Netflix vs Youtube, Saudi Arabia’s liquidity crunch, Tether’s gold pivot | Diet TBPN

0:01I wrote about Netflix. There was a funny, very brief interaction between Ben Thompson of Stratechery and Netflix co-CEO Greg Peters on last Thursday's interview interview. And they go back, the only mention of AI in like an hour long interview or something, it's just two little exchanges. Ben Thompson says, is AI slop going to save you if it overwhelms the UGC platforms? And basically, it's like you're a refuge. So this is actual, this is real. And Greg Peters just says, I think it's credible. I don't know if that's the reality. So I can't say with certainty that's where we're going to land, but it's a credible possibility.

0:41And so he's like, maybe that's a bold case. It is interesting. I mean, Netflix has been trading down over the last couple months, but in general, it's up, I think it's 4x up since the launch of ChatGPT. But every CEO needs to contend with the AI question, the AI issue, how will AI change their platform? And AI has already been changing Hollywood. I mean, I was reflecting on the Avengers. I just remember seeing, maybe it was even in one of the first ones, the whole CGI process for Thanos. He has this like very distinct large chin. So Josh Brolin is the actor that plays Thanos. Is he a Mogger? He is a Mogger.

1:17He has this huge chin. It's actually like - He's kind of like the OG. I don't know. It looks like chin implants. It's kind of crazy, but it has these like cracks in it. It has this like very distinct look, Thanos. And normally the way the VFX pipeline works is that you go and you put these black dots all over your face, and then you wear a helmet that has a camera pointing at your face. It tracks all the points. So when you smile, like it sees that the actor that's driving the performance capture is smiling, and then that facial movement is transferred. So they're recording the lines, they're acting it out, they're giving their facial performance, and then that's transferred.

1:55All the little subtleties of how their eyebrows move, all of that is transferred to the CGI character. It can look a little flat, though. So what they did with this is they still have all the points on the face, but then they interpolate from the small points that are on the face into a higher res model. Yes, don't read that. Don't read that. Don't read that. But it is a good point. So all of those are tracking markers. And then the question is like, you have a much higher resolution CGI model. If you just transfer with 50 points or 20 points, you're not getting all the detail of what a human face actually looks like and the way it moves.

2:34And so Digital Domain, which was one of the many VFX studios that worked on the Marvel series, they built a straight up machine learning pipeline. Like they used AI. It wasn't a diffusion model. It wasn't, you know, an LLM, but they used a machine learning model to basically translate from the low resolution, just a few dots, to a much higher resolution mesh that then became the performance of Thanos on the screen. And I don't know if you remember 2018 the movies obviously you didn't see any of these movies but I don't remember like AI back my prefrontal cortex fully developed but but but truly like I mean people people did make the oh it's too CGI the bill the explosions are too crazy it's too over the top but in general people weren't up in arms about like a use of AI or use of to everyone was just like this is a CGI epic this is a crazy you know Marvel movie like we're fine with all this and There wasn't backlash to that.

3:29And I don't think that there would be backlash to this type of like AI tool. Now, obviously Marvel's Avengers, that's a Disney property, but the same VFX pipeline is being used all over the industry and it will continue to be used. Interestingly, I talked to Jason Carman about... The Carminator. The Carminator. The Carminator. About using AI tools in filmmaking because he's obviously making movies and doing VFX and stuff. and I was like, certainly if you need to rotoscope out a background. So rotoscoping is where you are basically using like, you're cutting out like a subject from the background and then just doing like a background replacement.

4:09That's an example of rotoscoping. But it's over motion, so it's moving. So you need to track the hand here, move it over here, track it again, track it again. And it can be very, very time consuming. Typically, this is offshore to like a BPO and then they have a whole team of people that are all aiming it and they have some software that's used. But I was like, this feels like something AI could just one shot. He said that AI was not there at the level that he wanted to deliver. He wanted to deliver in 4K. And so he went to a team. I think he paid them a fortune. They did it. And when they rotoscope ahead, they actually draw new hairs on to kind of create this.

4:44It's very artisanal still. But obviously, AI can rotoscope. You see it in the cap cut edits and whatnot. Where's the rotoscoping Neolab? It's actually Runway. We've had Cristobal on the show, and pre-ChatGPT, Runway had a fantastic AI rotoscoping tool where you could basically load up a video, put a couple dots on what you wanted to keep, and then flip over to the red dots and put those in the background and be like, cancel all this out, and it would sort of use that as like an intuition for the model to drop out the background. And you could do a really, really clear, like, cut this person out of this video just in Runway.

5:28And now that's available in CapCut and Edits. And that's where you're seeing all those crazy hype reels where, you know, you'll see the F1 driver, like, standing up. And then it'll, like, it'll drop out the background and cut in a different background. And then the F1 driver drops out. And it's, like, this very, like, schizo edit. It's a really cool technique. Yeah, you can see, is this Runway's editing tool? So it basically draws a mask around it. you just highlight like what do you want to actually rotoscope this is an example of like motion adding motion to video but like you're you're putting in a little bit of your own aesthetic taste so i don't think netflix should take a hard line stance on ai broadly because they want to use ai tools obviously they've been using ai for recommendations forever the original collaborative filtering algorithms were machine learning models and that's how you open up netflix and says, we think this would be good for you based on what you watched.

6:21And it is much more nuanced than just, if you like, you know, K-pop demon hunters, we're gonna recommend Squid Game next. And so many of these rote tasks will be AI enabled and they already are. And there's not gonna be, I don't think there'll be a crazy pushback here. Although it's possible that there's some sort of, you know, comms mishap, especially if a director comes out and is like, we didn't use any AI in this film because they don't think they used any AI. But there's a VFX house that, in the motion capture stage, did use AI to up-res motion capture data. Like, you could see AI being used in matte painting for the background, and the director doesn't even know because they just said like, yeah, the background, just make the forest a little bit bushier.

7:05And they think that they're hand painting it. After that, they were using CGI and 3D modeling it. Now they're using AI, and that sneaks in. And then all of a sudden, they face some backlash. I think that's manageable. Well, I don't think that's that big of a deal. The bigger question is like, how does Netflix position itself against YouTube and the UGC platform? So Neil Mohan, the CEO of YouTube, has taken a very open stance on AI. And I liked his stance. He was like, we're not gonna throw an AI tag on everything. We're gonna let you use AI tools right in the shorts creator. We have VO3, we're great at this.

7:38Like, we're going to lean into this. And the algorithm will sort out if you like it. And if you think it's slop and you don't want to see slop, the algorithm will learn that and not show you that stuff. But for the people that like that, they will be served it. It is sort of a balancing act. And there's definitely this like stated preference for like, I don't want any AI on my platform. Now, how real is that? We'll see. Yeah. And what we were getting into earlier before the show started is Netflix's decision. The decision that's bigger than just like, are we going to sort of lean into AI or not?

8:09We'll just really be. Do we have does Netflix ever lean into UDC? Right. They've been signing some bigger podcasts, and they obviously work with independent media companies. But there's a very big difference between just allowing people to, like, will they ever have an upload button? It feels like no, and I feel like that could end up being their advantage. Part of what has made YouTube magical since the very beginning was that anybody could go and upload a video. Anybody could be a creator. And I think like as the amount of content that gets created, 10, 100 Xs, 1 ,000 Xs because of AI, Netflix could be this like refuge where you're like, okay, at least if I go here, I know that there was some filtering process.

8:48I know that this isn't just a total free for all. Yeah. Yeah. The upload button is probably a bigger deal than like AI on Netflix. Exactly. I think that's a very good thesis. YouTube has been on an absolute tear. in terms of watch time on TVs, according to Nielsen, YouTube has been number one in streaming watch time in the U.S. for nearly three years. And so this has been the backbone of the case for, like, let Netflix buy Warner Brothers, even though they'll get HBO Max. Like, you're merging two seemingly big streaming platforms, but the combined watch time will still be lower than YouTube. So, but the bigger question is, like, there's this gap between Netflix and YouTube.

9:26And at the start, back in, I mean, Netflix is almost 30 years old, YouTube's over 20 at this point. Back in 2005, these were seen as wildly different platforms. One was DVDs in the mail, and the other one was a video of a guy going to the zoo on his VHS camera. They felt extremely separate, and they felt extremely separate for years, and years, and years. Now they are starting to converge, especially around video podcasts, I feel like. I feel like YouTube really drove a big boom in video podcasting. The podcast was, I think invented by Apple. Yeah, when I started doing any work with YouTube channels and podcasts back in the day, there wasn't a lot of overlap.

10:08It was very clearly like these were just different types of creators. Totally, totally. And then there was a big shift. It was like, wait, I'm leaving a ton of attention on the table and I'm not uploading to YouTube. And that forced a lot of creators to actually get into video. Totally, totally. Yeah, there was the pivot to video. And then Spotify went really big into video podcasting. They went on a, I didn't realize how big of a push Daniel Eck really did around podcasting. So seven years ago in 2019, they acquired three companies, Gimlet Media, Anchor, and Parcast. Anchor is more of like a product.

10:41Parcast had a bunch of - Yeah, Anchor was like, we'll make it easy for you to create a podcast. Yep, yep. They knew that everyone who wanted to distribute a podcast wanted to distribute it everywhere, but they could sort of default you to getting into Spotify as well. So that did very well. And then they signed exclusive deals with Joe Rogan and a bunch of other people. Interesting the timing. Apparently there was somebody sent me a chart. There was over a million podcasts launched in 2020. Oh, yeah, you saw that chart. Jeremy shared this with us. That is a crazy chart. It actually fully retraced to now there's like sub 50 ,000 a year.

11:15that feels like you'd really have to, maybe they're being extremely explicit about defining what a podcast is. But either way, there was, if you look at the chart, it looks like there was like an insane bull market in podcasts and then a huge correction. Yeah, it does feel like there was a 2020 boom during COVID. I mean, we talked to the folks at Acquired about that and they said that during COVID, they saw a huge spike in people just going for walks, throwing on AirPods. all of that sort of hit around the same time AirPods were getting to like mass adoption. So we were just throwing on podcasts constantly and it really, really grew.

11:51There is this chance that with YouTube, with the trough of YouTube getting sloppier by the day, that Netflix carves out more of a unique value prop and you wind up seeing more space between the two. So I think of Netflix and YouTube as starting out extremely separate, then sort of like coalescing with like Joe Rogan experience. And I mean, Portnoy and, uh, and Bill Simmons, uh, both are YouTube dominant and now have Netflix deals, right? Yeah. Isn't there deals set up so that the video can only be on Netflix and the audio is still elsewhere? Why do you remember that? Because Portnoy drilled into your head.

12:26He said, if you want video, Netflix, Netflix, Netflix, video, Netflix, video, Netflix, barstool video, Netflix. And, uh, and it's true like that. And so I would think of Barstool, like if I'm trying to watch a Barstool YouTube video or a podcast, I would just go to YouTube. Now Netflix is getting into that. So the gap between Netflix and YouTube is getting like pretty narrow, like they're becoming competitors. But there's this question on the AI issue. Do they diverge more? And is that valuable? The pure AI feeds like Sora and Meta, they haven't really been able to hang on to the top spots in the charts.

12:58The struggle will be to create like unifying conversations around particular pieces of content that are AI generated. I still feel like the K-pop Demon Hunters moment, the Squid Game moment, the Alex Honnold Taipei 101 moment, these live events, these key things that everyone talks about are really, really valuable. And that's a lot of what's driving the Warner Brothers acquisition. People still dress up as Batman around Halloween. And if you can be the place there, that's way easier than... Well, I've been getting AI-generated content about a superhero, but my superhero is different than your superhero.

13:35And so if I wear a t-shirt with that superhero on it, you're like, what is that? AI Slop Man? I'm not a fan of that. I like Batman. It's almost better to think about Netflix less as being AI-free and more about being UGC-free. They're paying for curation and a quality bar that's backed up by a brand that's going on 30 years in the business. The AI tools will come. Some fully AI-generated content will come, but true slop will be filtered out by the Netflix team. And I think that that's important for a lot of viewers. Should we talk about Saudi Arabia? Yes, let's talk about Saudi Arabia. What's going on in the Middle East?

14:12According to Bloomberg, Saudi Arabia is widening its search for capital, turning to some of the kingdom's wealthiest families as the government looks to ease pressure on public finances and fund the next phase of the crown prince's economic overhaul. I saw this headline and was deeply concerned. I was like, why aren't you guys supposed to be funding the whole build out? We were kind of counting on you guys to be quite liquid while the rest of us are over here in America are levering up. So seemingly somewhat of a liquidity squeeze. They're also raising from, they've been raising, tried to raise money from the Qataris.

14:53They apparently asked for something like$10 billion from the Qataris and the UAE. Qataris threw in 10B okay allegedly the UAE did not and there's frustration around that I thought you were going to say the Qataris threw in 10B and Saudi Arabia was like and we deployed it time to re-up so as part of these efforts the PIF gathered about a dozen prominent families on the Red Sea last month to assess their appetite for participating in future opportunities at the summit which also included others from the private sector the$1 trillion wealth fund and called for more collaboration on deals. Government entities, including the Ministry of Investment, have also stepped up outreach to family offices, wealth managers, domestic businesses.

15:36Local families are being sought after to play a bigger role in partnering with global investors to draw more money to the kingdom. Years of excess expenditure and subdued oil revenues alongside a tighter lending environment have challenged the Gulf nation's ability to bankroll expansive projects planned under the$2 trillion Vision 2030 agenda. Officials this week said they would postpone the 2029 Asian Winter Games, and the government had previously pared back spending on other elements of Saudi Arabia's economic rejig. It seems hard to host a Winter Games. That seems extremely expensive to host a Winter Games in Saudi Arabia, if that's what's going on.

16:14Don't they have some mountains? They have mountains there? I don't know. Riyadh has been stepping up efforts to look for alternative sources of financing, including a rare loan deal, now a range of local entities have begun to sharpen their focus on Saudi Arabia's family offices and businesses, which collectively control assets worth hundreds of billions of dollars. The number of family offices in the Middle East in 2019, 250. 2024, 290. Now we're up to 310. And the projection for 2030 is 350 family offices. There are big portfolios. The wealth is sizable. These entities have long dominated the Saudi economy and close to 95 % of private businesses in the kingdom are family-owned.

16:53Interesting. They're not doing a lot of IPOs over there. Of these, many groups are only just starting to form family offices as they grow in size and look to formalize strategies to help spread the wealth across multiple generations. That makes both established and new family offices a prime target for more investment. They're naturally looking to diversify and want to contribute in areas where we've just scratched the surface. In addition, more complex areas of finance are also beginning to emerge, drawing the attention of family offices. That includes private credit and industry in its infancy in the kingdom as overstretched banks struggle to meet more explosive needs for financing.

17:27I like that the financing needs are getting explosive at this moment. Not expansive, not expanding, exploding. Lenders for years have been the primary financiers for individuals, businesses, and government entities looking to drive investment into Saudi diversification agenda, but they are starting to pull back as liquidity tightens, leaving many local firms scrambling to find new sources of financing. You're bearish on the US dollar, the token used to buy AI products. Bold. That's really good. The US dollar is all over the place. Tether is shaking up the gold market with massive metal horde. I did not see this.

18:04This is interesting. There are roughly 370 ,000 nuclear bunkers in Switzerland. So many. I've seen a video about one of them, but I didn't realize there were so many. The legacy of the Cold War that are now rarely used, one of them, though, is a hive of activity. Every week, more than a ton of gold is hauled into the high-security vault owned by crypto giant Tether Holdings SA, which is now the world's largest known horde of bullion outside of banks and nation states. Over the past year, Tether has quietly become one of the biggest players in the global gold market, The embodiment of a meeting of the crypto and gold worlds through shared distrust in government debt is a major factor behind the surge in prices to never before seen highs above 5 ,200.

18:51Now it was 5 ,000 yesterday on the cover of the journal. Gold is on an absolute tear. And yet relatively little is known about its inner workings or its gold strategy. When two of the most senior gold traders quit leading bullion bank HSBC holdings last year, the industry was abuzz about gossip about where they would head next. Few guessed that the answer was Tether. Chief Executive Paolo Adorno described the company's role in the gold markets as similar to that of a central bank and predicted that Washington's geopolitical rivals would launch a gold-backed alternative to the dollar. He revealed that it plans to keep plowing its enormous profits into gold while also beginning to compete with banks in trading the metal.

19:32We are soon becoming basically one of the biggest, let's say, gold central banks in the world. Interesting. This is like the original crypto narrative, right? E-gold even before Bitcoin? Was E-gold actually gold back? I think that was the whole pitch. Yeah, it was trying to be digital gold. And I don't think it ever really got adoption. It was very early, late 90s. Yeah, Tether has a scale now. Now, they also launched their US-focused stablecoin this week to compete with USDC. The new token is known by its ticker USAT. Cantor Fitzgerald, which already manages the reserves of Tether's mainstay, $186 billion USDT stablecoin will do the same for the new coin as its designated reserve custodian and preferred primary dealer.

20:17So USAT is already available for trading as of yesterday. day. It'd be interesting if like at what point does USDT D peg upward if gold keeps ripping, right? I mean, does USDT have a claim on the overall assets of Tether? I think that's not what the product is. I think like the Tether stock would own the treasury. Sure. But historically, when you saw a stablecoin like D peg, it was based on concerns around the reserves. Yeah, but I think that the contract is that they will never give you more than a dollar. No, I know. I know. But I'm just saying, like, stranger things have happened in crypto.

20:58No, it's always been a very profitable company. So certainly bullish for them. So Tether makes his money from its dollar stablecoin that is the giant of the sector with 186 billion in circulation. The company takes in real dollars in exchange for that USDT token and invests them in treasuries or other assets such as gold, raking in billions in interest and trading profits. Processing the physical metal is crucial, so much so that the company has taken the unusual step of storing the bullion itself in the former nuclear bunker in Switzerland, guarded by multiple layers of thick steel doors. And he says, it's a James Bond kind of place.

21:36It's crazy. That's a great quote to give Bloomberg. If you're building a secret bunker to hold all of your gold, I think you can safely use the James Bond analogy. The secretive nature of the gold market means that while it's easy to describe broad drivers of investment, it can be hard to pinpoint who exactly is behind the buying. China, for example, officially disclosed just 27 tons of purchases last year, but many traders believe it bought much more. Still, Tether is only a small part of a much larger rush from investors into gold, with central banks and ETF investors collectively buying more more than 150, 1 ,500 tons of metal.

22:12I wonder if this is moving the gold watch market. Do you think the Texas Timex is booming on the back of gold? We'll see. I think a lot of prices are still down pretty dramatically because of the tariffs. In the 2020, 2021 era. I mean, you gotta be a little bit scared right now if you're in the business of manufacturing gold watches and other precious metals, given that your input costs are going. I'm sure they have one or two years worth of supply. They can be somewhat insulated, but prices will go up, or at least costs will go up. I heard a very funny interview with an actor who was talking about why he always wears a gold Rolex.

22:57He was calling it a helicopter watch. Did I send this to you? This was Army Hammer. and he's saying it's like obscure it's such a situation such a funny situation he's like if you're ever in a crisis you're on the top of the building the zombie apocalypse is upon you someone shows up with a helicopter and they're gonna save a few people everyone knows what a gold Rolex is and they know that that's valuable but if you're not gonna have time to be like no it's a Patek Like, you know, let me explain high horology. Here's the term beyond. Here's the aftermarket prices. Yeah, yeah, exactly. It's like gold Rolex is a store of value.

23:38It's always going to trade. And now it's probably going to trade even higher. Paula says SF escape room called the permanent underclass. And it's just a room with a laptop and Claude Code installed. There's something here that's funny. Have you ever done an escape room? No. I have never once in my life thought that that would be fun. Nor thought that this is how I want to kill time. Yeah, it's like an hour. Well, if you're good, you get out faster, right? Yeah. Have you? I'm not into them, but I've done them, and they're fun. Sometimes it depends on if it's a well-structured one. But I like puzzles.

24:19It's fun. It's a fun puzzle to figure out. But you can very quickly get caught in like just like overthinking what's going on and being like, oh, it must be some like complex math thing. And it's like, no, you actually just needed to like press this lever instead of like analyze the situation or something. Are some people in there using their phones to try to figure stuff out? I imagine there's only... Take a picture. There's probably only... Solve this. Is it like a series of rooms? Yeah, well, usually you start in one room. They're all different, but oftentimes you'll start in one room. and then you'll there'll be a series of puzzles locks and keys and whatnot and then oftentimes like you'll unlock something and then you'll progress to another room and then you'll progress to a third room and then you'll finally get out of like a series room because it's a lot of like they're pretty easy to set up in sort of like a defunct office space or like you know storefront that's just kind of like you know going in between it's like the spirit halloween of commercial real estate anyone can come in and just say like oh we'll be in there for like a couple months it's It's not super permanent.

25:18The build out's pretty simple. It's mostly just like some walls and decorations and some creativity on the puzzle side. Trey says, can you guys put Tyler in an escape room and see if he gets out before the show ends? I mean, it'd be very hard to find a three hour long escape room. I think most of them aim for like 45 minutes. Well, maybe we need to make one. Have you done one, Tyler? I've not. Are you interested in it? You're a speed cuber, so you know. Yeah, I mean, it could be fun. I don't know. I'm kind of in the Geordie camp. When they came out, there was definitely like a boom in like in escape.

25:48Bobby in the chat says escape room would be a good benchmark for AI. Certainly, certainly a humanoid. Let's click over to rewatching the interview with the Claude Bot creator Peter Steinberger. So in November, yeah, I don't know, you know, I wake up every day, I'm like, okay, what do I want to work on now? What would be cool? And then there was like, okay, I want to chat with my computer on WhatsApp because if my agents are not running and then I go to the kitchen, I want to check up on them or like I want to do little prompts. So I just hacked together some WhatsApp integration that literally receives a message, calls the cloud code and then returns what cloud code returns, one shot.