AI transcript
0:00:03 This is a Reese’s Peanut Butter Cups sound experiment.
0:00:07 We’re looking to find the perfect way to hear Reese’s, so you’ll buy more of them.
0:00:08 Here we go.
0:00:11 Reese’s, Reese’s.
0:00:14 Reese’s, Reese’s.
0:00:17 Reese’s, get out of here, you little stinker!
0:00:22 Reese’s, Reese’s.
0:00:24 Reese’s.
0:00:26 Peanut Butter Cups.
0:00:31 That breathy one sounded very creepy, am I right?
0:00:33 What’s up y’all, this is Kenny Beachham.
0:00:36 On this week’s episode of Small Ball, we get into maybe the wildest, craziest, most
0:00:38 shocking week in NBA history.
0:00:41 The trade deadline came, and it did not disappoint.
0:00:46 Some trades I love, some I hate it, and some made absolutely no sense at all.
0:00:49 The league has been shaken up, and I’m here to break it all down with you.
0:00:51 Man, what a time to be an NBA fan.
0:00:55 You can watch Small Ball on YouTube, or listen wherever you get your podcasts.
0:01:00 Episodes drop every Friday.
0:01:03 This isn’t your grandpa’s finance podcast.
0:01:07 It’s Vivian2, your HBFF, and host of the Net Worth & Chill podcast.
0:01:12 This is money talk that’s actually fun, actually relatable, and will actually make you money.
0:01:15 I’m breaking down investments, side hustles, and wealth strategies.
0:01:19 No boring spreadsheets, just real talk that’ll have you leveling up your financial game.
0:01:21 With amazing guests like Glenda Baker.
0:01:24 There’s never been any house staff sold in the last 32 years.
0:01:27 It’s not worth more today than it was the day that I sold it.
0:01:30 This is a money podcast that you’ll actually want to listen to.
0:01:32 Follow Net Worth & Chill wherever you listen to podcasts.
0:01:37 Your bank account will thank you later.
0:01:41 I’m Scott Galloway, and this is No Mercy, No Malice.
0:01:48 Which AI company will build and sustain trillions of dollars in shareholder value?
0:01:51 The answer is no.
0:02:02 The New World of AI, as read by George Hahn.
0:02:10 A hat tip here to Financial Times columnist Robert Armstrong, who gave some insight on
0:02:13 the ProfG Markets podcast, which led to this post.
0:02:20 Deepseek, which has wiped out more than a trillion dollars in market value so far.
0:02:21 What is your view on Deepseek?
0:02:25 In a way, a genie has been let out of the bottle that cannot be put back in.
0:02:32 If it is in fact true that AI models are much cheaper to build and even run than we thought
0:02:36 before, people who are on the right side of this trade is everyone.
0:02:41 Now we have a vision of the AI industry where it is much more competitive.
0:02:44 Much of the value might be captured by consumers rather than companies.
0:02:53 A new technology emerges that ushers in remarkable productivity or, better yet, dopamine on demand.
0:02:58 A group of talented people builds a thick layer of innovation on top of the tech, financed
0:03:05 by government, and a small number of CEOs leverage storytelling to access cheap capital
0:03:09 and overwhelm the competition with brute force.
0:03:16 These companies engage in regulatory capture, i.e., they become johns for our elected whores,
0:03:19 and create trillions in shareholder value.
0:03:27 GPS, e-commerce, payments, search, social, streaming, all produced trillion-dollar-plus
0:03:28 entities.
0:03:35 AI is likely as transformative a technology as the aforementioned, and it’s already
0:03:39 setting records for consumer and enterprise adoption.
0:03:47 So the question is, which organizations will capture and sustain trillions in shareholder
0:03:48 value?
0:03:52 The answer may be no.
0:03:57 Mark Andreessen says DeepSeek is AI’s Sputnik moment.
0:03:59 That’s the wrong analogy.
0:04:05 This isn’t a rival flexing technological superiority, but dispelling the myth that we
0:04:09 the U.S. are the only game in town.
0:04:15 The Soviet Union did that before Sputnik in 1949 when it detonated its first nuclear
0:04:16 weapon.
0:04:24 Bicycles, sanitation, airplanes, vaccines, and CRISPR are just a few technologies that
0:04:30 have changed the world, but their benefits were dispersed across society rather than
0:04:33 being hoarded by a few shareholders.
0:04:38 I increasingly believe AI will join this roster.
0:04:45 It presents dynamics similar to most stakeholder versus shareholder innovations, government-backed
0:04:53 or university-developed like the internet, GPS, vaccines, open-source or public domain
0:05:04 like Linux, Python, Wikipedia, USB, and two foundational to be monopolized like bicycles,
0:05:07 sanitation, airplanes.
0:05:13 In sum, the winners here will be stakeholders, not shareholders.
0:05:16 Scan your emotions after reading the last sentence.
0:05:24 Did you reflexively grab your shareholder pearls and feel this was maybe a bad thing?
0:05:26 It isn’t.
0:05:32 America becomes more like itself every day, and our obsession with and idolatry of the
0:05:37 dollar has put the public good in the back seat.
0:05:42 Billions of stakeholders benefiting from AI versus one business becoming worth more
0:05:49 than every stock market on earth except Japan and the U.S. and one man being worth more
0:06:00 than Boeing feels less sexy, less American, hint, Nvidia, and Jensen Huang.
0:06:08 In December, Chinese hedge fund HiFlyer released an open-source AI chatbot called DeepSeek that
0:06:12 looks to be almost as good as OpenAI’s chat GPT.
0:06:17 It was reportedly designed in a matter of months by modestly paid millennial engineers
0:06:24 and doesn’t run on the expensive Nvidia chips the U.S. prohibits from being sold to China.
0:06:29 DeepSeek reportedly cost $5 million to train.
0:06:34 It cost $100 million to train OpenAI’s LLM.
0:06:42 Nvidia fell 17% on January 27, losing over half the trillion dollars in market cap.
0:06:49 In one day, the company shed the value of the entire global auto industry, not including
0:06:50 Tesla.
0:06:57 We don’t know if January 27 was a speed bump in AI or the beginning of a tech market correction
0:07:01 many have been expecting for 15 years.
0:07:06 Some air definitely came out of the balloon, but just some.
0:07:10 Nvidia fell to its October 2024 price level.
0:07:11 No big deal.
0:07:16 The DeepSeek revelation was shocking, but not surprising.
0:07:21 A Chinese company knocks off an expensive U.S. product at lower cost?
0:07:23 See above.
0:07:24 China.
0:07:29 In retrospect, it’s easy to identify the action that rang the bell at the apex of a
0:07:30 market.
0:07:37 I believe the gong may have been the news that SoftBank is close to leading a $40 billion
0:07:44 investment in OpenAI at a valuation of $340 billion.
0:07:49 This is double the valuation the firm raised at four months ago and a similar valuation
0:07:52 to TikTok parent ByteDance.
0:07:57 IP theft and addiction are both great businesses, however.
0:08:06 Time pays more as OpenAI is being valued at 92X revenues versus ByteDance at 2.3X.
0:08:11 Jesus, after reading the last sentence, I wonder if Sam Altman is going to begin using
0:08:16 terms such as “community-based EBITDA”.
0:08:23 Masayoshi Sahn’s limited partners, i.e. his investors, are looking for venture-type returns
0:08:33 – 3X to 5X in 7 to 10 years, meaning MASA’s LPs, i.e. masachists, believe OpenAI will
0:08:38 be one of the 10 most valuable firms in the world… soon.
0:08:46 Yesterday, I skirted along the edge of the atmosphere at 4/5 the speed of sound, traveling
0:08:50 from London to New York in 7 hours.
0:08:54 The least expensive tickets were $400.
0:08:59 Jet transport technology has changed the world.
0:09:03 Sixty years ago, my mother crossed the Atlantic in a steamship.
0:09:08 It took seven days and cost 4X what flying does today.
0:09:11 Commercial aviation has created enormous value.
0:09:18 However, the vast majority of that value has been captured by consumers and society
0:09:20 versus airlines.
0:09:27 Since 1945, the industry has experienced years of low-margin profitability only to have its
0:09:36 gains wiped out by periods of huge losses, like $128 billion in 2020.
0:09:42 Starting in the 1980s, personal computers put technology that had cost tens of millions
0:09:46 twenty years earlier on nearly every person’s desk.
0:09:52 The gains in productivity globally have been substantial.
0:09:57 I was on the board of Gateway Computer in 2006, weak flex.
0:10:03 We were the second largest manufacturer by unit volume of a technology that at the time
0:10:08 had greater adoption and a bigger impact than AI has at this moment.
0:10:15 I raised and purchased 18% of the firm for $90 million.
0:10:22 18 months later, we sold it to Acer for $900 million.
0:10:23 Why?
0:10:31 A. The CEO urged us to sell, as he felt there was a real risk we might run out of money.
0:10:33 Think about this.
0:10:40 NVIDIA shed 600 gateways on the deep-seek news.
0:10:46 AI could be enormously valuable and at the same time a lousy business.
0:10:53 As with email, the user may capture 99% of the value and the manufacturer 1%.
0:10:59 What looked at first, like a proprietary asset, may turn out to be a public good.
0:11:03 By the way, isn’t this how education and healthcare are supposed to work?
0:11:06 But that’s another post.
0:11:09 Vaccines may be a useful analog here.
0:11:13 I have a stock screen looking for potential fallen angels to buy.
0:11:15 One of them is Moderna.
0:11:21 At the height of the pandemic, the company’s stock was nearly $500 a share.
0:11:25 As I write this, it’s $33.
0:11:30 Vaccines may be the greatest innovation in modern history, however their value to shareholders
0:11:34 is fleeting.
0:11:39 Common assets can transform into public ones for a variety of reasons.
0:11:43 Economists have different words for the process depending on the details.
0:11:52 It might be called decommodification, non-excludability through diffusion or commonization.
0:11:57 They’re all Latin for “there is no money here.”
0:12:01 The ironies of deep-seek are pretty rich.
0:12:08 The biggest is, as John Stuart pointed out, AI stole AI’s job.
0:12:13 Another one is the way Sam Altman has been bitching that deep-seek stole some of his
0:12:20 IP, distilling big open AI models to produce its own smaller, more efficient version.
0:12:26 This conjures Steve Jobs whining that Bill Gates stole the idea of a graphic user interface
0:12:28 from Apple.
0:12:33 Gates responded that Apple had stolen the idea too, when Xerox Park left its garage
0:12:36 door open.
0:12:42 Open AI is built on data it took from other people under the banner of fair use.
0:12:47 Hannibal Lecter is a rate that his neighbors aren’t vegan.
0:12:52 Another irony is that the US’s attempt to keep American-made ships out of China may
0:12:56 turn out to be a powerful argument in favor of free trade.
0:13:03 NVIDIA is now in a reasonable position to tell the US government “you’ve only created
0:13:11 an incentive for adversaries to develop workarounds, destabling the AI industry and US-China relations.”
0:13:16 Anyways, it’s an argument.
0:13:22 Finally though, what looks like it may be very bad for business has the potential to
0:13:25 be wonderful for the rest of us.
0:13:28 Not just for the public, but also for the tech industry.
0:13:35 Since the rise of Amazon and then Netflix, valuations have been driven not by innovation
0:13:38 but capital.
0:13:44 We thought King Kong was singular and under US control.
0:13:49 And then a prehistoric reptile appeared on our shores, empowered by many years of exposure
0:13:51 to nuclear radiation.
0:14:00 FYI Godzilla #awesome was meant to be a metaphor for nuclear weapons.
0:14:10 Feels weird, but recently I find myself rooting for Canada, Denmark and the Lizard.
0:14:12 Life is so rich.
0:14:22 [Music]
0:00:07 We’re looking to find the perfect way to hear Reese’s, so you’ll buy more of them.
0:00:08 Here we go.
0:00:11 Reese’s, Reese’s.
0:00:14 Reese’s, Reese’s.
0:00:17 Reese’s, get out of here, you little stinker!
0:00:22 Reese’s, Reese’s.
0:00:24 Reese’s.
0:00:26 Peanut Butter Cups.
0:00:31 That breathy one sounded very creepy, am I right?
0:00:33 What’s up y’all, this is Kenny Beachham.
0:00:36 On this week’s episode of Small Ball, we get into maybe the wildest, craziest, most
0:00:38 shocking week in NBA history.
0:00:41 The trade deadline came, and it did not disappoint.
0:00:46 Some trades I love, some I hate it, and some made absolutely no sense at all.
0:00:49 The league has been shaken up, and I’m here to break it all down with you.
0:00:51 Man, what a time to be an NBA fan.
0:00:55 You can watch Small Ball on YouTube, or listen wherever you get your podcasts.
0:01:00 Episodes drop every Friday.
0:01:03 This isn’t your grandpa’s finance podcast.
0:01:07 It’s Vivian2, your HBFF, and host of the Net Worth & Chill podcast.
0:01:12 This is money talk that’s actually fun, actually relatable, and will actually make you money.
0:01:15 I’m breaking down investments, side hustles, and wealth strategies.
0:01:19 No boring spreadsheets, just real talk that’ll have you leveling up your financial game.
0:01:21 With amazing guests like Glenda Baker.
0:01:24 There’s never been any house staff sold in the last 32 years.
0:01:27 It’s not worth more today than it was the day that I sold it.
0:01:30 This is a money podcast that you’ll actually want to listen to.
0:01:32 Follow Net Worth & Chill wherever you listen to podcasts.
0:01:37 Your bank account will thank you later.
0:01:41 I’m Scott Galloway, and this is No Mercy, No Malice.
0:01:48 Which AI company will build and sustain trillions of dollars in shareholder value?
0:01:51 The answer is no.
0:02:02 The New World of AI, as read by George Hahn.
0:02:10 A hat tip here to Financial Times columnist Robert Armstrong, who gave some insight on
0:02:13 the ProfG Markets podcast, which led to this post.
0:02:20 Deepseek, which has wiped out more than a trillion dollars in market value so far.
0:02:21 What is your view on Deepseek?
0:02:25 In a way, a genie has been let out of the bottle that cannot be put back in.
0:02:32 If it is in fact true that AI models are much cheaper to build and even run than we thought
0:02:36 before, people who are on the right side of this trade is everyone.
0:02:41 Now we have a vision of the AI industry where it is much more competitive.
0:02:44 Much of the value might be captured by consumers rather than companies.
0:02:53 A new technology emerges that ushers in remarkable productivity or, better yet, dopamine on demand.
0:02:58 A group of talented people builds a thick layer of innovation on top of the tech, financed
0:03:05 by government, and a small number of CEOs leverage storytelling to access cheap capital
0:03:09 and overwhelm the competition with brute force.
0:03:16 These companies engage in regulatory capture, i.e., they become johns for our elected whores,
0:03:19 and create trillions in shareholder value.
0:03:27 GPS, e-commerce, payments, search, social, streaming, all produced trillion-dollar-plus
0:03:28 entities.
0:03:35 AI is likely as transformative a technology as the aforementioned, and it’s already
0:03:39 setting records for consumer and enterprise adoption.
0:03:47 So the question is, which organizations will capture and sustain trillions in shareholder
0:03:48 value?
0:03:52 The answer may be no.
0:03:57 Mark Andreessen says DeepSeek is AI’s Sputnik moment.
0:03:59 That’s the wrong analogy.
0:04:05 This isn’t a rival flexing technological superiority, but dispelling the myth that we
0:04:09 the U.S. are the only game in town.
0:04:15 The Soviet Union did that before Sputnik in 1949 when it detonated its first nuclear
0:04:16 weapon.
0:04:24 Bicycles, sanitation, airplanes, vaccines, and CRISPR are just a few technologies that
0:04:30 have changed the world, but their benefits were dispersed across society rather than
0:04:33 being hoarded by a few shareholders.
0:04:38 I increasingly believe AI will join this roster.
0:04:45 It presents dynamics similar to most stakeholder versus shareholder innovations, government-backed
0:04:53 or university-developed like the internet, GPS, vaccines, open-source or public domain
0:05:04 like Linux, Python, Wikipedia, USB, and two foundational to be monopolized like bicycles,
0:05:07 sanitation, airplanes.
0:05:13 In sum, the winners here will be stakeholders, not shareholders.
0:05:16 Scan your emotions after reading the last sentence.
0:05:24 Did you reflexively grab your shareholder pearls and feel this was maybe a bad thing?
0:05:26 It isn’t.
0:05:32 America becomes more like itself every day, and our obsession with and idolatry of the
0:05:37 dollar has put the public good in the back seat.
0:05:42 Billions of stakeholders benefiting from AI versus one business becoming worth more
0:05:49 than every stock market on earth except Japan and the U.S. and one man being worth more
0:06:00 than Boeing feels less sexy, less American, hint, Nvidia, and Jensen Huang.
0:06:08 In December, Chinese hedge fund HiFlyer released an open-source AI chatbot called DeepSeek that
0:06:12 looks to be almost as good as OpenAI’s chat GPT.
0:06:17 It was reportedly designed in a matter of months by modestly paid millennial engineers
0:06:24 and doesn’t run on the expensive Nvidia chips the U.S. prohibits from being sold to China.
0:06:29 DeepSeek reportedly cost $5 million to train.
0:06:34 It cost $100 million to train OpenAI’s LLM.
0:06:42 Nvidia fell 17% on January 27, losing over half the trillion dollars in market cap.
0:06:49 In one day, the company shed the value of the entire global auto industry, not including
0:06:50 Tesla.
0:06:57 We don’t know if January 27 was a speed bump in AI or the beginning of a tech market correction
0:07:01 many have been expecting for 15 years.
0:07:06 Some air definitely came out of the balloon, but just some.
0:07:10 Nvidia fell to its October 2024 price level.
0:07:11 No big deal.
0:07:16 The DeepSeek revelation was shocking, but not surprising.
0:07:21 A Chinese company knocks off an expensive U.S. product at lower cost?
0:07:23 See above.
0:07:24 China.
0:07:29 In retrospect, it’s easy to identify the action that rang the bell at the apex of a
0:07:30 market.
0:07:37 I believe the gong may have been the news that SoftBank is close to leading a $40 billion
0:07:44 investment in OpenAI at a valuation of $340 billion.
0:07:49 This is double the valuation the firm raised at four months ago and a similar valuation
0:07:52 to TikTok parent ByteDance.
0:07:57 IP theft and addiction are both great businesses, however.
0:08:06 Time pays more as OpenAI is being valued at 92X revenues versus ByteDance at 2.3X.
0:08:11 Jesus, after reading the last sentence, I wonder if Sam Altman is going to begin using
0:08:16 terms such as “community-based EBITDA”.
0:08:23 Masayoshi Sahn’s limited partners, i.e. his investors, are looking for venture-type returns
0:08:33 – 3X to 5X in 7 to 10 years, meaning MASA’s LPs, i.e. masachists, believe OpenAI will
0:08:38 be one of the 10 most valuable firms in the world… soon.
0:08:46 Yesterday, I skirted along the edge of the atmosphere at 4/5 the speed of sound, traveling
0:08:50 from London to New York in 7 hours.
0:08:54 The least expensive tickets were $400.
0:08:59 Jet transport technology has changed the world.
0:09:03 Sixty years ago, my mother crossed the Atlantic in a steamship.
0:09:08 It took seven days and cost 4X what flying does today.
0:09:11 Commercial aviation has created enormous value.
0:09:18 However, the vast majority of that value has been captured by consumers and society
0:09:20 versus airlines.
0:09:27 Since 1945, the industry has experienced years of low-margin profitability only to have its
0:09:36 gains wiped out by periods of huge losses, like $128 billion in 2020.
0:09:42 Starting in the 1980s, personal computers put technology that had cost tens of millions
0:09:46 twenty years earlier on nearly every person’s desk.
0:09:52 The gains in productivity globally have been substantial.
0:09:57 I was on the board of Gateway Computer in 2006, weak flex.
0:10:03 We were the second largest manufacturer by unit volume of a technology that at the time
0:10:08 had greater adoption and a bigger impact than AI has at this moment.
0:10:15 I raised and purchased 18% of the firm for $90 million.
0:10:22 18 months later, we sold it to Acer for $900 million.
0:10:23 Why?
0:10:31 A. The CEO urged us to sell, as he felt there was a real risk we might run out of money.
0:10:33 Think about this.
0:10:40 NVIDIA shed 600 gateways on the deep-seek news.
0:10:46 AI could be enormously valuable and at the same time a lousy business.
0:10:53 As with email, the user may capture 99% of the value and the manufacturer 1%.
0:10:59 What looked at first, like a proprietary asset, may turn out to be a public good.
0:11:03 By the way, isn’t this how education and healthcare are supposed to work?
0:11:06 But that’s another post.
0:11:09 Vaccines may be a useful analog here.
0:11:13 I have a stock screen looking for potential fallen angels to buy.
0:11:15 One of them is Moderna.
0:11:21 At the height of the pandemic, the company’s stock was nearly $500 a share.
0:11:25 As I write this, it’s $33.
0:11:30 Vaccines may be the greatest innovation in modern history, however their value to shareholders
0:11:34 is fleeting.
0:11:39 Common assets can transform into public ones for a variety of reasons.
0:11:43 Economists have different words for the process depending on the details.
0:11:52 It might be called decommodification, non-excludability through diffusion or commonization.
0:11:57 They’re all Latin for “there is no money here.”
0:12:01 The ironies of deep-seek are pretty rich.
0:12:08 The biggest is, as John Stuart pointed out, AI stole AI’s job.
0:12:13 Another one is the way Sam Altman has been bitching that deep-seek stole some of his
0:12:20 IP, distilling big open AI models to produce its own smaller, more efficient version.
0:12:26 This conjures Steve Jobs whining that Bill Gates stole the idea of a graphic user interface
0:12:28 from Apple.
0:12:33 Gates responded that Apple had stolen the idea too, when Xerox Park left its garage
0:12:36 door open.
0:12:42 Open AI is built on data it took from other people under the banner of fair use.
0:12:47 Hannibal Lecter is a rate that his neighbors aren’t vegan.
0:12:52 Another irony is that the US’s attempt to keep American-made ships out of China may
0:12:56 turn out to be a powerful argument in favor of free trade.
0:13:03 NVIDIA is now in a reasonable position to tell the US government “you’ve only created
0:13:11 an incentive for adversaries to develop workarounds, destabling the AI industry and US-China relations.”
0:13:16 Anyways, it’s an argument.
0:13:22 Finally though, what looks like it may be very bad for business has the potential to
0:13:25 be wonderful for the rest of us.
0:13:28 Not just for the public, but also for the tech industry.
0:13:35 Since the rise of Amazon and then Netflix, valuations have been driven not by innovation
0:13:38 but capital.
0:13:44 We thought King Kong was singular and under US control.
0:13:49 And then a prehistoric reptile appeared on our shores, empowered by many years of exposure
0:13:51 to nuclear radiation.
0:14:00 FYI Godzilla #awesome was meant to be a metaphor for nuclear weapons.
0:14:10 Feels weird, but recently I find myself rooting for Canada, Denmark and the Lizard.
0:14:12 Life is so rich.
0:14:22 [Music]
As read by George Hahn.
A New AI World
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