The Man Who Calls BS On AI: AI Is The World’s Greatest SCAM, And They All Know It! | Ed Zitron

30:38But it's also, an intern learns. An intern gets context. An intern learns your habits. An AI gets context and learns. No, it doesn't. An AI doesn't learn? I mean, it doesn't. The way it learns is you create a giant clawed.md file that it sometimes doesn't read, sometimes does read. You create a harness. It's like it's Pee-wee's breakfast machine from Pee-wee's playhouse. You have to do all these contrivances to mitigate the hallucinations. And even then at the end, how much effort have you put in? But okay, this is an extreme simplified example. If I went on my Claude now and said, what's my dog's name?

31:10It would know my dog's name. Jesus Christ. This company raised$95 billion this year. I'm using an extreme simplified example to show that it can remember things from the past. Obviously, it knows much more complex things as well. But I just use that as an example. So we accept the fact that it does have memory of the past. It has files it can access that have stuff on it. But that's not the same as memory. and it's also just okay so it remembers your dog's name it might remember your habits it might be able to read things you've said before does it know your moods does it know what's going on in the world around it does it have good days and bad days is it there for you because it's just a fucking text machine and the thing is the intern example an intern is something that can grow it's something that you invest in that's not something you do through feeding files and text to it the The way that we store memories ourselves, the way in which we accrue experiences is a milestone of emotion and feelings and facts.

32:07Completely different. So I think there's two things here. There's the process in which something happens and then there's the output. So the process, you were describing the process of how a human does memory. The way that an AI does memory is different. But the thing that people care about is their value in the output. i.e. you know if i dump all of my files into claude i don't really care how it processes it as long as when i ask it what's my revenue it has the number and one could say the same thing about training someone you could say you teach them you put lots of effort into them you give them lots of context you educate them and give them experiences and then you might come and say to them by the way what's my revenue now the processes are entirely different but the outcome is what i care about do they know the revenue number when i ask them and so i think that's the part that we sometimes get lost and we get you know because i have i've heard this debate about like can ai be creative right i think like the way to answer that question is like it's about the output when i ask it to do a creative thing does it give me the answer not is the process the same as a human process because actually no who cares what the people care about they pay for the outcome the product i actually disagree about the process because matt hughes for example your editor yeah yeah watching him go down a rabbit hole and being there with him and actually vice versa him doing the same thing we wrote these well i mean we were working on the research i ended up sitting there for like the day-long session of writing 11 000 words and he he had given me a bunch of notes it was actually just even describing that process i feel so happy because it was like us being like i can't believe how fuck these come jesus christ they can't like just like the misanthropy of just the horrible cynical people of asset managers like blackstone just learning about them and being like It can't be this and having a back and forth with him.

33:50That is fundamentally different because we were both learning together. And the learning process was as much about creating the output as the output itself. When you learn something, you're not creating the average, which really is what these things do, of the documents it could find. You're not getting particularly novel outputs. If I needed a generic slop output, sure. But I've used some of the higher-end LLM harness machines that the hedge funds use. and they all give the same shite it's all the same the same generic reports the same oh we noticed this analysis things that you can find on any kind of ai slop out there what you described to me there what i heard anyway is there's two points of value you're getting from your time with that i mean i mean there's many more but you said you're you're learning and then you're getting this book edited blog blog you're getting a blog edited which is the output and you're getting learning and you're also really getting connection and all these other things exactly but when i come to when people sort of think about the value of ai of course they could use it to learn but in the example i gave of like repeat my revenue number back to me or do this number i just care about the output i could use it to learn i could say as far with what if the revenue number was wrong once you should have defined deterministic ways of knowing those numbers you should not rely on them even with the terminal running bql which i trust i will double triple triple check everything just to be sure partly because also the process of learning for me i don't want just a report i go like that i want something that i fully understand and also understand the context around it.

35:17I don't think that LLMs do that, and I just don't see them getting better in a way that does that, because it's just not what they do. And also, there's the other problem of the more detailed the report, the more likely there are things to be wrong with it. If you are with Matt Hughes, for example, I can trust he's got it right. I can trust he understood, and I can trust that I can have a back and forth with him that will inform me if I've missed something. I can read the stuff that he's read and actually trust him because there's a big trust part as well. What is the basis of your trust in Matt?

35:49Could it be his historical performance? I mean, yes. Okay. And also the fact we've learned half of this stuff together. But tenure doesn't necessarily, there's probably people you know for 15 years who you also don't trust. Yes. So I think I was trying to figure out like what is the thing that's causing humans to trust another thing. And I guess it would be continual delivery of a commitment made of sorts. And so with Claude, for example, on simple tasks, as we've seen from this hallucination leaderboard, it continually delivers for people. And that's why we've seen the fastest - I mean, is that what that board says?

36:22Well, it's saying, like, is it getting it wrong? Is it hallucinating? On simple tasks. Simple tasks, yeah. How are those defined? I don't know. That's the thing, though. Because this is actually a very illustrative thing of the AI industry. they are the whataboutist masters they have like well look we've got this we've got this benchmark that says we're good at this and look the number's higher what's the number mean what does that mean and i'm not using this as a critique against you it's when you can't give a direct answer you give a side answer when you as the llm industry want to prove your worth you can't just be like just use the product when the first iphone came out i've got penn state at the time oh i felt like the apes at the beginning of 2001.

37:02Oh, fucking visual voicemail. It was immediate. And I showed it to tech friends. I showed it to the most normal people in the world. And everyone was like, holy shit. This is, they were on Razors. They were on Nokia 3210s. It was obvious the value. Amazon Web Services, same deal. It wasn't obvious though. Yes, it was. I mean, I bought it. To you, it was. It was. And I also showed it to a bunch of people because I'm aware that I have bias when I just love gadgets. But I remember the famous Steve Barmer, who was the CEO of Microsoft, interview where he was told about the iPhone and he bursts out laughing.

37:38$500 fully subsidized with a plan? I said, that is the most expensive phone in the world. And it doesn't appeal to business customers because it doesn't have a keyboard, which makes it not a very good email machine. You can get a Motorola Q phone now for$99. $9. It's a very capable machine. It'll do music. It'll do internet. It'll do email. It'll do instant messaging. So I kind of look at that and I say, well, I like our strategy. I like it a lot. You better start laughing, mocking you. Because it was so disruptive. It was way more expensive and it was way different. No keyboard. Well, phones used to be insanely expensive and the carriers would cover them, but you had to sign a long contract.

38:19You were still spending 500 bucks. But the thing I'm getting at is, you didn't have to explain to someone what, perhaps you'd have to get past the cost part, but you could just be like, look how good this is. And then once the app was the iPhone 3G with the App Store, people were like, oh shit, this could actually change things. Mobile web, even though it was a monstrosity, it was so bad at first. Even then you could get your emails and you could just look at them. The point is BlackBerrys were also expensive and were still actually kind of cool, but the way they worked was not like consumer software.

38:44They didn't have the classic GUI. iPhones felt like that. It felt like a cell phone designed even like a computer. It was obvious. It was obvious in the beginning. Everyone, I was dating a girl in the center of Pennsylvania at the time and everyone I showed it to was like, wow, this is incredible. That to me is the obvious thing. With AI to this day, when you're like, okay, why is it so amazing? People still dither. People are still like, yeah, you can't run a business fully with it without this weird system of pulleys and levers and such. But how come then, when you look at the stats around ChatGBT's growth, 100 million active users in just the first 60 days after launching?

39:24For comparison, TikTok took nine months, Instagram took 2.5 years, and the internet itself, the World Wide Web, took roughly seven years to reach that scale. Over 60 % of the US adults are integrated into AI tools in their daily and regular routines within three years of the launch, reaching 40 % of the population. and that same milestone took the internet five years and personal computers nearly 12. Okay. So like this is the, I think this is the part that's giving me dissonance is like when I showed my fiance chat GBT, okay, it didn't really work. But as a sole entrepreneur who English isn't her first language, who has to write lots of text and lots of copy and generate lots of images and was paying a graphic designer to help her make certain images that she, you know, couldn't make herself because she doesn't have the skills she would describe it as being transformative for her business what i'm hearing from you is that it's not transformative and there's no value in it for people but she if she was sat here now she'd get transformative it would she pay the per million token rate would she pay the actual rate because that's the thing if this was sold at its honest cost yeah i would actually if and people were reacting like that and they were paying two three four dollars every time they did something and they were genuinely happy that might be an argument what is the what would be the honest cost if they weren't the actual per million token cost the actual api cost they should charge you know how much that is relative to oh god it depends it depends on the model but there's actually kind of a point i want to make about the thing you said with the internet earlier so when i first got on the internet 33.4 kilobits a second modem even back then i was like fuck if this was faster and that was like immediate just like if this was faster because it was slow you go on like happy puppy or something download take all bloody day waiting for shareware to download immediately like if i could do this faster it would be better and even back then i'm like man you could probably do video camera stuff with this stuff that eventually happened and actually there's this guy called jim cavello from goldman sachs in a report he did in 2024 that was gen ai too much spend for not enough return paraphrasing there and he made the point that in the run-up to the iphone there was thousands of presentations that when gsm radios get smaller, when Bluetooth radios get smaller, when Wi-Fi radios get smaller, it is inevitable that we will get something like this.

41:33And then he said that there is no such path for AI. There was no roadmap to AI becoming this thing that they promised. And I must be clear, if these companies had gone out there and are like, yeah, this is interesting cloud software. It's generative. It's really expensive. We're not sure if we can fully not trust it, not in the, oh, I'm scared I mean, just like, we're not sure that this is going to be a disruptive, world-changing thing. It has potential, but we're going to go slow. It's really expensive. This is an R &D effort. We're not going to expose consumers to it and actually be like, I don't know, language models and no generative AI stuff.

42:10Just being not even calling because it isn't AI. It's not autonomous. It's not smart. I actually might respect it, but this is not. They've gone out there since 2023 and said, 2022, this is the best thing since sliced bread. This is changing everything. This is going to do all your work. This is going to take your job. You're going to talk to Bing and it's going to take you to leave your wife. All of these crazy things. And what's funny is when the writer, Kevin Roots, I think it was, he was speaking to Kevin Scott, the CTO of Microsoft, about it. And Kevin Scott goes, you know, I'm just glad we're having this conversation.

42:40Instead of being like, settle down, Beavis. It's a website. The website told you something. It's just LLMs. They talked it up. And that's because everyone is talking about what they wish this was rather than talking about what it can actually do. This makes it scary to people, deliberately so. It makes it environmentally destructive. Look at the gas turbines poisoning blank neighborhoods. I think it's in Louisiana. It's one of Musk's data centers. Look at the incredible energy draws. It is raising power bills. And also, it is creating inflation across all consumer electronics because of the massive ramp.

43:12Do you know what's interesting? I almost feel like so much of what you're saying is true. And also, it can be true that this technology is going to profoundly change the world. And I think back to the early days of... The internet is maybe the closest analogy we have of, you know, in the dot-com bubble. You know, you wrote this great essay. Yes, yes. Which I found really funny, especially the name. The Rot Economy. And you talked about the Rot-com bubble. Yes. talking about how ai is of less value than people think and in that in the sort of dot-com bubble what you saw is huge hype people overselling the capabilities of their websites and what they were building but in the wake of the dot-com bubble yes 90 of stuff went to zero but you had generational companies born that changed the world right and so i i do i kind of and that's what bubbles do right huge height, overinvestment.

44:10Investors get crazy delusional. They think everything's going to change. At the same time, you do have skeptics in these moments. The dot-com bubble had, I mean, the internet itself had the biggest skeptics. In 1998, Nobel Prize-winning economist Paul Krugman said, by 2005 or so, it will become clear that the internet's impact on the economy has been no greater than the fax machine. In 1995, astrophysicist Clifford Stuhl, famously, I wrote about this in my book, wrote famously in Newsweek, Do our computer pundits lack all common sense? The truth is no online database will replace your daily newspaper.

44:47No CD-ROM can take the place of a competent teacher. Commerce and businesses will shift from offices and malls to networks and modems? Baloney. So how come my local mall does a roaring business and the cyber mall gets zero business? and then i'll give you one more from krugerman who was the uh award-winning economist he said the growth of the internet will slow drastically as it becomes apparent most people have nothing to say to each other that's that that may actually be the worst one of those pretty like to hang around any bar in middle america honestly the best conversation it's just all it's just all the same i actually so clifford stall actually his piece was interesting because that there are some boner points in it but he made points about how like an overwhelming amount of bad information out there is bad for society.

45:31He's completely right. Saying how online education would not be a great replacement for regular education. I think we've seen that. But there is an economic difference that's vastly, it's just completely different. So dot-com bubble was actually two bubbles. There was the website bubble, which was just trash on trash on trash. It was just like, I think, what was it? Excite at Home bought a eager eating card company for like a billion dollars. It was insane crap happening. That was so small. The big thing that people are thinking about is the dark fiber dark fiber was all of the wires that put in the ground thinking we're going to have all this demand for internet and it turned out that demand for internet i think the analyst estimate was it was doubling every 90 days when it was doing that every six to 12 months maybe maybe longer and just thus there was a massive overbuild of fiber optic cable and indeed the transmission stations and such to simplifying to bring that to people's houses and there was the assumption that, well, that would all get lit up and people would want it immediately.

46:31Didn't really happen. Now, the post.com bubble thing people say is, well, but after that, there was demand from the internet. That's the thing though. That's very different to demand for generative AI. Right now, the demand we have for generative AI is predominantly subsidized. Just let's start there. Predominantly subsidized and most people experience it and yet are not paying the real cost. I agree. On top of that, we already have all of the possible marketing in the world. We have the largest, most disingenuous marketing campaign in the history of man pushing this up the hill. We have the apex predator of cloud software, Microsoft.

47:08They can only get single digit billions from selling AI software. And Christ almighty, outside of OpenAI and Anthropic, we would barely get$22 billion. And the thing is,$22 billion is a large amount to you and me. It's not a large amount of money when you spent a trillion plus dollars, when you have Anthropic and OpenAI with$1.1 trillion worth of cloud commitments. And on top of that, how does this turn into a post.com bubble thing? A data center built today is going to be as expensive to run in 2050 as it is today, unless there's some breakthrough in electricity. But again, that's not happening with AI.

47:42AI is not doing that unless there's some breakthrough in GPU technology. But we already have Broadcom, NVIDIA, Etched. We have every major chip company, arm trying to do something about this and no one seems to magically be able to make this profitable or indeed even less costly even nvidia with vera rubin their more expensive new gpu system even then they're like yeah 10x more efficient it's a more dollars per megawatt they're all coy about it they don't just say yeah we worked with open ai and anthropic and we found it reduced their cost by 50 easiest thing in the world if it was true and that's because it's not happening and And this isn't a case where...

48:19So you're saying there's not going to be the demand for, let's say, there's different types of AI, generative AI. Yeah, and actually that's a good point to make. The reason they use the term artificial intelligence is so everyone would lump everything into it. They would lump protein folding, nothing to do with LLMs. Robotics, not LLMs. Autonomous weapons, even horrible as they are, not LLMs because you couldn't trust them. But they've mushed everything into AI so that when you say, well, AI can't, they'll go, um um sir you forgot to give us homework and also ai it's working on curing cancer when it's just like no that's not llms stop giving them credit so similarity though is they all need gpus and that's the funny thing all those data centers that we're building all of them are for just generative ai they're not for all of the other stuff they're not for the cool shit ai has been around for a long time google a lot of the good stuff that comes out of google from the search side is ai but pre-generative how would you run the the type of ai that sits in a robot let's say one of the optimus robots if you didn't have a gpu so matic matic has this cleaning robot for example that thing is not got a little gpu in it what it has and may indeed have used some gpus but now a year as many as they need for generative ai to run the data feed training data into it so it's able to clean a house but when the little bugger is going around cleaning the floor turds liacol if it goes around mopping my floor it's not like burning money the whole time but when it comes to these massive amount of data centers siteline climate said in february there's 190 gigawatts of data centers under in planning don't know about under construction that works out if about 12 million megawatts well like 1.6 trillion to 3 trillion dollars a year in annual demand you'd need for that we don't even have 130 billion dollars worth of annual demand and people say well it will grow how when most of the demand is coming from amazon feeding money to open ai or anthropic microsoft feeding money to open ai and anthropic google feeding money to open ai and well google hasn't fed it to open ai yet but they're a pretty big customer billions of dollars the con side is that we are building these effigies to capitalism these giant gpu data centers and people are being told well it's for ai you know the thing that's done all this other stuff that's unrelated or the worst thing i've seen it's like oh you don't like you like online banking where you do like data centers there's a big difference between a data center for regular non-gpu compute for standing up a server a content delivery system like a akamai or something that brings the website to you or how meta runs facebook that is not the same it takes way less power mostly cpu driven compared to these giant gpu data centers that are for one thing one thing But I was doing the research and looking at some of these notes here.

51:03It does say that for tougher types of AI systems designed to solve concrete physics, biology, and spatial problems, they require some of the most intense data center infrastructure on the planet. AI systems like DeepMind's AlphaFold, the protein folding company, used for genomic sequencing and climate forecasting, etc., run on high-performance computing clusters. These require immense precision and continuous heavy computing data centers. training the brains for self-driving cars requires billions of miles of simulated physics environments the ai isn't generating text it's learning to navigate 3d spaces and gravity and relies on data centers right and the thing is those data centers they might have gpus in them we had gpus used for this hpc the high performance computing before generative ai and yeah that's how ai has been trained before that's how tesla did i believe they've had their own data centers when it comes to training the autopilot system for better or for worse that's how we've done it before again that is not why we're building these data centers these data centers are being built to sell to ai generative ai companies to either train systems or run inference these things are being built in this brainless way where it's just well actually maybe this is a good way of illustrating the con because everyone saw google microsoft amazon and meta give NVIDIA over, call it 800 something billion dollars.

52:31Because everyone saw that, they went, well, they wouldn't do that for no reason. They went, we've got to build more of these things because there must be all this demand. Even though the demand, 70 % or more of all that demand comes from these two companies who were funded by these three companies. And that's the funny thing. The reason that they don't want to break out their AI revenues is because it will become alarmingly obvious that this was the case. It turns out that the only real big customers, because it's not like they're building a few data centers. They're building trillion plus revenue potential.

53:03They believe they'll get speculative, highly speculative. They're building it because they saw the biggest companies in the world buy a bunch of GPS. And they said, I want in on that. They must have diverse customers, right? They wouldn't just have two unprofitable fail sons that they're propping up with. Christ, they've raised$217 billion just in 2026. so we know that some of the biggest companies in the world are using AI generative AI to write a lot of their code that is a great productivity gain for those companies right I mean have you used Google or Facebook or Instagram or GitHub recently because they are catastrophically worse Amazon Web Services went down multiple times because of their AI coding tool how is how is Google worse well I'll tell the story of a real arsehole guy called Prabhagar Raghavan previously one of the heads of ads at Google in 2019, Google called something called a code yellow, which is when they said, we've got a problem.

53:58And it was material weakness in query numbers, which means the amount of times that people were searching on Google search. Guy called Ben Gomes, internal at Google, then the head of Google search says, wait a minute, to increase this number of using Google more, we're going to have to, I mean, what you're suggesting would mean we give worse answers because if someone got the answer quickly, that would reduce the amount of queries, right? And people at Google, Shashi Thakur was another engineer who was saying, yeah, can we please tell Sundar this? Because this doesn't seem good. We can't just increase the amount of queries.

54:30That would just mean that people would have to search more, which would make the product worse. But it would make them more money, you're saying? Yes, because you'd show them more ads. So if you were spending more time on Google because Google's work... But is this linked to AI doing code? Oh, I'll get there. So the problem is that this guy called Prabhagar Raghavan He was the head of ads at the time, was pushing, pushing and saying, no, we need to make more queries happen. Got to make it happen. Nick Fox, who was there as well, I believe he's actually taking over Google search, said, got to make them go up.

54:57This is our new reality. Sometime in early 2020, Prabhagar Raghavan takes over Google search. From then, and this is what I believe, can't prove it. If you go and look around the various SEO sites, such as a journal and the various forums, Google stripped back a lot of the suppression of spammy sites so that people would be on Google more. and then over the course of time google wanted to create more queries and google search became much worse it's why people always do like plus reddit or from reddit or what have you it's because the actual underlying search results of google had got worse and then generative ai came along and probagard wouldn't you know it gets put to run part of gemini and google also was having trouble getting people back on google and what did they think they'd do well shit everyone's talking about this AI thing, we'll just put it right at the top so people have to stay at Google.

55:46And actually, they'll use it more because instead of searching websites and doing that annoying thing where they click away from Google, they'll just only use Google. Instead of generating answers, by which I mean giving you search results you click through, now Google is the answer. Is it right? God no. It might tell you to eat rocks, might eat poisonous mushrooms. Maybe it'll give you a few links you could click through. But the ideal situation was that AI was the ultimate form of Google's evil, which was but i'm saying here i'm saying here but that's not the fact that coders could code on google that's made google worse that's human decisions have made it worse yes and then there's the instability of google's platform which is actually i should have probably led with that a problem across the whole tech industry okay so you're saying that you're saying google is going down more yes google is less stable google docs is a bug fest right now and has been for a while google sheets same deal and the thing is you're right i'm being a little unfair this is everyone It's the same with Microsoft.

56:41It's the same with Amazon. It's the same across people. How do we quantify that outside of anecdotes? Like, is there a way to... You're right. I mean, GitHub downtime is the best example. Amazon Web Services went down, I think, two or three times this year because of AI tools. And honestly, you're right. It's kind of hard to quantify outside of anecdotes. But I challenge anyone listening to this, go and use a website these days and tell me how well it works. Tell me how buggy it is. Tell me how many problems, even with my iPhone, the supposed best UX in town. Even the iPhone is a flipping mess these days.

57:12Okay, so the research says, the short answer is yes. Tech downtime and software outages have demonstrably increased over the last few years and industry data points directly to the explosion of AI-assisted coding as a primary culprit. The problem is hitting the tech industry from two entirely different directions. The code itself is getting buggier and the sheer volume of AI activity is literally crashing the underlying infrastructure. Interesting. yeah that's because github people are just writing a bunch of code pushing it and thus there's just more code on there that's interesting yeah it's it's a real mess as well because open sources have this problem as well because it's well-meaning people they're like i learned a bit of code with an llm i'm gonna go out and do some stuff i'm gonna make this project better and these people barely understand what they're shipping or maybe they understand a bit of code and they say oh dunning kruger this motherfucker i'm gonna i'm just like i can understand some of this and now the code's all written and just push it right now so github is flooded with ai code this sounds like it's making humans complacent it is because we're going okay look i'll let it write the the code for the last 100 lines and it was broadly right so the next 100 lines i won't check them as much yeah and that's human nature is to get sort of to take shortcuts to spend less energy on an activity if you can right but the ai's still making the mistake and we're still making all the promises of AI.

58:34That's the thing. This thing is meant to be this autonomous perfect. You say it can't be perfect. I don't know. Based on what Sam Altman has been saying for the last few years, Clammy Sammy's been promising the world saying this will replace software engineers. Dario Amadei, Wario himself has been saying, oh yeah, 50 % of white collar labor is going to go away in the next few years. These people are promising the world. Again, if they were saying it would be smaller and they were like yeah it does have issues and we must be none of this oh what if it wakes up and it's super powerful just like yeah it's probabilistic it's going to make mistakes and if you don't know what you're doing you don't really know what you're looking at you're going to miss those mistakes and it's going to get multiplicatively worse as you go when you don't know what you're doing so yeah human nature is part of it but so is the marketing so are the promises.

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1:01:44And I think, if I'm not mistaken, driving is one of the biggest professions on planet Earth. So when you hear people, when you hear the CEO saying that there will be job disruption, you say that they are not telling the truth. Yes. Or they're guessing in a way that's very good for them. Think about it from the perspective of Microsoft. of satire nadella he's not going to be like yeah we don't know if this is going to work mate of course he's going to talk his book and he's going to say yeah this is going to replace all workers it's going to be amazing he's going to be so powerful and then he'll change his tune and say actually it's not going to replace workers it'll make them more powerful because the things aren't catching up dorothy from uber for example of course he's going to say if this happens then that would be good for uber because uber would just become an autonomous taxi service there's the reason that way most taken i i find way more fascinating i think that shit's really cool i think there are socio-economic problems that will come from it i think there are actual real problems that will emerge and also what kind of problems well i mean socio-economically there are like you said one of the largest employment centers in the world i mean just the economics of cabs will fall apart but again we are nowhere nowhere nowhere near that we're not even close waymo has had to do the smallest rollouts and the most controlled things because the problem with pretty much every AI system, but especially driving, is not the getting 95 % of the way.

1:03:02It's those edge cases. It's raining, which is a big problem for them in San Francisco. It's a kid runs across the road, but they're wearing a high-vis thing. Doesn't even notice it's a child. Again, this is a really interesting, but very, very applicable example of the right comparison to be made shouldn't be autonomous vehicles versus perfection. It should be autonomous vehicles versus human drivers. I mean, I don't know if I agree because the human driver might make mistakes, sure but again not an expert in autonomous cars just want to be clear but if we're pushing autonomous cars out there willy-nilly and we're not doing so in extremely controlled environments those edge cases will multiply and be dangerous yeah they might be better at human drives in some ways but they might also i was in vegas the other day and i was in a hotel and i watched a bunch of zoops cars just get fucking stuck the autonomous yeah yeah they did these weird boxy things they just blocked the exit they just all kind of lined up and just fell asleep i saw the same thing actually happen outside of a hotel when i got out of a waymo in san francisco just stopped at this and then a bunch of cars and another waymo got stuck behind it and these are kind of these are i've seen some human bad drivers as well i i agree but it's just we have control over deploying these bad or good drivers we have an ability to roll them out slowly which is exactly what we should do i'm not saying autonomous cars are bad i'm saying we need to be so so so careful and treat them as guilty and prove till proven innocent because we can prove and also they have people overlooking them they actually have people monitoring the routes it is something they cannot rush out and it doesn't seem like they're rushing it which is good and they're not promising the world i do agree listen i i'm a big fan of a big fan of taxi drivers generally in part because i spend a lot of time in taxis and i think i'm not just getting in there because i want to get from A to B.

1:04:44I'm getting in there for lots of other reasons. However, when I look at the stats around what is more dangerous, driving myself or having an autonomous vehicle drive me, there's a 68 % lower overall crash involvement rate when you're in an autonomous vehicle. Autonomous vehicles experience roughly 2.1 police reported crashes per million miles compared to humans that are at roughly 4.68 per million miles. So a 55 % reduction when you get in an autonomous vehicle and autonomous vehicles show an 80 to 81 reduction in crashes resulting in injuries versus human drivers uh-huh so you're 85 less likely to be involved in a single vehicle crash like hitting a wall or a tree right if you're an autonomous vehicle versus being driven by i agree but so it's safer in also that data is what's the sample size of human drivers i mean we've got many many many many many many more years of drivers and many many more years of accidents and also man does that not have anything to do with generative ai if we were just talking about that we're having a different conversation i guess the question here was really around job disruption like you know we look across industries and we go driving's a massive profession is there going to be job disruption because cars can now drive themselves if we think about white-collar you know jobs you know lawyers and accountants people sit here and they tell me that lawyers and accountants the profession right i should say some of the skills within the profession will be relegated to ais to do here's the thing lawyers for example great example always hearing fucking legal partners talking about ai never the associates the associates are the ones that go out and find the precedent they're the ones that go and do the grunt work they're the ones who pull emotions half the time the partner is the one that might be the litigant it may be the client facing but the ones that are actually doing the day-to-day work i'm not hearing from them i'm not hearing associates being like this is fucking awesome i'm hearing a bunch of well-paid people that have sat on chat gpt and gone yeah you know i'm the greatest lawyer ever they're not the ones that i want to hear from the actual workers white collar labor disruption is not happening open ai had a study that came out i think like a week ago that said there was no connection between spending on ai tokens and revenue per employee like this is open and that's what does that mean could you explain that as in the more tokens you spend has no no correlation at all with the amount of money you make it's the second report they've put out the other one was like hallucinations are mathematically guaranteed kind of almost it's the one thing i respect about that company occasionally they just put out a study it's like yeah it kind of sucks but the people that are having their lives disrupted work-wise are art directors it's people art directors transcribers translators who have bosses that don't care about the output it's what they consider cheap work and the problem is is those people would have automated your work away anyway they would have sold it they would have taken the cheapest offer they would have sold it to the global self they would have taken the shittiest option they could that is something that ai is doing and again those people are not paying the actual cost of ai they're using a subscription the actual white collar labor force might have some things that are slightly changing but there is no evidence of like productivity gains.

1:07:56In fact, if there were, they would be screaming it from the rooftops. There was an Oxford Economics study last year where it's like, oh, young people are finding less jobs because of AI. We actually read the study, which multiple journalists did not. It was a single line that said, yeah, we saw some correlation. Didn't give a number. Didn't actually say what the correlation was. We are so conditioned to believe that the rich and powerful know what they're doing that we internalize these narratives about like, well, previous booms lost a lot of money. Well, technology takes time to do stuff. And they are intentionally playing on those mythologies.

1:08:32They are playing on these knowing that journalists, analysts, investors will believe them. And this is partly because our realities are defined by stock prices because the stock prices of these companies went up. We're like, oh, look, it must be working, right? Both of those things you said were true though right like that previous technologies didn't make money at the start and you the other one you said was um they'll get better but that's the thing okay because another thing got better this will get better no but there's there's got to be something that they're saying that is fundamentally not true because those are two true statements that okay technology often okay i know i get what you mean yeah what they are fundamentally misleading people about is how possible it is how many actual signs they have because they don't have the signs if they had the signs as in the signs of this getting cheaper yeah as in the signs of this being able to autonomously do work without the Rube Goldberg machine.

1:09:21And even then, in a reliable way that was making the customer more money, being productive in a way you can say with your whole chest without a series of asterisks. And that's how it is across the board. The people that are most excited about this, psychopaths on Twitter in many cases, are people that I believe they really are. I'm sorry, there are some people on Twitter, because the other thing about this is this is really unique to the ai industry i've never seen it any other industry outside of maybe like sports teams the attachment that some people online have to these companies if you dare dare to criticize anthropic it's almost this religious attachment good example was this week bloomberg reported that open ai was on track to hit 40 billion dollars in annualized revenue month times 12 four weeks times 13 we don't know they don't define it i saw multiple people online going actually it's 60 billion it's actually 60 billion i heard from someone it is like a cult and it's a cult of software driven around growth and this idea that by backing the right horse you will have some grand thing and open ai in particular in particular mr altman they have been fomenting this that tbo as well the tibo the one of the guys are open ai they ferment this thing online they build this kind of parasocial relationship with both the large language model themselves and the companies and one's allegiance to the companies is so important it's truly vile if only these people gave a fuck about i don't know medicare for all or poverty or things like actual problems in the world versus are we buying enough gpus do you know what's interesting is some of what your narrative one would argue actually helps them how because you know the ai doomers that have come here and told you know some of the original founding fathers of ai like jeffrey hinton have told me that what they're building is highly highly dangerous and that it will be fundamentally disruptive to society and it's interesting because some of the ceos who you've mentioned their historical narrative was also by the way this is really fucking dangerous yeah and there is a significant chance we could fuck up the planet.

1:11:29And what we've seen is this slow pivot away from it, because now they're getting booed and they're being attacked. They've been this slow pivot away from it. And the pivot almost sounds a little bit like your narrative. It now sounds like, actually, no, it's not going to change anything. And you're all going to be fine. And it's not dangerous at all. But that's the funny thing. And that's why I'm saying, I actually think there might be a couple PR people at these big AI companies thinking, thank God for Ed. Oh, I don't know about that. Some of it, because you're like, you're saying, actually, don't worry.

1:12:02Everything's going to be fine. It's not going to take your job. It's not going to disrupt the economy. It's just a fad. There's no technology. And I think they don't think that. Here's the thing. I think Altman and Amadeus are some of the most deeply corrupt and cynical people in the world. I don't think, of course they were going to say from the, it was early 2023. Altman said, we're a little bit scared about what we're creating. Oh, shut up. I'm just I hear that and I feel so frustrated because I've met so many of these rich fucking liars these people and you know why he wants to say that so you'll invest in his company and buy the software so you'll be scared that if you don't use AI today you'll be left behind in the future which is their continual narrative that if you don't get on the train today then you'll be left behind by the way every single scam and con starts with rushing you every single trick in history begins with saying, you must do this now.

1:12:50And best piece of advice I ever got was, if anyone tries to rush you, and it's not literally a mortal thing, like you are bleeding or on fire or the house is on fire, slow down. And yet all of these companies say, so scary. And now they're talking about slowdowns. But you ever noticed that Amaday and Altman, they say, well, maybe we should slow down progress. And then they don't. Right now, Altman's saying, oh, we've slowed down progress because we're so delayed. Now they're out of compute. Now they're doing it. I can guarantee you, by the way, the PR people do not like me. I don't think OpenAI's PR people are super fond of me.

1:13:20But I bet there's elements of what you're saying, because you're calming people. You are theoretically calming down the general public. And you know what? I hope I am, because the fear-based tactics is horrible. These companies don't want that. These companies want people scared. I'm 100 % sure. I just fundamentally disagree. I think it... So the timelines, and I sit here, and what I do is I log their quotes over time. Oh. And I read them out from 2015 to 2026. and the change you see is them going from there could be extinction. That's the narrative, the early narrative. Elon said it himself. He says it's the single most dangerous thing in the...

1:13:55Elon says a lot of things. And then you track it over time and it evolves to this age of abundance. We're all going to have unlimited stuff. And then the new slogan at Chattapult is intelligence for everyone. It's suddenly... And whenever Dario comes out and says, by the way, it's really rockin' dangerous, they attack Dario. Yeah, that's right. They hate him. that man dario is they're like dario shut the fuck up honestly i i've been saying dario shut the fuck up for years but it's but the thing is i get your point where it's like i don't think they've changed to calm the public down so much as they're desperate to not get regulated which is laughable we don't regulate tech we don't regulate shit america doesn't regulate shit we are in the we are still trapped in the hands of milton friedman margaret thatcher and fucking and Ronald Reagan.

1:14:42We're still stuck in the neoliberalistic hellscape, which is growth at all costs, free market capitalism. So no, no one's regulating. The regulation of these companies should have been, I don't know, breaking up. Put these bastards aside. Break up these fuckers, for sure. We shouldn't have companies this big. It makes things worse. But these technologies are dangerous. I mean, they're dangerous, but not in the ways they've been warning about. Less if we think about cyber hacking. Right. And just be clear, those cyber hacking things that happened were not a result of they were like break out of the sandbox and then they set the sandbox up wrong they set up the server they were on wrong but i mean you know advanced ai models could very easily because they can go out onto the open internet as agents they could very easily go and look at code bases of different websites find vulnerabilities and exploit those vulnerabilities yeah at scale and arguably um at a higher intelligence and faster and wider than humans a human hacker could theoretically so that's dangerous well here's the funny thing we don't know how much compute was spent to do the hugging face attack the open ai one we also do know that they improperly set up the server to keep it they thought they'd turn the internet off and they didn't that's human error and that's human error in a sense that yeah they threw about an indeterminately large amount of compute this is dangerous but people keep saying we can't let the the chinese get a hold of these models we couldn't possibly because what if these models fall into the wrong hands they're already in the wrong hands mark zuckerberg sam altman dario amade the wrong hands are the hands of those who are running these companies we should not be training these models to do these things i don't know why the fuck we're doing it other than they've run out of other things they can train on there's a ton and the fact that they can do it it's kind of interesting but you do it would you agree that it's an intelligence and i'll call it that you might disagree with that terminology but an intelligence that can go out onto the internet and click around and take actions is inherently there's risks associated with that.

1:16:42Well, the second part I agree with, the risks. We've had people running automated scripts and hacking scripts for a while. We've had hackers doing that for years and years and years. This is brute forcing it with a bunch of compute. And yet, it is dangerous. These companies are doing something dangerous. That is not what Geoffrey Hinton et al. have been warning about. They've been saying, oh, these things could destroy society. they can manipulate people when you actually look at the underlying things not so much jeffrey hinton as well talking his book still got his google stock i think weirdly enough he left google because he was worried about the ai there but then immediately made a comment being like yeah actually though google's very responsible strange thing that but let's get back to the the cyber security side i agree this is dangerous these people should not have access to so much compute they clearly don't know what to do with it there's a really easy way of dealing with this it's not letting them use so much compute it's regulating that part out of existence what if the chinese do it the chinese were able to distill the models and also i don't know regulate it and stop i i feel like with this particular thing as well we got to this point and let the genie out of the bottle to use an annoying sam altman term we let this happen because we let these companies be unregulated and use as much computers we want we had these fucking enablers allow them to burn as large computers they want and also we for all of these dire warnings about ai dangers no one seems to have fucking done anything okay we're gonna play a game ed let's play it on these cards here i have the things that you consider to be myths about the ai industry the challenge is i want you to give me one sentence on each myth oh so just your first reaction you're gonna pick it up you're going to read it and then you're going to give me one sentence on your opinion of that um belief okay let's go so let's do this

1:18:33what does it say and what says the the ai industry is creating enormous economic growth no it's not it's nowhere in the data okay like it's just may i do a second sentence go ahead pretty much all of the economics is either nvidia feeding money to its companies like core wave or Or these three companies feeding money to these ones to spend it with them. Okay. And what evidence do you have that it's not causing economic growth? Just to be clear, other than the spend on semiconductors, so the speculative investment in GPUs and data center infrastructure, that's happening. But as far as like spend on AI goes, barely cracking$100 billion, and most of that is just these two running their services and paying these three companies, Oracle, Core, even others.

1:19:18But$100 billion is a lot of money for a relatively new technology. Not when you've spent$300 billion in equity funding and if we're going with just these three, I think$600 billion in capital expenditures. Yeah, I get that. That means it's not profitable. But the$100 billion is an expression of consumer demand. When the compute is mostly driven by subscriptions that are subsidized, no, it's not. When you're giving someone$20 or$40 for a dollar, they are going to use it more. If this was all on a per million token basis, we'd be having a different conversation. fine cool next one the united states need to spend trillions to beat china in the ai race let's see what ai race that's actually that's actually my point it's what ai race is there is it to make big scary llams they they did that already without the nvidia gpus by the way they've got blackwell gpus kakashi and just dario two amazing analysts i love they've been on this for years it's like china's already had nvidia gpus that they're not meant to have for years but also to do what they already got the lms what what's the race to do to make us spend more money than them for us to constantly piss our pants worrying about china because uh they won if that's the case myth number three ai will replace all human jobs that just isn't happening there's no economic data to support it will it replace some jobs i mean it's replaced some contract labor that would otherwise be replaced with cheap labor out in the global south it's a digital globalization in that sense but all jobs most jobs a lot of jobs no what about robotics robotics is not what we're talking about yeah robotics is a very different thing and even then robotics will be powered by ai i mean yes but there are tons of different kinds of ai we're talking explicitly about generative ai and that's what i this is for my myth busters piece i there was definitely about generative ai okay but what about robotics like the thing is the optimist robot that elon's working on it uh tesla the one where even in the demo of the hand he did like they had to have a guy controlling it wasn't doing an autonomous thing here's the thing if they can beat all these challenges yeah robotics would be really cool i don't know how long that's that's one i'd actually be willing to believe in a couple decades have you seen them chinese robots i know you've seen them what's it called the one that can dance and that but they can't really do human things well it's just it is pretty mind-blowing it's robotics are fucking cool i like i'm not going to pretend i don't think robots are cool i wish they were building robots and actually doing cool shit i wish the tech industry still made fun stuff and interesting stuff so we get these fucking large language models but with ai plus robotics isn't you know i was in san francisco and i went to this massive um incubator there and when i'd gone there three years earlier it was all software startups right and when i went back three years later it was all these robot startups and i remember saying to the founder of the incubator i was like why is everything robots now there was this one robot where it was just the arm and it had a frying pan on it yeah and its whole thing is it cooks for you yeah so it was it was showing me it cooking whatever and he goes well you know the arm he goes the hardware part the physical parts that's always been fairly cheap yeah he goes the expensive part was the intelligence yeah and now that's come down to pennies so what you're seeing is this explosion in the robotics industry because robotics is a function of intelligence plus hardware we've always had and a ton of data though as well like yeah the data is very expensive yeah the thing is cybercabs rolled out real slow it's gonna take a long time it could be a threat if they do a robot that could replace a human job sure it could but that human jobs are multifaceted human jobs change with environments and also a lot of human jobs that you might think of like i don't know dishwashing robot for example yeah some guy at a restaurant isn't paying 10 20 grand for a robot to replace the job that they're already not paying enough for the point is yeah it could if you can replace the jobs that is not what we're talking about with this yeah i just i just i ask these questions not because i'm trying to be like actually i'm trying to form my own opinion on these things and i i do think you know as it's written that it says ai will replace all human jobs obviously not obviously that's bullshit but i'm trying to figure out if the truth is somewhere in the middle that there's a certain type of job which actually humans probably shouldn't have ever been doing really um if you think back through history there was someone's job just to sit in an elevator and press the buttons right that's an example of a job that humans probably shouldn't have been doing and as technology gets more advanced it takes on a lot of that sort of automated monotonous stuff right the thing is with this particular thing that i know that this is from it's a specific blog i wrote i was explicitly talking about generative ai though I was explicitly talking about people, when they say this, they are referring to that.

1:24:00So you're not talking about agentic AI? Agentic AI is LLMs. Agentic AI is just a fancy way of saying an LLM talking to another LLM with a harness on top. That is still LLMs. Agentic AI is one of the bigger lies they tell. It's like when you hear agent, you're meant to think autonomous AI can do what you want. It's still LLMs. It's still LLMs talking to other LLMs. Yeah, taking screenshots and putting them in LLMs and stuff. Oh, God, yeah. Okay, but, you know, I could make the case that I'm just thinking about my personal usage. I definitely use agents to do things that I would have previously asked people to do.

1:24:33It's not to say that I still don't hire because we're hiring like crazy. And I still, in that particular function, I'm thinking about, like, the chief of staff role. So my chief of staff would have triaged all of my inboxes previously and put them somewhere and told me about them. Or maybe once upon a time, shown me a piece of paper back in the day, I guess. Now my chief of staff is no longer doing that job. You still have a chief of staff, though. This is what I'm saying. They're doing other things. Right. But the thing is, again, what you were describing is fairly basic automation. I don't know what the tasks are.

1:25:01Yeah, it's fairly basic. Didn't spend a trillion dollars on triaging email. That's the promise. If they'd spent$10 billion and this was much smaller and you're like, cool, software. Yay. A lot of the things that people are impressed with, like script stuff as well, it's just LLM's doing Python. You should be impressed by Python code. Python's incredible. You can scrape websites. You can download shit. It's awesome. But the point I'm making is none of this would be anywhere near as much of a problem if they didn't ask for all of the attention, all of the money and promise the world. It's their promises that are the problem.

1:25:31And the journalists who went along with it and the analysts and the Twitter people who went along with this saying that this would change everything and replace everything and leaving the realm of reality. Is there any technological innovation through history that was really, really game-changing where that didn't happen? i mean the internet i mean people over promised that i mean they over promised on the businesses but i've read through a great many pieces about the early internet a lot of people were excited but hesitant they were worried that there was not enough demand but they were still like oh yeah this could have potential ramifications if it happened people were not super negative about the internet a lot of the skeptics were saying we're worried about an overload of bad information Look at where we are.

1:26:16A lot of people were worried about the social consequences of everyone talking online, which they were correct about. With the economic things, they were specifically talking about like the globe, which I think made hundreds of thousands of dollars and had like a, I think a billion dollar market cap. They were talking - Yeah, there was massive hype in the dot-com era. I read a lot of those stories. The hype was nowhere near. You didn't have articles everywhere that were saying, if you don't get online, you'll be left behind. You didn't have professional consequences. Nick Suresh mentioned his blog earlier.

1:26:45He described this thing, AI's a Vista in global decision making, where he said that you have businesses you work at where if you don't say that you're more productive with AI, whether or not it's true is irrelevant. You have professional consequences. You can get fired. There are people having to AI wash their jobs by saying AI did it. Otherwise, their bosses don't do shit. We'll get mad at them. This did not happen with the Internet. It was not present. And part of the thing is social media was not like it is today. The kind of decentralization of media in general has caused this as well. And also the fact of day trading.

1:27:22There's so many different things that are different. It's crazy. I do think AI is different from the internet, in part if you just measured it on the speed of adoption. Especially if we could just think about generative AI. But the adoption of the internet required physical connections to your house. The adoption of generative AI involves having a web browser. It took a vast amount of effort to bring internet to people. even with dial-up connections it still required the distribution and that's why it was so slow and there was less you know there was less hype than i do agree that there's way more hype and we are again going back to this point that we're clustering ai in this big category of lots of different things it was generative ai there's generative ai there's like real world ai is explicitly what i'm talking about here when bosses are saying you need to use ai they're not saying i need you to go and buy a unibeam robot they're saying use llm so that i and that's the thing they have this theory the era of the business idiot where it's like we are ruled by people that don't do work because nobody who actually does a bunch of work who really is productive is harassing someone who works for them for not being productive enough they're not they don't have the time they're doing work someone who is sitting there with the ingratiation machine that's telling them every beautiful idea out of their messy little skull is amazing yeah they're going damn this thing says i'm a genius why are you not using the genius machine to do more work And yeah, if you're a boss that goes to lunch, leaves lunch, and sometimes reads your emails, LLMs are magic.

1:28:44Do you know one of the most compelling arguments I have for the overhype of AI? In a world where everybody has access to these tools, whatever the tools can do would largely be commoditized. And what the tools can't do, which one could say is the human taste judgment, you could say it's people skills, whatever you want to say, is now going to be the valuable thing because the scarce and the hard, becomes the most valuable through history and the commoditized becomes the least valuable so the very nature that we're commoditizing the generation of content or whatever you want to call it code means that's actually not where the value will accrue for the user and actually if you think about what it takes to now make something that is objectively great if an ai can do it then it's not the great thing is not a value so i think a lot i've been thinking a lot actually about how do you avoid the temptation of slopification of the things you make, the value you put into the world.

1:29:44It's a very simple example that people will be able to relate to. If you use ChatGPT or Anthropic, you know, Claude, to make your LinkedIn posts, let's say, they will be shit LinkedIn posts because everybody else is using them. And actually a great LinkedIn post now is someone who doesn't use them and makes something that's like irreplaceably human. Right. And deeper and more personal n of one lived experience yeah all these things that ai can't do and i think that's a compelling argument that actually the commodity tools produce commodity outcomes so everyone has access to these things and what's changed like really like what the slopification of stuff we've we've got a bunch of slob but these people are half-arsing their jobs before it's just a half-arsery machine and it's just it's it's the thing it's what i'm talking about with the slot blogs it's like it's it yeah people that gave you dog shit before have now got the dog shit machine to pump out dog shit it's so there's a guy called carl brown uh internet bucks awesome guy great software engineer he he said i might say this earlier so it makes the easier things easier the hard things harder when you know you're doing a really distinct small script for something and it can plop that out it's awesome i used claude the other day for something useful my kid loves minecraft i was trying to fix a fucking broken mod because he loves his wither storm it's awesome and it still took me half an hour and kept getting things wrong what do you use ai for generative ai i really don't You don't use it?

1:31:04With Bloomberg Terminal, I use Ask B, which is just when it's like requesting the consensus analyst estimates for NVIDIA. But otherwise you don't use it? No. So how do you know it's bad? I've used it. I've put it through its paces. I've used it to try and do financial models and found one error and immediately be like, ah, I've never been particularly impressed. The one thing I will defend it on is it's really good for like tech support. Like I had this thing called Synergy in my New York place I go to. I had this monitor where I have a MacBook and a PC laptop. and this thing synergy for using the same mouse and keyboard dropping a giant fucking troubleshooting log into this thing going what's wrong and it going this is wrong yeah it's super useful is that trillion dollars no is that a two trillion dollar company no pretty better than google though right better than google no i mean uh yeah remember do you use google search still i try i have to fucking push the crap out of the way and oh my god i can't remember the last time I did a Google search.

1:31:57Christ, I find myself using Bing sometimes. I know. I hate saying it too. But I have to scroll past the AI crap because I want the good stuff. I want the actual links to stuff so that I can read the thing and go. But you can ask the AI to give you the links. Yeah, and it doesn't do a particularly good job. Like my... So say that the other day, my iPad wasn't turning on and it was doing this funny little thing on the screen. You think that it's better to type that into Google? Oh, no, I must be clear. That may be the only LLM use case I defend. The troubleshooting thing is awesome for it. It's the one weakness I have.

1:32:31It's like genuinely being able to drop a log into it. That's awesome. Again, that is not what they're selling it as. They're not selling it as a useful little tool. They're selling it as the software, as the thing that will change everything, that will replace all jobs, that will do this and that. It's not like they sold it as a quirky bit of software. No, you are right. They are telling us that it is going to replace everything. But funnily enough, the critics are saying that as well. Which one? I mean, I mean, like the Jeffrey Hinton's of the world. You know, even people that have left the safety team in ChatGPT who I've sat here with, these are critics that are warning of the impacts it's going to have on the world.

1:33:08It's weird how all these critics also have a vested interest in AI doing well, though. Daniel, former OpenAI guy, AI 2027, written with the Star Codex guy that was nothing more than badly written science fiction that he's already had to walk back. But you know he could have made more money by staying at Chachapi 2. Could he? I mean, it looks like it. If he had options early, sticking around would have made him... The thing is, did he lose the options? How much did he lose? You're not saying that they're being critical... They're not critical of the companies themselves. They're not critical of the stealing.

1:33:38They're not critical of the environmental damage. They're not critical of the fact that you cannot rely on the answers. They're critical of this big, scary boogeyman out in the future where it's like, oh, I'm scared of when this becomes so powerful and everyone should talk to me about how scary and powerful it is. They're not saying, hey, here are the harms today. Here are the things we're actually looking at today. Here are the social problems of having this automated way of spewing out slop, of filling our feeds with crap, of having information that will pop up that is presented, even with the little disclaimer thing of saying, yeah, sometimes this gets shit wrong.

1:34:11So in the tiniest words possible, they don't talk about the fact that these things are trained on stealing millions of people's work. But on that last point where you say that it's going to get progressively more intelligent and when it does, it'll be a danger. Yeah. Would you agree with the statement that artificial intelligence has gotten more intelligent if you measure it based on any sort of measure of intelligence one might use? It's got better on the tests that are rigged for the models. It's got better at tests where you can train for the test. Okay, so it's got better at tests. It's got better at tests that they're intentionally trained for.

1:34:44So if you logged the rate of improvement on a graph, it would look something like this. Right. You agree? In terms of what it's capable of doing. Oh, there we go. Yeah. Because it's not got new features. You'll notice that outside of OpenAI and Anthropic, when you remove the coding startups, there's basically no successful AI startup company. So we agree that it's got better, it's got more capable at doing things. Yeah. Okay, fine. Over time, AI's got more capable. If we imagine that trajectory will continue, it will get more capable, then at some point it does cross, you know, this is what they say to me, it crosses human intelligence.

1:35:26And at such time, will it not start to do some of the jobs that people are doing today? Outside of software engineering. Remove software. Because I will concede software engineering. It's got better at that. Outside of software engineering. Yeah. Where? So the chief of staff thing is the admin. Okay, so it's got better at that, man. Video generation. photo generation okay text generation uh theoretically coding right but and then i'd say agentic workflows so what is an agentic workflow so automated workflows where you're doing the same i mean a good example is looking at the back-end data of the diary of a ceo summarizing looking at all of the data ingesting all of it going out onto the internet and searching who ed is looking at every interview you've ever done ever uh-huh this is summarizing and generating making a little model on you know the things people want to know from ed producing a report sending that to my inbox me getting a 20 30 40 50 page report on ed before he arrives this is all basically the same thing it's been doing for years though it's not really new capabilities research it's it's it's still the search it's still the same things they've had web search for years they've had report generation for years but we couldn't generate high quality videos that are like indistinguishable from cameras see dance and these ones that look like movies are incredible.

1:36:39So I'm saying the point I'm trying to make is that if we imagine that over the last 10 years, there has been a rate of improvement in terms of capabilities and output and quality. We've seen hallucinations drop. We've seen the models get more quote unquote intelligent, get better at, you know, if you give it an IQ test, it's getting higher scores than it was 10 years ago. We agree that there's been a upward motion of improvement. This is pretty much how machine learning goes when you feed it more data. Exactly. And you put more compute behind it. So if this continues, what does the future look like so the rebuttal i was expecting to hear is that it won't continue and i actually don't think it i think that there are hard limits that we're going to hit so you do believe in that there's a hard limit somewhere we've kind of already hit the diminishing returns level because for example video generation which is by the way far less an american concern anymore open ai shut down sora i think you can still use the api but nevertheless look at look around you with the amount of stuff and the crew you need to get a shot people think the movies are just shot by shot by shot and they just magically happen when you've got my wonderful girlfriend of first ad's and so assistant directors you've got gaffers you've got liars and also simulating light is insanely difficult there are so many magical things that happen in creating visual images that yeah you could create a one minute long thing that might fool someone how do you practically turn that into a movie because that movie i forget what the name is there was a movie that claimed it aired at Cannes.

1:38:01It didn't. It aired in the city of Cannes during the Cannes Film Festival. It was not at the film festival. When it comes to the practical creation of actual things at the end of it versus magic tricks, the actual practical outcomes are not there. The reason I keep coming back to the capabilities thing, for the example, is yeah, they can do better at tests. Do better. Number go up. When it comes to can this actually do distinct tasks you can rely on it? You can rely on it for summaries. You can rely on it for generations. The things it was doing, it's getting linearly-ish better at. But again, there's a ceiling to that.

1:38:33Like, okay, so it gets really good at research. What does that actually mean? You've already kind of got the automation there. What is the next step of that? Because training it to be more autonomous, for example, that's not something that comes from training data. That is actually a new, Gary Marcus, a neurosymbolic. You actually need to build a structure around the AI to make it work. And even then, it doesn't fix the problem. So you're saying that there will become a point where the rate of improvement will plateau. We're already there. And stop. We've already hit that diminishing. Gary Marcus said this in 2022 as well.

1:39:02You know, there's lots of people listening now that like they've had their workflows completely transformed by these tools. Have they? There'll be, yeah, there are. Yeah, the thing is, first of all, every single one of them, did you pay for the tokens? That's the thing. Did you pay for the tokens? And also, how many tokens did you burn? But putting all that aside, what workflows? Because if it's, yeah, did a bunch of web scraping or web searches. I'm just not impressed. did you make an entire fucking movie no you didn't is it speeding up your coding yeah i believe that i've heard that from multiple people but again how much can you trust this i think i was getting at is you know when in the moment of any technological innovation people they extrapolate linearly or they view it as a static state i.e they think today is going to look like tomorrow or they think it's going to get better in this sort of straight line but what we end up seeing a lot of the time is this exponential improvement all of the innovations we're talking about with you with like with compute and all that with fast processes those are hardware breakthroughs the hardware breakthrough companies don't seem to be fixing the llm problems despite the all the king's horses all the king's men we want nine ten generations of tpus from google now broadcoms building stuff with open ai their jalapeno chip and yet none of these people can just say yeah we're on the path to making this profitable because they can't if we fix the environmental problems and the profitability situation maybe i'd be more generous with this stuff but they don't seem to be able to and you talk about these improvements and capabilities there's a certain point at which i'm saying okay can it do even a tenth of the stuff they're promising samuel when the other fucking week was saying it was going to be in like six months will be like a genie that you can ask wishes for from it's like motherfuckers never watched aladdin what's he talking about like also the The genie was charming.

1:40:47Anyway, long story short, the promises do not line up with the capabilities or the capability improvements. An exponential improvement in software and software performance is always a result of direct hardware improvement. We have all the gifted mathematicians, all the gifted software engineers, all the gifted hardware engineers. And where are we? Trillion plus dollars in with the future great financial crisis and the world's greatest marketing psyop. I just think in the future, I do think that all of the devices and the computers we use and the physical items in our world will be more intelligent.

1:41:22I mean, sure, but is that LLMs? That'll be powered by the underlying AI infrastructure. It'll be the more data centers. It'll be energy coming down. How does a GPU full data center translate to a Nikon camera that can, I don't know even what you'd think. Because what is the thing we're talking about here? because the idea that devices will get smarter, sure, I can see that it's a very broad statement. I can see it happening. It's really kind of happening. What does that have to do with the data centers? Because these data centers, again, are not being built to make your consumer electronics smarter.

1:41:58They're not being built for anything other than speculating on the ability to capture demand for generative AI services. But it's not just generative AI. We went through that. It is. No, but those data centers, they are being built for generative AI. They are not being built for anything else. Would you consider generative AI to be the fact that on Meta's earnings call, like a couple of weeks ago, Mark Zuckerberg said, the big breakthrough we've had, which has resulted in 15 basis points of increased retention, I believe he was referring to Instagram, is that we now take anything you post on social media and we run it through an AI to get full context of what it is.

1:42:32And because we can see guys sat in front of me called Ed with Blue Shirt and coffee, we now can train the AI to serve whoever wants Blue Shirt, Ed with coffee to the right user, which means people are retained longer because... Isn't 15 basis points like 0.15 %? Yeah, it's not cool, but it makes a difference at scale. It makes a big difference at scale. Yeah, but 100 and something billion dollars in and the best you've got is 0.15%. If he could be fired, I mean, how much of a difference? Because there's a reason he's saying basis points versus dollars. Because think about it like this. If Mark Zuckerberg was...

1:43:08I take your point about scale. No, I'm saying the point I was making was that that is another application of these data centers, because it needs a data center, that is driving revenues, but also that's outside of us thinking about just generating a sentence. And that's the gem, their generative model. Muse. Oh, Muse Spark is their LLM. Gem is their generative model. It's Muse. Well, Muse, then that's them doing the weird thing where it's like on Instagram and it's like, Dave the cat, why is Dave the cat suffering? like it's the weird pop-up things meta is fuck god damn that company sucks like every time i think about how they've ruined that product but that's the thing though again why can't he just say with his whole chest we've made a couple billion why can't he say that because he isn't because there's not actually a way of going i spent all this money i spent 14 billion god damn dollars on scale by alexander wong and i made this much they can't it gets back to a very simple point of hey if it was going well you'd tell me how well it was going rather than I don't know doing this weird rain dance thing where you're like well if we move all the pieces around in three years theoretically this will happen I've done almost 700 interviews with some of the most interesting people in the world and one of the things you learn which is unexpected is that vulnerability is the doorway to connection and after sitting here for two three hours with a guest, I feel a deep sense of connection to them.

1:44:31And as they leave, what I get them to do is to write a question in the diary of a CEO. We've taken all of the questions from the diary of a CEO. We have put the question here on this card with the name of the person that wrote it. So you can sit at home as I do with my fiance and my colleagues at work and other people in my life. Whenever we get a minute, we play the diary of a CEO conversation cards. And it is incredible. what happens. These are great if you're in a romantic relationship and you want to connect your partner more. These are also great if you're in a team and you want to bond your team together.

1:45:06And I have to say they're also great for families that want to learn more about each other and that need a good excuse to spend some time in a digital world, in the analog environment, connecting human to human. It is remarkable what the right question at the right time can do. Go to thediary.com and you can get these conversation cards right now. I do think you're accurate and right when you talk about the fact that there's a lot of like, is the word for gazy? Yeah. Where like there's a lot of people that have spent a lot of money and they kind of shouldn't have spent it and they fucked up. And now they're thinking, shit, like we've spent all this invested money.

1:45:41Kind of like the metaverse was a bit of a fucking joke. Oh my God. That was a bit of a joke. That's so weird. A lot of money spent. We kind of thought this dream was coming of this one. I shouldn't say dream because it's not a dream that I've had. Dream that they had. Yeah, this sort of virtual world. And actually it never transpired. And there's no sign that it will in the near term. AI and the dot-com boom in this regard are the same. NFTs were the same. So one could argue that a lot of the crypto industry was the same. It's Wang that is inflated by the media. The difference is the reason the metaverse and NFTs didn't escape this was there weren't stocks to speculate on.

1:46:14There weren't big companies that you could invest in. They had record earnings in 2021. There's a bunch of money floating in the system thanks to post-COVID, the PRDC, that basically government, federal money flowed in. To the banks, there was a bunch of easy money. Zero interest for a year. Money was easy to find. Then after that, there was the hangover. Growth started to slow down dramatically. This is actually my rock-com bubble theory, which is they don't have any hyper-growth ideas anymore. So suddenly, they started buying GPUs. And when they bought GPUs, people went, they're doing AI. Oh, we better buy the stock.

1:46:46And the stock's went on an incredible run. Man, it's like several hundred percent. In the last few years, their stock has grown by hundreds of percent, despite zero proof. and because the media was just saying yeah meta's revenue is growing because of ai right microsoft's revenue is growing because of ai right the fugazi you're talking about was the fact that everyone just gave them credit in advance and now we're kind of getting to the point where it's like hey you didn't spend that trillion dollars for no reason did you satya amy amy hood just gonna take him out back send him to the glue factory or something like i do think there's overspending i want to concede that but i do think yeah no i do think there is and i think the reason why there's overspending ed is i think there is something here and what in terms of like i think there is practical uses for this technology and i think when people realize that through history they go crazy because they want to be the person that owns the opportunity i'm gonna be honest i just i fundamentally don't agree you don't agree with which part i don't agree that this that the speculation is a result of actual demand i don't believe it's suspect i don't think private credit is sinking hundreds of billions of dollars into AI because of actual demand.

1:47:53They are doing it because they saw the biggest companies in the world building data centers, making a ton of money from two companies they feed money, and went, I want some of that money. I'm saying that I do think there is value in the underlying technology. Sure. And so I think, I'm not saying how much value. Right. Okay, I get you meaning. That's fair. I'm not saying it's proportionate to the investment. All I'm saying is that, do you know what it's like? It's like, if I take your example, the rot economy essay that you wrote, say that you're on a desert island and then someone says they found a banana tree right and there's there's 10 000 people on the island okay they are gonna stam fucking peed towards where they think the banana tree is they are gonna fucking claw each other to pieces and if your essay here is right that there was desperation because they hadn't found an innovation in a while maybe that explains it maybe there is a bit of value here right and they're stam fucking impeding and killing each other and making irrational decisions like hungry people would.

1:48:48I actually think we're, then we actually agree. That is actually my point, which is these three companies in Meta, their main business lines are running out of growth. There's only so much they can grow. And indeed, in the next three and a half years, analysts think that these two bastards, these two, OpenAI and Anthropic, are going to spend over$400 billion on these people alone. Microsoft, Google, and Amazon. And the crazy thing is, is that's a large part of their future growth and if this money isn't spent their growth slows down okay so your point about a bananas i actually agree that is the rock on bubble it's they don't have a new thing and they're desperate and indeed they got rewarded for buying the gpus they got when they bought these goddamn gpus from nvidia all the markets went rock hard overnight they loved it there were stories about how they were sending armored cars with the gpus to microsoft to make sure microsoft got the gpus and so everyone saw all that money flowing in even though they never disclosed their revenues They saw the expenditures and they went, well, I want to do what these people are doing.

1:49:43I want to get a little of that money, don't I? I think the area where we have a slight disagreement is that I think the underlying technology has a lot more promise over the long term than you do. So the thing I want to push back on there is to have progress with AI, just taking it in a vacuum, to have progress for these two companies to keep going and to keep progressing. they need to spend tens of billions of dollars a year on training the only way that that can happen is if these companies and venture capitalists and private credit firms and nvidia keep circulating money to them so the progress yeah that we've got so far is entirely a result of this circular system so it means that without killer you talked about vcs there venture capitalists who are by the way investors the majority of the funding that open ai got in the last six months yeah came from softbank nvidia and amazon okay yeah so just the point is is you're talking about progress continuing progress in llms can only continue as long as the money keeps flowing once the money once the money stops flowing the progress stops which but isn't that most like early like spotify didn't make money for 20 years spotify didn't lose 20.9 billion dollars in one year they didn't need to raise 217 billion dollars in the space of six months yeah and uber's another example 33 billion since inception before it became a messy kind of profitable amazon web services between 2003 and 2015 when it became profitable 29.7 billion dollars they'd spent the scale yeah that's the total capital expenditures and that's not just amazon web services that's the entire logistics operation normalized for inflation so they all lost money for a long period of time is the tldr yes but the amount of money they lost is completely just magnitudes different on a level where these three come...

1:51:28Can I argue then that that's because the potential of intelligence permeates everything, whereas Amazon at the time was like selling books. No. That was bringing retail online. When Amazon Web Services grew, it was... Oh, Amazon Web Services. Amazon Web Services. Amazon Cloud. With Amazon Web Services, the reason I bring that up, I'm going to repeat something, but it's really important. 2003, it was founded. And it was founded mostly because Amazon, as a growing online store, needed hardcore infrastructure. 2006, I think, is when they turned it client-facing. I may be wrong on the dates there, but 2015 was the year it became profitable.

1:52:00The total capital expenditures normalized for inflation were$29.7 billion across that 12-year period. And yeah, it lost money, but if we speak cold economics here, Amazon didn't have to go into the - They were unprofitable in a way, but their margins actually started improving because AWS was a very margin-heavy business. It was great. These two, Google, cash flow negative. Amazon, cash flow negative. These businesses, the reason you liked software businesses, was they are meant to be cash-heavy, asset-light. These companies, along with Meta, have added more than$700 billion of new property, plants, and equipment.

1:52:42So, assets, data centers, GPUs. In the last four years, they have gone from being these cash machines to these cash furnaces. You said a second ago, this can only continue if investors continue to invest. Yes. And I was saying, I think that investors are used to pumping money into things that are burning cash. Your rebuttal to me sounds like, well, this is burning more cash than ever. And then so I would say, well, is the opportunity bigger than those other case studies you referenced like AWS? And one would say that the opportunity of intelligence permeates everything. So the TAM, the Total Adjustable Market, is enormous.

1:53:23maybe the rebuttal back to me is about open source and all these kinds no no no i i actually know what you're getting at so what you were describing there is the argument that satya nadella or sam would make but the theoretical opportunity of large language models and i could have bought that shit into any 24 from them when they were like oh we see the opportunity we've gone way past the point at which you can rationally argue that llms need this much money and when i say the money needs to keep flowing i am talking these two companies open ai just open ai clammy sam has said wall street general and isa gardizi reported a few weeks ago they plan to spend 750 billion dollars on compute through 2030 i think they're going to be dead before then but 750 billion dollars that is an insane amount of money it's crazy and a large chunk of that is training so when i say progress i mean literally to make the models better at stuff requires billions of dollars invested just in data and also tens of billions of dollars of taking that data and so training training is actually a really interesting thing because when you think of like for j control my trainers when i train with them i'll lift with them i have a defined thing and when i do it and i eat right muscles get bigger they would and here's the thing when you train with an lm you're experimenting each and this is not actually a hit on the companies because they're still trying to work out how to do the thing because putting aside how i feel like they're trying to innovate i think there are people at these companies that actually want to do something interesting it's costing too much money so once the money tap turns off the money won't be there to buy the data or to feed the data into the gpus put aside all the thoughts i have just the raw capital to get them this far has cost increasingly larger amounts of money and increasingly larger amounts of training money for training runs that sometimes can fail.

1:55:10GPT-5 was meant to be this panacea for the AI industry. They had at least one training run that cost half a billion dollars and did nothing. And that's the thing. If we are thinking about progress in a vacuum, they need so much more money just to maybe get somewhere. There's no guarantee. There's never any guarantee, but there's a reason that Google and Amazon are cashflow negative now. There's a reason why Oracle's probably going to die as a result of OpenAI because Oracle's future depends on open AI spending$300 billion over five years. It's absolutely fascinating because I was just reading through a list of quotes from the big CEOs of the AI companies to see what they would rebuttal you.

1:55:47And they're all basically saying the same thing. They're all saying, this is an actual and exact quote from Sundar, who is the CEO of Google. He says, the risk of under-investing is dramatically greater than the risk of over-investing. When you go down, you go through this, you know, Andy Jassy, CEO of Amazon, we're not investing approximately 200 billion in CapEx in 2026 on a hunch. We're not going to be conservative in how we play this. We're investing to be the meaningful leader and our future business, operating income and free cash flow will be much larger because of this investment. Then Mark Zuckerberg, CEO of Meta says, we'll continue to invest aggressively in infrastructure to meet the demand.

1:56:28I'd rather risk building capacity before it's needed than being late. Makes me think of Shrek with Law Farquad. Some of you may die, but that's a risk I'm willing to accept. It's like, you know, I'm just going to spend all this money. You can't fire me because Mark Zuckerberg can't be fired due to the unique board situation he's got going. So yeah, he's just going to piss the money away and hope he's right. I don't know from the people who know it matter, he's not right. The thing is, why might you be wrong? I mean, this is the thing. The AI people who claim this is going to be the biggest, strongest thing in the world, did they ever get that?

1:56:57I mean this. It's a good question. Because it's like, they don't. And the thing is, what would it take for me to be wrong? A bunch of hardware breakthroughs to make this profitable. It's just a good question. New mathematics. Because the thing is, when it comes to being a critic or a skeptic, you are put on the hot seat. Not the people spending a trillion dollars. Not the people promising the world. The arsehole with a blog is the one who's like, no, no, no. Trust me. If they came here, they'd be on the hot seat too. Trust me. Oh, they won't talk to me. Don't know why, Steve. it's because i call him clammy sammy um i think it's because my guests are quite quite critical that i don't think sam oldman wants to come here mr oldman go on steve show do it but this is the thing like of course they're going to say that and also if they thought they were right i don't think they do anymore if i was in their shoes and i thought that this was an existential thing sure but it gets back to the rock con bubble which is yeah this is the last thing they've got but i really want to know that question it was one of the questions i was really excited to ask you which is you have a different opinion we said this at the top yeah you have a very different opinion from a lot of people yeah i would categorize the the two most popular opinions as uh ai is gonna hurt everybody and it's gonna be catastrophic and we need to stop yeah the other opinion is age of abundance it's gonna be amazing let us crack on yours is different from both of those which is as you said in your words it's a con and it's in there's no real underlying value in the technology and it's overhyped yes and there's way too much spending i mean a few people agree on the spending part yeah but the other part so with you it's one of probably the first person that i've spoken to that's had this opinion so how what would it take for you to change your mind about what you believe here there would need to be a hardware breakthrough that reduced the cost by like a thousand but it would have to be just a dramatic breakthrough that is not happening just be clear because they've all been trying so it's the cost for you that would have to change it's the cost and it's also the data centers i think the way they're building the data centers is reckless and damaging to communities the fact that you have communities like in violent new jersey where the residents like i don't want this but the planning boards vote for it because they're all i assume having chummy lunches with the people doing it i think the use of gas turbines is fucking disgraceful i at the water situation i'm not super well read on so i'm not going to wade into it but the use of gas turbines and behind the beat of power is reckless and damaging to communities the noise that these things make and also generative ai is this egregious pornographic demonstration of how unfair the world is.

1:59:22Regular people try and get a loan for a business, a random business they want. I have a good idea. They go to a bank, a bank of talent, they'll go fuck themselves. They'll say, I'm not going to get, you're going to make a store that sells stuff? Screw you. You want to build a data center? Jensen Huang will back you. Jensen Huang will give you 25 % residual value. You want to build a regular business that's even profitable? Fuck you. No, a venture capitalist won't give you the money. Something that's just growing steadily, but it's profitable. Screw that. No, I need 10, 100x return. Try and get a mortgage.

1:59:52You have to give the bank a full colonic. But you want to get money for Jensen Hong to buy some GPUs? He'll give you a contract. CoreWeave is a great example. A NeoCloud, which is just a company that builds data centers and puts GPUs and rent people. NVIDIA, one of their first investors, in 2023, signed a$1.3 billion contract to rent back their GPUs from CoreWeave so that CoreWeave go to a bank and go, I've got a customer. Yeah, it's the guy I'm buying the GPUs from with the debt I'm getting from you. If you want to buy GPUs, it's open season. If you want to live a regular life where you build a regular business or buy a house, highest interest rates ever, screw you up yours.

2:00:31Yeah, you need to show us way more than that. I don't trust you regular folks. But if you're an unprofitable NeoCloud, you get billions from Jensen. It doesn't matter. It's so interesting. It's interesting because you are the first person that I've spoken to that has that opinion. I am pro-user. Let's take another myth. AI will be conscious.

2:00:53So, superintelligence, artificial general intelligence. These are theories. Anyone saying this stuff will become this is just guessing and does not have proof. Okay. And that's really it. Okay. Okay, let's take another myth. AI systems are already blackmailing and escaping control. So, this is a really specific one. anthropic there's actually two open ai's gpt 3.5 i realize this is more than the sentence i apologize in their system card and a bunch of media outlets covered this saying that open ai's model blackmailed a task rabbit into solving a capture what actually happened was a user of gpt doing the experiment got it to generate things to say to a task rabbit to make a task rabbit do stuff a task As in a person that you rent, not even to do a capture.

2:01:47It's someone you rent to nail a picture up in your apartment. It's an insane example. This was covered as if these things blackmailed someone. And they specifically said, yeah, we prompted it to do this. And also, the other note was that, yeah, AI systems can't do autonomous stuff like this. Then there was this other one where Anthropic said, oh, yeah, a model was blackmailing someone, saying that if you don't do this, I'll email proof that you slept with someone else other than your wife, I think it was. What actually happened was Anthropic explicitly trained a model to do this and then prompted it to blackmail.

2:02:20This keeps happening and the media just slop me up. I don't need no thoughts. Put the story in the bag. And it's frustrating because it scares people. Put aside the fact it's wrong. It's scary. It's scary to people, people living their lives who have to work longer hours to make less money and their money doesn't go far. and they turn on the fucking news and there's some arsehole being like yeah you should be terrified it blackmailed someone but this is this is so counterintuitive of their interest to some degree and they've experienced it backfire well they have now like it's it's literally backfired it's backfired eric schmidt getting booed at the commencement speech by 8 000 people every time he said the word ai but i mean this is this is i mean they're these seers are being attacked at home yeah which fucking sucks yeah which is terrible i must be clear like you disliked come don't fucking hurt people yeah don't don't attack people at home but but the point here is that that narrative is backfiring in a big big way i agree for them i don't think they saw it coming because you have to remember you mentioned regulation earlier these tech companies have been glazed for their entire existence travis kallinick's like oh what people don't like me now and it's because uber was a horribly run place and he was kind of a monster also tons of articles about how great uber was at the time point making is these companies are not used to pushback they thought what would happen i believe just guessing they thought they'd do this scary stuff and they would just get floods of money and everyone would just be like i kneel before you i'll do whatever you want they didn't expect i think what has i i agree this has backfired on them because they were inarticulate they're disconnected from regular people sam altman drives a five million dollar car around san francisco so that that man's doing it like nine miles an hour it's hilarious but these people are disconnected from everyone else so they don't they don't experience real problems so they can't build the solutions for them and they think well if we scare people into doing what we want that'll work right it didn't they this was all of this blackmail stuff was an attempt to make it mystic it was a mysticism attempt it was to make it seem like this unknowable impossible to control just this powerful thing but we're the only ones we are the only us only these two angels could possibly control the beast we've created this is this is quite a controversial statement but i think that for some reason i trust dario a little bit more because i think he's been the most balanced in his writing about the risk profile i whereas the others they they seem to kind of move with the wind i i do you know i get what you mean with the reason i don't like dario is dario was doing the scare tactics thing when he worked to open ai when GPT-2 came out and said, it's too scary to release.

2:04:57He's also gone on television and given AI psychosis to Axios, being like 50 % of jobs are going to go away because of AI. What I respect is the consistency. He's now being attacked by them. Good. But the thing is... Sorry, I mean, clarify the word attack. Dario is being verbally attacked by Silicon Valley. And, you know, if Silicon Valley, if powerful people in Silicon Valley are attacking someone... four months ago he wasn't though they were all saying he was the smartest boy ever but the point i want to make there as well is again wow you're so scared of how powerful this is you're so scared of it it's so scary what are you doing about it oh nothing like it's just like what are you doing well we have an alignment team so does every ai lab well i guess open ai cycles through those really quickly here's the thing if i'm dario amadeus and i'm scared of all things changing and i thought i had made a thing that would eliminate all jobs i'd be fucking terrified i'd be walking around with like like a 10 ton weight on my back the shot the responsibility the fact he doesn't the fact he wants to be this weird elder statesman that's too scared to hold sam altman's hand at an event just makes me believe that he's just saying it because it's convenient and he'll wind that back as he kind of already has whenever it's convenient for him i think open ai and anthropic are basically the same level of bad company i think anthropic is more cult-like i think it's so weird like jack clark over there one of the co-founders that fella used to be at the register he used to be one of the most critical journalists ever now he's it's like like something took over him because they talk of these things in these highfalutin terms but then again maybe the people anthropic by their shit maybe some of the people open ai by this year so going back to the central question we asked at the top here was what would have to be the case for you to look back and say you know i was wrong in 2026 and you said to me it would be mainly that the cost of production around ai drops dramatically and it would have to also do insane amounts of stuff it does it would have to be a truly autonomous it would have to continue its improvement in terms of capability it would have to be a different product it would have to be it would have to be indistinguishable from magic and the reason i have these high standards is they set them okay it's interesting as well because all these myths and all these conversations it's about technology but it's also it's an information war it's literally narrative versus narrative everyone trying to escape the financials everyone trying to actually escape what the models can do and the big thing i always say about ai boosters is if i could regulate them i'd regulate them they can't speak in the future tense anymore just you got to talk about today mate you get two weeks in the future max because if they were constrained to what was happening today it they would sound like insane people yeah no i think yeah most i guess most technology companies would at the time like uber would sound insane but no uber was basically the difference they were pissing money though weren't they they were pissing money away but the unit economics were the same just subsidized so you were still getting a service from a to b and paying a much lower cost it wasn't like you paid uber 200 sorry 20 bucks a month and you could get 500 miles of uber and then one day you started paying by the mile because that's what's happening with this have they they've changed their business model for customers like me now so that i have to buy credits no so you well kind of they asked me the other day so with the anthropics fable model yeah with some accounts you have to pay for usage and also adoption of fable has been pretty low because of this because of the cost but with enterprises so companies over 150 people you have to pay by the token now per million token oh so they are moving to a yeah but when they did that everyone went from being like this is the most impressive thing ever to being like it's always uh we've got to control these costs uber's coo says andrew mcdonald i think he said that it's getting hard to justify because it's hard to connect spending money on tokens to actual useful outcomes.

2:08:41He said the thing. Like, he said the actual thing I'd be saying, and it's... So we're in an AI bubble. Yes. And when this AI bubble collapses, so much of the economy is resting upon it. Yeah. It's going to have downstream consequences. So I got two questions for you. I guess the first question is, are we in an AI bubble? And what happens when the bubble pops? Yes, and it depends. So the big thing that people say is, oh, we'll get bailed out. Donald Trump, scared of Donald Trump. Here's the problem with this. It isn't just an AI bubble. It's the Rotcom bubble. So the AI bubble collapsing will probably be this company running out of money, OpenAI.

2:09:20And the thing is with OpenAI is they were meant to go public this year. And now it's been pushed to next year. A week and a half after I released their audited financials. I wonder where that was. But they've delayed to next year. Sarah Fryer, the CFO, has now said, well, they'll do it earlier than 2027 or 2027. Great answer there. For anyone that doesn't understand what going public means, that means joining the stock market. And at such a time when you join the stock market, your investors can finally sell their equity that they got for investing in the company when it was private. So oftentimes, companies will flirt with the idea of we'll go public someday soon, because investors will have a moment in their head where they'll get their money back at a return.

2:10:01So you kind of need to, if you're in these guys' shoes, you kind of need to be flirting with going public or investors won't want to invest. OpenAI up until this point has been a private company. And their last funding round, they were valued at$865 billion. Now, when they tried to go public, New York Times' Mike Isaac reported this. They tried to list, well, they wanted to go at a$1 trillion valuation. Apparently, their advisor said, no, don't do that. That is very bad for a number of reasons. One, OpenAI needs perpetual amounts of money. They raised$122 billion this year. Most of it's crossed.

2:10:36There's some left. But they are going to need to raise at least$100 billion a year just to survive. If they can't go public, they will have to raise another funding round. The problem is it's going to be difficult to raise even the same one they raised that. So they're probably going to have to take a flat, so the same amount. They can't do that. Exactly. But they need money. They need money so bad. Amazon sent them$35 billion that was meant to be contingent on them going public early. they did that because they need the money. Now, OpenAI is the kind of catastrophe center here, because Anthropic is likely going to beat it to go public, and once Anthropic goes public, it'll be borderline impossible for OpenAI to do so, because Anthropic, an unprofitable, unsustainable AI lab, but a better business that's growing faster than OpenAI's.

2:11:19I believe they have a ceiling, they're eventually going to face perdition too. I think sometime in 2027, things are going to start running out of steam, because the thing I said earlier, The only way these models get better is if you feed more money, tens of billions of dollars into them. So you think OpenAI runs out of steam in 2027? I think they're already running out of steam, yeah. But I think they run out of cash. You think they run out of cash? Yes. And the sequence of events here will be they go out and try and raise. And they have trouble raising another round. I think maybe NVIDIA props them up a little.

2:11:47Maybe private credit, Blackstone, BlackRock and the like. And the reason that private credit is getting involved, so asset managers, is because they're investing in the data centers. and they know this company's most of the data center demand. Okay, so they run out of steam in 2027, according to you. Yep. And maybe they try, if they bum rush to go public, they're going to have worse economics than an anthropic. They're going to get savage. WeWork was a great example. Another SoftBank classic. Now, I think OpenAI collapses. There are many different ways it could happen. There are many different ways it could end.

2:12:15But the crucial thing is, is that there are multiple companies that are existentially tied to OpenAI. SoftBank, one of the largest companies in the Japanese stock market, a holding company with lots of investments. They have on paper about$100 billion worth of OpenAI stock. If they can't go public, they can't do diddly squat with them. And so SoftBank's future, their ability to continue paying the people around them and existing as a business, relies on their ability to continually liquidate funds, to take the things they've invested in and have value from them, either by selling the stock or taking loans out on the stock.

2:12:50If OpenAI can't go public, Like SoftBank can't do that. SoftBank probably won't run out of money, but we're going to see one of the largest holding companies in the world become much smaller. We will also see Amazon, Google, and Microsoft have to restate guidance. They will have to say, actually, we don't think we're going to grow as fast. And what happens then? Well, I think we enter a tech depression because the rock-com bubble, the core of my theory, is that they're out of hyper-growth ideas, but the market doesn't think so. The reason they're so maniacally spending is because buying AI GPUs allows them to kick the can further.

2:13:25It allows them to say, we're still doing something. We're working on AI. Don't think too hard. And also, their current businesses are still growing. Their current businesses will eventually slow. There's only so many price increases. There's only so many tweaks to ads. Only so many tweaks to Google search. Only so many ways that Amazon can screw merchants. So in that tech depression, which you think might be triggered in 2027, is that a cascading downstream economic depression? Because the stock market is heavily dependent on these companies. The stock market sees a pullback. Investors stop investing.

2:13:58They get panicked. Yes. I think that because... What sort of downstream consequence, the sort of domino effect? There's so much to imagine that it's difficult to capture everything. But there are a few things that worry me. First of all, a ton of American money, just regular people's money, retail investors are in these companies and they bought into the Magnificent Seven thinking the number go up forever. NVIDIA is the largest company on the Fortune 500 and NASDAQ as well. And like seven to eight percent of the S &P 500. That company, when the bottom falls out from NVIDIA, and we haven't really got into it, but NVIDIA is doing the most circular financing, feeding companies money so that they can raise debt to buy more GPUs.

2:14:35I think NVIDIA's revenue could go 50 to 70 percent now. I think that NVIDIA could put NVIDIA back in 2022 was making single digit billion dollars. And what happens though, I'm thinking about like Jenny and Dave that are watching this right now, and they aren't just normal people with normal jobs. People's retirements are going to contract severely, and I don't believe they're going to return to those values. And I think that because so much of the value of the S &P 500 and Russell 1000 index comes from these four companies and the rest of the Magnificent Seven, And so Apple, Tesla, Meta as well.

2:15:06And the thing is, I don't know what happens after that because venture capital has also, like more than half of venture capital last year went into AI. I think most venture capital investments in AI are going to zero. Because when it comes to building a company on top of an LLM, all of those are unprofitable too. And the thing is, LLM companies have not really been acquired. The exception being Cursor bought by Elon Musk for the coding side. But you have Cognition, which is just another LLM company raising a$26 billion valuation, that means that company has to go public because who's buying a company at$26 billion other than Elon Musk?

2:15:41And there are rumors that Elon Musk was trying to buy them as well. Is Elon Musk just going to pick off every LLM company like on a fucking TJ Maxx for AI? Like Jesus Christ. So is that a recession you're describing? It is a recession, but it's also a depression within people's retirements. Like I'm talking about 20, 30, 40 % off the top of these companies' stock value. economic contractions, recessions consistently lead to job losses and rising unemployment. When an economy contracts, the mechanism driving job losses typically follows a predictable sequence. Falling demand, consumers and businesses spend less money, causing revenues across most industries to drop.

2:16:13Margin compression, with lower revenue and often fixed overhead costs like rent or debt, corporate profit shrink. And lastly, cost-cutting measures to survive or protect profit margins, businesses freeze hiring, reduce hours, and resort to layoffs. Yes, that would all happen. But the thing is we're talking about equity values dropping and we're talking about they're not really being a home for that value or that money so much is riding on these companies but you can't bail it out you can theoretically bail out open ai i don't think it happens you could pump these dogs full of money and keep them alive for a bit but at some point they're going to have to start they have between these two companies anthropic and open ai you have 1.1 trillion dollars of commitments.

2:16:54Just OpenAI. Oracle is building 7.1 gigawatts of data centers, so over$400 billion worth just for OpenAI. There is not a customer on earth. And Oracle's revenue has been flat the last 15 years when you adjust for inflation. Without OpenAI, Oracle dies. So you think OpenAI is going to crash and run out of money, and that's going to cause this domino effect across these other big tech companies, which is going to impact the stock market and impact the broader economy? Yes. And also the tens of thousands of people that will be laid off from the tech sector, But also, the venture capital thing is significant because venture capital has been having one of the most historic bad runs in history.

2:17:32Since 2018, the average return from venture capital, a total value put in, so the amount of money you get back for your dollar is between 0.8 and 1.21. Meaning, for every dollar you invest, you get 80 cents to$1.20. Paper gains? Well, no, that's just actual returns. Paper gains they'll give you, but even an internal rate return, which is a whole separate thing. even that's not very happy but long story short very simple venture capital is not making money come out venture capital is not actually providing returns they're celebrating paper gains they're celebrating paper gains and they're raising off paper gains and paper gains i mean just being able to say oh look the valuation of anthropic went up so that's that's what google and amazon were doing google's last quarter they boosted their net profits profits on paper by 99 billion dollars because of the increased value of their spacex holding and their anthropic holding and again the fact that this is happening is insane and the fact it's not a scandal is insane but we live in this culture i guess but everyone is really benefiting right now it's really that it's that great tweet where it's like when you're reaping it's like yeah fuck yeah this rocks sewing ah shit this sucks because right now they're all like yeah all the speculative gains are awesome the paper gains are awesome the theoreticals of anthropic being worth two trillion dollars.

2:18:46Wow, the articles we can write, the promises we can make. Then when the rubber meets the road, it's going to be pretty rough on them because the valuation of Amazon, Google, Microsoft and Meta is based on this idea that they will grow eternally, that they will grow forever. If that changes, to quote Ed Elson from Prof G Markets again, it's this, they're all doing Botox right now. They're sinking money into it to make themselves feel young again. And the market believes them. When the market doesn't, we're not just talking about a depression. I'm talking about the market valuing them like airlines and saying, yeah, you're real big and you make money off your existing products.

2:19:19But guess what? You don't have new shit. You're just going to be doing this forever and we're going to value you as such. So for Jenny and Dave, should they do anything differently? Should they be conserving money if there's a recession or depression coming? Should they be a little bit more conservative? Should they? Yes. I actually think it's, I don't know. I don't have money in the market. I think it's a casino. Casino pumped up by the media. should they invest in the s &p 500 should they invest in open ai oh god no i honestly i live in cash right now i you live in cash yeah i don't fucking trust the market man try and get some gains here i'm like i'm not comfortable giving financial sure advice but it's like if you like it's like you're gambling okay be conservative things might get volatile yeah it really is it's gonna be act as you would with volatility take the gains when you've got them don't sell everything but be suspicious of tech like that's actually the biggest thing it's like be suspicious of what they're promising.

2:20:11If you're acting based on their promises, don't trust the promises. Trust that they are going to say what will make the stock run rather than what's actually happening and that they will find every dodgy way to make you think something is happening rather than it's actually happening. Annualized run rate, great example. Microsoft said that they had 38, 37 billion dollars of annualized run rate in AI. You hear that, you go, I made 38, 37 billion dollars, right wow that's so much run rate maybe month times 12 they don't even define it but it's built to manipulate and they do that because we don't have a functional sec and we don't have a media environment that actually where skepticism is the priority and we're protecting the readers is necessary what would they say they would say ed this technology is going to be so great and so transformative that we are investing a ton of money in advance of the value and utility showing up that's what they would say right and i've heard your rebuttal but i just wanted to express i think that's their sentiment i'm not defending them or anything i'm just i'm trying to provide enough like balance to see if we can dance between these two perspectives and a lot of people would say that there's going to be a bloodbath because they can't all win big in the way that they're kind of describing so someone's going to have to lose and when one of these players starts to lose big i think it could as you say there could be some kind of domino effect or contraction yeah and i think the thing that people want to believe is they the dot-com bubble thing it's like it worked out afterwards because amazon oracle they didn't die after the dot-com bubble they're actually fine this isn't like that they're bigger companies there have bigger promises and even i'm not like oracle i actually think could die i r.i.p larry It couldn't happen to a nastier man.

2:22:01You don't like these people, do you? No. I ask this question purely because I want an answer, not because I agree or disagree. But why don't you like these people? I don't like being misled. And I don't think regular people are being misled either. And I really don't think that the average person can get away with bullshitting as much as these companies do. And I don't think the average person gets anywhere near the level of affordance for failure and lying as these companies do. and i think there is a real economic and human cost to allowing these companies to run rampant and promise the world and never really get called up on it the tepid nature of criticism these days is so frustrating there are some really great critics out there though the really great people but it's like seeing these ultra rich ultra wealthy ultra powerful people lie through their fucking teeth or misstate or whatever people want to call it it turns my stomach and i hate seeing people being misled and i feel like i write at such length because i really want people to see why i've come to a conclusion am i right am i wrong i think i am of course i do but i also i just find it loathsome i find these companies don't make good products anymore they don't care about their customers and and they treat their customers with contempt if people want to go read more about your work um you have a great substack ghost actually it looks exactly like i moved off of Substack in 2024.

2:23:26Oh, okay. And you also have a podcast, you do? Yeah, Better Off Lime. I'm going to link both of them below. So if anyone wants to read more, get more detail and follow Ed, I think it's, I would highly recommend. It is fascinating. And do you know what? One of the things people sometimes struggle with when they listen to podcasts is you get lots of different opinions. And weirdly, I think they think of, some people assume podcasts are going to be like one person saying the same thing as the next person and the next person. That is just not the nature of information in the world and opinions and progress and discussion.

2:23:54what happens is people have different opinions and i think my job but also the listener's job is to try and pass through it and over time collect more of these reference points from different people and and do your own research yeah whether it's on your health or whether it's on something like this is to watch and do your own research and to learn and i would say also never believe one person never believe one particular perspective religiously you know collect a body of evidence and follow follow the evidence yourself but i love watching your YouTube because it provides a different opinion and that challenges me to think beyond my current opinion about what might be possible.

2:24:33So when I've heard you talking about how this is an economic bubble and I've heard you talk about the CapEx spend with these big sort of frontier AI labs, it really did make me pause for a second and it really did make me consider that there could be a bit of figazi going on here. And then it made me reflect on history and go, you know through history there's always a bit of fugazi in these moments and oh that's an interesting take and what's going to happen in 2027 2028 when there's a bit of a market pullback and so i highly recommend people go watch because you do you challenge me to think differently um yeah and we need some of those contrarian voices to to have honest discussions so thank you for doing what you do really appreciate it and i find you to be a very compelling captivating communicator and i've i feel like i've learned a lot today so i appreciate that we have a closing tradition yeah where the last guest leaves a question for the next guest not knowing who they're leaving it for and the question left for you is given that high quality relationships are important for health and longevity what should we be doing to improve our relationships and social connection so this is actually connected to the ai bubble so i'm a critic i'm a skeptic what call it i have found that showing and appreciating and loving the people around you and uplifting them and And raising them up as you succeed is the way we do that.

2:25:49Your success should be everyone around you. It's not economic. It's talking about Matt Hughes for a while. Made me really happy. This whole thing has been at times quite grueling and quite negative and quite brutal. But the love I've found and the joy I've found from community and the people around. Because even in the small groups of haters, even like Gary Marcus and so the people I talked to, Edward Anguaso Jr., Molly White, Brian Merchant. there are so many people who have been loving and caring and i think within especially these very critical moments when you're like very much dialing in on how negative things are how bad things are finding the people who maybe find it repulsive too finding the people finding your people who can be and the people who would talk to you about it even like troy and jake my my trainers who's so excited about this um even talk to them about the shit as normal people knowing that there are people there going through their own struggles but also to just give you the perspective and also remind you that you are human too and focus i know this is kind of a all over the place point but it's just it's really easy to get hard locked on everything in life and to kind of get away from why you do things and focus too much on the work when the most important thing at times is just to know there are other people feeling the way you do and when i hear from my listeners my readers a lot the most common thing i feel is they feel like they have a voice and they feel like someone is there for you yeah and i don't think it can be understated how much it means when you just reach out to someone you love and tell them you love them tell them their shit rocks say that their shit bangs tell everyone you when you like an artist or a writer's thing or a podcast like this tell me you fucking love it we don't do this enough and we need to do it more well that's a good closing message so if you do have you have enjoyed the conversation today with ed please do let ed know that you love it down below um but please do leave your opinions down below and I shall read all of them.

2:27:36Ed, thank you so much. I'll link to your website, but also to your YouTube channel where people can learn more. And I would highly recommend you do because it is truly fascinating. And I think we need more voices that are demystifying a lot of the figazi and the narrative in this moment in time. And you're certainly one of them. I really enjoyed the conversation. Thank you.

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