WEBVTT - Monologue: AI Isn't Too Big to Fail

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<v Speaker 1>Ze Media, Hello, and welcome to this week's Better Offline Monologue.

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<v Speaker 1>I'm your host ed Ze tron. That's right, it's your

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<v Speaker 1>second damn monologue this week. But next week we're going

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<v Speaker 1>to have an awesome guest economist Paul Kajowski, and no

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<v Speaker 1>doubt some sort of us will break that will make

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<v Speaker 1>next week's monologue even spicier than this one. And man

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<v Speaker 1>is this spicy anyway. Earlier this week, I put out

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<v Speaker 1>a free newsletter about the SUBPRIMEI crisis. My ongoing theory

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<v Speaker 1>that as AI companies strive to try and make their

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<v Speaker 1>rotten economics work, they'll left to start cranking up the

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<v Speaker 1>price and making rate limits worse and generally trying to

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<v Speaker 1>move things around to make these products anything close to profitable.

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<v Speaker 1>But they won't even get close.

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<v Speaker 2>Now take a.

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<v Speaker 1>Little history trip. That's how I'm going to That's what

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<v Speaker 1>I'm calling it. When the subprime crisis happened, the subcrime

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<v Speaker 1>mortgage crisis, of course, millions of people built their lives

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<v Speaker 1>around the idea that easy money would always be available

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<v Speaker 1>and that anyone could get a mortgage, and that housing

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<v Speaker 1>would only ever increase in value. In reality, the value

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<v Speaker 1>of housing was massively overinflated by the lacks standards of

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<v Speaker 1>a mortgage industry incentivized the sign as many people as

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<v Speaker 1>possible thanks to a lack of regulation and easily available funding,

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<v Speaker 1>the value of housing and indeed the larger housing and

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<v Speaker 1>construction boom was of mirage. In reality, housing wasn't worth

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<v Speaker 1>anywhere near what it was being sold for, and the

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<v Speaker 1>massive demand for housing was only possible with unlimited resources

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<v Speaker 1>and lacks well underwriting. So that which is the process

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<v Speaker 1>of evaluating whether someone can get a house. You might

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<v Speaker 1>know that, but I've been encouraged by Robert and Sourphy

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<v Speaker 1>to be obvious with things. Those buying houses they couldn't

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<v Speaker 1>afford with adjustable rate mortgages either didn't understand the terms

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<v Speaker 1>or believed members of the media and government officials that

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<v Speaker 1>suggested housing prices would never decrease and that one could

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<v Speaker 1>easily refinance the mortgage in question. You know, kind of

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<v Speaker 1>like saying things like, you know, AI is always getting

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<v Speaker 1>more efficient, the values always going up, and venture capital

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<v Speaker 1>will always invest in that.

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<v Speaker 2>This is the new hypergrowth era.

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<v Speaker 1>Similarly, AI startups products are all subsidized by venture capital

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<v Speaker 1>and must in literally every case allow users to burn

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<v Speaker 1>tokens far and excess of their subscription fees. A business

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<v Speaker 1>that only works, and I put that in quotation marks

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<v Speaker 1>as long as venture capital continues to fund it. And

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<v Speaker 1>when I say that, I'm being quite literal. If you

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<v Speaker 1>go and use Perplexity, you're comfortably able to even on

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<v Speaker 1>a twenty dollars plan, burn thirty forty to fifty one

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<v Speaker 1>hundred dollars worth of tokens within account a month. Anthropic

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<v Speaker 1>allowed you, until very recently, to burn anywhere between eight

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<v Speaker 1>to thirteen and a half dollars per dollar of subscription revenue.

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<v Speaker 1>While from the outside these may seem like these are

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<v Speaker 1>functional businesses with paying users. Without the hype cycle justifying

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<v Speaker 1>the endless capital, these businesses wouldn't be possible, let alone

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<v Speaker 1>viable in any way, shape or form, And indeed they

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<v Speaker 1>wouldn't have any customers. My evidence being if they could

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<v Speaker 1>get customers by charging their actual rates and offering a

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<v Speaker 1>non subsidized product, they'd have them, and they would have

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<v Speaker 1>had them from the beginning. Let me give you an example.

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<v Speaker 1>Harvey is an AI tool for lawyers that just raised

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<v Speaker 1>two hundred million dollars at an astonishing eleven billion dollar

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<v Speaker 1>valuation or while having an equally astonishingly small one hundred

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<v Speaker 1>ninety million dollars in AR or fifteen point eight million

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<v Speaker 1>dollars a month. It raised another one hundred and sixty

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<v Speaker 1>million dollars in December twenty twenty five, after raising three

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<v Speaker 1>hundred million dollars in June twenty twenty five. After raising

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<v Speaker 1>three hundred million dollars in February twenty twenty five, where's

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<v Speaker 1>the fucking money, Harvey? Were you putting it?

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<v Speaker 2>Harvey?

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<v Speaker 1>Mister Harvey has been very unfair to the venture capitalists.

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<v Speaker 1>Actually they're fueling I can't even say that. Remove even

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<v Speaker 1>one of those venture capital rounds and Harvey coughs up

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<v Speaker 1>blood and dies. Much like subprime loans allowed borrowers to

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<v Speaker 1>get mortgages they had no hope of paying, hype cycles

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<v Speaker 1>create the illusion of viable businesses that cannot and will

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<v Speaker 1>never survive without the subsidies. The same does for companies

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<v Speaker 1>like open Ai and Anthropic, both of whom created priority

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<v Speaker 1>processing tiers for their enterprise customers in the middle of

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<v Speaker 1>twenty twenty five, and the latter of which, just as

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<v Speaker 1>I discussed in my last monologue, added peak rate limits

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<v Speaker 1>from five am to eleven pm Pacific time, you know,

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<v Speaker 1>just the entire day, and that was after they created

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<v Speaker 1>weekly limits late last year. The customers are the subprime

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<v Speaker 1>borrowers too. They built workflows around using these products that

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<v Speaker 1>may or may not be possible with new rate limits.

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<v Speaker 2>Think about it.

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<v Speaker 1>If your whole business, the whole reason you use this

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<v Speaker 1>software subscription is to do tasks, and suddenly the amount

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<v Speaker 1>of tasks you can do is limited. Is this really

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<v Speaker 1>is anything tenable anymore? Especially if you're one of those

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<v Speaker 1>people who can't actually code and using this to vibe code.

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<v Speaker 2>I'm not really sure this works.

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<v Speaker 1>But in the case of the enterprise customers using Priority processing,

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<v Speaker 1>their costs massively spiked, which is why Cursor and Replet

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<v Speaker 1>and several other AI startups suddenly made their products worse

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<v Speaker 1>in the middle of twenty twenty five, adding their own

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<v Speaker 1>rate limits and changing their pricing. In reality, none of

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<v Speaker 1>this ever made sense. None of this was actually possible

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<v Speaker 1>outside of endless resources. Now traveling back in time, by

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<v Speaker 1>November twenty nine, twenty three percent of US consumer mortgages

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<v Speaker 1>were underwater, meaning that they were worth less than their loans.

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<v Speaker 1>And I think we're eventually going to see that specifically

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<v Speaker 1>with venture capital valuations. By the way, I think there's

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<v Speaker 1>going to be a point when it's like ninety percent

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<v Speaker 1>of AI startup valuations are going to be way lower

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<v Speaker 1>or nil actually, and I truly think the subprime AI

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<v Speaker 1>crisis will be much much worse for the value is

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<v Speaker 1>AI companies made up more than fifty percent of venture

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<v Speaker 1>capital investments in twenty twenty five. I actually don't know

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<v Speaker 1>how any of them make it. This is something that

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<v Speaker 1>I think about a lot. My thesis basically says, these

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<v Speaker 1>companies are all dying. I don't see how it works out.

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<v Speaker 1>They're not getting acquired. They can't go public because they

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<v Speaker 1>have the worst economics of all time. In the moment

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<v Speaker 1>you show the markets that it looks real bad. Minimax

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<v Speaker 1>AI company in China that went public, I think it's

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<v Speaker 1>fifty something billion dollars of revenue and like two hundred

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<v Speaker 1>and something million and losses a little bit like that

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<v Speaker 1>make the real money. Nevertheless, I really don't know how

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<v Speaker 1>that works. I truly don't. I didn't think about it.

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<v Speaker 1>I'm like, is there a way they could get acquired?

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<v Speaker 1>Is there something else they could do? There really isn't

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<v Speaker 1>all they can do is check up their prices and

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<v Speaker 1>hope that people don't leave. And I think that's what's

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<v Speaker 1>gonna happen, if they even bother, and if they can

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<v Speaker 1>even get that far. Now, I know what you're all thinking,

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<v Speaker 1>and I hear this a lot. I'm kind of died

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<v Speaker 1>of hearing it, but I'm honest and I get why

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<v Speaker 1>people do it. But despite the subprime comparison, this is

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<v Speaker 1>not a too big to fail situation. And in this

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<v Speaker 1>week's premium newsletter, I'm going to dig into that question

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<v Speaker 1>in depth. Please do subscribe. If the money goes directly

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<v Speaker 1>to me, it's a main source of income now that

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<v Speaker 1>it's very.

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<v Speaker 2>Important to me.

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<v Speaker 1>But nevertheless, I'm going to give you a sizeable preview

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<v Speaker 1>here because I want this information out there. So too

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<v Speaker 1>Big to Fail refers to the Troubled Asset Relief Program

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<v Speaker 1>TOP over four hundred billion dollars and specifically the bailouts

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<v Speaker 1>of AIG in the surrounding finance industry, mostly focused on

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<v Speaker 1>the commercial paper loan industry that kept major banks and

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<v Speaker 1>financial institutions going as well as fucking ge capital. Oh

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<v Speaker 1>and also the PDCF and ts LF finance systems that

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<v Speaker 1>kept them going to I'll get to that.

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<v Speaker 2>In a bit, but the bailout was in the trillions.

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<v Speaker 1>Like I don't think people realize how and why it happened,

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<v Speaker 1>so I'm going to tell you. Anyway, AIG was too

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<v Speaker 1>big to fail because it had twenty billion dollars in

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<v Speaker 1>outstanding commercial paper and several life insurance subsidiaries that were

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<v Speaker 1>billions of dollars in the hole thanks to AIG literally

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<v Speaker 1>gambling with the money, not actually at casinos, on cds's

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<v Speaker 1>CDOs and the like. The knock on effects of AIG's

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<v Speaker 1>collapse would have been catastrophic for the money market funds

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<v Speaker 1>that held commercial paper from multiple companies. And commercial paper

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<v Speaker 1>is a short term loan type thing, anywhere from one

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<v Speaker 1>to four days to like I think two hundred and

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<v Speaker 1>something days, but most of it was either very short

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<v Speaker 1>term and in AIG's case, was also without any collateral

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<v Speaker 1>in any way. In any case, that used to be

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<v Speaker 1>the primary way that banks and finance institutions g capital

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<v Speaker 1>actually used to be able to fund their businesses. They

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<v Speaker 1>would go to the market and go, hey, well, why

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<v Speaker 1>you lend us some money just for like a few days,

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<v Speaker 1>and we'll get right back to you, and for the

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<v Speaker 1>most part. It worked right up until it didn't. I

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<v Speaker 1>also want to be clear about what the bailout actually

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<v Speaker 1>bailed out, because I think people here too big to

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<v Speaker 1>fail and they're like, right, they bought the houses that

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<v Speaker 1>were being foreclosed. No, no, no, that's not what they did.

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<v Speaker 1>It was like forty something billion dollars that was meant

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<v Speaker 1>to go to stop foreclosures. No one really knows what

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<v Speaker 1>happened to it, which is cool. No, the vast majority

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<v Speaker 1>of the bailouts were for financial instruments, not houses, not apartments,

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<v Speaker 1>not helping regular people, but making sure that the toxic

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<v Speaker 1>financial products associated with the finance industry were absorbed and

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<v Speaker 1>bought off and that liquidity remained in the market via

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<v Speaker 1>the primary dealer credit and term securities lending facilities that

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<v Speaker 1>provided as much as one hundred billion dollars to banks

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<v Speaker 1>and financial institutions a day. Now.

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<v Speaker 2>These still exist.

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<v Speaker 1>The repo facilities still exists, but are not used at

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<v Speaker 1>the same scale. But this, I want you to think

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<v Speaker 1>about this, like every day, fifty one hundred billion dollars

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<v Speaker 1>was just used to keep the to give them short

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<v Speaker 1>term funding to just get through the day. People should

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<v Speaker 1>have been in fucking prison to be clear, people should

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<v Speaker 1>have gone to jail for this, but this was necessary

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<v Speaker 1>to stop the financial system crashing to actually falling apart.

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<v Speaker 1>Lending insurance would not have got funded in the same way.

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<v Speaker 1>There was basically a credit freeze anyway, but I'm talking

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<v Speaker 1>nothing would have happened. And even during the Great Financial Crisis,

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<v Speaker 1>mortgages still were getting written, loans were still getting rerint.

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<v Speaker 1>Things still happened, and the financial system is a confidence game,

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<v Speaker 1>and the PDCF and TSLF existed to stop everything from

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<v Speaker 1>actually going to zero. And like I said, those few

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<v Speaker 1>loans were still being written and funded, and they needed

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<v Speaker 1>to make sure that insurance and borrowing they still actually

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<v Speaker 1>had happened because the world runs on debt and insurance.

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<v Speaker 1>And oh my god, this really reading about the finance

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<v Speaker 1>the Great Financial Crisis really did blackpilm me all over

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<v Speaker 1>again though, because you read what these fuck nuts did.

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<v Speaker 1>They were just they were like, yeah, we're gonna hedge

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<v Speaker 1>our bets on the on the mortgages by buying credit

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<v Speaker 1>default swaps that were not that we assume that aig

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<v Speaker 1>will be able to pay. Don't need to check. Well

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<v Speaker 1>they should have checked. They can fucking bet anyway. Some

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<v Speaker 1>estimate the true size of the bailout when you account

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<v Speaker 1>for that liquidity, to be over ten trillion dollars. Because

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<v Speaker 1>the underdiscussed part of the AIG bailout was that commercial paper,

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<v Speaker 1>the commercial paper lending industry that funded most of the

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<v Speaker 1>finance industry kind of broke.

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<v Speaker 2>It took years.

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<v Speaker 1>The finance industry actually had to undwind their dependence on it.

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<v Speaker 1>Colgate used to use commercial paper. It's fucking weird. In

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<v Speaker 1>any case, there really aren't any comparables to the AI bubble.

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<v Speaker 1>While open AI and Anthropic might be very prominent and

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<v Speaker 1>very annoying, their actual economic existence is relatively small. And

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<v Speaker 1>the overall AI in industry barely had sixty five billion

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<v Speaker 1>dollars in revenue last year, with much of that flowing

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<v Speaker 1>between a few counterparties and funded by venture capital dollars.

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<v Speaker 1>And also we don't know if all of that was cash.

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<v Speaker 1>By the way, a chunk of that is the inference

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<v Speaker 1>spend with Microsoft. That if that still tokens. If you

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<v Speaker 1>work at Microsoft and you want to talk to me

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<v Speaker 1>about the finances or any of these companies, please please

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<v Speaker 1>hit me up. I would love to hear from you.

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<v Speaker 1>Easy at Better Offline dot Com. Nevertheless, had AIG defaulted,

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<v Speaker 1>it would have left multiple banks without the funds to

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<v Speaker 1>continue functioning and killed its insurance companies in the process,

0:11:34.600 --> 0:11:37.840
<v Speaker 1>sending them into government receivership that wouldn't have guaranteed the

0:11:37.840 --> 0:11:41.480
<v Speaker 1>policies had the same value even have been fulfilled. Even

0:11:41.559 --> 0:11:43.680
<v Speaker 1>with that bailout, the government had to plug a hole

0:11:43.679 --> 0:11:46.360
<v Speaker 1>in the side of the finance industry for several years,

0:11:46.360 --> 0:11:48.600
<v Speaker 1>and they ended up bring it back during COVID as well.

0:11:49.440 --> 0:11:51.880
<v Speaker 1>While the collapse of open AI and Anthropic might tank

0:11:51.920 --> 0:11:54.920
<v Speaker 1>parts of the market, too big to fail is a

0:11:55.040 --> 0:11:57.440
<v Speaker 1>term that refers to something that has systemic risk to

0:11:57.480 --> 0:12:01.120
<v Speaker 1>the economy, and these are two very different things. Because

0:12:01.120 --> 0:12:03.680
<v Speaker 1>the market still shat its pants during the great financial

0:12:03.720 --> 0:12:07.160
<v Speaker 1>crisis that happened. The government wasn't stopping the markets from

0:12:07.160 --> 0:12:11.079
<v Speaker 1>collapsing by funding the markets. They were keeping the banking

0:12:11.120 --> 0:12:14.920
<v Speaker 1>system alive, so the markets just functioned at all. And

0:12:15.000 --> 0:12:16.959
<v Speaker 1>I really need you to know that difference, because it's

0:12:17.000 --> 0:12:19.319
<v Speaker 1>not the same thing. The collapse of AIG would have

0:12:19.400 --> 0:12:21.840
<v Speaker 1>quickly ripped through the funding mechanisms of most of the

0:12:21.960 --> 0:12:25.720
<v Speaker 1>US finance industry, and it's collapse still materially harmed one

0:12:25.760 --> 0:12:29.240
<v Speaker 1>of the main funding mechanisms of the US economy. There

0:12:29.280 --> 0:12:32.760
<v Speaker 1>is no such comparison with AI. AI is not producing

0:12:32.800 --> 0:12:36.080
<v Speaker 1>productivity benefits at scale. It is not replacing jobs at scale,

0:12:36.200 --> 0:12:38.080
<v Speaker 1>not that I want that to happen, of course, It's

0:12:38.080 --> 0:12:40.520
<v Speaker 1>not load bearing in an economic sense, in that the

0:12:40.559 --> 0:12:43.120
<v Speaker 1>flow of money in the US economy would collapse if

0:12:43.160 --> 0:12:46.760
<v Speaker 1>open AI or Anthropic did, and a bailout in general

0:12:46.800 --> 0:12:49.199
<v Speaker 1>exists to solve a problem rather than pass the bug.

0:12:49.360 --> 0:12:51.560
<v Speaker 1>And I also want to be clear if that if

0:12:51.640 --> 0:12:55.240
<v Speaker 1>they were truly too big to fail, Ah, no, and no,

0:12:55.320 --> 0:12:58.920
<v Speaker 1>wouldn't it wouldn't it be that when Anthropic goes down

0:12:59.040 --> 0:13:04.120
<v Speaker 1>or chat GPT goes down, the economy would stop, because

0:13:04.160 --> 0:13:06.120
<v Speaker 1>that's what would have happened if AIG died.

0:13:07.120 --> 0:13:10.440
<v Speaker 2>Goddamn have I nearly said AGI like five times? Anyway.

0:13:10.960 --> 0:13:12.800
<v Speaker 1>I also want to address that Fanny May and Freddie

0:13:12.840 --> 0:13:15.880
<v Speaker 1>Mack massive mortgage companies that were absorbed by the US government.

0:13:16.120 --> 0:13:18.880
<v Speaker 1>They're not a comparison as the deaths of though those

0:13:18.920 --> 0:13:21.960
<v Speaker 1>companies would have actually destroyed the US housing market like

0:13:22.280 --> 0:13:24.040
<v Speaker 1>they were like sixty five billion dollars in the whole.

0:13:24.080 --> 0:13:25.600
<v Speaker 2>It was very very very.

0:13:25.440 --> 0:13:28.480
<v Speaker 1>Bad, Like they I need you like The Big Short

0:13:28.520 --> 0:13:30.920
<v Speaker 1>is a great movie, it does not do justice to

0:13:30.960 --> 0:13:33.400
<v Speaker 1>how fucked things would have been. I also want to

0:13:33.400 --> 0:13:36.600
<v Speaker 1>be clear that none of these companies should have been

0:13:36.640 --> 0:13:38.800
<v Speaker 1>allowed to function in the same way, like any of

0:13:38.840 --> 0:13:41.520
<v Speaker 1>the banks involved in this should have like none of

0:13:41.559 --> 0:13:43.480
<v Speaker 1>the executives in questions should be allowed to work in

0:13:43.520 --> 0:13:45.920
<v Speaker 1>finance anymore. I think that it was genuinely evil and

0:13:45.960 --> 0:13:50.080
<v Speaker 1>the whole situation was caused by an industry wide just

0:13:50.760 --> 0:13:51.800
<v Speaker 1>gambling industry.

0:13:51.840 --> 0:13:52.520
<v Speaker 2>That's what it was.

0:13:52.600 --> 0:13:56.520
<v Speaker 1>It would It was truly horrifying, and everyone involved should

0:13:56.559 --> 0:13:58.079
<v Speaker 1>be in jail or jobless.

0:13:58.160 --> 0:14:00.320
<v Speaker 2>I think they're fucking awful. Nevertheles less.

0:14:00.320 --> 0:14:02.640
<v Speaker 1>It was necessary to do because of the fuck with

0:14:03.360 --> 0:14:06.480
<v Speaker 1>nature of the whole thing, because of the stupid gambling

0:14:06.520 --> 0:14:08.840
<v Speaker 1>they did, because of the low reserves they had, and

0:14:08.880 --> 0:14:12.600
<v Speaker 1>how brittle everything was, which is their fault. That's very

0:14:12.640 --> 0:14:16.920
<v Speaker 1>different to the bailout not being necessary. Though, now getting

0:14:16.960 --> 0:14:19.800
<v Speaker 1>back to AI. Without open AI and anthropic the AI

0:14:19.880 --> 0:14:22.600
<v Speaker 1>industry would disappear, as with the demand for AI compume.

0:14:22.840 --> 0:14:25.040
<v Speaker 1>It would lead to billions of dollars of loans going unpaid,

0:14:25.080 --> 0:14:27.000
<v Speaker 1>and the value of venture capital would probably be cut

0:14:27.040 --> 0:14:29.160
<v Speaker 1>in half or as much as eighty or ninety percent

0:14:29.200 --> 0:14:30.560
<v Speaker 1>has happened with the dot com bubble.

0:14:31.000 --> 0:14:32.600
<v Speaker 2>It'd be horrible for the markets core.

0:14:32.600 --> 0:14:35.760
<v Speaker 1>We would die, iron would die, and heaviest would die.

0:14:36.200 --> 0:14:38.640
<v Speaker 1>I think the open A and anthropics death would end

0:14:38.720 --> 0:14:41.240
<v Speaker 1>up ripping through the entirety of silicon value. I think

0:14:41.480 --> 0:14:44.120
<v Speaker 1>that it would be a payback for years of focusing

0:14:44.160 --> 0:14:47.640
<v Speaker 1>on growth rather than creating anything. On the banking side,

0:14:47.760 --> 0:14:50.160
<v Speaker 1>I do think we are somewhat safer. I think while

0:14:50.160 --> 0:14:53.120
<v Speaker 1>there aren't heavy reserve requirements, there are actual regulations around

0:14:53.320 --> 0:14:57.480
<v Speaker 1>high risk speculation. And the scale of speculation here is

0:14:57.560 --> 0:15:00.000
<v Speaker 1>ten tiny compared to I think it's like five trillion

0:15:00.080 --> 0:15:03.040
<v Speaker 1>and synthetic CEOs or something of that nature. There aren't

0:15:03.080 --> 0:15:07.400
<v Speaker 1>trillions of dollars of speculation here, billions, hundreds of billions. Sure,

0:15:07.560 --> 0:15:11.040
<v Speaker 1>And I'm fairly sure, fairly confident that a lot of

0:15:11.080 --> 0:15:13.640
<v Speaker 1>these banks and private equity firms and private credit firms

0:15:13.720 --> 0:15:16.840
<v Speaker 1>have some degree of reserves built in for these loans

0:15:16.920 --> 0:15:20.080
<v Speaker 1>going tits up. In the case of AI Data centers,

0:15:21.320 --> 0:15:24.680
<v Speaker 1>their debts, these AI companies debts wouldn't create a calamity

0:15:24.680 --> 0:15:26.960
<v Speaker 1>that would stop loans in general, or insurance in general

0:15:27.000 --> 0:15:29.760
<v Speaker 1>from being collateralized or any other basic functions of the

0:15:29.840 --> 0:15:33.000
<v Speaker 1>US economy. I'll also add the Nvidia and the rest

0:15:33.000 --> 0:15:34.560
<v Speaker 1>of the Magnificent Seven are going to die as a

0:15:34.600 --> 0:15:36.760
<v Speaker 1>result of the AI bubble bursting. They're not going to

0:15:36.840 --> 0:15:41.000
<v Speaker 1>need bailouts. I think oracles bailout chances are there, But

0:15:41.120 --> 0:15:44.000
<v Speaker 1>even then I'm kind of hesitant to say so, because

0:15:45.480 --> 0:15:47.440
<v Speaker 1>I don't know what they'd be better. Maybe bailing out

0:15:47.480 --> 0:15:50.440
<v Speaker 1>the loans they create a little Larry Ellison's shaped top

0:15:50.720 --> 0:15:53.000
<v Speaker 1>just for that fuck nut, But I actually don't know

0:15:53.040 --> 0:15:56.560
<v Speaker 1>if that would happen. Top was deeply unprop it was

0:15:56.600 --> 0:15:59.840
<v Speaker 1>deeply unpopular, deeply deeply unpopular. And Trump's already having enough.

0:16:00.440 --> 0:16:03.239
<v Speaker 1>I'm sure he's doing that. We're touching the stove competition.

0:16:03.800 --> 0:16:06.160
<v Speaker 1>But at the same time, I just don't see it

0:16:06.200 --> 0:16:08.520
<v Speaker 1>happening in the same way. And even then, I still

0:16:08.560 --> 0:16:11.320
<v Speaker 1>think Oracle would die and get absorbed into another company,

0:16:11.320 --> 0:16:14.200
<v Speaker 1>probably Microsoft. Wouldn't that be funny, man? The anti trust

0:16:14.200 --> 0:16:18.320
<v Speaker 1>would be crazy. That being set, I think that the

0:16:18.480 --> 0:16:21.359
<v Speaker 1>AI bubble will eventually be seen as a smaller precursor,

0:16:21.440 --> 0:16:23.160
<v Speaker 1>much like the dot com bubble was to the Great

0:16:23.160 --> 0:16:26.760
<v Speaker 1>Financial Crisis, to a larger financial crisis created by private

0:16:26.760 --> 0:16:28.760
<v Speaker 1>credit and private equity, and there are hundreds of billions

0:16:28.760 --> 0:16:32.640
<v Speaker 1>of dodgy investments in software and random companies. I am

0:16:32.720 --> 0:16:35.000
<v Speaker 1>still working out how bad this would be, and I

0:16:35.000 --> 0:16:36.800
<v Speaker 1>don't want to be an alarmist. I actually don't think

0:16:36.800 --> 0:16:38.640
<v Speaker 1>it will be as bad as the Great Financial Crisis,

0:16:38.640 --> 0:16:40.160
<v Speaker 1>but that is a question I'm going to try and

0:16:40.240 --> 0:16:43.320
<v Speaker 1>answer in the future. An open AI and anthropic aren't

0:16:43.320 --> 0:16:45.800
<v Speaker 1>getting bailed out. It's not happening. I don't care if

0:16:45.800 --> 0:16:48.920
<v Speaker 1>you think, oh, the Department of Events uses them, They're

0:16:48.960 --> 0:16:50.440
<v Speaker 1>not going to bail them out for that reason, They're

0:16:50.440 --> 0:16:52.600
<v Speaker 1>not going to put them into conservativeship. It's not going

0:16:52.680 --> 0:16:55.240
<v Speaker 1>to happen. It's not It would be deeply unpopular, and

0:16:55.360 --> 0:16:58.680
<v Speaker 1>also to what end a festering hole in the side

0:16:58.680 --> 0:17:03.480
<v Speaker 1>of the government. You already have Congress anyway. AI data

0:17:03.520 --> 0:17:06.600
<v Speaker 1>centers aren't getting bailed out either. I really need to

0:17:06.600 --> 0:17:08.919
<v Speaker 1>be clear about that. Houses were not bailed out for

0:17:08.960 --> 0:17:13.000
<v Speaker 1>closures will not bailed out. Perhaps the ABSs might have

0:17:13.119 --> 0:17:16.000
<v Speaker 1>some hope the asset back securities, but even then I

0:17:16.000 --> 0:17:18.720
<v Speaker 1>don't think the scale of those is anywhere close to

0:17:18.760 --> 0:17:21.800
<v Speaker 1>the Great Financial Crisis. And to be clear, the collapse

0:17:21.800 --> 0:17:25.080
<v Speaker 1>of the AI industry will fucking hurt. It will brutalize

0:17:25.080 --> 0:17:27.800
<v Speaker 1>the banks in private credit firms involved. It will fuck

0:17:27.920 --> 0:17:31.280
<v Speaker 1>venture capital for years, if not over a decade. Earning

0:17:31.320 --> 0:17:34.080
<v Speaker 1>seasons are going to look like the dog from John

0:17:34.119 --> 0:17:36.440
<v Speaker 1>Carpenter's The Thing. It's going to be horrible for them

0:17:36.440 --> 0:17:38.880
<v Speaker 1>and horrible for people invested in the market. It's not

0:17:38.960 --> 0:17:41.480
<v Speaker 1>going to be nice. I am not saying that it's

0:17:41.520 --> 0:17:45.399
<v Speaker 1>not going to hurt, but that is meaningfully different to

0:17:45.480 --> 0:17:47.840
<v Speaker 1>anything being too big to fail. And I'm tired of

0:17:47.880 --> 0:17:50.960
<v Speaker 1>people saying things without actually bothering to understand what they mean.