The Exchanges

Q Before you go on, explain, just explain the, what, what this off balance sheet situation is. Because I think it's important to talk about the mechanisms that are involved here. So instead of spending the cash, what do they do?

A They, you know, you work with Blue Owl is kind of one of the famous ones, and the external investor, and they're going to actually set up this financing vehicle, and then they're going to actually raise the money in potentially conjunction with you, but it's not going to live on your balance sheet, this new asset that you're creating. You're instead going to invest some amount of cash or NVIDIA or all these others. There's all these other very creative ways that they're going to be using chips as collateral to actually Raise this money. But the main thing is when you're reporting earnings, when you're actually showing investors the state of your business, these data centers do not live there directly. So it's a massive investment that you've managed to creatively push off your balance sheet and move and spread that risk to other people or other, other pools of capital. And I think, you know, we, we've, there's been endless talk about what, how this mirrors a lot of And I think that central point of not reflecting the risk of this investment you're making or gonna be depending on, on your kind of traditional financials, is how this entire spending spree is taking place.

AI assessment note: “they're going to actually set up this financing vehicle, and then they're going to actually raise the money”

Q Valley. I can't say with conviction that it's going to happen. It would probably be good, uh, if we were able to abstract screens away to some extent because we spend so much time looking at them. But it's interesting that this is coming again from Johnny Ive, effectively the guy that built the iPhone was Steve Jobs. Um, do you think that this intention has a chance of working?

A Yes, a hundred percent. I think it will. I think, and I'm admittedly, it's self-interested because I've been waiting for this, but to me, I've been trying to do this for a long time. Like, I look at the Apple Watch as another form factor that weans me off my screen, that I can mentally process a notification, and that if it's important, maybe then I'll pull out my phone. I look at the Meadow Ray-Bans. I look at my AirPods. These are all things that Have me interacting with some kind of technology, potentially, without looking at a screen. And my, my, my belief is, 10 to 15 years from now, when people see, like, videos of people walking around the streets looking down at their phone, it's gonna be like when you see people smoking cigarettes in a restaurant. Like, people, like, like kids, kids 30 years from now will just be like, wait, People did, like, smoking in an airplane. I mean, it's so bananas that that happened, and people will be like, wait, you guys just walked around looking down at this screen all day? So I think it's gonna be figured out, and if, again, if anyone can, it's Johnny and Sam. Johnny and Sam.

AI assessment note: “Yes, a hundred percent. I think it will.”

Q the compute to people using IP he doesn't own. Which is the other side of the, you know, the praise he's been getting, right? The praise he had been getting by being the company that had locked down OpenAI and invested in them and, and given them, um, and had rights to their IP. So what did you think of the fact that Satya is framing this this way internally?

A Is he wrong? Do you think he's wrong? Cause I actually think my favorite part of this is I feel there's some tech leaders. You get a kind of, we all know what they're thinking in general, and then there's those who are just so savvy that they keep it close to the chest. And this is one of the first times I think I'm getting a genuine look as to how Satya Nadella really thinks. And again, he was prescient on this. I mean, he recognized exactly Where they were, where the shortcoming was that, and I love that better to be an investor and not even take all this execution risk. So he recognized this idea of like the more partnership element as opposed to just the pure investor element was a major risk to the direction Microsoft was going. And I think we're going to get more into where Microsoft is today in just a bit, but he saw it coming. Satya Satya is king.

AI assessment note: “he was prescient on this. I mean, he recognized exactly Where they were”

Q don't think they've confirmed that number is a good bet that we will make the money. Although the money, of course, you know, it would be funny if they also had another chart, what they paid for that compute, uh, because the money is certainly still a drop in the bucket compared to the compute they're buying. So what do you think about this? Obviously it's time to the fundraise.

A No, no, I, I agree, because it was, I think it was an incredibly well-crafted corporate communication, because it laid out this really clear story, like, one-to-one ratio of growth in compute to revenue in terms of, like, nine xing, and, and on face, I agree, it sounds nice, it sounds really good, it's saying, like, we're actually scaling compute in parallel with revenue, but you're right, it's, We know they're losing ungodly amounts of money. Even this week we saw Anthropic, I think it was 5.8 billion. They're on pace to lose 5.6 billion last last year is now confirmed is what was lost. So like, and we, everyone knows this and has been talking about it, that these companies have been burning ungodly amounts of cash. Um, so when you dig in one level deeper, I think it doesn't really answer the question, but It's still, I thought, was a pretty, kind of, craftily put together argument of why they actually are ok, but, yeah, it doesn't, it still doesn't add up overall.

AI assessment note: “I thought, was a pretty, kind of, craftily put together argument”

Q start to see this crazy build out that open AI, Oracle and others are driving. That the numbers really only make sense if you get to AGI, if you get AI that cure cancer, and so much of that is speculative, and that is where we might be getting into a danger zone. So Ranjan, I'm just going to turn it over to you. What do you think about that?

A Yeah, I'm really glad that he's making this distinction between those who are kind of just pushing the idea that it's time to monetize these investments and drive a world-changing technology evolution versus this debt-fueled second push. I've been looking at this a lot over the last couple of weeks around the Oracle deal, the AMD deal, all these deals are focused on CapEx and not product. Again, I mean, there's been some incredible Moments in product over the last couple of weeks, SOAR included, which we're going to talk about, and I've been waiting to talk to you again. But I think overall, this idea that, you know, it has to be AGI, it has to be something that justifies all of this capex, you know, investment, is what Oracle, Meta, CoreWeave, all these companies are betting. And, and there's been absolutely nothing That shows us that we're actually headed in this direction, so it starts to feel more uncertain and irrational. Nothing's stopping it right now, but I think it's a good thing that we're talking about it.

AI assessment note: “there's been absolutely nothing That shows us that we're actually headed in this direction”

Q you, you don't really have many places to go until, uh, after you tap the sovereign wealth fund. So it looks like he's doing that. So that's one question. Are they going to be able to keep fundraising? And the other question is, do these, do the size of these rounds put expectations on this company that will never be able to be met? What do you think, Ron John?

A I don't think the size is going to be any more of an issue than it already has. Again, like, fifty billion at a 800 billion-ish valuation. I mean, for the amount of money they have been raising, this almost feels like a not unreasonable amount of money. I think more importantly, though, is what you were saying in terms of, like, really focused on the Middle East and sovereign wealth funds. As you said, that's always been a very specific type Of fundraising strategy, um, you know, when it's, when you've tapped out of a lot of other sources. So on that side, I think it can be indicative of, is there, or at least raises the question, is there fatigue among all of those early investors or more traditional sources of funding? But by the same token, like, I mean, MGX and all these other funds have been really focused on modernizing the economies and overall strategies and Bringing tech to the Middle East. So I think, uh, I think on that side, it's, it's not unexpected at all. What, what do you think signals?

AI assessment note: “I don't think the size is going to be any more of an issue”

Q course, like, AWS's lead is shrinking, but AWS is still, you know, far and away the leading cloud provider. They're doing great. They're underpinning Amazon's entire valuation. So having the lead matters. Uh, but It's, it's far from the, like, one horse game and consumer that it was not long ago. So what do you think that means as they try to IPO? Is that going to cloud their story?

A Oh, definitely. Which is why again, I think, and I think what were we saying last week before it's, is it the foundation model or the product? And then we introduced, is it actually the business model? They have to figure something out because it's, uh, like again, at a, from a user perspective, the switching costs are so low in any of these chatbots so far. Now everyone is talking about memory and context, and that's going to be the moat. But right now, there is no moat. Like, from an actual user experience, just consumer-grade chat AI is all pretty good. Like, I mean, people have different uses for different chatbots if you're an avid user, otherwise maybe, and as you said, Google has distribution, so I think user perspective is dangerous, so they have to show we can make a lot of money doing drug development and pharmaceutical development and Uh, launching their own, uh, I think they're, it was rumored they're gonna be launching an AirPods type device. We're gonna get into the pin from Apple in a bit, but did you see that, or?

AI assessment note: “Oh, definitely. Which is why again, I think”

Q I read these and I'm like, I know that you used ChatGPT to write that. And I think this is something that's becoming, uh, increasingly common across all bigness, all business, uh, communication, uh, and has really ushered in an era of work slop. So, uh, what do you think the implications are of the work slop era? Do you, do you welcome it? How do you feel about it,

A Ron? Okay. I have been waiting to rant about this for a few weeks now. I actually read in a Harvard Business Review article in late September where I first saw the term work slop, but, ah, they, they defined it as, ah, it's low-quality AI generated posts, or, or sorry, AI generated work content that mask, masquerades as good work, but lacks the substance to meaningfully advance a given task. I have seen more in my work life. See, I actually PR pitches are kind of like mass scaled marketing. It can be, it always was kind of crappy anyway, so like, the idea that it's going to be good, that's almost what AI was made for. To me, the more worrisome part is actual human-to-human interaction. Now, every call summary I get is like, 80 bullet points, which in the past, like, getting a meeting summary was a pain in the ass, so you like, it, but, but people, all I'm asking all of our listeners is, Before you send out your AI generated content, read it yourself first. Just force yourself to maybe condense it, maybe add in some misspellings just to make it feel, rewrite a couple of the sentences to make it more real. But, but the, the, the part of this article I really liked is it, it kind of brings up this idea that WorkSlop uniquely uses machines to offload cognitive work to another human being. When coworkers receive work slop, they are required to take on the burden of decoding that con…

AI assessment note: “WorkSlop uniquely uses machines to offload cognitive work to another human being.”

Q of his customers and friends, including OpenAI CEO, Sam Altman. Another interesting point from the story. Meta CEO Mark Zuckerberg has been actively recruiting top AI researchers in an effort to boost his company's AI efforts. He was frustrated with the reaction to its latest AI offering, Llama Four, and aims to catch up to competitors such as Google and OpenAI. Ranjan, your reaction, good or bad move from Zuckerberg?

A This one is tough for me. I do, I really go back and forth in terms of good or bad. I, they are taking some action. They've been falling behind and clearly they want to catch up. So that's good that they're willing to take some bold action. But again, Aqua hire Zition, fifteen billion dollars for a 49% stake just to hire the guy. Like I was even confused again If it was truly an acquisition, but actually, like, they announced that the chief strategy officer of scale AI, Jason Drogue, uh, will now be CEO, and, and Alexander Wang is full on meta. Like, he's, he's, he's not a little scale, little meta, some kind of weird Elon Muskian dual role. He's all in. Um, is it really, is he worth that much? Is he just, uh, some, Consultation to Mark Zuckerberg over the last few months and giving him good advice. Is he worth that much?

AI assessment note: “I really go back and forth in terms of good or bad.”

Q possibility. So talk a little bit about this Apple Glasses push, because this sort of plays in exactly to what we're talking about, about where the future of computing is heading. And should I say finally? I don't know if it's finally, they have, they have the HomePod, but finally it seems like Apple is really gonna push forward into a smart device that you wear and is AI first.

A Yeah, so Apple, they're aiming to release new smart glasses end of next year. We've been waiting for these glasses for a long time. If anyone should have been early, it should have been Apple. I think, uh, there, there's a lot of talk before that it would potentially be a smartwatch that would analyze your surroundings. It might have a camera that there'd be other form factors, but I am a full on convert to glasses. I'll admit, like, I think there, it's just such a natural way when you're in motion, not sitting in a meeting, not sitting at dinner. So maybe that does Limit the utility of it, but in motion, not looking down at your screen and having a pair of glasses on, I think is, it's already here. So Apple really needs to compete there.

AI assessment note: “they're aiming to release new smart glasses end of next year”

Q pick this up because everything is done behind the scenes, the recruiting, the payments, the editorial direction, usually in discords or in text messages or on WhatsApp signal. And it's very, very difficult to pick up. So now we know about one of them, but The DOJ is saying there are multiple. So my question for you is, and obviously this is speculation, how far do you think this goes?

A Oh, I think this goes incredibly far. There's, there's so many times where, especially on Twitter now, and oh, and actually for a long time, there's just certain reactions to certain stories that are so over the top, or have such a very specific bent. Even during the Olympics, the whole boxer is a female, male, like, that whole thing felt like there was, there's an extra push. Uh, to make that a story, a story story, rather than just, you know, something fleeting that a few people are arguing over, but really rise to the top. And this is something that, I mean, having looked at this stuff a lot, especially back in like 2016, 17, and just algorithmic media in general, all it takes is a little bit of a concerted push, and that's how these platforms still work. So there's still, I mean, and you have, it's a combination of, You have this kind of operation that's paying, uh, influencer to spread a very specific message who already has a following. Then you have, you know, have you ever seen those like photos and videos of those click farms of people with a bunch of phones? I actually, when I was in Taiwan, one of my Uber drivers had 10 phones on the dashboard and I asked him and he said he just scrolls and likes TikTok videos. And is paid to do it. And like, he was just like, yeah, yeah. You know, whenever I'm in between rides, I just sit there and make money this way. So like, this…

AI assessment note: “Oh, I think this goes incredibly far.”

Q you know, seen many of them turn around very, very quickly. Uh, and I could say with Google, right? The narrative was Google was done. Google's obviously not done. With Apple, the narrative was like Apple is a legacy company or toast. Obviously, some of their bets can arguably seen as, be seen as good ones. Um, what do you think about Microsoft and does Ackman have a point here?

A I think he has a point in terms of just being deeply entrenched, but I do think the risk Microsoft faces here is again, like there's been plenty of reporting around customers, especially like the AI offerings within co-pilot not converting to or converting at a much smaller scale. Again, Azure's growth is definitely kind of protecting them in the transition period, but You have both sides that you are everywhere. Everyone uses you. That's good. You can, you're, you should be much more able from a distribution standpoint to actually kind of take whatever's happening in the market and be able to kind of, you know, like transform that into your product and then actually get it out to users. But they haven't yet. And they've had, again, now that, I mean, they haven't Even when they had the advantage of that access to open AI and when others didn't. So the idea that it's going to be different going forward is it's, it's a risky bet. But as you said, like things change so quickly. And even again, these gigantic corporations actually moving quickly and something that we had not seen in a long, long time, I think, uh, or like could never have imagined in the industrial age that like, The most, you know, the biggest conglomerates actually being the innovators. So they still, you, you can't write them off in any way, but the fact that it's Bill Ackman and I do like the reporting had, uh,…

AI assessment note: “I think he has a point in terms of just being deeply entrenched”

Q Well, did he say that, that it was good or that?

A Oh, no. People want it. People want it. People want it. Okay. Fair, fair. He said people want it. And yes, it's human nature that you want something that agrees with you all the time. But like, I have never had ChatGPT tell me Actually, that's a terrible idea. Again, South Park was just so spot on, where they're like, I think it was like a french fry salad, and it's like, that's a culinary adventure. Um, like, it only will tell you that you're right and good, which most other humans don't do. Um, so like, in terms of actually totally distorting how people can actually form any normal human interaction, it'll distort the way you approach that. Like, even My son with Alexa, pre Alexa plus, which we've talked about over the last few weeks, but in the old school, just play me a song. What's the weather? Like you could see how demanding he would become around it and like expecting that this thing does whatever I say. So like the more people start to kind of associate that as a relationship and like a friendship and interaction. That is even, as I'm saying this now, even more terrifying, so.

AI assessment note: “Oh, no. People want it. People want it. People want it. Okay. Fair, fair. He said”

Q You think your oxytocin will go up or down when she sees the print the dog files?

A That is not an oxytocin inducer. No way. Though I don't discourage others from reading the meter report on your Labor Day weekend. I, I think I'm going to, because I do want to understand, again, the reason this stuff is so foreign to me is because all day long I work with AI and with clients and customers that are adopting AI, and It's just so removed from, and, and who are also using these products from these same companies as well, and we're working with them, and designing programs, and that have their tools, and like, no one's mind, it's just so far away from this kind of agent swarm hacking, whatever, that it's not emotionally resonant for me, and there's enough marketing value in it. When the agent swarms come, And all of it put me in, put me out first to, to feel their wrath because for denying their existence.

AI assessment note: “That is not an oxytocin inducer. No way.”

Q to trust that their kids can't get through your age gating. They will just push their kids to every other LLM. Why take the risk? Same with schools. Why take the risk? A few seniors in high school are 18 and decide it would be fun to show their hardcore erotica they created to the 14 year olds. What could go wrong? I think Cuban's making a good point here.

A Oh yeah. I mean, I, I don't age gating in the history of the internet. I don't believe has ever worked. So the idea that, uh, it's going to actually just, Hey, we have new tools. We solved mental health. Let's move on to this. I think is, uh, is, is a ridiculous idea anyway. So we just have to, if this is real and there's nothing, we move in this direction. In an open way, just assume that this is going to go. Forget 14. God help, like the younger this goes. But, but I, I also think like that Nate Silver had made a good point around, like he said, you know, OpenAI's recent actions don't seem to be consistent with a company that believes AGI is right around the corner. Do you think like, is this, and we're going to get into the usage numbers and revenue in just a moment and some new figures we've gotten, but, but is this an acceptance that kind of that AGI that's going to replace 50% of white collar work and transform society is actually far away. So we might as well juice some numbers and let people, uh, get a little creepy with their chat GPT.

AI assessment note: “age gating in the history of the internet. I don't believe has ever worked.”

Q your boss like an out. I think if you make a big ask, uh, and the out that he gives Satya is ready to be down voted on this one and not And not really serious. Like, if you're not really serious, why mention it? Um, but like, I kind of think he, if he wanted to do this, which he clearly did, he should have just asked for it.

A What do you think, Ranjan? I, do you think he wanted to do it, or do you think, I, I don't know, hold on, let me step back a second. My favorite part of these trials, I still remember on the Twitter acquisition trial, And that was even a different kind of type of person where like Jason Calacanis and others would kind of like grovel at Elon Musk and then he would just send like a thumbs down or a thumbs up or a smiling face reaction. To me, you have the CTO and CEO of Microsoft and my, they're just like us. They communicate like teenagers. Smiley face. They don't, he's not even responding just a thumbs down reaction. Crying, laughing emoji. That's the whole conversation of these masters of the universe, and that's it.

AI assessment note: “I don't know, hold on, let me step back a second. My favorite part”

Q we don't see a systemic risk, like we do talk about systemic risk more often than we do, like, you know, risk to individual investors if they have conviction. Um, I think, do you think it's still worth, worth kind of covering and talking about just so people are aware? Of like, what could happen if it goes south? Cause you know, it's happened here, but maybe it happens elsewhere.

A No, but it, this is the main thing about any kind of, and, and even the word bubble is all relative. Like when is something a washout or a downturn versus a bubble is always kind of difficult to like, I think that's more just like how cleanly packaged it is in the narrative eventually. But to me, Like, Leopold and situational awareness. These stories, this is the early part of any kind of bubbles ending cycle. And again, having lived through the 2008 on a trading floor, like, 2007, there was these, there was Countrywide and Bear Stearns and, um, before, long before Lehman, like, there was, uh, what was those hedge funds name again that collapsed back in, like, March? There was, you know, there, there were these, like, Bits and pieces coming out, and I do think it's, it's very important, because both at a human and individual level, and like, I think the big difference from 2008 was like, for the average person and individuals, your, the price of your home and your home equity was the kind of, like, exposure, whereas whatever is happening in this cycle, way more people, thanks to Robin Hood and Democratize investing, are exposed, so. Whatever we see happen, I mean, there's a lot more people with skin in the game right now.

AI assessment note: “I do think it's, it's very important, because both at a human and individual level”