Nikki Kristoff (1:51)

In this moment, as we are in the middle of strikes on Iran, the government wants to use the best claw is the best.

Kelly Evans (1:58)

It's Tuesday, March 3, 2026. Squawkpod begins right now.

Senator Tim Kaine (2:03)

Standby Joe in 3, 2, 1. His mic Q.

Joe Kernan (2:10)

Good morning and welcome to Squawk Box here on cnbc. Live from the NASDAQ market site in Times Square, I'm Joe Kernan along with Kelly Evans who were like this. Which is that right? Usually if we have someone. Becky's doing her cures conference today. Normally we would put you there, but I have been told this is my bad side.

Unnamed Male Host/Commentator (2:31)

So you want to stare like I feel like we're in combat here. Not to make a combat reference. We don't.

Joe Kernan (2:38)

You mean because of the person that's usually there?

Unnamed Male Host/Commentator (2:40)

Well, it's just, it's an intense positioning. Do we.

Joe Kernan (2:43)

No, no, no. We'll be nodding. We'll be finishing each other's sentences let's

Unnamed Male Host/Commentator (2:48)

get the latest on the fighting across the Middle East. CNBC's Dan Murphy joins us now from Dubai, which has had its share fallout as this goes on. Dan, good morning.

Dan Murphy (2:57)

Kelly, good morning. Well, the security situation in the Gulf has deteriorated in the last 12 hours. Two Iranian drones successfully hit the US embassy compound in Riyadh this morning, forcing the State Department to order all non essential personnel in Qatar, the uae, Bahrain, Jordan and Kuwait to leave. Emirati air defenses also intercepting Iranian missiles and drones over Abu Dhabi this morning. Authorities here say they are facing sustained barrages now and in the north as well, Israel also sending its forces deeper into Lebanon to combat Hezbollah. But as you've just flagged, the big factor for markets right now is the de facto closure of the Strait of Hormuz. Iranian state media now threatening to target any vessel attempting that transit. The Pentagon says the lane is open, but the insurance market is saying otherwise. This morning we are seeing war risk premiums on the rise. Now both Brent and WTI moving on up in tandem and in the gas markets as well. Qatar Energy, this is one of the world's largest LNG suppliers, is completely offline due to a drone strike. That is 20% of the world's LNG supply gone in 4, 48 hours. So the situation here is evolving fast and behind closed doors. Bloomberg also reporting today that the UAE and Qatar are pressuring Washington now for a diplomatic off ramp. But Washington also signalling in the last few hours that this Operation Epic Fury could last a month or more. So the bottom line here is Wall street is looking at $80, Brent, and ultimately wondering how soon all of this starts to impact the global economy. Kelly?

Unnamed Male Host/Commentator (4:44)

Yeah, and what, Dan, when we look at the oil price, obviously we're following the US Benchmark wti, but Brent prices are even higher and of course natural gas prices spiking yesterday. And I don't know if there's any relief on that front yet because it depends a little bit on what happens with that Qatari producer.

Dan Murphy (5:01)

Exactly. And we're seeing a risk premium in both Brent and WTI right now. Of course, at the weekend we saw OPEC moving to ultimately try and calm fears here, adding more barrels back into the market. But you have to really wonder here. When we have the Strait of Hormuz, that critical oil choke point, essentially offline and now the Iranians directly targeting Gulf energy infrastructure, including in Saudi Arabia, the UAE and also elsewhere, then the real risk here is what could be an oil price shock that the market is looking out for. And remember, as well, here in the region, you know, the Gulf home to some of the world's most sophisticated sovereign capital as well. Between the PIF in Riyadh and Adia and Mobile in Abu Dhabi and the QA in Doha, we're talking about trillions of dollars in capital. Some of the world's hottest venture and P players. Leaders here obviously really concerned about what's going to happen next because the story here is much more than oil. Leaders here want to build a safe haven for people and for capital, not necessarily get involved in another long running war in their own backyard. So they're watching not just what's happening in the markets but also the part of me the direction of travel for this conflict which ultimately has a pretty big question mark at the other end right now. Kelly.

Unnamed Male Host/Commentator (6:22)

Yeah, Dan, we appreciate it and you know, we'll circle back but I'm glad you highlighted once again what's going on there. I mean those nat gas prices spiking down up 40% 83 on Britain now as you said as they're directly targeting Gulf infrastructure for now. Dan, thanks.

Joe Kernan (6:35)

In the average retail price of gasoline at the pump in the US crossing $3 a share or a gallon for the things a share for the first time since November. We always reference gas buddy. See I would change that name. You know we're talking about Iraq, Iran and all these important. Gas buddy. Gas buddy. Look buddy.

Unnamed Male Host/Commentator (6:56)

Let's see what got triple A the fuel price gate.

Joe Kernan (6:58)

I'm sure it's you know, gas buddy. Gas buddy. Data shows they had already been rising for weeks as refiners transition to summer grade fuel. Secretary of State Marco Rubio says the US Will work to mitigate rising energy prices. He told reporter Treasury Secretary Scott Bessant and Energy Secretary Chris Wright would be unveiling some plans today. Yes, and we knew that going in would be a factor. And so we have a program in place that will begin to be implemented by Secretary Wright. Secretary Besant, we talked about it last night again about this program, we talked this morning and starting tomorrow you will see us rolling out those phases to try to mitigate against that. President Trump is scheduled to meet with the two secretaries early this afternoon.

Unnamed Male Host/Commentator (7:40)

It's the same thing for what it's worth on AAA 310 the all time high $5 a gallon June of 2022. I don't think we're there yet. Meantime, JPMorgan CEO Jamie Dimon says he sympathizes with President Trump on over the closing of Trump's bank accounts. But he doesn't think the president's lawsuit against J.P. morgan holds water? Here's what he told Leslie Picker yesterday on I've heard the show the exchange. Take a listen.

Joe Kernan (8:07)

We were quite clear.

Senator Tim Kaine (8:08)

I respect the president's right to sue the company. We respect our right to defend ourselves. That's why you have courts. The case has no merit. It's going to have years of discovery

Joe Kernan (8:19)

type of thing and we'll see what happens.

Senator Tim Kaine (8:22)

But I agree with them. They have the right to be angry. I'd be angry too. Like why is a bank allowed to do that?

Unnamed Male Host/Commentator (8:30)

And Dimon said banks are sometimes forced to close accounts of people in order to comply with regulators who could punish companies for bringing reputational risk to lenders.

Joe Kernan (8:39)

It was all all the Fed and the woke Fed that when some people really criticize the Fed and Jay Powell's purview, it has a lot to do with things like climate regulations. It seeped into what doesn't seem like

Unnamed Male Host/Commentator (8:57)

yeah, that was anything but on questions of so if the whole banking system currently has this whole know your customer thing. Right.

Joe Kernan (9:04)

This is their whole thing with awoke dei.

Unnamed Male Host/Commentator (9:09)

My question would be is the issue that you must know your customer in order to for instance, an Epstein kind of situation? For for instance. Okay, but how do you make a law to ensure that you're not shutting people down simply for political speech? I mean. Yeah, you know, some you do, some you.

Joe Kernan (9:27)

Well, it gives them cover to do a lot of things that probably, as Jamie Dimon said it, he wouldn't. If it was done to him, he wouldn't like it either.

Unnamed Male Host/Commentator (9:35)

It's almost like there needs to be some sort of tribunal or place you go to to say, you know, hey, the because this all seems like it's happening kind of in the shadows. People's accounts are getting closed. But then, you know, you're trying to prevent really bad kind of stuff from happening. I don't know.

Joe Kernan (9:52)

OpenAI CEO Sam Altman says he thinks his company shouldn't have rushed its recent deal with the Defense Department. In a post on X, Altman said, I think it just looked opportunistic and sloppy. Good learning experience for me as we face higher stakes decisions in the future. The post follows news late last week that OpenAI had reached a deal with the Pentagon on using the company's AI hours after President Trump directed federal agencies to stop using rival company Anthropic Tools. A big piece in the front page of the Journal today about the interaction between hegseth the what do we call it? Yesterday we kept calling him Defense secretaries, I think.

Unnamed Male Host/Commentator (10:36)

What does he call him? They call him War Secretary. All right. That's the title.

Joe Kernan (10:39)

Maybe they knew because it was. They changed it. A couple of months in his ex post, Altman said OpenAI was working with the Pentagon to amend its agreement, including adding language saying the company's AI technology wouldn't be used for domestic spying on Americans. He also said he didn't think that the government should have labeled Anthropic a supply chain risk. It's unclear why the Defense Department appears to have agreed that to red lines from OpenAI similar to those that Anthropic was seeking. And it has a lot to do with, I think, a culture clash.

Unnamed Male Host/Commentator (11:14)

The only thing I'll say about this, you know, it sounds like it was something that was done months or years ago. I mean, this was a few days ago. If there's an issue to be resolved, that should be resolved.

Joe Kernan (11:21)

Right?

Unnamed Male Host/Commentator (11:22)

I mean, it's one thing to talk about it as a tone and as a PR issue, but if there's an outstanding question about what's going on, there's still plenty of time to resolve that. Meantime, Anthropic's Claude chat bot has surged to the top of Apple's free app charts since its public fallout with the Defense Department, War Department, whatever it's called. Now, the company now says it's bringing a memory feature to its free tier of service, so non paying users Claude will be able to remember past conversations and giving answers to questions. That feature is previously only available to paying Anthropic subscribers. Anthropic will also make it easier to import conversation histories from other chat bots, certainly. I mean, again, you see that Katy Perry had a tweet or a message sort of saying that she's supporting Anthropic. That's all these celebrities are getting behind it, helping it, you know, big galvanizing public support, getting it to the top of the App store. So there they go.

Joe Kernan (12:12)

Probably not that surprising. If you read the. It was. A lot of it was about autonomous weaponry. And Hegseth said, look, I'm not going to agree to anything. It could make it less likely that our fighting men and women have the greatest ability to kill the enemy. And you could see, I mean, we've been through this. We've been through a whole segment of the population doesn't want any defense contractors. There's, there's.

Unnamed Male Host/Commentator (12:39)

Well, it's coming back to the fore

Joe Kernan (12:40)

because aren't there shareholder services that don't want any investment in defense contracts?

Unnamed Male Host/Commentator (12:45)

This was a big fight with the Google and everyone else. A decade ago, huge fights over whether they were doing business with the government.

Joe Kernan (12:52)

We don't need a defense industry.

Unnamed Male Host/Commentator (12:54)

Then it was a pivot. Then Palantir, the cool kids were at the front of the line with their military contracts. And now there's kind of. I don't know.

Joe Kernan (13:00)

I don't know if it's something. I mean, there's protests on college campuses about a place where, you know, the people there are murdering. People like that are at the protest when Iran happens. Crickets. Not a single person out in the game. People are. Our youth are getting some strange indoctrination and we now wonder why.

Unnamed Male Host/Commentator (13:22)

Claude will solve it. They talked to Claude about that.

Joe Kernan (13:24)

Who?

Unnamed Male Host/Commentator (13:25)

Claude?

Joe Kernan (13:25)

I don't know.

Unnamed Male Host/Commentator (13:26)

Anthropics too.

Kelly Evans (13:29)

Cheese will be next. Coming up on Squawk Pod, Democratic Senator Tim Kaine on his opposition to the US And Israeli strikes on Iran and his call to return to diplomacy to wage offensive war.

Senator Tim Kaine (13:43)

The framers of the Constitution were absolutely plain. It's been understood since 1787. You gotta come to Congress.

Podcast Narrator (13:53)

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com MarketUpdatePodcast or find Schwab Market Update wherever you get your podcasts.

Nikki Kristoff (14:22)

Not every sale happens at the register before AT&T business Wireless checking out customers on our mobile POS systems took too long. Basically a staring contest where everyone loses. It's crazy what people will say during an awkward silence. Now transactions are done before the silence takes hold. That means I can focus on the task at hand and make an extra sail or two. Sometimes I do miss the bonding time.

Podcast Narrator (14:46)

Sometimes AT&T business Wireless Connecting changes everything

Nikki Kristoff (14:52)

Exhausted from spending half your night cooking? Factor Eliminates the stress with chef crafted, fully prepared meals delivered to your door fresh, never frozen, ready in two minutes. Factor delivers zero cooking, zero stress. Just heat and eat over 100 dietitian approved options weekly with no refined sugars, artificial sweeteners or refined seed oils. Right now go to FactorMeals.com easy50off and use code easy50OFF for 50% off and free breakfast for a year. That's FactorMeals.com easy50OFF and use code easy50OFF

Kelly Evans (15:27)

welcome back. You're listening to Squawk Pod Today with Joe Kernan and Kelly Evans, here's Joe.

Joe Kernan (15:34)

Several Democrats have been voicing opposition to the strikes on Iran. Virginia Senator Tim Kaine writing in a Wall Street Journal op ed that it's unwise and unconstitutional and is calling for diplomacy instead. Senator Kaine joins us now this morning. And Senator, it's good to see you. Thanks for joining us.

Senator Tim Kaine (15:52)

You bet, Joe.

Joe Kernan (15:53)

We have had lots of discussions and I think your side of things has been, has been well represented in terms of remember the expression if you break it, you own it and it could be messy, it could be difficult. Dan Sonor asked me, whenever we have someone that has your viewpoint to ask a do you at least acknowledge that it's a good thing for the world that Khomeini is gone? And two, just mind boggling admiration for the US Forces and the Israeli forces in being able to keep carry out what they've done so far.

Senator Tim Kaine (16:32)

Yeah, yeah, Joe, those are easy questions. No sane person will miss the Ayatollah. And second, of course I admire the troops. I got a kid in the military. I represent the most pro military state in the United States. I'm on the Armed Services Committee. They serve wonderfully, just as they did in Iraq, just as they did in Afghanistan, just as they did in Vietnam. They were betrayed by poor civilian leadership in those instances. And that's why I believe we should not go to war illegally in violation of the Constitution. And no shortcuts, no easy pass lanes. Let's do it the way we're supposed to with the debate and vote in Congress where the reason is put before the American public and we decide whether that reason is sufficient to justify sending our sons and daughters to potentially lose their lives.

Joe Kernan (17:17)

Right, I understand that, Senator, and I know, I think you're on Twitter, you must have seen that some of the things that are circulated. How many times President Obama took military action without a declaration? When did we last have a declaration of war? I think it was, well, if you

Senator Tim Kaine (17:38)

use declarations for our authorizations of military force, which are essentially the same. When President Obama wanted to wage military action against Syria for using chemical weapons, I blocked him. I said you can't do that without Congress. I insisted that he bring it to Congress. When he wanted to do a nuclear deal with Iran, giving sanctions relief from congressional sanctions without coming to Congress, I blocked him. It is the case that President Obama struck targets pursuant to the 911 authorization where Congress had voted to allow presidents to take action against terrorist groups that was authorized action. And it's also the case that any president has the right to take action against incoming attacks. So President Biden using US Navy assets to fire back against the Houthis who were firing on our ships in the Red Sea. Any president can take self defense, but to wage offensive war. The framers of the Constitution were absolutely plain. It's been understood since 1787 you gotta come to Congress. That doesn't mean every president has and it certainly doesn't mean that every Congress has guarded that prerogative. I've always pledged that I would.

Joe Kernan (18:51)

Right, right. Okay. But it's almost a moot point. He's at least has probably 60 days under certain provisions to carry things out. And if we did go your route, Senator, what's happened over the past three days is impossible. It could never happen. Even informing Congress at times about certain raids or actions that have to be done, that's not in the real world. It's not possible. So in the real world. But is this going to be a good. But is it possible down the road you'll look back and say this was a transformative move. The world is a better place. Iran is. The Middle east is a better place. So many. And I'm not saying it'll get there. It's a long. Probably be a long road and years and it could get messy. It could be Iraq. I'm not saying. But is. Will you look back on it and say that took a lot of courage for the President to do that and it was the right thing. Could that ever happen?

Senator Tim Kaine (19:54)

Let me just underline the fact that I made an argument about the Constitution and you said it was a moot point. I don't believe that. I don't believe the Constitution is a minor matter or a moot point.

Joe Kernan (20:05)

I said it. It's already happened. I said it's already happened. And he's got 60 days. And I don't think.

Senator Tim Kaine (20:11)

No, no. If the War Powers Resolution passes, hostility stop. That's what the law says. And I'm asking every Senator to do what you should ask them to do. Go on the record and declare, are you for this or against this? Anybody who's elected to a job like this should not hide under their desk and say, oh, you know, even though the Constitution says it's for Congress, let's let the President do it and try to evade accountability. We got to be accountable. Service members have lost their lives. Families are being notified today and they are grieving. Others have been injured. More of that will happen. You're right, Joe. This could end up working out so that there's a new chapter in Iran and US Casualties are minimized. Or it could end up like Iraq and Afghanistan, with 14,000American service members and contractors dead, 65,000 injured. Trillions of dollars spent. We don't know today. But consequences are possibly so massive. That's why the framers wanted Congress involved.

Joe Kernan (21:10)

When I said moot, I mean, this would never. Would never happen. We'd be Talking about it 20 years from now if we went your route. And it would never happen. And it could have. It could be what we needed. They can't get a nuclear weapon. We cannot. You know, I'm sure you agree with that.

Senator Tim Kaine (21:25)

Yeah, let. Let me focus on that. Can't get a nuclear weapon. We had a deal under which they were blocked from getting a nuclear weapon. The first paragraph said Iran reaffirms that it will never.

Joe Kernan (21:36)

That ran out to acquire or develop.

Senator Tim Kaine (21:39)

No, the first paragraph said they will never acquire or develop or purchase a nuclear weapon. Donald Trump tore it up. He tore it up, alienating our allies, pushing our erstwhile adversaries, Russia and China away and allowing Iran to sprint. Then Donald Trump obliterated their program. According to him, six months ago, they were not on a path to getting a nuclear weapon that raised any imminent threat to the United States, suggesting the need for this invasion.

Joe Kernan (22:06)

I mean, how many times are we going to negotiate? Another administration comes in. Iran, meanwhile, is like smiling and laughing as all these. As the pallets of cash arrive under some administrations and building. I think at some point the talking is over. That listening to nodding and John Kerry, you know, pretending that there's a strong enforceable agreement. Sooner or later, you just say, you know what? We need to make sure this doesn't happen for the good of the world, and stop the negotiating and allowing them to lie, dissemble, continue to kill Americans and cause trouble in the entire area.

Senator Tim Kaine (22:47)

Joe, you're misrepresenting it. There was a deal. And when Donald Trump wanted to tear up the diplomatic deal, he asked his Secretary of Defense, Jim Mattis, his Secretary of State, Rex Tillerson. They said, stay in the deal because it's working. Donald Trump abandoned diplomacy, and now our service members are dying as result. Iran has shown that it will reach a deal to block its nuclear path. Donald Trump prefers war, and he doesn't want to come to Congress to ask permission. And so it's. It is Venezuela, it's the Pacific, it's Caribbean, it's Nigeria, it's Iran. Hey, maybe it's Greenland, Cuba, Mexico, Colombia. Next we've got. He may not have.

Unnamed Male Host/Commentator (23:24)

I mean, we're talking about the Just Interesting coda here. Just quickly on this. The Wall Street Journal thinks that, you know, opinion section that the War Powers act is unconstitutional. You know, 1973 Vietnam War. So what would ever happen if it struck down? I mean, is it possible that these actions are more in line with a pre1973 view of things?

Senator Tim Kaine (23:50)

You know, it's a good question. I mean, it's 50 years old. It's not been struck down. So, you know, the Wall Street Journal doesn't get to declare what the law of the United States is. I take an oath to uphold the Constitution, to support and defend it. It says only Congress can initiate war. A president can defend against ongoing attack without coming to Congress for permission. But the Constitution is clear about this, and that is the oath that I take. And as you guys know, the Constitution has some phrases that are incredibly specific. You have to be 35 to be president has other phrases that are vague due process of law. The war powers part of the Constitution is among the most specific. And the constitutional notes about the convention make very plain exactly what they were trying to do. They wanted to restrain an executive's ability to go to war. And at the time, the executive was George Washington. They loved George Washington. They just felt like war was too big a deal to leave in the hands of any one person.

Joe Kernan (24:50)

We won't even get into any of the unconstitutional things that maybe certain parties overlook at different points in time.

Senator Tim Kaine (25:00)

And we won't get into rising energy prices and the fact that the President

Joe Kernan (25:03)

isn't focused on, you know, what I'm talking about, not enforcing federal laws and open border. I mean, there's a lot of both sides are at fault in viewing the Constitution through a different prism depending on what we're doing.

Senator Tim Kaine (25:15)

So let's just follow it. Let's just follow it.

Joe Kernan (25:18)

Okay, well, let's all live by it then. Amen. Can't go back in time, but. All right. Senator Kaine, very good to have you on this morning.

Senator Tim Kaine (25:25)

Thank you, guys. Take care.

Joe Kernan (25:26)

Okay,

Kelly Evans (25:29)

next on Squawk Pod, AI is taking a bigger place on the battlefield. We'll get into how the technology is shaping the current conflict with Iran with industry insider Nikki Kristoff right after this.

Nikki Kristoff (25:42)

With the AI acceleration, as it becomes more powerful and more capable, there is genuine fear that they may not be able to control their own model models.

Podcast Narrator (25:51)

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Landsford for this information packed daily market Preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions and key results and statistics that may impact your trading. Download the latest episode and subscribe@schwab.com Market Update podcast or find Schwab Market Update. Wherever you get your podcasts.

Joe Kernan (26:20)

Lifelock how can I help?

Nikki Kristoff (26:22)

The IRS said I filed my return,

Joe Kernan (26:24)

but I haven't 1 in 4 taxpaying

Podcast Narrator (26:26)

Americans has paid the price of identity fraud.

Nikki Kristoff (26:28)

What do I do?

Joe Kernan (26:29)

My refund though.

Unnamed Male Host/Commentator (26:30)

I'm freaking out.

Dan Murphy (26:31)

Don't worry.

Joe Kernan (26:31)

I can fix this.

Podcast Narrator (26:32)

LifeLock fixes identity theft guaranteed and gets your money back with up to $3 million in coverage.

Nikki Kristoff (26:37)

I'm so relieved. No problem.

Joe Kernan (26:39)

I'll be with you every step of the way. One in four was a fraud paying American. Not anymore.

Podcast Narrator (26:45)

Save up to 40% your first year. Visit lifelock.com Specialoffer terms apply why have

Nikki Kristoff (26:50)

we asked our contractor we found on Angie.com to be our kid's legal guardian? Because he took such good care when redoing our basement that we knew we could trust him to care for our kids.

Joe Kernan (26:59)

We only met a month ago, Angie,

Podcast Narrator (27:01)

the one you trust to find the ones you trust. Find pros for all your home projects@angie.com

Kelly Evans (27:09)

this is Squawk Pod Standby Joe his mic.

Joe Kernan (27:12)

Q. You're watching Squawk Box on cnbc. I'm Joe Kernan along with Kelly Evans. Becky Nander are off today.

Unnamed Male Host/Commentator (27:19)

The US Strikes on Iran mark a new era for artificial intelligence and modern warfare. Joining us now is Nikki Kristof. Kristof and co CEO Nikki, it's good to see you. And of course this, this sort of whole thing continues between Anthropic and Open Air and the Pentagon. But US Forces did use AI tools, we understand, to carry out the strikes. You know, as we think about this as a significant aid on the battlefield. After all, isn't this what we should expect China and other adversaries to be doing?

Nikki Kristoff (27:48)

We absolutely should expect them to be using AI. It is essentially going to be the next phase of weaponry. So we need to be using it, China needs to be using it. And personally, I feel that the US Military needs the very best AI possible. And right now, Anthropic does have an extraordinary model.

Unnamed Male Host/Commentator (28:05)

So Sam Altman has apologized on X, saying the company shouldn't have rushed its recent deal with the Department of Defense. And he outlined revisions to the agreement. He said the company will amend the contract to include new language regarding its principles on topics like surveillance, including wording, to clarify that the AI system shall not be intentionally used for domestic surveillance of US Persons and Nationals, adding that they need to limit the limitation should prohibit deliberate tracking, surveillance or monitoring of US Persons, so forth. So it's obvious, and again, the Wall Street Journal talking about this this morning, there's bad, personal bad blood a little bit between the anthropic CEO and Pete Hegseth. OpenAI is trying, it sounds like, to strike a better tone to the relationship while still drawing a red line about surveillance on US Nationals. How are, how should we read this in terms of the limitations these companies are really putting on the Defense or the War Department?

Nikki Kristoff (29:05)

Well, I think we need to remember that these companies have evolving terms and conditions and usage policies. And it's not because they haven't thought about these things. It's because the tech is moving so fast. So you mentioned a contract. This whole battle is essentially coming down to something as mundane as contract languages. Like did they include the clause, yes, the Pentagon must comply with our evolving usage policies. That's anthropic. OpenAI, as Sam has indicated, is trying to figure out their contact clauses on the fly. And then you have the Pentagon saying, well, we forgot to put in, we want to use it for any lawful use. So it's as mundane as a contract issue. But it's also much bigger than that because we're talking about theoretical edge cases and potential uses of the technology for things that are either not legal, but even more importantly, not expensive, explicitly illegal.

Joe Kernan (29:53)

Nikki, the. The Journal describes a culture clash between the Pentagon and Anthropic. And this article says it really comes down to a disagreement about AI controlled autonomous weapons.

Nikki Kristoff (30:12)

Now it's A.B.S. sorry, go ahead.

Joe Kernan (30:15)

It's just that I look at a lot of tech founders and you look at the way social media initially came out or even Twitter and the stuff they were allowed to print, even sometimes on Google. It has to be policed constantly to not get the political ideology of the founders. Too much part of as too much part of the product for everyone. Isn't it possible that the same thing, do you think in China that the people that are trying to develop autonomous weapons, do they have to worry that the CEO of some company over there is not going to like that? It's what is it too deadly? Why would you not want AI to be involved in autonomous weaponry? Why would you want to tie the hands of Pete Hegseth or the United States and our soldiers by not being able to have that? And can you imagine in China if the CEO said, oh no, we can't have that.

Nikki Kristoff (31:14)

Listen, I take your point that China is very unlikely to put safeguards onto their technology when it comes to war. Although they make a, they're, you know, passing policies on safety right now on AI. But I take your point that they're probably not going to. But you asked why don't we want fully autonomous systems, weapon systems right now it's because of civilian casualties. It's because the tech is not ready for that. It's not reliable yet for that. There may be a moment when that does work and makes us more lethal. But it could also cause friendly fire incidents. Just not ready.

Joe Kernan (31:45)

You'd have to put a provision in that, in the language that Anthropic was using. Could you amend it to that? That would be satisfactory to the Defense Department as soon as you get it. I mean, I don't know if we want, you know, self driving autonomous cars yet. Well, so this is, that doesn't mean you're not allowed to do it or order to eventually develop it once it's ready.

Nikki Kristoff (32:07)

You have just hit on exactly the issue. So there's two problems. One is, is the tech ready? And you said this about cars. I don't think most Americans are completely comfortable with fully autonomous passenger cars right now. The tech isn't ready. And if that's not the case, why would we want fully autonomous weapons systems that can actually hurt our troops or our allies or civilians? Right. So I think that we're dealing with two things. One is the tech. The second is the law. There is no federal law that says thou shalt not kill people with a robot. Without a human in the loop, it doesn't exist. So when the Pentagon says, hey, we want to use all lawful uses, they're not talking about the things that aren't yet unlawful. And I think right now most people think we should have a human in the loop. Whether China does it or not, we need to do it in a world class way, in my opinion. And that means giving us a beat to get the technology ready. But you're right, it's also a contract dispute.

Unnamed Male Host/Commentator (32:59)

But Nikki, just to be clear, when we're talking about the readiness, whose determination is that? Are you saying that the onus is on the government or that the onus is on the companies supplying this technology to make sure? I'm just, you know, it's, this is all new and there's going to be a lot of uses and applications of it that are going to be novel and are going to take some trial and error. And who's responsible for making sure that that is appropriate? I would have to imagine it's the people who are using the technology?

Nikki Kristoff (33:27)

Well, this is a fascinating question. Right, you mentioned earlier, surveillance. It is illegal to target American citizens with surveillance by our intelligence apparatus. But the incidental collection is enormous. When we're talking about undersea cables, when we're talking about data brokers. Right. The world is changing, the tech is changing. So we may not be targeted as citizens, but the incidental collection is getting huge. And what AI does is, is allows the government to process that. So what we really need is Congress, who I'm about a football field away from, to get involved and set the parameters. It should neither be the Department of War nor should it be private companies. It should really be Congress saying, these are the limits on what we're using this for right now. Now, you and I both know they're not going to do that anytime soon. Which leads us to this conundrum where you have to decide should it be a private company or should it be the Pentagon? Personally, in my opinion, if a company says, we're not ready for this, let's set aside, you know, Joe, you mentioned the politics of the founders. Set it aside and just look at the tech itself. They're saying it's just not capable yet to do it reliably.

Joe Kernan (34:29)

I'm reading. You know, I love science fiction. The Three Laws of Robotics from Asimov. The first one is just not possible to live by. A robot may not injure a human. Human being. Well, robots, we got to throw that one out, right?

Nikki Kristoff (34:47)

We've already passed that.

Joe Kernan (34:48)

We passed that. So we're not going to do the. And these, these were pretty good. A robot Two, a robot must obey orders. And three, a robot must protect its own existence as long as such protection doesn't conflict with one or two. So. Yeah, well, number two. Number one is not feasible.

Unnamed Male Host/Commentator (35:04)

Protect its own existence.

Joe Kernan (35:05)

Yeah, protect it. As long as that doesn't conflict with the first or second and the second one, it must obey orders, unless that conflicts with the first law, which we already threw out. So none of them are any good.

Nikki Kristoff (35:19)

Well, the second one, though is a good point, right? That the robot must follow instructions. And in the industry, I know we can talk about the politics of the founders and the different labs and how they. Their partisan leanings, but it's not as relevant as how all of them are thinking, which are these edge cases. And there is fear in the industry. I mean, I've been in this industry for 18 years. With the acceleration, as it becomes more powerful and more capable, there is genuine fear that they may not be able to control their Own models. Now that's an edge case. And I don't think we all wake up thinking about that. But they do.

Joe Kernan (35:50)

Yeah, I mean, I think about the singularity and Kurzweil. I think about all kinds of things. Do you ever think when. When machines know that much, we have no idea what the future looks like when they get to. I think the singularity was a billion times the sum total of all.

Unnamed Male Host/Commentator (36:07)

So that's what.

Joe Kernan (36:07)

That's why you just love all this new stuff. Do I look like someone? I don't shop online.

Dan Murphy (36:14)

Okay.

Joe Kernan (36:14)

So, no, I don't do a lot. There was one other thing I was thinking about. I can't remember what it was, Nikki, but it was interesting to have you. Oh, I know what it was. Do you see what Larry Ellison said? That they're all the same. All these AI models are the same because they all scrape the same Reddit crap. They all scrape wherever they get everything. And what really will set something apart is private information, which Oracle, I guess has. And I have noticed a lot of gigo for whatever chatbot I use. They find something out in a normal way that's wrong and they tell me it's true and it's not. It's just garbage in, garbage out still. Right.

Nikki Kristoff (36:56)

So hallucinations are definitely, definitely an issue. But I'd like to take. I don't agree with Larry Ellison. They are not the same in the sense that everybody in the industry knows there are better models and there are weaker models. And none of this would be an issue if Claude was not an exceptional world class model of AI. This military wants to use the best model. And right now that lab is doing an incredible job with their model. So they're not all equal. I mean, Larry Ellison is right that they're going to collect different data over time. But in this moment, as we are in the middle of strikes on Iran, the government wants to use the best. Claude is the best. And so the question is, do they need Anthropic more than Anthropic needs them as a.

Joe Kernan (37:37)

If they want to definitely be patriotic and try and help because it's a dangerous world, do you expect some type of compromise eventually? Can he come back to the table and vote Amodi?

Nikki Kristoff (37:48)

There is a pattern in this town of people getting into a negotiation with the administration. When the administration gets upset about the outcome, they wake up and seek revenge. So we heard about the supply chain risk, which is just total bluster. I do believe. I predict they will come back to the table with a narrower set of contract clauses, there'll be a win claimed for the Pentagon and we will continue to be able to use Anthropic because it is embedded across our national security apparatus. We don't want to offload the best of the best. And so I think they will reach a compromise.

Unnamed Male Host/Commentator (38:22)

Nikki, thanks. Really appreciate your time this morning.

Nikki Kristoff (38:25)

Yeah, thanks for having me.

Unnamed Male Host/Commentator (38:26)

Nikki Kristof,

Kelly Evans (38:29)

that's the pod for today. Thanks for listening. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin. We're on TV. Tune in weekday morning on CNBC at 6 Eastern or to get the best takes from our TV show right into your ears. Follow Squawkpod wherever you get your podcasts. We'll meet you back here tomorrow.

Senator Tim Kaine (38:51)

We are clear. Thanks, guys.

Nikki Kristoff (39:03)

Why have we asked our contractor we found on Angie.com to be our kids legal guardian? Because he took such good care when redoing our basement that we knew we could trust him to care for our kids.

Joe Kernan (39:12)

We only met a month ago.

Podcast Narrator (39:13)

Angie, the one you trust to find the ones you trust. Find pros for all your home projects at Angie Combination.