Speaker 1: Also media, Hello and welcome to this week's Better Offline Monologue.
Speaker 1: I'm your host ed ze tron. It's gonna be a
Speaker 1: double monologue week. After last week's dramatic exclusive, I've been
Speaker 1: slammed with interviews and personal life stuff that made it
Speaker 1: feel like I was being hit in the head with
Speaker 1: a pool noodle twenty four to seven. Feeling a lot
Speaker 1: better now, but nevertheless, this is where I need to
Speaker 1: focus myself. I've also been enjoying a lot of the
Speaker 1: responses to my exclusive about open Aiyes twenty twenty four
Speaker 1: and twenty twenty five financials Now. Some have been mighty
Speaker 1: confident about Inference being profitable due to a seven point
Speaker 1: five billion dollar cost of revenue on thirteen point h
Speaker 1: seven billion dollars in revenue, but overlooked my reporting from
Speaker 1: last year verified by the Financial Times, by the way,
Speaker 1: that showed open Aye spent eight point six seven billion
Speaker 1: dollars specifically on infrared in the first nine months of
Speaker 1: twenty twenty five. It's very very clear that open Ai
Speaker 1: moved around numbers to make things look better than they are,
Speaker 1: and I believe that inference costs are being dumped into
Speaker 1: sales and marketing How else can you explain how a
Speaker 1: company spends more than forty three percent of its revenue
Speaker 1: five point seven three billion dollars on sales and marketing,
Speaker 1: more than the Coca Cola Corporation, which has three ad
Speaker 1: agencies and a vast web of different print, digital and
Speaker 1: physical ads spend. I think they do some influence of
Speaker 1: things as well. Hotously, if the Diet Coke Corporation wants
Speaker 1: to get in touch, please do. Nevertheless, Microsoft also had
Speaker 1: five hundred million dollars of sales and marketing spend too
Speaker 1: via open Ai. What do you think that is open
Speaker 1: ai spending five hundred million dollars on sales and marketing
Speaker 1: through Microsoft? Or is it them itemizing promotional spend or
Speaker 1: the inference and free users as a sales and marketing cost. Now,
Speaker 1: if you disagree, and I'm sure some of you do,
Speaker 1: please explain in any detail, love any level of detail, really,
Speaker 1: how open ai has spent five point six seven billion
Speaker 1: dollars and sales and marketing otherwise. Its first major advertising
Speaker 1: campaign was in September twenty twenty five. If it's spending
Speaker 1: let's say two hundred and fifty thousand dollars a year
Speaker 1: on its five hundred sales stuff that's still only one
Speaker 1: hundred and twenty five million dollars. Unless open ai is
Speaker 1: one of the single largest accounts in digital advertising and
Speaker 1: speaking with people all over the shop, I don't think
Speaker 1: that's true. I think it's far more likely that there
Speaker 1: are actual costs being hidden. And this is the kind
Speaker 1: of thing a company does when it has utter loathing
Speaker 1: for its investors, the media, and the general public, a
Speaker 1: brazen attempt to bury costs to make things look better
Speaker 1: for an audience that's directly incentivized to take any shred
Speaker 1: of proof that things are okay. Nowhere is this more
Speaker 1: obvious than in the FT's story, and I'm specifically referring
Speaker 1: to a quote where a source familiar with the matter
Speaker 1: suggested that somehow open ai only lost eight billion dollars
Speaker 1: in twenty twenty five, rather than the twenty point nine
Speaker 1: billion dollars it actually lost. Accountancy voodoo doesn't work on me.
Speaker 1: Clam you well, I'm better than that. But this comment,
Speaker 1: in my opinion, was not actually meant for the readers
Speaker 1: of the FT, but for the larger AI cargo cult.
Speaker 1: As I wrote in my free newsletter this week, Silicon
Speaker 1: Valley as exemplified by the AI bubble, has abandoned its
Speaker 1: supposed principles of rationality and meritocracy, and now more closely
Speaker 1: resembles a cargo cult desperate to recreate bygone eras of growth.
Speaker 1: Open AI and Anthropic are not interested in operating with
Speaker 1: honesty or integrity, nor are they particularly concerned with building
Speaker 1: real companies. They lose billions of dollars. They always have
Speaker 1: and they always will. Nothing changes that. They must keep
Speaker 1: the mythology of their company's going so that they can
Speaker 1: keep raising money in perpetuity until someone works out how
Speaker 1: to build a real company. Not that that will happen.
Speaker 1: But nevertheless, the things that they say they exist to
Speaker 1: feed the tech media in AI Booster's symbolic proof that
Speaker 1: the great prophecy that Open Ai and Anthropic will grow
Speaker 1: and be the biggest companies in the world. They'll be profitable,
Speaker 1: and AI will be the next Big Three. Well, they
Speaker 1: need that, They need you to believe these things so
Speaker 1: that the great prophecy will come true. It must come true.
Speaker 1: Don't you understand if it doesn't come true, Well, Warrio
Speaker 1: Amiday can't be an elder statesman forever. And this is
Speaker 1: why both companies have used annualized run rates and never
Speaker 1: really addressed the profitability question outside of dario Amidae's stylized facts,
Speaker 1: because they know that Silicon Valley is a monoculture dominated
Speaker 1: by people who don't interact with society outside of sand
Speaker 1: Hill Road, who they believe are gullible enough to accept
Speaker 1: and promote any rationalization that confirms their beliefs or indeed
Speaker 1: the great prophecy. And I mean they've they've been completely
Speaker 1: right so far. The AI industry doesn't feel the need
Speaker 1: to prove itself because it has complete contempt for its customers,
Speaker 1: the media, and the markets, believing they'll slurp up whatever
Speaker 1: slot they get and take it as proof that that
Speaker 1: great prophecy, my friends, will come true and all of us,
Speaker 1: all of us will be purifer And why wouldn't they.
Speaker 1: The media is accepted basically every single narrative the AI
Speaker 1: industry is created. AI boosters will accept effectively any proof
Speaker 1: that things going well, and we'll actively attack and ostracize
Speaker 1: any non believers. And if I'm honest, there are members
Speaker 1: of the media who do this too. And if you're listening,
Speaker 1: I'm not scared. You only make me stronger. You only
Speaker 1: make my posts longer too. But really, this is how
Speaker 1: it all works. This is how it's worked with AI.
Speaker 1: It's how they tried to make crypto and the metaverse work.
Speaker 1: But it really worked with AI because lllm's two do
Speaker 1: that kind of cargo cultish evans generation. Oh, it could
Speaker 1: potentially replace software engineers because it can burp out some code. Oh,
Speaker 1: it can look at my taxes and say stuff that
Speaker 1: means it can do my taxes, just enough symbology to
Speaker 1: push this bullshit through for an indeterminate end. Let's be honest,
Speaker 1: it's not going to be a government bailout. I've covered
Speaker 1: that in a previous monologue. Go back and listen to it.
Speaker 1: Not repeating myself, but this is Silicon Valley, and Silicon
Speaker 1: Valley stands for rugged individualism, rationality, and meritocracy, unless, of course,
Speaker 1: everybody in Silicon Valley agrees that idea is good, at
Speaker 1: which point all that bullshit goes out the window. Any
Speaker 1: singular piece of information that even slightly brings positive is
Speaker 1: proof of the grand prophecy of growth that AI promises,
Speaker 1: and chosen are those who take said proof, and cursed
Speaker 1: are those who question it. You dare to report an
Speaker 1: open aiy's actual revenues. No non believer help with him.
Speaker 1: It's we're going to put him in the wicker Man.
Speaker 1: We're going to put the man with the revenues in
Speaker 1: the wicker Man. Except this is this is more like that. Yeah,
Speaker 1: I guess this would be the wicked Man, except I'm
Speaker 1: not like a sexless British policeman. They're more on that. Later,
Speaker 1: I'll go deep down the wicked man hole. Nevertheless, this
Speaker 1: is Silicon Valley. Now, Silicon Valley is just a cult.
Speaker 1: It's a cargo cult where everyone's trying to shuffle shit around,
Speaker 1: put things in the right order to try and usher
Speaker 1: in the next Steve Jobs or the next Bill Gates.
Speaker 1: You ever notice as well that that's all they talk about.
Speaker 1: It's always the guys, it's never the product. You also,
Speaker 1: ever notice that all of these extremely well paid AI
Speaker 1: guys like a Nome shazeog or bought He left Google
Speaker 1: and got bored for two point seven billion dollars by
Speaker 1: Google to go back to Google, then went to open
Speaker 1: ai a month ago. What do you think he did
Speaker 1: at Google? What do you think Barrett Zaff, who left
Speaker 1: open ai too, went to thinking machines that he came
Speaker 1: back to open ai and knows left open Ai. What
Speaker 1: do you think he's done? And now Andre Carpathy he
Speaker 1: just went to Anthropic and he wasn't doing anything for
Speaker 1: two years. Isn't it weird that Andre Carpathy, one of
Speaker 1: the co founders of open Ai, formerly of Tesla, he
Speaker 1: sat around for two years and really didn't do anything.
Speaker 1: He had that Eureka Labs education startup, nothing happened with that.
Speaker 1: It's almost as if the valley moves around different forms
Speaker 1: of symbology hoping that when they're in the right place,
Speaker 1: the next era of growth will begin. And doing this
Speaker 1: allows them to get away from the horrible fact that
Speaker 1: they're out of hypergrowth ideas, that they don't have the
Speaker 1: people who have the ideas anymore. The original iPhone was
Speaker 1: created by a competing teams Tony Fadell and John Forstall.
Speaker 1: I believe the software and hardware teams coming together and
Speaker 1: actually built something people with real industrial expertise. The valley
Speaker 1: now is just I don't know, trading different kinds of
Speaker 1: AI scientists and mathematician in the hopes that one of
Speaker 1: them can usher in the digital god. It's fucking depressing.
Speaker 1: It's depressing, and make no mistake, it will lead Silicon
Speaker 1: Valley to its ruin. Faith can't fill your belly, or
Speaker 1: cover one point one trillion dollars in spending commitments, or
Speaker 1: magic up the more than two trillion dollars in revenue
Speaker 1: that big tech needs to make AI worth it both
Speaker 1: twenty thirty. I don't think it can paid Larry Ellison's
Speaker 1: bills either. In fact, faith can't really do much other
Speaker 1: than create speculative wealth, and speculative wealth can't pay for
Speaker 1: everything forever. I'll got you on Friday. This has been
Speaker 1: better offline, and I bet ed Zetron