US–Intel Partnership, AI Bubble & Market Risks | TSG Ep. 910

Us becomes a partner in Intel. What do they know about the restaurant business you're watching? Textron Gang.

Hey everyone, it's Alan Shimel. Welcome to Tuesday on Textron Gang. You know, we've got, we've got a hardcore gang today.

There's just three of us. I'm happy, but we'll be moving quickly, so it'll be good. Let me introduce you to our gang members for today.

We've got JP Morgenthal and Steven FoST. Steven jp, welcome. Thank you.

Thanks for joining today. You know, yesterday was a busy day. This weekend was a busy weekend.

Last week was a busy week. There is so much news. I we can only pick out three things to cover a day, but we'll try to do some of it justice.

Um, guys, the big news and it, you know, was from, it actually probably started last Tuesday, so a week ago, I, I think when, uh, uh, Intel's CEO was at the White House. That was the day before they wanted a Lynch him. Then they said he was such a great guy.

Now we find out he was such a great guy. 'cause he gave, made the US a 10% partner in this, in this in Intel. So, let me, guys, if you don't mind, I'm gonna start it off.

'cause I wrote an interesting article about this. Interesting to me. Anyhow, funny how, you know, when I first heard this story, I couldn't help but think of the movie Goodfellas, right?

One of the mobs, one of the mobsters beats up some guy from a, who owns the restaurant. Tommy. Tommy beats up a guy who owns a restaurant.

The guy goes crying to big Donny, I mean, poorly and, and, uh, and says, Paul, I, I, this guy's gonna kill me. I need your help. Why don't you be my partner in the restaurant business?

So Tommy won't bother me and poorly smoking a cigar says, very coily, be your partner. What, what do I know about the restaurant business in his best gangster is, what do I know about the restaurant business? And of course, he's being coy.

He doesn't have to know about the restaurant business. This is the way the mafia does. The mob does things, right?

They become your partner. They used the, the, the asset to run up bills, to clear fence goods, to do all kinds of things. And then when it's, there's nothing left to it, they just kind of set it on fire and collect the insurance.

I feel like you're spoiling the movie, man. People should see the film. Well, if you've never seen 20 years, dude, right?

I mean, this is a classic Martin Scorsese film. Sorry, Man. It a, a after, after five years, all spoiler bets are off, man, right?

All right. Yeah. But, but, you know, seriously, I, I couldn't help but think that, first of all, let's face it, they bought this with $10 billion that was already sort of pledged to Intel, or was earmarked, if you want for Intel number.

You know, I, I laid, I, in my article on this, I laid out five or six things that I think are terribly wrong here. Number one, I was a political science major in school. There's two kinds, two forms of government where government actually owns means of production.

One is socialism and one is fascism. Socialism is usually done for equity, right? Make it equitable.

We all own, because we all are part of the government, right? The government is us. And fascism is usually in a nationalistic kinda way, which it sounds nationalistic.

So, you know, we're a country that is Jews excused, socialism and Nash and fascism. Why? What are we doing here?

We point to Taiwan, Russia as examples of go of, of, uh, Singapore, where companies own, where government owns means of production, but they're still democracies that these are countries where people have given up their personal freedoms. It's just, it's not who we are, number one. Number two, how are we gonna build a competitive market?

If, if we've put our finger on the scale and Intel's the house brand, right? Will we ever develop another chip maker in the US who can compete on the world stage? Or have we have, we just anointed the, the chosen one, and that's it.

Number three, how's the rest of the world gonna look at this? Right? For so long, we have, we have, you know, beat the drum about, we're not gonna do bid.

You know, it's not fair. Uh, Japanese steel companies, Chinese steel companies, Korean steel companies have been propped up by the government, unfair labor and unfair trade. And, and that's a reason why we've used to keep companies out of our economy.

Well, now, these same countries are gonna turn around and keep Intel out of their economy because the perception, not the perception. The reality is it's a government owned entity. The market, the market should have blown up on.

I mean, this morning, we should have woken up to, uh, the Dow over a thousand points down on this news. It's, it's, it, it, it shows that the market is just gonna play along and, and take, and take the, the kickbacks and, and feed off of the greed, because I mean, it's anti-competitive. Uh, uh, on any front, you, you look at it, this is anti-competitive.

Uh, you know, it's, it's, it's funny when you said the market should have blown up on this. I thought you were gonna go in the other direction. Essentially, essentially, Intel stock should have shot up, and the market should be on fire because it shows that the US is actively involving itself in the, in the, in the market, and that the US is not going to allow Intel to fail.

I actually thought that's where you were going when you said that, jp, because, you know, my perspective on this is, you know, I mean, uh, setting aside, um, name calling, descriptive or otherwise about what form of government or what, uh, uh, movie metaphors this represents. Uh, you know, if you look at it purely from a capitalist investor standpoint, this is the US government saying, number one, intel will not fail. Uh, Intel has the blessing of the US government.

Number two, uh, you know, the challenge, the biggest challenge for lip Bhutan and Intel has been finding a 14 nanometer client. Um, that's partly because there's concern over the stability of their, uh, and the, you know, the, Their ability to deliver It, Of delivery for the, the 14 nanometer chips. But also because, you know, people I think are a little nervous about betting too heavily on that when, you know, T-S-C-M-C is right there with a decent, you know, alternative.

Um, but having Trump say this and having the administration and the US government, uh, take this share in Intel what it says to me, and what it would say to me if I was a contract manufacturer, anyone from Apple to arm, to, you know, one of these up and coming, AI Accelerator Pro, you know, whatever, Cisco, I mean, all these companies that make chips by designing them and then have somebody else make them for them, I would immediately jump on board with the Intel bag bandwagon, because that's a way to curry favor with the administration. And to show that you're on board with the, with this, I honestly don't understand Why Is that, why Isn't going crazy on this news and why people, investors aren't saying, oh my gosh, like, here we go. Let's do this instead of, instead it seems like they're saying meh, which is shocking.

Well, here, this is not America, man. Well, here's the thing. I think when you live in a market where there's shocking chaos every day, eventually deit desensitized sets in, right?

You're, you're not, you just nothing. And, and that's the biggest problem. And I think, by the way, is part of the governing philosophy here, right?

It's just keep the chaos cloud moving, so you can't focus on any one thing. 'cause you know, last week it was, we're gonna charge you a 15% export fee fee to sell to countries this week. The hell with it, we're just taking over the company itself.

Now, let me ask you another question. This isn't a bailout. Let, Let's differentiate.

This is not a bailout. This is a land grab. We, we had, we've had the US government use treasuries to Bail.

Yeah, I was gonna bring that up. Y have, this is different. But that there, you had very specific, when, when, when the government pulls back out, it was not a permanent thing.

But who, who's running Intel isn't Donald Trump? Because after all, only he, only he can deliver us. And who knows the semiconductor market better Trump than someone Trump who've never heard of Nvidia until last month.

And he knows restaurants too, And restaurants. What does he know about the restaurant? That's the point here, right?

Yeah. He's poly Or he is acting like it. This is, this is all kidding aside, forget what I learned in political theory and, and poli sci.

This is, this is the Putin model. Well, you, you know, it's a, it's an oligarchy. It's a, that that's what this is.

This is it, it, it, it doesn't bode well, it doesn't bode well. And what happens if Intel can't do the 14 nanos, what's gonna happen is the US just gonna write or write it off, and Donald Trump will blame it on Joe Biden somehow. I mean, and, And then there's another aspect to this too that I wanna bring up here too.

And that's that Trump is going around saying, we got $11 billion, a 10% share of Intel for nothing. Nothing. He walked into, he walked into the White House and begged me and said, sir, get, you know, please help me out.

And, and, and he gave me a share. That is not what happened here. Uh, what happened here, actually, it, it is very similar, as JP pointed out to the, uh, Chrysler bailout back in, I believe, 2008, when the US government, I think took like a percent, it Wasn't just Chrysler, GM two No, but, but specifically with Chrysler, they took a share in the company in exchange for the bailout dollars.

Um, she had too. It reminds me of that, like, people going around saying, oh, this is socialism, whatever. Uh, no, this is kind of what the US has done before.

But what's Weird, well, it's Steven, it's very different. The money is coming from funds that had already been allocated by Congress as part of the CHIPS act. And so it's, it's, it's a weird case where Trump basically said, oh, you want that money that you've already been allocated?

Well, you're gonna have to, and, and lip Bhutan, to be honest, I mean, again, to be a a, a swashbuckling capitalist here, uh, came in there and said, huh, okay, sure. We'll make you our partner. And, and again, like I said, now, if I was lutan, I would be going out to every American computer company and saying, you've gotta work with us, or else I'm gonna tell Uncle Don, Steven, I, I don't think, I don't, it's not Uncle Donny.

It's big Donny. But, but here's the deal. You've got this one wrong.

And I'll tell you why. Let me, I, I Had jp I'm on, I'm, I'm unclear on the details of, of, but it, uh, specifics, uh, of how it worked. But I'm pretty sure with the Chrysler, that was not money from Congress.

That was the treasury. It was treasury money, but it was, it was clearly earmarked that we're gonna take an equity stake, but upon financial health, and this is how we define it, that we could sell it for a profit. We will, which they did.

And by the way, they did the same thing. They did the same thing with the banks, right? All the most of the, you know, because what you had in oh 8, 0 9 is all the investment banks got bought by, by JP Morgan and C and so forth Initiative Investment banks in that initiative was based on, um, almost, weren't they based on like bond sales?

Like, it, it acted like, no, It wasn't bond sales. I think there were t bills put up behind it. Like, like guarantees, whatever it was, it was US money, government money, government credit.

But here's, here's the deal here. This is more like big poorly in Goodfellas than 2008. Because what happened was, the day or two before Lip Bond came to Washington, they were beating the hell outta this guy.

Just like the guy in Goodfellas as the patch on his eye and his arm in a cast, Donald Trump and his, and his, his gang, right? Were calling for this man's head. They wanted him rode outta town on a rail tarred and feathered.

They were saying he was in bed with the Chinese Communist Party. He did all these bad things. This guy came limping into the White House.

If they would've told him he has to do this, standing on his head, whistling Dixie backwards, he would have done it. He didn't have a choice. This is, I'm from New York, I'm not jp, so are you.

This ain't, this is not a new script. This is how these guys work. That's how they do.

They, this guy had no leverage. You wanna call it the art of the deal. This is not the art of, this is the art of the mafia.

This guy had no leverage. What choice did he have? Donald Trump said, look, should have Stepped down, is what he should have done.

You Got six and a half billion coming to you from the CHIP Act. I don't think we should give it to you. And I hear there's another three and a half coming from DOD.

I don't know if we should do that, too. You'd like that money, wouldn't you? Or what?

Maybe you should just resign or make me your partner. What do I know about the restaurant business? And in that, That's what happens here.

If your restaurant business is populated by the mafia, you know, what are you gonna do? Burn it down, or you're gonna welcome a new partner? What, what choice did Lipman have?

He had no choice. He had no choice. Now that my, my question is, so I, I happen to believe that, that he is actually a very qualified CEO for Intel.

If we didn't have this mob related, you know, cabal running the government, but is he gonna be allowed to run Intel if what he wants to do with the fabs, does he have to go get big Donny's permission? Do we have to have a sit down, you know, over in Howard Beach or something before he could open a fab somewhere? Are we gonna open Fabs based upon whether they're red states or blue states, or who voted for who?

Or are we gonna open Fabs where we have the best chance of it being successful? This is, this is a, this is a problem, guys. I'm sorry, I I agree with jp.

Steven, I'm sorry. Yeah, I, I, I'm, uh, you know, to be honest, I'm, I'm, I'm a bit being the, uh, devil's advocate here. I know You are.

Um, and, and all I'm saying is that if you were that restaurant owner and that guy's sitting across the table from you, what are you gonna say? You're gonna say, sure, come on in. Hello, Partner, Hello partner.

And that's what, and that's what Lip Butan did. And now that the government is Intel's partner, or the, the other thing that we have to keep in mind here is that this ain't a done deal. Like, uh, for, by all accounts, this is a suggestion, a verbal agreement, a Donny deal, Who knows?

But that's all his deals Are Like, No, but what are the papers gonna say? When does the treasury get these shares? Are they voting shares?

Are they not voting shares? Yeah. So who know What It's really gonna look like?

Yeah, I don't think in, I don't think this necessarily moves Intel out of the woods, I tell you. But anyway, there's a lot written about it. In addition to my article, we have, I don't know, three other articles up on either Textron it and Textron AI on this subject.

You are free to form your own opinions. We, it is just, here's the other thing. Where's the people in this country who scream socialism?

Anytime we wanna do something. That's what I'm wondering, man. It's like All of a sudden it's great, right?

Yeah. All of a sudden, uh, it's fine. Or I don't know, you just pretend that it's Not actually, I, I know sometimes I feel like red pill or blue pill, what's it gonna be?

Because maybe this whole thing is some AI induced Look, you end of the day, the, the strategy, or, or yeah, we'll call it a strategy is not new with regard to, uh, supporting, you know, and ensuring that a large US corporation doesn't go under that, the jobs that made it the, but when you, there's a way to do it. And clearly, well, We, we don't do it usually with Ownership. That template is not being followed here.

Let, there is no transparency. Yeah. Let me throw an, let me throw another kind of just wild ass capital I capitalist idea out at you by doing this.

We're propping up a loser. Intel Fair and Square on the world stage, got their ass kicked. They were the, they were a monopoly for most of all three of our careers, right?

Wintel. And they missed the boat. They, they carried off their game.

They got old. We all get old time for a new King of the Hill time for fresh growth. Yeah.

The biggest, according to Intel themselves, the biggest mistake they ever made was telling Apple to go get bent. When they came to say, do you wanna supply the iPhone chip? They, they missed mobile.

They, they late to ai, all of these things. So if they're not, if they're not on their game, the, the way the market works is they deserve to fall off the wagon, because that clears the forest for new growth. But by doing this, you're propping up, you know, your c your C plus student, your D plus student, and we know who was a d plus student and everything, but you're propping up your C plus D plus student at the expense of, of raising up the new, the new new.

Yeah. This is not about saving jobs. This is not about, no, this is, this is clearly a market.

Thi this, this is a i is going to affect the markets. This, this is market manipulation and this story, this is market manipulation. You know, let the best companies win.

I, I, I'd like to see who the next intel is, right? That, and we may never know now. Anyway, let's take a break on techron gang.

We're gonna come back and talk about feeling the vibe, vibe, coding. You're watching the gang Discover Techron group, the epicenter of tech innovation. We are your go-to for reaching IT, leaders and practitioners worldwide.

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Hey, everyone, we're back here on the gang. You know, I've seen a lot of technology come in the front door and the back door of enterprises over my time and vibe. Coding seems to be one of those.

It's coming in through the windows, even front door, back door, second floor seller all over the place. What's a digital leader to do? Jp, what's your take on this?

Well, you know, it's a, it's an interesting, uh, technology. We, I actually had a great talk, uh, with some of the, uh, individuals at AI for the recent event out in Vegas. Uh, the AI conference.

And this was a great topic of discussion because we talk a lot over the years, an enterprise about the IT iceberg, right? You have what's above the iceberg and what's below the iceberg. And w we all know, and we've been in this industry since the beginning of dinosaur, is that, you know, what's below the iceberg tend below the water waterline tends to get ignored because it's expensive.

And usually, and people don't see the outcome. They don't, they don't, it's important, but they don't see it. So it gets less investment, gets less attention, whereas something above the waterline very visible, right?

And someone gave you the example of the internet when it came out, right? Very visible, consumer oriented above the waterline. Lot of attention.

Well, this same thing is going on with ai. You have something that is incredibly invasive. It is generally available to the public.

It has, uh, immediate impact by using it. You can actually see, uh, you know, the, the impact that it provides. And so therefore, you are looking economically, you know, at, you know, the, from a market perspective, something that's very visible, and you're looking at the ability to do an effect change for by people who in the past had, didn't have the skills to do so, right?

And so you have to assume that this is gonna have, uh, like anything else, tremendous visibility, tremendous impact. And that's what we're seeing. We're seeing that because of it, it's getting a lot of attention.

There's a lot of training out there. There are YouTube videos. People who have never coded, uh, are using these tools to build themselves applications now.

Uh, and, you know, they are seeing an effecting change on a level we haven't seen before. So vibe coding really is an outgrowth of that. It, it's that immediacy, it's that immediate gratification and the ability to talk, do and affect things that you could not before.

You just didn't have the skillset. It required a specialized skillset in order to be able to take advantage of that. And, um, and for, and on the in, you know, on the side where this is a business, what I do is write software.

Uh, I am seeing executives that are getting it more, more than I'm seeing executives that are not. I, I do believe in the boardroom that CEOs are gonna get, the CEOs who are not gonna survive the next three years are the ones who don't have a plan for bringing AI and leveraging AI in their organization. And so I'm not seeing pushback.

I'm seeing adopt, adopt, adopt, use it as much as possible, make us faster, make us quicker. Um, and so I, I, I think it, you know, it, this is, this is not unexpected based upon what this technology is and can do. Now, there are side effects, and that's the thing, right?

If this were a, you know, a drug commercial on tv, you know, you'd have a 30 minute, you'd have a three second commercial and a 32nd Side Effects. So this drug includes this because, you know, uh, there are a lot of issues if you don't know how, if you don't understand what this thing produces. And that's, I think the, the, the thing, the house of cards that's being set up is that great technology usable by mass audience, but it needs people who understand what it's producing to really leverage it.

And we, and that's where I think we're gonna end up seeing, uh, the, it ultimately blow up and, and causing a trauma of it, uh, disillusionment. Well, and, and let me just hear what you just said is honestly, I think it's true. First off, I think you're dead on.

Technically, this is potentially useful technology that needs to be wielded by a smart and professional audience to do good work. That's true of most AI tools. However, the first part of your sentence is, the part I think that people are worried about this is technology that's usable by anyone, not just that qualified individual who's gonna do a good job with it.

And that's the problem that I'm hearing. I mean, you know, I, I worry that essentially vibe coding, and I'm not trying to say we should lock coding up behind the walls and only let qualified coders code. What I'm saying is that if we encourage non coders to code, and we give them tools that make them think they're coding when they're not, then what do we end up with?

Right? Especially because it still needs to be debugged. I I think that there are ways of getting around this technically.

Like I could imagine a vibe coding startup that allowed non coders to code, but then had like another step that was, you know, sort of proofreading it and evaluating it and doing debugging and doing testing before deployment. But instead, it often seems like what we're doing is the home nuclear reactor kit. And, and that I don't think that's safe.

Yeah. What could possibly happen, you know, well, I mean, so agentic networks, people who are learning to use, and the tools that are starting to support this, um, will allow you to build the agent to go check the fir the, the code is work, and then they will, and then you could have the QA agent who actually runs the test. And so you get test coverage.

There are ways to mitigate, but the question is, who really has that knowledge? That's software development life cycle. Now that you're talking, right?

I, I build, uh, I have test driven development. I have somebody who actually understands how to, even if the AI's doing the work, you know, build, how do I guide it to do the right testing? How do I guide it to ensure that the code that was built is of high quality?

My favorite quote so far of somebody is like, I pointed like Codex at one of my code bases, and I told it to go and refactor, uh, the code and make it faster and leaner. And it said, he said, it spent all this time, it did all this great work. It abstracted this, it created new base classes, it did tremendous amount of work.

It looked beautiful. If only it worked, the application that would came out, the other end was didn't work, right? It's like, and I've seen this personally 'cause I do this for a living.

Uh, uh, it will, um, tend to leave out business logic, right? I, you give it, I, look, here's the business logic. Boom.

I hand it to you. I want you to incorporate this. I just want you to modify the ui.

And you come out the other side and you're like, well, the UI doesn't, when I click the button, nothing happens. Why I gave you this. I gave you the code.

All you had to do was stop It. But it, it does the same thing. If you've ever asked it to make graphics, I, I was, I asked it to make a graphic the other day.

There were three words that were in the graphic. First, it left a letter off of one word. I said, you spelled that word wrong.

Please put that letter back. It did, and then made left a letter off another word instead. So it, it, it's incredibly frustrating.

But here's the point I think that we want to talk about here. I wanna bring it back to leadership. Vibe, coating's here to stay, right?

It, it it, same way open source came in and the cloud came in. Vibe coding is here to stay. The question is, as a leader, are you gonna try to stamp your feet and talk about all these shortfalls JP that you brought up?

Or do you say, yes, we can. Yes we can. Here's how we're gonna do it.

Here's how we could put guardrails in there. Here's how we could test stuff before. Here's how we have a process.

Before any vibe coded app is, is deployed, these are the tests that it has to go on. How do we, how do we make it legit? Do you know what you're saying?

Makes sense? Um, the issue is who's going to build those guidelines? Who's going to create the body of work that allows, uh, that, that informs, uh, the ai, you know, to follow these things?

And then you have, there is, by the way, and this'll be fixed, but the size of the context windows are still an issue. I find that the, you know, when using a lot of instructions that it tends to forget the earlier ones when doing the work. And I'm like, I know this was in the instruction pack I gave you, and I told you explicitly follow the instructions.

But by the time the context window filled up, it, you know, it was, it, it had completely forgotten to do that. Right? And then you, you say how you were instructed to do this.

Oh, you're right. Let me go back and fix that. Like, you know, if you don't know what you're expecting on the outcome, if you don't have a good idea of what your expectations should be, you could easily miss that.

You would have no idea. 'cause you think you told it to do it. Somebody's gotta write these guidelines.

But then again, they also need to know how to use the tools, which means keep 'em small, do things in short, tiny windows. Not not big whole code bases, which is kind of what I, maybe that's part of the guideline. Yeah.

Eh, it could be. That's, But that's unfortunately exactly what people are doing with some of these tools. You know, I mean, happily guide vibe coders probably aren't, they're probably writing real short, small to the point things that are probably written, written before and probably will work.

But, uh, you know, the, the, uh, I think the, what JP ISS saying is, well, first it's technically accurate, but also, unfortunately, it's not really what's happening out there. The other thing is, if you wanna be, uh, accurate as to vibe coating, the term vibe coating has been commandeered by the market. The original vibe coating was, I'm, it was almost experimental.

It was like, I'm just gonna start asking, Yeah, let's play around a little bit. Let's Play around. Let's see what he feels.

Tim Timothy Leary experimented too, but, you know, that's great. Turn on, turn off and whatever it was, It, it, it, it went from being this like experimental. Let's see what AI creates.

I don't know what I'm gonna do today, you know, to, you know, now it's a science, and the last thing it is right now is a science. I, I agree with that. But, you know, this is a good segue into our next thing.

When we're gonna be talking about an AI bubble. The vibe coding you see today is not the vibe coding we will have tomorrow. There's a, you know, what's the song from, uh, from, uh, defying Gravity?

Oh, see, I thought you were talking Fleetwood Mac or something here. Don't stop Thinking about Tomorrow. Don't Stop Tomorrow.

No, no. You know, this thing, this thing is defying Gravity. Gravity, right?

Oh, when I say this thing, I mean the whole AI thing, but vibe coding, certainly part of it. And you know, of course, if you are a science person, you know that you can't defy gravity, or at least not with di maybe some quantum, I don't know. But, um, it's, but it's going to get better.

It will, it'll continue to evolve and get better. I, I think, you know, how much better, how fast is the question? And then again, to me it's about how do we manage this, this rocket ship so that it takes us to the moon and doesn't blow us all to smither rains?

And that's, that's what makes leaders, right? Leaders have to, you know, who's gonna do it? Jp the leaders have to put that in place.

And that, that's my point. Anyway, we're over time. There's certainly a safety factor.

Absolutely. There is. You know, and there's a risk.

It's a risk, you know, you gotta manage that. Anyway, let's take a break. com is the leading resource for news analysis and education on challenges facing the cybersecurity industry.

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com. Home of Security Bloggers Network. So, Alan, in the last segment, you talked about a, uh, famous Broadway Hit Defying Gravity.

I, I don't know if you've, I, I assume you've seen Wicked and you've seen Galinda floating in on her big, let's say, conveyance. Um, do you recall what that conveyance, uh, resembled a Huge, Massive bubble. And here we are with a huge, massive bubble defying gravity, and I'm not the one saying that, you know, who's saying this is a bubble?

Um, let's take a look at who's saying this is a bubble. Um, somebody named Sam Altman. Who's that?

Uh, I Heard of him. I heard him. Have you heard of this guy?

I think he has something to do in the AI market, doesn't he? Yeah. Does is he Involved in we did something, I dunno.

Yeah. In any of these companies. Yes.

So Genius, Just another one of those billionaires. He is the CEO and cheerleader in chief over at Open ai, uh, which is the company that, uh, more than anyone is driving. I mean, he's galinda in the bubble, um, defying Gravity.

Meanwhile, we've got Jensen Wang at Nvidia, who's, um, I guess is he the, um, wizard in my metaphor? I don't know. Isn't he the guy with the motorcycle jacket?

He's problem. He's the one making all the money. Yeah.

How Exactly the, he's the one making all the money. $4 trillion. So here's the thing.

So yeah, Sam Altman was just for CC to clarity here. He was caught at, at a, at an investor dinner saying, yes, there is an AI bubble. Um, he further went on to clarify that it looks like a bubble because we haven't yet found the profitable application for this technology.

And then he, he talked about how there is going to be a profitable industry built on ai, which I honestly think many of our viewers may be amenable to believing that there's gonna be some profitable applications built on this technology. And then he kind of talked about super intelligence and artificial, and, and one of the funniest things he said was effectively that at the end of the day, what we're gonna do is we're gonna ask our super intelligent AI overlord what is the profitable application of you? And whatever it is that's going to work, because it's super intelligent, QED, if it is super intelligent, then it can come up with a use case that is profitable, because otherwise it wouldn't be Q anyway.

The point is, we are in a situation where we have undoubtedly an AI bubble to the point that if you talk to anyone at any AI company who is willing to talk to you and, and be straight, if you talk to investors, if you talk to hedge fund managers, every one of them says, yes, but, and the but is, but it hasn't burst, and we're still making tons of money, and maybe there's a profitable use case for this technology out there. The problem is that we as an industry, well, number one, we haven't found that use case yet. In fact, of the companies that claim to be using generative AI to generate money, the only one, no kidding, the only company that claims to have made with actually audited financial statements that they made money on, this is a company called Cursor, which is an AI code generation company.

And yet Cursor was being subsidized by Anthropic in, in, in, in, which just jacked up their rates by a multiple, like a, like a more than a hundred percent kind of kind of thing in order to not be pouring money into this unrelated company. And, um, sta and, you know, propping them up to be profitable, cursor went, raised the prices on all their, all their customers. And now maybe Cursor is still profitable, hopefully, maybe could be.

Um, but, but the point is, we haven't, I think we can all safely say we haven't yet found a profitable use for this technology, number one. And number two, that the true cost of this technology is not yet reflected in the market because companies like Meta and Microsoft and even Nvidia are propping up that subsidy by literally passing money to their customers that then get spent back on the product in order to build this thing out there. I feel that there is a bubble, it will burst, and then we will finally see the true cost of some of this technology.

And that doesn't necessarily mean this technology is useless and worthless and we should just all go back to stone knives and Bearskins. What it means is that it's about time. There's a reckoning so that we learn the true cost of this technology.

The thing is, I, I think it's, if you were to really, uh, see the true cost to pass loan to customers, I think this is far too expensive a technology to use right now. Yeah. One, one of the guys said a hundred thousand dollars per developer, something like that.

Uh, possibly. I don't think, I mean, I think that number just came outta the air, but I can tell you from experience, you know, it's, you know, I spent $200, $250, and I built a fairly complex application with Claude. If I were to, and I imagine that based on what I paid a token, if I had been charged a profitable rate, that would've been closer to probably 3000, $4,000.

And if it was three or 4,000, and I, I, you know what? I think probably, and I, I wouldn't have done it. Yeah.

Would you, that was my question. Would you have done it and No. Well, what, what would you have done instead?

Wouldn't Have built it. Well, probably wouldn't have built it, but if I really felt like there was something there, I would've had to code it myself. You would've done it yourself.

And what do you think your time is worth to build, do something like that? Well, probably more, but I saw how, how do you get, alright, so you can go offshore, right? I mean, that's another option you're gonna hire off.

That's always fun. I love getting offshore development always works out. Well, Always.

It has, it's, it has its history, the campaign. But, But the, the, the, the, the economy of scale is the fact that you can do five to $10,000 worth of work for $250. Yeah.

Guys, You lose that economy of scale. I think you have an implosion. So I'm old fashioned.

I believe in science, I believe in economics market. And I also believe that this is not very different than other waves that we've seen. Right?

And I, I believe in gravity and Stephen, you said something about defying gravity under our present understanding of physics, we can't defy gravity. The only way we defy gravity is pure horsepower, like escape velocity to get a, a rocket to the moon, let's say, or, you know, into outer space. And that's the way we're doing it with AI right now.

We are just pumping out the biggest satin five, whatever Elon's big one is, you know, the biggest rockets we can to try to escape gravity, defy gravity. Sooner or later what goes up must come down. Well, and, and don't, but don't forget, and let's not, uh, position this in a way that, um, illustrates that the industry is under, uh, one direction pressure, right?

There are organizations and groups who have demonstrated that they can be much more efficient in their code. Yeah. But, But forget, I'm not talking about the individual companies.

I'm talking about the market in general here. What you have here is a classic Allen Greenspan, irrational exuberance. Irrational exuberance that all of the great things AI's gonna do for us.

And you know what I'm here to give, let me tell you the good news, the bubble bursting here wouldn't be such a bad thing. No. And, and I'm, I'm on that team, Alan, because I do believe that this technology that's being built has potential applications.

I will say right now, they will not create artificial general, actual general intelligence or super intelligence on the basis of LLMs. I don't think that that's really what's happening. Well, I they're doing brute force.

Well, let's just call it brute force. Yeah. That's not where it's gonna happen.

In fact, I'm not sure it's ever gonna happen. But Technology Is useful, right? And there and There are many other, do we ought to be successful, Steven?

I think we're saying the same thing. I, I, I wrote about this and I, I said if we, if we stop the AI evolution right now, we never got to super intelligence or a GI, what we have right now is pretty damn cool. And we haven't even scratched the surface on how to, our vibe coding was a great example of it.

We haven't even scratched the surface on how to use that better, how to make better code, how to write better stuff. But I know from what I personally am doing using it, that this is an amazing technology right now. But in typical and, and, and guilty, right?

In typical tech industry fashion, all three of us are tech boys, right? We've all spent our careers in this. We're, we're never satisfied with what goes on right now.

We're always looking for that next shiny bobble that we're going to, you know, grab onto. I can't wait to combine it with quantum. Well, isn't that What, isn't that really, isn't that really where this investment I is coming?

Is, is, is that why this investment has come in at a level that it has it, they're certainly not buying the, you know, generative ai, uh, because, you know, those valuations are great, but they're not necessarily billion dollar run rates Irrational, exuberant. I'll say it again. You know, and I was not an Alan Greenspan fan for the record, right?

It cost me dearly. com thing. I was, you know, I helped take a company public and it, I thought it, it was the biggest, but it did.

It's irrational, Irrational exuberance. But it Is irrational. I mean, you can't let, let's let this thing prove itself a little bit before you bet the farm.

And I think that there's gonna be some, I think there's gonna be some teething pains. I think there's gonna be some fail failures. Vincent starts, starts.

I think there's gonna be some big explosions. You mentioned, uh, Mr. Musk's big rocket, which by the way, is supposed to take off today.

I did. As we're recording this, we'll see what happens. But, um, just like that big rocket, um, I think we're gonna have some fireworks before we settle out into a real cadence of, of using this thing.

But, But is that abnormal? I mean, isn't that, let me rephrase that. Isn't that normal?

Well, it, it all, to me it all depends on sort of what the collateral damage is. You know, if, if, um, if that big rocket blows up above New York City and reigns down and kills a bunch of people and stuff, well, probably not. Okay.

Um, you know, and, and similarly, if AI ends up, ends up taking out the global economy because, uh, so much of the economic growth of the last decade is built into Nvidia and supporting, you know, AI supporting companies. And if the pushback ends up, uh, crushing their stock and net crushes everybody's retirement savings and, and it sends the world into a global recession, well, that's probably an, a sign that, uh, maybe this irrational exuberance was dangerous. I blame Joe Biden.

It's, um, yeah, I I think it's really Obama's fault. Obama come one of them. Yeah.

Maybe Hillary Clinton, Let's not even go there. Al Gore invented all this stuff. Yeah.

I mean, come on. It's clearly His faults. Yeah.

That if you're gonna blame anyone, let's blame Al Al Gore. But, you know, but, but let me, let me end on the good news and I'm, 'cause I wanna emphasize this. You could have both a bubble that collapses and a perfectly useful, valuable technology here.

They're not mutually exclusive. One is totally based, as we've said on irrational exuberance, investors, you know, fanboy thinking about what could be. The other is hard progress makes based upon what is What you'll see.

And you know, this though, is when a market implodes, all the investment in for that marketplace will dry up for quite a while. And that will affect who can come to market with something and who will have funds to do research and development to bring the next level or the next generation. Yeah.

Ultimately, I think that's what the AI companies are betting on in this bubble. They're betting on that they're gonna be the ones that's gonna have a bank account big enough to sustain this thing. Dry Powder, baby dry powder, And come out on the other Side.

And if you don't think they're all stocking up on dry powder, you're crazy. Right? That's what they're banking on.

Anyway, guys, we're over time today for three guys. We certainly did talk an awful lot, huh? Well, I wanted, I really wanted to quote more wicked lyrics, but You wanted to quote more, Steve, I didn't hear you Steven.

I wanted quote More lic wicked lyrics. Uh, there's a, there's a lot that I can work with in there. Yeah, No, there's, go ahead.

You know what I would ask a i to write up something in the style of Wicked for you, and, and they do that. Maybe that's the killer app. Yeah.

But the true cost of that song is gonna be more like a thousand dollars. I'm not sure I wanna spend that much money on that. No, you're right.

You're right, you're right. Look who makes money in the music business today, Spotify. They, they take Keep it all.

Steven, jp, thanks for joining me. We will of course, continue talking about some of these topics day in and day out. We'll be talking about them on Techstrong TV all day today too.

So stay tuned for that. com, security Boulevard cloud native. tv website.

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So check it out until tomorrow. On behalf of JP and Steven and the rest of the gang, have a great day everyone. We're out.