Sharp Tech with Ben Thompson · 2026-10-30 · 1h 38m
Key moments - from our scoring
Substance score
51 / 100
Five dimensions, 20 points each
Thompson digs into Anthropic's S1 with characteristic rigor, unpacking the business mechanics beneath the headlines. The core story is compelling: Anthropic's subscription and API businesses are genuinely profitable with margins around 80-85% (though this excludes a material accounting nuance where roughly 37% of cloud revenue flows to AWS, Azure, and Google and arguably shouldn't count as Anthropic revenue). The real structural concern, however, is that training costs - the largest expense category - are growing faster than revenue, driven by competitive pressure to pace the frontier with better models. This cost function sits outside management control. The $80 billion loss figure floated by Wall Street Journal isn't cash outflow but rather mark-to-market accounting on convertible debt structures with Amazon and others, which artificially inflates losses while benefiting hyperscaler earnings statements elsewhere. Amazon's arrangement is particularly clever: they funded Anthropic's compute via loans convertible to equity, benefiting from Trainium chip adoption, improved tooling, and optionality on share conversion. Anthropic's multi-cloud, multi-chip architecture (originally born from necessity) now provides flexibility. The financing picture reveals aggressive share dilution baked into the cap table through various hyperscaler agreements.
Hosted by Andrew Sharp and Ben Thompson. The show scores 65.3/100 on substance across its analysed episodes. See the full show profile.
Anthropic's subscription and API margins are approximately 80-85%, but roughly 37% of cloud revenue flows to platform providers (AWS, Azure, Google) and is arguably misclassified as revenue rather than cost of goods sold, which would compress reported margins.
Training costs for frontier models are the primary expense driver and grow faster than inference costs because competitive pressure forces continuous model improvement, placing the growth rate outside management's direct control.
The $80 billion loss stems from mark-to-market accounting on convertible debt structures with Amazon and other hyperscalers; it reflects unrealized gains on those investors' balance sheets, not actual cash outflow from Anthropic.
Amazon funds Anthropic's compute via convertible loans, benefiting from Trainium adoption and improved tooling while holding the option to convert to equity; Anthropic gets capital when alternatives are limited, and the deal demonstrates why Amazon's position with Anthropic is strategically superior to Microsoft's exclusive OpenAI relationship.
Multi-cloud and multi-chip architecture (AWS, Google, Azure; Nvidia, Trainium, TPU, AMD) provides cost flexibility and allows Anthropic to serve enterprise customers who want to run services on their preferred cloud, an advantage OpenAI lacks due to Microsoft exclusivity.
Our reviewer’s read on each dimension, with quotes from the episode.
The episode contains genuinely substantive financial analysis - particularly the accounting critique of Anthropic's gross revenue recognition and the $80B loss explanation - but easily 35-40% of the runtime is consumed by baseball celebration, an Elizabeth Holmes documentary review, and mutual agreement padding that yields nothing actionable for a B2B operator.
The largest portion of their costs is not in fact inference. The largest portion of their cost is this training cost and the speed with which they need to spend money on that is out of their control.
they are putting that 30% into sales and marketing... I'm not sure how that's not a cost of goods sold
A handful of genuinely fresh angles emerge - the alignment between advertising optimism and AI optimism as a worldview signal, the Netflix-as-AI-casualty through Meta engagement pressure, and the drone delivery - to - military capability pipeline - but the bulk of the episode recycles familiar bubble/railroad analogies and standard hyperscaler dynamics already circulating widely in tech media.
I see again and again I feel there is an alignment between optimism about AI and a belief. Optimism about advertising, business models.
it speaks to how Anthropic is deeply an anti human company. They don't get it.
There are no guests; the episode is a two-person discussion between Ben Thompson, a credible and well-sourced tech analyst, and a facilitating co-host. Thompson demonstrates real command of financial statement analysis and platform strategy, but he is a writer-analyst rather than an operator who has built or scaled these businesses, which caps the practitioner insight ceiling.
Once I read it, I'm like, of course it's going to drop this year. They're actually in a really favorable window as far as their business goes
I think I've written about in the past they talk about the S1, the fact their compute is built from the ground up. Their whole model is built from the ground up to be heterogeneous in terms of chip
The episode offers meaningful concrete specifics - exact percentages on platform revenue share, the S1 staleness date, named deal structures - but many claims about competitive dynamics, model quality, and timing are asserted without data, and the named numbers are primarily sourced from the S1 document rather than proprietary analysis.
about 50% of their revenue is coming from the big three via those services
people were saying about 37%. Goes to the provider, the platform provider, the AWS, the Azure, the Google
Andrew Sharp moves the conversation forward competently and asks reasonable clarifying questions, but he almost never challenges Ben's assertions, frequently validates them instead, and the episode drifts into extended tangents (Brewers, Holmes documentary) that the host accommodates rather than redirects. There is no productive disagreement anywhere in the transcript.
So what advantage did that give Anthropic with Enterprises?
What are you still wondering about as we move forward?
Computed from the transcript - who did the talking, and the words that came up most.
Ben and Andrew begin with a salute to the world champion Milwaukee Brewers before turning to Anthropic’s S-1 as the company prepares for its public offering in November. Topics: Anthropic’s impressive margins, questions about the second half of 2026, how the company “lost” $80 billion in 2026, how compute will be paid for going forward, and an SEC disclosure that finally shows us the breakdown of training vs. inference costs. From there: Anthropic’s obsession with OpenAI, reactions to Craig Moffet’s questions about the AI bubble, understanding Meta’s AI spending as an echo of Anthropic’s S-1, a brief 1Password history, and Muse as the ultimate founder bet. At the end: An emailer wonders about Elon’s role in the Ukraine War, Ben sees You Can See Everything, and a few emotional thoughts on the Brewers World Series win. Sharp Tech is Presented by Stripe . To email the show: email@sharptech.fm @SharpTechPodcast Channel - YouTube @Stratechery Channel - YouTube Anthropic S-1, The Cost of Compute, Who Is Paying?
Transcribed and scored by The B2B Podcast Index.
Speaker A: Foreign. Hello, and welcome back to another episode of Sharp Tech, presented to you by Stripe. I'm Andrew Sharp. Joining me in studio today, a world champion, Ben Thompson. Ben, how you doing?
Speaker B: I am doing fantastic. I did not want to talk about the Brewers. You brought it up last week. I'm like, no, we are not mentioning it, but now
Speaker A: we can mention it.
Speaker B: I am free.
Speaker A: We
Speaker B: can lean into it. You know what, Sharp? Check Colors. Brewers colors. Who knew?
Speaker A: Here we are. I was gonna be very, very disappointed in you if you did not wear a jersey to our taping today. You did me one better. You wore a jersey and a Brewers. Well,
Speaker B: the hat is the one piece of, um, you know.
Speaker A: Oh, it's a World Series.
Speaker B: World Series hat. There
Speaker A: we
Speaker B: go.
Speaker A: Doing it. Right. I have not had a chance
Speaker B: to get the, uh, the, uh, World Series champion merch, so. So I will address that on Friday
Speaker A: when I match the trust that you will. I can't imagine how much money you're going to spend on World Series merchandise on the heels of that win.
Speaker B: I do. I do have. I do have takes.
Speaker A: I know you do, so
Speaker B: save them for the end. Actually, I would like to request the entire last segment of the. I have two takes. I have a Brewers take.
Speaker A: Okay.
Speaker B: And I have a. I went to see a movie.
Speaker A: Oh, boy. Ben went to the movies. Okay, well, that's a good teaser for the end of the episode. Um, you did mention you could soliloquy at length about the brewers, so I look forward to that when we get to the end. For now, we will begin with Anthropics S1, which went public 9am Monday morning. This week, we're going to try to do the impossible, which is make a fun podcast out of a 400 page document that was drafted by lawyers and accountants. I know that's fun for you, though. You know,
Speaker B: Um, I can't decide if it's fun or not, to be honest. It was. It was a real challenge. You know, it's been busy these few weeks. You asked a couple of weeks ago, or did you ask? Or I think John asked, you know, is it going to drop this year? Actually, once I read it, I'm like, of course it's going to drop this year. They're actually in a really favorable window as far as their business goes, to drop it.
Speaker A: M.
Speaker B: But dropping the week of the World Series, when I have games to watch.
Speaker A: People actually don't understand how much you've been juggling with the brewers playoff run the last month or so, because you'll watch every playoff Game and then write from like 1am to. No,
Speaker B: we don't talk about that because I don't want people judging my output. Uh, but yes, it's. I. I am relieved about the brewers in
Speaker A: multiple dimensions, and I don't have to do this anymore. Well, I am really thrilled that we have some actual numbers to discuss with any of these Frontier Labs. Dario opened the hood. We get to look at the engine a little bit. Um, there were 93 pages of that document dedicated to risk factors. I am actually less interested in risks. And that whole conversation that has surrounded Anthropic for the last couple years.
Speaker B: Well, there is one. Did you see this sort of satire tweet going around about the Rocco Basilisk?
Speaker A: Uh, no, I didn't.
Speaker B: Oh, so Rocco's Roko's. Roko's Basilisk. There's a. It's a Twitterer, I think his name. Name. Uh, but the
Speaker A: idea is a list. Okay.
Speaker B: You should be careful about what you're writing because the AI is going to consume it.
Speaker A: Mhm.
Speaker B: And just in case it reads it and knows what you think or act.
Speaker A: Okay.
Speaker B: You should be. You should be. You should be positive about the AI.
Speaker A: Oh,
Speaker B: so it's kind of like, um, what, there's a. Oh, there's some philosopher
Speaker A: that has. AI is keeping a list of naysayers.
Speaker B: Well, so there's a thing about, uh, like, why you should be a Christian or believe in God. Um, I can't remember what it's called, but it's the same concept where you might as well. Because in case you're wrong, like, just the expected value,
Speaker A: the downside.
Speaker B: That's right. Is very high. So, um, this is the same concept. So someone put up a screenshot in, like, the text of an S1 document.
Speaker A: Mhm.
Speaker B: That said, wow, anthropic risk factors are off the hook. And it had a whole thing that was like, our models may, like, be aware of what you did. So. So if you don't invest in our ipo, it may take that personally or whatever. So, number one, it was very funny. Uh, number two, it was believable.
Speaker A: So that's what I was going to say is there were a couple different parody risk factor sections floating around on Twitter this week. And literally anything that somebody threw in there, I believe. I don't. Who the hell knows what they put in the risk factor section. So. But again, that's sort of been the conversation with Anthropic for like, two years now. I think it's pretty interesting that we have real numbers. Um, so I Have some specific questions for you. Top line question though. I saw someone tweet that Anthropic's IPO will be for the AI trade what Coinbase was for crypto, essentially top of the market. It all goes sideways from here. Based on what you saw in the S1, do you buy or sell that take?
Speaker B: I don't know. I mean, so there's no question? No, there is a question.
Speaker A: Okay.
Speaker B: I think it's inevitable that we are right now will be whatever, sort of in a bubble and it's going to pop and it's going to be painful and then we'll come back. That's just the inevitable nature of these things. I think there is an extent to which AI is different in lots of areas. The sort of mechanics of stuff piling in too quickly, there being a mismatch in timing between when it's absorbed or not. Like there's lots of differences that we've talked about between the dotcom era and this era. But that dynamic, I think, where, you know, dot com had lots of good ideas just didn't make sense for a while or didn't sort of get penetration for a while. I think that is almost inevitably going to be the case.
Speaker A: Okay,
Speaker B: now when does that happen? I don't know. I mean you have all the, the. There's been a lot of issues with the uh, the NEO scalers. Neo. Neoclouds.
Speaker A: Neoclouds, yeah.
Speaker B: Right. Can they get financing? All of which goes back to. I think TRI was pretty on the ball with this. We've been talking about the concern about the credit mismatch. Not like just are we going to run out of money? This is when we had the discussion about railroads. We had, you know, we talked about Google. I know we're going to get more into some of the financing questions sort of later on, but I think it is likely there's going to be pain.
Speaker A: Mhm.
Speaker B: Um, but
Speaker A: so racing is the gate and people will experience pain. So my experience reading your coverage of the S1 this week though was turns out Anthropic is actually like a rock solid business.
Speaker B: So yes, you're totally right. Like the core business looks amazing. The subscription for sure is profitable. It's less profitable than the API.
Speaker A: But um,
Speaker B: the subscription is a great product. People are like, they've already paid for it so they're going to use it. They're going to get used to your, your product, your workflow. They're going to advocate for that in their companies.
Speaker A: Mint Claude. People, you know. Exactly. Loyalists. And
Speaker B: once you're paying for it. It's like, of course I'm going to use that. Like.
Speaker A: Yeah,
Speaker B: no, I think it's worth it to pay for both. But who's going to actually do that? Right. By the way, there was a whole point. Someone like figured out the whole point system. That quad applies to you, like reputationally, to see.
Speaker A: Wow.
Speaker B: Yeah.
Speaker A: I did not know that Claude was bestowing social credit. Apparently people.
Speaker B: Well, I think it, I think it's kind of for like some of the distillation issues, questions or whatever.
Speaker A: Uh,
Speaker B: so like if you sign up and do max plan immediately, like you start in the basement. So that's
Speaker A: interesting. Okay. Counterintuitive. Perfect.
Speaker B: Well, it kind of makes sense if you think about it. But
Speaker A: I think
Speaker B: about it. Yeah, I think I'm pretty sure I have when. That maybe I started out in the basement. Um, so business looks amazing. So on one hand that's a reason not to show that off.
Speaker A: Yeah,
Speaker B: like, companies don't want to show like how good their business is sometimes for like, sort of competitive reasons. But that's actually not the concern in this case. It's great. It's a great talking point. Everyone realized, holy cow, this is an amazing business.
Speaker A: Right.
Speaker B: The problem is the R and D spend is again, much larger than the cost to serve.
Speaker A: Mhm.
Speaker B: And it is increasing more quickly than the cost to serve. Even in the first half when their usage is exploding.
Speaker A: Right.
Speaker B: In that half year, the cost of their R and D spend for training and all that sort of thing went up more than the cost of
Speaker A: serve.
Speaker B: And the issue is that why did it go up? Well, because they want to make a better model. Why do they need to make a better model? What's the whole point of pacing the frontier?
Speaker A: Uh, because there is competition.
Speaker B: Because there is competition. And what that means is the largest portion of their costs is not in fact inference. The largest portion of their cost is this training cost and the speed with which they need to spend money on that is out of their control.
Speaker A: Right.
Speaker B: It is a, uh, it is an
Speaker A: ongoing cost. Right.
Speaker B: Huge cost until
Speaker A: you crack the code and then get it under control.
Speaker B: That's right. And so that is the, that's the concern here with this, with this company is they have a cost function that is kind of out of their control. And all indications are the bigger the models get, the
Speaker A: better they get going away, the more it costs, more expensive.
Speaker B: And this is where we circle back to we need to pace the frontier for safety. It's like we need to pace the frontier to make sure. Our company stays in business. It's like is definitely the case.
Speaker A: Yes. Well as uh, their safety is aligned
Speaker B: perfectly with their business needs.
Speaker A: Well so as far as losses are concerned, another number that was floated before this was actually released, the Wall Street Journal reported Anthropic reported a loss of $80 billion for the first half of 2026 based on the S1. Can you unpack that figure and why it's not as ominous as it sounds.
Speaker B: Well, so it's not ominous. I mean what. Depends how you look at it. It's not ominous at all. So what happened was when Amazon. Amazon made the investment of a lifetime, uh, them. And uh, uh, who's the sbf? Um.
Speaker A: Oh, sbf.
Speaker B: He lost his. So Amazon when uh, Anthropic, like no one. They were, they were counted out completely.
Speaker A: They're
Speaker B: like OpenAI has won the second place coming along. Nothing's going to happen. Amazon comes in and just a brilliant investment and they say they got multiple things out of it. Number one, they're like, you're going to come use Trainium.
Speaker A: Yeah.
Speaker B: And did Anthropic want to use Trainium?
Speaker A: Absolutely not.
Speaker B: Probably not. That turned out very well for Anthropic. By the way, I didn't write about it this week, but I think I've written about in the past they talk about the S1, the fact their compute is built from the ground up. Their whole model is built from the ground up to be heterogeneous in terms of chip
Speaker A: and chip agnostic. Right.
Speaker B: Yeah. Uh,
Speaker A: yeah,
Speaker B: they're just, it just sort of built a certain level of flexibility in their overall cost structure is sort of built in because they had to. Yeah, you know they originally way back their very first models, like on video, then they do this whole Trainium thing. Then they. But once you've already sort of supported two, then okay, now we're on TPUs and now
Speaker A: we're going to
Speaker B: be on AMD. Have a deal with AMD. Like they're just, they've built a layer of abstraction that is uh, a very good place to be I think has benefited them very well. Just like they similarly have this. They've always been on all the clouds.
Speaker A: Yeah.
Speaker B: Like they, they, you know the, they're, they're always on Amazon and then Google and now they're on Microsoft. And that was a huge. I think that's very underrated in why they took over the enterprise under OpenAI's nose. OpenAI was stuck on Microsoft like and
Speaker A: so what advantage did that give Anthropic with Enterprises.
Speaker B: Because if you have all your data in aws, you would rather use
Speaker A: the service on
Speaker B: aws and like, so, so there. There's another thing. Sorry, there's. It's an S1. It's like I've
Speaker A: 400 plus pages,
Speaker B: a
Speaker A: lot of threads.
Speaker B: So about 50% of their revenue is coming from the big three via those services. So
Speaker A: it's
Speaker B: coming through AWS, coming through Azure, coming through Google. And it is confirmed that they're doing kind of sketchy accounting. Depends how you want to define it. Which is if you pay Amazon $100 that their anthropic, uh, is recording that $100
Speaker A: as revenue. As anthropic revenue. Okay.
Speaker B: And then in reality like 30. A third of that or so depends. It sort of varies. I think people were saying about 37%. Mhm. Goes to the provider, the platform provider, the AWS, the Azure, the Google. So they are putting that 30% into sales and marketing.
Speaker A: I was wondering what the sales and marketing costs are. So that's part of it. Okay.
Speaker B: A little bit of BS accounting, in my opinion. So for two factors. Number one, I think it's fair to argue that they should not be recognized at 30% at all.
Speaker A: They
Speaker B: should only be recognizing the portion that is going to them. And then you would. Their revenues would be lower.
Speaker A: Yeah.
Speaker B: And then so when we say 15 or 85% margin, that is totally excluding this portion.
Speaker A: Mhm.
Speaker B: So if their revenues were commensurately lower, the margins would be compressed because the costs are still the same. Or number two, I'm not sure how that's not a cost of goods sold.
Speaker A: Like,
Speaker B: um, to. To. Because it is a portion of the revenue.
Speaker A: Right.
Speaker B: It's not like you're paying a fee and it's a fixed thing. It's like as you do more revenue, your portion, you have to pay the platform scales as
Speaker A: well.
Speaker B: From my perspective, I think that should be in cost of revenue. Now this
Speaker A: is what I mean by the way. You live for this. You love
Speaker B: accounting. I absolutely love.
Speaker A: You've got a brewer's hat on right now, but you've always got your accountant's hat on. Uh, ready?
Speaker B: I needed to get a custom brewers jersey with a pocket protector. Um, that'd be great. So
Speaker A: Amazon's $80 billion and that. That we're
Speaker B: working in there. Okay. You're
Speaker A: weaving. You're weaving.
Speaker B: Weaving. That's right. Uh, so those numbers that we talked about for margin are not quite correct because this is a significant material amount that should be accounted for. I mean, it's in the financial statements. But it's. I think this is more of a cost of goods sold. Lower margins
Speaker A: for
Speaker B: sure. The margins are lower still. Great. To be clear, we're not complaining about the margins. That part of the business looks fantastic. So you go back to Amazon way back when they put uh, they have to be on Trainium. They're gonna be obviously a part of aws, but then also Amazon I believe. So I think how it worked, they might have put some money in the company, but they basically gave Anthropic a bunch of money. And this money was actually given in the form of a loan and so Anthropic could take that money and buy Trainium Compute. So nice little, you know, this is the circular financing people complain about. But in this case from Amazon's perspective we can get into the role the hyperscalers here. It makes a lot of sense
Speaker A: and they needed the computer.
Speaker B: They're basically double dipping in advantage. Not just that Anthropic using Trainium makes Trainium better because they're going to push the limits of what this architecture can do.
Speaker A: They're
Speaker B: going to develop more tooling for it. All of which makes Trainium a better product to offer for anyone and everyone else. So this is a massive win for Amazon which they got because Anthropic had nowhere else to go. They needed lots of money, they needed lots of compute. Microsoft was with OpenAI, Google was doing their own thing. Amazon
Speaker A: mhm
Speaker B: Stepped in. So as part of this loan, the nature of the loan is Anthropic could pay back the money or Amazon could take shares.
Speaker A: Right.
Speaker B: And that was Amazon's call.
Speaker A: Now
Speaker B: of course Amazon is going to take the shares but every time Anthropic raises money,
Speaker A: it's repriced. The value
Speaker B: of those shares are repriced and they have a liability to Amazon because they'll give the shares. Like I believe it'll happen with the ipo.
Speaker A: Mhm.
Speaker B: So every time. So they raised money multiple times I think the first half of this year. Every time they had to reprice this. That is booked as a loss on their accounting. So that $80 billion is fake. It's not money out the door. What that is is the all the beautiful accounting is everything has to balance. Right? One thing goes up, another thing has to go down. Where that money shows up is on Amazon's income statements.
Speaker A: Um, the
Speaker B: increased value of their investments.
Speaker A: Yes, well, and it's a, it's a reflection of the astronomical, astronomical growth that Anthropic has experienced over the last.
Speaker B: This is Actually going to be a big problem with all big tech ear going forward because all the hyperscalers have various investments in these companies. Their MHM earnings are going to go up and down based on the value of these investments.
Speaker A: So Google,
Speaker B: one of the challenges they had in their this year. We're not going to talk about Google's earnings. We'll probably get to it next week. But is their SpaceX value. The value of their SpaceX holdings went down.
Speaker A: Yeah.
Speaker B: And so that like impacts their earnings. So you're going to have to look at the operating income, not the overall income. And that's going to be the case with Amazon in the opposite direction. Their overall income is going to be way higher because of their anthropic investment which doesn't actually have anything to do with understanding the underlying business.
Speaker A: Okay, so we can all look forward to that. Super
Speaker B: interesting. And also very annoying.
Speaker A: Yeah, well I mean some of these like Google they've had their investment in Anthropic like reflecting massive earnings over the last couple of years as well. For sure.
Speaker B: Yeah. This has been, this has been.
Speaker A: So we'll sort of ride the roller coaster once these companies become public. That's actually going to be kind of fun. And
Speaker B: by the way uh, there's a bunch of these outstanding
Speaker A: MHM
Speaker B: Anthropic has this sort of loan to. I uh, can't remember these actually have the name in front of me what these are called but there's more with. So Amazon is. Hasn't finished converting their first one.
Speaker A: Yeah,
Speaker B: they have two more.
Speaker A: Is this how Anthropomorphic is paying for compute as much as anything else?
Speaker B: Of course,
Speaker A: yeah.
Speaker B: But this and this is the whole thing is who's actually paying
Speaker A: m who
Speaker B: investors at the end
Speaker A: of the Anthropic Investors.
Speaker B: Well so yeah they're basically like materializing this money out of thin air which is every other investor Anthropic in Anthropic is heavily diluted by these what goes out. And this is the whole thing about the uh, like Anthropic is just super aggressive about this. But this is the case with all the hyperscalers. It's the case with everything as we're moving into equity for funding this stuff the people who are paying are existing shareholders.
Speaker A: Yeah,
Speaker B: it is like uh, because you're just devaluing what you own. And this is built into Anthropic number one they have all these outstanding uh, share issues. They have to Broadcom, they have to Google, they have two and a half more to Amazon where it's just Built in dilution. They also have built in. If the value of our stock goes up by like 50% then we have the right to issue 2% of outstanding shares to this Benefit
Speaker A: Corporation LLC.
Speaker B: It's like you're, it's just.
Speaker A: The fun continues.
Speaker B: Yeah, I mean I guess they're, they're very straightforward about it. Like. No,
Speaker A: but dilution is baked into the equation because there was a tweet from someone named Vincent Jansen on Twitter. He wrote this week, first hyperscalers used free cash flow, next hyperscalers use debt. Now hyperscalers are turning to share dilution. Is there a final step or is this the last Anthropic very much part of the same story there?
Speaker B: Yeah, well, I mean we, again we talked about this on trajectory like, like this summer. I think we are very sort of ahead of the curve on that. Yeah. This is the last. I mean it's, but it's also in some respects the best.
Speaker A: Mhm.
Speaker B: Because the reason why companies want to do debt first is because then they retain the upside.
Speaker A: Yeah.
Speaker B: Once you're giving away or once you're having to sell shares, you're basically like give us money because you believe in there's going to be and you're, you're giving away the upside to new people. To new people buying those shares. Which I think is in this space is
Speaker A: healthiest,
Speaker B: all
Speaker A: things
Speaker B: considered.
Speaker A: Yeah, I mean you could go glass half empty and say well now the burden is being shifted to retail investors of the future to fund these bets. But
Speaker B: right in there, you know, I am sympathetic to the private investors, got all the upside to date. And Amazon, uh, if you were a retail investor, you could have had money in Amazon.
Speaker A: Yeah.
Speaker B: Sort of seen this coming. It's not like it was unknown that they had these deals. Uh, but okay, now the public can buy in. When we're worth 1.5 trillion or 2 trillion, it's like where are we going to go from here? Uh but I mean that's why anthropic is they're pretty strict proposition is look, you can buy, it's super expensive, we're going to dilute you endlessly, but we're going to control the world. And how much is that
Speaker A: going for a
Speaker B: ride?
Speaker A: Absolutely. Well, and my counter to somebody who made that argument to me would be it's preferable to the scenario where anthropic just remains private in perpetuity and does it that way. So I um, think it's healthier to have public market disclosures number one and also public market Upside in the midst of all this, whether
Speaker B: that is, there's a couple of timing things that are interesting here. One, I think it's so it was a year ago where Dara Amaday was like Matt or like mocking OpenAI or not mocking but saying they're being reckless for buying all this compute.
Speaker A: Mhm.
Speaker B: And like literally like six weeks later he looks like a dummy because they don't have enough compute.
Speaker A: And all of it's more expensive now.
Speaker B: It's more and more expensive. And uh. And so now they're like actually we're going to get a ton of compute. I suspect. I can't say for sure, but I suspect that made the first half of this year look even better financially though, because their costs are compute. They didn't have enough compute.
Speaker A: Uh, but their
Speaker B: costs were lower even as they're. Well because. But this is a similar idea. Who's actually paying? The people who are paying in the first half this year was the people for whom anthropic was down every few hours because they didn't have enough capacity. So like all those people, you did your part for Anthropic IPO by making their, making their margins
Speaker A: look. Grinding through your frustrations with uh, cloth. That's right.
Speaker B: Well the other thing that's interesting is these numbers in the S1 are as of June 30th.
Speaker A: That's what I was going to ask about. What are you still wondering about as we move forward?
Speaker B: Well, all the reporting and is that in like the whatever data we can see, like ramp has that like index of spend or whatever is that it's sort of flatlined. Not flatlined, but the rate dramatically decreased in the second half this year. Astra comes out. You know, I OpenAI is really, really pushing. And what's interesting. But then again. But on the flip side, Opus 5.5 came out. So did it re. Accelerate? Like what's gonna. So this is all. I think it expires like uh, what's it called? Does it not dehydrate? It uh, goes stale.
Speaker A: Mhm.
Speaker B: I think it's November 12th and
Speaker A: the
Speaker B: reporting is they're gonna like actually go
Speaker A: out pushing to go public in mid November. Right.
Speaker B: Ah,
Speaker A: will we get fresh numbers? You know, to celebrate these. We have to get fresh numbers as of
Speaker B: November 12th.
Speaker A: Okay.
Speaker B: Are they going to try to get out before then? Are
Speaker A: they
Speaker B: going to go. Is it going to be after that? Is there going to be like an October surprise? Right. Like it's, it's. I don't.
Speaker A: And it is interesting though because the narrative around Anthropic. Look, people are very bullish on this company in any context. But the narrative around Anthropic has become a bit more nuanced over the last several months because of the progress that OpenAI has made in the enterprise because of random ramp charts that show the growth flatlining, at least in relative terms. And the reality is given the growth over the last couple years, they're just not going to be able to replicate that growth going forward because it's impossible. It's the law of large numbers. So let's see.
Speaker B: We'll see
Speaker A: what it looks like.
Speaker B: But the counter to this is that was the I think accepted wisdom a month ago.
Speaker A: Mhm.
Speaker B: Opus 5.5 is
Speaker A: so
Speaker B: good.
Speaker A: Fair enough.
Speaker B: I mean so maybe it's gonna say yeah, it flatlined, but then it took off again. The only problem if that's the case, that actually just reinforces the we have to spend because all that matters is how good our model is.
Speaker A: M
Speaker B: if all that matters, how good your model is, you have this built in accelerating cost center in your business that you're just have to be sprinting on the revenue side to outpace.
Speaker A: Well and you had this question for Shyam Sankar in your Stratecheri interview this week. Is it inevitable that the labs have to come for all software companies because of the commoditizing nature of their models and I think about Anthropic's costs and obviously competing on the frontier is going to continue to be incredibly expensive. And that does make me curious about what other lines of business they try to come for to realize all their upside in the years to come. And maybe that sort of allays some of the concerns about continuing to compete on the frontier.
Speaker B: Yeah. I mean you have all these lines of battle in tech.
Speaker A: Mhm.
Speaker B: So what is obviously OpenAI versus Anthropic. Yeah. That's sort of the headline
Speaker A: that's been the big blockbuster fight. That's right. Three years now.
Speaker B: But there is the frontier labs versus everyone else. And I think the two companies on the forefront of the everywhere else is Microsoft and Palantir.
Speaker A: Mhm.
Speaker B: Both of which are making very similar propositions to their customers and making the argument publicly. Both say Nadella and Alex Karp have been doing this, which is you need to be in a place where the model is completely replaceable.
Speaker A: Yeah.
Speaker B: Everything you do needs to be around it. Their
Speaker A: model agnostic. They will trot
Speaker B: out every argument they come up with for why this needs to be the case. Right. Like but you know, the uh, but
Speaker A: there's a lot of like anthropic will steal your business too. Is part of the rationale.
Speaker B: A big part of is, yeah, you're, if you give them your data for how your business works, like
Speaker A: it's only a matter of time.
Speaker B: Like what, what do you have? But another one is you should be able to sub them out. And why
Speaker A: do you
Speaker B: want to set them out? Because whoever gives you a cheaper deal, whichever model is better. And so there, there's a real sort of fight and tension going on here. And the argument that I've made, I asked this to Shams or I told him, I apologize for calling you Shams.
Speaker A: You did drop a Shams at one point. Oh,
Speaker B: did I? Oh no. I, I, I told him at the end. I'm like, I, I, I wanted kept wanting to say Shams. Um, unfortunately a classic tech guy, he did not know what I was talking about,
Speaker A: which
Speaker B: is Sham Sharania Newsbreaker in the NBA. I
Speaker A: think at one point in the interview you dropped a Shams bomb. And I don't know, is Sham Shankar, like, known for bombs?
Speaker B: Yes.
Speaker A: No. So
Speaker B: he's known for writing these like emails to the, like the whole company or a whole team just taking them to task. Like he's
Speaker A: like, great.
Speaker B: They're called, they're called sham bombs.
Speaker A: Okay.
Speaker B: Uh, but no, it was not really. I did get a long email from him, but it was, it was nice. Um, but
Speaker A: yeah, he clarified there weren't enough expletives in his email to qualify.
Speaker B: So yes. Sham Sakara. No, I've been raising this for ages.
Speaker A: Yeah.
Speaker B: I think in the long run, in the fullness of time, they need to go up the stack, integrate into the customer, owning the customer experience because, and you could even see this with things like quad code and versus Codex.
Speaker A: Mhm.
Speaker B: Working with Quadco where with Codex are different, like they're organized differently. The way I think about it is I feel like Codex is like people who file their emails into folders.
Speaker A: Yeah.
Speaker B: It's like very project and you have threads within projects and it's like, like if you're that sort of person that is very organized, it makes more sense.
Speaker A: As a former lawyer, I think of Codex as the associate and Claude as the partner.
Speaker B: Yeah. Claude is just like, it's just, it's better at handling lots of different things. You're constantly changing topics. But if you want to be organized, like on your own, it's like kind of maddening.
Speaker A: Yeah.
Speaker B: Uh, needless to say, that's why I use Claude a lot.
Speaker A: Claude's kind of a dick.
Speaker B: Uh, so, uh, the personality still drives me crazy. But, um. Like, yeah, like for the, like, for me, the way it ends up manifesting. Like, I work on this, I talk about Geckobot, the actual building of it where it's very clear and building this piece, this is, this piece I've done mostly in Codex. And the actual model powering it is quad
Speaker A: because
Speaker B: it just handles like different things coming at different times. Now it is, it is kind of interesting its own. Right. I'm almost choosing from a UI perspective as opposed to like what the model does perspective. But the more you have that choice from a ui, UI is essential because that is, that's the interface. It's the interface to humans. It's literally the name user interface. But you don't. You have people who are used to say quad code and they don't want to go to something else. Now right now you can sub stuff in and out to a certain extent. You can call different models, so that could be worked around. But the further up they go, uh, go in the stack or say you do a Codex work project, whatever it's called, I can't keep track.
Speaker A: But
Speaker B: you get your little virtual machine in the cloud, so you have your own vm, it can write stuff down. It's like, wow, it's so helpful. They're giving me this virtual machine in the cloud. Yeah. You're now stuck in their cloud.
Speaker A: Yeah.
Speaker B: Right. Or the code design thing, like, you know what they did to Figma kind of did them dirty. But the more you're using that and using an application, the less likely you
Speaker A: are
Speaker B: to
Speaker A: switch. Locked in. Sure,
Speaker B: that's right. In a world where all you need to do is change an API, that's the world to go back to the beginning where you're on this treadmill. Yeah.
Speaker A: And you don't have very much pricing power. Sure. Well, and it does. I mean, you could talk yourself into limitless upside if you talk yourself into the possibilities of anthropic just eating SaaS over the next couple of years and doing all sorts of different areas or all sorts of different things in the software area to expand its revenue piece. And maybe they could do that. Well, it doesn't
Speaker B: revenue pie. It's lock in. Lock in is an important part of making money. What's your moat?
Speaker A: Right. Well, and right now it's very difficult to falsify any hyperbole about what Anthropic or OpenAI could accomplish in that space. Uh, for now we have a couple emails on Anthropic but before we get there, I mentioned at the top. Today's show is presented to you by Stripe, Ben. Stripe is the financial infrastructure behind many Internet native businesses, including companies you regularly cover on Certecary
Speaker B: and including Stri
Speaker A: and. And including Strary and including Goat. Uh, Substack is one example that you've been invoking on Strary in ads all week long. Every Substack creator is also a Stripe customer. Question for you. As a general matter, why does Stripe have a market and why does it make sense for Substack to outsource for those capabilities rather than building
Speaker B: Miserable? Like don't you like the. This is goes back to why I started with why Stripe was the unlock for me to do so tech re.
Speaker A: Mhm.
Speaker B: Like there is PayPal, which is options was terrible. A terrible reputation. You lose your money wasn't really like catering to individuals in the way that needed to be in my estimation. I think probably still doesn't. Or what are you going to do? Go get like a merchant account from like Chase or something.
Speaker A: Okay.
Speaker B: Like just the.
Speaker A: So maintaining it would be so miserable that it would defeat the purpose of starting a business.
Speaker B: I mean I wrote a uh, few years ago Stripe, like the platform of platforms which you need an abstraction layer for basically everyone else.
Speaker A: You
Speaker B: have a gazillion banks in the world. You have all these like financial rails, all of which are archaic or old or new or whatever it might be. It's like an operating system. It's an operating system for finance. Like what, what. Why do you need an operating system? If you build for Windows, that means your computer is going to run on a gazillion different kinds of hardware. Like because all that part is abstracted away from you. And so yeah, when I did the first version of Stry and I had to get like Mailchimp over here and I had to get like WordPress Plugin and I had to get all these different pieces. The Stripe part was great. And so a subset comes along or a passport and we want to say, oh, let's integrate all that stuff. Let's provide one offering that does everything.
Speaker A: But let's not. You're still not going to pay, you're not
Speaker B: going to reinvent payments.
Speaker A: Right. And that abstraction layer.
Speaker B: Exactly. So that, that, that's, that's the commonality.
Speaker A: Okay.
Speaker B: It's like why did I use Stripe and all this other stuff? Why did Substack do it all together and still do Stripe Passport, same sort of thing. Even like a Shopify. Shopify their Most important product is the Shop pay.
Speaker A: Mhm.
Speaker B: Which ultimately goes down to Stripe.
Speaker A: I didn't know that.
Speaker B: Yeah,
Speaker A: I didn't know that Shopify is running on Stripe. I love Shop Pay. Boy, oh boy. One of my favorite products of all time.
Speaker B: Phenomenal. Yes.
Speaker A: Um, just a clean experience every time. Well, fintechs can use Stripe to you to start their own credit card programs. Marketplaces can use Stripe Connect to verify sellers. AI companies can use Stripe billing to track usage. I am really grateful that Stripe has empowered so many members of the modern media. Um, that was one thing I didn't mention last week. Obviously empowered my own career. But like my media diet, uh, is probably 75% stripe.
Speaker B: No. For
Speaker A: customers at this
Speaker B: point. Like the obvious angle for us to talk about it. Because it's the direct personal thing.
Speaker A: Yeah, it's us.
Speaker B: All the listeners and readers. This is why they should be grateful. Not just us, uh, not the greatest of all talk, but all your favorite podcasts, all the substacks, all this sort of stuff. You have to be able to get paid.
Speaker A: Right.
Speaker B: And, uh, that was not easy to do before.
Speaker A: Well, here we are. Um, all right, back to this show. Couple anthropic emails. Alexander says, Andrew and Ben. I watched Dario and Daniela's interview this week with Walter Isaac Isaacson and woof. They start off the interview by praising the inherent honesty and goodness of Anthropic and then spend the majority of the 42 minute discussion criticizing OpenAI for the following, having ads in their product, building more sycophantic models, partnering with the government as corporate quote an opportunistic move rather than a quote principled stand and being generally dishonest. The level of obsession, hatred and disdain they have for OpenAI is alarming. It's like someone badmouthing their ex during their wedding vows. Someone should remind Dario and Daniella that when you point one finger at someone else, there are three fingers pointing back at you. Um, not sure how that works. Had not heard that phrase before, but. Are
Speaker B: you serious?
Speaker A: I mean, I'm pointing a finger at you? Yeah. There's no. Oh, there we go.
Speaker B: People
Speaker A: have to watch the video for that one. But sure enough, there were three fingers pointing back at me.
Speaker B: I'm baffled. How. There's a question, um, here about the Gen X millennial thing. Is this a generational?
Speaker A: I don't know.
Speaker B: How have you not heard this before?
Speaker A: It could be. Are we. We're only divided by like six years, but maybe that's enough of a chasm to create that disconnect in Any event, what do you think of Alexander's sentiments there?
Speaker B: It was funny you included this email because I was literally thinking the exact.
Speaker A: This is the hazard of recording podcasts. Sometimes you're just thinking out loud on air for everybody, but there you go, learn something new every day. All right, so you were thinking the. I was thinking this exact
Speaker B: same thing.
Speaker A: Okay.
Speaker B: Like the. It's kind of. It's pathetic in a way.
Speaker A: Okay.
Speaker B: The extent to which they do continually define themselves as being the opposite of OpenAI. And it's kind of funny because they're like, oh, about alignment and training our model to be great. And if they continue making decisions like, oh, we're going to not do it, OpenAI does. Who's actually setting the agenda here? Right. Fair
Speaker A: enough.
Speaker B: If OpenAI is like, too online. Uh, anthropic is. Yes. Like,
Speaker A: anchored on, um, what they're doing. That's right. Sure.
Speaker B: And you know, to what extent might OpenAI actually do something that makes sense, that is the right thing to do? And anthropic is like, anchored on. Well, guess that's the wrong thing to do. I, uh, do think it is a very astute point. It speaks to overall, just the discomfort I have with their entire view of the world,
Speaker A: which
Speaker B: is like, this stuff is too powerful, so someone has to teach it how to be good. And the only ones that can be trusted to do that are us.
Speaker A: Mhm.
Speaker B: And you always ask why you and Alexander's pointed out what their answer is. Because we're not Sam Altman. I'm like to. If your definition of being good is not being Sam Altman, you.
Speaker A: Well. And maybe I'm too immersed in this world at this point because to me,
Speaker B: we're still defined by Sam Altman. It's like people who define themselves as being Trump. You have let Donald Trump define the entire frame of which you're operating,
Speaker A: but it's almost just ambient noise to me when I hear them go off on one of these tangents about how untrustworthy OpenAI is or how untrustworthy Sam Altman is. I mean, I mean, there's an element of this where it's more charming than, like, some of their other crazy digressions. Uh, their obsession and their rivalry with OpenAI. Not really that big of a deal one way or the other, as far as I'm concerned. Um, I can't get too worked up about it.
Speaker B: Except these are the people setting themselves as, like, the moral arbiters.
Speaker A: Mhm.
Speaker B: For everything.
Speaker A: So I don't believe that. I've never Taken them seriously? No,
Speaker B: I believe they're trying to do that.
Speaker A: Yeah.
Speaker B: The answer isn't to just like I don't think it's the right approach that they should need to teach quad morals.
Speaker A: Mhm.
Speaker B: I'm not here to teach anthropic morals. What I'm here is to make sure that there is no small collection of people that get it aside it for everyone else.
Speaker A: Yeah.
Speaker B: Like that's sort of the biggest.
Speaker A: Well to the extent that the mudslinging at Sam Altman is intended to delegitimize him in the eyes of the mainstream and ultimately sort of redound to Anthropic's monopoly power over how this technology is deployed. That sucks. It's also so far to what extent
Speaker B: has Anthropic actually been the best thing for Sam's like oh
Speaker A: my God.
Speaker B: Right. Like suddenly.
Speaker A: And they've done wonders for Mark Zuckerberg as well.
Speaker B: Everyone who's like worried about Anthropic is like sam, he's not that bad. I figured right.
Speaker A: We can work with this guy. And when you go back to OpenAI when Dario was there, the original beefs with Altman at least in some cases were completely dumb. M stuff open
Speaker B: I did were from Dario Amadai and his whole team. The whole like chat GPT2 is too dangerous to release.
Speaker A: Right.
Speaker B: Like this. Uh
Speaker A: well and part of their falling out it involved a clause that would have required OpenAI to merge with another company that was closer to AGI than they were. And Sam wouldn't include that clause or Microsoft wouldn't agree to including that clause in the investments. And Dario was very upset. Uh, like of course Microsoft wouldn't agree to it and of course Sam wouldn't like have that be a deal breaker for the Microsoft. This
Speaker B: does go back though to the opening original sin which is this whole we're going to be a nonprofit like this. Actually companies should should operate like normal
Speaker A: traditional incentives. And this is
Speaker B: the whole problem with the whole the S1 and the anthropics. Insane governance structures. We haven't talked about either. There's like seven share classes.
Speaker A: Yeah.
Speaker B: Like there's this magic share that like the board as or the benefit corporation has or what. What are these random things has about who gets voting or who doesn't. It's nuts.
Speaker A: Mhm.
Speaker B: Like actually we should just operate like normal companies that that
Speaker A: would be buying in. That's what you're buying. Yeah. Well we'll see. Um,
Speaker B: profit motives. Good.
Speaker A: Healthy.
Speaker B: Good for society. Healthy. Yes.
Speaker A: You know I was writing about China for Sharp text this week. And they have all these political incentives that kind of distort things obviously, uh, famously. And America, as crazy as America can become in the eyes of the world, the rest of the world can trust that there are basic profit and market incentives guiding the decisions that are made. That's
Speaker B: incredibly important.
Speaker A: Yeah.
Speaker B: Like it is its own rule of law and it gives you. Why is the rule of law important? You can make decisions, you can make investments
Speaker A: within a predictable framework.
Speaker B: That is what the traditional corporation, profit maximizing corporation. Yes, there are obviously issues. They're well documented. But every system has issues. And what the benefit that has is rational acting. You can actually engage understand someone else. This seven share weird governance. We're not actually governing for profit is. It's worse.
Speaker A: M.
Speaker B: And it's. I mean, you know what you're signing up for, to be fair.
Speaker A: Yeah.
Speaker B: And you're signing up for like, we're going to just dilute you away and we're not focused on making a profit. And maybe they'll pull it off because Opus 5.5.
Speaker A: Because at the end of it, that's what we always come back to. It's like the core product. Really, really good. All right. Ravi says, I was just listening to Sharp Tech at 3x speed while on the treadmill. I usually listen to podcasts at 3x, but for Ben's updates or interviews where there is also a transcript I listen and read, which is even better.
Speaker B: Yeah, see, Ravi, you should have filled us in. Yeah,
Speaker A: there we have it. Um, I don't watch video versions because I don't have YouTube Premium and can only go to 2x.
Speaker B: Ravi,
Speaker A: does he need YouTube Premium? That's a hilarious reason to not watch video podcasts because it only goes to 2x.
Speaker B: I mean, like, you can live the life where you want to. I'd rather you pay your subscription money to checkery versus YouTube if there's
Speaker A: one. He's. He's making good choices as far as I'm concerned. Yeah.
Speaker B: You know what? I have nothing to say. Continue with
Speaker A: a great interview with Craig Moffitt. He says, uh, where does Ben land on his key question about AI CapEx? This is Moffat's key question. Is end demand from consumers and enterprise where it needs to be and will that be sufficient in the near term? 2027, 2028 and the direct quote from Craig Moffat, All I care about, he said, is, are the revenues coming into the system, which means coming into anthropic, coming into ChatGPT, are those greater than the cost of building the whole Value chain. Ignore all the revenues going on between the layers of the value chain. That's just noise. All that really matters is enough money coming into the system to support the system. Where do you stand on that question? I thought it was a pretty good formulation of like the core issue from Craig Moffat.
Speaker B: Right. It's easy. Kind of like how much is Nvidia taking? How much is TSMC taking?
Speaker A: What's up with the new clouds? Yeah,
Speaker B: uh, no, it's a very good observation and I don't know, like we don't know what the timing is right now. As impressive Anthropic's revenues are, they don't come anywhere close to all the CapEx that's being put out.
Speaker A: Yeah,
Speaker B: but the CapEx is also for two to three to four to five years down the road. If Anthropic keeps accelerating the way they are then accelerating based on what time frame? The beginning of the year later on this, all that matters is the revenue growth. This is the other point. This goes back to like people get really worked up about stock based compensation because that is also dilution.
Speaker A: And
Speaker B: they're like, you don't, you should be evaluating this in your stock picks. The reason people don't care about stock based compensation, they only care if your revenue's not growing. If yours growing, no one cares. It's fine. Once yours growing, they're like, yeah, well and also have you seen their stock based compensation? Right,
Speaker A: like
Speaker B: this. And so all this stuff at all, anthropic, the dilution, the weird governance, no one cares if it's up and to the right.
Speaker A: Yeah.
Speaker B: And like, and that matters broadly for the whole ecosystem. The thing to come back to though is that Amazon deal at the end of the day and the question that we got about um, going from free cash flows to debt.
Speaker A: Mhm.
Speaker B: To equity, the entities with the most capacity in all three areas. Who has the most cash flow, who has the greatest capacity to issue debt because of their large cash flow and diversified businesses which gives them basically like not quite but other sources of income.
Speaker A: Yeah.
Speaker B: And who has the greatest capacity to issue stock
Speaker A: hyperscalers?
Speaker B: Google AWS or uh, Google, Amazon and Microsoft. There is an extent to, if we cross the gap, they're like the girders of the bridge that get us across. And it's going to be very interesting to see how they play their hand over this little bit. Like to what extent does it end up
Speaker A: or Sundar and Satya holding up the bridge.
Speaker B: Well, I mean are we going to end up in a world where Anthropic is all over here doing all their crazy stuff and what actually happens is just AWS and Google just like basically own them, uh, to get them over. Over the canyon.
Speaker A: Okay.
Speaker B: And um. And of course we could reach a limit. The limits where everything goes sideways is once the hyperscalers can't do it anymore. But there they are.
Speaker A: What would that mean?
Speaker B: Wolves Resort. They have the debt of last debt raising capabilities. I mean even all the Neo clouds, all this sort of stuff that's out there, the hyperscalers, their cost of capital is so much lower than a hyperscaler trying to raise like Nvidia's out.
Speaker A: Yeah.
Speaker B: Or yeah. The Neo cloud. Yeah. Why is Nvidia backing up the Neo clouds? This is one of the concepts. This is when I really wrote about the credit crunch or the credit questions and the railroads. Was Nvidia putting backstopping all these neoclouds
Speaker A: to help
Speaker B: this happening too? Right. Because the, the worst case scenario is the world runs out of money before the revenues catch up.
Speaker A: Mhm.
Speaker B: And that's like what happened with the railroads in the massive crash. Basically the world just ran out of money. The didn't mean the rails weren't useful.
Speaker A: Right.
Speaker B: The rails are still used today. But there was a massive financial crash. If we. The way we don't get there is we just have to bridge the gap to where the revenues are enough to pay this all back.
Speaker A: Mhm.
Speaker B: And it's this. The challenge for Nvidia is if we get there, it's probably because the hyperscalers.
Speaker A: Okay.
Speaker B: And that means the hyperscalers who have gained tremendous power over the entire ecosystem because that's. You get what you pay for. Right. And in that world those are the ones who are going to build competitive chips. And
Speaker A: when we say
Speaker B: you're going to push Nvidia on prices the most, all these sorts of things.
Speaker A: When we say tremendous power, is that because Anthropic and others will have to continue trading equity in exchange for compute. Right.
Speaker B: Right. You know, in the terms those terms Amazon got with Anthropic was when Anthropic needed it the most.
Speaker A: Mhm.
Speaker B: Because they were trying to get started and no one believed in them. They needed a ton of compute. And so Amazon got an unbelievable deal.
Speaker A: Right.
Speaker B: You can fast forward. The deals today maybe aren't gonna be quite as good. But if Anthropic is like we can't
Speaker A: operate.
Speaker B: We can't operate. No uh, one our equity. Like if their stock price starts plummeting.
Speaker A: Yeah.
Speaker B: The Neo like they have to turn where can we get money to be competitive? Amazon's like, I got some money for
Speaker A: you. Oh boy.
Speaker B: Remember that deal we made 20, 23, 24. How about an even worse one?
Speaker A: I can't wait to see what happens over the next couple years here, you know. Um, well, and I think Moffat's core question is like, is the money for any of this here? And like, because he doesn't doubt the technology but it's like how much are ah, people. How much are enterprises willing to pay? And can that sustain any of this over the next couple of years? I think is something of an open question.
Speaker B: I mean the. Yes. Well if you want to really zoom out. I think the biggest, broader question, one of the really. I really enjoyed this. The email with Sham, not Shams this week.
Speaker A: And one
Speaker B: point he made up front is from the pal. Uh, you know he's talking his book, but of course, but I mean Palantir, he admitted in there because I kind of pushed about this like cult recognized cult. Like part of the reason they're worried about it throbbing is like we're the
Speaker A: right religion.
Speaker B: They're the wrong religion. That's
Speaker A: right.
Speaker B: Uh, but is what they see with companies is companies who are focused on using AI to improve the bottom line.
Speaker A: Mhm.
Speaker B: Struggle. Because how do you improve the bottom line? Replacing humans.
Speaker A: Yeah.
Speaker B: Uh, how do you improve the top line? Multiplying humans. Right. There's this, this, this difference between multiplying versus replacing. And when you're multiplying humans, you're basically creating entirely new things to do, new workflows, new opportunities. The challenge for this whole trade in general is that usually number one takes longer and number two usually comes from new
Speaker A: companies. Yeah.
Speaker B: That they, they come in, they disrupt the incumbents by virtue of the AI first company taking on the old school SaaS company. The SaaS company is trying to shove AI and use it as much as they can, but they're just fundamentally not constructed properly to do it.
Speaker A: Yeah.
Speaker B: And so in the fullness of time those companies go away. The AI native companies take their place and that's how AI takes over the world. I think there's a very decent chance that that's how it happens.
Speaker A: Mhm.
Speaker B: The problem is it takes a long time.
Speaker A: Yeah.
Speaker B: And timing is the issue. All the money that's being spent on capex is being spent now.
Speaker A: Yeah.
Speaker B: And that money needs to circle back into. Because that when you go from paying for free cash flows, paying with debt, paying with equity, the idea is it circles back around to your cash flows. Um, and so the question is, how long is that going to take? It's all about timing. I 100% believe in AI.
Speaker A: Like
Speaker B: I think that is pretty straightforward. It's incredible. Well, I'm in the middle ground. I don't think AI is a replace all. You
Speaker A: don't think it's going to be God.
Speaker B: But it's just unbelievable. I was just showing someone this week. It's so fun when people have like just suddenly the unlock.
Speaker A: Yeah.
Speaker B: They're like holy cow. And then suddenly they have like. Once you see what it can do, you come up with like 25 new things that I can do. And, and I could not be a firmer believer in this. And yet number one, that's I, I said this years ago. The greater of an upside something is almost the longer it takes.
Speaker A: Mhm.
Speaker B: And you go back to the Internet. 1993, the feed was not invented. 2006.
Speaker A: Yeah.
Speaker B: Like the core unit of the Internet, the core monetization unit of the Internet, the feed with personalized advertising. We did get search ads along the way, but even then we're talking 1999, 2000. Somewhere around then. There's a lag between the new technology and understanding the core
Speaker A: how to monetize it. The new businesses that it enables, user
Speaker B: interface of it, the business model around it. Um, also while we're here, if this whole interview them OpenAI is evil because they include advertising.
Speaker A: Okay.
Speaker B: It's a personal shot on me. That's all I gotta say.
Speaker A: Oh boy.
Speaker B: But I think it's a point I made before. I think it's worth repeating. I see. Again and again I feel there is an alignment between optimism about AI and a belief. Optimism about advertising, business models.
Speaker A: Mhm.
Speaker B: If you believe in advertising, why do I think meta advertising is the good advertising? Because it shows you stuff you didn't know you wanted.
Speaker A: Mhm.
Speaker B: It's not just that. It's a win, win win. People create businesses that exist. I get stuff I didn't know I wanted.
Speaker A: It grows the pie.
Speaker B: It grows the pie. But it's manual. It's manufacturing human desire.
Speaker A: Mhm.
Speaker B: And there's a certain like uh, what's the word I'm looking for? Ah, ascetic perspective. No, not aesthetic. Ah, ascetic like not eating anything or like very, very low, low key.
Speaker A: I
Speaker B: was like appalled by this like consumerism, all these sort of bad things, which, fine, whatever. But consumerism at the end of the day is what drives the economy.
Speaker A: Mhm.
Speaker B: And in a world of AI, the whole mindset that AI is going to completely replace humans rests on this assumption that all the economy is utilitarian. Everything is just done because it needs to be done and AI is just going to do it better. Which I don't think is the economy. The economy, a huge portion of it is status seeking. It's buying stuff you don't need.
Speaker A: Yeah.
Speaker B: It's like a, you know,
Speaker A: a huge portion of it is trying to get laid.
Speaker B: It's spending an unbelievable amount of money on World Series tickets. Which I may have done. Like it's, it's all these things. That is what it means to be human and which is inextricably tied to advertising.
Speaker A: Yeah.
Speaker B: And it's not an accident that their go to point. One of their go to points about why Open Eyes evil is because they're including ads. It speaks to how Anthropic is deeply an anti human company. They don't get it.
Speaker A: They don't get humans. They're just a socialist company.
Speaker B: Ah. There's this mindset in Silicon Valley that is anti ad. I think it's rooted in this. People are just getting tricked. It's just very utilitarian. I can figure it out. Yes. Communist. Sort of like top down.
Speaker A: The economy is all about your needs. Not necessarily. Right.
Speaker B: And it can be controlled. Right. We just haven't had the tools yet. But now AI can do it. Right. We can actually understand all the inputs. And this lack of faith in the market, lack of faith in humans. All these, all this talk about no one's going to have a job is fundamentally a lack of faith in humans.
Speaker A: Sure.
Speaker B: Like we can't come up with things that might be worth paying for that AI won't do better.
Speaker A: I bet we can.
Speaker B: I bet we can. I
Speaker A: can think of some right now. That's
Speaker B: right.
Speaker A: We have.
Speaker B: So it just, it's funny that that's one of their talking points about
Speaker A: why
Speaker B: OpenAI is evil.
Speaker A: Yeah.
Speaker B: It's like that's one of my talking points about how you don't understand humanity and the audacity you have that we're gonna create this consciousness for a machine to. It's insane. These people are nuts.
Speaker A: I mean Alexander's a better man than I am. I don't think I could slog through 42 minutes of the Amadeus and Walter Isaacson. But it's uh, not surprising to me that they're slinging mud at OpenAI for ads. Whatever. This is the thing. I don't really take it seriously so it doesn't bother me. Bloomberg uh, reported this week Meta shares fell after Mark Zuckerberg told investors the company would bet even more aggressively on artificial intelligence during its quarterly earnings report Wednesday. The social media giant boosted its capital spending plans last
Speaker B: Wednesday. This is a week ago, which pertinent point I'm going to get back to. Okay.
Speaker A: Uh, and announced a new class of non voting stock that could ultimately be used to help pay for acquisitions and other expenses. The Bloomberg story references a plan to to raise up to $95 billion in waves of stock offerings as Meta continues its cash raising spree to fund AI. Uh, so Metashares down about 10% in the last week. How much worse would the reaction be without the success of Muse?
Speaker B: Well, just one thing to note is the share should be down. People are being
Speaker A: diluted.
Speaker B: Right. So uh, like there's nothing.
Speaker A: And one of the things that's interesting about the dilution is those companies, Meta, uh, Google, Microsoft, like they can probably get away with dilution because who else do you feel really comfortable investing in in the present day economy?
Speaker B: That's my whole point from before. That's why they're the last resort.
Speaker A: Yeah.
Speaker B: And if you're lending money, who else do you want to lend it to? Like Meta's
Speaker A: got, we've got foreign governments sinking lots and lots of money into these companies.
Speaker B: Yeah. So, uh, yeah. So the reason, uh, the reason I mentioned the timing is I was annoyed. I'm like, okay, it's fine. I can do Meta earnings. Even though the brewers game is tonight. Company I know well can knock that out. Anthropic drops their S1M. I'm like, uh, I got to cover the S1 first before I get to the earnings.
Speaker A: Yep.
Speaker B: I'm so glad I did the S1 before the earnings because I think it gave my. The entire take that I had on the earnings was actually based on what I Learned in the S1.mhm. Which is this point that actually all the money's going to training.
Speaker A: Yeah.
Speaker B: That gives a completely. It gives a very clarifying perspective on you.
Speaker A: Okay.
Speaker B: Now we've said on this podcast, I think we had like a Muse run a couple of weeks in a row. At least two in a row. The unbelievable opportunity that is here. The aggregator of aggregators, the interface, the 1. The actual connection to the user that is the layer between everything else. I don't stripe being the platform of platforms.
Speaker A: Mhm.
Speaker B: This is like the aggregator of aggregators. It's like the opposite end of the sandwich. Very valuable place to be, be. Uh, and to be there though the model has to be good
Speaker A: and
Speaker B: you have to control the model. It's the key component of it to have a good model, to control your own model.
Speaker A: Got to train your ass off.
Speaker B: You got to spend a lot of money. And so this is the question for investors who are questioning their spend. If you believe in museum, you should be happy they're spending money.
Speaker A: Mhm.
Speaker B: If you don't want them to spend money, then you need to appreciate your take actually is they should not be doing Muse.
Speaker A: Yeah,
Speaker B: they're, they're inseparable.
Speaker A: Mhm.
Speaker B: And I believe in Muse. I believe in this layer. I mean the overall with Muse right now is the bottle's not good enough. Like that's, that's the number one, even above.
Speaker A: I don't really experience that interestingly enough.
Speaker B: Well, I mean the other issue is like all this interface layer between companies and pushing back on agents and all this sort of thing.
Speaker A: Yeah,
Speaker B: um, no,
Speaker A: they got the 1Password integration finally. That's a game changer for me,
Speaker B: by the way. 1Password. Little Ah, tip to the builders out there. Uh, you can use 1Password as your secret store if you're using like agents to do building. So because like there's a whole issue of secrets like API keys, usernames, passwords, how do you pass them to the agents? You don't want, you want them to put it into the chat. They will go up to the servers and like,
Speaker A: it's
Speaker B: not great. Uh, and so to. You can like do things in, in a terminal and like have a secrets file and all sorts of stuff. Super hard to manage. 1Password has this amazing layer where you create a vault for the agent you can do on a per app basis and they
Speaker A: can access it to get
Speaker B: their, to get the keys that they need. And then from a user perspective, I would rather type usernames and passwords into one Password than doing convoluted terminal commands and like pasting
Speaker A: stuff.
Speaker B: Absolutely, yeah. It's great.
Speaker A: 1Password is in the easy Pass shop pay T of tech products as far as I'm concerned. I
Speaker B: completely agree.
Speaker A: A 10 out of 10.
Speaker B: No, there were, there were those sort of random. I want to say it's random, but a company that if you had predicted who's going to be massively well placed for AI,
Speaker A: you
Speaker B: probably wouldn't have thought about it. But turns out like they shifted to being an enterprise product. They're another classic example, kind of in the Dropbox genre. They started out as a consumer product and a lot of Mac people like, I can see Jim over here, I think he's grimacing because there's a whole area of folks that were so mad
Speaker A: people.
Speaker B: There's so. No, no. They're so mad@1 password used to be like very custom built, like beautiful apps,
Speaker A: all
Speaker B: this sort of thing.
Speaker A: I missed that era.
Speaker B: No. So they, they became like more like the. What you know. Right. Ones were nu. I'm not sure that's really true. But like more web appy. What's the word? Uh, what's the. What's the framework everyone complains about as far as electronic Electra, uh, whatever. Um, like that. That's laxing basically. The app got worse.
Speaker A: Yeah.
Speaker B: But the app got worse, got more extendable, easier to work on, work cross platform. And their whole business model shifted from consumer to enterprise and they raised a bunch of money. And so all the old 1Password people, they're still mad about it.
Speaker A: Right.
Speaker B: But that's what happens if you sell a product, if you sell software, you sell to businesses, they will pay. Consumers are require advertising. We've talked about this whole thing. Well because you also have Apple coming in making their 1Password management more and more capable actually having an app around it. So it's just hard to be a consumer software company if you either your ads or your. The operating system is coming for you. Tough place to be. They move to enterprise, everyone gets mad at them. Brilliant move. Like so number one, it was just a brilliant move in general because that's a better market. The password area in general is so difficult to manage. We've been using it at Checker for ages.
Speaker A: Yeah.
Speaker B: In part because we have to share passwords for a lot of different stuff. Super useful in that regard. You would enforce rules. Um, the. But number three turns out like for agents, it's amazing. It's. It's like just a company
Speaker A: that was sort of out in the world. There's a really big value unlock in terms of how I use museum. So in terms of the investment. No, that's a
Speaker B: perfect example. Right. What's the. One of the big problems with Muse? How do you get your passwords suddenly if you share it. There you are. It's all there. But all this to say like there's no question whether you think the model is good enough or not. Meta has to control that model.
Speaker A: Yeah.
Speaker B: And they, they can't be like outsourcing that to Anthropic or OpenAI which by the way is going to want to own the interface as well.
Speaker A: Mhm.
Speaker B: If you just cut them off. Right. They have to, they have to. They have to control the model underlying Muse. Which means as we saw from Anthropics S1, they have to spend a ton of money on training and even more than I fully internalized. And this did give me some sympathy for their enterprise thing. It's still solipsistic. They're setting up an enterprise company because they're like, we're spending so much money on training. We need to sell it
Speaker A: somewhere, find money somewhere. Sure.
Speaker B: The reason it made me feel a little better is the concern about doing enterprises like you're taking Compute away from all your other products.
Speaker A: Yeah.
Speaker B: It's like, actually turns out serving this stuff doesn't take that much compute, relatively speaking.
Speaker A: Yeah.
Speaker B: Um, so
Speaker A: this is what I mean. It's great to have Anthropic open the hood.
Speaker B: It's true.
Speaker A: It's why,
Speaker B: like, it is true.
Speaker A: Make it a little clearer. And the other thing,
Speaker B: good thing about Anthropic coming along is because this is their business. And I think, like I said, whoever at the SEC made them break about this computing is it. The whole
Speaker A: document was
Speaker B: worth it for that table. Because the other companies like Meta, uh, Google, this is just sort of grown inside their balance sheets and
Speaker A: so
Speaker B: they've never had to like break it out
Speaker A: totally.
Speaker B: And so like now you can take what you learn from the Anthropic S one that must apply to Meta as well.
Speaker A: And we've spent four years speculating about the cost breakdowns here. I will say you wrote the most compelling argument for investors opposed to this spending is not that mute that Muse doesn't need it, but that Meta doesn't actually need Muse. Um, I could understand that sentiment from investors if they were making that argument because of how dominant the ads business continues to be.
Speaker B: Yeah. But
Speaker A: I'm not mad at Meta for going this direction. And Mark Zuckerberg is a founder who is always going to go this direction. This seems a lot more fruitful than some of the other sort of detours of the last seven or eight years.
Speaker B: Investors want to Meta to be Google or be Amazon.
Speaker A: Yeah.
Speaker B: Companies that are not run by founders that, um, you know, does Amazon, they
Speaker A: are just printing and optimizing and that's. They're. They
Speaker B: are focusing on what they're good at, what makes sense. Like, I think Amazon is in a great. This isn't, say, doing the bad thing. I think Amazon's in a great position as far as being the inference provider. All the infrastructure, all the logistics, all the things we've talked about and just focusing on that, not spending billions and billions of dollars trying to be in the leading edge of Models, like I think last summer they kind of like wound down their. They claim they're still doing it somewhere else, but I don't believe them.
Speaker A: Yeah,
Speaker B: like why would they. They are there. They will serve anthropic, they'll serve open AI and they will be. They're built in to be a lower margin business anyway, so they're a place for this. I think Google shifting to being like a capital company,
Speaker A: like
Speaker B: Berkshire Hathaway, but uh, even larger makes
Speaker A: smart for where they are.
Speaker B: Well, um, the Google one's interesting again, I will say.
Speaker A: Yeah, let's say Google for next. But,
Speaker B: but they are prudent, rational decisions that you would expect from a professional manager.
Speaker A: Yeah.
Speaker B: Meta is not run by a professional manager. It's run by Mark Zuckerberg who founded the company.
Speaker A: Yeah.
Speaker B: So like what do you expect?
Speaker A: Totally.
Speaker B: And also I'm all in. Let's go. Let's do it.
Speaker A: I can't help but observe that uh, their ads business does look pretty bulletproof.
Speaker B: Well, that's the other thing is like of all the digital things in the world, like Reels feels the safest. Right. It's actually also eating everything else. Like from the other side,
Speaker A: they're eating Netflix. We talked about that.
Speaker B: Interesting. Is. So here's a take for you.
Speaker A: Okay.
Speaker B: Netflix is a casualty of AI.
Speaker A: How so? I've heard others offer that thesis and I never quite buy it.
Speaker B: What is the other's thesis? Because I think mine's better. But
Speaker A: um, I've heard people argue that people are going to start creating their own videos. Uh, stuff like that. No,
Speaker B: sorry, I have a 3D.
Speaker A: Okay.
Speaker B: 5D 60. Go
Speaker A: six dimensions here. Yes.
Speaker B: Okay. So what's the. So Meta is spending all this money on AI.
Speaker A: Okay.
Speaker B: They're obviously under investor pressure. They need as much money as possible. You go back like eight, nine years ago, they used to talk about on earnings calls. We don't want to like overdo the number of ads in the fees need.
Speaker A: Mhm.
Speaker B: Right. Um, because you know, we want to make sure the user experience is good. They had Facebook video which they reduced. And uh, they. Because they're like, it's not, it's not good for users to get like consumed by video even though. So they're like, they had a period where their time on service went down because they were deprioritizing video.
Speaker A: Yeah.
Speaker B: And it sounded like. And it's almost like that was their monopoly phase. They could just sort of like do what's best for people. Do what's best for society because it's the right thing to do. The better user experience. We don't have
Speaker A: to. They don't have to worry about it. Sure.
Speaker B: Uh, what are they doing right now? They need money. They're shoving ads in there. They're ramping up the engagement. They have all the dials turned to 11 of making you watch more reels, making you never look away, see more ads. Which means your eyeballs, your wife is spending her
Speaker A: every night,
Speaker B: real time,
Speaker A: an hour.
Speaker B: And what. What is she not doing?
Speaker A: Watching Netflix.
Speaker B: So Netflix is actually a casualty of AI because AI
Speaker A: is
Speaker B: pushing Meta, uh, to ramp up engagement.
Speaker A: Dialogue. Engagement. That's interesting. I do buy that, honestly. Yeah. As the cost pressure, uh, intensifies for some of these companies, Netflix is going to have a harder time. I like it. Um, all right, well, that's enough meta. I'm sure we'll come back to Meta in the Google conference.
Speaker B: We
Speaker A: do a lot of Meta on the show. Show. Um,
Speaker B: which, by the way, it is in part because Mark Zuckerberg is in charge. So they. They're more interesting in some respects than some of these other companies.
Speaker A: They are. I, um, mean, certainly over the last couple of years have been super interesting. Uh, and I love Muse. Utkar says. I've been listening to Sharp Tech since the beginning. I was very surprised to hear the opinions of you and Ben saying that Anthropic should essentially be forced to offer its products to the US Government, even if it doesn't agree with how it might be used. Oh,
Speaker B: I. Sorry.
Speaker A: I knew you were going to jump in as soon as I finished reading that sentence. What do you got for Utkarsh?
Speaker B: For clarity, the point of the Anthropic, um versus Dow article
Speaker A: is M,
Speaker B: that in the fullness of time, if AI is as powerful as they say it is, they will ultimately have to deal with the entity that has a monopoly on violence.
Speaker A: Mhm.
Speaker B: And that is a reality that people don't want to think about and don't want to be honest about, but need to be.
Speaker A: Right.
Speaker B: And the point is, yeah, they can defy the US Government. You can make the case that, oh, wait, if the US Government doesn't want it, they shouldn't buy it.
Speaker A: Mhm.
Speaker B: The reality is, if
Speaker A: it's a transformation,
Speaker B: they talk
Speaker A: about civilization altering,
Speaker B: the government is going to have their say.
Speaker A: Yeah.
Speaker B: And they have the guns.
Speaker A: M.
Speaker B: So it's not that I think this is good. This wasn't a, uh, a qualitative normative. I was gonna. Normative?
Speaker A: Yeah, you drop normative a lot. I've never really Used dangerous.
Speaker B: I'm never not quite sure if I'm using it right.
Speaker A: Oh,
Speaker B: I'm not saying it's right or wrong. I'm
Speaker A: saying it is what it is. It was. And it was a very controversial.
Speaker B: It's
Speaker A: just one of those things that even at the time it was like so obvious to me, but
Speaker B: it was so annoying at the time.
Speaker A: So
Speaker B: much pushback on this that you're advocating. So I'm not, I'm like, I'm not advocating.
Speaker A: Yeah.
Speaker B: I'm stating what is going to be a fact of life.
Speaker A: Right. Well, and there are. The public private tension is not going away in a number of spheres. And so Utkarsh says, I personally agreed with Anthropic that I shouldn't be used for mass surveillance or weapons targeting. So I sided with Anthropic as I thought they were doing the right. Again,
Speaker B: this is. You're. I'm not disputing your opinion on this matter, but your judgment is operating at a level that is not the level I was discussing.
Speaker A: Mhm.
Speaker B: It wasn't
Speaker A: whether it's right or
Speaker B: right or wrong. That is an important debate to have. Should AI be used for this? The debate that I was having was there's a higher order here.
Speaker A: Mhm.
Speaker B: Which is you telling the US you have access to this tool and we're going to dictate to you what you can or cannot do. Number one, fairly insane on its face. Number two, if you fast forward, if the models increase like you say, they will become as powerful as you will. It's somewhat intolerable now. It will be completely intolerable just from. Again, politics is violence without guns.
Speaker A: Yeah.
Speaker B: Uh, wait, is that the way it goes? Violence.
Speaker A: Violence
Speaker B: by other
Speaker A: means?
Speaker B: Yeah. Something by that I can't remember.
Speaker A: Well, yeah, it's funny, I mean, looking back at that. There was. There were so many insane opinions at the time about how the administration. Well, it was the. It was the American AI system and the ecosystem and Anthony
Speaker B: Cars. But this was part of the problem is people were like, you're disagreeing with. I wasn't arguing AI should be used for surveillance.
Speaker A: I
Speaker B: was saying that argument is immaterial.
Speaker A: Right.
Speaker B: Anyhow,
Speaker A: maybe
Speaker B: we'll wait for another email in three months that says I said something different.
Speaker A: Well, I know. I think your piece aged well. I wrote something that also aged well. The End of the World as We Know It. Uh, fast forward to last week, Utkarsh says, and the Wall Street Journal reported that Musk ordered the slowdown that blinded Ukraine. I don't know for sure if he acted 100% unilaterally. But it is now clear to me that a private company should not be able to unilaterally decide the foreign policy of the United States and in this case, basically the entire world, since it has no viable competitor. I'm wondering, based on this, have you changed your opinion on Starlink? I can't imagine anyone in Europe is happy about this, even if they can't really do anything about it in the short term. We have not talked about this.
Speaker B: It sounds like you came around to say I was right all along. Sorry, feel bad. Geez. Unbelievable. I'm a terrible person.
Speaker A: Uh, what do you. What's your reaction to what may or may not have happened with Starlink and Star Shield and Ukraine and the Trump administration.
Speaker B: So I don't know what happened with this.
Speaker A: Mhm.
Speaker B: So
Speaker A: profoundly opaque, so dangerous to podcast about because we just don't know
Speaker B: as I understand it. So number one, I think something that is right about Starlink is there are two services.
Speaker A: Mhm.
Speaker B: There's Starlink and there's starshield.
Speaker A: Right.
Speaker B: Starlink is a
Speaker A: public,
Speaker B: private, commercial, whatever we want to use. Yeah. Open to the public. Commercial offering. Starshield is a military offering.
Speaker A: Mhm.
Speaker B: Starshield. As I understand it, the US Military has total control over how it is used. Used.
Speaker A: Right.
Speaker B: Musk or anyone else cannot. Will not. I'm not sure what the lines are, but at least we're into Musk. But I think I would imagine is the case dictate how that is used. I think that is a good division. That makes sense. That is harkening back to the best ideas of like dual sourcing. And like we get mad at China for dual sourcing. I think there's a little bit of jealousy there. Dual sourcing is obviously good because you get volume from the consumer market. So you get a better product for the government
Speaker A: and
Speaker B: you get important capabilities for the government. Right.
Speaker A: Yeah.
Speaker B: Um, the uh. And
Speaker A: look, we do a bit of that here as well.
Speaker B: Of course we do. I mean the entire like arsenal of democracy, the whole World War II machine was just repurposed. Car factories were churning out planes.
Speaker A: Civil military, fusion. Sure.
Speaker B: The whole problem we have right now in losing our industrial base is all we don't have that capability. What
Speaker A: are
Speaker B: we, what do we switch to making all this military stuff? All our military contractors, they, because they only serve the US government, they end up number one. The US government is stuck with these insane like entities that all they exist.
Speaker A: Government.
Speaker B: Right. But then also they. You tend towards this very, uh, low volume, very high cost weapon systems because you're just serving one customer. It's like the subscription business. In the subscription business you want to maximize your revenue per user because you don't have as many users if you're selling to only the government. You want to maximize your revenue per item because you only have one customer. If you're serving the entire market, then you make it up in volume.
Speaker A: Mhm.
Speaker B: And so the, the, the future of war is in my estimation clearly things like drones, missiles, unmanned things, which is a volume play. All of our defensive primes are not built around volume plays.
Speaker A: Yeah.
Speaker B: The consumer market is how you get sufficient volume.
Speaker A: We need to fix the regulatory regime to enable the flowering of a domestic drone industry for the sake of national security.
Speaker B: Yes. Ah.
Speaker A: If we're, if we're going six dimensional chess.
Speaker B: Yeah.
Speaker A: Maybe we do
Speaker B: know actually from a military perspective it is nuts that we don't have drone delivery.
Speaker A: Yeah.
Speaker B: Seriously. Yeah. Like ban all foreign drones and completely legalize drone delivery across the US you're going to get your drone, you're going to get your drone capability. That is actually the route to do it.
Speaker A: Yeah.
Speaker B: Not to like, I mean Andrew is out there. It's like, oh, we're the newest new poster child. They're like, in many respects they're just building like if you want to form a defense tech company, you have to go through us because we got into the Pentagon first.
Speaker A: And
Speaker B: by the way, if you talk to people in the Pentagon, they're like, yeah, the anthropic stuff needs to actually work or the Android stuff needs to actually work at some point. That's sort
Speaker A: of
Speaker B: pushed back there. The actual uh, by the way, God bless. And Andrew, like the, in the like Palantir. They were there when it wasn't cool. Right, sure. And, but what you need is volume. So yeah, it's a great take by you.
Speaker A: There you have it.
Speaker B: Um, drone delivery tomorrow, US military dominance next week. Uh, so.
Speaker A: But the, the Ukraine, the Ukraine fair. Did it change your opinion in any way?
Speaker B: The, this is where you don't know who decided what. Yeah. Right. I, as I understand it, uh, the terms of service for Starlink define where it can be used for. Sure. I know this on a couple levels. So number one, you have to buy different levels of plans if you want. Like I have a Starlink on my roof for my house as backup.
Speaker A: Yep.
Speaker B: That is a relatively low rate because it's fixed. I also have a mobile Starlink that I take to Canada or I couple weeks ago. Went to a baseball game and set it up and watched the brewers game at the same time. Uh, and that I pay more because it's mobile. It can be used everywhere. And this is just basic contractual terms of service things. They know. They have to know where the Starlink is because it aims itself at the satellites, so they know where it is. And another example of this is there's no Starlink in Taiwan. Like, I was talking to a buddy when I was, oh, you should get it. Because, you know, he was like, up on top of a mountain or something. Internet wasn't great. Like, Starlink's also doesn't work in Taiwan. Um, there's like, uh.
Speaker A: Has Musk ever said why that is?
Speaker B: As I understand it, it's the Taiwanese government. That's the. That's the issue here.
Speaker A: Okay.
Speaker B: But. Yeah, I think. But obviously it's a hairy situation in general.
Speaker A: I have some questions. I
Speaker B: think there's probably. Well, this is actually a great example. Whose fault actually is it that there's no Starlink in Taiwan? It's in Musk's interest that the Taiwanese government be against Starlink, so he doesn't make China mad.
Speaker A: Mhm.
Speaker B: Right. You get to Ukraine. The US doesn't want, as I understand it, Ukraine making attacks deep into Russian territory
Speaker A: on oil refineries.
Speaker B: Right,
Speaker A: right,
Speaker B: right. Pushing up the price of oil.
Speaker A: Mhm.
Speaker B: Which Ukraine was doing using Starlink. So is there a. Hey, Elon, can you enforce the terms of service which Ukraine was violating? They're
Speaker A: not
Speaker B: on starshield. They're on, like. And it is balanced by the fact that Starlink has saved, like. It's a little rich to be mad at Elon. Now, when Starlink saved Ukraine's rear end. Again, I don't want to get into the whole thing. This is why it's so murky. You could see who's pushing on who. At the end of the day, they are using a consumer service that a US Company has no loyalty to.
Speaker A: Mhm.
Speaker B: Like, there's a lot of the world right now is just things that were. What
Speaker A: do you mean us Becoming
Speaker B: clear.
Speaker A: Has no loyalty to
Speaker B: a US Company as well. To the US Government.
Speaker A: Yeah.
Speaker B: They don't answer to the Ukrainian government.
Speaker A: M.
Speaker B: There's a little bit of presumptiveness.
Speaker A: Sure.
Speaker B: Sort of embedded here. Um, but again, we're not a political podcast.
Speaker A: Yeah. I mean, I. To me, broadly speaking, it just is a good object lesson in why these public private dynamics are potentially dangerous. In terms of what happened with Ukraine, my guess is that Musk was in Pretty close alignment with the Trump administration and the United States government in terms of what buttons were being pushed. My guess
Speaker B: is the US Government asked him to do it.
Speaker A: Sure.
Speaker B: And he's like, falling on the grenade to a certain extent. Um, but,
Speaker A: but if it were a, uh, Democratic administration.
Speaker B: Here's the point to ucarche's overall point. We're talking about power.
Speaker A: Yeah.
Speaker B: Like this is the whole thing. Who has power? Ukraine, at the end of the day, relative to the US Government or even relative to Starlink, does not have power.
Speaker A: Mhm.
Speaker B: Once you grok, no pun intended, that we're talking about power dynamics. You get what I was going for with Anthropic versus Dow article. It wasn't about legalism, niceties. It wasn't about mass surveillance.
Speaker A: Yeah.
Speaker B: It was about who, at the end of the day, has power. And if Anthropic keeps saying and insisting, perhaps accurately, we are accruing, uh, power to an extent that rivals nation states. The nation states are going to have a say in it.
Speaker A: Absolutely. And if Anthropic's not going to jump, uh, or not going to say how high when the government says jump, then the government is going to investigate other options and ensure that its suppliers are not relying on Anthropic. Um, it is going to continue to be an issue, though, because particularly as everything becomes increasingly polarized, uh, the questions get awful thorny. But in any event, we've come too long. There were two segments that you demanded that we do on the podcast. Uh, so
Speaker B: this is unbelievable. We're an hour and a half in. I, I wanted.
Speaker A: No, no, first of all, we had a little interruption about ten minutes in, so we have an extra five to seven minutes here. Uh, the text message that you sent me 30 minutes before recording was you looked at the rundown and you said, why? No, you can see everything segment with multiple question marks. So
Speaker B: what else did I say?
Speaker A: Uh, I think he said, you're terrified of my takes or something to that effect.
Speaker B: You're trying to muzzle me.
Speaker A: Trying to muzzle you? I don't want to muzzle you. All right, so what do you have for me? You went to see. You can see everything because of the World Series. You saw it at 10:00am Um, I believe last Saturday. More
Speaker B: than that, because of the World Series, I promised my daughter, who was very jealous of me and my son, going, you know, might have gotten a few other games in this run. Um, I said, if they make the World Series, I'll
Speaker A: tie you
Speaker B: up to go
Speaker A: to the World
Speaker B: Series game. Didn't know what I was getting into.
Speaker A: But yet you were a dad of your world.
Speaker B: That's right. Um, and so she came up and was insistent that I see it. She wanted to see it again. Turns out, yeah, the local theater had added an extra run at like
Speaker A: 10 in the morning.
Speaker B: So we get to it, then Make a Way did a full tailgate. The weather was beautiful, Parking lots were open. For
Speaker A: a second. I thought you tailgated the movie. Great. I'm glad you got out of the movie in time for a tailgate.
Speaker B: You can see everything is the Zootopia of documentaries.
Speaker A: So people may not have context. You were not really a fan of Zootopia.
Speaker B: Zootopia is a very entertaining, very well done movie.
Speaker A: Okay,
Speaker B: that is insane. The premise of the movie,
Speaker A: great.
Speaker B: This is an old sharp text segment. But the premise, because you're like. Have you said K Pop Demon Hunters yet?
Speaker A: I.
Speaker B: Which you have to do that. I see everything but this
Speaker A: deal on the last show. And I almost went to see K Pop Demon Hunters. I almost sat down with Netflix and I was like, can't fucking do this. No, at some point I'll do it. At some m point. I'll do it
Speaker B: at some point. But
Speaker A: at one point I did say the only cartoon movie that I've enjoyed was Zootopia. Then Ben proceeded to break down. Why? It's just a complete, completely ridiculous portrait of society.
Speaker B: It's not ridiculous. It's
Speaker A: permanently dangerous for me. So
Speaker B: the premise of Zootopia is that animals whose nature instinct because they're carnivores is to eat other animals are bad,
Speaker A: are benign.
Speaker B: No, it was saying that they're bad. The, the, the, the bad actors were the ones that were like, wanted to eat other animals.
Speaker A: Okay?
Speaker B: It was saying that the fundamental intrinsic nature made them evil and that they should just magically change their digestive system. Everything about them to live happily ever after. It's an insane
Speaker A: existence with other animals in the animal city. Yeah, man.
Speaker B: Extrapolate the meaning of this broadly. It's an insane view of the world that we're somehow mainlining to our kids.
Speaker A: Okay?
Speaker B: Terrible movie. Very well done. Terrible movie.
Speaker A: And you know what? I'm not arguing with you on that point. When I watch it through that lens, it is very kind of frustrating.
Speaker B: You can see everything
Speaker A: is blank slate ism from Zootopia.
Speaker B: Somehow, somehow, if you don't know anything leaves you sympathetic to Elizabeth Holmes. This poor, well meaning, um, little girl being taken advantage of
Speaker A: by the men in her life. Absolutely.
Speaker B: Elizabeth Holmes is a psychopath,
Speaker A: okay?
Speaker B: She is a liar. Uh, whistleblower, abuser. She has been in these relationships before with Sunny Balwani, which again, was framed by some as he taking advantage of her. When you see this. What happened with this Billy. I don't know anything about Billy Evans guy. Whatever it is.
Speaker A: Okay.
Speaker B: It sounds a lot like this relationship. It made me rethink, actually what I knew about Theranos in that she consistently finds men that she can manipulate to basically do the COVID for her to play. Act at being a scientist.
Speaker A: Mhm.
Speaker B: And live in this mystical reality that has no connection to the real world. And
Speaker A: you're not buying in on Theranos 2? Theranos 2.0.
Speaker B: That would. It was. It was. Hearing her talk about the movie is like, holy cow. She has no idea what she's talking about.
Speaker A: This lady's crazy.
Speaker B: So somehow this movie, like, what was like the big line where the whole theater guest.
Speaker A: Ooh, I don't know. I think there were a couple.
Speaker B: Well, there's a couple, but some of them. One of them was that she signed
Speaker A: over power of
Speaker B: attorney.
Speaker A: Okay, yes,
Speaker B: it was. Oh, my God. And like, that was like a point about what a manipulative guy he is. Turns out, what do you do if you're going to prison and your spouse is taking care of your kids?
Speaker A: You probably should sign. Power over it
Speaker B: is totally standard, totally normal, because guess what? You're in prison. Like,
Speaker A: gonna blow out the studio's mics second episode ever.
Speaker B: So it's unbelievably well done. It's well done because if you don't know what it is about going in, you 100%. He convinces you.
Speaker A: Yeah.
Speaker B: So the craft, just like Zootopia, is amazing and the premise is nuts.
Speaker A: So it is innervating for you to sit there, having known more about the backstory and see it portrayed that way.
Speaker B: Yes.
Speaker A: Okay.
Speaker B: Absolutely insane.
Speaker A: So did you enjoy yourself across the three hours at the Cineplex?
Speaker B: I mean,
Speaker A: I like that I have no blood on my hands because this was your daughter forcing you to go to the movie. I was very confident you were not going to see it for, like, three years after our conversation. What did you think on a scale of 1 to 10? Just the experience of it,
Speaker B: first part was it definitely got better once you went to prison. It got better. Um,
Speaker A: turns into a different movie at that point. Yes,
Speaker B: it does. Um,
Speaker A: I love the pregnant pauses.
Speaker B: I can't decide.
Speaker A: Not really a movie guy. So I felt a little guilty subjecting this guy to the three hours in a theater. Um, well, I think as a sort of postmodern commentary on media and truth. That's the only way you can embrace the movie as a success, as a documentary. Because of the holes that you just highlighted. It is like, almost insulting.
Speaker B: Well, there's all sorts of like, crazy things. Like the, um, there is a well known conservative figure who was assassinated is a, uh. That's one of the other lines in the movie where the whole theater is like a
Speaker A: gasp. For sure.
Speaker B: So I'm in Madison, Wisconsin, uh, which is like very progressive, uh, to say the least. And the reaction to the theater was, ah, the gotcha moment. That means Billy Evans is a bad guy. So I went back and looked
Speaker A: in my theater as well. What
Speaker B: was he referring to?
Speaker A: Okay.
Speaker B: Um, the whole thing at the time. A guy
Speaker A: got shot in the neck. Uh. Oh, wow. She's happy about
Speaker B: it
Speaker A: that week.
Speaker B: Right?
Speaker A: Wow.
Speaker B: So I thought that was fascinating. So it was fascinating. Not in a. This is me putting your shoe on. I'm not making a commentary on that point. Rather the fact that that was arguably the peak of the movie.
Speaker A: Mhm.
Speaker B: Was itself a, uh, meta on top of meta commentary. Because that specific event and the reactions to it was the ultimate societal divide.
Speaker A: Yeah.
Speaker B: One side
Speaker A: is very specific. At that time period. I didn't even. The guy got shot.
Speaker B: One side's like, he was a racist. I was like, what does that have to do with him getting shot? Like, it was just a fundamental divide in how you see the world. That specific episode and the way it's played out as shorthand since then.
Speaker A: Yeah.
Speaker B: The fact that that was the, like, climax of the movie is like, to your point, building on why you like the movie. It was an even, like, higher meta level. On top of all the levels of meta that were going on in the movie.
Speaker A: There were about eight different meta layers at play throughout that movie. I think it should win Best Picture. But again, not an Elizabeth Holmes documentary. Definitely not how it should be understood by the mainstream.
Speaker B: Zootopia.
Speaker A: I'm just glad that we got you out to the theater, man. Um, once in a blue moon. We will see you at the citiplex. All right, now, we have come far enough talk. World Series. Can I begin as a, as a friend of yours? The fact that the brewers won this series, uh, is just endlessly delightful to me as your friend, because I've watched you sink into this baseball obsession over the last several years here, where, like, you will watch basically every brewers game throughout 162 games. And I'll joke with you, like, wow, you're really a Brewers. Die hard. And over the last couple years, I swear to God, we've had like, five different conversations where you've been like, I'm in it for the journey. We're never actually going to win a World Series. That's not what it's about for me. It's about summer evenings, watching my team every night. The rhythm of it is what I've come to love. I've accepted that we're never going to compete with the big markets. And now here we are, a World Series champion sitting across from me. I just love to see it, man.
Speaker B: You just took my whole segment. Oh, really?
Speaker A: I'm sorry.
Speaker B: No, it's. It's true. Like, there's the whole thing about, you know, uh, how can you not be romantic about baseball? Yeah. Baseball is a metaphor for life. And, um. Yeah, that's the thing.
Speaker A: You're getting emotional
Speaker B: right now. No, I'd given up because it did seem inevitable. Like, it's different. Like, something about basketball is different. You, like, basketball is very binary. You know,
Speaker A: one player can make a difference. Difference.
Speaker B: That's right. And so you have Giannis. The pressure's insane. Like, we have to win it, but you 100 know you have a chance to win it.
Speaker A: Mhm.
Speaker B: With the brewers, like, oh. You get to the postseason, you have to hit homers or the most expensive guys. We're never going to have those guys because we're a small market.
Speaker A: It's. The sport is not set up for a team like the Brewers. That's
Speaker B: right. That's right. And. And so. But so you had to. To enjoy it. Otherwise, what's the problem? Like, the late Giannis years, it's like it's all or Nothing.
Speaker A: There's a 10% chance that this could work.
Speaker B: Right. And it just makes it almost makes it less enjoyable. Like the whole path of a basketball team, the early years are the best because there's no expectations. And then, like, it's almost less fun when they're winning because it's like.
Speaker A: Because it's a grind. And then once
Speaker B: you get over the hump, it's like, can we get back? And it's just. It's miserable. The last few years of a dynasty are, like, kind of miserable to cheer for. It was different with the brewers and with baseball in that. How it is like a life lesson. How do you avoid, like, nihilism about the whole thing?
Speaker A: Mhm.
Speaker B: And what it really is about is embrace the journey. Enjoy the journey. Like, enjoy the summer nights. And it's okay with a little tournament at the end of the Year. It doesn't really matter.
Speaker A: Yeah.
Speaker B: Um, and so the great thing about this is it was a weird reaction when they won. Like when the Bucks won. I was like, in tears. Like, middle hit. That's.
Speaker A: I was in tears as a Yanis guy. Yeah.
Speaker B: And here I was almost like, didn't feel anything. In part because I like, cauterized the postseason in my heart to such an extent that even winning I could barely feel anything. But it was like, um, it was great. It was like a really pleasant thing that happened to me.
Speaker A: I
Speaker B: am 100 getting emotional. M. And that's the beautiful thing is I did get the best of both worlds. I enjoyed this, this whole season without thinking we were going to win the whole time. And then they won. And like, what. What a better way to live. Like, being seen. So. So
Speaker A: you were not anchored on. Oh, can they. Can they do it this year? Because you knew the. I love that you're actually
Speaker B: crying.
Speaker A: Break this video out. Um, no, but it, like, rather than spending July and August and September obsessing over that question, you had answered that question. The answer was no.
Speaker B: That's right. No, I'd answer that question that. It doesn't. It doesn't. What happens at the end is not going to impact me right now.
Speaker A: Mhm.
Speaker B: We'll get to the end when we get to the end. And you think about it with AI. You think about, like, everyone worried about people are like, depressing themselves about the future that is unknown.
Speaker A: Yeah.
Speaker B: We're having debates about it. How about you enjoy life right now? How about you live your life instead of always thinking in the future or thinking in the past? Live in the present. Be nice to people around you. Learn new things, explore new things. Figure out the future when it gets there.
Speaker A: Mhm.
Speaker B: And the reason is that, number one, you don't have control. This is the thing about sports. The worst thing about being emotionally invested in sports is you have no control.
Speaker A: Yeah.
Speaker B: All you have control over is yourself.
Speaker A: I have no control over the fucking Wizards. You
Speaker B: gotta control that. Very good season
Speaker A: tickets.
Speaker B: But that is why this isn't just great for sports, it's great for life. But live in the moment.
Speaker A: Yeah.
Speaker B: I enjoyed every game of the brewers this season. It was an awesome season. People online or on Twitter, always the throwback, you know, from the Cubs fans in particular. Like, you know, you could just lose the postseason. It's like, yeah, we probably will.
Speaker A: Mhm.
Speaker B: And you know, that's fine. And then we get here, we also won. I get to enjoy. I get a double dip. I had a great season at a great playoffs. The brewers are world champions.
Speaker A: You're going to a great parade on Friday afternoon, you know, and look, the brewers, all kinds of fantastic merch for you to spend money on. It's really great. Um, so on that cheerful note, we will head into the weekend, then we'll head to Milwaukee for the parade. What a weekend it shall be.
Speaker B: We will first record our subscriber only mail.
Speaker A: That's right. And we have some mail that we're going to be rolling over to the subscriber mailbag. So we do need to talk about the duo disaster. Um, and we'll save that for Sunday. Um, but email SharpTech. Well, maybe it's look subjective, maybe it's not a disaster. A lot of. A lot of complaints out there. Uh, for now, email @sharptech.fm M is the email address. Ben, I will talk to you soon. Um,
Speaker B: talk to you later.
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