1 00:00:02,800 --> 00:00:03,560 Speaker 1: Zone Media. 2 00:00:05,519 --> 00:00:20,720 Speaker 2: Hello, and welcome to this week's Better Offline. I'm ed Zetra. Now. 3 00:00:20,720 --> 00:00:22,560 Speaker 2: At the end of November, and Video put out an 4 00:00:22,600 --> 00:00:26,000 Speaker 2: internal memo that tried to well get ahead of a 5 00:00:26,040 --> 00:00:28,840 Speaker 2: few things, is how I'd put it, that had been 6 00:00:28,880 --> 00:00:31,560 Speaker 2: bubbling up in the news, specifically comparisons to Enron, the 7 00:00:31,600 --> 00:00:34,199 Speaker 2: massive energy trading giant that imploded in the early two 8 00:00:34,200 --> 00:00:37,519 Speaker 2: thousands after well a lot of fraud, also with some 9 00:00:37,800 --> 00:00:41,000 Speaker 2: other concerns about its earnings. Said memo was leaked to 10 00:00:41,120 --> 00:00:43,479 Speaker 2: Baron's reporter Take Him, who is one of the largest 11 00:00:43,479 --> 00:00:46,920 Speaker 2: in video boosters in the known universe. He posts constantly 12 00:00:46,960 --> 00:00:49,040 Speaker 2: about how Invidio is going to be the biggest, most 13 00:00:49,080 --> 00:00:51,199 Speaker 2: hugess company in the world. He's meant to be like 14 00:00:51,240 --> 00:00:53,880 Speaker 2: an analyst and a reporter, but he mostly just seems 15 00:00:53,920 --> 00:00:58,000 Speaker 2: like a cheerleader and it's kind of embarrassing. Now, nevertheless, 16 00:00:58,000 --> 00:01:01,000 Speaker 2: he was leaking a memo that was quite worrisome, so 17 00:01:02,080 --> 00:01:04,800 Speaker 2: oh no, and Vidio chose to disseminate it through him, 18 00:01:04,840 --> 00:01:08,160 Speaker 2: but also to short sellers. The actual providence of this, 19 00:01:08,360 --> 00:01:10,319 Speaker 2: or is it providence? I don't know, but someone will 20 00:01:10,319 --> 00:01:14,440 Speaker 2: correct me is kind of confusing anyway, long story short, 21 00:01:14,480 --> 00:01:17,560 Speaker 2: people have a few concerns about in Nvidia, and well 22 00:01:17,680 --> 00:01:20,560 Speaker 2: you shouldn't. Though, you shouldn't have any concerns at all, 23 00:01:20,600 --> 00:01:24,039 Speaker 2: because in video's very secret, not to be leaked immediately. 24 00:01:24,080 --> 00:01:28,120 Speaker 2: Document spent thousands of words very specifically explaining how in 25 00:01:28,240 --> 00:01:31,800 Speaker 2: video was fine, and most importantly, by the way, nothing 26 00:01:31,880 --> 00:01:34,319 Speaker 2: like Enron. Now why did I need to say all 27 00:01:34,319 --> 00:01:36,800 Speaker 2: of this? And why did Nvidia need to sell of this? 28 00:01:36,920 --> 00:01:37,200 Speaker 1: Well? 29 00:01:37,440 --> 00:01:39,400 Speaker 2: In Vidio wrote this note as a response to both 30 00:01:39,480 --> 00:01:42,360 Speaker 2: short seller Michael Burry, famous of course from The Big 31 00:01:42,400 --> 00:01:45,240 Speaker 2: Short and Sound Capitol. There's a whole bunch of other 32 00:01:45,280 --> 00:01:47,920 Speaker 2: stuff there, but putting that aside, but also because of 33 00:01:47,960 --> 00:01:51,000 Speaker 2: another thing, a guy called Shinaka and Slim Pereira, who 34 00:01:51,040 --> 00:01:53,520 Speaker 2: wrote a piece called, and I quote the algorithm that 35 00:01:53,600 --> 00:01:56,400 Speaker 2: detected the six hundred and ten billion dollar fraud, how 36 00:01:56,440 --> 00:02:00,800 Speaker 2: machine intelligence exposed the AI industry's circular finance scheme. And 37 00:02:00,840 --> 00:02:03,200 Speaker 2: I've now been sent this about eleven times maybe more 38 00:02:03,240 --> 00:02:04,040 Speaker 2: since it came out. 39 00:02:04,720 --> 00:02:04,960 Speaker 1: Now. 40 00:02:05,040 --> 00:02:07,360 Speaker 2: The reason I'm not going to link to Pereira's piece 41 00:02:07,400 --> 00:02:10,160 Speaker 2: in the show notes or in the companion newsletter to 42 00:02:10,160 --> 00:02:13,480 Speaker 2: this episode is simple. It's full of bullshit, and I've 43 00:02:13,639 --> 00:02:17,040 Speaker 2: had some very good reporters linked to this thing. I've 44 00:02:17,200 --> 00:02:19,160 Speaker 2: heard from a lot of people say all this scared me, 45 00:02:19,200 --> 00:02:21,120 Speaker 2: and the fact it's scared in video really pissed me 46 00:02:21,160 --> 00:02:24,200 Speaker 2: off too, because it's straight up got lies in it, 47 00:02:24,280 --> 00:02:27,240 Speaker 2: like made up stuff. I'm not even talking just misstatements. 48 00:02:27,280 --> 00:02:31,240 Speaker 2: I'm talking about really specific things. It's made up. For example, 49 00:02:31,480 --> 00:02:35,120 Speaker 2: in one part, Perera talks about major semiconductor distributor Arrow 50 00:02:35,200 --> 00:02:38,399 Speaker 2: Electronics stating things and it's Q three twenty twenty five 51 00:02:38,400 --> 00:02:41,840 Speaker 2: earnings about in video. Let me be fucking clear about this. 52 00:02:41,919 --> 00:02:44,840 Speaker 2: Really pissed me off. Arrow makes no statements of any 53 00:02:44,960 --> 00:02:48,240 Speaker 2: kind about in video on its earnings calls, in its 54 00:02:48,280 --> 00:02:51,920 Speaker 2: ten Q or its earnings presentation. You can go and look. 55 00:02:52,080 --> 00:02:54,560 Speaker 2: He doesn't link to anything. By the way, and if 56 00:02:54,560 --> 00:02:57,480 Speaker 2: you need another example, Prera claims that when in Vidia 57 00:02:57,560 --> 00:03:00,120 Speaker 2: launched the Hopper H one hundred architecture in Q two 58 00:03:00,160 --> 00:03:04,160 Speaker 2: fiscal twenty twenty three, also amid reported supply constraints in 59 00:03:04,200 --> 00:03:07,480 Speaker 2: strong demand, inventory declined eighteen percent quarter of a quarter 60 00:03:07,520 --> 00:03:11,320 Speaker 2: as the company fulfilled backloged orders. If you bothered to 61 00:03:11,360 --> 00:03:13,640 Speaker 2: go and look at a videa's inventory from that period, 62 00:03:13,720 --> 00:03:16,120 Speaker 2: which is public. By the way, you can see that 63 00:03:16,280 --> 00:03:19,000 Speaker 2: inventory increase. Now, I'm not pissed off at anyone listening 64 00:03:19,000 --> 00:03:21,440 Speaker 2: to this. I'm pissed off at any financial media that 65 00:03:21,520 --> 00:03:24,000 Speaker 2: gave this any kind of attention. And I'm kind of 66 00:03:24,000 --> 00:03:26,320 Speaker 2: pissed off at in Video for doing it too. It's 67 00:03:26,360 --> 00:03:29,799 Speaker 2: aislop and I've not heard of Brera before, but as 68 00:03:29,800 --> 00:03:32,240 Speaker 2: LinkedIn says, he is, and I'm not shitting you. The 69 00:03:32,320 --> 00:03:37,120 Speaker 2: CEO at pet Express Sri Lanka, I would suggest getting 70 00:03:37,160 --> 00:03:40,200 Speaker 2: your financial advice elsewhere and at a minimum, making sure 71 00:03:40,200 --> 00:03:44,120 Speaker 2: that you read out lets that actually source their data. Anyway, 72 00:03:44,320 --> 00:03:46,760 Speaker 2: as you're probably working out, all of this is fine 73 00:03:46,840 --> 00:03:51,280 Speaker 2: and normal. This happens normally all the time. Companies do 74 00:03:51,400 --> 00:03:54,920 Speaker 2: this all the time, especially successful ones. And there's nothing 75 00:03:54,960 --> 00:03:58,200 Speaker 2: to be worried about here, because after reading all seven 76 00:03:58,240 --> 00:04:00,640 Speaker 2: pages of this document, we can all read that Invidia 77 00:04:00,760 --> 00:04:05,080 Speaker 2: is nothing like Enron. No really though, in Video is 78 00:04:05,120 --> 00:04:07,840 Speaker 2: nothing like Enron. And it's kind of weird that anyone, 79 00:04:08,000 --> 00:04:10,960 Speaker 2: especially you, by the way, as saying that Enron and 80 00:04:11,080 --> 00:04:14,480 Speaker 2: Nvidia have any similarities at all. They just put out 81 00:04:14,640 --> 00:04:18,280 Speaker 2: a very long document, by the way, and it says 82 00:04:18,279 --> 00:04:20,520 Speaker 2: they're not Enron. Why do you keep asking about Enron. 83 00:04:21,120 --> 00:04:23,840 Speaker 2: All right, why are you being weird? Okay, Now, in 84 00:04:24,040 --> 00:04:27,920 Speaker 2: Vidia said something about Enron, but that's because fools and 85 00:04:28,000 --> 00:04:30,400 Speaker 2: vagabonds keep suggesting that in Video was like Enron, and 86 00:04:30,480 --> 00:04:33,520 Speaker 2: very normally in Vidia has decided thousands of words at 87 00:04:33,560 --> 00:04:37,160 Speaker 2: a time to set the records straight, and I genuinely 88 00:04:37,240 --> 00:04:40,560 Speaker 2: no jokes do agree in Vidia is nothing like Enron. 89 00:04:41,040 --> 00:04:43,120 Speaker 2: Putting aside how I might feel about the ethics or 90 00:04:43,200 --> 00:04:46,600 Speaker 2: underlying economics of Generative AI, in Vidia is an incredibly 91 00:04:46,640 --> 00:04:50,440 Speaker 2: successful business that has incredible profits, holds an effective monopoly 92 00:04:50,480 --> 00:04:53,000 Speaker 2: on Kouda, which powers the underlying software layer to running 93 00:04:53,040 --> 00:04:57,200 Speaker 2: software on GPUs, specifically Generative AI, and not really much 94 00:04:57,240 --> 00:05:00,440 Speaker 2: else that has any kind of revenue potential. Now talked 95 00:05:00,440 --> 00:05:02,560 Speaker 2: a bit about Cooder and the Hater's Guide to in Video, 96 00:05:02,600 --> 00:05:04,719 Speaker 2: which I've linked to in the show notes, And yes, 97 00:05:04,760 --> 00:05:06,400 Speaker 2: while I believe that one day this will all be 98 00:05:06,440 --> 00:05:08,440 Speaker 2: seen as one of the most egregious wastes of capital 99 00:05:08,440 --> 00:05:11,719 Speaker 2: of all time, for the time being, Jensen Huang is 100 00:05:12,320 --> 00:05:17,440 Speaker 2: potentially the greatest salesperson of all time. Nevertheless, people have 101 00:05:17,520 --> 00:05:20,000 Speaker 2: somewhat run away with the idea that Invidia is Enron, 102 00:05:20,040 --> 00:05:22,480 Speaker 2: in part because of the weird circular deals in videos 103 00:05:22,520 --> 00:05:26,440 Speaker 2: built with NEO clouds, dedicated AI focused cloud companies like 104 00:05:26,520 --> 00:05:29,520 Speaker 2: cor We've, Lambda and Nebius, who run data centers full 105 00:05:29,560 --> 00:05:33,320 Speaker 2: of GPUs sold by a video, which they then use 106 00:05:33,360 --> 00:05:36,040 Speaker 2: as collateral for loans to buy more GPUs from in video. 107 00:05:36,120 --> 00:05:39,599 Speaker 2: I can see why people are a little concerned. But 108 00:05:40,520 --> 00:05:43,880 Speaker 2: as dodgy and weird and unsustainable as this all is, 109 00:05:43,920 --> 00:05:47,440 Speaker 2: it isn't illegal in it certainly isn't Enron because in video, 110 00:05:47,520 --> 00:05:51,000 Speaker 2: as I've been trying to tell you, is nothing like Enron. 111 00:05:51,680 --> 00:05:53,640 Speaker 2: Now you may be a little confused. I get it 112 00:05:53,839 --> 00:05:57,480 Speaker 2: that Invidia is bringing up Enron at all. Nobody seriously 113 00:05:57,520 --> 00:06:00,880 Speaker 2: thought that in video was like Enron, not even the 114 00:06:00,880 --> 00:06:04,040 Speaker 2: psygonomous and analyst just Daurio, who has been questioning its 115 00:06:04,040 --> 00:06:07,479 Speaker 2: accounting practices for years. Because Enron was genuinely one of 116 00:06:07,480 --> 00:06:10,680 Speaker 2: the largest criminal enterprises in history, and Nvidia is, at worst, 117 00:06:11,240 --> 00:06:14,400 Speaker 2: I believe, a bit dodgy and doing whatever it can 118 00:06:14,440 --> 00:06:19,960 Speaker 2: to survive through various forms of accountancy alchemy. Wait, wait, 119 00:06:20,720 --> 00:06:23,720 Speaker 2: you still think in Vidia is Enron? What's it going 120 00:06:23,760 --> 00:06:25,400 Speaker 2: to take to convince you? I just told you that 121 00:06:25,440 --> 00:06:29,320 Speaker 2: in Vidia isn't Enron. In video itself has explained at 122 00:06:29,400 --> 00:06:32,159 Speaker 2: length as I'll explain by the way, it's not Enron. 123 00:06:32,240 --> 00:06:34,360 Speaker 2: And I'm not sure why you keep bringing up Enron 124 00:06:34,400 --> 00:06:37,320 Speaker 2: all the time. Stop being an asshole. Enron and in 125 00:06:37,440 --> 00:06:42,559 Speaker 2: Vidia are nothing alike. Look. Look, in Vidia's own memo 126 00:06:42,720 --> 00:06:45,560 Speaker 2: said that, and I quote in Nvidia does not resemble 127 00:06:45,680 --> 00:06:49,760 Speaker 2: historical accounting frauds because in Vidia's underlying business is economically sound, 128 00:06:49,920 --> 00:06:52,960 Speaker 2: its reporting is complete and transparent, and it cares about 129 00:06:53,000 --> 00:06:56,719 Speaker 2: its reputation for integrity. Now I know what you're thinking. 130 00:06:56,960 --> 00:06:59,360 Speaker 2: Why is the largest company on the stock market having 131 00:06:59,400 --> 00:07:02,520 Speaker 2: to reassure us about its underlying business economics and reporting. 132 00:07:02,800 --> 00:07:06,000 Speaker 2: One might immediately begin to think strives out effects style, 133 00:07:06,360 --> 00:07:09,320 Speaker 2: that there there might be something up with in Vidia's 134 00:07:09,400 --> 00:07:13,440 Speaker 2: underlying business. But nevertheless, you know what, fuck it in Vidio, 135 00:07:13,560 --> 00:07:15,640 Speaker 2: grab your coat, we're going out. Let's forget how all 136 00:07:15,640 --> 00:07:17,720 Speaker 2: of this ever happened? What? What? 137 00:07:17,720 --> 00:07:18,040 Speaker 1: What was? 138 00:07:19,040 --> 00:07:20,080 Speaker 2: What was that first? 139 00:07:20,400 --> 00:07:23,280 Speaker 3: Unlike en Run, in Vidia does not use special purpose 140 00:07:23,400 --> 00:07:26,600 Speaker 3: entities to hide debt and inflate revenue. In Vidia has 141 00:07:26,680 --> 00:07:29,960 Speaker 3: one guarantee for which the maximum exposure is disclosed in 142 00:07:30,040 --> 00:07:32,720 Speaker 3: Note nine of eight hundred and sixty million dollars and 143 00:07:32,840 --> 00:07:35,880 Speaker 3: is mitigated by four hundred and seventy million dollars in escrow. 144 00:07:36,240 --> 00:07:38,560 Speaker 3: The fair value of the guarantee is a crude and 145 00:07:38,640 --> 00:07:43,160 Speaker 3: disclosed as having an insignificant value. Nvidia neither controls nor 146 00:07:43,240 --> 00:07:46,000 Speaker 3: provides most of the financing for the companies in which 147 00:07:46,080 --> 00:07:47,200 Speaker 3: in Vidia invests. 148 00:07:48,000 --> 00:07:50,880 Speaker 2: Oh okay, I'm I wasn't really thinking about all that. 149 00:07:51,200 --> 00:07:53,760 Speaker 2: I was literally just I was just saying, how you 150 00:07:53,880 --> 00:07:57,000 Speaker 2: were nothing like Enron. We're good. Come on, let's let's go. 151 00:07:57,200 --> 00:07:58,120 Speaker 2: Let's the second. 152 00:07:58,400 --> 00:08:01,120 Speaker 3: The article claims that in Video Ever symbols WorldCom but 153 00:08:01,200 --> 00:08:05,200 Speaker 3: provides no support for the analogy WorldCom over stated earnings 154 00:08:05,200 --> 00:08:09,240 Speaker 3: by capitalizing operating expenses as capital expenditures. We are not 155 00:08:09,440 --> 00:08:14,080 Speaker 3: aware of any claims that Nvidia has improperly capitalized operating expenses. 156 00:08:14,560 --> 00:08:18,840 Speaker 3: Several commentators alleged that customers have overstated earnings by extending 157 00:08:18,880 --> 00:08:24,160 Speaker 3: GPU depreciation schedules beyond economic useful life. Rebutting this claim, 158 00:08:24,360 --> 00:08:27,440 Speaker 3: some companies have increased useful life estimates to reflect the 159 00:08:27,480 --> 00:08:31,400 Speaker 3: fact that GPUs remain useful and profitable for longer than 160 00:08:31,400 --> 00:08:34,960 Speaker 3: originally anticipated, in many cases, for six years or more. 161 00:08:35,640 --> 00:08:39,400 Speaker 3: We provide additional context on the depreciation topic below. 162 00:08:41,880 --> 00:08:47,560 Speaker 2: Uh okay, I mean I wasn't even thinking about WorldCom. 163 00:08:48,000 --> 00:08:51,160 Speaker 2: I wasn't thinking about WorldCom at all. I genuinely hadn't 164 00:08:51,600 --> 00:08:54,559 Speaker 2: thought about WorldCom in a while. You're nothing, You're nothing 165 00:08:54,640 --> 00:08:58,800 Speaker 2: like them listeners for context. WorldCom was a telecommunications company 166 00:08:58,840 --> 00:09:01,079 Speaker 2: that collapsed in the early two thim in part because 167 00:09:01,080 --> 00:09:04,120 Speaker 2: it had a tendency of overstating its earnings by billions 168 00:09:04,120 --> 00:09:07,679 Speaker 2: and billions of dollars in total eleven billion dollars. This 169 00:09:07,760 --> 00:09:10,680 Speaker 2: followed a failed merger with Sprint, which was blocked for 170 00:09:10,720 --> 00:09:14,120 Speaker 2: antitrust reasons, essentially forcing the company to grow its stock 171 00:09:14,160 --> 00:09:18,320 Speaker 2: through customers rather than mergers. You know, normal way. Kind of, 172 00:09:18,920 --> 00:09:21,679 Speaker 2: the telecom sector was pretty saturated back there, making this 173 00:09:21,720 --> 00:09:23,520 Speaker 2: a pretty tall ask, and so we ended up with 174 00:09:23,520 --> 00:09:25,920 Speaker 2: a bunch of dodgy accounting, which all fell apart when 175 00:09:25,920 --> 00:09:31,440 Speaker 2: the company filed for bankruptcy. Hmmm, in video, you you're 176 00:09:31,480 --> 00:09:33,160 Speaker 2: not doing anything world commie, are you? 177 00:09:33,400 --> 00:09:45,520 Speaker 1: Why are you bringing up world Com? 178 00:09:45,559 --> 00:09:48,240 Speaker 2: To be clear, by the way, WelCom was doing capital 179 00:09:48,360 --> 00:09:51,240 Speaker 2: f fraud, and its CEO, Bernie Ebbers, went to prison 180 00:09:51,520 --> 00:09:54,480 Speaker 2: after an internal team of auditors led by WorldCom VP 181 00:09:54,640 --> 00:09:58,520 Speaker 2: of Eternal Auditing Cynthia Cooper, reported three point eight billion 182 00:09:58,559 --> 00:10:02,400 Speaker 2: dollars in misallocated expres says and phony accounting entries. That 183 00:10:02,600 --> 00:10:07,520 Speaker 2: is just straight up fraud. So okay, look, in Video, 184 00:10:08,760 --> 00:10:12,200 Speaker 2: you are really specific about saying you didn't capitalize operating expenses, 185 00:10:12,240 --> 00:10:17,000 Speaker 2: capital expenditures. You're not doing that. That's that's great, great stuff. 186 00:10:17,040 --> 00:10:21,600 Speaker 2: I literally never thought you'd done that before. I genuinely agree. 187 00:10:21,679 --> 00:10:25,680 Speaker 2: You have nothing like WELLcom in VideA, nothing like Wollcom anyway. 188 00:10:26,600 --> 00:10:29,199 Speaker 2: Glad to hear about the depreciation stuff. Looking forward to 189 00:10:29,240 --> 00:10:30,120 Speaker 2: hearing more about Bird. 190 00:10:30,440 --> 00:10:34,640 Speaker 3: Unlike Lucent, in Vidia does not rely on vendor financing 191 00:10:34,720 --> 00:10:39,240 Speaker 3: arrangements to grow revenue. In typical vendor financing arrangements, customers 192 00:10:39,240 --> 00:10:43,040 Speaker 3: pay for products over years. In Vidia's DSO was fifty 193 00:10:43,200 --> 00:10:47,120 Speaker 3: three in Q three. In Video discloses our standard payment terms, 194 00:10:47,120 --> 00:10:50,840 Speaker 3: with payment generally due shortly after delivery of products. We 195 00:10:50,960 --> 00:10:55,640 Speaker 3: do not disclose any vendor financing arrangements. Our customers are 196 00:10:55,679 --> 00:11:00,520 Speaker 3: subject to strict credit evaluation to ensure collectibility. In Video 197 00:11:00,640 --> 00:11:03,640 Speaker 3: would disclose any receivable longer than one year in long 198 00:11:03,760 --> 00:11:06,800 Speaker 3: term other assets. The six hundred and twenty three million. 199 00:11:07,040 --> 00:11:11,559 Speaker 3: Other balance as of Q three does not include extended receivables. 200 00:11:11,600 --> 00:11:14,880 Speaker 3: Even if it did, the amount would be immaterial to revenue. 201 00:11:18,200 --> 00:11:23,280 Speaker 2: All right, Uh, all right, man. If anyone asks whether 202 00:11:23,320 --> 00:11:26,439 Speaker 2: you were like famed dot com crashout Loosen Technologies, I'll 203 00:11:26,480 --> 00:11:29,920 Speaker 2: be sure to correct them. Oh god, I'm gonna have 204 00:11:29,960 --> 00:11:32,280 Speaker 2: to explain another business that failed around the millennium right now, 205 00:11:32,320 --> 00:11:36,160 Speaker 2: aren't I? After all, Loosent situation was really different, well 206 00:11:37,240 --> 00:11:41,160 Speaker 2: sort of. Loosen was a giant telecommunications company, the one 207 00:11:41,440 --> 00:11:45,160 Speaker 2: one that was for a time extremely successful, really really successful, 208 00:11:45,160 --> 00:11:48,960 Speaker 2: in fact, turned around by the now infamous Carli Fiorina. Furina, 209 00:11:49,000 --> 00:11:51,640 Speaker 2: who joined Loocent from AT and T, had a strong start, 210 00:11:51,800 --> 00:11:53,800 Speaker 2: and in her first few years at the company before 211 00:11:53,800 --> 00:11:56,679 Speaker 2: she left join the HP, Loosen saw revenues grow by 212 00:11:56,720 --> 00:11:59,360 Speaker 2: fifty eight percent to thirty eight billion dollars and their 213 00:11:59,440 --> 00:12:01,760 Speaker 2: income grow from a small loss to a four point 214 00:12:01,760 --> 00:12:06,040 Speaker 2: eight billion dollar profit. In video, this all sounds great. 215 00:12:06,240 --> 00:12:11,520 Speaker 2: Why wouldn't you want to be compared to Oh? Oh yeah, yeah, sorry, 216 00:12:12,080 --> 00:12:14,719 Speaker 2: you see. In nineteen ninety seven, Farina took over the 217 00:12:14,720 --> 00:12:17,640 Speaker 2: group responsible for selling geared to telecoms providers, and within 218 00:12:17,720 --> 00:12:21,440 Speaker 2: one year, that business unit grew by just shy of 219 00:12:21,520 --> 00:12:24,720 Speaker 2: a quarter. In two years, it had jumped from fifteen 220 00:12:24,760 --> 00:12:27,959 Speaker 2: point seven billion dollars when Furina took over to twenty 221 00:12:27,960 --> 00:12:31,040 Speaker 2: three point six billion dollars in nineteen ninety nine. Lucent 222 00:12:31,080 --> 00:12:33,439 Speaker 2: did this by lending money to its customers, with its 223 00:12:33,480 --> 00:12:36,920 Speaker 2: loans appearing on its balance sheets. As quoting CNN here 224 00:12:37,160 --> 00:12:42,680 Speaker 2: an allegedly sold assem now Lucient was classifying debt as 225 00:12:42,760 --> 00:12:46,040 Speaker 2: nasse and did something called vendor financing, which means you 226 00:12:46,120 --> 00:12:49,760 Speaker 2: lend somebody money to buy something from you. It turns 227 00:12:49,760 --> 00:12:53,040 Speaker 2: out Loosen did a lot of this, and in a 228 00:12:53,160 --> 00:12:55,560 Speaker 2: very simple way. This is like giving someone a ten 229 00:12:55,600 --> 00:12:57,840 Speaker 2: dollar loan to buy ten dollars of bricks from you. 230 00:12:58,080 --> 00:13:01,720 Speaker 2: It's just handing the same ten dollars back and no 231 00:13:01,760 --> 00:13:06,720 Speaker 2: one's really doing well here. Look. These loans were also 232 00:13:07,040 --> 00:13:11,560 Speaker 2: very generous with Telco's small fledgling telecommunications companies with minimal 233 00:13:11,559 --> 00:13:14,000 Speaker 2: assets and revenue by the way, and often mountains of 234 00:13:14,040 --> 00:13:17,640 Speaker 2: high interest. They're often paying nothing up from the loans 235 00:13:17,679 --> 00:13:20,079 Speaker 2: themselves were often bigger than the company itself and far 236 00:13:20,120 --> 00:13:22,959 Speaker 2: beyond what the company could hope to repay. Okay and 237 00:13:23,080 --> 00:13:26,160 Speaker 2: Video look we're we're friends. 238 00:13:26,240 --> 00:13:26,480 Speaker 1: Okay. 239 00:13:26,800 --> 00:13:29,400 Speaker 2: I hate to say this, but I kind of get 240 00:13:29,400 --> 00:13:31,920 Speaker 2: why somebody might say you're doing loos and stuff. After all, 241 00:13:31,960 --> 00:13:34,600 Speaker 2: Rumor has it that in your supposed to deal with 242 00:13:34,640 --> 00:13:37,080 Speaker 2: open AI, a company that burns billions of dollars a year, 243 00:13:37,800 --> 00:13:42,080 Speaker 2: will maybe involve leasing your GPUs to them, which sure 244 00:13:42,200 --> 00:13:44,079 Speaker 2: sounds like you're doing vendor finance. 245 00:13:44,200 --> 00:13:47,800 Speaker 3: We do not disclose any vendor financing arrangements. 246 00:13:48,280 --> 00:13:54,360 Speaker 2: Oh all right, Okay, you're not disclosing any vendor financing arrangements. Okay, 247 00:13:54,400 --> 00:13:55,760 Speaker 2: I I got it. 248 00:13:55,800 --> 00:13:56,000 Speaker 1: Man. 249 00:13:57,320 --> 00:14:00,400 Speaker 2: Anyway, back to Loosen. Loosen really did fuck up big time, though, 250 00:14:00,400 --> 00:14:02,959 Speaker 2: indulging in the dark art of circular vendor financing, the 251 00:14:03,040 --> 00:14:06,160 Speaker 2: legs of which and VIDIA has not kind of. In 252 00:14:06,240 --> 00:14:08,920 Speaker 2: ninety ninety eight, signed its largest deal, a two billion 253 00:14:08,960 --> 00:14:13,439 Speaker 2: dollar deal, an equipment and finance agreement with telecommunications company Windstar, 254 00:14:13,480 --> 00:14:16,199 Speaker 2: which promised to bring I shit you not, one hundred 255 00:14:16,240 --> 00:14:18,480 Speaker 2: billion dollars in new business over the next five years 256 00:14:18,760 --> 00:14:21,640 Speaker 2: and built a giant wireless broadband network along with expanding 257 00:14:21,680 --> 00:14:26,800 Speaker 2: Windstar's optical networking I quote the Wall Street Journal. Windstar 258 00:14:26,920 --> 00:14:29,640 Speaker 2: was one of the scores of standalone startup companies created 259 00:14:29,640 --> 00:14:31,720 Speaker 2: in the late nineteen nineties to compete in the market 260 00:14:31,720 --> 00:14:35,080 Speaker 2: for local telecom services. These firms, known as competitive Local 261 00:14:35,120 --> 00:14:39,240 Speaker 2: Exchange Carriers or clacs, raised billions of dollars in debt 262 00:14:39,280 --> 00:14:42,360 Speaker 2: and equity financing and embarked upon ambitious plans to compete 263 00:14:42,360 --> 00:14:45,520 Speaker 2: with incumbent carriers. For a time in the late nineties, 264 00:14:45,760 --> 00:14:49,360 Speaker 2: their stocks were hot properties, outpacing even Internet stocks. In 265 00:14:49,400 --> 00:14:52,320 Speaker 2: December ninety ninety nine, Wyatt would say that Windstar's small 266 00:14:52,360 --> 00:14:56,040 Speaker 2: white dish antennas heralded a new era and new mindset 267 00:14:56,040 --> 00:15:00,200 Speaker 2: in telecommunications and included this awesome quote about Loosen from 268 00:15:00,280 --> 00:15:04,200 Speaker 2: CEO and founder Will Ruhanna. On one level, we're a 269 00:15:04,240 --> 00:15:06,960 Speaker 2: customer and they are a supplier. On another level, they're 270 00:15:07,000 --> 00:15:10,280 Speaker 2: a financier and we are a borrower. On yet another level, 271 00:15:10,440 --> 00:15:13,800 Speaker 2: they are providing services around the world to accelerate our development. 272 00:15:13,960 --> 00:15:16,080 Speaker 2: They also want to use our service and have guaranteed 273 00:15:16,120 --> 00:15:20,360 Speaker 2: one hundred million dollars in business. Hell yeah, I also 274 00:15:20,440 --> 00:15:23,320 Speaker 2: love this because you can read this or hear this 275 00:15:23,440 --> 00:15:26,040 Speaker 2: or what have you, and go and read current magazines 276 00:15:26,080 --> 00:15:28,640 Speaker 2: talking about these companies and see them do the same things. 277 00:15:29,240 --> 00:15:33,800 Speaker 2: Just look, Oh my god, there is actually another great 278 00:15:33,840 --> 00:15:37,320 Speaker 2: coat I might want to share with you. Windstar is 279 00:15:37,320 --> 00:15:39,760 Speaker 2: a publicly traded company and has more than four thousand 280 00:15:39,800 --> 00:15:42,320 Speaker 2: employees and reports more than three hundred million dollars in 281 00:15:42,360 --> 00:15:46,600 Speaker 2: annual highed coore revenues. We love annualized revenues, double, folks, 282 00:15:46,840 --> 00:15:49,320 Speaker 2: we love them. Just do month times to where you 283 00:15:49,360 --> 00:15:51,840 Speaker 2: get the biggest numbers we've ever seen. They're beautiful. 284 00:15:51,880 --> 00:15:54,520 Speaker 1: We love them. 285 00:15:54,640 --> 00:15:57,480 Speaker 2: A company making about twenty five million dollars a month 286 00:15:59,120 --> 00:16:02,080 Speaker 2: twenty five million dollars a month in revenue signed a 287 00:16:02,080 --> 00:16:07,520 Speaker 2: two billion dollar loan two billion dollars in financing for 288 00:16:07,720 --> 00:16:11,720 Speaker 2: business that would make them one hundred million dollars ass 289 00:16:11,760 --> 00:16:14,760 Speaker 2: across five years. They aren't teaching this in business school, 290 00:16:14,840 --> 00:16:18,400 Speaker 2: do they? Weirdly, Winstar's Wikipedia page says that revenues were 291 00:16:18,400 --> 00:16:20,520 Speaker 2: four hundred and forty five point six million dollars for 292 00:16:20,520 --> 00:16:23,640 Speaker 2: the year ending nineteen ninety nine, or around thirty seven 293 00:16:23,680 --> 00:16:26,760 Speaker 2: point one million dollars a month. These numbers don't line 294 00:16:26,840 --> 00:16:31,480 Speaker 2: up so good, and probably because Windstar was kind of crooked. Now, WinStar, 295 00:16:31,600 --> 00:16:35,640 Speaker 2: they loved raising money. Two years later, in November two thousand, 296 00:16:35,800 --> 00:16:38,320 Speaker 2: it would raise one point oh two billion dollars for example, 297 00:16:38,400 --> 00:16:40,920 Speaker 2: and it raised the remarkable five point six billion dollars 298 00:16:40,960 --> 00:16:43,680 Speaker 2: between February ninety ninety nine and July two thousand and one. 299 00:16:43,760 --> 00:16:46,720 Speaker 2: According to The Wall Street Journal, nine hundred million dollars 300 00:16:46,760 --> 00:16:48,840 Speaker 2: of that came in December nineteen ninety nine for an 301 00:16:48,880 --> 00:16:52,440 Speaker 2: investment from a bunch of investors, including, of course, Microsoft, 302 00:16:52,600 --> 00:16:55,720 Speaker 2: with analyst Greg Miller of Jeffreys and Co. Saying the 303 00:16:55,760 --> 00:16:59,160 Speaker 2: Microsoft investment is a significant endorsement that the technology will 304 00:16:59,160 --> 00:17:02,200 Speaker 2: be used more aggressive in the future. Windstar can use 305 00:17:02,240 --> 00:17:05,360 Speaker 2: the capital. They sure fucking can, can't they? 306 00:17:05,960 --> 00:17:06,160 Speaker 1: Now? 307 00:17:06,240 --> 00:17:08,880 Speaker 2: Another fun thing happened In November two thousand and two, 308 00:17:09,280 --> 00:17:12,359 Speaker 2: Lucent would admit it overstated its fourth quarter profits by 309 00:17:12,400 --> 00:17:15,320 Speaker 2: improperly recording one hundred and twenty five million dollars in sales, 310 00:17:15,400 --> 00:17:18,160 Speaker 2: reducing that quarter as revenue from profitable to break even. 311 00:17:18,920 --> 00:17:22,000 Speaker 2: Things would eventually collapse when Windstar couldn't pay its debts, 312 00:17:22,160 --> 00:17:25,920 Speaker 2: filing for Chapter eleven bankruptcy protection on April eighteenth, two 313 00:17:25,920 --> 00:17:28,639 Speaker 2: thousand and one, after failing to pay seventy five million 314 00:17:28,640 --> 00:17:31,320 Speaker 2: dollars in interest payments to Loosen, which had cut access 315 00:17:31,359 --> 00:17:33,720 Speaker 2: to the remaining four hundred dollars million dollars not four 316 00:17:33,800 --> 00:17:36,440 Speaker 2: hundred dollars four hundred million dollars of its one billion 317 00:17:36,480 --> 00:17:40,200 Speaker 2: dollar loan to Windstar. As a result, Windstar would file 318 00:17:40,240 --> 00:17:42,399 Speaker 2: a ten billion dollar law soon in bankruptcy court in 319 00:17:42,440 --> 00:17:45,520 Speaker 2: Delaware the very same day, claiming that Lucent breached its 320 00:17:45,520 --> 00:17:49,320 Speaker 2: contract and forced Windstar into bankruptcy by well not offering 321 00:17:49,320 --> 00:17:53,280 Speaker 2: to give it more money that it would not pay off. Elsewhere, 322 00:17:53,320 --> 00:17:56,040 Speaker 2: things had begun to unravel for Loosened. A January two 323 00:17:56,040 --> 00:17:57,960 Speaker 2: thousand and one story from The New York Times stopped 324 00:17:57,960 --> 00:18:00,000 Speaker 2: the strange story of Lucent, a company that made up 325 00:18:00,000 --> 00:18:02,199 Speaker 2: over thirty three billion dollars in revenue in its previous 326 00:18:02,200 --> 00:18:05,120 Speaker 2: fiscal year, asking to defer the final trance of payment 327 00:18:05,560 --> 00:18:08,439 Speaker 2: twenty million dollars for an acquisition due to and I 328 00:18:08,520 --> 00:18:13,040 Speaker 2: quote accounting and financial reporting considerations. Now why would they 329 00:18:13,080 --> 00:18:17,040 Speaker 2: do that? Well, Lucent needed to keep that money on 330 00:18:17,080 --> 00:18:18,960 Speaker 2: the books to boost its earnings as its stock was 331 00:18:19,000 --> 00:18:21,000 Speaker 2: in the toilet and was about to announce it was 332 00:18:21,040 --> 00:18:23,439 Speaker 2: laying off ten thousand people and a quarterly loss of 333 00:18:23,520 --> 00:18:26,440 Speaker 2: over a billion dollars. Over the course of the next 334 00:18:26,440 --> 00:18:28,879 Speaker 2: few years, Lusent would sell off various entities, and by 335 00:18:28,880 --> 00:18:31,160 Speaker 2: the end of September two thousand and five, it would 336 00:18:31,200 --> 00:18:33,920 Speaker 2: have thirty thousand, five hundred staff and a stock price 337 00:18:33,960 --> 00:18:36,119 Speaker 2: of two dollars in ninety nine cents, down from a 338 00:18:36,160 --> 00:18:37,959 Speaker 2: high of seventy five bucks a share at the edge 339 00:18:37,960 --> 00:18:40,080 Speaker 2: of nineteen ninety nine and one hundred and fifty seven 340 00:18:40,119 --> 00:18:45,240 Speaker 2: thousand employees. According to VC Thomas Tunger's and that is 341 00:18:45,280 --> 00:18:47,879 Speaker 2: his name, Luson had eight point one billion dollars of 342 00:18:47,960 --> 00:18:51,439 Speaker 2: vendor financing deals. At its high, Lusent was still a 343 00:18:51,440 --> 00:18:54,560 Speaker 2: real company selling real things, but it had massively over 344 00:18:54,600 --> 00:18:57,200 Speaker 2: extended itself in an attempt to meet demand that didn't 345 00:18:57,200 --> 00:19:00,080 Speaker 2: really exist. And when Lucent realized that it was, how 346 00:19:00,119 --> 00:19:02,880 Speaker 2: did Degree demand itself to please the markets? To quote 347 00:19:02,960 --> 00:19:06,199 Speaker 2: MIT Tech review and author Lisa Endlich, it believed that 348 00:19:06,240 --> 00:19:09,160 Speaker 2: setting and meeting the expectations of Wall Street subsumed all 349 00:19:09,160 --> 00:19:11,639 Speaker 2: other goals, and that Lucent had little choice but to 350 00:19:11,720 --> 00:19:15,760 Speaker 2: ride the wave. To be clear, in Vidia is quite 351 00:19:15,800 --> 00:19:18,240 Speaker 2: different from Lusam. He has plenty of money in the 352 00:19:18,240 --> 00:19:20,800 Speaker 2: circular deals it does with Corweve and Lambda don't involve 353 00:19:20,880 --> 00:19:23,439 Speaker 2: the same levels of risk. In Vidia is not, to 354 00:19:23,560 --> 00:19:27,080 Speaker 2: my knowledge, backstopping Corwy's business or providing it with loans. 355 00:19:27,119 --> 00:19:29,920 Speaker 2: Though in Vidia had agreed to buy six point three 356 00:19:29,960 --> 00:19:32,240 Speaker 2: billion dollars of computers the buyer of last resort of 357 00:19:32,320 --> 00:19:36,520 Speaker 2: any unsold capacity, and did mention an unnamed partner it 358 00:19:36,560 --> 00:19:39,600 Speaker 2: had agreed to backstop the leases of in its most 359 00:19:39,600 --> 00:19:43,960 Speaker 2: recent earnings. Nevertheless, Nvidia can afford this, and it isn't illegal. 360 00:19:44,040 --> 00:19:47,040 Speaker 2: Though it is obviously propping up a company with flagging demand. 361 00:19:47,640 --> 00:19:50,240 Speaker 2: Nvidia doesn't appear to be taking on masses of debt 362 00:19:50,240 --> 00:19:52,919 Speaker 2: to find its empire either, with other fifty six billion 363 00:19:52,920 --> 00:19:55,840 Speaker 2: dollars in cash on hand and a mere eight point 364 00:19:55,880 --> 00:20:00,560 Speaker 2: four billion dollars in long term debt. Okay, we got there. 365 00:20:00,640 --> 00:20:03,480 Speaker 2: This man and video is nothing like Loosen either. Okay, 366 00:20:03,840 --> 00:20:06,560 Speaker 2: maybe there are some similarities, but it's different. No worries 367 00:20:06,560 --> 00:20:09,240 Speaker 2: at all. I know I'm chill, I'm relaxed, and I'm 368 00:20:09,280 --> 00:20:13,960 Speaker 2: most importantly normal. You still seem nervous in video. I 369 00:20:14,320 --> 00:20:17,080 Speaker 2: promise you. If anyone asks me if you're like Loosen, 370 00:20:17,200 --> 00:20:19,040 Speaker 2: I'll tell him you're not. I'll be sure to tell 371 00:20:19,080 --> 00:20:21,560 Speaker 2: him You're nothing like Lucien. Are you okay? 372 00:20:21,640 --> 00:20:21,920 Speaker 1: Dude? 373 00:20:21,960 --> 00:20:22,680 Speaker 2: When did you last? 374 00:20:22,720 --> 00:20:23,240 Speaker 1: Slow? Okay? 375 00:20:23,520 --> 00:20:28,840 Speaker 3: So about inventory growth indicating waning demand, People are claiming 376 00:20:28,880 --> 00:20:32,399 Speaker 3: that growing inventory in Q three, which was above thirty 377 00:20:32,440 --> 00:20:35,960 Speaker 3: two percent quarter over quarter, suggests that demand is weak 378 00:20:36,080 --> 00:20:40,280 Speaker 3: and chips are accumulating unsold or customers are accepting delivery 379 00:20:40,320 --> 00:20:45,000 Speaker 3: without payment capability, causing inventory to convert to receivables rather 380 00:20:45,080 --> 00:20:46,240 Speaker 3: than cash. 381 00:20:46,280 --> 00:20:51,439 Speaker 2: Whoa, whoa, Okay, slow down, slow down? Who's been saying this? 382 00:20:51,720 --> 00:20:52,200 Speaker 1: Oh? 383 00:20:52,240 --> 00:20:55,159 Speaker 2: Everybody? Did Michael Burry scare you? Did you watch the 384 00:20:55,160 --> 00:20:55,720 Speaker 2: Big Shorts? 385 00:20:55,720 --> 00:20:55,880 Speaker 1: Say? 386 00:20:55,920 --> 00:21:00,280 Speaker 2: Ah, Christian Bale's playing Pantera again? Eh? Anyway, how you've 387 00:21:00,280 --> 00:21:02,239 Speaker 2: woken up everybody else in the house and they're all 388 00:21:02,280 --> 00:21:06,040 Speaker 2: wondering why you're talking about receivables. Shouldn't that be fine? 389 00:21:06,359 --> 00:21:08,879 Speaker 2: In video is a big business. Your business is pretty big, man, 390 00:21:08,920 --> 00:21:11,399 Speaker 2: And it's totally reasonable to believe that a company planning 391 00:21:11,400 --> 00:21:13,679 Speaker 2: to sell sixty three billion dollars of GPUs in the 392 00:21:13,680 --> 00:21:17,240 Speaker 2: next quarter would have ballooning receivables thirty three billion dollars 393 00:21:17,280 --> 00:21:20,000 Speaker 2: in receivables up from twenty seven billion dollars last quarter. 394 00:21:20,200 --> 00:21:23,760 Speaker 2: A growing inventory nineteen point seven eight billion dollars up 395 00:21:23,760 --> 00:21:26,520 Speaker 2: from fourteen point nine six billion dollars in the last quarter. 396 00:21:26,640 --> 00:21:31,480 Speaker 2: That is that is pretty big up. But nevertheless, in 397 00:21:31,600 --> 00:21:34,439 Speaker 2: video's a big asset, heavy business, which means in videos, 398 00:21:34,480 --> 00:21:37,520 Speaker 2: clients likely get decent payment terms to raise their or 399 00:21:37,560 --> 00:21:41,360 Speaker 2: move cash around to get them paid. Okay, everyone, calm down. 400 00:21:41,440 --> 00:21:43,680 Speaker 2: You can go back to bed like my buddy, who 401 00:21:43,720 --> 00:21:46,080 Speaker 2: is nothing like Enron by the way, just said. 402 00:21:46,440 --> 00:21:50,639 Speaker 3: First, growing inventory does not necessarily indicate weak demand. In 403 00:21:50,640 --> 00:21:54,760 Speaker 3: addition to finished goods, inventory includes significant raw materials in 404 00:21:54,840 --> 00:21:59,520 Speaker 3: work in progress. Companies with sophisticated supply chains typically build 405 00:21:59,520 --> 00:22:03,080 Speaker 3: inventory in advance of new product launches to avoid stockouts. 406 00:22:03,520 --> 00:22:07,360 Speaker 3: In Video's current supply levels are consistent with historical trends 407 00:22:07,400 --> 00:22:11,919 Speaker 3: and anticipate strong future growth. Second, growing inventory does not 408 00:22:12,000 --> 00:22:16,119 Speaker 3: indicate customers are accepting delivery without payment. Capability in video 409 00:22:16,160 --> 00:22:21,040 Speaker 3: recognizes revenue upon shipping a product and deeming collectibility probable. 410 00:22:21,440 --> 00:22:25,080 Speaker 3: The shipping reduces inventory, which is not related to customer payments. 411 00:22:25,320 --> 00:22:30,280 Speaker 3: Our customers are subject to strict credit evaluation to ensure collectibility. 412 00:22:30,760 --> 00:22:35,040 Speaker 3: Payment is due shortly after product delivery. Some customers prepay 413 00:22:35,520 --> 00:22:39,400 Speaker 3: in videos. Dso actually decreased sequentially from fifty four days 414 00:22:39,400 --> 00:22:40,480 Speaker 3: to fifty three days. 415 00:22:43,280 --> 00:22:47,120 Speaker 2: Nice dude, You're totally right. It's pretty common for companies, 416 00:22:47,200 --> 00:22:51,160 Speaker 2: especially large ones, to deliver something before they receive cash 417 00:22:51,160 --> 00:22:54,639 Speaker 2: and it happens. I'm being sincere. Sounds like companies are 418 00:22:54,640 --> 00:22:57,639 Speaker 2: paying great, but you know, can you just be just 419 00:22:57,760 --> 00:23:01,120 Speaker 2: a little more specific, like the whole shipping things before 420 00:23:01,160 --> 00:23:01,920 Speaker 2: they're paid things. 421 00:23:02,000 --> 00:23:06,720 Speaker 3: Video recognizes revenue upon shipping a product and deeming collectibility probable. 422 00:23:07,200 --> 00:23:09,520 Speaker 2: Yeah, okay, I thought I heard you out the first time. 423 00:23:09,720 --> 00:23:13,359 Speaker 2: What does deeming collectibility probable mean? You could have just 424 00:23:13,359 --> 00:23:16,399 Speaker 2: said we get paid like ninety five percent of the 425 00:23:16,400 --> 00:23:19,240 Speaker 2: time within two months or whatever, unless it's not like 426 00:23:19,359 --> 00:23:23,280 Speaker 2: ninety five or ninety percent. How often? How often are 427 00:23:23,359 --> 00:23:26,399 Speaker 2: you paid within two months? Most companies don't break this down, 428 00:23:26,440 --> 00:23:28,080 Speaker 2: by the way, But then again, most companies are not 429 00:23:28,080 --> 00:23:30,399 Speaker 2: in Video the largest company on the stock market. If 430 00:23:30,440 --> 00:23:32,720 Speaker 2: I'm honest, nobody else has recently had to put anything 431 00:23:32,720 --> 00:23:35,760 Speaker 2: out that says I'm not Enron, And I want to 432 00:23:35,760 --> 00:23:40,520 Speaker 2: be clear that in Vidia is not like Enron for real, 433 00:23:40,600 --> 00:23:45,000 Speaker 2: though it really isn't like Enron, and jokes aside, bits aside, 434 00:23:45,560 --> 00:23:49,119 Speaker 2: there were very different businesses. They were very different. Indeed, 435 00:23:49,520 --> 00:23:52,200 Speaker 2: is it is very strange though that in Video wants 436 00:23:52,240 --> 00:23:54,919 Speaker 2: somebody to think about how it's nothing like Enron. This 437 00:23:55,080 --> 00:23:57,199 Speaker 2: was technically an internal memo, and thus there is a 438 00:23:57,359 --> 00:24:01,479 Speaker 2: chance its existence was built for only nvidians or short 439 00:24:01,480 --> 00:24:04,720 Speaker 2: sellers or something worried about the value of the stock. 440 00:24:05,000 --> 00:24:07,080 Speaker 2: And we know it's definitely written to try and deflect 441 00:24:07,080 --> 00:24:11,520 Speaker 2: Michael Burry's criticism, as well as a random AI slap substacker. 442 00:24:14,720 --> 00:24:19,440 Speaker 2: It's just weird. It's weird. I don't really know what's 443 00:24:19,480 --> 00:24:21,679 Speaker 2: going on, and I really want to know. Why does 444 00:24:21,760 --> 00:24:23,840 Speaker 2: nvidio need you to know? It's nothing like Enron did 445 00:24:24,280 --> 00:24:26,920 Speaker 2: do something like Enron? Is there a chance that you 446 00:24:27,080 --> 00:24:31,679 Speaker 2: or I may mistakenly say, hey, is in Vidio doing Enron? 447 00:24:47,119 --> 00:24:49,760 Speaker 1: Hey in video? How are you feeling? Yeah? 448 00:24:49,920 --> 00:24:51,600 Speaker 2: Yeah, you had a rough night. You were saying all 449 00:24:51,640 --> 00:24:54,679 Speaker 2: this crazy stuff about Enron. Are you doing okay? No, No, 450 00:24:54,760 --> 00:24:57,720 Speaker 2: I get it. You're nothing like Enron. You said a 451 00:24:57,760 --> 00:25:00,600 Speaker 2: lot of that last night. So why you were sleeping? Yeah, 452 00:25:00,640 --> 00:25:02,720 Speaker 2: you've been asleep sixteen hours. By the way, you were 453 00:25:02,720 --> 00:25:05,800 Speaker 2: pretty messed up. You brought up loosent than puked in 454 00:25:05,880 --> 00:25:09,199 Speaker 2: my sink and tried to scream at my cat. I 455 00:25:09,280 --> 00:25:11,120 Speaker 2: did some digging though, and like, I get it, You're 456 00:25:11,160 --> 00:25:13,520 Speaker 2: nothing like Enron. Enron was breaking the law in video 457 00:25:13,640 --> 00:25:17,120 Speaker 2: is definitely not doing that. But you said you didn't 458 00:25:17,200 --> 00:25:21,240 Speaker 2: use special purpose vehicles recently you did though you are, 459 00:25:21,720 --> 00:25:24,880 Speaker 2: You're not using them like Enron. Enron moved the debt 460 00:25:24,920 --> 00:25:28,280 Speaker 2: around on the SPVs. But you're investing two billion dollars 461 00:25:28,320 --> 00:25:30,840 Speaker 2: in in Elon Musks special purpose vehicle that will then 462 00:25:30,920 --> 00:25:33,800 Speaker 2: use that money to raise debt to buy GPUs from you, 463 00:25:34,280 --> 00:25:37,119 Speaker 2: from you and video that would then be rented to 464 00:25:37,280 --> 00:25:41,520 Speaker 2: Elon Musk. And this is very different to what Enron did. 465 00:25:41,600 --> 00:25:43,760 Speaker 2: I am with you, dude. Don't let the haters keep 466 00:25:43,800 --> 00:25:46,800 Speaker 2: you down. No, I I don't think a T shirt 467 00:25:46,800 --> 00:25:48,520 Speaker 2: that says in video is not like Enron for these 468 00:25:48,560 --> 00:25:51,480 Speaker 2: specific reasons will help you either. Wait wait, okay, look 469 00:25:52,480 --> 00:25:55,679 Speaker 2: one thing, though, you have this theoretical deal lined up 470 00:25:55,680 --> 00:25:58,240 Speaker 2: with Sam Mortman to invest one hundred billion dollars in 471 00:25:58,240 --> 00:25:59,919 Speaker 2: the open AI. And yes, you said in your latest 472 00:26:00,280 --> 00:26:01,919 Speaker 2: that it was actually a letter of intent with the 473 00:26:01,920 --> 00:26:05,159 Speaker 2: opportunity to invest, which doesn't mean anything, got it. And 474 00:26:05,200 --> 00:26:07,560 Speaker 2: the plan was you would lease the GPU's two open 475 00:26:07,600 --> 00:26:12,359 Speaker 2: AI if the deal happens. Now, theoretically, how would you 476 00:26:12,440 --> 00:26:14,320 Speaker 2: go about doing that in video? You'd probably need to 477 00:26:14,320 --> 00:26:16,720 Speaker 2: do exactly the same deal you did with Xai. You 478 00:26:16,800 --> 00:26:20,360 Speaker 2: would you would buy the GPUs from yourself and then 479 00:26:20,640 --> 00:26:25,199 Speaker 2: rent them to open Ai. That's that's a little loosened 480 00:26:25,240 --> 00:26:30,440 Speaker 2: to you. Kind of sounds like vendor financing. And oh 481 00:26:30,480 --> 00:26:31,840 Speaker 2: you mentioned that rook man. 482 00:26:32,160 --> 00:26:35,760 Speaker 3: Unlike Lucent, in Vidia does not rely on vendor financing 483 00:26:35,840 --> 00:26:40,320 Speaker 3: arrangements to grow revenue. In typical vendor financing arrangements, customers 484 00:26:40,359 --> 00:26:44,199 Speaker 3: pay for products over years. In Vidio's DSO was fifty 485 00:26:44,200 --> 00:26:48,119 Speaker 3: three and Q three. In Vidia discloses our standard payment terms, 486 00:26:48,160 --> 00:26:51,199 Speaker 3: with payment generally due shortly after delivery of products. We 487 00:26:51,280 --> 00:26:54,680 Speaker 3: do not disclose any vendor financing arrangement. Let me stop 488 00:26:54,680 --> 00:26:56,919 Speaker 3: you right there. Let me stop you right there for 489 00:26:56,960 --> 00:27:00,320 Speaker 3: a second. You were on about this last night, and 490 00:27:00,359 --> 00:27:02,560 Speaker 3: you scared my cats from you're crying about something called 491 00:27:02,760 --> 00:27:06,040 Speaker 3: two nanimeter. I don't know. First of all, why are 492 00:27:06,119 --> 00:27:10,080 Speaker 3: you bringing up specifically typical vendor financing agreements? Do you 493 00:27:10,080 --> 00:27:15,280 Speaker 3: have atypical ones? Also, I'm jazzed. I guess i'd say 494 00:27:15,320 --> 00:27:19,439 Speaker 3: to hear you disclose your standard payment terms. But what 495 00:27:19,720 --> 00:27:22,760 Speaker 3: standard payment terms? What exactly where can I find those? 496 00:27:22,800 --> 00:27:25,080 Speaker 3: By the way, because you didn't link them, you didn't 497 00:27:25,640 --> 00:27:26,560 Speaker 3: didn't mention them. 498 00:27:26,600 --> 00:27:30,600 Speaker 2: Where are those. And also, look you're saying the words 499 00:27:30,680 --> 00:27:33,800 Speaker 2: you don't disclose any vendor financing arrangements. Those are the 500 00:27:33,840 --> 00:27:37,240 Speaker 2: exact words, though those words are very different to I 501 00:27:37,359 --> 00:27:40,080 Speaker 2: do not have any We do not have any vendor 502 00:27:40,160 --> 00:27:43,240 Speaker 2: financing arrangement. I do not disclose when I go to 503 00:27:43,280 --> 00:27:47,080 Speaker 2: the bathroom, but I absolutely do use the toilet. Let's 504 00:27:47,080 --> 00:27:49,439 Speaker 2: not pretend that Nvidio doesn't have a history in helping 505 00:27:49,840 --> 00:27:53,679 Speaker 2: getting its business buddies funding and Video has deals with 506 00:27:53,680 --> 00:27:56,000 Speaker 2: both Lambda and Core weave to guarantee that they will 507 00:27:56,119 --> 00:27:59,160 Speaker 2: have compute revenue, which they in turn used to raise debt, 508 00:27:59,160 --> 00:28:01,720 Speaker 2: which is then used to buy more in Vidio GPUs, 509 00:28:02,600 --> 00:28:05,359 Speaker 2: you've learned how to feed the day into yourself in video. 510 00:28:05,440 --> 00:28:08,520 Speaker 2: I'm genuinely impressed. This is great stuff. I'm having the 511 00:28:08,520 --> 00:28:11,160 Speaker 2: time of my life with how not like Enron you are. 512 00:28:11,320 --> 00:28:13,760 Speaker 2: And I'm serious that I one hundred percent do not 513 00:28:13,840 --> 00:28:18,320 Speaker 2: believe you are like Enron. But what exactly you doing? 514 00:28:18,440 --> 00:28:18,840 Speaker 1: Man? 515 00:28:19,720 --> 00:28:22,920 Speaker 2: What do you what are you doing to get Wall 516 00:28:22,960 --> 00:28:29,720 Speaker 2: Street what it wants? I'm serious though, seriously, folks, and 517 00:28:30,000 --> 00:28:33,880 Speaker 2: thank you Ben for being in Vidia there in video 518 00:28:34,000 --> 00:28:37,239 Speaker 2: really isn't like Enron, though, it really isn't. And I 519 00:28:37,280 --> 00:28:39,440 Speaker 2: hear a lot of people saying things like, even about 520 00:28:39,440 --> 00:28:41,640 Speaker 2: Sam Morman, I wanted this is a brief rent here 521 00:28:42,320 --> 00:28:44,200 Speaker 2: saying people are going to go to jail. People are 522 00:28:44,240 --> 00:28:46,240 Speaker 2: going to go to prison. There's fraud. There's fraud here, 523 00:28:46,320 --> 00:28:48,280 Speaker 2: Core Weave's doing fraud, this, that and the other. None 524 00:28:48,320 --> 00:28:50,880 Speaker 2: of these companies are doing fraud. That's the world we 525 00:28:50,920 --> 00:28:54,360 Speaker 2: live in. They are doing accountancy, alchemy, They're moving stuff around, 526 00:28:54,400 --> 00:28:57,600 Speaker 2: they are There are ways that in Vidia could be 527 00:28:57,640 --> 00:29:00,280 Speaker 2: doing all of this, and I'm very sure that the 528 00:29:00,320 --> 00:29:03,480 Speaker 2: case perfectly legally. Sam Orban not breaking the law either, 529 00:29:03,840 --> 00:29:08,320 Speaker 2: assuming he's been honest with his investors. Nevertheless, for real, though, 530 00:29:08,760 --> 00:29:12,400 Speaker 2: Invidia is nothing like Enron. Enron was a criminal enterprise, 531 00:29:12,440 --> 00:29:14,760 Speaker 2: and Nvidia is not. More than likely in video is 532 00:29:14,800 --> 00:29:17,600 Speaker 2: doing relatively boring vendor financing stuff and getting people to 533 00:29:17,600 --> 00:29:20,480 Speaker 2: pay them on fifty to sixty day time scales, probably 534 00:29:20,520 --> 00:29:23,040 Speaker 2: net sixty and like it said, it gets paid up 535 00:29:23,040 --> 00:29:29,040 Speaker 2: front sometimes. In Video truly isn't like Enron. After all, Meta, 536 00:29:29,200 --> 00:29:31,880 Speaker 2: Microsoft and Apple are the ones getting into energy trading. 537 00:29:32,440 --> 00:29:34,600 Speaker 2: To the point that I actually think it's time that 538 00:29:34,640 --> 00:29:37,920 Speaker 2: someone explained what exactly happened to Enron with a more 539 00:29:37,920 --> 00:29:41,320 Speaker 2: modern twist, or at least as much as it's possible 540 00:29:41,360 --> 00:29:44,800 Speaker 2: within the confines of a podcast that isn't exclusively about Enron. 541 00:29:45,280 --> 00:29:47,480 Speaker 2: But I'm going to explain next episode what the fuck 542 00:29:47,600 --> 00:29:50,560 Speaker 2: Enron was and you can have some fun listening to it. 543 00:29:59,040 --> 00:30:00,720 Speaker 2: Thank you for listening to Better Offline. 544 00:30:00,840 --> 00:30:03,280 Speaker 4: The editor and composer of the Better Offline theme song 545 00:30:03,360 --> 00:30:06,000 Speaker 4: is Matasowski. You can check out more of his music 546 00:30:06,040 --> 00:30:09,680 Speaker 4: and audio projects at Matasowski dot com, M A T 547 00:30:09,680 --> 00:30:14,160 Speaker 4: T O S O W s ki dot com. You 548 00:30:14,160 --> 00:30:16,680 Speaker 4: can email me at easy at Better Offline dot com, 549 00:30:16,760 --> 00:30:19,080 Speaker 4: or visit better Offline dot com to find more podcast 550 00:30:19,120 --> 00:30:22,440 Speaker 4: links and of course my newsletter. I also really recommend 551 00:30:22,480 --> 00:30:24,440 Speaker 4: you go to chat dot where's youreaed dot at to 552 00:30:24,520 --> 00:30:27,320 Speaker 4: visit the discord, and go to our slash Better Offline 553 00:30:27,360 --> 00:30:28,440 Speaker 4: to check out our reddit. 554 00:30:29,200 --> 00:30:32,480 Speaker 2: Thank you so much for listening. Better Offline is a 555 00:30:32,480 --> 00:30:35,360 Speaker 2: production of cool Zone Media. For more from cool Zone Media, 556 00:30:35,720 --> 00:30:38,840 Speaker 2: visit our website cool Zonemedia dot com, or check us 557 00:30:38,840 --> 00:30:41,840 Speaker 2: out on the iHeartRadio app, Apple Podcasts, or wherever you 558 00:30:41,880 --> 00:30:43,000 Speaker 2: get your podcasts.