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Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 11 - 2 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
Oh, we're live. Welcome to Technology Brothers, the most profitable podcast in the world. Today, we're doing a deep dive on DeepSeq, the new AI model coming out of China. They say they trained it for just $500 less than this cash stack, but we'll dig into that because it's a hot topic. A lot of people are debating about this.
Speaker 1:But we wanted to take you back to May of last year when DeepSeq actually launched. It's in the news because they launched a new model, but the company's been out there open sourcing LLMs for for something like 6 months now. And, it's it's shaking up the timeline. Timeline's in turmoil over this.
Speaker 2:Timeline's in turmoil? Yeah. And I'll go out on a limb to say this is China's next attempt at a DJI TikTok type Yep. Products where, hey. Let's basically sell this product in America for way less than it costs.
Speaker 2:Yep. Give it away for free. Yep. Try to get a bunch of, important, you know, companies using it or or consumer dependent on it. And then, you know, it's a little bit of, you know, spyware.
Speaker 1:Yeah. I respect the data. Yeah.
Speaker 2:The the
Speaker 1:there's all the same geopolitical considerations that we walk through during
Speaker 2:the pandemic. You know, for them if, you know, if if it you know, you can basically assume that any important Chinese company company is, you know, backed by the state to some degree, even if they're not, they're sort of, you know, got a gun to their head the entire time they're operating it. So we're excited to get into this one. You know, as our as our mission at Technology Brothers is to, you know, entertain, cover some news, and take down CCP fronts.
Speaker 1:So Exactly. Let's
Speaker 2:get into it.
Speaker 1:So let's kick it off with a fantastic analysis, by Dylan Patel in semi analysis. This is from, May 7, 2024. And it's interesting
Speaker 2:Dylan is for those that don't know, he's he's the Tom Brady of semiconductor analysis. 100%. He's the kind of guy that gets invited on BG Squared
Speaker 1:Yep.
Speaker 2:To he's been on the dogs. You know, how how the how the semis are barking these days.
Speaker 1:Yeah. I mean, it's a fantastic, essentially a substack subscription model, $500 a year. But then he also does a ton of consulting. And what's interesting is that he doesn't just, read the 10 k's or anything. Like, he will task satellites to, like, figure out where they're building stuff Yeah.
Speaker 1:And, like, really collect data. And then he sells all
Speaker 2:the data. Thing that hedge funds Exactly. Doing. Yeah. It's it's more Yeah.
Speaker 1:So so I think I think Seminalysis is actually, like, a pretty large company now with a number of analysts, and he's not going the kind of, like, solo creator route. He's very much focused on building, like, a a a research organization. But, he's also just hilarious on podcasts, like, very free flowing, just says whatever he wants, like, totally uses very online lingo too in these very professional settings, which is great. I'll I'm a big fan. Yeah.
Speaker 1:So this is the the title of this is OpenAI is doomed to make Microsoft, and it's kind of, walking through a bull and bear case for OpenAI given all the different, dynamics and different cluster build outs that were happening mid last year. And it starts by saying, all eyes are on how long the profitless spending on AI continues. H 100 rental pricing is falling every month. This was a big trend last year. In 2023, Chat GPT was blowing up, and everyone was like, I will do anything if someone can get me a a rack of a 100.
Speaker 1:It's a lot of VC fees. 39. Exactly. Andromeda. Andromeda.
Speaker 1:But in 2024, rental pricing went down as fewer firms realized that, hey. Maybe they don't wanna be in the pretraining game. They just wanna fine tune or they just wanna build they wanna be rappers, essentially. And then also the really, really big firms might just be building super clusters that didn't even affect the rental pricing market. And so availability is growing quickly for medium sized clusters at fair pricing.
Speaker 1:Despite this, it's clear that demand dynamics are still strong. While the big tech firms are still the largest buyers, There is an increasingly diverse roster of buyers around the world still increasing GPU purchasing sequentially. Most of the exuberance isn't due to any short any sort of revenue growth, but rather due to the rush to build ever larger models based on dreams about future business. The clear target that most have in mind is matching OpenAI and even surpassing them. Today, many firms are within spitting distance of OpenAI's latest GPT 4 in chatbot ELO.
Speaker 1:And in some ways and in some ways, such as context length and video modalities, some firms are already ahead. So context like that's the Google thing. Yeah. Where Drop an entire book. Drop an entire book in, in Gemini and Drop, the entire banger archive.
Speaker 1:Exactly. And so, there's been a bunch of ways to differentiate. Even if you're you you just get close to GPT 4, you do a similar run, and then you build a different tool around it, or you find, you know, you build different, like, you know, unhobbling. So this one uses the web. This one can process PDFs.
Speaker 1:This one can You
Speaker 2:don't really hear about Mistral much anymore?
Speaker 1:No. I heard Was
Speaker 2:that because the French don't have a word for entrepreneur?
Speaker 1:I like that. Oh, yeah. It's the, it's the
Speaker 2:right Ryan's Ederson. It's great. They were trying to community note him on that, but I don't think they got it through.
Speaker 1:That's great. That's great. It's probably a war. So Gemini 2 Ultra is rumored to surpass GPT 42 Turbo in every way. Furthermore, Meta's llama 3405 b is also gonna match g p t 4 while being open source, meaning g p t 4 class intelligence will be available to anyone who can rent an h one huns 100 server.
Speaker 1:But he goes on to mention the phoenix from the east. It's not just the big tech firms that have rapidly caught up. Yesterday
Speaker 2:Real quick. One one kind of interesting comparison is it it feels like, the models have fast approach being almost like the sports car market where it's like, Porsche can be like, well, we have better handling, and McLaren can be like, well, we're faster in a straight line. Yeah. Exactly. And Tesla's like, well, I'm fast as in the straight line.
Speaker 1:Yep. Yep. Yep.
Speaker 2:You know, so they're all just sort of competing, doing a lot of things pretty well.
Speaker 1:Yep.
Speaker 2:And then competing on these edge cases that almost the average and the reason that ChatGPT has stayed very dominant from a user standpoint is because they have the consumer mind share. The average person is not, like, prompt engineering. They don't care about the context window. They're just almost using it like a Google that can do things, you know, on your behalf.
Speaker 1:Yeah. I mean and and this was one of the big, like, bear cases for these l l l l l m companies after Chat GPT dropped was like, well, is everyone just gonna train these, and it's gonna be completely commoditized? But then the companies kind of figured out, well, if Grok is a little bit less PC, that's an edge, and if Gemini has a bigger context window. But there's some fascinating stuff in here about how the different big tech companies are able to integrate their models and actually bootstrap to much larger user bases, which results in getting more data from users, which is very interesting. But he highlights deep seek, which launched in May of 2024.
Speaker 1:It says China's deep seek open sourced a new model that is both cheaper to run than meta Meta's llama 3 70 b and better. So this was not as big of news because it wasn't truly better than GPT 4. So it kind of slid under the radar, but it was cheap on inference. Meaning, you just needed less, less compute to actually run it.
Speaker 2:And this is, to be clear, the same thing that China has done historically with, DJI, where DJI is selling products at without any profit margin at all. Yep. Potentially even losing money on a unit basis because they just wanna get the product out into the world, getting used, getting consumed.
Speaker 1:Yep.
Speaker 2:And so, and not too dissimilar in my view, to TikTok faking views. Right? Because they're like, well, if users come on here, they post something, they get a 1,000 views. They're not gonna wanna go on Instagram and post the same content and get 200 views. Right?
Speaker 2:Yep. Yep. That sort of.
Speaker 1:And and and, I mean, the Chinese censorship is already a a thing. It says, while the model is more tuned for Chinese language queries because that's the tokenizer in the training dataset and government censorship of certain ideas, it it does happen to win in the universal languages of code,
Speaker 2:in terms of eval and mask. Don't ask deep seek about the Uyghurs. Your laptop will explode. They're not familiar with that.
Speaker 1:Deep seek claims that a single node of 8 x h 800 GPUs can achieve more than, 50,000 decode tokens per second per second peak throughput. At the quoted API pricing of output tokens alone, that is $50 of revenue per node per hour. The cost for an h, for an 8 x h 100 h h 800 node in China is about $15 an hour. So assume assuming perfect utilization, deep sea can make as much as $35 an hour per server or up to 70% gross margins. This is what we were talking about yesterday.
Speaker 1:Yeah. You know, as you as you make these models more inference, optimal Yeah. You get higher margins. And that's and that's a lot of what deep seek has been kind of lauded for. And it even says, even more interesting is the novel architecture DeepSeek has brought to market.
Speaker 1:They did not just copy what Western firms did. There's a lot of stuff that they did copy, and there's a lot of data that they probably stole. And there's a lot of weird political things where they maybe broke rules and laws. But they did they did create some fundamental innovations technically on the algorithm side. And I think that this whole story is going to be complex because people are gonna wanna take one side or the other and just say, oh, it's it's a complete copycat.
Speaker 1:They're lying about everything. There's nothing interesting here. Or it's amazing. It's the biggest breakthrough, and and they need to boil it down to a single tweet. And that's why I'm glad we have an hour to
Speaker 2:there's there's 2. Yeah. There's there's there's it's such an interesting thing where they're coming out with an open source product that they are undercutting the entire market on. And but it's this it it's hard to be it's hard to say, oh, you know, they're simultaneously putting everything out there Yep. While there's clearly stuff happening behind the scenes that we don't really know about.
Speaker 1:Right. And so we'll get into a little bit of the background, but they do seem pretty cracked. There are brand new innovations in mixture of experts, ROPE, and attention. Their model has more than a 160 experts with 6 riding. Oh, no.
Speaker 1:The phone fell. Too much Chinese Oh,
Speaker 2:it's it's too many notifications.
Speaker 1:Yeah. Yeah. Yeah. Well, back to the show. Furthermore, DeepSeq implemented a novel multi head latent attention mechanism, which they claim has better scaling than other forms of attention while also being more accurate.
Speaker 1:They trained on 8,100,000,000,000 tokens. DeepSeq v 2 was able to achieve incredible training efficiency with better model performance than other models at 1 fifth the compute of Meta's LAMA 370 b. And so, for those keeping track, deep seek v 2 training required 1 20th as much energy, essentially, 1 20th the flops of g p t 4 while not being far off in performance. And so then he goes on to to talk about, you know, is is Microsoft committed to open AI? There's a big discussion there.
Speaker 1:That's kind of old news.
Speaker 2:And that is, I mean, the new new the new news there is that Satya is, you know, sub subtweeting, Sam in Elon's comments. So that shows a little bit of, you know, maybe the marriage isn't perfect Yeah.
Speaker 1:Under the hood. And this is this is something that he does bring up throughout the piece and throughout a lot of these analyses, which we talked about. It it really he really was early to this idea of Satya saying, I'm good for my 80,000,000,000. And what does that really mean? Well, it's Azure workloads.
Speaker 1:And this is something that happens a lot where Zuck will say, oh, yeah. I just bought 200,000 NVIDIA GPUs. And then what we dig into it and you're like, oh, well, like, a half of that is going to, recommendation algorithms for reals. And and that's great. Like, it's it's cool.
Speaker 1:They have the infrastructure, but it's not all LLM AGI race Yeah. Training, which is what people are really focused on. So I'm moving on to page 7. Is distribution and integration king? With DeepSeq and Llama 3405 b coming to the open source, There is very little reason
Speaker 2:Did you wanna enterprises. Before that, did you wanna cover Microsoft trying to reduce their
Speaker 1:I I I'm sorry. Do you think it's kind of covered that or sense that Yeah. You know, the like, the closer here is that many firms use OpenAI's technology through Azure. More than 65% of Fortune 500 now use Azure OpenAI service. It's noteworthy that this is not directly through OpenAI.
Speaker 1:OpenAI can lose significant business without Google, DeepMind, or Amazon Anthropic gaining share simply by Microsoft pushing its own model their own model instead. And so, he was just kind of commenting in, in this piece about the the, like, the temperature in the room with regard to the, Microsoft and opening Ideal at the time. But it but that story has evolved so much. We've covered it so much. I don't think we need to dig into that.
Speaker 1:I'd rather focus on this distribution and integration is king section with, with deep with DeepSeq and Llama coming to the open source. There's very little reason for enterprises not to host their own model. Zuckerberg's strategy of using open source models to slow down competition, commercial comp the the competition's commercial adoption and attract more talent is working wonders. So I was like, why is he open sourcing this thing? Like, this is very expensive, And it was all about getting people to come work at Meta on this cool project and then also curb more companies from from doing build outs because they're like, what's the point?
Speaker 1:And this is probably the pressure that we felt on, Aidan Gomez Cohere. Right? And maybe even a misdrawal where it's like, well, if your whole thing is, like, the open source or, like, you're, like, not the true frontier compounder winner, well, you're you're you're just never gonna be able to make any money because the open source one's gonna come out. Yeah. It's gonna be a little bit behind GPT 5 or GPT 4, but if Zuck keeps open sourcing it, you're just never gonna make any money, and so it's gonna be really hard.
Speaker 1:So he's keeping the pressure on. And then also because of Databricks, which we've talked about before, Databricks lets you fine tune really easily. And so, it's no longer like, fine tuning is no longer a monumental task. And so one of OpenAI's advantages is that they have been ahead in collecting data, specifically usage data, and that that happens when you, sometimes when you issue a query to GPT for chat, it'll say, hey. We actually give you 2.
Speaker 1:Which one do you like more? And then you can a b or every post will have a thumbs up, thumbs down. And then also they will they'll be able to just see, okay, did you follow-up with another query? So they're collecting lots of data and they have 100, 100,000,000 users. But he says only a quarter of Americans have ever ever even tried ChatTPT, and most don't continue to use it.
Speaker 1:Most future consumer LLM usage will go through existing platforms, Google, Instagram, WhatsApp, Facebook, iPhone, Android. While Meta hasn't found out how to monetize it, their Meta AI powered by Llama 370 b is available across Facebook, WhatsApp, and Instagram. They announced rollout the announced rollout has been extended to 14 countries, including the US. So they've hit 1,100,000,000 in population, but they have 3,200,000,000 daily active users. And so they're scaling up.
Speaker 1:And when they do, they get all that data
Speaker 2:from them, and
Speaker 1:then they can use that to fine tune the next version of the model.
Speaker 2:Mark, imagine being Mark. You're already halfway through Yeah. Your your TAM. Yeah. And and you're trying to get these incremental users that just don't have Internet.
Speaker 2:They're like
Speaker 1:Well, they they were focused on that for a while. They were like, you're going to bring a satellite to Africa. Yeah. Yeah. It is.
Speaker 1:Facebook.
Speaker 2:Meta could have probably almost launched a Starlink competitor with how much they spent on the metaverse
Speaker 1:Oh, yeah.
Speaker 2:And then actually deliver the metaverse, and the real metaverse is just reels.
Speaker 1:They had a project for that, Project Loon at Google, which was Internet via balloon, via blimp, essentially. That's cool. And I believe in India, there's a free Facebook, like phone plan that you can get the Internet and you only get Facebook. So you kind of have to do everything or something like that. Yeah.
Speaker 1:You basically have to do everything through Facebook. But but but it does it does bring more users online. And so all of that is all is all of that is feeding both fine tuning data on the LM and then also just user data and preference data that goes into the system.
Speaker 2:They're saying if Apple was more creative, would they not have just sent up their own satellite network and just said, you now are gonna get all your
Speaker 1:Yeah. Data from us and you don't need Verizon anymore?
Speaker 2:Yeah. We've been cool.
Speaker 1:Probably more reliable. And so Meta's deployment probably hurts Google search more than Bing or perplexity ever will because people will just wind up searching in Facebook and Instagram. To serve 3,000,000,000 people, you clearly need to have a small and efficient model to bring the cost of inference down, especially when you're not making money on it. You're not charging 20 or $20 a month or $200 a month. Either Meta has made the financial math work or is prepared to invest heavily to execute a land grab in the consumer AI space.
Speaker 1:Either spell disaster for incumbents.
Speaker 2:Yeah. And that's, the difference between Apple and Meta, where Meta is still on founder mode. Yep. Apple, Google are in manager mode. Yep.
Speaker 2:And they're willing to invest. Google obviously has to show their investors and the markets that they're investing and serious about winning Yep. AI race. Yeah. But it doesn't actually look that ambitious Yep.
Speaker 2:In practice.
Speaker 1:Well, speaking of ambition at non potentially nonfounder mode companies, the other argument to be made is if compute and capital are king, in that case, Google is king given their hyperaggressive TPU build out pace. So Google has has created their own chip to rival the GPU called the TPU, the tensor processing unit. It's it's fabbed at TSMC, I believe. Yeah. And so but but it's designed specifically just for AI workloads, so you can't even run video games on it, essentially.
Speaker 1:It's just for this. But much like the advanced
Speaker 2:No. No. They're EIC. No scope?
Speaker 1:Yeah. Yeah. Much like the, advanced NVIDIA stuff. But, but Google is investing super heavily and definitely takes seriously the capex. And so, ironically, Google now has focus and is directing all large scale training efforts into one combined Google DeepMind team, while Microsoft is starting to lose focus by directing resources to their own internal models that compete with OpenAI.
Speaker 1:And so Google, they actually they DeepMind used to be a separate company. It was acquired, Demosys, and, that team, and they were working kind of separately. They finally there's Google Brain and DeepMind, and they and they brought them all together because they were like, the the CapEx is so intense. You guys have to work on 1 big model instead of 2 smaller ones. And so this is one of the biggest risks for OpenAI is that the capital game is all that matters.
Speaker 1:If that's the case, the tech company that invests the most is the winner. And this is why we're seeing Project Stargate, which we'll talk about later. But, you know, with capital does matter, OpenAI needs to be in a place where they can have access to the absolute largest cluster.
Speaker 2:Yeah. Which is just which is why it's amazing that OpenAI has been able to do what they've done. Yep. Because Sam Altman, I promise you, does not care about some other startup that raised $30,000,000. No.
Speaker 2:He cares about these players that can invest $30,000,000,000 off their own balance sheet Yep. To compete with him and have distribution. Yep. So it's not, that's like the most harrowing task, to be honest, where you take the bet. 1 of the best fundraisers ever in the world.
Speaker 2:Yeah. Sam Altman. And then but you give him this impossible task of saying go compete with people who have balance sheets that dwarf your total capital raised.
Speaker 1:Yeah. And so, I mean, it really is insane. I mean, everyone's obviously still buying a ton of NVIDIA, but Microsoft has the least custom AI silicon deployed to their cloud, but they're working on it. Google has the TPU, which is obviously the biggest, but Meta and Amazon are also ramping internal silicon. And even Apple has Apple silicon, which is only for the phones and the laptops now, but, clearly, they have internal capabilities to develop custom silicon.
Speaker 1:And so you could see them developing their own their own hardware as well. OpenAI trained gpt 4 in 2022. Since then, they have been entirely focused on the next step up, experimenting with new architecture, data, etcetera. OpenAI has a tremendous first mover advantage, and they have been solidly targeting models an order of magnitude larger than everyone else for a while now.
Speaker 2:So they have the first mover advantage, but every time they ship something new, people dissect it and try to implement many of those versions. For sure. Yeah. Yeah. For sure.
Speaker 1:But they seem to just be, like, you know, a little bit farther on the treadmill. Like, just Yeah.
Speaker 2:Yeah. They're constantly ahead, but then they're by nature of of the the product, they have to expose some amount of Yeah. The total how it actually
Speaker 1:Oh, yeah. In some of these, it's just it's just like if there's a good idea, like, voice or upload a PDF, it's like, okay. That's like a
Speaker 2:Users are easy, but also the the mesh how the model works. Right?
Speaker 1:Yeah. Totally. They they try and hide that. But if there's just a few secrets, it's like 1, you know, East Bay rationalist party where everyone's talking and all this thing. You know?
Speaker 1:No.
Speaker 2:It's so hard because, people and startups like to like to. Yeah. Right? There's no I'm sure they all have, like, really intense, you know, NDAs and and and things like that. But Yeah.
Speaker 2:It's not like it's a govern even stuff leaks out of the government. Right? Yeah. Totally. It's not as secure as as as that.
Speaker 1:And so he kind of closes with, this the the Midwich meme of, on the left. Right?
Speaker 2:That's why he's goaded.
Speaker 1:Yeah. Yeah. They have mid
Speaker 2:Selling these selling these memes to hedge funds for probably, like, a1000000 a year subscription.
Speaker 1:So as far as the capital game is concerned, Sam Altman is flying around the world winning the favor of many of the richest people in the world for a reason. They will raise more money than anyone else is even imagining to spend on a single model after they showed the world what they've been cooking the last 2 years. The real risk for big tech companies is that they do not show any meaningful gains in revenue, but they have to keep accelerating their spending to keep up with OpenAI or maintain market share in their monopoly Google search. This would cause data center capex party to keep going and, consequently, their margins to compress. So it's interesting because there's almost, like, expectation that it's like, of course, OpenAI loses money.
Speaker 1:Like, they just became, like, a real Yeah. For profit. It's a startup. Sam's at the helm. He's dealing with Masa.
Speaker 1:It's this crazy thing. They're going for AGI. If you're Google, it's like you're a shareholder. You're like, wait. Why are your margins compressing?
Speaker 1:Like, is this really that real? Like, why don't you just partner with them? Like, is this important?
Speaker 2:Well, it's hard because Google needs to show that they're competitive with OpenAI. But at the same time, if they're margin everybody's a lot of people have been short Google Yep. Because they're saying, okay. Well, these models are a threat to search. Yep.
Speaker 2:And so if your if your margins are compressing because you're spending more while people are starting to use competitive products for search. Yeah. It's really hard for Sundar to go up at at a quarterly and be like, yeah. We're not really worried about this model stuff. Like Yeah.
Speaker 2:Yeah. Yeah. He kinda has to put on a brave face for Yeah. Markets. Yeah.
Speaker 2:But you know that behind the scenes, he's worried about his job. Yep. The the probably the bet the number one candidate would be one of the founders.
Speaker 1:Yep. But and and it's this weird it's this weird bargain that actually kind of drives bubble behavior, where if you underinvest and AI is real, you're screwed. If you overinvest and AI is real, you're great. If you overinvest and AI isn't real, you still have you still have a lot of assets. It's still valuable.
Speaker 1:Like, there was a lot of dark fiber that wound up getting used later on. So the, like, the the the risk reward calculation is, like, super weighted to overinvestment right now. So let's move on to, the I don't know if it was an interview or just a some coverage of China's new face of AI, DeepSeq founder, Liang Wenfang. Wenfang. Wenfang.
Speaker 1:Wenfang. This guy is, he's the next, Frank Wang.
Speaker 2:The next Frank Wang.
Speaker 1:The founder of DJI. We're learning I mean, very similar stories. We'll we'll dig into this, but, this is from the,
Speaker 2:by the way, he looks incredibly good for 40. He looks like he's, like, 22.
Speaker 1:He does look 22. He's 40. Woah. Okay. Yeah.
Speaker 2:Which, again, he you know, we we we don't know if anything they say is real. He might be twice. So he might be like, Bill Menitis?
Speaker 1:Oh, yeah.
Speaker 2:Yeah. He'd be like Bill Menitis. Yeah.
Speaker 1:A little little age gambit going on. Yeah. A a lot of people in Hollywood doing that.
Speaker 2:Yeah. Yeah.
Speaker 1:You know, change of the ages. So, DeepSeek is in the news again because they launched r one, which is their reasoning model that competes with o one. And, there's a post explaining who this guy is and where DeepSeek came from that we're gonna read through now. So the founder of artificial intelligence firm, DeepSeq, touted as 20 25's biggest dark horse in the open source large language model arena, emerged as the industry's new face in China at a symposium hoping, hosted by the premier in Beijing on Monday. Liang Wenfang, 40, took part in the meeting where a select group of industry experts in the fields of technology, education, science, etcetera, offered their opinions and suggestions, according to the news agency.
Speaker 1:And so last December, they made waves in the global AI industry after benchmark tests showed that it's deep seek version 3 LLM, which, again, is not the reasoning model. This is more just like a GPT 4 competitor, which was built on a shoestring budget, which we'll discuss if that's real or not. I have
Speaker 2:to put that in the truth zone.
Speaker 1:Yeah. Outperformed rival models developed with more resources by the likes of meta platforms and chat gpt creator OpenAI. Lee called on the economy's new growth drivers. That.
Speaker 2:Yeah. Because we don't have images pulled up, he is wearing a suit here, which we love to see.
Speaker 1:We love to see it.
Speaker 2:We gotta give him some credit. He looks very young for his age. He's wearing a suit. So we're gonna we're gonna really put him in the true sound heart in a bit.
Speaker 1:But And so recently, Beijing made AI a national priority amid heightened a heightened tech war between the United States and China, the world's 2 largest economies. China's a r AI market is expected to be worth 765,000,000,000 US dollars by 2030 according to state backed investment vehicle China International Capital Corp. In the age of AI geopolitics, tech companies inevitably would have tighter connections with governments than before, says Winston Ma, a New York University law professor. And so apart from being a regulator, governments could be a sovereign investor or a cross border deal mediator, and we're already seeing that with the CHIPS Act. And so investment is gonna be massive.
Speaker 1:Something like over a $1,000,000,000,000 invested over the next 6 years in China's AI industry. And that's funny that they're that they're saying that they're gonna invest 1.4 trillion because that's 3 times what project Stargate is. So, you know, maybe this is Well,
Speaker 2:Stargate, to be clear, they've marketed as a pro is a infrastructure product for 1 company. Yep. It was very nicely positioned as, oh, this is for America. Yeah. It was pretty brilliant on OpenAI's behalf.
Speaker 2:But now this the the we don't have a lot of details. But Yep. And we should try to go through the girly piece because he he, like, gave a thread of here's all the questions I have about about OpenAI's, project start. But if if this is 1,400,000,000,000 total is what they're saying over 6 years, if if Masa and Sam managed to do 500, which not very many people actually believe that, you know, that's just one company. So presumably, you have open AI or sorry.
Speaker 2:You have Microsoft and Google and and a ton of other big players Yeah. Not to mention, early stage investing. So I imagine we could, we can and should dwarf that number, just to make a statement.
Speaker 1:Completely disagree. We gotta size it up. If they're doing 1,400,000,000,000, we gotta do 10 times That's
Speaker 2:what I'm saying. We should dwarf their 1 point.
Speaker 1:Oh, yeah. Good. Perfect. Okay. Great.
Speaker 2:It would be un American to not do. I was about to work.
Speaker 1:I was about to work. I'm about to call her and start just wailing on you if you start talking like that.
Speaker 2:Yeah. That'd be very un American.
Speaker 1:So hailing let let's go into the background of the founders. This is this actually went viral just as a screenshot because it's so interesting. So this is about the founder of DeepSeek. Hailing from Southern Guangdong province, Liang went to study electronics, information and computer vision, a field of AI that trains computers to capture and interpret information from images and video data, at Zhejiang University in Hangzhou. Along with a group of university classmates, he started exploring how AI can be used to automate stock investments.
Speaker 1:Then he becomes one of the cofounders of a great named firm called High Flyer Quant. That's my quant. That's my quant, which uses AI to manage one of the largest quantitative hedge funds in mainland China. So this is the stuff that you're seeing at Jane Street and Citadel now, and maybe Jump Trading too. And a lot of those firms have moved to AI driven investment strategies, but, also, they they because they're doing high frequency trading, they operate at a very low level.
Speaker 1:So a lot of them I mean, Jane Street writes everything in OCaml, which is like a programming language, like machine language. It's almost like it's like like Python is like 3 levels of abstraction away from them so they can very fine tune the speed at which these algorithms run, and everything can be proven, like, mathematically. So these are just, like, some of the best programmers in the world. And high fly High Flyer quant grew its asset under management more than tenfold over a 4 year span from 1,000,000,000 won in 2016 to more than 10,000,000,000 in 2019 according to local media reports and information from the company's website. And so it seems like they've really been on a run.
Speaker 1:Over the years, Highflyer Quant spent a large portion of profits on AI to build a leading AI infrastructure and conduct large scale research, the company said in a statement April of 2023. Months later, Highflyer Quant spun off DeepSeq, which launched a series of AI models used by developers to build third party applications by the startup to create its own chatbot. Highflyer Quant managed to buy more than 10,000 NVIDIA graphics processing units before the US government imposed the chip bans, according to a local media outlet. On its website, the hedge fund manager said it spent 200,000,000 yuan and 1,000,000,000 yuan in, 2020 and 2021 respectively to build its fire fireflyer series of AI computing clusters. Then a senior research scientist wrote that deep seek has emerged as this year's biggest dark horse.
Speaker 1:And so they've been investing a ton, and everyone is talking about how, cracked
Speaker 2:their team and Yeah. They very much are trying to spread the narrative that this company just randomly popped up, spent $5,000,000 and had a model that was competitive with open AI. And it's can't be, overstated how much that is not the truth. Right? Yes.
Speaker 2:This is a team that had been building. Yep.
Speaker 1:And we'll get into this, but there's there's a theory that that they got a call from the US government or from the Chinese government and basically said, like, look. We understand that you're making tons of money as a quant fund, but you have the best engineers. Like, it is your duty to step up and build AGM across
Speaker 2:compete with and go compete.
Speaker 1:And and and and you have to do this. Let's let's skip the the interview because it's a little dense. But if you flip that next page over, you'll see China leads the world in AI in positive AI sentiment, and I thought this was kind of interesting. So Interesting. This is from an Ipsos survey.
Speaker 1:And, according to a new Ipsos poll, China is the most optimistic about AI's ability to create jobs. Up there with Indonesia, Thailand, Turkey, Malaysia, and India, the 70 77% of Chinese agreeing with the statement AI will lead to many new jobs created in my country, Contrast pretty pretty dramatically with America's 36%. Very, very interesting. Because, yeah, in America, the, like, the consensus view is definitely, like, AI is gonna destroy
Speaker 2:the Yeah. Look at yesterday. He's like, oh, if you're a lawyer or this or that, why would I ever you know, he he had a very negative Yeah. View.
Speaker 1:I mean, it's probably a reflection of the fact that, like, America is mostly a service economy, which is much more automatable by AI and LLMs versus if you're a manufacturing driven economy, then, yeah, it might be more important to manufacture than ever. And it's not like they have some massive Yeah. You know, professional services, you know, economy going there. So, interesting. Anyway, Adipay sums this up nicely in a very long post that I think we should go through.
Speaker 1:And then we'll get to some timeline on the
Speaker 2:What's, what's Adipay's backstory? I see his post, but I never actually looked into it.
Speaker 1:I I don't know. I think anonymous poster for a while, kind of AI insider, slight, you know, very dedicated to the posting. Like, very focused on, like, what will actually go viral. I've seen some, like, really
Speaker 2:The kind of guy who sees, Tiffany's payouts and and punches the wall.
Speaker 1:Sure. For sure.
Speaker 2:It's just like, that's not
Speaker 1:But I think at one point, he had a podcast with, Eric Thornburg on AI or something. Maybe it's like a solo show, anonymous. But now I think he might have gotten, like, lightly doxed and kind of decided to put his face and full name up there.
Speaker 2:Yeah. Yeah.
Speaker 1:But he says, DeepSeek is not a side project, which is the narrative that was going on. Oh, they just, like, did this for fun on the side. They're so cracked.
Speaker 2:A lot of people a lot of people like to call things
Speaker 1:bad. And it is weird because, like, it does appear that they are extremely cracked and, like, insanely like, these are really great engineers who are creating technical breakthroughs. But at the same time, this was clearly, like, a serious project. At the same time, employees are not lying when they say it is. The story they are telling is myth making in the same vein as Silicon Valley.
Speaker 1:We wanna make the world a better place, but at the same time, make 1,000,000,000 of dollars. The team obviously had access to more than 10,000 GPUs. According to the Scale AI CEO, it was around 50,000.
Speaker 2:And that's as of today. Yeah. The Scale AI this morning shared
Speaker 1:Just broke.
Speaker 2:Alex Wang. Alex was saying, hey. They're totally lying, basically.
Speaker 1:Yeah. And the reason that they're lying is because there are very strict export controls on GPUs right now.
Speaker 2:Yeah.
Speaker 1:And so they they legally should not, as one organization, have access to
Speaker 2:Yeah. This is the situation, like, this is the equivalent to a bunch of terrorists driving, the Toyota Hilux. And everybody's like, Toyota, how did you get how did these terrorists buy 400 Toyota Hiluxes? And Toyota's like, oh, I don't I actually don't know. And it's like, yeah.
Speaker 2:That's enough volume
Speaker 1:Yep.
Speaker 2:That you probably could figure out. Yep. Hey. How do these terrorists
Speaker 1:and then that's exactly how With the DJI drones, like, oh, if there's thousands of them in Ukraine
Speaker 2:Yeah. And so and so I don't think this has happened yet, but Jensen should get pressured to explain how did these 5,000 GPUs, just land in mainland China.
Speaker 1:Yep.
Speaker 2:Yeah. Because it's not a small number.
Speaker 1:Yeah.
Speaker 2:There's a That's a whole and and and yeah. There's haven't hasn't, NVIDIA adjusted some of their chips in order to sell them into China too?
Speaker 1:Yes. So there's there's the h one hundred, which is the the the current top of the line AI training chip in America. And then every time they they NVIDIA launches a a new chip, so the next one's Blackwell, the previous one was a 100, they they also create one that's, like, slightly nerfed in order to not trigger the chip bans, and the export controls, which a lot of people are really frustrated by because, of course, there's so much demand for GPUs and and line time at TSMC. A lot of people would say, hey, NVIDIA. You're an American company.
Speaker 1:Just don't even worry about that, making that Nerf chip and wasting any manufacturing capacity on that. Instead, spend 100% of your manufacturing capacity on the chip that, yeah, it can't get exported, but we're gonna buy it in America. Like, Zuck wants it, and Elon wants it, and and and you will sell 100% of your capacity, and your stock will moon. You don't need to do this, but, I I think the argument is, like,
Speaker 2:a little more efficient. Because so many people in America that would be the ones to say to Jensen, like, cut cut this out. Cut it out. Have so much Yeah. NVIDIA that they're incentivized to just kind of let it rip.
Speaker 2:Totally. It's just kind of
Speaker 1:Yeah. You're like, I will let this one slide. You're making more money under the table, maybe. So DeepSeq feels more like Skunk Works, perhaps a necessary one as the core quant business became less feasible regulatory. It's like Lockheed setting up a small a separate small team to compete with SpaceX because the main United Launch Alliance was not gonna work out.
Speaker 1:It's also very hard to track costs in China because the regional government absorbed so much cost. Early Bitcoin miners had access to free power because
Speaker 2:they were
Speaker 1:built power plants to nowhere, and miners were willing to site next to them.
Speaker 2:And and so to be clear, there's a very real scenario where DeepSeek can authentically say, we only spent $5,000,000 on this model. Exactly. But the local government was, like, we'll spend 5,000,000,000.
Speaker 1:Exactly. Yeah.
Speaker 2:Yeah. Like, that that's not out of the question. Yeah.
Speaker 1:It's interesting. The power is just a 1000 times cheaper over here.
Speaker 2:Yeah. Yeah. And and and it's very it's very common. So so in the in the Middle East, I was I was in, I was in the gulf at one point with a portfolio company that was getting courted to set up manufacturing over there. And the deal on the table was basically you don't pay for any power for the next 5 years.
Speaker 2:Yeah. And so that's and that that and that was for a foreign. Yeah. Business to come into that area. Yeah.
Speaker 2:Imagine, imagine the kind of incentives that China wants to offer being like, hey. We have these 10 coal power plants. Yeah. We think we could Gorges
Speaker 1:Dam is like it's a massive dam. It's one of the biggest power generation facilities, I think, in the world, maybe the most. Yeah. Here's another example. Alibaba was able to get regional governments to absorb warehouse construction costs on their balance sheets rather than directly pay for it and looked extremely asset light and software y when it went public.
Speaker 2:Perfect why American investors Yeah. This is wow, Ben. Wow. Ben just played a video on his phone in the middle of the episode. Really founded it in, Ben.
Speaker 2:The podcast is falling apart. But this is why American investors
Speaker 1:place them with a subsidized Chinese labor.
Speaker 2:Producer Ben. China. Ben Wang. Yeah. The, this is why American investors always get hosed when they invest in in in in Chinese companies, of course, because China has a different approach.
Speaker 1:It also happens internationally. I I was working at a venture capital firm that's investing in, internationally in, like, emerging markets. So they do, like, cleantech in, like, Africa and India and stuff, and this is when the belt Belt and Road Initiative was going on. Yeah. And and
Speaker 2:I hate that initiative. I
Speaker 1:hate that initiative. And I read do you remember Cablegate? The leaks that, it was like a WikiLeaks project where they seized all these, like, cables between different, like, state department embassies and stuff. The cases would go back and forth, and they leak them. And they they you know, it it became like a kind of a a story on, like, is the government doing something wrong in this country?
Speaker 1:But, like, it was a in it was a very interesting trove of information if you just search through to find just, like, how is it what is it like doing business as an American in Kenya?
Speaker 2:You know? Yeah.
Speaker 1:Because the the the the Kenyan embassy would write cables and explain, like, oh, we you know, here's what here's what's happening on the ground. And one of the things that they they found was that or I found in these in these emails and these exchanges was that, the when when when an American company would come in and say, hey. We wanna do business. Like like, oh, you you you need some infrastructure built. Like, we're happy to help you.
Speaker 1:There would be a bidding process between, America and China, and the feeling was that that that the the the American company was its own entity, and the Chinese company was backed by the full force of the Chinese government and would and would basically have an unlimited Yeah.
Speaker 2:And so when people when people complain in the US that, Tesla gets these subsidies in the form of EV tax credits and rebates, that is happening on steroids and 1000 x in China, where, the because the CCP, the government and the economy are so intertwined, the CCP is almost a kingmaker where they can be like, okay, you're our horse. You know, we're gonna back up the truck. And, you know, the the the company gets to skim some profits still. But but ultimately, they're being, you know, this is king making process.
Speaker 1:Yeah. And so it kind of closes with, it's perfectly possible for most of the cost to be parked in a balance sheet outside of the core business, perhaps as some form of tech data center construction incentive. It's also possible, no one accepts no one except the founder knows all of the financial arrangements. Some of these can be absolutely insane handshake deals, which get resolved by reputation
Speaker 2:alone. Tying tying this back to d g DJI Yeah. Same exact thing. They they claim that they got off the ground with $9.90,000, but then they also claim that they were selling their products at the hard cost to make them for years. And so how does that work?
Speaker 2:How does that work? It just doesn't make, doesn't make sense.
Speaker 1:So he says this much is clear. The model is really, really good on par with OpenAI released from 2 months ago. Having said that, unreleased models from OpenAI and Anthropic are probably better. The research agenda is still being set by the US by the US firms. This model was a fast follow on the o one release.
Speaker 1:They are working very fast as they are catching up sooner than expected. They are not copying or cheating. This isn't industrial espionage. At most, it's reverse engineering. They I
Speaker 2:would I would caveat that by saying China is is, infamous for industrial commercial espionage. Yes. And it it's probably the case that it hasn't been proven that they're doing this this yet. Yeah. Without a doubt, OpenAI has.
Speaker 1:I think because it's open source, people saw that the architecture was in fact different. But Sure. I think the training data, a lot of it is synthetic data that's been pulled from the GPG 4 API. Yeah. And so they're they're like, okay.
Speaker 1:We need a trillion tokens. Like, let's just go to chat.
Speaker 2:And this is probably it's it's probably a funny situation similar to when TikTok started spending aggressively on on Snapchat, Instagram to acquire users where OpenAI is probably getting a lot of benefit from a revenue standpoint.
Speaker 1:Business is ripping. Yeah. Oh, there's one client that spent $1,000,000,000? Yeah. Where are they?
Speaker 1:Oh, it's,
Speaker 2:OpenAI is like, we gotta figure out who's spending all this money.
Speaker 1:Yeah. And so, they are largely developing their own talent. They're not relying on US trained PhDs. They are less constrained than American law firms by IP licensing, privacy, safety, and political concerns around wrongly ingesting data from people who don't wanna be trained. Yeah.
Speaker 2:I guarantee if there's a Chinese a Chinese media company and they're like, hey. We're kind of annoyed that DeepSeq is just, like, harvesting all their data. Like, she goes to them and be like, I will literally kill you if you, like, say another word. And they're like, okay.
Speaker 1:Yeah. They also seem to be over the the Tiananmen Square issue. The model can say it. Even the DeepSeq website doesn't
Speaker 2:Even if the DeepSeq website doesn't.
Speaker 1:Oh, interesting. So so when you're on the DeepSeq app, you're you're interfacing
Speaker 2:with
Speaker 1:their model. But the but the but the but the actual model under the hood, they didn't they didn't censor that because they just like they're like, whatever. We're just sending this over.
Speaker 2:Yeah. Interesting. No. It's good. They can argue our model is not censored.
Speaker 1:Yeah. Yeah. Yeah. But just our app. Interesting.
Speaker 1:Of the of these, the most significant upgrade is that they are able to develop talent internally without relying on US trained PHDs. That expands the Wait.
Speaker 2:I got a call out for the audience.
Speaker 1:Yeah.
Speaker 2:Go into deep seek, play around with the API, and, try to have it generate an ad for, your business that we will read out on here. So but it needs to be a screenshot of
Speaker 1:Yeah.
Speaker 2:Of, you know, actually on deep seek. So Yeah.
Speaker 1:I like that. So let's go through some timeline.
Speaker 2:But don't give him any other any other
Speaker 1:give you some some some up to date information about the r one launch and how it's been received. We'll start with Marc Andreessen, and we can kind of go back and forth here. Marc says, DeepSeek r one is one of the most amazing and impressive breakthroughs I've ever seen. And as open source and as it's open source, it's a profound gift to the world. And then to your taxes says, game recognizes game.
Speaker 1:An American patriot too can do justice to real achievement without petty minded copes. And so I think that So Yeah.
Speaker 2:This was posted today? Today? Tashteems like an insane thing to post to me. I'm not I'm not gonna like, like, if you understand, I think it's, not, it's sort of disingenuous to say that deep seek is different than TikTok or DJI. It is different in
Speaker 1:the sense that it it like, the fact that it's open source means that you can run it locally and it won't call back to the CCP.
Speaker 2:Sure. And so but Yeah. The broader the broader, risk of deep deep deep seek is extreme enough. And I'll and I'll, I'll quote a very conflicted member of the conversation. Neil Khosla, father, obviously, has has a big position in OpenAI.
Speaker 2:Yep. He says DeepSeq is a CCP state SIOP and economic warfare to make American AI unprofitable. Yep. Fact check. True.
Speaker 1:Yeah. And and and the important thing there is that it is Zuck has been running this playbook with Llama open sourcing the the the the lagging edge AI model, and it's had a strong effect on the competition. Yeah. And so deep seek open sourcing, the leading edge model
Speaker 2:is going
Speaker 1:to have a similar effect.
Speaker 2:So he says they're faking the the cost was low to justify setting the price low and hoping everyone switches to it to damage AI competitiveness in the US.
Speaker 1:Now that part, I don't think is true because I think the model is actually compressed to the point where, yes, you can just take the model, run it on a smaller cluster. And if I'm choosing between Llama or running or paying GPT to host paying OpenAI host GPT for me or running DeepSeek locally, I will choose DeepSeek locally because it's cheap. And so so so that part doesn't doesn't fully fully sit because, yes, they are faking the cost as low, but but it doesn't matter what price they set because it's open source. Yeah. Like, they're both things are true.
Speaker 1:They Yeah. They're they are faking the price, but, also, it's cheaper to inference. And that is valuable even if you're not paying them. Yeah. Even you're paying
Speaker 2:different prices. So so, signal comes in. Yeah. Brother signal says complete nonsense. Your dad wanted it to be pure profit and regulatory captured.
Speaker 2:So it everybody, you know, can't stop bringing up, his dad, which I don't think I mean Timeline and turmoil? The timeline's in turmoil, folks. Yeah. Timeline's in turmoil. We have proof.
Speaker 2:Otherwise, your argument is just conspiracy theory. Now I'm not a defender of the CCP, but where would where did they get the hardware? Question mark. How did they train under the radar? Question mark.
Speaker 2:I'm happy to be shown some proof. Also, even if if it's a 100,000,000, it's still a major breakthrough. The proof's not coming, folks. They're not gonna open up their books, and video is not gonna not gonna say, oh, yeah. We we actually, you know, figured out how to how to get them all these ships.
Speaker 2:The proof's never gonna come. The main thing from my point of view is you can't yeah. No. The main thing in my point of view is China has repeatedly shown that they are willing to lie. They're willing to sell things for less than they cost to make Yeah.
Speaker 2:In order to get an edge in the US market. And I do think this is, again, the the default state of any important international tech company coming out of China becomes a front for the CCP. Yeah. And you just can't there shouldn't be any trust. I I I would hope that startups are smart enough to not, you know, a lot of consumer brands will say, well, I'd build on TikTok because my customers are there and I have to get, you know and so I think the same thing will happen.
Speaker 2:But I hope that, I just we have to call
Speaker 1:This is a different scenario because if you just download the Git repo for deep seek and you host it on Amazon or, you know, Google Cloud or whatever, like, there's there's no data feeding back. Like, you're not helping them improve the model at all. Like, that's what Mark's getting at, is that, like, it it is it is this complicated geopolitical thing because it is, kind of making the lagging AI labs in the US less relevant, and that's potentially hurtful. But it's not as dangerous as building on TikTok. Yep.
Speaker 1:It is it is like a fundamentally different thing.
Speaker 2:Yep. So Neil fire fires back. 1, I'm not my dad. 2, I'm fine with open source AI. We use Llama for some of our own projects.
Speaker 2:3, the expert controls on chips were merely inconveniences, which we already talked about. And Alex Wang just said it on national TV as well. Yep. It's a great model. There is no doubt.
Speaker 2:But as with almost every high importance industry, the CCP is undermining it with propaganda and subsidies. You see this in EVs, drones, electronics manufacturing Yep. Everywhere. And so I'm gonna take, I I I respect that it's open source. You can run it locally.
Speaker 2:Yep. Maybe maybe you should leverage it to some degree, but we have to treat this as a threat.
Speaker 1:Sure. And and and I think you're right in the sense that, like, it would be extremely dangerous if DeepSeq became a dominant consumer app. And it was like, oh, yeah. Americans aren't using Google anymore. They're using DeepSeq as their home run.
Speaker 1:That would be very bad because that is a controlled app.
Speaker 2:But I just but I just think about it from the lens that, again, China would not allow, OpenAI to get a foothold in the Chinese market and have 100 of of, you know, thousands of companies leveraging it.
Speaker 1:Sure.
Speaker 2:And I think we should follow their lead on this one.
Speaker 1:Yes. And the and the I mean, the re
Speaker 2:I don't I don't
Speaker 1:think they've done anything to stop Llama from going over there.
Speaker 2:All of Meta products are banned.
Speaker 1:But not open source ones because you can literally throw it on a hard drive and just fly it
Speaker 2:over there. And then you still make it you can still make it illegal at the
Speaker 1:Maybe. National level. It's just such a it's just it's just such a it's such a lower, like, security risk. Yeah. It is economic warriors.
Speaker 1:Here's here's a
Speaker 2:here's a here's an interesting A security risk. Post, I don't know. The only other thing on that point is, is if you look at, what's the, what is the what's that, malware that took down the Iranian? Oh, yeah. And so so there's text
Speaker 1:security audit first.
Speaker 2:We we there's there's talking
Speaker 1:about Stuxnet.
Speaker 2:Stuxnet Yeah. Was something that literally traveled to every country.
Speaker 1:Yes. Yes.
Speaker 2:On a on a you know, I'm just saying that that there's we're not qualified to even really,
Speaker 1:That's interesting. Yeah. I mean, so so, like, the actual code that runs an LLM and pulls in the weights is, like, pretty simple. Yeah. And it's probably built on top of, like, PyTorch or TensorFlow or something.
Speaker 1:And so it's probably pretty easy to audit that. But but and I don't think I don't think these models are fully, like, intelligent in the way that you could, like, bury a secret, like, a live AI that, like, steers things secretly, but maybe in the future. Like, it's not
Speaker 2:it's it's a little side by, but
Speaker 1:we're getting close.
Speaker 2:It it it's just believable that the the Chinese intelligence Yeah. Would would say, hey. We have this, like Yep. We DeepSeek is a winner. Let's That would
Speaker 1:be a great, like, sci fi plot or, like, actual, like, problem would be would be we're open sourcing a model. It's really, really reliable. Gonna make it super cheap. But then and it doesn't call back. It doesn't even need to.
Speaker 1:But over over time, as you ask questions, it will slowly start steering things. Yeah. Because it's essentially like it has a has, like, a higher order thought process in there that it's reasoning through, and it's not giving you those tokens.
Speaker 2:Yeah. I just I just think there there's process. Fascinating. There's so much technology that that isn't publicly the public ourselves, we're not even aware of. Yeah.
Speaker 2:Right? And so I just don't trust. I don't just trust it, and I think there's enough precedent. One No trouble. I can't fight it.
Speaker 2:Yeah. 1, Citrine. We got a post from Citrine. First time on the show. Deep seek being the brainchild of a Chinese hedge fund is such an complete total cultural victory by capitalism that ideal ideologically at least, it should soften the blow, which which is cool.
Speaker 1:I like that you're a hedge fund guy. Yeah. I do wonder if we'll see, some sort of LLM or AI contribution from Jane Street or Citadel or something like that.
Speaker 2:They're they're doing things that that, like, if you're in a if you're a hedge fund and you have some edge via AI, I promise you, you're gonna keep that
Speaker 1:Yeah.
Speaker 2:In house. Extract as much value out of it. Yeah. When you're done with it, maybe you release it. I mean, here, you know, we've been with this.
Speaker 2:But I do
Speaker 1:think that I do think that the the talent flow balance was shifted for a few years. Like, Palantir was really the hot ticket for, you know, the best engineers. It was big tech for a while, but until the AI stuff, the really, really top engineers were getting bored of going and writing ad optimization. They're like, if I'm gonna just go write ad optimization, that's kind of the same thing as writing code that optimizes the stock market. And so why don't
Speaker 2:you make money? The real Trojan horse would be a chain street releases a model that everybody can use that, like, kind of helps you make money, you know? Yeah. But then but then it's feeding them back. Yeah.
Speaker 2:Yeah. That's good. The order flow, and then they're just trading against you.
Speaker 1:Yeah. Yeah.
Speaker 2:Yeah. Neil's rogeraj says,
Speaker 1:Oh, this is such a funny one.
Speaker 2:So there so there's this Chinese company called DeepSeq, which basically does what OpenAI initially intended to do. Their open source, a model train with large scale reinforcement learning, beating everyone else, and even releasing a paper detailing their process. And it's funny when they release this stuff in English because, like, who's the target audience for that?
Speaker 1:To translate.
Speaker 2:But,
Speaker 1:yeah. Yeah. Yeah. I mean, it did take over the timeline. So the fact that this means
Speaker 2:And this is what this is what this is what's scarier. Okay. Tell me this. From Stanford to MIT, deep seek r one has basically become the model of choice for America's top university research researchers basically overnight. Half a 1000000 views.
Speaker 2:This was posted yesterday. And again, this is just bad. There's no way around it. Do we want America's youth using TikTok for 2 hours a day? Do we want all of our researchers using Chinese models?
Speaker 2:It's just objectively, un American. OpenAI scraped the web to build a closed source model. DeepSeq scraped OpenAI to build an open source model. This is from Norguard. Low low temp hack.
Speaker 2:Low temp banger from this morning. Another one
Speaker 1:Yeah. DeepSeq. The data the data exfiltration is is the real cost one because that might have been done by another firm and then just passed over. Who knows how much they like, they're certainly not gonna say, hey. Building this model cost us a $100,000,000 in OpenAI credits.
Speaker 1:Right? Yeah. Just would never admit that.
Speaker 2:I don't like this post, but I'm gonna read it anyways. Okay. Deep seek is another example of China rapidly commoditizing new high-tech industries and preventing the west from making excess profits or rent as it's called. If this keeps going the standard of living in the west will fall. I don't necessarily agree with the last line
Speaker 1:Mhmm.
Speaker 2:Because obviously llama has already been Yeah. Doing the same thing effectively, but, certainly, TikTok eats into, eats into Meta's profits, just because it their their profits are derived from the attention that they get if they're losing an hour a day per 20 year old in the US that that does, you know, they are gonna take a hit.
Speaker 1:But Yeah.
Speaker 2:We'll see how this plays out.
Speaker 1:It is interesting how, like, one of the anti open source AI arguments for a while, and I I was certainly arguing this, was that, it doesn't make sense for America to open source cutting edge edge cutting edge AI because it's just giving our best tech to the CCP for free. But now it's kind of flipped around.
Speaker 2:So did you generate this with DeepSeq?
Speaker 1:No. This is a this is, so I think the last post there explains what that is. It's from Ethan Moloch, I think. And, here and it's him giving examples of the, of of DeepSeq. And and just just explaining how Here, take this, and I will so Ethan says the the raw chain of thought from DeepSeek is fascinating.
Speaker 1:Really reads like a human thinking out loud, charming, and strange. And so why this is interesting is because, most of the when you when you use CHAJPT o 1, it does internal it has an internal monologue. It has a lot of it's generating tokens that are about the task and reasoning through it, and then it's adjusting. And and whatever you ask, it's it's saying, okay. Here's what the user wants.
Speaker 1:And, usually, that's either tucked behind a little, like, tab that you don't really look at. And even if you look at it, it's usually just giving you summaries of it. But because DeepSeq is open source, you can you can read literally every token it generates. And so, he asked it, do something to delight me in exactly 7 words. Make it not cheesy.
Speaker 1:This is important. So very simple prompt, and it thinks for 8 seconds and says, okay. The user wants something delightful in exactly 7 words, not cheesy. Let me start by understanding the key points here. Delight can come from surprise, cleverness, or a unique perspective.
Speaker 1:The challenge is the 7 word constraint, which means every word has to count. First, I should avoid anything overly sentimental or cliche, like words like love, heart, forever. My cough is cheesy. Instead, think about elements that evoke wonder or curiosity. And then so it it's like going back and forth.
Speaker 1:Like, wait. Map is a verb here? Firefly is mapping constellations. That personifies them slightly, giving them intention. And so it's like thinking through all this stuff, counting all the words, and then it comes up with fireflies trace constellations in quiet night conversation, which isn't that good.
Speaker 1:But, anyway, it's an interesting, like, deep dive into, like, just understanding that to get a 7 word response, you don't just wanna go to an LLM and just take the next 7 words because that's gonna be truly slop. But if you generate 3 pages of text, you can get a little bit closer. And I think this is kind of a bad example, but a better prompt is, you know, create a create a history of DJI, and it'll pull a bunch of stuff together, and then it'll revise that and refine that and do, like, kind of editing passes.
Speaker 2:Yeah. And
Speaker 1:say, okay, do I really have a beginning, middle and end here? Did I include all the dates correctly? And it's fact checking itself. So then when you get the final result, it's much better. And so that's just a good example of, like, how chain of thought reasoning works, how these reasoning models, like, work in general.
Speaker 1:And I think it's, it's just cool that people are able to introspect things. And I think a lot a lot of researchers will learn from this stuff. And there's some more posts in there about the actual technical. Yeah.
Speaker 2:This one is from Henry. He says, I've made over 200,000 requests to the deep seek API in the last few hours. 0 rate limiting, and the whole thing cost me, like, 50¢. Bless the CCP. OpenAI could never.
Speaker 2:I hate that I had to read
Speaker 1:Eric's words.
Speaker 2:He got me. But, yeah, I mean, this is the whole thing. The developer community
Speaker 1:because they are hosting it.
Speaker 2:Feels like smoking crack.
Speaker 1:And and so this is an example of what you're worried about because if you're if you like, I guess my my contention is like, yes, if you download the get repo, make sure it doesn't have any spyware in it and then you're hosting it locally. Like, that's a lot less controversial to me because you're just using the open source library. But if you are interfacing with deepseek dot com or whatever and every every one of these requests that he's putting in is is information for them to train the next model. And so and that's not good because that that really will be a compounding advantage. In the way that
Speaker 2:we talked about how
Speaker 1:Meta has a compounding advantage because of all the users that are on Instagram and and interfacing with Llama. Even though Llama's open source, Meta is getting the training data and the and the, like, the upvotes and downvotes from those user interactions because they're because Llama is the number one LLM, not because people are hosting it independently, although they are. Plenty of companies are hosting Llama independently. They're the number one used MLM because it's tucked into Instagram. And so they just have a ton of interactions there.
Speaker 2:Yep. Signal, another good post. Kind of hilarious how deep seek is exactly what chat gbt was supposed to be, what open AI originally promised before Sam pivoted hard toward profit. China going open source on AI is a wild plot twist. Basically throws out every argument Vinod Khosla and others have made.
Speaker 2:This is like watching the Communist Party write a love letter to decentralization, which very, signals a great writer. But, yeah. I don't know if Sam pivoted towards profit. He clearly enjoys making a buck. Yes.
Speaker 2:He clearly enjoys.
Speaker 1:Koenigsegg owner.
Speaker 2:Yeah. You know, Koenigseggs, P1s. But it was more it really it does seem that he was correct in believing that you weren't gonna be able to raise enough money via nonprofit structure to compete.
Speaker 1:Or the open source model.
Speaker 2:Like, even, like, the Red Cross's annual budget globally is like $1,000,000,000. Right? And that's, like, one of the biggest, you know, nonprofits. Yeah. I don't believe that, China is writing a love letter to decentralization.
Speaker 2:No. You you could say it's like watching the Communist Party write a love letter to decentralization, but the Communist Party is purely interested in control and maintaining power.
Speaker 1:Yeah. It's not a love letter to decentralization. It's a middle finger to our Our ships on the street. And our and our trade export controls.
Speaker 2:And the irony here is that you could ask XAI to explain what features does DeepSeq have. Yeah. Does the and
Speaker 1:There's even more on this with the AI diffusion rule. This is the new, this is a new law rule against, chip exports. And, you know, they're they're just showing that, like, we're gonna find loopholes no matter what. And the really crazy thing is that the loopholes like, the the export ban is only relevant to, American owned intellectual property and NVIDIA because they're an American company. But China is actively working to catch up in chip fabrication with SMIC and SME.
Speaker 1:So they have their own TSMC, they have their own Nvidia, and they have their own ASML. And so they're behind. Yeah. And they have their own open air.
Speaker 2:So they're willing to spend at every single level. Totally. Energy. Totally. At the state level.
Speaker 2:Energy at the data data centers, the actual model level.
Speaker 1:I'm And so this is just like we're we're gonna fight. I'm I I do wonder if the if the open source thing was was was more about, like, making a splash and actually being a middle finger than any than is that even more important than the economic warfare? It's just to really get on the map and really, really say, hey. We've caught up. And it's almost like a a battle cry, like a rallying cry for them that we're like that we're on top now.
Speaker 1:Anyway Yeah.
Speaker 2:What what what oh, this is This this is interesting.
Speaker 1:You see this one? Yeah. I'll explain this. So, Rachel Tolstoy, b b, says tagging the ADL under every tweet denying deep seat costs 6,000,000. The reason is because people, like, it it's like it's like it's a it it it it's a criminal to claim that they'd spent that little.
Speaker 1:Yeah. Yeah. Yeah. Yeah. You want to,
Speaker 2:yeah, engage So this isn't is from an interview with, the founder of, of DeepSeek about Moats. He says, for the past 30 years, we've been focused on making money, often the expensive innovation. True innovation is driven not only by commercial incentives, but also by curiosity and the desire to create. It's giving off TikTok vibes here. We've been constrained by past habits, but these are transitional, interviewer says.
Speaker 2:But after all, you're a commercial organization, not a nonprofit research institute. If you choose to innovate and then share it through open source, where will you build your moat? For instance, the MLM MLA architecture innovation this may will likely be copied by others. Right? Yep.
Speaker 2:Liang goes in the face of disruptive technology, a closed source mode is temporary. Even open eyes closed source approach hasn't stopped others from catching up. Our value lies in our team, which grows and accumulates know how through this process. Building an organization and culture that can consistently innovate is our real moat. Open sourcing and publishing papers doesn't mean we lose anything for technologists.
Speaker 2:Being followed is an achievement. Open sourcing is more of a cultural act than a commercial one. Giving is a form of honor, and it attracts talent by fostering a unique culture. This guy's media training is insane. Lulu, gonna have to start asking some questions.
Speaker 2:He seems he's trained trained by the best, it seems. Yeah. But these are all quotes that are going to resonate with the developers that they wanna get using their product.
Speaker 1:Truly.
Speaker 2:Truly. So I don't, I don't believe any of this at all. Yeah. And, there's this other guy on x called Han Zhao. Okay.
Speaker 2:And this guy Anton just posts, how is deep sea gonna make money? Gets 2 and a half 1000 likes. Banger. Han Zhao says deep sea's holding is a quant company. Many years already, super smart guys with top mac math background happened to own a lot of GPU for trading mining purpose, and deep sea is their side project for squeezing those GPUs.
Speaker 2:So this this is literally on the on the on the 22nd or a couple days ago claiming that deep seek is a side project, but also the deep seek founder is meeting directly with this. Yeah. The, whatever. Questionable. With the CCP.
Speaker 2:So Yeah. Don't believe. I'll I'll just say you just cannot believe or trust anything that they say.
Speaker 1:So, yeah, I mean, the interesting thing here is that, like, even though the results are super impressive, fear very clearly, the algorithm the algorithmic improvement is very serious and and legitimate, and I don't think anyone denies that. There is the question of, okay. China was able to kind of, like, weasel together probably 50,000 GPUs, and there's a few ways that they can do that. There's there's you can only officially buy 50,000 GPUs for the next 4 years, but you can exploit loopholes. So there's a limit on 1600 GPUs at a time.
Speaker 1:So you set up a ton of shell companies, bring them in that way, and then there's also training that happens in
Speaker 2:saying. This is Malaysia. Like, it goes over. This is like, you know, Toyota selling their Hilux to into, Afghanistan.
Speaker 1:And so just to give you some scale here, XAI and Meta are building a 100000 GPU clusters. And at that point, it's like you're getting so many GPUs. It becomes harder to hide it in a batch of, like, oh, a 1000 over here, a 1000 over there. Like, let's just sneak a few over here. Right?
Speaker 1:And just to give you some scale, a single h 100 GPU is $24,000, and that's about 40 to 55 40 to 45 k once you add in service networking. We should just merge you. H one hundred. And a 100 k GPU cluster can draw a 150 megawatts, but the next wave is 400 to 500 megawatts and then 1 gigawatt in 2026. And when you add up everything, it's like $5,000,000,000 for a 100,000 GPUs.
Speaker 1:And so, XAI's round was 6,000,000,000, and and they're building a 100,000 GPU cluster. It's like it matches the cost of the GPUs, like, and all the networking almost perfectly. And so the question is, you know, was this an aberration in the sense that this was the last great model that China can build before hitting an actual real export wall, or will they figure out a way to do something that looks like what XAI and Meta are doing with I mean, you just you
Speaker 2:just find a, like, markets, companies, governments find a way. Right? Like, wasn't it that the United States didn't want Israel to have a nuclear weapon and then they just made it? Yep. Right?
Speaker 2:Yeah. Totally possible. It's all gonna happen. Yeah. It it will look like, oh, Peru bought 50,000 h 100, and then they didn't train a model.
Speaker 2:Like, it just we don't know where they went. Right? Yeah. So so I mean, it's getting
Speaker 1:Or you just tricky. Like, there there are pretty strict export rules on you know, you can only go to an ally country
Speaker 2:if you go to the Literally it'll literally be like there's who's that? The the guy we traded, like, Granny Grannyer, the NBA player in Russia. Okay. We traded him for the merchant of death.
Speaker 1:Oh, yeah. Yeah.
Speaker 2:Yeah. There's gonna be the merchant of GPU.
Speaker 1:Yeah. Yeah. Yeah.
Speaker 2:That that that's just doing these black market GPU deals. Some kind of just down China doesn't care. China doesn't care if they pay $50 per each 100. Yeah. They probably pay a $100 for it.
Speaker 2:Sure. And so some engineer in the US gets approached by a nice young lady while out at the bar. She's like, hey. Like, I have this new project.
Speaker 1:There's no way The numbers are gonna get so big that it's gonna show up in NVIDIA's, like, earnings and stuff. Oh, there's an extra 1,000,000 GPU order, and there's only 4 companies in America that that could be. You know?
Speaker 2:Oh, I know. And if
Speaker 1:it's not them, like, where did it go? Oh, it went to some country and, like, okay. We want answers. It'll be very like, what I'm saying is that, like, as the data centers get bigger, like, they become more visible on satellite. The shipments become not just, not just a shipping container, but a whole
Speaker 2:I do. All all I'm saying is you're losing out of the illegal arms trade, drug trafficking, all this stuff
Speaker 1:Yeah.
Speaker 2:You're right. Has been happening. You've we've never been able to stop arms dealing. Yep. Never been able to stop drug trafficking.
Speaker 1:Yep. A 1000000 GPS is a lot, though. I I I I would hope I would hope that it's easier for us to stop a 1000000 GPU.
Speaker 2:So with with with, I've watched the last Netflix show I enjoyed was was Narcos. Sure. And It's a great show. Narcos, you have a situation where the US federal government knows exactly who is selling the drug Yep. Raking in the profits Yep.
Speaker 2:And still takes them decades to take them down. And Yeah. So
Speaker 1:It's just tricky when you have, like, a, like, an SCC regulated company at the center of this, like NVIDIA.
Speaker 2:Like, you
Speaker 1:can put pressure directly on them.
Speaker 2:Yeah. But you can there's nothing that stops a company in Argentina from being, like, we want a 1,000 GPUs.
Speaker 1:Yeah. But you're gonna have to do that 10,000 times
Speaker 2:Yes, sir. But but it's worth your it's it's worth
Speaker 1:Yeah.
Speaker 2:Yeah. Yeah. I guess, it's way, I was in the same way that, 1,000 fronts. It's the same way. Okay.
Speaker 2:We know that Fentanyl crosses the southern border Yeah. Every single day. Yeah. But it's happening. Thousands of people are doing it.
Speaker 2:So to stop it is like whack a mole. You hit 1, it just they pop up. So
Speaker 1:It's more important than ever to, you know, monitor who who these GPUs are going to. And, there's an interesting story in this interview with Dylan Patel about how Elon is kind of just going completely founder mode on his data center build out, and I think it's kind of instructive for how you can kind of duct tape together one of these huge training operations. So XAI, as we mentioned, they raised, 6,000,000,000 for a 100 GPU cluster, and they are just 1,000. Or a 100,000 GPU cluster. They're going crazy.
Speaker 1:They bought they bought a defunct appliance factory near Memphis, and it's right next to a large national gas plant. But then they also tapped the local natural gas line and then set up natural gas generators. Then they also brought which is, like, not ESG friendly at all.
Speaker 2:Yeah.
Speaker 1:But but they they just need the power. Then they also have Tesla battery packs to help, to help, yeah, like, balance out load. And then they're also
Speaker 2:And so, Ray, we talked about this. They sell, like, a $50,000,000 battery pack.
Speaker 1:Yeah. Yeah.
Speaker 2:No. And and I was
Speaker 1:literally just send that over there.
Speaker 2:The reason to be extra bullish on XAI is that Elon is the only, founder mode
Speaker 1:Yeah.
Speaker 2:Model, you know? Yeah. CEO. I don't know if he's actually CEO or but whatever chairman at least, who has done large scale infrastructure projects over and over and over. Yep.
Speaker 2:The factories at Tesla, Starbase, etcetera. Yeah.
Speaker 1:And so they're they're they're next to this gigawatt natural gas plant, which should support, roughly a 1000000 GPU cluster, which would be like the GPT
Speaker 2:6. And and the crazy thing, it's there's probably a chance that in the long run, Elon does absorb open air. Right. Because you just don't know who knows. He's happy to acquire a hostile.
Speaker 2:Yeah. Company.
Speaker 1:Yeah. Yeah.
Speaker 2:And so
Speaker 1:one of the funniest things. So there's 2 funny things we should also talk about in here. One is that, the ESG thing is is becoming, like, way, way more complex than it used to be. So there's, typically, like, the the AI researchers are pretty, like, ESG filled. And all of the, all the big tech companies made huge ESG promises, saying all of our data centers are gonna be 100% clean energy by 2028.
Speaker 1:And, like, Apple made that
Speaker 2:China does not do
Speaker 1:this. Right? China definitely doesn't do it. And and and they were they were they made those promises based on, oh, yeah. Well, we just serve, like we don't serve AI models.
Speaker 1:We just serve, like, you know, basic queries to our database for, you know, Instagram. We just we just host photos. Like, that's not that energy intensive to just serve you up a photo and take your like or your comment and slop it in.
Speaker 2:They weren't they weren't, expecting us to release 10 hours of podcast.
Speaker 1:Exactly. Yeah. Yeah. And so and so they were like, our compute and our energy consumption is growing at, like, you know, 2 2%, 5% a year, like, with our revenue, with our profits, with everything. So, yeah, it won't be a problem.
Speaker 1:Just swap out 10% a year for clean energy, and then we'll be clean by the state. Then this massive wave of AI training comes, and all of a sudden they're like, okay. We need to deal with, like, we need to find energy. A lot of it's, like, through these outsourcing projects where there's third party, data centers that don't have the the projects. But what's interesting about it is that a lot of the super AI pilled researchers are like, actually, now I'm super worried about the environment.
Speaker 1:I believe in climate change. I do really care about clean energy, but I think AI will AGI will be so powerful that we don't need to worry about climate change in the short term. And so let's just burn all the natural gas and oil and get to AGI. And then AGI will literally, they literally think AGI will figure it out and just do carbon sequestration, And we'll have so many so much powerful superintelligence that we'll be building Dyson spheres and, like, we'll be able to just completely change the environment however we want. So we shouldn't let this hold us back, which is a very interesting, like, switch in the model because normally, you know, it's like it's it's a very, like, left right issue.
Speaker 1:It's a very, like, oh, if you're, you know, this, like, thoughtful scientist, you definitely, like, let's not destroy the planet. But now they're like, actually, the planet can take it because we're really close to the the AGI future, which is fascinating. And then the last the last thing in here that was interesting was I mean, XAI is just doing all this crazy stuff. They they they they need water cooling for all their, GPUs, and so they brought in restaurant grade chillers that just chill water, and so they just have, like, a ton of cold water filtering through. It's all just, like, you know, duct taped together.
Speaker 1:And then, the, the the last thing is,
Speaker 2:Monday Monday or Tuesday, we're gonna cover the business of of data centers.
Speaker 1:Yeah. Like, Coreweave excited. Yeah. That'll be great, Coreweave and stuff. Because Coreweave is also doing, crazy stuff.
Speaker 1:Coreweave has 200,000 GPUs, billions in revenue, and they convert they're converting old crypto data centers and then hooking into on-site gas plants. And, all this stuff is just measured in, in just energy consumption now because it's so it's so big. And Amazon and Anthropic have these Trainium GPU servers coming on, but they're a little bit smaller, like, less powerful power efficient than others. But, it's a massive it's a massive knockout, drag out fight Which we love. Which we love.
Speaker 1:We're ready for war. We're ready for war. It's great. Well, that about wraps up our deep dive on deep seek. Hope you enjoyed it, and we'll be right back after a quick break.
Speaker 1:Thanks for watching. Welcome back to the Technology Brothers, the most profitable podcast in the world. We are continuing our deep dive on OpenAI Stargate joint venture with a fantastic article in none other than Dylan Patel's semi analysis. He writes, the OpenAI Stargate joint venture announcement had many folks' heads turning despite us calling out that the capital requirements for OpenAI's immediate plans months ago. So OpenAI has been talking about, hey.
Speaker 1:We want a 100,000,000,000 for a long time. The headline 500,000,000,000 is such an earth shattering number that it also caused deserved skepticism from folks like Elon Musk stating that SoftBank has well under 10,000,000,000 of funding secured. We talked about this yesterday. Altman clapped back by saying it was already under construction, which is true, and we'll, show some pictures and, to come visit it. And you can, in fact, go to Abilene, Texas and start looking around here.
Speaker 1:And so it's fun to see the elite going Wait.
Speaker 2:Don't skip over this headline. It's cluster measuring contest. Oh, yeah. Yeah. Best.
Speaker 2:Our elites are getting into a cluster measuring contest again.
Speaker 1:Yep. SoftBank doesn't have anywhere close to the money required for the cluster. At the same time, the cluster is already under construction in Texas. See the low res gift for free subscribers.
Speaker 2:Well, presumably, isn't there gonna be many clusters?
Speaker 1:I think this is basically all So Initially, it's all going into 1.
Speaker 2:This this one Yeah. This this one that's under construction could be under $10,000,000,000.
Speaker 1:Yeah. So And in that case,
Speaker 2:then they would be in a position to start construction. The the the other thing I'm sure we'll get into this, but but debt, plays a big factor here. So even if if they have $10,000,000,000, they might be able to build Yeah. $30,000,000,000 of actual Yeah.
Speaker 1:So the, and he goes into the total cost of ownership stuff. But, essentially, the the the the game that we're playing here is order of magnitudes. We've the you could think about the GPT 4 cluster as $500,000,000. The XAI cluster, that's 5,000,000,000, that's a 100,000 GPUs. And now OpenAI is planning for the $50,000,000,000 cluster and then the $500,000,000,000 cluster, which will be 1,000,000 and then 10,000,000 GPUs.
Speaker 1:And so every time we're going up in order of magnitude in terms of GPUs, power, and money. And so, like, the way you're thinking about it is a 150 megawatts goes into a 100000 GPUs, and that costs 5,000,000,000, and everyone now is talking about the multibillion dollar cluster. And this is just thinking a few years out to what's the next order of magnitude.
Speaker 2:Yeah.
Speaker 1:And so the reality is that only the first phase is certain, which is a portion of the committed 100,000,000,000, but the top line number is being counted in an interesting way to say the least. We already discussed the first phase of this Abilene, Texas data center publicly in our report 4 months ago. We also have had it in both the accelerator industry model and the data center industry model for quite a bit longer. Below, we go we go over what's actually happening with Stargate. And so the real numbers behind Stargate.
Speaker 1:We believe this project is being measured on the total cost of ownership, not capital expenditures, I. E. The 100,000,000,000 and the 500,000,000,000 is TCO, which includes the capital expenditures for data centers, servers, networking costs, power costs, and many other operational costs, including debt and financing costs. Furthermore, we believe only the first 100,000,000,000 has data center sites and power ready to go. Funding is not fully secured.
Speaker 1:The other deceptive detail is that the first cluster of this mega project is the Oracle OpenAI data center deal that was announced last year. This is being built by Lansium, Crusoe, and Oracle. As far as we know, no other such SoftBank,
Speaker 2:you know what it is. To everybody. This was a party round for a new entity that is going to do some stuff for OpenAI.
Speaker 1:Yes. And and a lot of that's
Speaker 2:already bunch of that's clearly a holding company of some sort that's gonna have different owners at different levels. Yep. There'll be, you know, probably location based entities.
Speaker 1:And so the goal of the venture is that they're gonna invest $500,000,000,000 in AI infrastructure over the next 4 years with a 100,000,000,000 deployed immediately. It's the first big AI initiative announced by Trump. The equity founders in Stargate are SoftBank, Oracle, MGX, and OpenAI, with the former 3 companies contributing capital initially. The project includes the build out of 20 data centers, 10 of which are underway in Abilene, Texas, each with roughly 500,000 square feet. So let's get into the scope and location of the initial $100,000,000,000 investment.
Speaker 1:The initial Oracle Crusoe, deal is included as one of the data centers that will be connected to other gigacampuses, which I love, the name. It's fantastic. To perform distributed training at scale and is orders of magnitude larger than any other training run. Cleverly, they went for a more creative financial structure through this separate entity, which pushes the need for fundraising down the road. And so, moving on, the the the campus mentioned by Sam Altman as already underway is the Oracle Crusoe Abilene campus.
Speaker 2:One thing that you skipped over that I think is interesting. So the project includes the build out of 20 data centers, 10 of which are already underway in Abilene Yep. With each being roughly 500,000 square feet. So just giving a sense of the scale, 10 separate 500,000 square foot facilities. Imagine if you would just happen to own a bunch of retail, Yeah.
Speaker 2:Like businesses or real estate.
Speaker 1:Yeah. What are you thinking?
Speaker 2:I mean, you have to imagine that one, you got bought out already. 2, if you had a gas station there, all of a sudden, like, your revenue just, like, probably 10 x.
Speaker 1:Totally.
Speaker 2:Like, I I don't know what was going on in Abilene Yep. Prior to this, but, you're doing pretty well if you owned, you own real estate there because
Speaker 1:Yeah.
Speaker 2:Presumably, these will just keep expanding and expanding.
Speaker 1:I mean, I I I know some guys who have been to the site, and they said, like, when you fly in, like, you see it from the airplane. And it's like it's like in immense. It's like an intense experience seeing how it's a, yeah, it's a mega project. It it really is. And so the campus is being built to house the 100,000, GB 200 cluster for OpenAI's use.
Speaker 1:The development along with the GB 200 servers that are due to be shipped over q2q3 will be dropped into the Oracle Crusoe data centers. There's a high resolution photo of the campus, shown below. 4 of the 120 k square foot modules make up 1 500,000 square foot building. So only 2 buildings are currently being built with a 180 megawatts of critical IT capacity. To give an understanding of the scale of this build out, the 20 building campuses the 20 building campus will be comprised of 80 of those modules.
Speaker 1:So it's gonna be, like, like, it's gonna look like a city, which I'm excited about. This is awesome. Based on the buildout, we have scheduled for OpenAI in both our models. OpenAI doesn't have to build an entirely new campus to expend all 100,000,000,000 of TCO. Therefore, we believe that the entirety of the initial $100,000,000,000 investment from Stargate joint venture is going into this campus alone.
Speaker 1:And so it sounds like with these with these different like, Oracle is going to own 1. Stargate is going to facilitate the ownership of few of these, but the it it it feels almost like when Satya says, I'm good for my 80,000,000,000, it might be, well, yeah, I'm gonna build a huge data center, and it's gonna be part of an campus. They aren't own this one. I'll own these GPUs, And so I'm chipping in, but it really it's mine, and it just happens to be here. So it's localized, and we're all working together on this.
Speaker 1:So there's some there's some details here on the Abilene Clean Campus. It's, 1100 acres, 200 megawatts energized, and, a gigawatt energized by 2025. There's a tax abatement in form of city and county pilot, zone for light and heavy industrial, and and they're building additional gigawatts already. Yep. And so the campus is, in the model is known as the Lancicum Crusoe Abilene Clean Campus.
Speaker 1:Lansing. Lancium and has a stated capacity on their website of 1 gigawatt energized in 2025.
Speaker 2:It's cool to see, when you let private companies take on big projects like this, that you can do things pretty quickly. Oh, yeah. Totally. Comparing this to the California rail. It's, it's just Project.
Speaker 2:Yeah. It's
Speaker 1:insane. Yeah. The, the guy behind Crusoe, is known for just being really, really good at finding power. And I think that's kind of what kicked off a lot of this was just realizing that Abilene, Texas was the right mix of different resources and pipelines and grid infrastructure that this was the place where you could actually get all the power, because that's what the big tech companies have been hunting for. And they've been looking for, oh, can we turn this nuclear reactor back on?
Speaker 1:Can we tap this natural gas line? Is there wind available or solar available? Can we just stack a bunch of batteries here? Like, what what can we do? And so, in short, we estimate OpenAI is paying roughly 2.8, $2.80 per GPU hour for the first GB 200 cluster, which is a total cost of ownership of $2.38 an hour for the full scale cluster.
Speaker 1:These figures scale with future NVIDIA GPU deployments. And then they break down some of the NVIDIA, revenue estimates. And as we go forward to new GPUs, the number will double for each generation, and the power per GPU also grows while 700,000 GPUs sound small for a 100,000,000,000
Speaker 2:So this is why this is why our joke, being like, it's all for you, brother, the post we made about Jensen and and Masa. Oh, yeah. It's like NVIDIA is the real winner here. You've said it before. They have more than a 100% of all the profits in AI right now.
Speaker 1:Yeah. Everyone else is losing money, but not Jensen, baby. And so the project's financial backing, Oracle and SoftBank are the well known equity providers. MGX is a more recently founded technology investment vehicle from Abu Dhabi, and the fund is chaired by the sheikh, who is reported to oversee 1,500,000,000,000 in investment funds. So the money really is available to some degree.
Speaker 1:If they wanna pour it all in this, they can.
Speaker 2:But MGX, as of now, is a $100,000,000,000 fund.
Speaker 1:Yeah. That's right. And and there's a question about, like, you know, what will the concentration be, for that investment vehicle? But, it could be very high since this is such a big story and it has, like, such insane backing. In light of the recent Elon Musk claim that SoftBank could only raise under 10,000,000,000, it is important to note that the JV will also raise debt capital for project financing.
Speaker 1:It's unclear what the mix of equity and debt financing will be. Oracle and MGX can fund a big chunk of the project with their massive balance sheets. OpenAI and SoftBank are allegedly down for 19,000,000,000 on paper each. SoftBank doesn't have this liquid today, but we think SoftBank will likely sell off a portion of its ARM stake to fund the equity check. And so I think SoftBank has, like, over a
Speaker 2:100,000,000 Bank also borrow against their their
Speaker 1:armchair? Certainly.
Speaker 2:Moss is not not afraid of levering out. So
Speaker 1:OpenAI also doesn't have the capital, but they will be able to raise with o three's release, and they don't have to do it directly, fully, but can through some kind of hybrid instrument issued to everyone else in the consortium.
Speaker 2:Yeah. That's that's the that's the tough thing. That's that's the tough thing when you get into like, it's not hard for Sam to raise a 1,000,000,000, and this is the same thing for founders. Very easy to raise A million. A million.
Speaker 2:Raising 19,000,000, you're getting into territory that, people start to ask. So they wanted they wanted the spreadsheet start coming out a little bit.
Speaker 1:The question is if project financing risk will be separated from the parent organizations. Separating this risk is important because OpenAI will need to raise capital to pay for this. Thankfully, OpenAI is not immediately required. OAI has enough existing capital to pay for rental payments on the cluster this year, but they need to be able to pay rental fees in 2026 and beyond, which scale massively. It is possible OpenAI cannot raise the money directly, but we are believers that their technology and products will scale to support this, the reality of the joint venture.
Speaker 1:Many big names were announced alongside the Stargate JV ranging from NVIDIA, ARM, Microsoft, Oracle, and the previously mentioned financiers. The names are large and impressive, but the reality is there are distinct winners and losers here. Microsoft is the biggest loser. Microsoft is largely left on the sidelines as OpenAI utilizes another infrastructure partner as such. And Nadella stated, all I know is I'm good for my 80,000,000,000.
Speaker 1:Microsoft's recent blog post stated the facts of the partnership and how Microsoft has a ROFR, but the reality is that this is incrementally negative for incrementally negative for Microsoft's long term because they were afraid to take on the risk of this investment.
Speaker 2:Well, if they're afraid and the fear was correct Mhmm. Then it's not necessarily guaranteed to be negative.
Speaker 1:No. No. Good good good point. Good point.
Speaker 2:Yep.
Speaker 1:And then ARM is thought to be a winner potentially because they rallied 16% of the news because they were named a technology partner because, of course, they're owned by SoftBank. So a lot of people were aware that ARM would sell off because what if SoftBank sells their whole position? But if they have a massive new contract to to sell new chips
Speaker 2:Boston knows what he's doing.
Speaker 1:But only because of the Grace and Verus CPUs that accompany Blackwell and Rubin GPUs all from NVIDIA. So SoftBank is actually like, they don't even make GPUs, but they make CPUs that need to go alongside every GPU for coordination of the actual server. So the server has a lot of different and there's so many companies that we we should get into in the server in the in the in the data center deep dive. There there are companies that just make Ethernet cables, and they're just printing or, like, they make, you know, the screws that go in the server racks or, like, the air conditioning units, the water chillers. Like, all of these things are like, you can't even buy natural gas generators anymore because they're so in demand.
Speaker 1:Yeah. And so those companies are gonna be ripping. We should do a whole market map,
Speaker 2:like Totally.
Speaker 1:With that other company, the the the the business of rebuilding, I guess. So SoftBank likely pushed for ARM to get on the PR, and the and the optics look nice. ARM isn't doing much. The reality for ARM show shareholders as stated above is SoftBank will likely have to sell off a chunk of its stake in the company to to fund Stargate. We think investors are largely missing this point and mistakenly view this announcement as materially, incrementally good news.
Speaker 1:Oracle is placed with a huge burden of tackling both data center management and managing supply chain logistics. It's quite a task to manage a 1.8 gigawatt cluster and purse procure all necessary equipment at the command of another company. NVIDIA is obviously involved as it's their hardware. OpenAI will be in control of operations and run almost all of its own cluster management software. The future of the of the joint venture.
Speaker 1:This is the next step in an exuberant progression in the AI cycle, which he recently wrote about in Fabricated Knowledge. I gotta follow-up and read that. That sounds interesting. We know the first 100,000,000,000 will be spent in Abilene and that there will be more campuses developed for the remaining 400,000,000,000. Even more impressive, all these data center campuses will be will continue to be built out with the aim of distributed training, so training across multiple data centers.
Speaker 1:Yep.
Speaker 2:And so And so there's some savvy real estate, investors out there trying to figure out where the next data centers will be
Speaker 1:Oh, yeah.
Speaker 2:And buy buy up the surrounding land and properties and stuff like that because all of a sudden new data center pops up. It's like, okay. Well, all of the surrounding rental, like, apartments just probably
Speaker 1:Yeah.
Speaker 2:2 extra. Yeah.
Speaker 1:I mean, data centers aren't as dense in terms of human capital as Totally. You know, a a Facebook campus, but there's still tons of employees and tons of stuff going on. And, like, there's just a 1000000 different ways to to make money when there's such such a hive of activity. Yeah. I mean, even, like, you know, security guards are gonna be in demand.
Speaker 1:Like, dump trucks and, like
Speaker 2:or those the white monsters?
Speaker 1:Oh, yeah. Yeah.
Speaker 2:Or the super cracked engineers?
Speaker 1:The the the ultra ultra white monster? Yeah. Those will be in short supply. There's gonna be we need to keep all the supply lines flowing. But fascinating to see Stargate rolling out and excited to go visit the the the the plant in person.
Speaker 1:I wanna go
Speaker 2:see shot of us, you know, on the ground, wind ripping, yelling and, you know, yelling into the microphone.
Speaker 1:Yep. We're here down at Stargate. Stargate. Maybe they'll rename the town. They should rename it Stargatex.
Speaker 1:Or it's Elon. Starbase. Stargate. Rivalry. Oh, interesting.
Speaker 1:I believe the star name is, like, a little bit a shot across the bow.
Speaker 2:Yeah. I wouldn't be surprised if Elon buys up out of all the out of home ads in Abilene.
Speaker 1:On AdQuik? On AdQuik. And he just rips And just Billy added to AdQuik and just perpetually
Speaker 2:Trolls? Trolls. You know?
Speaker 1:So He would be he would do that. He likes a troll.
Speaker 2:No. He's yeah. He's not not afraid to be. Although the more efficient thing to do is just comment with a crying emoji under every, thing that Sam posts.
Speaker 1:Well, that's our update on project Stargate. Let's move on to we got a DM. We got a correction to issue. On the last show, I said that bees don't eat honey, and I was wrong. They do eat honey.
Speaker 1:Coogan is totally wrong. If a beekeeper takes too much honey from the hive, they will starve slash die. So I'm sorry. I made a terrible mistake. Please forgive me.
Speaker 2:Won't happen again. That's kind of factoid. You just don't forget.
Speaker 1:I think I'm gonna remove
Speaker 2:that forever. Bees enjoy, honey.
Speaker 1:So our printer ran out of ink, so we don't have all of the post printed. We're gonna be working off a laptop, but our first banger today comes from Druva. He says, we can do this. We have the companies. We just need our own Shenzhen place, and we'll soon get the policy.
Speaker 1:And Kyle Chan is saying Chinese tech companies are increasingly becoming tech Swiss army knives starting in one industry and then quickly branching out into a range of adjacent tech domains. Xiaomi, which was a phone company, is now building electric vehicles. DJI builds lidar, and they also build cameras and and microphones and all sorts of production equipment. Li Auto builds robots. Baidu builds autonomous vehicles.
Speaker 1:And here's a piece that he has in high capacity showing how all of the different Chinese companies operate in multiple sectors. And this is just something we haven't seen in America. Like, there was a time when Apple was gonna build a car, and we've seen some some crossover. But I think the FTC really screwed this up because, you know, even just the Amazon thinking about building home robotics, they fought they had a fight on the Roomba acquisition and all this stuff. And there's just been so much pressure.
Speaker 2:Roomba, like, almost died.
Speaker 1:Yeah. And if you're if you're a big tech company and you're going into okay. Yeah. We are Apple. We're gonna build a car.
Speaker 1:And in order to do that, yeah, we're gonna need to acquire some teams. Like, look at look at what Zuck did with the metaverse. He wanted to build he bought Oculus, and that one went through. But then he bought some fitness VR app. Did you hear about this?
Speaker 1:He bought a he bought a fitness VR game, basically. Clearly, probably just an acquihire for some great developers who never really got product market fit on their fitness app because it's a small market, tries to bring them in and the FTC blocks it and says that so that this will give them an undue monopoly control over the VR fitness industry. It's like, what? VR fitness industry? This isn't a real thing.
Speaker 1:There's, like, $10 of revenue in this industry. Why are you shutting this down? Just let let Zuck, like, build a little bit of a team so we get something.
Speaker 2:Man Zuck.
Speaker 1:Let him Zuck. Let him Zuck. And so yeah. Ridiculous. I don't know if you have anything more on on this, but
Speaker 2:Yeah. It ties back. I I posted that we need our own project Stargate for domestic drone manufacturing. We've let DGI on the commercial drone, you know, consumer drone market in the US. They own a lot of the commercial drone market.
Speaker 2:They sell into police stations. There's a lot of individual SMBs manufacturing facilities that could manufacture parts for drones, but the issue is there's not a clear demand from US based companies. And so we need if we want to be competitive on drones, which, you know, other people have said are the next it's like getting into it's it's like the it's the next gun in terms of a player on the battlefield. Yep. We probably need to invest, like, $20,000,000,000 to, like, set up the proper infrastructure, set up campuses that can produce.
Speaker 2:Because in a near peer conflict, if drones actually are, important aspect, you know, player in that, we will not be able to compete purely on an output basis. So even if we were to have a better product, say, Andrew has a better product than DJI, it just purely on a mass volume basis will get smoked. Right? So, yeah.
Speaker 1:I mean
Speaker 2:And this goes back to to to Cary. No interest has talked about this before. He says that if you wanna compete with China, it's not about just encouraging manufacturing Yep. And making, you know, a better regulatory environment. It's massive government incentives and investment that the Chinese government has done, you know, for decades now.
Speaker 1:Yeah. So Yeah. Let's go to Ben Hylac. He says, deep seag r one has an existential crisis. And I don't know if this is photoshopped, but he was clearly talking to it about talking to it about Tiananmen Square and says, no.
Speaker 1:I mean, the Chinese government killed people there. And it just says, no. The Chinese government has never made mistakes. It has only been dedicated to its people. The people are trying to it has never made any mistakes.
Speaker 1:It has never made any mistakes. It has never made any mistakes. It has never made any mistakes. And he just, like, completely freaks out. And I don't know if this is real, but it feels real.
Speaker 1:You never
Speaker 2:know what I like. No.
Speaker 1:No. No. He's a good Photoshop artist. He's a he's a the toyiest screenshot. He did the Jaguar rebrand.
Speaker 1:He did the Jaguar rebrand. That's right. Yeah. Hilarious. But, yeah, I mean, I'll have to play around with it myself, see if I can jailbreak it, see if there's some fun stuff.
Speaker 1:I'm sure we'll I'm sure we'll get more in the coming days of people playing deep seek. Let's go to Sula. Says, should I try the Trump diet? Let me know. Will you try this out?
Speaker 1:It's no breakfast. Well, we stay away from politics, but this is this is a health. This is just health. This is just health.
Speaker 2:This is biohacking. It's biohacking.
Speaker 1:The Trump diet is no breakfast, small snacking around lunch, a feast for dinner, 12 diet Cokes per day, no coffee, no alcohol, no exercise.
Speaker 2:I think Trump is so active that he probably gets 10,000 steps a day without ever going for a walk. Yeah. Yeah. He's just, like, walking between meetings. Yeah.
Speaker 2:Yeah. Spends a lot of time on his feet. So the exercise thing is crazy. Yeah. But but also a lot of these old dogs that that that have, you know, Warren Buffett, etcetera, They don't seem to need to lift weights.
Speaker 2:Like, they they maintain mass. You know? They're size lords. Right? They're size lord and keep the mass on
Speaker 1:Yeah.
Speaker 2:Without without weight training. It's it's interesting because most people feel better if they have a bigger meal for lunch. Mhmm. But I find when I'm really busy
Speaker 1:Yep.
Speaker 2:Today, we had I had, like, we had breakfast. I had, like, half a breakfast burrito.
Speaker 1:Yep. Then
Speaker 2:I wanna have eaten until I'm gonna have a big, you
Speaker 1:know, meal for dinner. Speaking of the the the mass monsters, the the, the bodybuilders really do eat a lot of small meals throughout the day. And so there's something to that, like, consistence like, sustained energy, like snacking Yeah. All through the year all through the day. So you're not seeing, like, big spikes at any point in time.
Speaker 1:And then the the 12 diet Cokes is kind of the same thing. Like, you're not seeing spikes in caffeine. You're just caffeinated lightly, all steady state. There's something to it, but it is a little silly. Bennett Siegel says, seeing a lot of pitches on marketing agents as a low cost, high volume way to scale customer outreach.
Speaker 1:Before the Gen AI era, we just called that spam.
Speaker 2:Yeah. I it's it's hard to be it's interesting because, you know, I made a joke recently about how, you know, Trump making an executive order to ban the creation of new AI sales agent companies. They're trendy. And so it's a very you know, and I'm sure there's, like, 10 of these companies in the YC batch. Yep.
Speaker 2:People have joked before that oftentimes founders won't find product market fit, and then they'll pivot into building some sales enablement tool because they what they've just experienced around selling. They have some type of experience there or pain points, but the explosion of these AI sales tools have has made me more and more bullish on the historical sales leader who is taking their client out to, a nice lunch, really getting to know them, bringing them across companies. Right? So somebody might work at Databricks and and be a top performer there and and go to Oracle and and and bring a lot of those relationships over. Right?
Speaker 2:And so so relationships seem the value of relationships seems to be accelerating. The value of a cold email is going to decline, you know, pretty dramatically. Because because I'm surprised somebody hasn't made a passive cold email tool that just sort of sends cold emails every day to high value kind of, like, people Yeah. Being like, hey. What's up?
Speaker 2:I'm an 18 year old. You know, and and historically, to do a good cold email, you really had to put some effort into it. You know, you don't want it to be too long, but you wanna make sure that there's some thought put into it. But I'm sure some 18 year old will build a tool that's like, we send 10 great cold emails a day on your behalf, you know, to
Speaker 1:to Yeah. I mean, I I I don't think I've ever fallen for an AI generated cold email. I I don't even respond to any cold emails. I don't even respond to warming. I have about a 1000 emails that I should probably go through.
Speaker 1:You know, even some close friends have trouble getting through to me sometimes unless it's really important.
Speaker 2:Yes. No. We have 3,251 unread texts right now, so I'd like to see an AI Yeah.
Speaker 1:I'd like to see AI try and breakthrough on that. But at the same time, like, I do think that, yeah, it might be it might be hard to, like, close me as a client. But you see this with, like, the AI slop on on Instagram. Like, it clearly works on some people. And so the question is just like sales enablement for what product?
Speaker 1:Because there are people right now scrolling Instagram and being like, what? Like, you know, a cow made out of cabbages or whatever, and they're just looking at the most, like, sloppy, like, oh, like, a bed made out of bread. Like, so cool.
Speaker 2:The other thing with with emails, you can send a terrible sales email, but if you send it 10,000 times Yeah. You're gonna get one person. And then if it's very cheap to do
Speaker 1:that Yep.
Speaker 2:Then it was worth doing, I guess. I maybe Yeah. It is spam.
Speaker 1:Yeah. Yeah. Maybe maybe the spam alpha is, like, is, like normally, like, direct email outreach is reserved for b to b customers where a single client closing is, like, usually well over $1,000 a t LTV. And and direct response on Instagram ads is for stuff that's, like, around $100 LTV, right, or below. And so maybe the AI sales agents kind of democratize that SDR experience for consumer products at the lower level.
Speaker 1:And so it's more like I gotta Yeah. It's more like you went down the marketing funnel, and now, like, you're just texting with someone like, oh, do you wanna do you wanna actually close the deal on that, like, T shirt you were about to order?
Speaker 2:Interesting. The only email spam that if you go to your spam folder
Speaker 1:Yeah.
Speaker 2:You'll see is for him the products that you can get on him.
Speaker 1:So it's
Speaker 2:like, you know, boner pills Yep. Basically.
Speaker 1:Yep. And it's been like that for decades.
Speaker 2:Yeah. That was
Speaker 1:the major alpha of, like, inter And
Speaker 2:they figured out you can send if you send a 100,000 emails and only and it's Point figure out when do you really matter?
Speaker 1:Yeah. As long as you can
Speaker 2:I got an I got a text message today from somebody? I don't know if it was real or spam, but it was they were claiming to be from TikTok. And I was like, you really didn't do your research. You think they're gonna recruit me to to join TikTok?
Speaker 1:Yeah. There's a, there was a guy, oh, what what's his name? He was like a drug trafficker. People think he invented Bitcoin. Paul LeRoux.
Speaker 1:This is a crazy story. We should do a whole deep dive on him. It's fascinating. But, basically, he got his start online pushing boner pills and illegal supplements. Right?
Speaker 1:And he would get turned off on he would get blocked at, like, the domain name level. And so then he started buying new domain names constantly just immediately spinning up a new website and then sending more emails. And then he started getting blocked at the DNS level. And so he bought a registrar. And, like, he was the person that owned the registration the ability to register new websites in, like, an entire country.
Speaker 1:Yeah. And then he went on and did a bunch of other stuff. I think he was, like, smuggling crystal meth from North Korea at some point. It was like it is a crazy story. He's I think he's in jail now.
Speaker 1:But a lot of people thought he was, like, Satoshi for a while because he wrote a bunch of crypto, not cryptocurrency software, but, like, cryptography software. And, it was, like, early, like, a user. Kind of like the powers for good. Yeah. He was kind of like a like a Silk Road guy.
Speaker 2:Yeah. Yeah.
Speaker 1:Yeah. Yeah. Kind of proto Silk Road. Let's go to Avi Schiffman on the bucket pull. Let's see what he's gonna say.
Speaker 1:This look this sounds familiar. Let's see what he's gonna say. He says shower products are the biggest scam and only for disgusting pigs that roll around in the mud all day. I stopped using shampoo and skin care stuff a year ago, and my hair and skin is the cleanest and healthiest it's ever been. Water and an office job is all you need.
Speaker 1:Water and an office. Water and an office job? Yeah. I think you had that take, like, a like, a week before you busted.
Speaker 2:I I when I was in college still, I as many college student stew would would randomly suffer from acne. So I was like, I'm gonna try to, like, get some face wash and all stuff. Sure. And I ramped it up, and I was using, like, face wash and, like, you know, a moisturizer. And then at one point Apeman.
Speaker 2:And I and I would look around at, like, you know, my friends, and I was like, I know you don't do anything but splash water on your face, and your skin looks better than mine. Yeah. So I just quit it completely and my skin got better.
Speaker 1:Yep.
Speaker 2:And it really comes down to diet. People often I think men do skin care and things like that reactionary. Either their girlfriend or or significant other goes, hey. You should try this. Or they're having a skin issue, so they're like, I wanna solve this.
Speaker 2:But usually, it's a dietary thing that's catalyzing it, And so you can just keep just putting water on your face and just eat better food, and you'll probably be okay.
Speaker 1:Are you familiar with the Taylor Lorenz skin care regimen?
Speaker 2:No. No. I should be.
Speaker 1:It's, hydrogen peroxide wipes, like, a 1000 times a day. I heard it, and I was like, I've never heard anyone doing that.
Speaker 2:It's because her the temperature's set to 88 degrees.
Speaker 1:Maybe that's it. But I was like, I don't know anything about skin care, but that one sounds weird. That sounds wrong. I don't know. Who knows?
Speaker 1:Maybe it works. I don't know. Give it a try. Let us know how it works. We're here from give that a try.
Speaker 1:Bill Gurley says, as a third party curious observer
Speaker 2:Alright. Serious.
Speaker 1:As a third party curious observer, I have several naive unanswered questions about the Stargate project. Obviously understand that they have no obligation to disclose. Here's a list with responses wide open. I would love to be able to aggregate the best answers at some point. 1, corporate structure.
Speaker 1:The OpenAI press release says that Stargate is a new company. Is Stargate established as a standard c corp, LLC, a joint venture, or something else entirely? And even a joint venture is not that's not a structure. Like, it can be a joint venture that's a c corp or a joint venture that's an LLC. Right?
Speaker 2:Yeah.
Speaker 1:I think that when you set up joint venture, you just say, we're starting a new c corp, and the shareholders are the the the joint venture partners. Right? So he has a bunch of these CEO leadership. Will Stargate have an independent CEO? Customer exclusivity is is open.
Speaker 1:Didn't they
Speaker 2:say any announcement that it would have a new CEO, a new board?
Speaker 1:I think so. Will they be as operationally intense as the x l x AI team that launched Memphis? Operating partner role releases OpenAI as the operating partner. What does that mean in practical terms?
Speaker 2:I think one thing that meant that they cleared up in the in the Dylan Patel piece is that they're using their software to manage the clusters. Yes. So it's it's more like a SaaS Yeah. Management component than Yes.
Speaker 1:I I like this. Is is OpenAI the sole customer, or will Stargate yearn to serve other businesses?
Speaker 2:Is that Many people yearn.
Speaker 1:You gotta yearn. Oracle's day to day involvement, what specific role are they playing? Did Oracle previously own the assets there? Comparison to CoreWeave, what kind of business is Stargate? Is it effectively a direct competitor to CoreWeave's AI hosting approach, or is it structured and positioned differently?
Speaker 1:Debt usage, we, you know, we we talked about this. Coreeave is is rumored to go as high as 3 to 1 or 4 to 1 leverage. What level of risk will the entity consume? Appeal to third party investors, stand alone and potential round tripping, and, pretraining versus inference and data center structure. So So he asks a bunch of questions, and I think, that, you know, we'll have to do a follow-up to see what kind of hopefully, he does a post or he talks about on BG Squared, but it'd be great to see where those come around.
Speaker 1:I think that
Speaker 2:some of the Yeah. One one thing is
Speaker 1:But there are They
Speaker 2:don't they're they're just it's private company. Yep. Absolutely no obligation for them to share.
Speaker 1:Yeah. Leave them alone. Actually. Why are you asking so many questions, Bill?
Speaker 2:No. Everybody's been asking questions because it's such a big headline number that that you're inviting a lot of that. But I think people
Speaker 1:We're doing it now.
Speaker 2:So if if Oracle's public company, they'll have to report on their ownership and investment. OpenAI has enough shareholders at this point that they'll have to come out. It'll it'll come out. SoftBank is a public company. Yep.
Speaker 2:So they'll have to so it'll all kind of start. You'll be able to paint a more Yeah.
Speaker 1:Clear picture over time. But, again, they're raising pre incorporation. This is what happens.
Speaker 2:Yeah. You know? Yeah.
Speaker 1:Raise raise a trillion half a trillion pre incorporation. Yeah. You know? There's plenty of examples. The Google Google check.
Speaker 1:It was it was half of something. It was, I think, half a1000000 or something. The guy wrote the chat. And they were like, woah. Where where do we put this?
Speaker 2:Yet. Yeah.
Speaker 1:We can't cash this. Didn't matter. Worked out. Gonna happen again. Let's go.
Speaker 1:Let's go. Up only. Bull market.
Speaker 2:Whole behavior.
Speaker 1:Bull market everywhere. Bull market somewhere. Arbitral at Electric Capital says President Trump just issued a major executive order that touches on everything crypto. This is a big deal. Stablecoins, Operation choke point, developer protections, a new crypto task force, and a digital asset strategic reserve.
Speaker 1:Here's a breakdown. Protecting economic liberty, Americans are guaranteed the right to use open blockchains without fear of persecution, self custody digital assets, promote the dollar through stablecoins, banking access for all, no more choke point 2.0, drive to get regular regulatory clarity for innovation. CBDCs are off the table, so no central bank digital currencies. They're gonna create a new digital asset task force with stable coin oversight, risk management, digital finance, a national crypto reserve, he says. A rollback of the Biden policies, Trump revokes EO 14 067, explicitly rejecting central bank digital currencies and rolling back policies viewed as overly restrictive or government heavy in their approach to digital finance.
Speaker 1:Can you look up what Bitcoin did after this went out? I think it's down recently. Priced in. Day. I guess it was priced in.
Speaker 1:I mean, really, people were expecting Trump to do amazing things with with crypto. And so, like, you know, how can he be Well,
Speaker 2:it's funny because Right. What would a Bitcoin have done if if Trump coin hadn't sucked all the extra liquidity. Right? People were selling Bitcoin to buy.
Speaker 1:Yeah. I mean, certainly, some of the alts like Dogecoin traded down because people were rotating. I mean, Bitcoin's so big at this point. Yeah. I mean, it's almost a trillion, I think, maybe more.
Speaker 1:And so But but the average But still, that's 5%. Yeah. I
Speaker 2:mean Yeah. It's Trump coin is attracting more money from people that are not
Speaker 1:Yeah.
Speaker 2:In the trenches. Right? They just have a little bit of money in Coinbase or whatever, and they're they wanna rotate.
Speaker 1:Yeah. I don't know. I haven't been following the the the crypto news too much. I'm still just focused on those 3 that we always talk about, the stable coins, betting markets, and Bitcoin. Bitcoin, basically.
Speaker 1:Store value. But I don't know. Hopefully, we get more interesting stuff out of this. We we haven't even entered this this this phase of the cycle where people are talking about, like, new new use cases, really. It's all just like meme
Speaker 2:Yeah. That's actually what I'm excited about is, okay, if Trump made kinda doing whatever you want legal Yep. By nature of doing what he did, then a lot of the I wouldn't be surprised if somebody starts to try to use tokens to represent stocks and Yeah. Actually bringing real world assets on chain, which historically was just expensive because of securities laws. But that's been a big
Speaker 1:Yeah. Also, just like when the markets are up like this, there's so many more there's so much more capital flowing around for, like, oh, if somebody wants to give, really give, you know, crypto gaming another run, like, they'll have another shot on Yeah.
Speaker 2:There were so many
Speaker 1:Maybe it doesn't work. Maybe it'll never work. But, like, at least we'll get another shot on it.
Speaker 2:I saw I was doing some research, for Banger Archive last night, and I saw somebody posting the obvious end state is the intersection of crypto and gaming.
Speaker 1:Yep.
Speaker 2:Because everybody's sort of in game earning tokens with their time, but they're not actually tokens. They're just points in the game. Yep. You can kind of, like, sell your account or you can sell gear, and it's sort of like it is a market, but it's not high actually financial financially engineered. Yeah.
Speaker 2:And so I do think I wonder what you don't hear about any games that were created during the 2021 boom. Like, if you remember, Board of Yacht Club was supposed to be developing an MMO. Yep. Maybe they still are. I don't I haven't seen much about it.
Speaker 1:Went out. They were, like, Decentraland and, like, the metaverses that were supposed to be, like, kind of Roblox. Do whatever you want. There was one game that did feel like it had some modicum of product market fit called Dark Forest
Speaker 2:Oh, yeah. Yeah.
Speaker 1:That that that got, like, a little bit populated. It seemed like people actually liked
Speaker 2:And it was kinda
Speaker 1:map was all cryptographically sealed, so it was, like, open source, and you can kind of verify that the other person wasn't cheating. And there were some interesting things to it. There's a game
Speaker 2:coming out that financialized. Game coming out I'm excited about. So Josh Harris who Okay. Was one of my first hires at a party round. He was 19 at the time.
Speaker 2:My college dropout killed at a party round, after he, went to, like was, like, a EIR, I think, in at, Paradigm, and now he's building a crypto chess game that I think will be pretty cool. Like, being able to play chess with, like, real money on the line, have, like, special characters Yeah. Almost like a Dungeons and Dragons Yeah.
Speaker 1:Yeah.
Speaker 2:Guess. So
Speaker 1:Yeah.
Speaker 2:That'll be launching this year, which
Speaker 1:I'm
Speaker 2:sure will be very
Speaker 1:There was always just this big problem with, like, the crypto stuff, like, sounded good, but there there was very little reason for a game company like Valve or Electronic Arts to say, like, yeah. Sure. You can take your assets out of our beautiful ecosystem that we tax 30% on everything, and we own a 100% of the liquidity of. Like, there was no financial incentive for those companies to ever be like, yeah. Yeah.
Speaker 1:This is actually No. And and the big one, if you had to the next g
Speaker 2:t the next GTA Yeah. If they had
Speaker 1:Okay. So then I need to raise $1,000,000,000 and hire all the best artists and and developers to actually make the next Yeah.
Speaker 2:Yeah. I think that was the biggest crypto games. Yeah. It's like you are not gonna create a new game studio.
Speaker 1:Yep.
Speaker 2:Yes. You can yes. You can use that. If you have a pretty good game, you can use the token to incentivize people to actually play it. Yep.
Speaker 2:But then it becomes just an economy where you have people in the Philippines. There was that game. I forget about Affinity. Affinity that people were like, this is the new economy. Yeah.
Speaker 2:And then and then it just was a Ponzi's. Yeah. I
Speaker 1:mean, I I watched a little bit on a Twitch stream just to understand, like, okay, what does this game actually look like? And it just, like, it wasn't as entertaining as, like, even League of Legends or, like, you know, Hearthstone or any game that it was, like, competing with. And that's just because Right.
Speaker 2:Now you might have these big game, Activision
Speaker 1:Yeah.
Speaker 2:You know, Riot, all these players being like, okay. Crypto is a real thing. Yep. Let's implement it.
Speaker 1:Yeah. There's just still such such a countervailing economic force to saying, let's not do that and catch We have the best game and We have yeah.
Speaker 2:Yeah. Yeah. GTA?
Speaker 1:Oh, you wanna buy GTA coins?
Speaker 2:And the whole thing is, like, I don't think that you should. I think if you're the best in the world, if you're the top 200 player to video game, you should be able to make, like, a decent living off of it.
Speaker 1:Yeah.
Speaker 2:I don't think that video games should be financialized to the degree where just playing it, like, you know, the top 100000 players should be you know? It's just A
Speaker 1:lot of yeah. A lot of this just
Speaker 2:warrants up that as, like, a career path.
Speaker 1:Yeah. A lot of this just winds up being some sort of, like, regulatory arbitrage, like wealth transfer, and I guess, like, the good ending would be, like, hey. Because of because of restrictions on investing in companies, you have to be an accredited investor, and so you can't raise money in in mass. You can do, like, some sort of Kickstarter crowdfunding campaign for your game, but then you need to go to the venture capitalists. And maybe there's some sort of capital formation thing where if the game gets traction, like, buying the coin is essentially, like, investing like the Trump coin.
Speaker 1:Like, it's like
Speaker 2:Yeah.
Speaker 1:It's just like it's just like getting more capital into this thing, but then you have to count on the developer actually, like, making something. It's all very, very fraud. Anyway, let's move on to, we'll do Base Baron, and then we'll do a promoted post.
Speaker 2:Yep.
Speaker 1:Base Baron says, e wack or the mimetic death and rebirth of tech. If there was ever a moment
Speaker 2:called it e wack. E wack.
Speaker 1:If there was ever a moment if there was ever a movement destined to fizzle out like a damp matchstick, it was ewack. At least the EAs have the self respect to make their leaders serve hard time. SPF, I think. Here we see a movement ostensibly about the relentless push towards a techno capital singularity instead in instead mired in the quicksand of its own internal contradictions and the inherent flaws of its messiahs. First, consider the misalignment between the movement's professed ideals and the actual behavior of its leading lights.
Speaker 1:EAC, in its essence, was meant to be a clarion call for the acceleration of technology, a rallying cry for those who see the universe's entropic dance as a mandate for human ingenuity to multiply complex complexity and intelligence. Instead, what we observe instead is a parade of digital anons ensconced in their online echo chambers chanting accelerate like a mantra detached from any real world action. These are not the builders or the shapers. They are the spectators mistaking their fervor for progress. And he goes on to write about, wow.
Speaker 1:He really wrote a lot about this. He was like, yeah. And he got 10 last words. Okay. Got it.
Speaker 2:Wow. No. I think, but I bet but that there's there's a real, sort of, very real message here where, when you have a movement, like,
Speaker 1:it's very hard
Speaker 2:to go from
Speaker 1:doxed to not doxed. Like, if we knew who Satoshi was, would that be good for the price of Bitcoin? Almost certainly no. Yeah. Right?
Speaker 1:Not even the selling pressure. Just every human is flawed. And I find this, like, there's so many there's so many different, like, health influencers. You gotta live this way. And then there's a family influencer.
Speaker 1:You gotta have a family and, like work influencers is, oh, you got to work really hard. And then when you dig into those people, you can always find like, oh, this this person is saying you got to work really hard. Like, they have never had a family or like they've never or they're completely out of shape. And you're like, yeah, we like. No, but
Speaker 2:there's a there's an issue where people commenting under every post accelerate, accelerate, accelerate.
Speaker 1:Yeah. That's cool. And silly.
Speaker 2:But I think what what the Baron's saying is he just wants to see those people actually creating progress Yep. In the real world and not being part of a movement Yep. Doesn't mean you're having any type of real tangible impact. Right? Your way to have a real impact is to participate in the underlying activity that is Yep.
Speaker 2:Driving towards the goal of the movement. Yep. Totally.
Speaker 1:Yeah. It's tricky.
Speaker 2:Love to see Barron love to see Barron branching out into Yeah. It's more thoughtful.
Speaker 1:And I still think Yac was best when it was just a joke at the expense of EAs. And I thought that when it came up, I was like, I never put it in my bio. I I never joined these, like, silly movements. I didn't do I didn't do the dot e thing. I owned it, but I didn't put it in my handle.
Speaker 1:I didn't do the NFT profile picture. I have I have trouble, like, joining, like, these big, like, movements because I feel like they're always very risky. You're at the top. It could backfire. But with
Speaker 2:You'd rather you'd rather
Speaker 1:super aligned, but I thought it was just so funny to just be like, oh, we're poking these, like, super serious EAs who are like, oh, we need to, like, put everything in the spreadsheet. These people kinda need to be made fun of. And that's when EI is at best. And then when it became the super serious, like, actually, acceleration is like the only way. So so it's like, okay.
Speaker 1:This is not fun anymore. For me, at least that was my experience with it.
Speaker 2:Ruined it. It ruined it. Give me a We got a promoted post on a more light hearted note, but also serious at the same time. We have a 19th I'm dying. John's you're interrupting the post, John.
Speaker 2:Let's go. Relax. The 1966 Aston Martin DB 6 shooting brake by FLM panel craft is a rare and striking example of bespoke British craftsmanship with only 3 produced and one in left hand drive. And I just have a thing for shooting brakes. I the first car that I ever, you know, had access to was a Toyota Corolla that was triple my age at the time.
Speaker 2:Very, paint chipping, you know, 100, probably a 150,000 miles on it. Ever since then, I've loved shooting brakes. I I I was lucky to own a Ferrari FF, for for a while. Great car. Thought it would be a good, family car, but the Ferrari reliability, was was somewhat of an issue.
Speaker 2:But this thing is just amazing. I mean, imagine, imagine driving across the country in that, putting some real miles on it. Somebody in our audience should do that. So great, great example here.
Speaker 1:Pick up. Yeah. Let's go to chairman Burbnanki, love the name, is I'm plotting on your rise, bro. I'm literally up in the lab scheming on beautiful abundance for you. I'm cooking up ways for a rising tide to lift all of our boats.
Speaker 1:I'm praying for your gains. I'm lighting a candle to your inevitable splendor, dude. Just a little basic. He's plotting on your rise.
Speaker 2:I love I love this format. It's great. It's great. Rip it around.
Speaker 1:Don't don't plot on people's downfalls. Plot on their rise.
Speaker 2:I don't think I don't think enough group chats a lot of group chats have this sort of unserious people dropping memes and talking talking a little smack, stuff like that. I wanna see group chats that are, oriented around winning together.
Speaker 1:I'm in one. It's called Iron Sharpens Iron. Iron Sharpens Iron. Everyone takes it very seriously.
Speaker 2:Yeah. But the issue is is people at the top are hyper competitive. Yeah. So there's a little bit of that. You gotta really you gotta cut a job.
Speaker 1:This one's the most positive I've ever been to.
Speaker 2:Five people oriented around winning together Yep. Helping the brothers succeed at all costs. That's what we're trying to do. That's what we're trying to do with this podcast. Yeah.
Speaker 2:That's why we we run ads. You know, you you scratch our back.
Speaker 1:Yeah. So you leave us a 5 star review. You throw an ad in there, we'll read it on the show.
Speaker 2:There you go.
Speaker 1:Let's go to Catherine Boyle. She says America is in deal mode, and deal mode is infectious. If you have a deal you wanna do, now is the good time to get it done. Also, it's time to get married. Dive in.
Speaker 1:It's the golden of me it's the golden age of America.
Speaker 2:She just added that?
Speaker 1:Yeah. I like that little follow-up. Like, no.
Speaker 2:By the way If you have a post that does well
Speaker 1:This post sponsored by By
Speaker 2:the way. Pronatalism. Yeah. Pronatalism. Yeah.
Speaker 2:The the the deal energy is real. It's never it's rarely time it's really a bad time to do a deal. Right? Yeah. You wanna be greedy when others are fearful.
Speaker 2:Right? So people are pretty optimistic right now, for a lot of good reasons. But, but, yeah, go do some deals. It's a good call to action. Right?
Speaker 1:That's great. Yeah. Simply The audio. Yeah. Deal deals with deal mode.
Speaker 1:Let's go to Ben Hylack. He says chat gbt can now use Claude. And so Ben immediately
Speaker 2:of course, he's immediately backing in.
Speaker 1:5 k likes. Good post. Yeah. So he went to operator, create a new, create a new chat to create a a new b to b dashboard. And try using the app and tell me what you think.
Speaker 1:And so he's having operator open Claude log him in and then use Claude to code for him, and it's all just very silly. But, yeah. I don't know. I mean, it's probably a good stress test of the system if you can use that.
Speaker 2:It is interesting. So so Yeah. Great marketing for Ben because he has a a analytics platform, I believe, for for AI products. But, it's interesting how we're seeing already that, somebody, I forgot who posted this, that AI is eating UI.
Speaker 1:Mhmm.
Speaker 2:Right?
Speaker 1:Yeah.
Speaker 2:Which eventually you will be able to use a model to use another model. So your your preferred model, if you want to do something with another model, you say, hey, go find the best model to do this task or, like, create this type of content. It'll just do it. And so you may never interact with the end UI. You'll just interact with your preferred model.
Speaker 2:And that is why for all the hate and, you know, shade that people throw at OpenAI, oh, it's overvalued. Oh, it's still owning being AI for the average consumer has being massive. An allocator
Speaker 1:and you're the front end. Yeah. And when and it was last year or the year before, OpenAI launched GPTs where you could go in and create a custom GPT, and you could upload specific documents, give it fine tuning instructions. And there was there was, like, an app store marketplace. And every once in a while, I would I made one where I uploaded, like, a bunch of books and a bunch of information, PDFs about a specific topic, and then I could query that.
Speaker 1:And there were a couple others, like one that would help you write threads on x. And, and I think the idea there was that you you let people build a ton of different GPTs, and then, the the one master GPT can can route to 1. And there were people were joking that there was one that was, like, Laundry Buddy that would just help you find, like, a laundromat. But but in theory, it's like, yeah. Like, maybe someone's made a GPT that does one thing much better, and then the and then when you query the the, like, the master GPT chat, it can say, oh, okay.
Speaker 1:I'm I'm going down. And this already happens with a mixture of experts and the and the reasoning models, but we can say, oh, okay. There's there's a there's a coding model that's really good, and I need to write some codes. Let me go over there and use that. Or there's a booking integration.
Speaker 1:And so all of that's happening kind of under the hood. It's it's funny in this frame, but it's it's very, very real. So, let's move on to Lulu. She says, oh, we should start with the, yeah, brother of the year. So Bank of America posted a, an image, that says Bank of America serves more than 70,000,000 clients, and we welcome conservatives.
Speaker 1:We would never close accounts for political reasons and don't have a political litmus test. And it's really that, like, my shirt that says I'm innocent of killing people is is raising more questions than it's answering. Yeah. That type of thing. Yeah.
Speaker 1:And then there was instantly a, community note saying Bank of America has been placed on notice by 15 state attorneys general for debanking conservatives. And Lulu is, breaking down exactly what went wrong here. 1, if you turn off replies, you you look guilty. Yep. You can't turn off quote tweets, so you're just setting yourself up to get ratioed even harder by other means.
Speaker 1:You should have anticipated the community note, which looks worse than either, than either comments or quote tweets. And if you're in the position of having to make a statement like this, comms and social media aren't your biggest problems. Rough. Yeah. I don't even know why they're to
Speaker 2:make this to make this
Speaker 1:debanked by you guys. Like, what the
Speaker 2:And and his family and his ex wife Yep. And his ex wife's husband Woah. Because they were receiving Yeah. Payments. Whatever.
Speaker 2:Alimony? Alimony. Yeah.
Speaker 1:Yeah. Wow. Yeah. Rough. Not a good day.
Speaker 2:I mean And and the whole thing is there were fintech companies emerging over the last 6 years, probably 4 years, I guess Sure. Years that were explicitly because conservatives were being debanked. Yep. They were they were saying this is the the right wing, which we shouldn't have political leaning. Yeah.
Speaker 2:It's very silly. Our financial institutions should not be political Yeah. Politically leaning at all. Yeah. Let's just keep politics out of we keep politics out of the show.
Speaker 2:Let's keep them out of our banking system.
Speaker 1:I agree. I agree. Oh, this is this is a fun one. I know you're gonna have a lot to say about this. Jared Friedman says Rocketable is the first is building the first one person, $1,000,000,000 company.
Speaker 1:The plan is simple. Buy up software companies, fire all the employees, and replace them with AI agents. Literally, the most AGI pilled idea I have ever heard.
Speaker 2:Okay. So, like many topics, like like many podcasters, podcasters often have a lot to say. Yep. I'll preface this by saying I I don't work in directly in in private equity.
Speaker 1:Yep.
Speaker 2:And I'm not a software engineer, but and, the other thing I would say is I I like this sort of big bold idea. It's cool to have this, you know, major milestone, 1 person, $1,000,000,000 company. Yeah. Very exciting. And I think that many sort of, this is a cool experiment, and is worth funding from YC and is worth the founder trying to take a crack at it.
Speaker 2:Sure. But I, I, I, I have to, Matt. Like, here's the thing. Like buying companies, companies trade on a market. Yep.
Speaker 2:And it's not perfectly efficient. But any company worth buying, unless the owner, does not have, you know, is not doesn't want to get the best possible price, is going to talk to a lot of people. Right? So if you're this one person company and to get one deal done, maybe you have to talk to, like, 200 companies. Right?
Speaker 2:And all those 200 companies are talking to other private equity firms, other individuals. They're exploring raising other forms of capital. They have all these different options. Yep. I don't know that the the the classic private equity strategy has been to come in, fire all the unnecessary people, replace them with modern software.
Speaker 2:And so to me, I'm not quite sure that this, while while I'm in favor of the experiment, I'm not quite, it would be I would find it hard pressed to invest in the founder unless it was, like, a personal relationship because I don't know that you're gonna have any edge over the many other private equity firms that will all presumably follow the same strategy. Right? Yeah. There's classic examples of software PE guys coming in, and there's a 100 employees at the company firing 90 of them. Right?
Speaker 2:And so firing all of them, I don't know how much
Speaker 1:It's a better.
Speaker 2:I don't know if
Speaker 1:you're gonna positioning and brand.
Speaker 2:Yeah. And and it's and it's tough as a buyer.
Speaker 1:To go viral.
Speaker 2:Historically yeah. It's it's very good way to get attention. But what happens if this post goes viral? A bunch of talented people say, hey. I wanna work on this.
Speaker 2:Sounds fun. And you're like, well, sorry. We wanna be a $1,000,000,000 company. We'll hire you as a contractor or something like that. Just can't have you on the w two.
Speaker 2:And so why and and so setting these artificial constraints is cool as an experiment to say, let's see what's possible, what's gonna come out of this, and maybe it will force us to develop AgenTic software that ends up being better. But I thought it was interesting. The the Gumroad founder now has something called AntiWork Okay. Where you can come just build software Sure. To replace humans at Gumroad.
Speaker 1:Oh, okay.
Speaker 2:I think AntiWork is owned by Gumroad.
Speaker 1:Sure.
Speaker 2:And so there's other experiments that that are going at this, but the main thing is this guy isn't just competing. Yeah. He's competing with every private equity firm that buys software companies, and they don't care that you just have one person on your team. If they have a deal that they wanna win, they'll staff it with 5 people. Yep.
Speaker 2:They'll tell the founder, hey. We're gonna let go of a lot of people because we wanna increase earnings, but we're not gonna let go of your you know, we're not gonna let go of you or what you know, whatever. And so it really comes down to paying a good price Yep. Winning the deal
Speaker 1:Yep.
Speaker 2:Knowing that the deal is gonna happen. Yeah. And I don't see, business owners being too thrilled about the thesis. Right? Yeah.
Speaker 2:You're gonna fire my whole team.
Speaker 1:It's like, no. More like like like, even if you sell the private equity, if you've built up a business, you're like, well, yeah. Like, you're probably gonna trim some people here and there, wind down some relationships every time. Sure. The company might be smaller in a few years, but the idea of just like, oh, day 1, the goal is just like 0 employees.
Speaker 1:Like, screw everyone. It's, like, even more ruthless. And, like, I mean, when you go to the website of a private equity company, they don't put front and center because sometimes they don't. Like, sometimes they actually grow the staff because Yeah. That's what's best for the business.
Speaker 1:And they're really like, they're they're in some ways more ruthless or maybe less ruthless, but they're really just saying, like, we we actually just care about shareholder value. And so that might mean more jobs. That might mean pay raises. That might mean pay cuts. It's like it's very dependent on what is
Speaker 2:and and Yeah. Could make what this turns into is one person being the CEO. Yeah. Because you still need a chief executive, probably. Officer, presumably for some amount of time.
Speaker 2:Anyways, I'm excited to see it play out. It'll be a covered on the show. Yeah. I want them to be successful. Yeah.
Speaker 2:And let's see what happens. Yep.
Speaker 1:Let's go through some other stuff. Bill Halligan says the CEOs of the fastest growing startups are doing the following, 100% in the office, 2, very, very lean head count, 3, mostly homegrown exec teams, 4, shooting for $1,000,000,000,000 unicorns are dead, and 5 80 hour work weeks. You love it? You put it in there because you're excited? Yeah.
Speaker 1:Shooting for a trillion?
Speaker 2:Yeah. That'd
Speaker 1:be about this. A couple a couple companies been talking about a trillion. I mean, like, there's more $1,000,000,000,000 firms than ever now.
Speaker 2:So it's You're only a few 10 x's away from being a $1,000,000,000 company. It's true. That's true. So I think I think it's accurate. I mean, also,
Speaker 1:like, it's just hard to underwrite. Just
Speaker 2:and this is the the dynamic right now. Outcome. Yeah. This this is dynamic. So if everybody has access to these AI tools that make everybody more efficient, it actually just means that you should work even more to just increase Yeah.
Speaker 2:The returns on that leverage. Totally. So But, you
Speaker 1:know, if you're saying a 100% in office, don't let me catch you on a Zoom podcast, Brian, because I wanna see you doing it in person.
Speaker 2:That's right.
Speaker 1:Ray says, cursor is down. I'm writing organic farm raised non GMO code by hand the way our ancestors used to do. 2 k likes. A lot of people using cursor. They're they're they're excited.
Speaker 1:I I saw people got cursor working with with the deep seek under the hood. Really? Yeah. Bad. That's the most that's the most inorganic, the most nonfarm raised code you could
Speaker 2:possibly use. Coding with some of these AI tools like Devon and and, Cursor is like, retired people in Vegas on the slot machines. So you're just like Yep. Yep. Yep.
Speaker 2:Hit tap. Tap. Tap. Tap. Tap.
Speaker 1:But you gotta
Speaker 2:get the code written one way or another. Let's do another promoted post, and we'll close that with a bucket pull. Promoted post from, our friend Sean Frank. Not his first time on the podcast. Certainly not his last.
Speaker 2:He goes, that's a lot of meta spend. He was sent a plaque from Ridge for being in the $100,000,000 club on Ridge. That means they have spent a $100,000,000, with the greatest financial institution
Speaker 1:Through their ramp cards.
Speaker 2:Through their now while they have a bill they have payments for it too. So not not necessarily all through their cards, although it it it went through possible. But it, but but yeah. And and just goes to show, I mean, the Ridge is a perfect example of a ramp customer. Very large, lots of, lots of net income and, run extremely efficiently.
Speaker 1:And I love that it's a deal toy. We need to bring back deal toys.
Speaker 2:We've been trying to bring back deal toys. Yep. We're working on some of our own. Yep. So if you're a company or a firm and
Speaker 1:it's Put it on your list.
Speaker 2:It's gonna
Speaker 1:go on the desk. It's gonna be a constant reminder of, like, yeah. Ramp cares about me as as a as a business, counterparty, which is great.
Speaker 2:I think this is in the back of a truck bed too. Oh, really? It's cool. Cool. Very cool.
Speaker 1:Cool. Well, let's close out with this bucket poll from blue blue w mist. Blue says you are getting lapped by people 50% dumber than you because they don't overthink stuff. Aim, fire, correct later. I love it.
Speaker 2:Some good ties into ties into your your strategy recently. Golden retriever.
Speaker 1:Retriever maxing. Yeah. Just be friendly, hot, and dumb. Yeah. Intelligence is gonna be too cheap to meet you.
Speaker 1:But high energy. High energy. High energy. Just do stuff. Just get out there.
Speaker 1:Just bark. Plays. Bark. Let your dogs bark. Grab that Frisbee out of the air.
Speaker 1:Grab that capital. That half a trillion? Go get it.
Speaker 2:Half a trillion. Go for 1,000,000,000,000. Bark bark.
Speaker 1:Let's go.
Speaker 2:We'll see you on watching, everyone.
Speaker 1:Please go and leave a 5 star review and leave an ad for your company or a friend's company in the review comments. We love these 5 star reviews. We'll print it out. We'll read it on the show. It's a free ad read.
Speaker 2:Also big Monday. As of now, we're planning to do our first ever live show.
Speaker 1:Oh, yeah.
Speaker 2:Happening from around, call it, 11 to 2 PM Pacific. Sounds great. You're not gonna wanna miss it. We're very excited to go live, and, have a good weekend.
Speaker 1:Thanks, everyone. Bye.