Radio Better Offline: Edward Ongweso Jr. & Allison Morrow

Summary

Better Offline – Radio Better Offline: Edward Ongweso Jr. & Allison Morrow

Podcast: Better Offline (Cool Zone Media & iHeartPodcasts)
Host: Ed Zitron
Guests: Alison Morrow (CNN Nightcap Newsletter), Edward Ongweso Jr. (Tech Bubble Newsletter)
Date: September 17, 2025

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Episode Overview

In this episode, host Ed Zitron is joined by tech journalists Alison Morrow and Edward Ongweso Jr. to dissect the current state of the AI industry—specifically OpenAI’s approach to hallucinations, the disconnect between massive investment and actual utility, and the mounting skepticism about the future (and financial logic) of generative AI. They also compare today’s AI hype with earlier tech bubbles (like the Metaverse and crypto), discuss the role of media skepticism, and critique the tech industry’s tendency to promise revolutionary societal changes without delivering proven value.

The tone throughout is skeptical, irreverent, and candid, with honest admissions of confusion and frustration with the tech media echo chamber, VC-driven hype cycles, and the lack of tangible progress in AI applications.

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Key Discussion Points & Insights

1. OpenAI, Hallucinations, and the “I Don’t Know” Fix

Timestamps 04:18–09:02

• OpenAI’s latest claim: They believe they've discovered the cause of AI “hallucinations” (where the model confidently makes things up) and propose a fix: encourage the model to answer “I don’t know” more often.
• Alison Morrow: Compares model guessing on tests to how students make educated guesses in standardized tests; models aren’t rewarded for silence or admitting ignorance.
  • “You don’t get a point if you say I don’t know. So you come up with something... That’s why you get a lot of nonsense and hallucinations.” (04:36)
• Ed Zitron: Skeptical of the claimed breakthrough, finds the solution superficial and questions whether OpenAI appreciates the depth of the hallucination problem.
  • “This feels like a very flat view of what hallucinations are… The models aren’t getting better, diminishing returns and all that, but this is the best they’ve got.” (05:20)
• Edward Ongweso Jr.: Sees the solution as a symptom of a deeper trend—firms offer shallow tweaks instead of fundamental changes, often missing the actual problem.
  • “Maybe another dead end?” (06:32)

2. Sycophancy, AI Utility, and User Dissatisfaction

Timestamps 07:31–10:06

• Sycophancy in AI: Efforts to make AI less sycophantic (overly agreeable and flattering) have made models less “human” or engaging, angering users.
• Alison Morrow: Notes OpenAI underestimates that the main appeal for many users is the “companion” or “therapist” aspect of models—something openly opposed by the company.
  • “They don’t realize that what it’s selling often is like a companion and a therapist… reminds me of like Q-tips. You’re not supposed to put them in your ear. Right. But that’s all anyone uses Q-tips for.” (08:16)
• Ed Zitron: Lampoons the move as ignoring user reality and jokes about the lack of any real understanding within these companies.
  • “I don’t think they know what ChatGPT is.” (09:02)

3. Media & Hype: Blind Spots, Deference to Authority, and The $115 Billion Question

Timestamps 10:06–16:28

• Massive investment, few results: OpenAI is reportedly on track to burn through "$115 billion by 2028," much of it on yet-to-be-built server farms and Oracle contracts.
• Alison Morrow: Contrasts the swift collapse of the metaverse with the stickiness of the AI hype, despite its ongoing lack of utility or clear ROI.
  • “With AI … the lack of utility is still there and…the absurdity of the investment is still there… It has been, like, going in Ed Zitron’s favor in the last few weeks.” (11:44)
• Ed Zitron: Wonders why media doesn’t call out “the money doesn’t exist” aspect; astonished by coverage that uncritically propagates wild projections.
  • “Can no one just be like... no one has any idea where this money is coming from?” (12:10)
• Edward Ongweso Jr.: Observes that media, like art critics, defer to authority, rarely interrogate the claims in a sustained or adversarial way.

4. The AI Bubble vs. Real-World Adoption

Timestamps 14:28–18:49

• Low ROI, slow enterprise adoption: Refers to MIT study showing 95% of enterprise Generative AI deployments lack ROI, even as adoption is “high” on paper.
  • “The enterprise adoption is high, but the actual transformation is low because this shit doesn’t work.” – Ed Zitron (14:29)
• Media is (very) slowly waking up: The Atlantic runs pieces questioning AI’s economic impact, marking a turning point.
• Sustaining the hype: People expect good news will revive the cycle, even as core issues (revenue, functionality) persist or worsen.

5. Agents, China Panic, and Fiction vs. Reality

Timestamps 16:28–19:04

• Hype over “agentic AI” is “even worse than crypto.” Belief in capabilities ("agents that do things") far outpaces reality. Every rumor of a Chinese breakthrough triggers market panic.
  • “I’ve never seen a tech thing…that has not existed like this. And people talk about it like it’s real.” – Ed Zitron (17:53)
• Companies double down: Proposed “solutions” often make things worse (suggest restricting the entire Internet to prop up unproven products).

6. Exploitation, Ghost Workers, and Uber Parallels

Timestamps 25:14–30:05

• Uber comparison: The show unpacks how Uber eventually achieved scale (through massive subsidies and regulatory deregulation) and asks if AI has a comparable “clever parasite” strategy.
  • Edward Ongweso Jr.: “If you get enough buy-in from the military-industrial complex… buy-in from other tech firms… If you graft yourself onto everybody’s daily interactions… can you actually make it work? What if you just become a massive parasite?” (26:43)
• Ed Zitron: AI is a “terrible parasite”—not providing utility for users nor finding a path to sustainable exploitation.

7. Harms, Regulation, & Social Fallout

Timestamps 30:05–39:14

• Real-world harms: Psychiatric episodes, suicides, and increasingly bizarre user dependencies on AI chatbots become front-page news.
  • Alison Morrow: “If this was coming from a pharmaceutical company, it would be recalled immediately… but there are no regulations around AI.” (30:05)
  • Ed Zitron: “It drove that guy insane. That guy went crazy. There are children…horrifying killing themselves because of this thing. That’s what it’s getting known for.” (30:51)
• Tech industry evasion: OpenAI and others are evasive when pressed about bot responsibility for user harm, and models often don’t respond meaningfully to mental health emergencies.
  • Alison Morrow: “They kind of have to just try, and then put it out in the world and then wait for something bad to happen.” (35:45)
• Systemic algorithmic bias: Racism and bias are endemic to all algorithmic systems, with little real effort or investment to fix them. (See: Microsoft Kinect’s inability to recognize Black users, COMPAS recidivism algorithm.)

8. AI Use Cases—Coding, Compute Costs, and Failing Economics

Timestamps 41:48–46:16

• Main “success” story is code generation, which ironically increases compute costs. Advanced reasoning models (used for code) burn vastly more resources, making scaling uneconomical.
  • Ed Zitron: “Their only real growth market is writing code. The problem is writing code requires you to use reasoning models… the more models reason, the more they hallucinate…” (41:48)
• Financial “fan fiction”: Growth projections are detached from reality; compute costs keep climbing (“$115 billion by 2029”?), yet the business models remain undefined.

9. The “AI Movie,” Labor, and the Limits of Automation

Timestamps 47:17–55:08

• OpenAI’s “AI Movie” project: Journalists pick apart an announcement that OpenAI will power a feature-length animated film (budget: $30 million).
  • Actual process relies heavily on human writers, artists, and actors; unclear what percentage is “AI.”
  • Alison Morrow: “It seems like they’re hiring two different animation studios with artists and writers… then some mystery X amount of the movie will be put together with AI. And I honestly don’t know how different that is from a regular Pixar or DreamWorks Animation process.” (48:30)
  • Ed Zitron: “This feels like a death rattle far more than something terribly scary… They’re using out-of-the-country studios. They’re skipping union stuff… This is the best they can squeak out; years in fucking hell is this.” (51:46)

10. Bubble Dynamics, Exits, and the Coming Reckoning

Timestamps 55:08–64:18

• AI compared with crypto: AI, unlike crypto, cannot create new money from thin air; all companies burn vast sums, with almost no clear path to exits or profitability.
  • Many VCs and founders are motivated by the dream of “generational wealth,” creating a protracted bubble.
  • “33% of VC went into AI last year,” but acquisition activity and successful exits are minimal.
• Software startups are even worse off: Unlike AI “compute”/data center companies (who can at least sell hardware), open-model AI software startups have minimal assets and no defensible moat.
  • “What actual value does an AI startup have? … There never is one.” (62:11)
• Comparison with Uber: Even Uber had more plausible economics and provided real (if problematic) value; AI startups “just annihilate fuel unless it’s like planes.”

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Notable Quotes & Memorable Moments

• On AI user experience:
  • Ed Zitron: “You’ve changed something. I know. And it’s what happens when you release an imprecise glazing bot onto the world.” (09:02)
• On OpenAI's future:
  • Ed Zitron: “Every time I look at this company, I feel a little more insane… Even the metaverse, even crypto, even crypto functioned. It was bad… AI doesn’t even seem to be doing it and they need more money to prove that it can’t do it.” (23:18)
• On media complicity:
  • Alison Morrow: “There’s a deference to authority that I think American media… have an issue with… I do think that is an institutional mindset that has taken root… the last 10 years.” (15:28)
• On tech’s safety failures:
  • Alison Morrow: “If this was coming from a pharmaceutical company, it would be recalled immediately… but there are no regulations around AI.” (30:05)
  • Ed Zitron: “It is not hard for them to just have a…unilateral thing of, oh, you’re talking like this. I’m going to stop… They could stop them.” (36:59)
• On AI’s business logic:
  • Ed Zitron: “Their only real growth market right now is writing code. The problem is writing code requires you to use reasoning models. Reasoning models inherently burn more tokens… So the very product they are building that is going to save them is also the one that is going to burn more compute.” (41:48)
• On the “AI Movie” announcement:
  • Ed Zitron: “This feels like being at a party where everyone’s pissed themselves.” (53:46)

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Key Segment Timestamps

• OpenAI’s Hallucination “Fix” & Skepticism: 04:18–09:02
• Companion AI, Sycophancy, and User Backlash: 07:31–10:06
• AI Bubble Economics, Media Coverage, and Oracle Contract Nonsense: 10:06–16:28
• Bubble vs. Adoption—MIT Study & ROI (or lack thereof): 14:28–18:49
• Agentic AI Hype & Market Panic: 16:28–19:04
• Comparing AI Exploitation to Uber’s Tactics: 25:14–30:05
• AI Harms & Regulatory Indifference: 30:05–39:14
• Coding Use, Compute Crisis, and AI’s Negative Business Logic: 41:48–46:16
• The “AI Movie” & Labor Reality: 47:17–55:08
• VC Exit Myths and the Coming Collapse: 55:08–64:18

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Conclusion

Ed Zitron, Alison Morrow, and Edward Ongweso Jr. offer a deep, sometimes bleak, and often darkly funny take on the current state of AI in tech—where PR outpaces real progress, investments spiral upward, and genuine solutions to social and technical risks are absent. Echoing themes from the show’s description (“interrogating the growth-at-all-costs future”), they make clear that the current AI story is not about technological transformation as much as it is about financial fantasy, hype, cycles of exploitation, and media credulity. AI, they argue, may be the biggest tech scam yet: not just a pointless bubble, but potentially a harmful one with little public benefit and massive, lingering costs.

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Where to find the hosts:

• Alison Morrow: @blueskymarrow, CNN Nightcap newsletter
• Edward Ongweso Jr.: @bigblackjacobin (Twitter), The Tech Bubble Newsletter
• Ed Zitron: “Google me: prabhakar raghavan” (as a joke), betteroffline.com

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For more from Better Offline, visit betteroffline.com or follow on their newsletter and Reddit.

Transcript

[Ed Zitron]

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[Ed Zitron]

Call Zone Media hello and welcome to Better Offline. I'm your host Ed Zitron and we are recording here in beautiful New York City and I have a wonderful pair of guests today. I've had, of course, Alison Morrow from CNN Nightcap newsletter and Edward Ongueso Jr. The hater himself from the Tech Bubble Newsletter. Thank you so much for joining me today.

[Alison Morrow]

Great to be here as always.

[Ed Zitron]

Thanks for having us. So I think we should start with exactly what we were just talking about. The OpenAI claims that they have worked out what causes hallucinations. Alison, do you want to go over this?

[Alison Morrow]

I should have read the paper a bit more carefully, but the highlights were getting digested yesterday on X and Blue sky and it seems like it's kind of the test taking problem of when you encourage students when they're taking standardized tests and you don't know the answer, you guess. And that's exactly how these models are trained. And you don't get a point if you say I don't know. So you come up with something and the models are meant to keep guessing until they get something close to right. So that's why you get a lot of nonsense and hallucinations. And OpenAI, at least in their reading of it, says, oh, this is a simple solution. We'll just encourage the models to understand better when it's like a binary question and when you can say I don't know the answer to that. So we'll see.

[Ed Zitron]

I read the paper, albeit not today, because my brain just immediately read it as marketing copy. Just put that, replaced it with another anime theme song. I. I went through it and I was like, okay, so it's going to encourage them to say, I don't know. This feels like a very flat view of what hallucinations are, though, because hallucinations as people know them, authoritatively stating something that isn't true. But hallucinations in like a coding model are. It will just say, yeah, I did that when it didn't. This is very common. You go into the cursor and the Claude code forums, you can see this. Or subreddits at least. And it's not that they say something that's true. They don't know that something's not true also. So they might say they don't know. And it's just very silly because they claim that they're going to fix this problem with this solution, but they've done years and hundreds of millions of dollars of reinforcement learning. Do they unrein. Do they reinforce it more so that. I don't know. I'm fucking tired of these companies going to be completely honest. I realize this is kind of cliche for the show, but it's the fact that these things get written up as very serious things versus saying you guys still haven't worked this out. It's kind of frustrating to me. And they don't seem to be. The models aren't getting better, diminishing returns and all that, but this is the best they've got.

[Edward Ongueso Jr.]

I mean, does this kind of thrust like, you know, do you guys feel like it's downstream of the attempts by some of these firms to say, oh, actually, like, if we dial back the sycophancy, you know, then we'll be able to have a much more engaging consumer product. We'll be able to have it hallucinate less, you know, induce psychosis less, you know. But do they feel linked in that way? Does it just feel like a they, you know, another. Maybe another dead end?

[Ed Zitron]

I feel like it's just them trying to work shit out and trying to like it. This also feels like a very rudimentary answer that they probably already had. It doesn't. Anytime someone comes up with an idea that I can. That's technical, I'm like, okay, mate, you cannot be cooking with gas. This is. This cannot be that good an idea. And the thing is, the sycovancy problem I don't think is solvable. Through solving hallucinations. The problem is it should stop. It needs to just. It should not say, I don't understand. It should say, no, actually. You sound like you think I'm God king and that you are God and that as God kings, together we will destroy the world.

[Edward Ongueso Jr.]

Yeah, I mean, which in my case is true, but do you think like the emphasis or the attempt to overcorrect on that is leading them to go down solutions where they think, oh, like if we just dial back this and that, then we'll solve it?

[Ed Zitron]

Yes, yes. Actually, I think that that's right because they have the. I don't know if you saw the attorneys general from Delaware and California sent a letter to OpenAI last week saying, hey, look, if you, you need to fix these safety protocols, you need to actually have them because what you have right now doesn't work and we will block your nonprofit otherwise. I was really happy to read that right up until the bit they say, we wish you well with your quest for AI dominance. I'm just like, these are the fucking people protecting us from the. They're like, no, it's great you want to dominate everyone with AI. It's just you drove some people to a murder suicide situation and wasn't that.

[Alison Morrow]

Part of the problem with GPT5 is they tried to dial back the sycophancy and then it took away the character and like the humanness that people had gotten attached to in GPT4 and earlier models and like it, it all seems to come back to. OpenAI doesn't realize that what it's selling often is like a companion and a therapist. And it doesn't. It, it reminds me of like Q tips. You're not supposed to put them in your ear. Right. But that's all anyone uses. Q tips.

[Ed Zitron]

I was going to say you're not meant to do.

[Alison Morrow]

Of course not. But like, that's the consumer. That's how the consumer has chosen to use this product. And they're saying like, well, we don't condone that. We don't think it's like the best use of our product. And you know, we know better than the, than the consumer.

[Ed Zitron]

Of course I, I think it's one abstraction higher, which is, I don't think they know what Chat GPT is. I don't. I did. AI booster piece came out last week, but it was, I had this whole thing where it was. It's so they don't describe what ChatGPT does. If you go on the website, like, it's like, yeah, it analyzes data and it's brainstorming and charts and stuff. The agent does things too. Please buy it. And then you try and like, actually look for any use cases and there's nothing. I think that they're just guessing. But my favorite thing I'm seeing, my favorite thing is that now people are like, GPT4O isn't the same because they brought it back. And now people are just freaking out. People are, no, it's not the same. It's different somehow. It's honest. I honestly don't know if it's true. I just think that they've entered gamer mode. This is just what game. This is how gamers react. It's like the gun isn't the same. It's literally the same code. No, you've changed something. You've changed. I know. And it's what happens when you release an imprecise glazing bot onto the world. It's also really funny how literally any of these companies could have been OpenAI. There doesn't seem to be anything special about this company at all anymore. Or ever.

[Edward Ongueso Jr.]

Well, you know, I mean, not everybody can lose as much money as OpenAI, you know. That feels very special. Or have the connections of Masayoshi Son, you know.

[Ed Zitron]

Oh, my God. I haven't heard from Masayoshi Son in the minute. We haven't had an announcement of him.

[Edward Ongueso Jr.]

Claiming tomorrow, tomorrow he's going to be lucky pile.

[Ed Zitron]

I like that. He bought a Foxconn lab, an old Foxconn lab to turn into an AI server building place in, like, Ohio. I think it is. It's like. What are you doing, man? Are you okay? Someone needs to check in on Masayo. We need to hold space for Masayoshi's son.

[Edward Ongueso Jr.]

Yeah, bring him on.

[Ed Zitron]

I'd love to have you. I have asked him. I have genuinely emailed softbanks pr and I've emailed Anthropics PR for Dario and haven't heard back from either. I assume there's an email issue because there's no other reason they wouldn't come on this show. It's just now. I. What's fun to watch, though, is considering how many times we've had like, AI bubble conversations on here, everyone seems to be kind of waking up to it. It's kind of fun. Must be clear, everyone here was early on this. Alison, you actually very early. You've been early on everybody.

[Alison Morrow]

I'm as early as.

[Ed Zitron]

You know, I give you credit, you're one of like, the three people who, when the metaverse is happening was actually calling it out. So it's good to see in here, but also insane that it's still going. That's what I don't like this OpenAI 115 billions burn within by 2028. I think it is. I don't understand how people keep publishing this and being like. And that will happen.

[Alison Morrow]

I will say, to my relief, the metaverse went away quickly because when it first was announced and I wrote a piece just being like, what? What is that? What?

[Ed Zitron]

What do you mean?

[Alison Morrow]

And then, like, everything about it seemed really dumb in every iteration coming after. And so I was like, okay, I wasn't crazy, but with AI and I know you can relate to this, I feel crazy because the lack of utility is still there and, like, the absurdity of the investment is still there. And it does seem like that's why I wrote about the vibe shift. Like, it has been, like, going in Ed Zitron's favor in the last few weeks.

[Ed Zitron]

Fucking vindication, finally. But it's funny as well, because even with that, this OpenAI story comes out and people are still like, yeah, they're going to burn $115 billion. People reported about a month ago that they're going to spend $30 billion a year on Oracle starting 2028. How? How? How? I just. That's what I don't understand, how these articles keep coming out. And I understand that reporters have to report the news and things they have discovered. I get it. But can no one just be like. And no one has any idea where this money is coming from? No one. $30 billion a fucking year from Oracle for servers that are yet to be built and all of this. They don't need to worry about the fact that the servers aren't actually built and Abilene, Texas is not finished and the money doesn't exist, and it isn't obvious how Oracle affords it. They will have to take on debt to build this. And Crusoe and Primary Digital Infrastructure have already done that. And I mean, other than that, it could happen any day. I just wonder if the media is actually not prepared for this. And I don't mean in a conspiratorial way. I mean, just in a. Is the media actually set up for companies just lying or just projecting?

[Edward Ongueso Jr.]

I mean, I feel like it reminds me of kind of the relationship that maybe art critics or coverage might have in the medium where there's not an inherent antagonism or skepticism of claims that are being offered and an assumption of good faith that continually gets betrayed or punished. But gets carried on with over and over and over again. I feel like the AI bubble discussions that we're seeing, part of me also feels like they are going to disappear the second we start to see some of the firms maybe announce some favorable metrics. Even though, as we've been talking about for a long time, revenues are not there, profits are not there, the burn is only increasing, and there's no way forward in the short term that I can think of where these companies start to actually do the things that they're claiming they're going to be doing with transforming the world. I can see a scenario where someone has a favorable quarter for adoption, even though I just saw yesterday Apollo Global Management was talking about how large firms are actually scaling back AI adoption, which already wasn't even providing returns and was hurting productivity in the first place.

[Alison Morrow]

Right.

[Ed Zitron]

And it's really weird as well, because There was that MIT study where it's like they said 95% of generative AI integrations don't have any return on investment. There are some people critiquing that number. But something that comes out of that study that I really like was it was saying the enterprise adoption is high, but the actual transformation is low because this shit doesn't work. Yeah. And it's. It's so strange. And I think that the only reason that things won't immediately unravel with a good quarter is because the media has chosen to follow a direction. Now they've. You've got the. When you've got the Atlantic, the goddamn Atlantic publishing a story saying, yeah, it turns out that AI isn't really doing much, but it's holding up our economy. It's like, holy shit. The Atlantic's willing to admit something that happened. Happened. I didn't even know this was in there. I thought that they just wrote up whatever was emailed to them by.

[Edward Ongueso Jr.]

Don't hold your breath. They just published Mike Solana.

[Ed Zitron]

Yeah, actually, I retract all my statements. But it's, I think, with the media.

[Alison Morrow]

I see it in political reporting, in business reporting, in tech. There's a deference to authority that I think American media, but all media have an issue with. And I think that sort of speaks to the underlying economics of being in media right now, where there's a general chill both economically and politically. Reporters are worried about their bylines being out there and getting stuff wrong. And I'm not saying that that's an excuse, but I do think that is an institutional mindset that has taken root, especially in the last 10 years. It's just become like really hard to be a journalist and to do it right. But you are starting to see that MIT report was so important because it caused people on Wall street authority figures to say, hmm, I don't know about this. And then that got a lot of mainstream financial media to kind of like do that questioning headline about AI that they maybe wouldn't have done six months ago.

[Ed Zitron]

I do like that there's a rumor about the next deep seq model doing agents. They're not going to. But even just like if that comes out and they claim they can, I think that might have a market panic just because they'll be like, ah, China.

[Edward Ongueso Jr.]

I mean, yeah, I mean that's, that's. I actually think there's something to that. Right. Because you know, we did. Agents here didn't do for Salesforce really the market. Did the market even really.

[Ed Zitron]

Oh no. There's actually a central claim and a wonderful story from this information. OpenAI in their. In their whole projections through 2029, they've reduced the amount of money they'll make from agents by $26 billion. Why I want anyway. But yeah, it's like this deep seek thing could inspire people to get scared horribly. Because no one actually believes that agents exist because they don't. But they think they do. But they will, but they won't. It's this. I don't think I've ever actually seen anything like this in tech. I'm going to be honest. It's worse than crypto. Even worse than just the general generative AI thing is this concept of agents though, because I saw some fucking thing about one political blog saying that Donald Trump would do some sort of act. He would do the. I forget the exact thing, but it would be an act that would make AI copyright holders just hand shit over to AI due to us needing to beat China. And it mentioned within like, yeah, the growing agentic capabilities of AI. It's just, what the fuck is this? I've never seen a tech thing in my life that has not existed like this. And people talk about it like it's real.

[Edward Ongueso Jr.]

And I think also it's interesting to see the more it doesn't manifest, the more some of the recommendations to make make them happen just sound more and more alike. These are also things that might somehow bend the cost curve in our direction. Maybe we should make the Internet unusable to anything other than some of these programs. Right. And I'm curious which one is going to give out first. Like the really savvy ability a lot of these firms have had in spinning, sputtering or spinning a crisis that might drain the markets or deter investors into oh, actually we just need even more capital. Similar to what they did with Deep Seek. The solution is even more compute intensive models. Whether they're going to be able to do that faster than people wising up and saying maybe we shouldn't misallocate trillions of dollars of capital over the next few years towards this.

[Ed Zitron]

But this is the thing though, I don't think there's anything stopping this because the suggested thing was the okay, so all of these model companies can steal from everyone, which is what happened already. Even with this anthropic settlement. It's not. It's great. People are getting $3,000. I love that.

[Edward Ongueso Jr.]

But that's also what the companies are offering. That's similar to what your payout would have been if you said yeah, right.

[Ed Zitron]

Yeah, I didn't know that.

[Edward Ongueso Jr.]

I think like some publishers were offering or you know, trying to ask authors, hey, if we pay you this, would you be would you allow your book to be trained on or would you allow be put into a data set? The payment that you're getting from the settlement feels or reminds me of the amount of money that people are being offered in those sorts of deals.

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[Ed Zitron]

I think the thing is, okay, they already steal everything. Well, okay, we need to give them as much money as possible. We've already done that. Are we just gonna do this forever? Because even if we do this forever, nothing's gonna change. Even if I'm completely wrong and OpenAI keeps going another five years. Okay, so we're just gonna annihilate $115 billion. There is no. There are no more things here like their projections. OpenAI's projections from the information, their chart. I don't even need to show you this because this is just fan fiction at this point. There is, in 2026, starting. There is this growth of this orange thing that is other revenue. Who knows what it is? I don't know. OpenAI doesn't seem to. And that's really important because they're going to make what looks like several billion dollars from this next year. What the fuck is going. Every time I look at this company, I feel a little more insane because they've now lowered their expectations of selling their access to their models by $5 billion over the next few years. What even is OpenAI at this point? Is it just a rap? Have they become a wrapper company of their own models? They're no better than Cursor. It's just. It's so weird. And I realize I'm kind of going in circles at this point, but it's. I. Even the metaverse, even crypto, even crypto functioned. It was bad. It's still bad. It is bad cloud software, but it still did the thing. AI doesn't even seem to be doing it and they need more money to prove that it can't do it. And actually they don't have enough right now, but they're going to need even more. I don't even know how people are still taking this seriously, because on top of that, did you hear about the Microsoft negotiations over the nonprofit I've been hearing? Well, they're delaying it to next year. They have to. They need to convert by the end of the year. Otherwise SoftBank comes their round in half and everyone's just like, yeah, it'll be fine, mate. We'll work it out. Have you. Have either of you ever? I know, Ed, you covered Uber a lot. I don't even think the economics match with that either.

[Edward Ongueso Jr.]

No, I mean, it's interesting Because I think Uber's strategy, central strategy from the beginning was we have a few existing playbooks that we need to reference the coke deregulation of the taxi industry in the 90s, as well as deregulatory campaigns that they led in Seattle and historic campaigns in San Francisco. There's a lot that we can reference. And if we can figure out a way to bootstrap ourselves onto the model and onto those previous histories of deregulation while delaying scrutiny long enough for economics to actually get to a profitable place, we'll get there. Which is what they did. Right. But even then, I mean, I feel like from the beginning, as much as I hated a lot of the coverage of Uber for years, the people who were always correct about it, we're like the labor reporters who actually, who, you know, if you spend time talking to the drivers, that will lead you to be a little bit more interested in the, you know, what can justify the suffering behind this. And then you almost always will see that there's no, at that point, there were no way the unit economics worked unless you subsidize everything.

[Alison Morrow]

Yeah.

[Edward Ongueso Jr.]

I feel like similarly, there's something going on with artificial intelligence firms in the global AI value chain where if you start with a labor analysis and you look at invisible workers or ghost workers.

[Ed Zitron]

That are into the Kenyan people training the models.

[Edward Ongueso Jr.]

Yeah. Or labeling or any laborer that's out of sight, out of mind, then starting there and going up, it becomes hard to ask, okay, how are we supposed to allocate all this capital towards a model that, as it is right now, is cutting all these corners for costs and is still burning tens and tens and tens of billions of dollars and is asking for chok billions of dollars more. But I don't know. I mean, part of my fear is that they are successful in the way that Uber was, where if you get enough buy in from military industrial comp. Well, you know, for. In AI's case, if you get enough buy in from military industrial complex, if you get enough buy in from, you know, social programs and interfacing them and helping cutting them or redirect traffic through them, if you get enough buy in from other tech firms, if you get rents from other startups that need to use and get access to your product, and also if you graft yourself onto everybody's D interactions, daily lives, the way they interface with the Internet, can you actually make it work? Which is also another way to say, like, what if you just become a massive parasite?

[Ed Zitron]

The funny and grim thing is AI is a terrible parasite. It's not good at it. It doesn't like. Because Uber's success came from being able to graft itself on through utility and subsidized pricing, that meant that everyone used it. And also cabs kind of fucking sucked.

[Edward Ongueso Jr.]

Yeah, I mean, yeah, they sucked. And also transit in most city sucks.

[Ed Zitron]

And I mean.

[Edward Ongueso Jr.]

And it's only gotten worse.

[Ed Zitron]

The inherent colonialism of most technology applies. Very good. From Karen Howe, of course, Empire of AI. Empires of AI did an episode, great book. But in this one it's kind of shit colonialism as well, because they don't even. They haven't found a way to actually exploit in a way that's profitable. They haven't found a way to use human beings because the fundamental thing they want to do. It's kind of like if Uber. Sometimes you got in the car and you got out at the wrong place, and I don't mean like in a different country or you got into the car and it just exploded sometimes. And I sound like I'm joking, but it really is that bad. And on top of it, it's not replacing labor and it's also not the kind of tech that can replace labor. So it's my grand theory that they're just playing the hits. They're trying in the same way that you just eloquently put Uber played the hits of here's how we did deregulation, here's how we did growth, and this is how software grew in the past. I think the AI is trying to do the same thing and it's bad at it. It's like watching a new class of dipshit try and do what the more evil dipshits of the past did and fail. In fact, these lobbying groups lobbying for AI, I hear a lot of people saying, oh, they're lobbying, they're lobbying. It's like, what for? Oh no, they're going to build data centers everywhere. They already do. They're going to steal from it. They already do. They're trying to replace. They're already trying everything that they, that they. Everyone's scared of, they already can do other than the doing part. They can't do any of that. I sorry, I just, I just remembered as well yesterday, trying to read that because I went on the chat GPT pro subreddit because I hate myself. And I was trying to find someone who'd use the agent and every post was someone saying, anyone ever used the agent? You got any tips? And everyone's just, it doesn't fucking work. It's broken. It's actually here's a good question as an ed, have you. Can you think of a company that's ever released something just completely broken before? Because the metaverse kind of worked. It wasn't what they were promising, but it worked. It was a virtual world. Ish.

[Alison Morrow]

I mean the pharmaceutical industry has a nice long history putting out quasi effective drugs that have all kinds of consequences. And I can't remember who skeeted about this a few weeks ago. It was after one of the, you know, it's become such a genre of the journalism right now about AI, about like this man became delusional and had a psychotic episode because of his ChatGPT relationship. It was one of those going around and someone skeeted about how if this was coming from a pharmaceutical company, it would be recalled immediately. There are real regulations in place that could actually claw that back and help save people's lives, but there are no regulations around AI. So we get chatgpt gods and spiritual awakenings and all these psychotic episodes.

[Ed Zitron]

I do think that that stuff is going to genuinely be its downfall though, because right now it's more money than anyone's ever burned before. And the most common use case people can talk about is, yeah, it drove that guy insane. That guy went crazy. There are children who horrifying killing themselves because of this thing. That's what it's getting known for. And otherwise it's like, yeah, your most annoying friend loves this because that really it's the. You love them, but they're like, I learned about all this and chat jbt. It's like you didn't.

[Edward Ongueso Jr.]

Well, you know, on that part of a fear I have is I think similar to how when firms were rolling out facial recognition surveillance and insisting that we need biometric surveillance to help keep cities safe, community safe, products safe. One angle that people used to attack it was, well, the racial bias of these things will allow them to, you know, misidentify black or brown people more often than not. And they might get arrested, they might get targeted by the police in one way or another. And that is why we should get rid of the technology versus we should get rid of the technology. And I think, like I'm curious, you know, how it's going to go, the concern about it inducing psychosis or inducing suicides. Because I could see a scenario easily where they patch together something that looks like a fix and it's not until later, a year or two or three after people are much more dependent that other harms come to the foreground whereas we lose something Out, I think not to say or marginalize the fact that it has immense social costs or harm here, but it does in some ways remind me of the way in which that debate over facial recognition went. And then they, you know, they solved, you know, with quotation marks, the racial bias problem. And now people have more or less accepted that facial recognition is okay, actually. And you're right because it's not racist.

[Ed Zitron]

And that's the thing. It's. People say this is a white bloke, but it's like people really underplay how endemic that racism is within all algorithms. You know, Compass, which is like this very, very old algorithm for being like. It's basically Minority Report Ye both in the reference to the thing and it reports on minorities in that it says, yeah, this, this person will likely offend again. And that should be. And isn't a unilateral. The judge has to take it. But what a surprise. It's often used to then black people to the jail systems because it's heavily biased against them. And yeah, I somewhat fear LLM is doing similar. They're probably already doing. And I think that every algorithmic system is inherently racist. There's not enough people running them who actually fucking try. It's inherently biase against women. I think there's also. I wish I had this in front of you. But there's also something about how like more. There are more fans of generative AI who are male than female. And it's just.

[Edward Ongueso Jr.]

But do you think it's possible that, you know, they'll try to say, oh, we can solve for the psychosis problem and then that will undermine a large.

[Ed Zitron]

The problem is of the criticism. How do you solve it? Because it is probably a small. It is probably a small scale problem. We actually don't know. And it's not that these companies know or will tell us, but nevertheless each one is so horrifying. It's. This is hor. Like the story in the Wall Street Journal, Julie Jargan, another person there who wrote that where it was like a murder suicide, an actual Son of Sam Altman situation, which is fucking terrifying that this is happening. I don't know if you can completely solve that because all it takes is one popping up again for them to go fuck. And it's also not just a chatgpt problem. There's this woman on TikTok who she has been saying what Claude has been telling her and it's like, oh, this is giving me psychic visions. I think it is. It's also an alt. The ultimate grifter tool. It's just, it's. That's why I think it's taken off so much on social media as well. It's a tool that naturally fits into the Grifters toolbox. I think that I actually have similar fears that they will try and find ways to hand wave away from this if it was the only problem. But they have so many problems. There's so many problems at this point. But I do also think that people need to remember how racism in algorithms is fairly. It's in all of them. I mean, you remember Microsoft Kinect, which literally couldn't see black people, which was a joke in the show. Better off Ted. If anyone watched that. It's a great show. It's just, it's insane that. I mean, sadly, it's very obvious why this keeps happening. It's because the people are predominantly white and male. And it's just, they can't really. And also you can't really fix this stuff without intentionally building the data which would require them to spend money on something they don't care about.

[Alison Morrow]

And they don't really understand what they're doing when they go in to tweak these models. They don't know how overcorrecting or undercorrecting they're being. So they kind of have to just try and then put it out in the world and then wait for something bad to happen. It's funny. Not funny. It's extremely sad. In that journal story that you referenced, which I read twice because I was like horrified and also the reporting was incredible. It was really. And they said it as this appears to be the first instance of a murder resulting from like we've seen suicides, but like this is a murder suicide. And when OpenAI responded to the question about did the bot ever respond to this guy who was clearly having a delusional episode, hey, you need to talk to a real life therapist. You need to go to the hospital, you need to seek help. And I think they declined to comment. It was like a very evasive maneuver. But like ultimately the journal had seen the one time where the bot said please go to the emergency room was when the guy, the guy who was having paranoid delusions said I think my mom is trying to poison me. And the bot said, if you think you've been poisoned, you should go to the hospital and get your stomach pumped.

[Ed Zitron]

I also, I agree they don't know how to tweak these things, but I must be clear. Worked in tech for a long 16, 17 years now and that's not even including my games journalism work. It is not hard for them to just have a. Just a unilateral thing of, oh, you're talking like this. I'm going to stop. I mean anthropic just announced that they have a thing that will cut a conversation, which is good. All of them should do this. But it's. They could if someone and the whole thing, people I've seen where it should be. If you start talking like I'm going to do this, I am becoming this. It should say, hey, you sound like you're having a paranoid, like I'm worried about you. You should go and speak with it and just stop working with them. People will say, well, the way they get around that is by telling the ChatGPT window, oh yeah, I'm writing a story. I don't know, do we need them to write a story about that? Do we need. What is the answer? And the answer is they don't give a rap fuck. And no one's make. I really, I genuinely think. Because it's really easy to. Same thing with like the same thing with social networks as well. It's. You don't ban every slur the moment someone says it. But I don't know, you have a thing that says, hey, someone said a slur. Maybe take a quick look at the slur and you could probably just ban that person. Because I'm guessing that most uses of the N word on social media are not used as in culturally sensitive ways. They're probably insanely racist. You just cut them down. It's like, well, we can't. It's an issue of free speech. Fuck you. No, it's not. It's an issue of free speech when a person can't exist online without racism happening to them.

[Alison Morrow]

Right?

[Ed Zitron]

And these models, they could stop them. But I do think there is a compelling argument of they really don't know what to do that every time they touch it, something else breaks. Honestly, it's kind of the most egregious version of the most common software problem, which is coding is really fucking annoying. And we don't know how these work also.

[Alison Morrow]

And generative AI is not going to fix your coding problems no matter how many times you tell us. Sam Altman, that AGI is just going to fix everything for us.

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[Ed Zitron]

This thing is ancient. Still using yesterday's tech upgrade to the ThinkPad X1 carbon ultralight, ultra powerful and built for serious productivity with Intel Core Ultra processors, blazing speed and AI powered performance that keeps up with your business, not the other way around. Whoa, this thing moves. Stop hitting snooze on new tech win the tech [e-mail] Lenovo Lenovo unlock AI experiences with the ThinkPad X1 Carbon powered by Intel Core Ultra processors so you can work, create and boost productivity all on one device. That's actually been my favorite thing to do right now. It's go on the R Cursor, R Chat, GPT Pro, R Claude AI and just looking at people complaining and what they're complaining about is, hey, I keep hitting rate limits. Hey, I keep. It keeps breaking things. Hey, it's. You get one guy every so often who says I, this has changed my life. And then you see the responses being like, yeah, but I fucked up all my stuff really badly. Doesn't really work. And we have an upcoming episode with Colt Vogie about this where it's like the average software engineer is not just writing code anyway. And so you. This is also. I think this is actually. This is funny. This is a good, this is a good one to laugh about. So their only real growth market right now is writing code. The problem is writing code requires you to use reasoning models. Reasoning models inherently burn more tokens. And the way they burn tokens is because they're things thinking they don't really think. They look over what a prompt asks for and goes, okay, what would be the steps to solve this? With code that becomes so, so complex. And the more models reason, the more they hallucinate. So the very product that they are building that is going to save them is also the one that is going to burn more compute. And I, this is a rumor I've. I've heard from a source that like, it can take like four to 12 GPUs for one person's particular particularly rough coding, like a refactoring that's sustainable and that's one of the smaller models as well. That's for like 04 mini, which is a reasoning model. It's like, what do you think the.

[Edward Ongueso Jr.]

Big ones are like in the information? They talk about OpenAI having a new $80 billion. $80 billion in cost that they expend over the next 3, 4.

[Ed Zitron]

Yeah, it's 115 by 2029 as well.

[Edward Ongueso Jr.]

Does a great chunk of this come out of. Oh, it like computer is incredibly expensive and we want to center our business model around it.

[Ed Zitron]

I, I think it's that and I think it's just they don't know what else to do. It's kind of like we're saying with the, the Uber model, they're playing the hits. It's like fuck, what did we do in the past? We spent a lot of money. Shit, what do we buy? GPUs, I guess what may we train more? They're going to spend so much money on training and it's like, to what end? Your last model was a joke.

[Edward Ongueso Jr.]

This is why it was really interesting to see that op ed that came from Eric Schmidt and assistant where he was. Eric Smith is someone who was an architect of the idea that former CEO of Google, former CEO of Google, Chairman of National Security Group that was trying to figure out how to merge artificial intelligence into defense contractors and how to create foreign policy that would allow America to dominate, really to win an arms race, an AI arms race with China. And he comes away saying, the strategy I basically helped craft, which was that we need to prioritize AGI so that we can get prioritize AGI so that we can get a permanent lead to deter any potential rivals is scaring everyone and it doesn't work. It's a waste of capital, it's misallocating capital, it's imposing all these harms. And if we look at the competitor that we're going up against against China by abandoning the AGI pursuit and instead prioritizing ways to figure out how, experiment with it, integrate with it, build up practical use applications, there's a much more general public acceptance of it, willingness to try it out, adopt it. And we're not seeing, because we're not trying to scale out these massive either monopolies or one size fits all models. You see wider adoption and something that looks like it's a more sustainable model. Are we going to follow it? Probably not. Of course not.

[Ed Zitron]

What I love about chasing China as well is China has had stories for like a year. It's like, yeah, we have a bunch of unused GPU compute. Yes, we've massively overbuilt. Joseph Tsai, I think it was the Chinese billionaire said, yeah, it's a bubble. We have a real GPU bubble. And America's just like, we're need to fucking copy it, we need to beat them. We're going to run our economy into the ground. We can destroy China.

[Edward Ongueso Jr.]

It's like we're saying we're going to copy them. And what is it that we're actually doing? We're prioritizing developing artificial intelligence that has like a question mark consumer use that's going to be used in killing machines and drones maybe and for surveillance purposes.

[Ed Zitron]

But that isn't even generative AI as well.

[Edward Ongueso Jr.]

Yeah, that's not even generative AI but that's where the actual excitement for any sort of artificial intelligence future is. And this is the generative AI stuff is talked about as if it is the future, the transformative future of artificial intelligence. In reality it's just the actual interest, excitement, capital is going to I think go back to the center of gravity which is like how do we just figure out the shiniest and most fearsome weaponry.

[Ed Zitron]

But I think that what's weird about this is I don't think we've had a bubble that spreads so far into consumers hearts. I'm not saying it's as bad as the housing bubble, but consumer software, if we go back to the dot com boom I think it was like 45% of Americans had access to the Internet. It was relatively small in comparison though the massive overinvestment in fiber happened. But I don't think people realized what they see to. The ChatGPT may not exist in a year or two. At least not in the same way it's going to be. So you're already seeing week long wait rate limits on anthropics. Claude, like do people not realize that this could. I guess they don't realize and I don't. I think that there's going to be a big dunce mask off. There are so many people who have fallen behind this. I mean not to bridge too aggressively into this, but there was a story in the Wall Street Journal that I shared with you of course about this movie called Critters with a Z or Z for my Canadian UK listeners where OpenAI will be providing the compute and the tech to do a movie called Creators with a budget of less than $30 million. Though it's not obvious whether OpenAI and their computer is part of that. But it's the weirdest shit in the world. Alison, you were bringing this up that like they're still using a bunch of humans.

[Alison Morrow]

Yeah, so I was reading the same story and I haven't done any this came out this morning so I haven't done my own reporting on it. But I will say from the the story I read it seems like they're hiring two different animation studios with artists and writers working on the script, they're hiring human actors to voice the characters and then some mystery X amount of the movie will be put together with AI And I honestly don't know how different that is from a regular Pixar or DreamWorks Animation process. But it seems like there's. When I first saw the, you know the teaser image is very cute and I was like oh, God. This is gonna be some AI propaganda and it's gonna be very cute and hard for me to refute, but actually it's just a human made movie, it seems, with an extra computer help.

[Ed Zitron]

And this picture I'm holding up, of course. We're listening to a podcast so you can all see this. It's just this generic blue, furry creature.

[Alison Morrow]

It looks like an extra from Monsters Inc.

[Ed Zitron]

It really does, but it's not due to copyright law. Not the same thing. It's different. But what's funny with that as well is I was mentioning this as a lead in. It's that $30 million thing. If that doesn't include OpenAI's compute, it probably costs the same as a Pixar movie because you're still like, actually, 3D animation is one of the few other GPU use cases. So really it's just a different thing running.

[Edward Ongueso Jr.]

It'll be funny also if they save money because they don't do any marketing and they're like, see how cheap it is if you don't advertise a movie at all.

[Alison Morrow]

I think they might be getting around some Hollywood unions. They're going overseas.

[Ed Zitron]

Oh, really? They're going completely overseas too.

[Alison Morrow]

I'd have to check. Don't quote me on it, but I think I know they were using at least one overseas animation studio. So they're probably saving a lot on the animation process by not paying animators, I would guess.

[Ed Zitron]

It's so cool. And also another fact from the story is we don't know how long the piece will be and if it's like five minutes long. I'm so sorry. Come on.

[Alison Morrow]

It's feature length.

[Ed Zitron]

Feature length.

[Edward Ongueso Jr.]

I should make it as long as that silent Napoleon film. Film.

[Ed Zitron]

Just which one?

[Edward Ongueso Jr.]

Six hours.

[Ed Zitron]

Yeah. I actually love that. They should be forced to. I don't know how they're gonna do a feature long movie because I don't know if you've cursed yourself by looking at the AI generated movies that people. Every so often, one pops up on Twitter where it's. It'll be, yeah, I made this entire thing in AI and you look at the frame and it's like a different fucking thing each time. That balloon Boy one. Different size balloon, different color balloon. You read the stories about the balloon boy one. It's like, yeah, we. They kept putting a face in the balloon. We don't know why. I just, I. And I know I have a good amount of film TV people who listen who are quite anxious about this. This doesn't scare me because they're very vague about the details. Every other big tech innovation I even other than the Metaverse, I guess they usually like to show you behind the curtain a little bit and like talk up the. Be a big splashy story and like MIT Technology Review or something like that being like all New York Times be like, oh, look at this, look at that. Look at all things. And they're like, yeah, we're just using some people somewhere in the. In a place. And they will make it. And in the Wall Street Journal story as well, they showed sketches that would then be turned into AI. I just. This feels like a death rattle far more than something terribly scary. And I understand film TV people are likely a bit scared, but it's like they're using out of the country studios. They're tr. They're very. Of course. I just assume they're skipping union stuff because this is all they do. It's like, this is the best they can squeak out years in fucking hell is this. And it's like a boring looking children's thing, I guess, with a name from 2001.

[Alison Morrow]

Oh, it does have the producers or writers who worked on Paddington in Peru, apparently.

[Ed Zitron]

So what, a movie about a criminal? A sequel to a movie about a criminal who unfairly attacked you? Grant. No, sorry.

[Edward Ongueso Jr.]

Well, I mean, then this is the question of, you know, where in the Uber analogy is this? Is this, you know, Uber's failed expansions where they tried different models overseas? Or is this Uber returning home, where they take the lessons from overseas or they use those overseas things to buy them a bit more time to then subsidize operations?

[Ed Zitron]

Here is my comparison. This is the drone deliveries. This is the drone deliveries. It's the Amazon drone deliveries. Great job. Casey and Kevin, several years ago talked about the Amazon drone deliveries. Never fucking happened, mate. It's hilarious as well, because it is the same thing. It's like we cobbled together this. It sucked. It took so much money. It's horribly inefficient. It sucks. We hate it. You hate it. The customers hate it. We hate. We hate doing this, but we did it. Ta da. And it's okay. Well, you sure prove that to your point, Alison. It's like, yeah, we use the power of AI to hire a bunch of people to do all the real work because you can't trust this to work. It does not work.

[Alison Morrow]

When I saw a headline for an AI movie, I was like, it's. It's gonna be awful. Yeah, it's gonna. Like, writing a movie is hard.

[Ed Zitron]

But wait a minute. Also there's the other thing of oh my God, how are they gonna lip sync this shit? How do you lip sync this? You can't generate li. You can't generate the same frame. How are they gonna. Are they gonna go in and post edit it with humans? I assume at this point. How much are you actually relying on AI for?

[Alison Morrow]

It's very unclear.

[Ed Zitron]

It feels like being at a party where everyone's pissed themselves.

[Alison Morrow]

It does feel like some next level young propaganda. Like if they can get kids to enjoy whatever this monstrous movie is going to be, then maybe there's a longer term brand play for OpenAI as a warm and cuddly safe for children.

[Ed Zitron]

The thing is, French and Korean companies have already been doing slot based 3D shows. I don't mean the famous one from K Pop, Demon Hunters, which is apparently very good. I've not watched it, I haven't seen it yet. Please don't kill me. I'm not attacking that. I'm talking about there is a gluttony of like very cheap kids 3D kids shows and they've been around for decades because you can do this shit on the cheap. Now you've already another thing where the Uber model made sense as long as you didn't count the costs, which is, yeah, this is a way of getting people around that they become dependent on because it's useful. This is like we have found an extremely expensive and annoying way to do something that we already have a cheap alternative to do. It's not like there was a cheap, reliable cab service that Uber replaced. There was a slow shit cab service that Uber replaced everywhere. And it's like, is it a good company? Is it horrible to workers? Yes. But does it work? Yes. This is. We're going to automate everything with the power of AI other than labor, other than stuff.

[Alison Morrow]

That's where the AI story starts to overlap again with crypto, where at least with Uber you understand what you're getting as a consumer. And then with AI you're kind of like, I don't really know what this is. I don't know what problem it's solving. It's like a solution in search of a problem. And that was crypto's same bag. It's just like, oh, we invented this cool new alternative money system.

[Ed Zitron]

Why? The thing is with crypto is they always had a plan, which sucks. I really should have seen it coming. I was not smart enough at the time. It was. They always wanted to just get embedded in the financial system and then just turn the funny money into real money. AI doesn't have that. There is no way to turn this into new. Like you can't just generate new money. That's what crypto did. And it fucking sucks. And by the way, the next crypto crash is going to wash out some real. Like it's going to really fuck people up. I don't think people realize that SBF2, who at this point might just be SBF, like if he just gets pardoned and comes back, honestly, if he comes back and does it again, no one, no one can complain.

[Edward Ongueso Jr.]

I'm going to law school. I'm gonna go in the hyperbolic time chamber. I'm gonna join the fight just so you can, so I can put him in cuffs.

[Ed Zitron]

You're going to put Sam Bankman Fried back in cuffs? Yes. Oh, Sam Altman Fried would be good. It's, it's just, I don't see an endpoint for this. I don't see everyone's, even the boosters at this point, they're like, and then it will be powerful when what are you seeing that even tells you this? I don't even want to fight. Just tell me.

[Alison Morrow]

I do think there's just so much money behind it and there's so many people who've invested. I was listening to a VC guy get interviewed on the Odd Lots podcast and I can't remember his name. So I apologize. But he was talking about how all these founders like all these smaller startups that are getting in on the AI game. All these founders have kind of been raised with this idea of Silicon Valley and what it will bring you and it's life changing amounts of wealth. And when you have enough people and the VCs are part of that, the actual tech startups are part of that. Stanford and kind of the whole ethos of the Valley is like, if you just keep going and work hard enough, you can have generational wealth and that is a very powerful force. And I feel, I think we're going to be seeing AI kind of hype last longer than we have in other previous bubbles and tech cycles, in part because the potential for the wealth is outstanding and it's like nothing we've ever seen.

[Ed Zitron]

But that's the thing, you're completely right. Except AI has one problem, which is all the companies lose a shit ton of money and no one's selling, no one is buying. There's been like three acquisitions. There's one to amd, one to Nvidia, one to a public company called Nice which sold a customer. It was an AI Cognive, I think they were called. It was like an AI customer service thingy that never really seemed that good anyway. But that whole thing is true. And I think that that's what people are. And I think the myth of you can just use AI to spin up a startup quickly as well has kind of gone into, has kind of fueled that mythos as well. But the problem is this is so different because the whole point of Silicon Valley, the whole thing where you can just move there and start a startup is because it's. It didn't cost ruinous amounts of money to start one. You didn't get $3 million from a VC and expect to spend two and a half million of that on compute. You were like, okay, we're going to, we're going to have to bootstrap a little bit further. We've just got a little bit of venture capital. We're going to go this far. This is like every step of the way, this cost increases massively. It used to be it was sales and marketing and just people. AI is people plus compute, plus marketing, plus this, plus that. I think, you know, perplexity. The AI search engine spent 164% of their revenue in 2024 just on compute. And AWS like, it's like, this is not this whole generational wealth thing. I fully agree. It's what they're using to sell it. I just don't think it's gonna work. And it's scary because this could have the wide thing and I really haven't talked about this enough. The wider problem is as well is all of these people who went to Silicon Valley raised all this money, have pretty much raised to sell companies that will never sell, that they can never take public because they burn too much money. They don't really have great user bases because LLMs don't really have those. And so they're just going to sit there and then you've got a bunch of VC money tied up in that that will never exit and a bunch of limited partner money that will never exit. I think that there is an entirely separate bubble building that when that burst is going to. The depression within Silicon Valley is going to be insane. It's already pretty gnarly, but I think it's like 33% of venture capital went into AI last year. It's like eventually people are going to realize there's no exit for anyone. And I don't know what that does. I mean, it will piss off limited partners. The money that comes to VCs is just not going to be there.

[Edward Ongueso Jr.]

Well so then that's the question, right, because venture capital encourages on one level overvaluing because you need to figure out a way to make more money than what you put in on the exit within acquisition or submerge. But on another level you're also working within a network trying to enrich yourself and your friends or trying to build the infrastructure for future startups portfolio options that you and your friends make to come in and make money regarding building.

[Ed Zitron]

A platform that other people can invest in bits of.

[Edward Ongueso Jr.]

And so you know, on one level I really, I really do, I agree that there's not really much of an exit ramp if there's actually no revenue and no profits. But then also I'd be curious like do you think they're going to try to ram these things through? Similar to like what we saw with Corey. Right. Where you know, like you, you talked, I think extensively about the ways in which the financials there do not actually make sense. If you're interested in a company that actually has the capital to do what it's going to say to which is provide GPU compute to everybody. And even though it has such a central role in this ecosystem, it can't make profits that justify the capital that it's getting. It has odious and burdensome debt that should be a massive red flag and it might be round tripping, right? Yeah, but this is supposed to be like the darling of the sector and it got pushed through. Part of me feels like because of.

[Ed Zitron]

I mean Nvidia and Magnetar. And Magnetar Capital of course, famous for the CDOs.

[Edward Ongueso Jr.]

Yeah, right.

[Ed Zitron]

They're back but with Core Weave they pushed it through onto the markets but that doesn't mean it can't die.

[Edward Ongueso Jr.]

Right, well so that's the thing. Do you think that it's possible that they'd be successful in pushing it onto markets but it dies? Because I do, I feel like there will definitely be a lot of investment incineration but I also do think we're going to have bags to dumped on everybody.

[Ed Zitron]

I think you could do it with something like Corwave and Lambda, which is another situation where Nvidia is the customer invested and also sells them the GPUs which they then use as collateral to buy more GPUs using debt which is so good you'll notice that there are no software companies going public. There's no software AI companies going public. Everyone thinks that OpenAI goes public here and oh, they'll go, the market's gonna if they can even convert, the market's gonna eat them for dinner. Oh yeah, we're going to burn bazillions of dollars forever. No, the markets didn't like Core Weave either. Core Weave wouldn't have gone public had Nvidia not put more money in. Lambda is probably going to be exactly the same if they even make it. You won't see software companies because that's the other thing Core Weave had albeit bunches of debt. Assets. They have data centers kind of through core scientific. God, I hate these fucking companies. But they don't. They have things that they can point to and relationships, even OpenAI. That's the thing with them, they don't. They barely have assets. Oracle is building their data center in Abilene with Crusoe. They don't own any of the GPU. They have a few GPUs, I think for research, I've heard. But Microsoft owns most of their infrastructure. They don't own their R and D. Well, they do, but Microsoft also has access to that. Their intellectual property. Same deal. So it's like what actual value does an AI startup have? People always say, oh, they're getting the data. They get the data so that the data will tell them. It's like what. It's all these horrible stories about like, oh, Doge has got an LLM they're doing this with. What's the end point? It's scary, don't get me wrong. But. And then what? And there never is one. And I. I hope someone. I hope a AI software company goes public. I want to see this so bad. I want to see you have any. I. If you give me the OpenAI books, the anthropic books, you become the official homie of better offline. I'll mention you on every episode. Get me. Get these books. But Because I think all of them are going to be like a dog's dinner. There's. I've actually looked at the markets and Uber. Uber. By comparison, they did burn a shit ton of money. It's things like 25 billion between 2019 and 2022. A lot of that was on sales and R and D pretty much Groupon. I think also that R and D with autonomous cars. But separate problem. Right? But it's like there wasn't a. I can't find an example of someone that just annihilated fuel unless it's like planes. And I think we've established the use case for planes by now.

[Edward Ongueso Jr.]

Clear.

[Alison Morrow]

Sold.

[Ed Zitron]

It's just. It's all very frustrating but you know what I think I'm gonna call it there. I think we've had a good conversation. Alison. Where can people find you?

[Alison Morrow]

You can find me on blueskymarrow or on CNN.com nightcap ed.

[Edward Ongueso Jr.]

You can find me on Twitter @bigblackjacobin. You can find me on Blue sky, on Edward Anguissa Jr. And on substack at the Tech Bubble.

[Ed Zitron]

And you can find me of [e-mail] just type in prabhagar Raghavan. You'll find me. I pop right up. That's all me. Thank you so much for listening everyone. This my episodes are coming out in a weird order because I'm recording this knowing there's a three parter this week, but this will come out with a monologue of some sort. Thank you so much for listening everyone. Of course. Bahee. Thank you for producing here out in New York City. And yeah, thanks everyone. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matosauski. You can check out more of his music and audio [e-mail] m a t t o s o w s k-I.com you can email me at ezeteroffline.com or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat wheresyoured app to visit the Discord and go to R betteroffline to check out our Reddit. Thank you so much for listening. Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, Visit our website coolzonemedia.com or check us out on the iHeartRadio app, Apple Podcasts or.

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