How Epstein became a tech influencer

16:57David Pierce:This is what I mean by like the longer you spend in this and the broader the set of names implicated get. And again, I say implicated in the broadest way. Like Jeffrey Epstein was a pedophile and not every single person in the Epstein files is implicated as a pedophile. Like it feels important to say that out loud. But the association with Epstein runs a gamut from very bad to very bad. Do you know what I mean? Yeah. And the more you get into this and the broader it seems to be and the larger the circles become with this man at the center of it, the harder it is to feel anything other than that, like the world and this part of the world that we cover is run by a bunch of people who don't care about anything but lowering their tax bill.

17:37David Pierce:And that is like one of the most interesting things to me that I spent a lot of time reading about last night was these things called grantor retained annuity trusts, which were a specialty of Jeffrey Epstein. So one of the ways he like worked his way into rich people's circles. The New York Times did a really great piece about sort of where Epstein came from and how he made his money. His story is very strange. But one of the ways he worked his way into these circles was he was very good at lowering people's tax bills, in particular by doing this very complicated thing that let you set up a trust so that if you had valuable assets that were likely to get much more valuable over time, like most things, like stocking companies, you could find a way to essentially put that in a trust for your children, quote unquote, that the government then couldn't tax the same way.

18:23David Pierce:So he became like a specialist at this and saved people tons and tons of money and became like the go-to for this. And there are all these weird stories about like he made a lot of his money by charging people a percentage of the tax money that they saved. So like crazy, like these private equity people paying him tens of millions of dollars because he's saving them hundreds of millions of dollars on their tax bill, crazy stuff. And so it puts him at the center of this world because he is the guy saving these people money. And you look at every single one of these CEOs and it's like, okay, in the best case scenario, the best case, the most generous read of this is that you are happily associating with a known convicted pedophile because he's going to save you some tax money.

19:07Nilay Patel:Yeah. That's the best read of this. Yeah, all these Tanofsky emails happened well after his Florida conviction in 2008. And there's, you know, there's one email in here that we reported on, you know, that the Apple fans are very mad about. But Epstein emails to Sinofsky, Tim Cook is interested in meeting you, but he's worried that you're going to start a thing with Scott Forstall. And it's like, well, he had knowledge of Tim Cook's state of mind. Right? He's trying to arrange a meeting. And then six months later, there is a meeting between Sinofsky and Tim Cook. Like, there was...

19:38David Pierce:Which Sinofsky immediately reports to Jeffrey Epstein.

19:40Nilay Patel:And you're like, well, he tried to arrange a meeting. Like, he was in the mix because he's in the mix with everybody all the time. Yep. And that is, yep, you can say that's a wide blast area. But here's this guy, you know, he was convicted. It was years later. And yet everyone is talking to him. Or enough people in the degrees of separation are talking to him that he has knowledge of concerns.

20:04David Pierce:Yeah.

20:04Nilay Patel:That he's communicating very clearly without a second's hesitation. There's something here that's icky. and especially when at the end of all this Sanofsky says I got my settlement I think it was like 14 million dollars or something he says you're going to get paid for it and it's like yep this is the game by the way inside baseball journalism we obviously asked everybody for comment nobody's commenting you know we don't let like PR people be on background we don't let them be anonymous so Tom went to Sanofsky, Sanofsky declined, sent us to his crisis PR company Hiltzik Strategies, Matthew Hiltzik and Hiltzik Strategies, by the way, also Jeffrey Epstein's PR guy in the files, getting a vendor payment from Jeffrey Epstein, said, can I talk to you in background?

20:50Nilay Patel:He said no, and then he declined to comment. So you just, like the machinations here are everybody wants to anonymously undercut the stories, but if you ask them to put 10 toes down and put their names on a statement, they just disappear. And I think that is, you know, that's us. We're very finicky about that for a lot of reasons. But when Tom said we're not taking a statement, like, anonymously, you have to put your name on it. I was like, yeah, this is why I'm a jerk to, like, food delivery companies that want to anonymously give us quotes about hot dog sales. Like, it's so that we can build up to this.

21:24Nilay Patel:Anyway, that's what we pay for. You subscribe to The Purge. But I think it's crazy that Sanofsky is the same PR guy as Epstein and that person declined to comment for money. It's a tough look.

21:33David Pierce:Yeah. Anyway, I think we should move on from this. but we're going to keep covering this.

21:37Nilay Patel:Yeah. The feedback I'm looking for specifically is there are these business stories in the files and then there's the nature of the files themselves. And I feel icky about, the same way that I feel about hack and leak stories. Like when the Sony hack happened and we did a bunch of stories about Google and Sony and Hollywood doing DRM schemes. I was like, these were stolen by a foreign adversary of the United States to make Sony look bad for publishing that horrible Seth Rogen movie. Do you remember this? This is what happened. Oh yeah.

22:06David Pierce:The interview.

22:07Nilay Patel:Yeah, the interview. Terrible movie. Like North Korea decided to embarrass Sony, and then we published some stories out of it because we thought they were important. It's the same kind of ickiness in a much grander scale. So I'm just open to the feedback. We can do the stories dead ahead. We can do the stories and apologize all the way through, or we can just ignore it all. You let me know where you think we should land because I'm still working it through.

22:28David Pierce:Yeah, and there's a lot of putting pieces out there and putting pieces together left to be done. Again, it is an awful lot of just combing through PDFs on a website. It's weird times. Should we take a break or should we just plow through? Let's take a break. Okay.

22:44Nilay Patel:Let's come back. We're going to come back to some sillier things. Let's have a moment.

22:48David Pierce:Yeah, all right. So let's take a break. Neil and I are going to go do whatever we do during breaks, as everyone likes to imagine. And then we're going to come back. We're going to talk about Super Bowl ads, which are going to be much more fun to talk about. We'll be right back.

23:00Nilay Patel:Yo, Harvey, Zoe, group selfie.

23:02David Pierce:Ooh, nice new iPhone 17, Drewski.

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23:59Nilay Patel:Visit T-Mobile.com. Yo, Harvey, Zoe, group selfie. Ooh, nice new iPhone 17, Drewski. Let's do a triangle formation. I'm in front.

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24:16Nilay Patel:Focus, people. Nail your pose.

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24:22Nilay Patel:Yes way, guys.

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26:23David Pierce:All right, we're back. two things in this segment that we're going to talk about. But I want to start with Anthropic and OpenAI and this sort of ongoing bizarreness of who is up and who is down in the AI industry. But my first question for you is, have you watched the Claude ads?

26:42Nilay Patel:I've watched some of them.

26:43David Pierce:Okay. So Anthropic put out four one-minute-long Claude ads. I assume one of them is going to be run during the Super Bowl or maybe they're going to be run in different markets. I don't know. But they put them out on YouTube and they have caused, I would say, a firestorm. Next to this, Anthropic also published a blog post explaining in pretty aggressive terms why it will never have advertising in Claude. The blog post is pretty fascinating. It makes a pretty compelling argument against ads, which I think is very funny. and essentially promises like the basic clawed chatbot will never have ads. They said that the interactions you have with your AI bots are so personal and context rich that even the feeling it would give you to have ads in there, even if they were able to handle the data correctly and even if everything were targeted right and even if they made all of the correct decisions, the very existence of ads in these conversations would change the nature of your conversations, which is an argument I find really interesting.

27:47David Pierce:I fully agree with that. I do too. I do too. And this is what I'm going to get into. So these ads come out, this blog post comes out. Notably, neither one of them mentions OpenAI or ChatGPT by name. It's very clearly done at them. But this causes, I don't know, meltdown is maybe too strong a word, but not by much. Sam Altman goes on Twitter and puts out a 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 paragraph essay responding. The CMO of OpenAI responds, both of them saying this is disingenuous. This is not what ChatGPT is. This is not what our plans are for ads. It's going to be a whole thing. But actually, before we get too far into this, can I just play you one of these ads?

28:30David Pierce:This actually works perfectly as an audio thing. So even if you're just listening, you'll get the idea here. Hit me. It's a guy in a therapist's office and the therapist is a bot, clearly.

28:42Nilay Patel:How do I communicate better with my mom?

28:47Nilay Patel:Great question. Improved communication with your mom can bring you closer. Here are some techniques you can try. Start by listening.

28:56David Pierce:Really hear what she's trying to say underneath her words.

29:00Nilay Patel:Build conversation from points of agreement. Find a connection through shared activity. Perhaps a nature walk. Or if the relationship can't be fixed, find emotional connection with other older women on Golden Encounters, the mature dating site that connects sensitive cubs with roaring cougars. What? Would you like me to create your profile?

29:26David Pierce:And then it pops up and it says ads are coming to AI, but not to Claude. It's very good. It's very good. And it is, I think, if not an exactly accurate representation of what is going on now, it is certainly an accurate representation of what people are afraid is coming for AI.

29:44Nilay Patel:It's an accurate representation sort of abstractly of what it's like to use Google. Yeah. Like not Google AI overviews, but Google search, right? Like that's basically what Google is going to do. And even Google is kind of like, we're not doing this AI overview because they know that it's a little twitchy. Like, nobody wants that product. I think it's very smart of Anthropic to advertise a product that everyone is saying they're not going to build because now no one can build it.

30:10David Pierce:Yes. So this is what I think has been interesting about this. One of the things that Sam Altman says in his Twitter post responding to this is essentially just that, why on earth would we build this? Our users would hate it. He writes, we would obviously never run ads in the way Anthropic depicts them. We are not stupid and we know our users would reject that. True. And yet that is the exact end state of every advertising business. That is, it is the one they are all after. And it's the thing where you go to Amazon and the first 12 products, quote unquote, recommended to you are ads, or the first bunch of things in search results are ads.

30:51David Pierce:It's the thing where you go to Google and most of what's there is ads, but it's not super clear what's what. It's the thing where there are sponsored posts in your TikTok feed that are just like, what is TikTok if not a bunch of people making ads for you, right? The goal is to make this stuff more endemic and more native and more ingrained into the content at all times. That's what the advertisers want. It's what works. It's like this is the slope that every advertising business eventually goes down because that's where the money is.

31:23Nilay Patel:Wait, I want to actually talk about that for a second, the slope that every advertising business eventually goes down. I don't know that that's 100 % true. I don't know that's historically how every advertising business has worked. Before the internet, the advertisers had not totally captured the content. Right? Like, there's a long history here that isn't just the last 20 years. The thing you're describing, which I would say broadly we can call in shitification, to quote our friend Corey Doctorow. By the way, people should listen to that episode. You did one. It was great. Is Amazon is a monopoly for buying products.

31:55Nilay Patel:And so they unshittified it with ads. And the advertisers get to be right in your face when you go to buy a product name. Google is the only search engine that matters. And so they've unshittified it with ads in a particular way. Instagram is the only whatever Instagram is. It is now unshittified with ads in whatever way. Also, Mark Zuckerberg and his particular taste about advertising is his platforms are whatever kind of monopoly they are. And his taste has led them to whatever kind of thing they are.

32:22David Pierce:I think Mark Zuckerberg earnestly believes that really good ads are indistinguishable from content and that that is the right thing to build towards. Sure.

32:31Nilay Patel:I don't know. He's wrong.

32:32David Pierce:I think a lot of other people are more cynical about it. I think Mark Zuckerberg might earnestly believe that if he can just make perfect ads, everybody wins.

32:38Nilay Patel:I have this idea that we're, you know, we're going to try to get Zuckerberg on Decoder this year. It's like, you know, you make a list at the beginning. You're like, who should we interview? And he's on there. And if we don't do it, my idea is that I'm just going to do it. I'm just going to read the questions I would ask him for an hour. Like I have an hour's worth of questions to ask Mark Zuckerberg. And some of them are like, what do you believe?

32:56David Pierce:And then just pause for as long as you think it'll take him to answer.

32:59Nilay Patel:Well, the standard for a decoder prep doc is if I just read the questions, it should be a good episode. That's what Kate and Nick and I always talk about. Oh, that's fun. And so I'm like, we should just do it. Like he can be here or not. Anyhow, I'm just saying those platforms, those experiences you have are essentially monopolies of format. Right. Google and Amazon will claim they compete, and certainly Meta thinks it competes with everything under the sun. We're going to come to Netflix, and Netflix is competing with video games. But the interaction you are taking, they're kind of all monopolies.

33:33Nilay Patel:Do you know what I mean? Amazon's experience is bad. I'm not going to use Amazon, really. You can try, and some people do. But in its interface, it's able to and shouldify itself with advertising. The only reason I bring this up and I'm pointing at it is that is not the case with these AI tools right now. They are, except for maybe software coding specifically, and we can talk about cloud code and all that. But for the general sort of use case of how do I get along better with my mom, which is what's in this ad, they're all pretty much the same.

34:07David Pierce:Yeah, there's no moat whatsoever.

34:08Nilay Patel:There's no moat. And so it's funny that OpenAI is having this wild overreaction. and I think it's because they're pretty skittish for a lot of reasons. Yeah. And it's because if they even try to do that, obviously people would switch to Gemini or Cloud. Like there's another thing preventing them from in shittifying their product in this way and it's not just Sam Altman has good ideas or good taste. It's, yeah, in an actual competitive market, if you did this, the first thing people would do is click on Gemini instead and get virtually the same experience in a way that Amazon is not virtually the same experience as Google, it's not virtually the same experience as Instagram and down the line.

34:46David Pierce:Right. But at the same time, what all of these companies are desperately trying to do is build that mode, right? When there are no switching costs, and to be fair, this is a much easier thing for Anthropic to do to OpenAI than for OpenAI to do to Claude, because OpenAI is the dominant player, and it's much easier to poke at the big guy who is winning in some meaningful way. there's a great line OpenAI's CMO Kate Rausch I think is how you pronounce it also posted a response and there's just a line in there that just says ChadGPT has more free users in Texas than Claude parentheses trademark has globally very good I don't know if it's true it's great it's a great line I just want to point out

35:25Nilay Patel:her tweet it's a long tweet it's just so obviously written by ChadGPT

35:29David Pierce:yes

35:29Nilay Patel:and it sucks so bad because of it

35:32David Pierce:yes 100 % that's actually a real problem the next line is real betrayal isn't ads it's control it's like that is grammatically nonsense. And also what?

35:42Nilay Patel:It's like, if you've gotten to this point where your product writes so badly that I can see it a thousand miles away and it undercuts your point, that's bad.

35:51David Pierce:Yeah. But at any rate, I think what these companies are desperate to do is build those moats to make it harder to leave. This is what personal intelligence is about. This is what memory is about. This is what all of the different app store stuff is about. The more you can build around these models that makes them sticky and also so importantly, increases the switching costs. That's how you get to this. And then the penalty for introducing ads goes down because people can't leave. So they won't. So you can keep making the ads worse. This is what it like. If Amazon, if Walmart.com was a real competitor to Amazon, Amazon would be a better looking website.

36:24David Pierce:Like it's that simple. And right now, these things are all you're very right. They're easy to switch between. They are all sort of in meaningful ways, indistinguishable from one another. And so OpenAI is the one who is forced to say out loud, we're doing ads because it needs to explain to people how it's going to make money at some point here for reasons we're going to talk about here in a minute. But Anthropic, which is a smaller business with smaller commitments to take over the world and build God, is just able to play a slightly different game. They just talk about it less.

37:00Nilay Patel:Anthropic thinks Claude is alive. Can we just say it out loud?

37:03David Pierce:I mean, that's true.

37:04Nilay Patel:It's just very obvious that they think Claude is alive, and they can't quite bring themselves to admit it. But the way they talk about, like, their soul documents and, like, the nature of intelligence, it's like, Dario, do you think it's alive? Because it sounds like you think it's alive.

37:20David Pierce:Yeah. I think if you asked them that you would get a long answer about the nature of sentience that would really, really bum you out and lead you to believe that, yes, in fact, they do think it's alive.

37:30Nilay Patel:They super think Claude is alive. So they're just quieter about it and they are running a B2B business fundamentally. And the explosion of Claude code and its capabilities, they've been more focused, right? They've been totally relentlessly focused on Claude as an agent, Claude as a business product. We've had their executives on our various shows to talk about that stuff. And so they're ahead because they have focus. Whereas OpenAI has been throwing spaghetti at the wall the whole time. And they have believed that the core technology of ChatGPT, the core technology of their LLM, can do everything, and it obviously cannot.

38:05Nilay Patel:There's a lot there. The difference is the enterprise focus of Anthropic means they have revenue that's growing in consistent ways. And as more and more businesses adopt it and get useful work done with it, which is really happening now, their revenue is growing faster but also predictably. whereas OpenAI has hired basically every single person from Meta which is funny because Kate Rauch, the CMO of OpenAI says these ads Anthropic is running are made by a former Meta executive and it's like dude your entire team is former Meta executives your head of product, Fiji Simo is a former Meta executive, she ran Facebook literally ran Facebook, what are you talking about?

38:44Nilay Patel:they have to do ads it's the only thing that can make them the kind of money that will justify the kind of investment they're asking for and you can see and this is why I think they're so skittish and why they're totally overreacting, those ads need to be aggressive, they need to be effective, and they need to take market share away from Google and Meta in order to win. Yes. And that means they're going to be aggressive. There's going to be real advertising in these products.

39:07David Pierce:And the fact of the matter is, like, historically speaking, the thing that OpenAI has showed us, which is that you're going to have a thread at the top and then at the bottom is going to be a relatively separate display ad. We talked about this last week, right? It's like a 20 % of the bottom of the screen just shows a display ad that is kind of about the conversation you're having, but is not part of the conversation you're having. That flatly will not convert in the way that OpenAI is going to need it to, in the way that if it just, the third paragraph was sponsored, that would hit different.

39:37David Pierce:It just would. There is more money in putting it in the third paragraph than in putting it at the bottom of the page.

39:42Nilay Patel:Yeah, I don't want to fall too far down like advertising world, but like Google is the master of direct intent advertising. Yeah. Where you just search for, By the way, here's a search I've been doing a lot lately. Humidifier that doesn't suck. If you can tell me what that is, I'll buy it from you right now. I will pay you the affiliate fee.

39:58David Pierce:The answer is the one I bought at Costco that I've already bought four of. Great.

40:01Nilay Patel:That's how it goes for everybody. And then they all suck. But like you type that into Google. Google's like, here's pictures. Click on one and you're buying it. Right? And there's a lot of money in making sure that your picture goes first. You've got to take market share away from that. which, to be clear, is the greatest advertising and commerce business in the history of the world. Well, if you're going to take market share away from that, you have to compete with that very directly. And so I think the reason OpenAI is so skittish, and this is really skittish behavior, is one, they have to have an advertising product that works, which means the advertising will be obtrusive and in your way and try to capture purchase intent.

40:39Nilay Patel:That's just the way it's going to go. and two if that doesn't work the other thing that we should talk about is that no one seems to want to give them as much money as they need to do the things that they have promised to do and now you're trapped right you either need to turn on the revenue like fire hose and sell it yourself or you need to promise your investors or would-be investors that the revenue is coming and they should give you enough money to get there and that money is like on the order of like one trillion dollars. And I'm just not sure that's going to happen for open AI.

41:13David Pierce:I think that the most clear example of this is Jensen Wong, the CEO of NVIDIA, who has been kind of randomly repeatedly asked recently whether this mythical hundred billion dollar deal with open AI is going to come to pass. The sort of context here is open AI is by all accounts, A, trying to raise money and be racing to go public. Open AI and Anthropic both seem desperate to go public this year by all reporting and all accounts. There's a lot of money in it. There's a lot going on. There's some XAI stuff happening there too. The AI business wants to go public in 2026 in a very real way. I think because the bubble is going to pop and everybody knows it and if you can get in before it does, everybody's going to get rich.

41:58Nilay Patel:Yeah. If we were a different kind of show, our episode this week would be, boy, that bubble seems like it's popping.

42:05David Pierce:Yeah, exactly. But Jensen Wong has been asked a bunch of times about this deal that they... Announced isn't even quite right. They sort of... They alluded to the existence...

42:16Nilay Patel:Well, in the way that OpenEye in particular announces deals. It was last September. They're like, NVIDIA's going to give us$100 billion.

42:22David Pierce:Right.

42:22Nilay Patel:And they're like, lock it down. Right.

42:26David Pierce:And then there are a bunch of details. It was a letter of intent that they were going to do this, not a fully signed and detailed agreement. it was up to$100 billion. So there's just a lot of like squirrely things going on. But every time Jensen Wang gets asked about this, it seems abundantly clear he is not interested in giving$100 billion to OpenAI.

42:42Nilay Patel:And he's walked it back in the course of a week.

42:44David Pierce:Yeah.

42:45Nilay Patel:Right? It was first the Wall Street Journal, I believe, reported this is on thin ice. He's unhappy with the way OpenAI is being run. And then for some reason, and you have to really be in the weeds of like the minute-to-minute reporting here, but there's this very funny trend that is happening where Jensen Wong is just on the streets of Taiwan a lot. He's just always at dinners with other billionaires in Taiwan. And so he's always being caught on the street and being like, asked, are you going to give him a hundred billion dollars? Which is just a weird thing. It's just a weird sub story in this, which is.

43:16David Pierce:It just always makes me think of like the paparazzi who asked celebrities like, who are you dating or whatever. But instead it's Jensen Wong being asked about a hundred billion dollars.

43:24Nilay Patel:It's very good. I have no idea what's going on there. But so he had asked, and there was this long video you should watch where he's like on the streets of Taiwan walking out of a dinner. And he says, I'm very happy with Sam. I like working with OpenAI. I love working with Sam. We're going to invest. It's going to be this amount over time. And they're saying, but it was reported you were going to invest$100 billion. And he says it was up to$100 billion over time. So that's already a walk back. and then like a day and a half later, once again, our man walking the streets, just available. They ask him again and there's another video you can watch and he says, no, let me be very clear.

44:02Nilay Patel:We were invited to participate in an investment round and we're excited to participate because we were invited. But we were just invited. Like it wasn't, I mean, we're happy. We love being invited. And it's like, you've walked this back a lot from we had a signed letter for$100 billion to we love being invited. We might have other plans. This is a very naked shift in tone. And then he was on stage at the Cisco AI Summit where all news happens. And he says what I think is the most pessimistic thing about AI you can say in the context of OpenAI. He said, the notion that the software industry is in decline and being replaced by AI is the most illogical thing in the world and time will prove itself.

44:47Nilay Patel:openai's entire thing is that you can just talk to its magic jesus robot and it's going to do stuff for you and that you don't need software and i think a lot of this is people are looking at cloud code and open claw which was used to be moltbot and all this stuff and like saying oh look it's just writing software for itself but this was the investment thesis for openai was that it would have an all-powerful agi agent that would just take action in the world and you would not need another software business. And all of this money, all this investment would be supported by the idea that all of the money that you were paying to other software would go to OpenAI.

45:22Nilay Patel:And here's Jensen saying, walking back the big investment thesis that he said he was going to have, and then saying, actually, the thesis itself is the most illogical thing in the world. There's something going on with OpenAI. If you just look at this, there's something happening here. And then in the background of this, just another very funny side note, is just Oracle is randomly tweeting throughout this that it's confident that OpenAI can pay its commitments for Oracle data centers and has nothing to do with anyone else's investments. And everyone's like, Oracle, what's up? Like, is there some reason you're saying this right now?

45:54Nilay Patel:Your shirt that says we're confident OpenAI's money is raising a lot of questions that should be answered by your shirt. And it's like, this is crazy time.

46:01David Pierce:Yeah, it's weird.

46:02Nilay Patel:I'm beginning to understand why Larry Ellison is like, I should sell some Oracle stock to buy Warner Brothers.

46:08David Pierce:Surprisingly chill alternative.

46:11Nilay Patel:It seems like a much better investment than OpenAI.

46:14David Pierce:Yeah. I mean, it's really interesting too, because I think next to this also, there's been this news over the last week or so that Amazon is looking at investing up to$50 billion in OpenAI and that OpenAI's models could power Alexa and Alexa Plus in some meaningful way, in the same way that Apple and Google just signed this deal. And I think I've heard from a few people is there There is a very real anybody but Google energy happening in the AI space right now where Gemini has made so many huge advances and Google has made these big deals, has made big advances. Google is like a full stack AI success story right now.

46:53David Pierce:And there is a real sense in the rest of the industry like we cannot let Google win, even if it means this sort of weird, strange bedfellows energy has to happen where we're all invested with our competitors in our competitors. And it just gets sort of like messy and Ouroboros-y. But they're like, we cannot let Google win. And it's just so fascinating. And OpenAI is like, both seems more tenuous than ever. And is also, if you were to say, okay, how do I as Amazon prop up somebody other than Google? Like, of course it's OpenAI. That's where you go. Amazon also, by the way, massively invested in Anthropic.

47:30Nilay Patel:Yeah. Anthropic is running Alexa right now. Yeah. Like, it's just clear. Like I have heard Anthropic executives say they can identify the personality of Claude inside Alexa.

47:41David Pierce:Yeah.

47:42Nilay Patel:I think they're going to open AI because it's cheaper. I think if you're open AI, you're now in an economy where you can undercut the bigger players. So Anthropic is having a great run. They're not going to lower prices for their investor. Amazon open AI can show up and be like, what would be cheaper? And what you, you know, if what you want is for Alexa to tell people that they're cute and they should keep talking to them to agree to engage. You're like, our product is great at that. Again, I think the models are becoming commodities, right? They're all kind of effectively the same. It's easy to switch between them.

48:12So now it's what you would hope would happen.

48:15Nilay Patel:They're competing on price, and then they're trying to build other moats. And I think Cloud Code is one of those moats. I think Gemini being everywhere is one of those moats. It's going to be an Apple device as soon. That's a big moat, maybe an unrecoverable moat. And I just think OpenAI, there's a reason it keeps talking about how many users it has. They think that's a moat. And I'm, I don't know, man. My prediction for the year is we don't end the year with OpenAI in the same configuration as it is today.

48:41David Pierce:Yeah, that feels like a less spicy take kind of every single day, which is just a wild state of affairs. That it's February 5th and it already feels like it's kind of in the process of coming true. All right, before we take a break, we should hit on just a couple of weird streaming service-y pieces of news that happened this week. the first one is this Netflix hearing did you watch any of this Netflix hearing?

49:04Nilay Patel:I watched so much of this Netflix hearing

49:06David Pierce:did you? okay tell me about it all I've seen is like the clips that have been passed around tell me about this hearing

49:10Nilay Patel:so Senate Judiciary Committee holds a hearing just about the deal to buy Warner Brothers and they have a bunch of characters there notably David Ellison who owns Paramount who desperately wants to buy this thing doesn't go he says it won't be helpful so he sends his CEO and senators are mad I don't know what else to say about this now Now, you all know me. The idea of the number one streaming service buying the number three streaming service usually just lights me up. Like, that's demand and trust stuff. We shouldn't do that. I want more competition. What are you going to do?

49:38David Pierce:Oh, I thought you were psyched about it. I was like, yeah, Neal famously loves consolidation.

49:41Nilay Patel:If there's one thing I love, particularly when media companies consolidate to buy Warner Brothers, I'm like, that's good business right there. That's how we got a 4.3 Grayscale Justice League movie, David. The height of culture in America was AT &T paying for a 4-3 grayscale Justice League movie. Anyhow, so normally you would say, yeah, yell at them about antitrust. Yell at Netflix about consolidation in this industry. And you kind of got a little of it from the senators, particularly the Democratic senators. Cory Booker at one point says, can we get back to antitrust? And the reason he said, can we get back to antitrust, is our Republican senators live in an alternate reality where Netflix is a total, unstoppable cultural hegemon, and they're going to make everyone gay if they buy Warner Brothers.

50:31Nilay Patel:Like, there's no other, like, literally, you sum up the concern that Republican senators had about this deal, and they're like, everything on Netflix begins and ends with a demand that you be gay and woke now, right? And poor Ted Sarandos is sitting there being like, I don't know what you're talking about. Like, but he can't say it. So, you know, he's like, Senator, we have a wide range of content on our service. You know, there's parental controls. And then you have senators. We just run this clip. The Republican senator looks at him dead in the face and says, you have potentially, and I quote, the wokest content in the history of the world.

51:07David Pierce:It's very good. Can we just run the clip? Yeah, let's do it. So the question before this committee, and you come before Congress, why in the world would we give a seal of approval or a thumbs up to make you the largest behemoth on the planet related to content? It seems as though you have engaged in creating not only a monopoly of content potentially, but the wokest content in the history of the world. So forgive me if I'm a little concerned.

51:32Nilay Patel:Senator Schmidt, can I just say, it would fucking rule if Netflix was like, we have the wokest content in the history of the world. Like, I don't know what that means. I don't know what this dude means by woke. Again, my feeling is that we're probably going to say woke now. They mean anything that isn't just like nakedly racist or anti-trans. Like, we've moved the bar.

51:51David Pierce:Also, like, do you know what was at the top of Netflix all week this week was the movie Independence Day from 1996, which just randomly showed up on Netflix.

51:58Nilay Patel:I do want to say this. Independence Day is the wokest content in the history of the world. I just want to point out, it's very important for me to say this out loud, and then I'll let it go. To believe this, you have to believe that people don't have phones. right it's like the load bearing assumption of this line of argument that it is impossible to watch anything other than netflix when in reality netflix is so threatened by video games that it is actively trying to make and distribute video games on phones in reality netflix is so threatened by podcasts that it's out there buying podcasts to run on its phones netflix is so threatened by TikTok and YouTube shorts that it is turning its mobile app into TikTok.

52:45Nilay Patel:And it's saying out loud that it's doing these things because it has to compete with all the other content that's available. And so, you know, we can argue on antitrust and market definitions and all this, and like, there's a lot to say about all of that. But the reality is people consume everything. And if people don't want the woke Dave Chappelle specials that are currently available on Netflix, the super woke Matt Reif crowd work specials that are on Netflix, they can just get them somewhere else and they will. And I, I don't know. And I watched this hearing and I was like, man, we are all just pretending that literally YouTube doesn't exist.

53:19David Pierce:I mean, this is very Brendan Kari, right? The like, there is no television other than late night hosts is like the official stance of Brendan Kari's FCC. And in this case, it is Netflix is an unstoppable force of culture. And what's funny is Netflix would desperately like to be that, right? Like there's there's been all this really funny chatter over the last couple of weeks about the end of Stranger Things and Stranger Things was like a hit on on scales that I think are sort of unprecedented. There was a time when the I think it was either four or five most watched things on streaming were Stranger Things seasons like crazy huge.

53:59David Pierce:And now Stranger Things is over. And this is sparking like an existential crisis within Netflix because it's like, oh, we don't actually have anything anybody cares about. That's why we have to go get Independence Day from 1996 and promote it to our audience again. And like Netflix is very powerful in that sense. But that is not that is a different kind of power than even what like Disney has. Right. Which is a huge set of really important, really long living IP. Netflix has never had that. One of the reasons it's trying to buy Warner Brothers is to get that IP for the first time. So there's just this huge disconnect where it's like they said Josh Hawley said that almost half of its content for kids promotes a transgender ideology agenda, which is just like a transparency insane thing to say.

54:41Nilay Patel:Yeah. By the way, Ted Sarandos is sitting there like, how did you get that number? Yeah.

54:45David Pierce:It's like you can just say things, I guess.

54:47Nilay Patel:Yeah. Are you ranking it? Yeah. You know, there's a part of me that always wants these executives to just assert their First Amendment rights. I felt this way about the social media executives during that period where they all kept getting hauled in front of Congress. It's like, no, you know, the first man says Congress should make no law regarding freedom of speech, right? Like, you're Congress and I'm not. So, like, shut up. Anyway, make me the CEO of Netflix and I'll do that. But I just I see this push from the, you know, the Republican side of the House to punish Netflix for wanting to buy Warner Brothers.

55:24Nilay Patel:and again, number one, buying number three, 99 % of the time, I think that's bad.

55:30David Pierce:Yes.

55:31Nilay Patel:I'm not sure that I, I think Netflix buying Warner Brothers is good. Famously, I, you know, buying Warner Brothers has killed you. So even as a business decision, I think that's pretty dicey.

55:42David Pierce:Yeah. So you're saying Netflix in, in exchange for promoting transgender ideology should be forced to buy Warner Brothers and destroy itself as a company.

55:50Nilay Patel:I'm saying that what's naked about it is that is Paramount is sitting there and the thing, the thesis here is we will yell at Netflix, we'll make them seem so woke, whatever that means, that Paramount will buy Warner instead and we know that they will do what we want. And that is just a backdoor speech regulation. Yep. That is our government putting its thumb on the scale of free speech in America, not based on what the market wants, not based on where the money is going or who's buying what, not based on who has a good app that works well at streaming videos, Paramount, I'm looking at you, but instead based on whatever they think ideologically aligns with what the government wants.

56:27Nilay Patel:And it was not subtle in this hearing at all. It was absolutely not subtle. Why do you have this show? I don't like that show. My constituents don't like this show. And it's like, wow, we should get away from this.

56:38David Pierce:It really, the social media comparison is a really interesting one because it did remind me of all the times they hauled up Jack Dorsey and just read him tweets they didn't like. Yep. And like, what are you going to do about this? And he would sort of hem and haw and apologize.

56:51Nilay Patel:I thought that was totally improper then. And what I always wanted one of those CEOs to do is say, okay, we're going to give you a feed without any content moderation. You don't like our content moderation? Here's the fire hose of garbage that you're asking for. And then you will beg us to moderate. And I think in this case, you know, Ted Sarandon is trying to get a multi-billion dollar deal done. I understand why he's basically saying nothing. But a little bit of assertion of First Amendment rights from some of these players would go an awful long way. and I think actually the creative community would like to see that from Netflix as well and they're not getting it right now but it is pretty naked that at least one side of the house is like we're going to put our thumb on the scale so that Paramount and CBS which we now perceive to be our ideological counterparts will win this deal which is just not how you want business to work in America like at all

57:40David Pierce:yeah agreed I'm now imagining what the like very specifically tuned right wing Netflix would look like and it's just like episodes of alone.

57:50Nilay Patel:I think it looks an awful lot like Netflix. Fair.

57:54David Pierce:There are a lot of college football documentaries floating around on Netflix these days.

57:58Nilay Patel:I mean, again, this is you know, you can see whatever you want about Netflix. They get a lot of shit for running Dave Chappelle specials. And they are very proud free speech warriors for that stuff. They're not getting any credit for it. Everybody should look at that. You don't get credit for it in the end when you cave in that way. We'll see what happens. Again, it's one buying three. It's not great. But I think the reason Hollywood is still in favor of Netflix is they don't think it will be as nakedly partisan or in favor of the Trump administration as Paramount seems to be promising. It will be.

58:31David Pierce:Yeah. Yeah. So next to this in sort of a very funny twist of timing, Disney announced its new CEO, which I have come to think of as a sort of fake ceremony. years ago Bob Iger appointed a new CEO Bob Chapek and then COVID happened and Bob Iger just sort of ran him out of the room and then came back and

58:57Nilay Patel:Chapek did blow it right like if you piss off an Avenger that bad but they were also like Bob

59:05David Pierce:why is no one coming to the theme parks and he's like well have you heard of this disease that's going everywhere around the world like there was some stuff going on it wasn't great but anyway bob eiger now named the new ceo uh josh diamaro who was the head of the theme parks so one thing i've always come to understand is that the the fight at disney is basically between the executives of the different divisions and it's essentially like content versus theme parks it's kind of the the holy war inside of disney and in this case theme parks one uh josh diamaro is the the head of the theme parks he's been at disney for a long time, 28 years, oversees the theme parks, oversees resorts, oversees the cruise lines, lots of stuff, and is now going to be tasked with A, figuring out how to make those continually huge businesses because I think a thing I've seen a bunch after this came out is that actually there is not a sense that Disney World and Disneyland and this physical business is sort of a rounding error next to all this other stuff Disney does that in many ways it is actually like the main thing Disney has going for it.

1:00:11David Pierce:It's the biggest business. Yeah, it is most of Disney's profit, which it wasn't always, but it is now. And it is also the thing Disney has. Like, you know, we talk about moats. Like, that's a hell of a moat is Disney's ability to do all of that stuff around every time it makes a movie makes Disney very powerful. And I like, it's going to be a tough change for Disney because Disney is also doing this huge shift with ESPN, which is about to go fully streaming. They made this weird deal with open AI. And now people are, you're going to get to do Sora videos in Disney plus, which is just a thing that I hate and feels like a complete regret move from Disney.

1:00:50David Pierce:That they're like, we promised to do videos. We'll just put them in a feed over here.

1:00:54Nilay Patel:Disney is going to turn Disney plus into TikTok. And where are you going to get a bunch of content from? You're going to let Sora generate it.

1:00:58David Pierce:Yeah. You're going to let people turn themselves into Disney characters. And that will be that. but I like Disney I think is the other most important company in this space right like Netflix and Disney sort of run the entertainment business in most meaningful ways and they're both I think going through pretty huge changes this year which is just going to be fascinating

1:01:21Nilay Patel:you know my thesis about Disney is that they made a big bet on content and trying to be as big as Netflix and paying for content the way Netflix paid for content and yeah And content has been totally devalued. Yeah. Like everyone's expectation is that you'll pay nothing for it. And I think Disney is saying, well, you can't steal theme parks. If you're in the theme park and you're hungry, you can't pay less money than what we will charge you. And you can just see the prices going up and the elaborate theme park rides and renovations going up. And that is a bigger, safer business than we will make expensive content and distribute it on the internet.

1:01:57Nilay Patel:and in so doing, compete with Instagram's army of teenagers that work for free. Yeah, yeah. That's why I keep saying, all of this industry is built on the assumption that you're not competing with the thing you're actually competing with. Like TikTok is right there. Instagram is right there. That's just an army of people working for free. YouTube video podcasts, they look a lot like talk shows, right? They are not making money the way talk shows made and they are certainly not paying the union rights that the TV networks have to pay for their talk show crews. And so you're just up against this cost structure that will kill you.

1:02:30Nilay Patel:It will absolutely kill you. And everything is an AG1 ad. You're up against an industry that is designed to hawk supplements just at a scale never before seen in human history. And you're like, that sucks. We can't pay a bunch. We can't pay Scarlett Johansson her bill. We're going to do theme parks because the money is still there and it's protected. There's something there. By the way, I should point out Super Bowl week. And we ran a story that I've been dying to run for ages. We had Yanko Ruckers, who used to work with the protocol. write about the streaming boxes that everybody has, like the cheap, generic Android IPTV boxes.

1:03:03Nilay Patel:And he wrote about the companies. There's Superbox, there's VCTV, which is an amazing name. They all appear to be botnets and malware. But the story I want him to get was the people who buy them and the people who sell them. And I will tell you, that story is just about rage. It is just people who are so mad at the TV industry that they do not care that they're buying a hardware instantiation of a botnet to steal a TV. Like, they're like, I don't care about these security problems. I'm not paying this bill. I'm going to buy this weird box and plug it into my TV and probably my entire network will be compromised.

1:03:39Nilay Patel:I just don't care.

1:03:41David Pierce:And not only that, there is zero regret or conscience in any of it. There is no feeling of like, I am doing something wrong

1:03:51Nilay Patel:and I feel slightly bad about it.

1:03:53David Pierce:It really makes me think of like the sort of peak days of music streaming where it was like, this sucks. I'm being taken advantage of. None of this exists to serve me. It all exists to make someone else a bunch of money. And in most cases, not even the people who made the thing that I like. It all exists to make Ted Sarandos really rich. So screw that guy. I'm going to pirate it. And there is this like it's almost it's not only is it not regret. It's almost self-righteous. You know what I mean?

1:04:21Nilay Patel:absolutely there's a line there from someone who's like what are they gonna do come arrest me and it's like you just see that dude like at the at the his doorway with a shotgun being like i'm watching this game like it doesn't matter we actually more inside baseball we we have an amazing illustrator kath virginia her work is all over the site she's so good um and she the first illustration uh you know the first the opening scene of the story is a farmer's market where people are buying these boxes at a farmer's market next to like banana bread it's it's a great scene So her first illustration was a farmer's market.

1:04:49Nilay Patel:And I was like, this is good. It's really cute. We need to capture how fucking mad everybody is. Like there's just an undercurrent of rage in the story. So she went away and thought about it and came back with Calvin peeing on a satellite dish.

1:05:02David Pierce:It's really good.

1:05:03Nilay Patel:And I was like, yeah, that's it.

1:05:05David Pierce:That'll do it.

1:05:06Nilay Patel:That's pretty much how America feels about streaming television right now.

1:05:09David Pierce:Yeah.

1:05:10Nilay Patel:It's very good. It's very good.

1:05:12David Pierce:Yeah, and this is what all these companies are up against. You're right, that there is this feeling of the product has gotten worse, it has gotten more expensive it has gotten more like piecemealed and stratified all of this sucks this is for no one my only option is piracy yep that is a very hard thing to win back as a as a consumer facing business once you've lost a meaningful number of people to that that's a

1:05:37Nilay Patel:really hard fight to go yeah you don't deserve my money it's whoo it's rough yeah um and again a lot of people in that story quoted as being like i hope this puts them out of business which by the way it means that there won't be the tv to pirate anymore no one's no one's thought through step two

1:05:51David Pierce:but step one they're very clear on which is they already made independence day neil i'm good you

1:05:55Nilay Patel:know what i mean and it appears we'll never pay for another independence again i watched the sequel

1:05:58David Pierce:wasn't any good yeah that's fair um all right we should take a break go read yanko's piece by the way that is one of my favorite things we ran on the site this week uh we'll link all this stuff in the show notes but uh yanko's piece is is a particular delight from the the lead image on down um we should take a break and then i'm noticing a deeply terrifying amount of brendan carr quotes that you put into the Google Doc that we have here. We'll be right back. This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right skills fast.

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1:07:52David Pierce:All right, we're back. Neil, I just, I know it's time. We've already talked about how it's time. It's time once again for America's favorite podcast within a podcast, Brendan Carr's dummy.

1:08:02Nilay Patel:He's such a dummy. We have a theme song. We have a new one. Joe V sent us another one.

1:08:07David Pierce:Can we run it? This just continues to be the greatest thing that's happening. Here is this week's theme song. let's just run this intro again, Eli. Brendan Carr is a dummy.

1:08:14Nilay Patel:He's such a dummy. Brendan Carr is a dummy. See, he's just a little singer.

1:08:22David Pierce:It's beautiful.

1:08:22Nilay Patel:We got to run at the end of the segment, too. Yeah, absolutely. All right, so I teased this last week because I knew this hearing was coming. So a theme of the Trump administration is being outraged about fraud, which is very funny because it's the Trump administration.

1:08:39David Pierce:Well, it's other people. You're very mad about other people's fraud.

1:08:42Nilay Patel:If you can accuse someone of fraud, literally anything is possible. You can invade their cities and towns. You can do whatever you want. Even as you, and in fact, the principal of the Trump administration, Donald Trump himself, does frauds. I don't want to say about this. I would point out, for example, that the Trump phone is itself a fraud that we cover regularly. But the Trump administration, if we can find fraud, whoo, have we, are we dining out tonight, boys? So Brandon Carr holds an entire hearing about something called the Lifeline program, which I am guessing most Vertical House listeners don't pay attention to, don't think about, but which is very, very important to lots of people in this country.

1:09:23Nilay Patel:It is the program that subsidizes phone and broadband bills. So if you are poor, you don't have the means, you need to be connected. To participate in site, you need to be connected. The Lifeline program is there for you. And it's basically just a subsidy program. And it's one of those things that works. like it exists up until Brendan every FCC chairman talks about protecting it about funding it there's some debates on the margins over where the money should come from there's something called the universal service it's all this stuff but no one thinks we shouldn't have it no one thinks it's bad except for Brendan I was gonna say who showed up this week and decided that the Lifeline program is full of fraud and he put out a notice to propose rulemaking where he claims the FCC's Office of Inspector General found that the states that don't, that run their own verification for being eligible for Lifeline are doing massive fraud.

1:10:19Nilay Patel:And California is doing all the fraud, 81 % of the fraud. And they've taken like$5 million in fraud, which in the grand scheme of billion dollar government programs is nothing, but that's enough fraud for you to punish California, which notably is a blue state. So, Brendan, I'll just read the quote, a recent Inspector General advisory ratios lifeline providers received nearly$5 million in federal providers to provide phone internet services to more than 116 ,000 dead people in the three opt-out states. Of that, 80 % of the scams took place in California alone. That type of waste, fraud, and abuse is completely unacceptable.

1:10:50Nilay Patel:This is a brand on his high horse. California, notably, responds to this, and they say, no, you're just doing the same dumb thing Elon did, which is that you're over-indexing on the amount of time between someone dying and someone being taken off the program. Right. So like there's just a lag time. California is a big state with a lot of people. There's just a lag time in our reporting between someone dying, us being told they're dead and then being removed from the program. Carr's response to this is saying, I'm going through this anyway. I'm radically changing the eligibility rules for the Lifeline program to make it harder to be in it, which is a way of punishing poor people, punishing minorities.

1:11:30Nilay Patel:We know this is true. And is, of course, the whole goal. which is always the goal. And so you have just the one poor Democratic commissioner remaining on the FCC, Anna Gomez, in her quote, by proposing to use the same cruel and punitive eligibility standards recently imposed for Medicaid coverage, the FCC risks excluding large numbers of eligible households from Lifeline, including seniors, people with disabilities, rural residents, and tribal communities that millions rely on to stay connected to work, school, healthcare, and emergency services. There are ways to fix this. You can think that Lifeline is full of fraud.

1:12:02Nilay Patel:You can. That's fine. And like I said, there are lots of debates on how to fund Lifeline and whatever. You have to know Lifeline is important. You have to care about the people that need broadband to participate in society. And your goal has to be those people that we think are alive and rightfully taking part in this program or getting the service they need and we're going to deal with the fraud. Not California is full of waste, fraud, and abuse, and I'm going to doge it up and I'm going to make it so that almost no one can get this because I I don't like Gavin Newsom, which is 100 % what Brandon Carr is doing.

1:12:33Nilay Patel:And in so doing, I think he's punishing people who desperately need connectivity. I also think the entire point of the FCC should be to get this country connected. And they've utterly failed, across every administration, they've utterly failed at this. So here we are. Brandon Carr is a dummy. He is going to cut lots of poor people off from internet service and phone service in the name of punishing Gavin Newsom. I think that is outrageous. I think, like, it's as morally outrageous as all this First Amendment stuff. As always, Brendan, you're welcome to come on the show. Defend your callous and, quite frankly, un-American behavior.

1:13:05Nilay Patel:And I'll yell at you a bunch. I think that'll be fun. I think that'll be a good use of my free speech and a good use of your time as a government servant. You can come on. You can ping me. People can tweet at you. I know you listen to the show. But you still haven't shown up. Here are the virtual cast. That's it. That's been Brendan Carr is Dummy, America's favorite podcast. Brendan Carr is a dummy. He's such a dummy.

1:13:25David Pierce:It hits nicely. It's good. it's got real like beginning of a scene of fraser energy to it and i mean that as a compliment yeah it's good stuff um all right my my first lightning round is uh i just want to talk about the the ongoing memory crunch and the ways in which that continues to hit everything like i I just think this is kind of sneakily the gadget story of the year is can anyone afford to make anything?

1:13:57Nilay Patel:Did you read that Wall Street Journal story about Apple no longer being the dominant player in the supply chain?

1:14:01David Pierce:Yeah.

1:14:02Nilay Patel:It's very good. Yeah.

1:14:04David Pierce:I also just finished the book Apple in China, which I truly cannot recommend highly enough about the way that Apple's entry into China as a manufacturing country, like changed the way that China and Taiwan operate and has had massive ramifications to the technology industry. all very interesting um but the two things that happened this week were uh raspberry pi the the like simple computer i have one right here it's raspberry pi uh raising their prices again um because it is harder and more expensive to get memory uh and raspberry pi doesn't need that many things but it needs a little bit of memory like this is not they're not competing with ai boxes to get you know giant quantities of memory for you but it is so hard to get your hands on anything i've been hearing from people who are like you can't get megabytes of memory anymore because this stuff is just not being made.

1:14:51David Pierce:And every single bit of it that's being made has already been purchased in giant quantities by some AI company. But then the other one was Valve. We've talked a lot about the upcoming Steam machines. They made this huge announcement last year, really exciting new hardware from Valve. And they put out a new blog post. Notably, when all the Steam machine stuff came out, didn't announce prices. And in part, that was because of tariffs, which have made everything really complicated. Last year, there was also starting to be some of this RAM memory crunch. But in this blog post, I'm just going to read you this chunk of it, because it is as honest and brutal as you could possibly ask for.

1:15:27David Pierce:It says, We plan on being able to share specific pricing and launch dates by now, but the memory and storage shortages you've likely heard about across the industry have rapidly increased since then. The limited availability and growing prices of these critical components mean we must revisit our exact shipping schedule and pricing, especially around Steam Machine and Steam Frame. And then Valve said its goal of shipping all three products in the first half of this year has not changed. But we have work to do to land on concrete pricing and launch dates that we can confidently announce, being mindful of how quickly the circumstances around both of those things can change.

1:15:55David Pierce:There's no way to read that other than we have no idea what is going to happen.

1:16:00Nilay Patel:No, I mean, look, I had to see a Razor on Decoder at CS and I was like, can you predict your pricing for new laptops like through the year? And he's like, I can't predict them through the end of the week.

1:16:09David Pierce:Yeah.

1:16:10Nilay Patel:I mean, it's nuts.

1:16:11David Pierce:Yeah. And I think we're, this is hitting bigger and bigger products and bigger and bigger players, right? I think we, like Apple's a good example. We think about Apple and this other handful of companies as the kinds of companies that have enough leverage and enough resources and enough planning to have made a lot of these decisions ahead of time. And a lot of these companies have, but that's going to run out. Like we are rapidly running at a point where no one is going to be able to get their hands on memory to sell you a laptop. Like that's just coming.

1:16:42Nilay Patel:Yeah. Or the bubble's going to pop. It's like, yeah,

1:16:44David Pierce:Or there's either going to be a lot of empty data centers or there's going to be a lot of unsellable laptops. Don't know. But it's like this thing, it just keeps ramping up. And we did the Holiday Spectacular at the end of last year all about this stuff. And the overwhelming consensus is like the solution to this problem takes a long time because it involves building factories. like either like you said there's going to be some giant economic change that all of a sudden these ai companies are not buying this stuff at this kind of volume at this kind of pace or it requires standing up a huge amount of volume that actually a lot of these manufacturers don't want to stand up because when the bubble pops they might not need so we're we're stuck in this scary spot for it seems like a while longer i agree this is like one of the gadgets for us can there be new gadgets yeah it was really funny i was actually thinking about this the other day Like sort of by happenstance, last year I bought a new laptop.

1:17:40David Pierce:I bought fancy new headphones. I bought a Switch 2 and I bought a camera. And it was just like, it just sort of happened that I bought all of those things in the span of one year. And looking back, I'm like, good God, I'm glad I upgraded everything in 2025.

1:17:52Nilay Patel:I like that you've taken this story where like the economy is on the precipice of collapse. You're like, I'm really glad I convinced myself to buy a Mac Studio. Yeah. Good thing I got a Switch 2 when I did. You know what I mean? Great call by me. Yeah. no really impulse buying the smack studio is a great idea now in retrospect uh yeah but i i

1:18:10David Pierce:think like we're gonna keep watching that but it really feels like that just gets worse and worse all the time yeah scary stuff all right what's your next one my next one is very funny um for

1:18:19Nilay Patel:a variety of reasons uh it's about peloton which is just one of the funniest companies around um so v song and i have just been chatting for months and i keep saying like you were she covers wearables for us. She covers health and fitness for us. And I keep saying to her, like, you are a wellness reporter. You don't want to be a wellness reporter. But like, I keep joking that like the entire podcast economy is held up by AG1.

1:18:43David Pierce:Which you've now mentioned twice on this show.

1:18:45Nilay Patel:I have a goal for our AG1 coverage. We're going to set it aside. He has a story coming out, which is why it's on my mind. And, you know, RFK Jr. is out there saying like the future of healthcare for Americans is everyone gets a health wearable. Dr. Oz this week, This is a true thing. Dr. Oz this week said we have to just accept the fact that the best way to get health care to rural Americans is with AI avatars, which is just crazy. Like, what are you talking about? Like, we've tried everything to get health care to rural Americans except providing them with health care. We're out here doing 5G grape surgery with robots, but we're not like we should just pay for doctors to live in rural areas.

1:19:24Nilay Patel:Like, there's something about the tech industry right now that is in a collision course with wellness. And I bring this up because Peloton missed its earnings today. He covered it. And at the very end of the earnings haul, the new-ish CEO of Peloton, Peter Stern, announced Peloton is no longer a fitness company. It's a wellness company.

1:19:43David Pierce:Here we are. They're this close to being like, we're a lifestyle brand. It's super close.

1:19:47Nilay Patel:Well, they're partnering with lifestyle brands. They're doing more strength training. And they said they were doing more strength training content because many more people are on GLP-1s. and you need to lift weights when you're on GLP. So that's Peloton. So that's all very fun. Like all of that is just, this is just me pre-apologizing to be on the podcast and she has to hear a wellness report. Because it's here. Whatever switch needed to flip that the tech industry is now the wellness industry, I think Peloton just straight up announcing that it's a wellness company now that sells hardware subscriptions.

1:20:22Nilay Patel:That switch is here. The other very funny thing is that their bikes aren't selling well. They just upgraded the bikes with cameras in them. The cameras can watch you as you lift weights and do strength training and monitor your form and all this stuff. It's basically the old Peloton Guide camera that was out for a while that no one really bought, and they just sort of integrated it into the tablet. Yeah. So the bikes and treadmills are basically exactly the same. I think the bikes especially are exactly the same bikes. They just have a new Android tablet with this camera attachment on the top.

1:20:55Nilay Patel:Like that's all that has happened here. And Peloton will not just sell people the tablet as an upgrade. You have to go buy a new bike or a new treadmill. The new Tread Plus is$6 ,700. And there's not a trade-in program. You can't send your old one back and have them refer. Nothing. You just have to outright buy it. And they just will not sell you this tablet. Even though people have gotten, like when they've gotten the new bikes, the tablets come in a different box with a sheet labeled upgrade instructions. So they're like designed to be put on the old bikes. And lots of people who have bought both are like, I can just unplug the USB-C cable for my old bike and plug it into the new tablet and it works fine.

1:21:39Nilay Patel:And they just won't take the money. Like I would upgrade our Peloton to the new tablet because Becky and I both do the strength workouts on the Peloton. Like we would do it, it would be fun. And like, I'm not going to buy a new bike. and Peloton is sitting here being like, we're going to force you to buy a new bike. And instead of taking the money that's in front of them to hit their earnings, they're going to be a wellness company. It's the dumbest thing I've ever heard in my entire life. I've never seen a company not understand how people upgrade hardware. Like, I don't need a new bike. I need a new tablet.

1:22:11Nilay Patel:Just sell me the tablet. You can sell me the tablet for a lot of money.

1:22:13David Pierce:I was just going to say, even wildly overcharge me for the pieces that I need. Like, if I need a new pedal, charge me twice what that pedal should cost. Yeah. Like, fine.

1:22:22Nilay Patel:It's so dumb. I mean, yeah, I'm not saying something that costs. I'll pay hundreds of dollars to upgrade the tablet. I've had this bike for a long time. The screen is actually cracked on the tablet. Like, let's do it. Yeah. And they're like, nope, you had to buy a whole new bike. I'm like, yeah, I'm super not doing that. But instead, they're going to be a one-list company and target their strength workouts to GLP-1 users. Good times. It's good. It's good stuff. Anyway, if you work at Peloton and you have any insight over whether they're just going to sell the tablets as they are already packaged to be sold as upgrades, let us know because i'm dying at some point peloton is going to break and they're gonna have to sell the upgrades because all the facebook groups are like yeah we're just gonna wait for you to sell the upgrade it's very good it's it's ridiculous so can i just random brief aside

1:23:06David Pierce:so right on the other side of this wall behind me is just a little tiny like sort of storage utility room uh that we've been wanting to repurpose as like an exercise room so i've never had a less pleasant experience than trying to comparison shop treadmills on the internet. First of all, every single display ad I see now is for treadmills because I guess it's such a, it's a like thing you don't buy all that often and they're pretty expensive. And when you shop for it, you shop with intent. So like everybody is super incentivized to just pour ads down my throat about it. So I'm getting them everywhere.

1:23:41David Pierce:But also, I don't know if you're aware of this, but according to the internet, every treadmill is exactly the same and they're all terrible. yeah that's all right like i literally went to dicks the other day because i was like i just need to see some of these with my eyes in person and then i was like oh all of these look the same to me and just left so i've accomplished nothing uh if anyone has a treadmill you would like to just put in this room behind me that would be fantastic um i'm gonna do just a quick pivot on my next one because there's some some breaking news uh on the verge.com um which is that bitcoin is kind of in the middle of just totally collapsing.

1:24:15David Pierce:It's been cratering kind of for a while. It has dropped in a big way over the past week. But just today, like as we're recording, the price of a Bitcoin dropped below$65 ,000, which for a long time has been seen as kind of like an intellectual floor. That puts it basically where it was in November of 2021. It gives back all of the gains since the Trump administration. There's a lot of scary stuff happening in the crypto world right now. Bitcoin is believed to be immune to all of this other stuff that is going on, right? And all this stuff around tariffs and all of the sort of frothiness of the market.

1:24:57David Pierce:Bitcoin was supposed to be the thing that solved for all of this and was immune to all of it. And obviously it has not been. As Trump continues to like run roughshod over the financial policy of the United States, that's getting messy. But we're at this moment where like, I have never been sort of a believer in Bitcoin as a thing. I don't think that's, but what this means is that there is a tremendous amount of money just disappearing. And the thing that happened relatively recently that a lot of people really cheered on in the crypto world was it became legitimized in really important ways. You started to be able to buy Bitcoin ETFs.

1:25:32David Pierce:you started to be more people had more access to bitcoin and more like regular people and and more sort of traditionally like lowercase c conservative investors were buying into bitcoin because it was believed that this administration was friendly to it that it was going to establish some long-lasting crypto-friendly regulations and now it's just like it's it's in a it's in a tailspin and all

1:25:53Nilay Patel:the shit coins are gone like bitcoin was i don't remember who it was we had some decoder guest who just very confident was like, Bitcoin is the alpha and the omega. Like, everything can happen, everything else, and Bitcoin will remain because it is the only one that's pure and good. And maybe you believe that, maybe you don't. But I definitely believe that all the shit coins were just along for the ride. Yes. And they're done. Like, they're not going to come back. Maybe Ethereum has some other utility.

1:26:19David Pierce:I think Ethereum is the only one that might live in the space of Bitcoin.

1:26:24Nilay Patel:Yeah, because it has this other utility associated with it.

1:26:27David Pierce:Yeah, like Bitcoin is in its own tier. Ethereum is probably below it in its own tier. And then it's just nothing like a bottomless pit of nothing. You don't think Dogecoin is important?

1:26:38Nilay Patel:I will ask the same question I always ask about Bitcoin every time it comes up. No one has ever made a case for why you should transact in a Bitcoin. Until today, if you had a Bitcoin, the only rational thing to do was hold it. And I'm sure today people are still saying you should hold it. But if you could not make a case for actually using a Bitcoin as a currency, there is no case to be made for Bitcoin. And the only case that anyone would ever really make was you can do crimes with it, which is probably why Jeffrey Epstein was so deeply invested in making sure it happened. Sure.

1:27:10David Pierce:I mean, there are a lot of people in my life who are crypto people and the ones I've respected all along were just the people who were like, this is the way I'm going to make money. Like, it's fine. Treat it like an asset class, right? Like, don't stop pretending to me that it is the future of anything on the Internet. It is just a way to put money into something and hopefully make some money.

1:27:31Nilay Patel:I just had this image of you and like your baby son talking about crypto and, you know, like, we're going to make money.

1:27:43David Pierce:It's not. Let's just say there is a group chat that I'm in. Okay. At least one of whom listens to this podcast. So hello to you. And some members of that group chat were forced to start a crypto only group chat because the rest of us got tired of listening to them talk about crypto.

1:27:58Nilay Patel:That's great.

1:27:59David Pierce:This is where we are. That's very good. and but but i to me it's like we're at this place now where at least it was supposed to be stable right it wasn't the whatever like crypt bitcoin to the moon whatever but this is like there are real ramifications to this thing especially that people in in our world have spent a decade

1:28:19Nilay Patel:investing in that just wiped itself out more more than a decade yeah way more than a decade We're 15 or even 20 years into Bitcoin. I'm just going to point out, the idea that it was stable really rested on the idea that it was an asset like gold and not a useful currency.

1:28:38David Pierce:Gold, by the way, absolutely crushing recently.

1:28:41Nilay Patel:Well, now I know what you're going to talk to your group chat about.

1:28:44David Pierce:I mean, this is the thing, right? I think this is going to be, if nothing else, even if the price recovers, this becomes a really useful piece of evidence that actually the thing you thought Bitcoin was, even if you boiled it all the way down, it's not that. It turns out it's actually nothing.

1:29:00Nilay Patel:I'm not going to pretend that I'm a finance reporter. One of my group chats is with a world-class finance reporter. She routinely takes me to school. So I'm not even going to try to pretend. We should actually. That'd be fun. But at any rate, that$65 ,000 mark

1:29:13David Pierce:was viewed as an important threshold. And it is below that and falling.

1:29:18Nilay Patel:All I'm saying is the tech industry invented a bunch of stuff that wasn't useful and Bitcoin was like the number one thing that wasn't useful of this whole time. NFTs weren't useful, they just went away. Crypto, broadly, no one can identify a use for crypto and Bitcoin, except for it's going to get me rich. That's it. That's all anybody had. There's no reason to transact in Bitcoin.

1:29:41David Pierce:Not to full circle back to Jeffrey Epstein, but it turns out that that's enough for an enormous number of people. And this is the thing that always drove me crazy. Like, just say it's about the money. like stop pretending you're about anything else yeah i you know we um this is just another tangent

1:29:58Nilay Patel:and i promise i will tell a joke about google um i swear to you i will uh we the beginning sort of ai boom there is a we got a lot of notes it's like why are you covering this it's just crypto again and like yeah you know like you can squint and be like yep the gpus are all the same like it's a bunch of data centers doing a bunch of nothing right and we're even at the point now where, you know, it seems like a bunch of AI CEOs are kind of like begging you to use their products to support the valuations. And there's some parts of this that rhyme. But right underneath that is like, oh, it's actually useful, right?

1:30:33Nilay Patel:And like some cases, in some ways, some people are finding real uses for AI and that's what makes it different. And I just keep coming back. The tech industry for after doing smartphones did not find the next most useful thing. and crypto is just high on my list. I don't know what's going to happen with that, but the idea that no one for a decade has been able to tell me why you should spend a Bitcoin has always been the biggest red flag for me. Yep. All right, here's my joke about Google. I'm just going to read the headline. Ready? Google Home finally adds support for buttons.

1:31:07David Pierce:Okay, this is huge news. Don't undercut this. Is it? Is it huge news? So can I just give you like a brief bit?

1:31:16Nilay Patel:AI and here we are.

1:31:19David Pierce:My favorite part is Jen Toohey wrote a story about this and the top of the post is just a finger pressing a button. It's like, well, how else do you illustrate this story? The tech industry. Yeah. So Jen came on the show on Tuesday to answer a hotline question from somebody who was enraged because they had bought IKEA buttons that didn't work on their Google Home. And Jen was like, it's not you, it's Google. and Jen and I recorded this at like I think it was like 11 a.m. Monday morning the show went out on Tuesday and between then and the launch of the show Google announced the buttons. So does Jen get credit?

1:31:57David Pierce:Does this mean Google's phones are listening to us as we talk and they finally ship the thing? Who's to say?

1:32:03Nilay Patel:I think it's very funny that everyone is so excited about these IKEA buttons and they just like didn't work out of the box.

1:32:08David Pierce:Super didn't work.

1:32:08Nilay Patel:It seems like IKEA is scrambling. Yes. It also seems very funny that the major smart home platforms are so bad at the concept of buttons. Can I show you, can I show you my Apple Home notification for a button on the door to get our house? It's just a button that turns on a light. So Apple Home does support buttons, but it does not support buttons as toggle switches, right? Okay. So you can have a button that turns on a light, but that same button cannot then turn that light off.

1:32:38David Pierce:That's why the IKEA buttons are two buttons.

1:32:40Nilay Patel:Yep.

1:32:40David Pierce:Yeah.

1:32:41Nilay Patel:So in order, so in one of those buttons, Virgil House listeners know I have a smart garage opener, right? So in order to make one of the buttons on the smart control panel both open and close the garage, I had to write a script in shortcuts. It literally checks the state of the garage door and then does the opposite thing whenever you push the button. No. And it's like, I shouldn't have to do this. Like there's a lot, there's a trillion dollars of R &D in this phone.

1:33:09David Pierce:Seriously.

1:33:09Nilay Patel:You should support toggle buttons. So anyway, I'm proud of Google for arriving here at buttons at all. I would like to convince all of our richest companies in the world to consider the concept of buttons that both turn on and off. Just think about it. It's right there for you. That seems like a lot. It does seem like a lot. That's what Cloud Code is for.

1:33:31David Pierce:I hear Matter is working on that for 2037. It's going to be sick.

1:33:35Nilay Patel:We should mention one last thing, which we can talk about next week. I picked Google Home Buttons. We needed something light to end on. But it is true that Elon announced that he's going to merge SpaceX and XAI, which means SpaceX will own Twitter, which does feel like a full hour of the Vergecast. It does. So we're going to set that aside.

1:33:55David Pierce:I think at some point in the relatively near future, we're going to have Liz Lopato come on and we're all just going to yell at each other about IPOs. And it's going to be our least popular episode ever, but we're going to have a great time.

1:34:05Nilay Patel:Very good.

1:34:06David Pierce:All right. But for now, we should get out of here. My last one, by the way, is we talked a little bit about aluminum, the Google OS combining Chrome and Android. Sean Hollister did some great reporting and found some documents that suggest that that is going to, A, take longer and B, be messier than you thought. So all of the hopes that you did not get up about aluminum, keep them low. You know what I mean? The year 2034 was bandied around several times in that piece. It's rough out there. But all right, we should get out of here. keep sending us emails we've gotten a lot of feedback on the way we were talking about all the Minnesota stuff last week I genuinely you and I both I think want to hear how we should keep covering the Epstein stuff how we should keep covering sort of what this means for the tech industry how we cover the business stories inside of it like can we just write about the Surface RT without having to write about the Epstein files I don't know

1:34:58Nilay Patel:by the way Sanofsky is just tweeting about shipping software right now no thought to what's happening in the background.

1:35:07David Pierce:The amount of posting through it that is happening right now on X in particular is just astonishing. It's quite a lot. But anyway, that's it for the show. Thank you to all of you for writing in. Thanks to everybody who calls the hotline. We got a lot of fun stuff. People have sent me a lot of phone recommendations. Neil, did I tell you about this? No. I'm beginning a phone journey. I'm tired of my iPhone 16. So I've decided that instead of just getting a new phone like a normal person, I'm going to try every phone I can find. And then, like, I'm not a phone reviewer anymore. So I like, I haven't used all the new phones.

1:35:36David Pierce:So I'm going to go use all the new phones and then, uh, presumably never be able to successfully text anyone ever again. That's right. But I'm going to get a new phone and I'm, I'm pretty excited.

1:35:44Nilay Patel:I'm excited for you.

1:35:45David Pierce:The funniest outcome here is if I just buy an iPhone 17, uh, it will, it will piss off everybody, but I'm very excited about it. Uh, all right. Keep emailing us. Keep calling us. Vergecasttotheverge.com. 866-VERGE11 is the hotline. The Vergecast is a production of The Verge and the Box Media Podcast Network. This show was produced by Eric Gomez, Brandon Kiefer, and Travis Larchuk. We will see you next week. Neelai, crack and roll.

1:36:09David Pierce:Rinse knows that greatness takes time, but so does laundry.

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