B (2:55)

Yeah, Lou, it does seem like they're at least focusing. And we've asked a lot of questions about how are, how are they going to build a sustainable business model. So this is maybe a step in the right direction. But the other interesting thing is it seems like they're kind of seeding a lot of this consumer space. You know, if you want to make a video, go to Gemini. And that was the theory even 12 or 18 months ago, was that Alphabet was going to be and Google were going to be disrupted. This is kind of ceding that entire area to them.

A (3:23)

You're giving them the Focus Award, Travis, is that.

B (3:26)

Yeah, well, I mean, for now, we'll see until they go public and then start throwing spaghetti at the wall again.

A (3:33)

I think this is a rare moment of honesty from OpenAI, a company that loves a good press release. For all of the bluster, for all of the statements about how wonderful it is, things are not going well and we're supposed to make bold statements here. Travis, this may not come true, but I am increasingly wondering if OpenAI will ever get to an IPO. I mean, the simple math here is that they were not making money on this. As Rachel said, just the sheer bandwidth needed was too much for the revenue. Also, I think it's fair to say that they didn't see a path for revenue, which is kind of the scarier thing. And add into it the fact that even with a billion dollar sweetener from Disney, if they would have kept going, they still couldn't justify it. I think the conclusion here is they were losing tons of money with no path to profitability. And, hey, I guess credit to them for at least backing off. But look, Anthropic is doing it better. Anthropic is using a lot fewer resources to actually grab the enterprise customer. So copying them makes sense. I don't know if the consumer matters here. I think the enterprise matters for now. And yeah, Anthropic is showing the way. OpenAI would be insane not to follow.

B (4:47)

So is the theory there, if you're looking at a potential ipo, that, hey, the consumer space is just going to be Too hard. Maybe Alphabet is already there with the ad business in particular, something that OpenAI really said they didn't want to do until it was kind of too late. So if you want to build a real business and go public, you have to go after these coding opportunities, these enterprise opportunities, and that's what they're focusing on. Even though we've seen seemingly everything else, we had the browser shut down, we've seen now Sora shut down. Is even chatgpt going to be the future of the company, or is it really just Codex at this point?

A (5:24)

It's weird to compare them to Alphabet because it's such a different set of circumstances. One is an established business. That part is backfilling. Let's be honest. You know, the whole. It used to be Alphabet's going to get killed by OpenAI because search is going to be destroyed. Instead, they're kind of just transitioning search. But you have an established customer base and an established business, and so it makes sense to stay in that business that you know so well. I think on the OpenAI side, like anthropic, starting from scratch, you need to earn customers. And the cost of acquiring a customer in almost any business is high. So you want to go after the customers with the highest payout. That's on the enterprise side. I mean, again, we'll see what becomes a consumer AI. We'll say, maybe we all will pay hundreds of dollars a month for these magical tools that make our lives better. There's time to fight that out if and when that happens. For now, if you are trying to build a business, you need to see your efforts generate revenue. And clearly, I mean, I don't think this is unique to AI or anything. Clearly, the enterprise is the customer to go to get that.

B (6:29)

Yeah, I think it makes a lot of sense in a lot of ways, especially if you are trying to get to that ipo. But it's just striking how many things they've tried that were supposed to be the future of technology, the future of artificial intelligence, and they just didn't really work out. So we will see where OpenAI goes. I'm sure we're going to be talking about this again soon. When we come back, we're going to talk about crypto and what the future of stablecoins looks like. You're listening to Motley Fool Money. Have you been sleeping on your mattress a little too long, like I have? My back's getting sore more than it used to, and I feel like Homer Simpson with my body shape and printing on the mattress. But like you, I'm busy with a job and kids and who wants to go to the mattress store with the family only to deal with a pushy salesperson? That's why I was excited to learn about Leesa and their premium mattresses that you can shop for from the comfort of your own home. We wanted stability and comfort, so we went with the Legend Hybrid. It has over a thousand individually wrapped springs. But here's the great thing. It virtually eliminates motion transfer. Just in case one of us has a restless night. No matter how you sleep or your budget, Leesa has a mattress for you. They're made from premium materials right here in the US With a focus on using sustainable materials like recycled steel. Check out which mattress is right for you@leesa.com for 20% off. Plus get an extra $50 off with the promo Code fool exclusive for our listeners. That's L E-E-S.com promo code FOOL for 20% off plus another $50 off. Support our show and let them know that we sent you after checkout. Lisa.com, promo code fool. Welcome back to Motley Fool Money with the Hidden Gems team. Yesterday we saw shares of Coinbase and Circle plunged. I think Circle is actually down over 20% at least one point. And the reason was Congress is pushing through this Clarity act, which is going to set the rules for stablecoins. And one of the things that's been on the docket is are crypto companies going to be able to offer rewards for holding stable coins? This is something that Coinbase does on their platform. If you have USDC stablecoins, they'll pay you. I think it's three and a half percentage points right now as a reward for that. So looks a little bit like interest on a bank account, even though it's a little bit different than that. But this would make that illegal, Lou. And the interesting thing here is this would make it maybe a little less attractive to be holding those stable coins in an account like Coinbase. But if you do still hold them and you don't really care about that three and a half percent because it's a more efficient payment method or whatever your logic is, this is actually going to make companies like Coinbase more profitable because they're not going to be have that rewards expense. So it's sort of an interesting reaction from the market. Stocks are down, but at least short term Coinbase should make more money because of this ruling. If it ends up passing.

A (9:09)

Yeah, I keep thinking of that. Life comes at you fast when I See this? Sure. Travis, you know what? Banks would make more money if people just put their money in without demanding interest. So you're right, definitely. But look, I don't know if this is fair, but I think it's the right call. Okay? And look, life is not fair. I'm not pro or anti stablecoin, I'm not going to say that. But I want them to solve problems, not create problems. And for all of the flag and

B (9:37)

do you not see the efficiencies.

A (9:39)

Let's go there. Let's go there. Okay. For all of the issues we have with our US Banking system. And it's not perfect, it does work and it is the model the rest of the world bases itself on. We have a good thing here. Just like in medicine, the first rule should be do no harm. And to the extent that these stablecoins are a threat to that core system, I think regulators should be aware and trying to avoid harm to this system that serves us well. I keep saying this about fintech, but it is so true. The house always wins. Regulators are risk adverse. That's a feature in the system. It's not a flaw. If you want to come up with something better, it has to be significantly better than the status quo. Because again, the status quo, for all of our complaints about it, works really, really well. And most of the world wishes they had the problems we had.

B (10:35)

I've been following stablecoins for quite a while, but the efficiency of moving money with stablecoins, if you own a business and you're paying 3% for credit cards, having an alternative, which a company like Stripe does, they charge about half of the fee to take stablecoins as they do to take credit cards. So that would be the disruptive angle. Is Louis saying it's good that we're not allowing or we're not enabling some of this disruption from stablecoins which is going to just entrench companies like Visa and MasterCard, you know, I guess. What are your thoughts looking at that? Because that seems like the angle that Coinbase or Circle is going for is, hey, this is better, it's more efficient. But now we have regulatory capture coming in, which is always going to be a challenge.

C (11:15)

Well, and I think another way to look at it is this. We have heard some pretty lofty ambitions for what stablecoins can do for the consumer, for big business. And one of the hallmarks of adoption, one of the on ramps that enables adoption, is greater regulatory environment and more regulations in place. And so I think that in the long term, should this legislation pass. I actually think it's a good thing. You think about companies like Coinbase, they've been leaving leaning pretty heavily on USDC rewards to drive engagement and revenue. So obviously this is kind of massive regulatory red line, so to speak. You think about, you know, the Genius act and other recent bills have really essentially been trying to treat stablecoins more like traditional cash and less like speculative investments, which again is a really important element of long term adoption. So I think by cutting off rewards, regulators are hoping to prevent a massive drain of deposits from traditional banks. I think that's one piece of it, but I think it's also about kind of the fundamental safety of the financial system and there's also the redemption factor. So the new rules would mandate that stable coin holders get priority in case of an issuer's bankruptcy. And that would finally give users some of the same protections that they would expect at a regular bank, which again, there might be individuals and entities that have hesitated to adopt stablecoin that should those regulations be in place, would be more induced to do so. So I don't think, you know, this is a dead end. You know, the free money, so to speak, via rewards might be going away, but I think that core utility of stablecoins is still very much intact, if you believe in this space. I think for the big players this is more of a regulatory speed bump, if you will, than a dead end. They'll have to pivot their business models, focus more on transaction fees and infrastructure. But I do think that the genie's already out of the bottle here and I think stablecoins are probably here to stay.

B (13:03)

Well, Lou, I do want to push back on that a little bit because the piece that we're missing here is there is still money, billions of dollars of revenue coming into these stablecoin companies because these assets are backed. In the case of USDC, I think it's their around 80 billion market cap today. That money isn't just sitting in an empty room, it's sitting in bank accounts. It's sitting in US Treasuries that is generating interest. What they're doing with rewards, what they're calling rewards, is just returning that to the people that are actually holding the coins. Now you're saying you can't give them that money so that profit is going to go to companies like Circle and Coinbase. Is that better? Like I think that's the argument you guys are making is that that's better not to give the rewards out. That seems a little bit backwards.

A (13:45)

A couple things for one, we'll see how much of that money stays there for them to generate the interest. If this evolves, if there isn't a use for it, Rachel said they can make it up in fees. If the goal is like, hey, this is better than Visa and MasterCard because there's none of those pesky fees or the fees are less, here comes the creep again. The house is going to win here. Visa can cut their fees in half a lot easier than these companies will find it to just, well, it would

B (14:11)

be Visa and the banks though I think that's going to be the sticky part, is that Visa takes a relatively small chunk of that 2.9% or so.

A (14:19)

But again, this is margin and it's always the path of least resistance is the incumbents lose a little margin versus a new system comes into place that has happened over and over again. This isn't just about protecting Visa or protecting the banks. Right now the system that we all benefit from works because in part the banks have so much access to cheap deposits to the extent that we threaten that for the sake of lower credit card fees, we are potentially causing a bank crisis down the road that will do more harm than the toll that they are extracting on the economy. You can say that this is fear mongering. You can say that it'll never happen. You can say, oh, that's the worst case. The job of regulators is to avoid worst case. It is to keep the system stable and functioning because again, the system basically works. So this may not be fair, it may not be consumer first friendly. It might mean that businesses still have to figure out what to do with credit card fees. All of that can be true and it can still be the right decision in terms of financial stability and long term financial stability. That's the point. And we can argue till we're blue in the face about fairness, we can argue about, oh, what are you doing? And that. But at the end of the day, the job of the regulator is to keep the status quo working because the status quo has gotten us 200 years in pretty well. And that's exactly what they're doing here. And I'll be on it. Maybe I'm just a old Luddite, but I appreciate that holding. And look, I think you put it really well.

B (16:01)

And I think, you know, the investors who are listening to this, who own maybe shares of banks, maybe shares of Visa or MasterCard, the credit card processing companies, or like myself, I own shares of Coinbase. Think about that. You know, what sort of disruption is there? What does disruption potentially look like and what is holding off that disruption? Because I think you laid it out that you're arguing that the status quo is beneficial, even if it's less efficient and less consumer friendly. Does that ultimately win? You know, that's something that the market is going to eventually figure out one way or the other. But for now, regulatory capture rules the day. When we come back, we're going to talk about Amazon's latest robots. You're listening to Motley Fool Money.

A (16:41)

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B (17:43)

Welcome back to Motley Fool Money with the Hidden Gems team. Amazon is one of the biggest employers in the world, but it may not be for long if it keeps buying robotics companies. Last week acquired a company called river that makes a kind of dog looking delivery robot. This week it added Fauna Robotics, a humanoid ish, like a short, like a four foot tall humanoid robot that's supposed to be quote capable, safe and fun for everyone. And also we've got Zooks in the mix. Rachel, what is going on here? Is this a company that's going to have a billion robots and no employees a decade from now?

C (18:19)

I mean, maybe that's the long term vision. Right? Right. So river, they're the Swiss startup known for their dog like quadruped robots. They're designed to like navigate stairs and drop off packages directly at your door. And then Fauna Robotics makes this humanoid ish robot called Sprout. It's about three and a half feet tall, as you noted. When you add Zoox, obviously the self driving robo taxi and delivery service to the mix, this picture starts to get kind of clear. You know, you think about could we be living in a world where a Zoox vehicle drives itself to your neighborhood, the river dog hops out the back to climb your porch steps, and a fauna humanoid potentially manages the human interaction or complex tasks in the warehouse? I mean, I don't think we're there quite yet, but I can't help but wonder if that's the long term vision. Amazon, for their part, publicly maintains that these robots are designed to work alongside humans, right? To make jobs smarter, not harder. There's been some leaked documents that have suggested that they maybe plan to replace, you know, half a million or more human roles by the early 2000 and 30s to solve some of their labor supply shortages. So we'll see what the reality is in practice. But the other thing to note here is that from these acquisitions, I mean, Amazon's also competing with say Tesla's Optimus as well as other players in this race for general purpose humanoid robots. So whether they plan to sell these robots to other businesses or simply use them in the logistics machine, I think remains to be seen. It's an interesting move to be sure.

A (19:46)

I put out a memo to myself stating I want to be a trillionaire by mid-2030s. I mean, it could happen, but we'll see. I don't think you should just assume it is fact. Similarly, I'm glad Rachel mentioned the word logistics because I think about this in terms of logistics and I think not to say that this isn't important, but it's just Amazon is a different animal because of its scale. But really all Amazon is doing is what everybody's doing. In the case of logistics, Amazon was just the one company big enough to take it in house when everybody else is still delivering stuff. They're just using UPS or whomever. Similarly, I could give you pages and pages of various retailers, logistics companies, companies with warehouses that are partnering, experimenting with robotics. I could give you a trucking company that used to spend $500 million a year on tech related to warehouse tech. What Amazon is doing is what everybody is doing. It's just more, I guess, in the spotlight because they're buying companies. It's just this long term trend towards automation that's been going on since the 70s. I doubt it ends with zero employees, but if nothing else, it is the path to greater efficiency and scaling the number of employees you have not that this is much to do about nothing, because it does over time make these companies more profitable. But I don't know if there's anything Amazon is attempting that a lot of other companies can't do through vendors like Honeywell or through their own internal efforts.

B (21:13)

Yeah, I think that's probably true. We are seeing this vision kind of come together with Amazon, especially with the Zoox vehicle, which I kind of left for dead for a long time. But now that that's approved, you can modify those and there's obviously designing those in house. So you could modify that to. Look, you know, the Cruz did this a few years ago. Instead of having people inside, you just have. You have a refrigerated area, maybe for groceries, you've got packages coming out. Maybe it's just one of these robots that parks on the corner in my block and a whole bunch of robots come out and deliver a handful of packages to different houses in the area. The future is going to be wild. I think that's what we can probably agree on at this point. And there's going to be more robots than there are today. Well, lots to think about for investors, but we do want to pour one out for Sora because that was one of those highly hyped products that kind of sad to see go away. As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertisement advertising disclosure, please check out our show notes for Lou Whiteman, Rachel Warren and Christy Waterworth. Behind the glass, I'm Travis Hoyam. Thanks for listening to Motley Fool Money. We'll see you here tomorrow.