins. They had a negative 50 % gross margin in June, but they are back to positive gross margins.

2:57John Coogan:They changed their model usage. Of course, there's a whole bunch of models that are cheaper and better for certain things. And they actually fine-tuned an open weight model. So they did post-training on an open weight model, and they're calling it Harvey Tennant. And there's some interesting details there. I want to debate with you on like the value of that, where that goes. First, Gabe, one of the founders of Harvey responded. Oh, he did. He said the hardest thing about building Harvey is doing what's best for our customers despite immense pressure to do what's easy. The easy thing would have been to force our customers into consumption pricing before they were ready and serve them worse models to protect our margins.

3:32We chose to help our customers transition on a timeline that works for them and give them the best models in the meantime, even though it hurt our margins. This meant optimizing our product through routing, harness improvements, and post-training so we could serve frontier intelligence at an affordable price. It also meant building the infrastructure for customers to monitor and manage spend, usage dashboards per matter cost attribution, spend caps, and ROI reporting. As a result, we improved our gross margins from negative 50 % to positive in a single quarter, despite usage doubling month over month and continuing to serve the best models.

4:06Our philosophy is simple, do what's best for our customers, even when it's painful, hurts our margin, or draws criticism from competitors X and the press. We believe the most important part of building a company is earning and keeping your customers' trust. You do that by doing the hard thing for them, even when it costs you. A bunch of great points in here, even outside of the Bloomberg piece and the subsequent coverage. Max from Lagora was going pretty hard saying it doesn't make sense. It doesn't make sense to train your own models because the publicly available frontier models are dropping in cost.

4:44And the quality is increasing. So you're just sort of like wasting your own. And again, that's a bet that he's making. Harvey is going to make another bet. Probably some mixture of both is going to be the right approach.

4:55John Coogan:There's another interesting sort of like how bad is this situation, just comp, which is – So they had negative 50 % gross margins in June. They're at a$400 million run rate for ARR, I suppose. And so that's$33 million a month. And so negative 50 % margins means they lost$16 million, but they've raised like$500 million. So in terms of like burn, it's not super cause for crisis, in my opinion. And what's interesting is that even through June, maybe they did the Sequoia deal that valued the company at 15.5 before that happened because it was announced September 9th. But I have to imagine that the deal probably got done with at least some insight into those negative gross margins in June.

5:45John Coogan:What do you think? I would assume so. But the main thing is like every application layer company has like gone through a moment like this, even if it was for like a single day. Totally. So it matters how quickly you can respond and adjust. Yeah. So where do they, where do they need to get to? Like, what is the standard for the legal technology industry? There's some comps here. Uh, e-discovery provider, disco public company, 75 % gap gross margins. Like it is a software tool that when you're going into discovery, you need to connect with, uh, a bunch of data. Okay. We got a whole bunch of tech messages, a whole bunch of emails.

6:19John Coogan:Let's put them in a system so we can review them sort of, you know, normal SAS. I'm sure there's a bunch of AI involved now, but that business is running at 75 % gross margins. Thompson Reuters has a legal professionals segment of software that's running at almost 50 % adjusted EBITDA margins. So like true net profit. So that's sort of where they want to be. Also, pure play law firms have really high margins as well. Hard to comp them to businesses because they pay out to the partnership. but PricewaterhouseCoopers reports net profit margins around 41 % for the top 10 firms. It's lower for firms 10 to 100 or something like that, but still lots of health in the legal industry broadly.

7:02John Coogan:Obviously, everyone knows lawyers make money. That shouldn't be surprising. And yeah, tokens are getting cheaper by the day. There's a bunch of model launches. Opus 55 launched today. Grok 4.7 was yesterday. And Grok 4.7, no one was, even Elon was like, okay, we're not jumping straight to the frontier with this. It's going to be a couple more iterations, but we're excited with the progress. But there was one benchmark that really jumped out. And it was actually the Harvey Legal Agent benchmark, which is interesting. So I don't know how insanely good that benchmark is. It might be, you know, you could, you could bench max against it.

7:37John Coogan:But the interesting thing about that particular benchmark was that it was a legal task benchmark based on cost. And so Grok 4.7 is particularly cheap for the type of legal work that at the very least Harvey wants to do. So you could see them funneling more token spend towards XAI and Grok. Do you have something? You wanted to give it up for big law? The chat wants to give it up for big law. They're the real winners here.

8:03Additionally, GPT-6, Sol, and Luna are starting to roll out. So we'll look out for announcements there soon.

8:11John Coogan:There were some cool demos. I saw one Opus 5.5. The chat says the hat-jacket combination isn't working. I'll try to adjust a little bit. I'll try to adjust. Hopefully that's better. Flawless, yeah, thank you. Thank you for flagging. Huge upgrade. Very funny. Yeah, I saw a cool demo where someone sketched out on a piece of paper, sort of a trebuchet in Opus 5.5, took that image into simulation and created like a virtual version of it. AI continues to impress in terms of translation of things. Oh, your kid drew a, you know, some crazy mythical creature, turn it into a story, turn it into a movie, turn it into a video game.

8:59John Coogan:Whatever format you want, if you want to read a 2 ,000 page novel based on Call of Duty Modern Warfare 4, you can probably do that now. So you can have your content in any specific format you want. It seems to be where the AI continues to impress. Anyway, let me tell you about Codex. Codex is a powerful workspace for getting work done with AI agents, whether you're writing code, analyzing data, creating content, or automating business workflows. Codex helps you move projects forward from start to finish. I've been having a lot of fun generating AI videos with Codex. Should we pull up your latest masterpiece yeah the literally me uh compilation it burns up the internet and vibe reels all of the time but now if you see those literally me characters and you're like i am jake jill and holly nightcrawler i am i forget who else is there uh patrick bateman in american psycho you can put yourself in the movie there's inception we got jordy in there that's drive I think that's Heat, Mad Men.

10:04John Coogan:Can we call them out? I think that's Bike Club. You got Joker. You got Taxi Driver. You got Nightcrawler. No Country for Old Men. Social Network. Godfather. Back to Joker. I forget that one. Stockshank, maybe. That one's Collateral. Then Blade Runner. Blade Runner again, I think. Yeah. Some of the renders are really, really good. That one, your face doesn't quite fit on Leo's head, but that one's really good. That one works pretty well. This one's a little awkward. The Joker, it's really just Joaquin Phoenix's face didn't actually swap you in at all. Codex was even like, it didn't work. And I was like, do it anyway.

10:40John Coogan:I don't care. It's fine. It's going to be on screen for two seconds. That one's good. John is really my human agent. No, you didn't even tell me to do this. He's sort of like an ambient, always-on agent. That's what I'm saying. I don't even have to tell you. You just predict my needs, right? You'll send me something like this. Everyone should have a John in their life. Everyone should. But yeah, fun, powerful tool. Still got$500 locked away in Higgs field in the wrong section. Can't do anything with it. Just give away the account or something. Anyway, what matters more, people or insects? Tough call, John.

11:22We should get into maybe one side of it first. Yeah, steal matter? Before we form an opinion.

11:28John Coogan:Okay, the human side? You want to steal me on the human side? Look, and I'll just say that we're coming to you live.

11:38We had a rough morning with the mosquitoes. We actually had to door dash one of those bug bite treatment things, the heat, whatever. What do you call them, Tyler? I think it's like insect bite healer. That's what it's listed as. It did work because I, yes, Sebastian says I'm famously pro-mosquito. Yes. But a mosquito did bite me on the face today and a bunch more times. So I ended up capitulating and having to get one of these. But I don't like using these. I don't like using these. It's funny because I can't stand EAs and I think they're weird freaks. And I don't think they should be anywhere near public policy or anything like that.

12:22But the one thing that I can agree on with Ben, this guy writing this post that insects are more important than humans, is I don't think anyone should – I don't think we should harm the insects.

12:32John Coogan:Oh, OK. I think humans are more important, but that doesn't mean you got to like take them all out. Yeah. Just go somewhere else. You would take sort of – you would be altruistic towards the insects. Ellie says mosquitoes are terrorists of the air. They really are. You want to be altruistic towards the mosquitoes. You want to be effective in your altruism when it comes to mosquitoes. You don't want to arrest them. No, I want them effectively to be nowhere near me. An effective altruist who writes under the name Bentham's Bulldog went viral over the weekend for an essay titled Insects Matter More Than People in the Aggregate, arguing that the combined welfare of insects outweighs that of humanity.

13:16John Coogan:His basic argument is one of scale. Insects are so numerous that even if their capacity for suffering is only a tiny fraction of ours, their total suffering could still dwarf human suffering. It's almost just a thought experiment. There's so many other directions you could make. Why not go pound for pound? Maybe cows are the most important because there's a lot of cows and they weigh a lot. There's probably more aggregate pounds of cow than humans. Maybe they matter more than humans in the aggregate. right or fur like the amount of fur on all the monkeys in the world is more than all the fur on all the humans in the world and so maybe monkeys matter more i don't know it's a it's a it's completely arbitrary where people draw these lines but uh he estimates that for every for every second of human life insects collectively spend roughly 270 000 seconds dying about 75 hours and notes that more insects die in a single second than the total number of humans who have ever lived.

14:17John Coogan:Wow, that's a crazy stat. I mean, the guy pulled some cool numbers together. This is interesting. This is fun fact territory. A large part of the essay turns on whether insects can experience pain. Bentham's bulldog argues that they can even weekly. If they can even weekly, their suffering should count morally just as ours does. What species you are is just totally irrelevant to whether it's bad for you to feel terrible pain. Using what he describes as a conservative assumption that insects experience pain at just one ten thousandth the intensity that humans do, he concludes the sheer number of insects would still produce vastly more suffering in the aggregate.

14:54John Coogan:He ultimately argues that insects may experience more suffering in a single day than humans have throughout all history. Now, is there a piece on this where this is the view of the of this community with the relative like are they looking forward to how a world might interact with like a god-like machine super intelligence and humans so the idea is like we got to stand up for the insects now because we are the insects of the future so we want them to make the same calculus i think that's certainly like where the thought experiment goes yeah right And so this feels almost like bait or like a trap where it's like if you are the type of person that jumps on this and says, no, I disagree.

15:40John Coogan:Like insects don't matter more than people in aggregate. Then you're setting yourself up for like the dunk that's, OK, well, now there are a quadrillion super intelligences that can all feel pain in some abstract way. And so they're more valuable. And so now you're the insect. And so your previous argument can be used against you to advocate for your own eradication. And so it's like stand up for the insects now lest you be discarded in the robotic future. Yeah. I don't know. The reactions to this were rough. People did not like this argument at all. Well, it's just the timing is funny because there's so much tension building around the sort of EA rationalist movements with.

16:23John Coogan:Which is super fractured. People don't realize how fractured it is. But it's sort of boiling up to the sort of national level in a way that it hasn't before. And so during the midst of that broader conversation to come in and being like, yeah, insects actually matter more than people in the aggregate. What were some of the reactions? Doomer said, if you truly believe that a bug's life is worth more than a human life, you will immediately feed yourself to bugs. Do it right now. If you don't do this, you are a fraud, a liar, a poser. Yeah, I think it's actually important for people to read that.

16:54Before you go and comment on this article, watch A Bug's Life at half speed.

17:01John Coogan:Half speed. Yeah, watch the whole movie at half speed. You're a movie guy, but maybe you're not a fan of watching movies at half speed. It's not really how the— I'm really a half speed guy. But half speed is a great sort of tool to have in the tool chest when you want to deeply comprehend. 2x speed, 3D glasses with the two different movies interlaced so I can get one movie in one eye, another movie in the other eye, one audio book here, one podcast here. Duo. While I'm sleeping, yeah. With the duo. Exactly. Max Brainrot. I mean, the fracturing of EA really leads to a really, really wide range of outcomes that get sort of lumped together.

17:43John Coogan:Everything from the Pace the Frontier essay to this. These are clearly very, very different pieces of communication, and yet they get sort of lumped together. It must be full employment if you're in the public relations department over there. Yeah, I was going to say, I think the shrimp welfare stuff makes more sense than this, because I'm not really sure what, after reading this and saying I agree, what are the next steps? We're not really factory farming insects, maybe through pesticides or something. Speak for yourself, brother. Yeah, yeah, the shrimp welfare. Got some big announcements coming soon.

18:16Like what percent of these like 600 billion insect deaths per second are preventable? Yeah. Where like with the shrimp, you know, you can say like, okay, it's factory farming. Change the farming practice or just don't eat the shrimp. Yeah. So I think that's why maybe this was less impactful. I don't know. Yeah.

18:32John Coogan:I mean, it's all a continuum to like until you get to like the veganism, like the animals who you can pet, you know, should be able to live full lives. This is sort of the most abstracted version of that. But yeah, I don't know. It's odd. More importantly, update on TBPN's road to Christmas. Oh, yeah. We're down to just 93 days. 93 days. A lot to think about, a lot of moves to make, and we couldn't be more excited. Start counting it down. I was trying to think of a realistic AI doom scenario. Like everyone's like, oh, I can't imagine it. And so I actually mapped out one that maybe I could take you guys through.

19:14John Coogan:I wrote a little script here called The Old Way. So, you know, fades in, starts in the TBP and Ultradome. Me, you, Tyler, we're all doing the show. All of a sudden, all the phones in the Ultradome light up. Emergency alert. Unknown biological event. Shelter immediately. Outside, alarms begin to sound across Los Angeles. A strange haze starts pouring through vents and drifting across the streets outside. I see a cloud approaching the Ultradome entrance. First thing I do, bioweapon attack, this is what you got to do. Boom. Right there. It's not going in your mouth. You're good. Second step, pull out your gun.

19:52John Coogan:Boom, boom, boom, boom. Start blasting whoever's responsible. You're just firing wildly. Once you got the situation a little stabilized, then we got to start, we got to figure out what's going on. So I go over to Tyler and I say, look, we got to hack into the super intelligence. We got to figure out what is going on with this bioweapon. And he's like, sure. I'm like, yeah, let's hack into it. I'm like, I'll open up Codex. What do you want me to prompt? I'm like, no, the AI has gone rogue. We have to do this the old way. He's like, okay, I'll open Cloud Code. Like, what do you want me to prompt?

20:22John Coogan:I'm like, no, the old way. He's like, okay, I got cursor open. Like, what are we doing here? I'm like, no, Tyler, we have to go back to the old way. He's like, okay, I got GitHub Copilot fired up. I'm like, no, Tyler, you can't use any AI at all. He's like, okay, just let me know what code you want to write, and I'll look it up on Stack Overflow. And I'm like, no, the internet has been contaminated, Tyler. We can't use anything. We have to code the old way. We have to do it by hand. And Tyler's like, I can't. We don't know how. I don't remember anything. I can't write any code. So what do we do next?

20:56John Coogan:We got to get George Hatz. He's the only one who can help in this scenario. Because he's the only one that remembers how to code. He remembers how to code. He's got local models stored. He's got his own hardware. So we go get George Hatz. And then we're like, okay, George, hack into the super intelligence. Tell us what's going on with this bioweapon. And why aren't we affected? Like, we've been walking around. We seem to be fine. Everyone else is turning into a zombie. What's going on? So he locks in. He writes some code. He hacks in, figures it out. He says, Jordy, tell me about your diet. And you're like, well, I just eat at Erwan exclusively.

21:29John Coogan:And he's like, yeah, my analysis shows that your body has never had a toxin in it. And so you are immune to the bioweapon. it doesn't affect you at all. And I'm like, but how do you explain me? I only eat air one once a day. And he's like, well, John, my analysis indicates that you might have had the original Four Loko. Did you drink the original Four Loko? In large quantities? And I was like, yeah, I was daily driving in college. Why? I was like, your body consumes so much original Four Loko, it's now essentially pure toxins. So the bioweapon sees it as a hostile environment. It doesn't even try to infect you.