The AI Capabilities Overhang

0:00Today on the AI Daily Brief, the AI capabilities overhang and what to do about it. Before that in the headlines, why cloud code is officially breaking into the mainstream. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI.

0:22All right, friends, quick announcements before we dive in. First of all, thank you to today's sponsors, Zencoder, Landfall IP, Robots and Pencils and Super Intelligent. To get an ad-free version of the show, go to patreon.com slash AI Daily Brief, or you can subscribe on Apple Podcasts. Ad-free is just$3 a month. I really tried to price it in a way where anyone who really doesn't want to hear those ads can get it for less than the price of a cup of coffee at this point. But if on the other end of the spectrum, you are interested in sponsoring the show, send us a note at sponsors at aidailybrief.ai.

0:52Lastly, before we dive in, another quick call to check out aidbintel.com. A little later this week, people who sign up are going to start finding out what this cool looking chart is. I promise you, you won't want to miss at, again, that's aidbintel.com. With that out of the way, let's dive in. Welcome back to the AI Daily Brief Headlines Edition, all the daily AI news you need in around five minutes. The story of this January so far has been the slow but steady settling in of the notion of a shift in capabilities centered upon Opus 5, Claude Code, and now more recently, Claude Cowork. Turns out the change is not just among the highly enfranchised AI users on X.

1:31The Wall Street Journal declared over the weekend that Claude is taking the AI world by storm, and even non-nerds are blown away. The WSJ writes, they call it getting Claude-pilled. It's the moment software engineers, executives, and investors turn their work over to Anthropics Claude AI and then witness a thinking machine of shocking capability, even in an age awash in powerful AI tools. The article noted the huge wave of positivity on social media, with many non-technical people using Claude code to develop their first piece of software without knowing the first thing about coding. It also noted that CloudCode is being deployed for a range of other use cases, including health data analysis and expense report compiling.

2:09The Atlantic had a similar take, writing MoveOverChatGPT. The article says, Though CloudCode is technically an AI coding tool, hence its name, the bot can do all sorts of computer work, book theater tickets, process shopping returns, order DoorDash. People are using it to manage their personal finances and to grow plants. I don't know what it says about The Atlantic, that the first example they reached to is book theater tickets, but there you go. The author remarked that they used vibe coding tools for the first time in preparation for the article and was astonished that they could create a new personal website in minutes without any coding.

2:38They went on to spin up a dozen additional projects over the next few days. They texted a friend to try it out and received the response, it just does stuff. ChatGPT is like if a mechanic just gave you advice about your car. CloudCode is like if the mechanic actually fixed it. To be honest, I don't really think that that does it justice. I think it's more like CloudCode is like if when you dropped off your car at the mechanic, you could request any other car, and all of a sudden, a few minutes later, it would just be there waiting for you. A user named Alex Lieberman was profiled for the piece and claimed that in terms of implication, this was even bigger than the chat GPT moment.

3:09However, he added, Pandora's box hasn't been open for the rest of the world yet. That might not be the case for long, however, with major publications now raving about Anthropik's product lineup. Cloud Code creator Boris Cherney remarked on the overnight success that was years in the making, saying, Glad to see Cloud Code starting to break through. It's been a year of very hard work, and we're just getting started. Ajni Mida writes,

3:42One other Anthropics story, the latest on their reported fundraising. That round that we've been hearing about that values Anthropics at$350 billion is apparently getting supersized up to potentially$25 billion. That includes about 15 from Microsoft and NVIDIA, and another 10 from VCs and other investors. Among those VCs is apparently Sequoia. Feels like we're probably within a few weeks of this closing, so I'm sure we'll get more news soon. Now, despite the Wall Street Journal writing so glowingly about Claude, U.S. users clearly remain concerned about the technology overall. According to a new survey commissioned by Google and conducted by Ipsos, AI users are now in the majority.

4:1866 % of respondents said they had used AI in the past 12 months, compared to 48 % in the 2024 poll and 28 % in 2023. This was the third year of the longitudinal survey, which was conducted in late September last year, so relatively up to date. The survey polled around 1 ,000 adults from each of 21 countries. Respondents were evenly split when it comes to AI job disruption, with 50 % saying AI in the workplace will create jobs and 50 % saying it will eliminate jobs. Still, the majority of survey participants were in favor of fostering advancements using AI at 58%, compared to 41 % who wanted to protect industries that might be disrupted by AI.

4:52Not surprisingly, AI optimism was closely tied to AI use. 70 % who said they've used AI are optimistic about its benefits. And of those who use AI a lot, 86 % were excited. There's also a strong correlation between countries with high levels of AI use and high levels of optimism. The U.S., however, ranked low on both use and optimism. Just 40 % of U.S. survey participants said they have used AI in the past year, which was the only country without a majority of AI users. As a point of comparison, the UK was at 56%, Mexico was at 66%, while the UAE, Nigeria, and India were all north of 80%. Only 33 % of US respondents said they were mostly excited about the technology, the worst national result in the survey, and vastly beneath the overall result of 57%.

5:35Now, I actually think this is a major national issue. The implications are not just the user numbers for OpenAI and Anthropic. It's about the seriousness with which people are taking the potential disruption for this technology and preparing themselves for it. I believe there continues to be a strand of people who are hoping to just wait it out and return to the world that once was, and obviously I do not think that that's going to happen. Moving over to an issue that has become part of the political cannon fodder around AI, which is of course data centers, XAI's Colossus 2 has now reached 1 gigawatt of capacity, becoming the first training cluster to cross that threshold.

6:08The data center is now drawing more power than the city of San Francisco. For comparison, the first Colossus cluster has a total capacity of 300 megawatts, while OpenAI recently disclosed that they have 1.9 gigawatts across their entire training and inference fleet. Construction began in March of last year, so this milestone was nine months in the making. The only other cluster that's close is Anthropic and Amazon's new Carlisle data center, which is expected to hit 1 gigawatt sometime in the first quarter of this year. OpenAI's Stargate Abilene is expected to come online over the summer. For now, XAI is the only company with access to this much compute, which is exactly what we discussed as the big potential opportunity that could translate into differentiation for Grok in the year to come.

6:46Colossus 2 is also using Blackwell GPUs, making it one of the first training clusters to run NVIDIA's latest hardware and the only one at this scale. The cluster reportedly contains 550 ,000 GPUs as currently configured. As Amateo Kaplan put it, Gigawatt Grok has arrived. Now, staying in Musk world for a moment, Elon Musk is seeking up to$134 billion in damages from OpenAI and Microsoft as his lawsuit heads to a trial. A trial date has been set for late April, and during a hearing on Friday, Musk's lawyers quantify the damages. Their argument is that Elon is entitled to a portion of OpenAI's current$500 billion valuation due to the$38 million in seed funding he donated to the nonprofit in 2015.

7:26Musk's lawyer wrote in court filings, just as an early investor in a startup company may realize gains many orders of magnitude greater than the investor's initial investment, the wrongful gains that OpenAI and Microsoft have earned, and which Mr. Musk is now entitled to disgorge, are much larger than Mr. Musk's initial contributions, which is a very legalese way of saying if that$38 million had been an investment into a for-profit startup, it would have been a heck of a lot more than$38 million by now. The filing also says that Musk plans to seek punitive damages as well as an unspecified injunction.

7:55OpenAI's lawyers rejected the approach, stating that his, quote, methodology is made up, his results unverifiable, his approach admittedly unprecedented, and his proposed outcome, the transfer of billions of dollars from a non-profit corporation to a donor-turned-competitor, implausible on its face. OpenAI, for their part, continued to deny the premise of the lawsuit outside of the courtroom. In a statement, they said, Mr. Musk's lawsuit continues to be baseless and a part of his ongoing pattern of harassment, and we look forward to demonstrating this at trial. This latest unserious demand is aimed solely at furthering this harassment campaign.

8:25Now on X, the discussion centered around pages from Greg Brockman's private notes that were revealed in the new filing. One especially frequently shared passage from 2017 read, This is the only chance we have to get out from Elon. Is he the glorious leader that I would pick? We truly have a chance to make this happen. Financially, what will take me to$1 billion? D.D. Das of Menlo Ventures said, Deep down, it really is about the money. Now, several other quotes from the filing paint OpenAI in a very poor light. The quotes. Altman said, Elon is cherry-picking things to make Greg look bad, but the full story is that Elon was pushing for a new structure, and Greg and Ilya spent a lot of time trying to figure out if they could meet his demands.

9:02Altman continued, I remembered a lot of this, but here is a part I had forgotten. Elon said he wanted to accumulate$80 billion for a self-sustaining city on Mars and that he needed and deserved majority equity. He said that he needed full control since he'd been burned by not having it in the past, and when we discussed succession, he surprised us by talking about his children controlling AGI. Altman continues after that quote, I appreciate people saying what they want and think it enables people to resolve things or not, but Elon saying he wants the above is important context for Greg trying to figure out what he wants.

9:31With the trial less than three months away, The story is unfortunately going to be a big overhang for OpenAI as they try to execute on a pivotal year. Right signal, this is going to make a lot of people look greedy and ugly. Hopefully we won't have to spend too much time on this. I'll probably start to err on only sharing the really big highlights, where it becomes a major inescapable point of conversation as it has been for the last couple of days. This show, however, will not become a play-by-play court drama, as interesting and salacious as it might be. For now, that is going to do it for today's headlines.

10:04Next up, the main episode.

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13:28Welcome back to the AI Daily Brief. Today we are talking about something called the AI capabilities overhang. Now this is something I think about a lot, but the specific context for it was an article that came out as part of the broader set of assets around OpenAI's announcement that ads are coming to ChatGPT, with them basically saying that part of the issue is access and ads are going to help them with that access issue. Now, in that blog post called AI for Self-Empowerment, OpenAI defines the capability overhang as the gap between what AI systems can do now and the value most people, businesses, and countries are actually capturing from them at scale.

14:01In other words, the delta between AI's current capabilities and society's current usage of them. And what's important about this concept is this is not about some future state. This is not, in other words, a debate about AGI or superintelligence or anything like that. It is instead a discussion of the current state of play and how far behind different types of people and groups are in taking advantage of it. So what I want to do today is talk about the AI capabilities overhang across six different groups. Individuals, communities, municipalities, educators, businesses, and sovereigns. For each of those groups, I want to talk a little bit about what the capabilities overhang looks like at the moment, what some of the answers to that overhang might be, and how we, and this is the royal we, I could mean society, I could mean the listeners of this podcast, but how we could support tackling that capabilities overhang and improving the way that people are taking advantage of what's possible right now.

14:52So let's talk first about individuals. Now this is admittedly a wildly all-encompassing category with a huge range of different levels of this particular overhang. While there are very, very few people who could claim that they don't experience that overhang at all, in fact, even as someone who spends basically all of my time on this, I think that there are entire categories of what's possible that I don't take nearly full enough advantage of. Most people fall somewhere on the spectrum from barely taking advantage to only just starting to take advantage. In fact, I think part of the reason that you're seeing so much excitement around Claude Code and see it moving into the mainstream in the Wall Street Journal and things like that, is that for people who are picking it up, it is radically and directly undercutting that capabilities overhang by massively accelerating what people can do.

15:36But the implications of the capabilities overhang is dramatic. Skills that took years to develop can now be augmented or replicated in hours. Now, this sort of commoditization of knowledge work creates displacement risk, of course, but it also creates incredible opportunity in terms of the massive leverage that it can give people. One of the implications of the capabilities overhang, however, when it comes to that individual focus, is that personal economic moats are eroding faster than people realize. In other words, the gap between I should learn this AI stuff and I needed it yesterday is closing.

16:05So what are some of the challenges? Information is one, and by that I don't just mean information about what's possible with AI, although that's part of it, but also I think we have a real issue in the way that we discuss AI. Every survey that comes out shows that, to be a little bit reductionist but honestly not all that much, eastern and lower income countries are extremely enthusiastic about AI, while people in Western and higher income countries are less so. There are all sorts of reasons for this, but what it means is that in addition to just a general information gap, you also have a massive enthusiasm gap, which means that people who don't like AI or wish it didn't exist are getting farther and farther behind, kind of hoping that it just goes away.

16:41Go on any social media platform and you will be able to find myriad posts about people enthusiastically quote-unquote waiting for the end of the bubble so things can go back to normal. Despite the incontrovertible fact known by everyone who is listening to this particular show that there is no such thing as going back. So improving information availability about what you can do with AI, but also about, to some extent, the inescapability of some changes because of it is a key part of overcoming this overhang. Another part is, of course, access. People who can pay more right now have better access to AI.

17:12However, the gap isn't necessarily as big as it seems. Although ChatGPT data shows that the typical power user of their system uses seven times more compute than a typical user, there's still incredible capacity available to anyone, even in the free versions of these tools. One of the things that's been super interesting to me watching people interact with the New Year's AI resolution, which is the 10-week self-education program that came out of my New Year's episode, is that a lot of folks, despite being on the very high end of enfranchised users, are seeing how much they can get out of the free versions of these tools.

17:41I actually think that that's incredibly valuable and more instructive in many ways to the average user than some insane person like me who's going to pay for the ultra or Mac subscription to every single tool that comes along. I will say that I think even with this, equality of access is going to continue to be an issue and probably one that gets worse. As much as we might not like the experience of ads in something like ChatGPT, I do believe that it does extend access and keeps access democratized in a way that a non-ad-supported model just couldn't. However, ads from the platforms are certainly not the only way to ensure access.

18:14There might be a role for government here, and frankly, it's one of the reasons that some of the ideas around things like stopping data center construction are so wrongheaded because they are likely to have the exact opposite impact where they actually further restrict access to only the people who can pay for it. So how can we support individuals overcoming the capability overhang? One is a different conversation about AI and an acknowledgement that it's coming. Two is continuing to look for ways to democratize access, whether that's from the platforms themselves through ads or other models or through public-private partnerships or some other larger type of initiative.

18:45And I think the last piece, and something that certainly we will be trying to do a lot of this year with this show is self-education opportunities. So many people are engaging so deeply with this New Year's AI resolution that I am 100 % sure that we will release other similar time-bound, but ultimately self-directed types of programs. Next up, let's talk about communities. Communities hold many of the assets that AI can't replicate. Trust networks, local context, physical gathering, shared identity, accountability structures, and the overhang actually increases the value of these assets. As digital interactions become AI-mediated and in many cases for people harder to trust, in-person community becomes a premium good.

19:23In fact, as we think about the individual overhang, local institutions are sitting on distribution and trust infrastructure that could be leveraged to help members navigate the AI transition, but of course most aren't thinking this way yet. Indeed, the challenge for communities is that community institutions tend to be the most strapped for hard resources. And so the people who are involved in leading communities have to trade time for everything. Basically, when there isn't money, you require people to volunteer time and service. That means less time for keeping up with all of these opportunities.

19:52But if we can position community institutions as the human layer in an increasingly AI-mediated world, there is a ton of potential power in these institutions taking on renewed importance in this new age we're moving into. To support that, I think we have to start by supporting their leaders. We need dedicated resources and leadership support and training for these particular types of institutions that are not necessarily just about the same things that are going on with individuals, but are really about how to become a node for disseminating and supporting transition among constituencies. Closely related to communities is the capabilities overhang for municipalities.

20:27Municipalities are, of course, the public and governmental complement to many of those community institutions. Like communities, they're strapped for resources. They have old patterns of doing things that can be very, very difficult to change. Are these groups potentially some of the biggest beneficiaries of the efficiency gains that come with AI. One study found that 30 to 50 % of municipal staff time is spent on tasks that are already automatable or dramatically acceleratable right now. And it takes about five seconds to think about some of the examples. Changing review time for permitting and land use, moving from hold times, phone trees, and manual routing within constituent services to instant intake, automated routing, and proactive follow-up.

21:06There are potential implications for public works, for social services, for records, for courts, for revenue and finance, for public health, you name it. AI efficiencies are so full of opportunity among municipalities. And for that reason, I think we should be spending way more time, energy, and resources on trying to fix this particular category of capabilities overhang. What does that look like? Well, of course, I don't know, but I think that some opportunities include different types of public-private partnerships. I got to say, right now, the model labs and many AI startups in general don't necessarily have the best brand and reputation.

21:37The AI industry as a whole is suffering from a broader sense among many people, especially in the West, that tech no longer exists to serve people to the extent it ever did, but instead serves only to enrich the people who create that technology. Seems like a pretty good time to try to engage in some public-private partnerships that actually bring the benefits of AI to a wider audience. Frankly, this also strikes me as an opportunity for perhaps a different class of business that has different incentives. I think there are very clear profit-motivated business opportunities in AI-ifying how municipalities work.

22:09But I think that trying to find a new generation of entrepreneurs, maybe some of whom have backgrounds in that type of municipal service, who are designing leaner, more capital-efficient providers, who are going to be able to offer municipalities contracts and services that provide that transitional support without gouging them. it just strikes me that this could be a great moment for a new class of civic-minded entrepreneur to really do some damage in the best possible way. When it comes to educators and education, goodness gracious, where to even begin? This is something we've talked about a lot on this show, although not for a little while, believe it or not.