AI May Not Be Worth The Cost — Here’s Why

a lot of the tools out there that are supposed to make your life easier just aren't great

“at talking to each other. That means you end up having to toggle between a dozen different”

apps and services just to keep the lights on. Enough of that. Now there is ODU. The all-in-one fully integrated platform that might actually help you get it all done. Thousands of businesses have made the switch, so why not you try ODU for free at ODU.com. That's ODU.com. With Finn we've built the number one AI agent for customer service. It solves up to 90% of queries for businesses, tops all the performance benchmarks and the G2 leader boards,

and it comes with a million dollar guarantee. Check it out at Finn.ai

support for the show comes from ODU. Running a business is hard enough, so why make it harder with it doesn't different apps that don't talk to each other. Introducing ODU. It's the only business software you'll ever need. It's an all-in-one fully integrated platform that makes your work easier. CRM, accounting, inventory, e-commerce and more. And the best part, ODU replaces multiple

“expensive platforms for a fraction of the cost. That's why over thousands of businesses have made”

the switch. So why not you? Try ODU for free at ODU.com. That's ODU-O.com. Today's number 49. That's the percentage of billboards in the Bay Area that are advertising AI. Ed True Story. I went into my doctor's office with a shoulder problem and he said, "Well, I need you to pee in a cup and then we have our AI look at it." The AI looked at it and said, "You're a layman's name. I mentioned you need to take this medicine and then when you come back,

you're going to pee in another cup and the AI is going to tell you how you're doing." So I came back and he said, "You're not taking your meds. The AI is pissed off. You take your meds." I started to get pissed off, so I went home and I had my wife pee in a cup and also,

“and I'm not proud of this, so I jerked off into the cup and I came back and they gave it to the AI,”

and the doctor came back and said, "Your wife is pregnant and the father is your friend,

Brett, and if you don't stop masturbating, your arms are never going to get better."

Welcome back to Market Fly. It never, ever gets old. It is so good to be here in the global capital of technology, the capital of venture capital as well. And I'm really excited to get into this show, but before we start the show here, Scott, I just want to read you a couple of quotes that I've collected over the years that you have said about the venture capital community, because I know that there are probably a lot of venture capitalists in the room right now. So I just want to make sure that we're

all on the same page, and I just want to like, here we have to say about this. So I found this from a podcast we did a couple of years ago. You said quote, "I've worked with a ton of venture capitalists, they're not the sort of loving, caring people that are depicted on the website." You later said that there are, quote, "very few cohorts less pleasant, more self-absorbed, and more convinced they're changing the world than venture capitalists." And then a few

ones that are you said that venture capitalists are, quote, "generally speaking awful people." And then you later clarified in the same episode that actually they are, quote, "the absolute worst-fucking people in the world." So... Scott, just before we saw, I just want to ask you, what do you mean by these statements? What do you mean venture capitalists are the worst people in the world? Yeah, but you left a brightest people you've ever met the new apps of

fucking lootly nothing about your company with sleep with their sister for a nickel. If you meet a guy in a blazer and he brightens up a room by leaving it, chances are he's a venture capitalist. They're already leaving out the doors. I see them now. Yeah. This is 70% VCs. So just another thing about the barrier, and I love so many things, but there's a few things I don't love about the barrier. One venture capitalist. But, too, I'm in this as a manuscript. I am so done with

bitches. What? And I'm being very serious here. So the fastest zero to a billion dollar

“companies in history. I think everything in life reverse engineers to essentially biology,”

and astrology, which is manifested in business. So I think there's a lot of life lessons in business. Fast is zero to a billion dollar retailer in history was old Navy. And it's got a very

powerful axiom. It's 80% of the gap, but for 50% of the price. The fastest zero to a billion dollar

revenue airline, Southwest 80% of the market leaders for 50% of the price. And I think and I'm being serious now that these guys who were trying, it's mostly guys trying to optimize the 97% with all these cold plunges and red light bullshit and measuring their sleep, which would just stress me out, so I couldn't sleep. This is trustworthy on the old people who do that in this audience. I think that's most of them. This is the axiom. Optimize the 80% and I'm serious. And

that is, all right, we all know, you're supposed to be healthy, you're supposed to be well, manager sleep, be fit, but manage the 80. In the other 20% fucking enjoy your life. Have desserts.

Drink a little bit. Approach strangers and make an ass of yourself. Hang up the condom you never

used. It just like have the right go to 80. Anything above that, trust me on this. It's not about lifespan. It's not about health span. It's about fun span. 80% old Navy your life. I'm sorry, back to the original program. Fun span. Great way to sell the show. I totally agree. So we're going to get into the show now. We're going to get into our stories. But before we do that, we have this

“QR code that was supposed to be there it is. So if you want to ask a question at the end of the show,”

you can scan that QR code right out your question and then we will try to get to as many as possible at the end of the show. But without further ado, let's start with our first story. So it has been a

sleepy few years for the IPO market. But it is about to come roaring back. SpaceX, open AI, and

anthropic are all set to go public this year at a combined valuation of roughly $4 trillion. It's for contact that is more than every dot com IPO put together inflation adjusted and also equal to half of the combined value of every IPO in the 50 years before it. So the last time that we saw an IPO frenzy, this dramatic was in 1999, which made a lot of Silicon Valley investors lot richer right before it made them actually a lot poorer. IPO mania was in many ways the beginning of the

end. The Nasdaq began its collapse in March of 2000 and it eventually lost 78% of its value in two years. So we sit here tonight in San Francisco on the eve of the next IPO mania. And the question that I will post to you, Scott, is will it look like 1999? There's some similarities, but there's also some pretty stark differences, right? So there was a confusion around how this is all going to manifest or play out. So there's a digression to investing in the technology

infrastructure layer. We did it with global crossing and Cisco, which last 90% of its value, there was momentum, euphoria, a certain techno narcissism back then. It was the internet's going to change everything. Now it's AI's going to replace everyone, but there was a certain belief that did this region and these companies were going to be the operating system for the world moving forward. There's some pretty stark differences though, and that is while you had about 60% of GDP growth

was from infrastructure spending back then or growth or investment in internet companies. It's now about 90% of GDP growth is from the infrastructure build out. So it's even scarier. And typically, whenever you get over 3% of GDP is being invested in any infrastructure, railroads, electricity, electrification, the highways, again, telco in the 90s, but then 24 months there's a crash.

“But where it's different, as I don't think there'll be a crash this time. I think there'll be a pretty”

vicious, uh, re-correction or price recalibration, but where things are different as the following, the companies now are cash jargonauts. They're incredibly profitable. Whereas in 99, it was just, I don't know if any of you remember this, the globe that went up eightfold on its IPO, pets.com, um, I mean, likeos. There was just all of these ridiculous companies. And we're at on-volo.

I had to.

Anyway, why me today? Anyway, that's the clips. But these are really profitable. These are incredibly profitable companies. They're financed with their own cash flows, not with the debt. But if you look back and walk down memory line, Google was still sort of this PhD project that was run by two guys of like Chechen Molly dealers. Amazon was a book company that was losing a lot of money and a ton of smart internet analysts were convinced it was going to go bankrupt because it had

too much debt. eBay was considered a really powerful company. It was making money selling

shit to people in Ohio. And probably the most important tech media company, maybe even the most

important media company in the world at that time, was a company called Yahoo, which bought a company called Broadcast.com for Mark Cuban for $5.4 billion. So I love marketing. He's very smart. He's also one of the luckiest people ever. And then you had just a ton of companies that got swept off swept off the planet. So it feels as if this time it's similar but different. But what is the same is a group of young men who are socially awkward, who are self absorbed

“and think they're going to change the world and have a totally inflated sense of self. So I think”

that there's a certain kind of narcissism that infects this type of movement. Whereas back then

it was going to change everything. Now the kind of narrative is that AI is so impressive and powerful

that it's going to replace all of us. And in 99, to their credit, they got it right around the internet. They just got the arc or the time span wrong. And I think the same thing is true here. I think AI will in fact replace a lot of costs and increase productivity. But again, I think we got the time or the arc, I don't think it's going to happen as quickly as is everybody thinks. But more importantly, back to me. In 99, this guy in Frank Quattro from Credit Suisse first boss and

was going to take the company. I'd started public read on below. And I remember a bunch of internet CEOs, we were fond when airfield to look at bombardier jets because they said they would take stock and a private company changed for jet. And it was a bunch of 30 something your old speaking of self absorbed people who couldn't get dates to the prom. We were all out looking at these jets and picking out our jets. And even then I had enough mindfulness to know this is not right.

This doesn't feel right. And within three or four months, we were no longer looking at jets.

“And I remember, I remember, I was in a board meeting, my company read on below. And I accused”

the chairman of our company, and it's been a long time. So I don't hold any grudges, Mike Moritz. And I said to Mike, you're using read on below was a dumping ground for the failed products of your portfolio company companies. And on the way to the airport, they called me and said, we're kicking you off the board. And so I got kicked out of the band I'd started. And I remember being at SFO and I had this flashback tonight and getting out of the car, we used to rent cars

back then. And I remember just being frozen. Like, I had never in my life. I was 34 at the time.

I'd never in my life had that kind of professional punch in the face. And I remember getting out of the car and just being paralyzed for a good five or seven minutes. Like, I literally, I just didn't know what to do. I just didn't, I'm, do I call a lawyer? Like, what do I do? I remember just sitting outside of my car and finally the lady who gives you checks in the cars, came out and said, Sir, you all right. And then just to be serious for a second,

for those of you who, I don't know how many of you are here living in the 90s. But it wasn't, it wasn't the internet that was the most dramatic thing. At least for me, it wasn't

“in terms of what I think of as being the thing I remember most about San Francisco in the 90s.”

That really is like stuck with me. Is anyone on my guess what it is? It's not, this is not light at all. Eight. It was, if you're under the age of 45, you probably think of COVID as being, hopefully what will be the, the most dramatic health scare. You are literally walking around this neighborhood. And there were these beautiful young man everywhere. I mean, it was, it was just like, it was catastrophic. So, and, you know, fortunately,

in the 90s, I mean, it really was a plague. And it, it was like the best in the worst of American

“science in terms of how we responded to it. But that's how I think of San, that's like what I would”

remember most. Give me how to this, Ed. I have all my, all of these numbers and all of these notes. And now it's, I'm not sure what to talk about. Well, I'm going to talk about numbers. Yeah, go forward. Because that's what we're going to talk about. So, when we think about what's what are some of the differences to today, I think that you make a lot of your points. One thing that we should point out, though, is that we have these three companies that are literally combined,

they're going to be worth $4 trillion. I mentioned some of those stats. It's going to be 6% of the global public equity markets is these three companies. Yeah. And you talk about profitability, which for the longest time, I wasn't so worried about myself either, because I looked at these companies like Google, like Meta, like Amazon, which are these cash juggernauts that's spending unbelievable amounts of money, building these data centers, setting up AI. And everyone was saying,

the AI bulb was going to happen because they're spending so much money. We haven't seen the ROI

“and we'll get to that in a moment. But I think something that you and I were saying was, well,”

they have the cash to do it. And they've been saving up this cash for years and now is their moment and here they are. They're doing it. However, let's look at these three companies that are going public. Let's look at SpaceX, which is going to go public at it supposedly at a $2 trillion valuation, which is going to be more than 100 times price to sales multiple. The most expensive stock in the S&P today is Palantir, which is way out over at skis and it's trading at 64 times sales.

This is trading at 107 times sales. If it goes public at $2 trillion. It's losses grew seven hundred

percent last quarter. It's on track to lose $20 billion this year. So I look at that. I say,

okay, well, that's not really a great business. By the way, it's revenue grew 15 percent last quarter

“and someone say, okay, that's fine. Actually, if you're an AI company, which they claim they are,”

that's not fine. That's six times lower than Nvidia's growth rate. And also, it's half the growth rate of this podcast. So we're growing faster than SpaceX. Just put it out there. So the idea that you're going to have this company and then you're going to have open AI, which is expected to burn $25 billion this year. These are all, again, we don't know these financials because they say this to reporters and then we hear people who are familiar with the matter who tell us,

this is what the financials look like. All I can tell you is whatever's going on at Open AI, it probably ain't that good. And we also know that because we saw this article from Ronin Farrow came on the podcast and told us that Sam Outman is, quote, "unconstrained by the truth." That was according to a board member. So I'm a little worried about that too. And then you've got Anthropic, which supposedly is about to hit operating profits,

this course is, or maybe that's a little bit safer, but still, it's losing a lot of money and supposedly paying billions of dollars to SpaceX. Okay, those companies are now going to be a part of the market. And not only that, the Nasdaq is changing its rules, it used to be that you had to wait 12 months or after you go public to join the Nasdaq to one of the most popular passive index funds in the world. They've changed the rules. They said, "You only have to be

public for 15 days if you are a mega-cap company, if you are i.e. SpaceX, Open AI, or Anthropic." They have literally changed what it means to be part of the market for these three companies, none of which are profitable. That part makes me a little bit more worried. And I wonder if that feels more similar to 99. When you saw a lot of these companies that were losing billions of dollars, these ones are going to be worth 6% of the global stock market. Yeah, well oftentimes the

technology survives evaluations. And I would say, I mean, if you look at, for example, SpaceX, three companies, a rocket company, a satellite company, and an AI company that's playing catch up. If you price each of those three companies, similar at a similar ratio at the high end of the

market leaders and those respective categories, you get to about the 7,800 billion dollar market

Why not, right? Well, it's true. He does. He does bring a certain vision that shareholders absolutely love. But the way I would describe right now, SpaceX is snowlighting the 7 doors,

and that is snowlight is ridiculously hot. The SpaceX is an incredible company. It's got incredible

votes, 16 billion revenues, 8 billion in operating profits, an incredibly robust company. Probably the biggest moats, I think, of any business in the world, 90% launch capacity, 23rds below

“at satellites. But what he's done is he said, okay, if you want to marry snowlight,”

you've got to take these seven doors that are just dysfunctional and awful people. And expensive and add no value. Because he's trying, he's basically attached. He said, if you want to hang out with snowlight, SpaceX, you have to also invest in this money furnace called X-A-I. And if you look at, and what's really interesting is he clearly doesn't believe as much. He's made it in Granite. He's a visionary. There's snow getting around it. But he looks at A-I as the future

and that he needs to catch up fast. So he's going to take his hot property and use it as a means of trying to raise incredibly cheap capital to try and play catch up. The other two, I believe,

are incredible companies. But my prediction is that, similar to, you know, if you look at these

cycles, typically what you have when you have this type of spend, you have a dramatic repricing

“at some point because the public and the capital markets are impatient. And I think the way this”

is going to play out in the next 24 months is that we're already seeing, and this is our next story, that a lot of companies are starting to question the kind of return they're getting on these increasingly exorbitant bills, they're getting from their different site licenses around A-I. And then I think geopolitics is going to come into this in the next 24 months. And that is, if I was she, I would engage in A-I dumping, and I would start flooding the U.S. market in going to CFOs

and companies sick of spending $5, $7,000,000 on A-I and tokens are not really understanding why. And dumping the market with incredibly cheap LLMs out of China. And I think you're going to see a dramatic repricing of the A-I trade. As a matter of fact, I would, or my prediction is in the next 24 months. A-I is going to be dramatically repriced down because I haven't seen or does anyone see a lot of like A-I moisturizer or you get argue autonomous is maybe a use of A-I. But there's

not a lot of new products that you would say are creating incremental revenue, other than the LLMs themselves from A-I. There is, does appear to be a lot of smart people saying we're going to get dramatic efficiencies. And we've all probably seen hints of that, right? We're not sending stuff to our lawyer as often, customer service, et cetera. But if you think in America there's

a hundred and fifty five million people who actually work. Assume half of them are A-I vulnerable.

That's seventy five million, say $100,000 per employee five trillion dollars. That means you would need somewhere around five to seven million layoffs across the eighty five million that are in fact A-I vulnerable. See it have in certain in those industries about a 10% labor destruction in the next two to three years. That would be chaos in labor markets. So one of two things is going to happen. Either the valuations of A-I are going to come down by fifty or seventy percent

“or we're going to have labor chaos in these industries. And I think it's going to be the former.”

I think that you're not going to see nearly the job apocalypse. You know, I just way I would describe as apocalypse no. And that is, just as you were trying to raise money back in the 90s on changing the world, now they're basically catastrophizing. And fear is the product and capital is the outcome. And unfortunately for them, I don't think the job apocalypse is going to come as quickly is their predicting. And so if it's either going to be labor chaos or valuations coming

down by fifty sixty seventy percent, I absolutely think it's, it's the latter. In addition, if you just look at the biggest companies now that we're all so intoxicated with, whether it's meta or alphabet. In the last just in the last five or seven years, all of them have gone peak to trough down forty fifty, meta was down seventy two percent in twenty twenty two. So it just wouldn't be unusual for these companies to have that kind of draw down. In addition, I think this is

effectively the end of the IPO markets as we know it. Because the way I look at it is the IPO market is now the last stop on the chum train. And that is what they're saying is, there's no reason to go public because if the VC still thought there was juice to squeeze, used to have to go

still see upside, they can find the capital. So effectively this, when these companies go public, it's effectively the smartest people in the room who know the company the best are saying, we've squeezed as much juice out of this as we can. We got to find people stupider than us to invest at this valuation. I think retail investors are going to figure this out in a painful way over the next two years, tokenization of private companies. I think this effectively might be the end

of the traditional IPO market as we know. This is going to be the question is, are these companies or are these investors all the employees of these companies? Are they all just going to sell? And what we have seen is that SpaceX is looking at shifting to lock-up periods so that they

“can sell earlier. And I think you have to ask yourself, if you were an investor and I'm”

throwing up, if you're an investor in OpenI, if you're an investor in SpaceX, these companies go out at a trillion dollars, one and a half trillion dollars, two trillion dollars, the question is,

would you sell? If I'm an investor in SpaceX, for me, the answer is the immediate sell right now

today. Easy, no questions whatsoever. And I think that will be the question for investors in this round two, just before we move on to the second story here, would you sell? And any of these companies? Yes, yeah. Yeah. Oh my god, tell us, if any of you hold shares in any of these companies, just trust me on this, as a guy who was looking at jets when he was 34, sell everything. And there's always going to be pressure from the VCs and your managers, aren't you in it to win

it? Yeah, fuck you. I need a house bitch. So everything. So, and I hope I'm wrong. Come back to me and tell me you only made $11 million on your shares as a junior product manager. And now they're

worth 15. But there's going to be some really interesting second order effects. 11,000 people of these

companies go public at their valuations. It's going to mint 11,000 new millionaires just in the Bay Area, 60% of whom are under the age of 40. Last month, you saw rents on a one-bedroom and San Francisco increased 24% pending sales of luxury homes in the U.S. where at 4% last quarter, they're up 48% in the Bay Area. It's not all bad. You're also going to see philanthropy absolutely surge in the next three to six months with these people, especially the bigger

shareholders who will start their own foundations and things like that. You're also going to see

“I think a baby boom lead in the Bay Area because what people generally do is they move houses”

and they think okay, let's start having kids. But there's going to be, I mean, the second order

effects of this type of wealth are going to be traumatic. We'll be right back. Support for the show comes from Odo. Running a business is hard enough, so why make it harder with the dozen different apps that don't talk to each other? One for sales, another for inventory, several one for accounting, before you know it, you are drowning in software instead of growing a business. This is where Odo comes in. Odo is the only business software you'll ever need.

It's an all in one fully integrated platform that handles everything. CRM, accounting, inventory, e-commerce, HR, and more. No more app overload, no more juggling logins, just one seamless system that makes work easier. And the best part, Odo replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business, whether you're just starting out or already scaling up plus it is easy to use, customizable, and designed to streamline every process.

So you can focus on what really matters, running your business. Thousands of businesses have made the switch so why not you? Try Odo for free at Odo.com. That's Odo.com. Support for the show comes from Odo. Running a business is hard enough. So why make it harder with it doesn't different apps that don't talk to each other? Introducing Odo. It's the only business software you'll ever need. It's an all in one fully integrated platform

that makes your work easier. CRM, accounting, inventory, e-commerce, and more. And the best part,

“Odo replaces multiple expensive platforms for a fraction of the cost. That's why over”

thousands of businesses have made the switch. So why not you? Try Odo for free at Odo.com. That's OdoOo.com. I'm pretty confident talking into a mic. Hey, I'm doing it right now, but home projects,

That's where thumb-tack comes in. Upload a photo or voice note and their AI powered search helpstack

“knows the issue and match you with the right top rated local pro. Instead of second guessing or searching”

for hours, you get clarity and can hire the right pro with confidence. For your next home project, try thumb-tack. They know homes. How do the right pro today? We're back with profty markets. Nearly 50,000 workers have been laid off this year supposedly because of AI. And that's almost as many as in all of 2025. For companies adopting AI, the thesis is simple. AI is going to do is supposed to do much of the work that humans do. In recent weeks, however, that thesis has hit a roadblock.

More and more companies are reporting that despite the enormous power of AI, the technology is actually more expensive than the humans that it is supposed to replace. Uber, for example, just blew through it's entire 2026 AI budget in just four months. According to the COOO, it is now getting harder to justify AI costs within the company. Microsoft is canceling its Claude code licenses across multiple divisions because it's simply gone too expensive. And over at Nvidia, one executive

said that the cost of compute is now called far beyond the cost of employees, which all raises

“a crucial question for the AI industry, which we just hinted at earlier and that is at what point”

does AI actually stop being worth it? So this has blown up basically in the last 48 hours, where many companies are now coming out and saying, we're actually not as confident about this whole AI thing as we used to be. Service now is another company which just blew through their entire anthropic budget. Technical staff at Stripe are reportedly spending nearly $100,000 on AI tokens

every day. And sales forces on track to spend $300 million on anthropic tokens this year.

Shopify said that their earnings were called partially offset by increased LLM costs. We heard similar things from Meta and Spotify and Pinterest. One anthropic police said that his Claude code bill came out to $150,000 in a single month in some, it's getting very, very expensive. And we have seen in the past that there has been an incentive, especially among tech companies, to use AI as much as possible, and there was this idea that

employees will engage in what we call token maxing, where use as many tokens as possible to use in your AI API. And they'll create even leaderboards at these companies like Meta like Amazon, where they will track how many AI tokens you're using and the people who are using the most tokens are the ones who are the most AI deployed, most AI forward, those are the ones who are going to get recognized, maybe they'll get a promotion. And this is resulted in unbelievable and extraordinary

costs on the AI front. And now we're starting to see Scott, the next phase of this, which is companies and their executives are going to realize this is a little expensive. And now the question becomes at what point will AI actually pay off? So I will pose that question to you. At what point is it too much? It comes down to incentives. You were talking about how you're trying to incentivize people. I mean, an interesting part of the ecosystem right now and the

different layers is the adoption layer. Trying to get people to use it and companies have put in place the incentives to try and get people to use AI more. But there was a recent survey by a professor at MIT, the new found that about 5% of the projects that people are using tokens for,

“they can actually connect. The CFOs can connect to some sort of return. So while I think that”

they're really intoxicated, it was like using AI as much as you can to talk about in your earnings call as like getting dot com back in the 90s. But I think you're already starting to see some fatigue. And I think the AI companies are trying to get public as quickly as possible to raise that cheap capital before things start to, I don't want to say unwind. But you can see how the string that gets pulled here is a large company and a kind of a CO has a lot of credibility

in the industry just comes out and says we're dramatically scaling back our AI investment. Let's be honest folks, we're just not seeing the return we initially hoped. And Nvidia just reports

its first company, you know, for the first time, Nvidia's first miss, I think Nvidia has beat

its estimates 15 quarters in a row. Nvidia's first miss probably takes, I would think the entire market down 5% or 10%. But the first, the string that gets pulled is a CO comes out and says,

some productivity. You are seeing some productivity gains in the economy from this. And quite frankly, they look as dramatic. If not more dramatic than the internet, but look what happened in 2000, this definitely does feel like 99. And I'm waiting for the first CO to come out and say, we have to get procurement involved and we have to dramatically scale back our expenses here.

“I don't think it's that romantic. I think it's just going to be a traditional Fortune 500”

company that starts the narrative of, okay, this has been fun, but we have to dramatically decrease our AI investment because we're not seeing the type of ROI we'd anticipated. Yeah, well, I mean, once we heard a quote this week from, I mean, not a huge company, the CEO of Match Group.

But he said that AI is costing the company $5 to $10 million a year and he said, quote,

I think we're benefiting from it, but it's hard to feel it as what he says. So that's not great. If we're supposed to be writing on this, you know, multi-trillion dollar technology that's going to transform our economy, I think there are a few possibilities that could play out here. One is that companies will decide, you know, what we are just going to pull back our AI usage, because this is, you know, we want to do experiment here and it's good that we did, but ultimately

we can't afford this and we're starting to see signs of that. Two, it's possible they just say, we're going to not use AI and actually we've decided that humans are cheaper and they're more versatile. And so we're going to use humans. I really doubt that that's going to happen personally. But third, I think most likely is that these companies are going to resort to the cheapest models possible. And this goes back to what you said in the previous segment, which is this

relate relates to China. And that is Chinese models today are around 10, and in some cases, 20 is, in some cases, 30 times cheaper than American models. You have models like Deep Sea, which obviously went very, very popular. Kimi K2, Gipu, GLM, all of these new Chinese models

that you've never really heard of, but every developer in the world has heard of, because 80%

of American AI startups are now using Chinese models. And the reason that they're doing this is because they are dramatically cheaper, why are they cheaper? One, because they're getting unbelievable subsidies from the Chinese government. So the CCP's paying for it. And two, because they're engaging in this thing called distillation, which is essentially where a Chinese AI company will go and industrially harvest the outputs from the American frontier models and then use it

for their own models. It's this very sophisticated kind of technological term for theft. They're basically stealing people's stuff. And that turns out to be a great business model because it means you'd have to pay for things. And China's been very good at this for a long time. They've been doing it with intellectual property for many years. But I think that this is ultimately where it's all headed where we don't have the money to pay for it. We're not going to use Claude,

we're not going to use Chachi BT. We're going to use this cheap Chinese thing that can kind of deliver us very similar, very similar results. And you made an interesting point about geopolitics, because that there is going to be a problem for Trump for the United States, for the administration. If China overtakes the U.S. in AI, essentially because they were distilling our models,

“I.E. stealing them. How do you think that might play out? The only thing that's sort of”

propping up and giving any license to the 34% approval rating right now of Trump is the S&P in the NASDAQ, which I would argue the most damaging metrics haven't been in, because they give

this illusion of prosperity. And the reality is they're just wealth indices for the top 1%

and spoiler alert, the top 1% are doing incredibly well. But I do think, so if you have 93% of GDP growth is from this giant bet on AI, and you start to see a threat from abroad from AI, which would really, really damage the Trump administration, I think you're going to see, essentially they're going to be Y.D. the whole thing. And that is they're going to decide that just as they've decided that Chinese EVs can't come into the U.S. market, I think they're going to

ban Chinese LLMs. Because I think it's only a short, I think in the next 90 days, supposedly already 80% of startups, smaller companies are starting to use Chinese LLMs for the same reason you were talking about because of cost savings. I think you're going to see the Trump

“administration ban these models because right now AI is the only thing quite, it feels like it's”

propping up the economy right now, the incredible capex, the shareholder gains. So I think the

the magnificent 13 collapses. And when we start to see evidence that there is in fact AI dumping,

“and to be fair, I think there's some legitimacy to that. Germany used to be the powerhouse”

of Europe. And China's very strategic and great economic capture and what they've done is, I mean, not only do they, they'll steal the IP of Siemens and then sell them back a sell tower into Germany for 40 cents on the dollar, but they will invite Volkswagen and Dameler and Siemens into China. Prop them up, have their R&D facilities there, the production facilities there, and make it incredibly profitable for them to do the production and their R&D in China,

such that when Germany tries to implement some sort of national economic policy that that stops China from dumping the IP theft and then dumping products back into China, the largest companies in Germany say, no, don't do that because we are now dependent on the economic arbitrage between China and Germany. And so what China has done to Europe economically, we're failing to do militarily in the Gulf. And that, as they've said, rather than trying to force our will

or impose our will on the world militarily, we're just going to create economic capture where other nations become so dependent upon us that we can have huge political influence and turn internally and stop them from creating some sort of prohibition of our products.

“I think it's going to happen here. I think Trump's going to decide,”

once he sees evidence that the AI trade is under real threat because of these Chinese LLMs, he'll ban Chinese LLMs. And to be clear, I think there'll be some legitimacy around that. I think the Chinese are going to try to do to the AI market, but what they try to do to the steel market here in the '80s and '90s. Stay with us. Whatever your thing, it could be anything. Canba helps you make that thing a thing.

Canba is a simple online tool thing. It's a way to design with our Magic AI tool things. You can social media your thing, generate images or videos of your thing, make decks or presentations to show your thing. Whatever needs to be done for your thing, canba can make it an even better and bigger thing. Canba, the thing that makes anything a thing. Support for the show comes from Odo. Running a business is hard enough,

so why make it harder with it doesn't different apps that don't talk to each other? Introducing Odo, it's the only business software you'll ever need. It's an all-in-one fully integrated platform that makes your work easier. CRM, accounting, inventory, e-commerce, and more. And the best part, Odo replaces multiple expensive platforms for a fraction of the cost.

“That's why over thousands of businesses have made the switch. So why not you?”

Try Odo for free at Odo.com. That's OdoO.com.

Support for the show comes from retail. Too many companies run critical operations on duct tape

spreadsheets, Slack workflows, and whatever else they could couple together. Not because they want to, but because building internal tools means weeks of waiting on someone else's backlog. That's where retail comes in. Build custom internal tools just by describing what you need. Prompt something like "Build me a revenue dashboard on our salesforce data" and "retool actually builds it." On your company's data, in your cloud,

with Enterprise Security built-in, go to retool.com/vox. We all need to retool how we build software. We're back with proxy markets. How are we feeling? I asked that because I'm looking at the clock and we need to make sure that we have time for questions.

The first question is from George Gilbert in CF105. I wanted to know if

maybe besides the three stocks that have excess valuation, besides them, there are a lot of large technology stocks that are who's fundamentals are doing very well, much better than the rest of the market. If we see that continue, that drives a team's concentration of wealth. I'm wondering what you see the

Frank Quattrone in 99 when you were, I was an equity research analyst on software, but I didn't

remember red velvet. I was telling folks to sell to sell the ERP country, red velvet, or red

“envelope. What's your hero to thousand times you remember it?”

Yeah, thanks for that. Red velvet, that's a cake boss. Not the premier internet based gift company. Yeah, look. I think that so every year I do a big tech stock pick and in 25, my pick was alphabet. Because of the existential threat that supposedly opened AI, presented to search, it was trading at 17 times earnings. The S&P trades at 23, alphabet was just a much better company than a dupland or a PNG or a caterpillar with a WAMO. And by the way, search, I think

is up 17% this year. My big tech stock pick for 26 is Amazon. Because I think one place, I think there's two places where AI is actually going to show three places. The incremental shareholder value live up to the height. The first is just simply put in medical research. If I were to go

“long a sector, it would be pharmaceuticals and anything related to GLP one. I think the advances”

were finally going to see the great age of discovery and farm of the we've been waiting for

for 30, 40 years. Autonomous. I think it's just incredible. I think it's going to change everything.

I hate myself because the people I'm most rooted to in the service industry are drivers. Like, why the fuck are you going this way? Just follow. I mean, just follow the look at the phone. It's not that hard. It drives me crazy. And then, and also, in my big tech to get in my big tech stock pick for 26 is Amazon. There's a million industrialized robots at Amazon facilities right now. The rest of the nation has, I believe, 400,000. So I think you're going to see a suppression.

I think the stock prices might come down a little bit because I think so much institutional capital is going to be sucked out of the market into these new IPOs. So I do think the markets might come down for, or the prices might come down for some of these other companies. But if you look at these companies and the valuations, I would argue that they're pretty good buys right now.

“So I think that if you see a ton of capital going to these IPOs that they're so thirsty for,”

and you see a drawdown in the S&P and some of these companies, I think they'll be really good really good valuations. I don't, you know, if you look at, and I just think they're more resilient and in some ways less vulnerable because their businesses are much more diversified. So in some in sounds like you're in this business, I would personally, I would stay the hell away from AI right now because I think it's really vulnerable. But I think the traditional guys have built

such incredibly robust diversified companies that you're just on a risk-adjusted basis going to do really well to them. And I'm talking about my own book here. I own Apple and Amazon. Those are companies I'll just probably for the rest of my life. But I think they'll be, I personally, when I think you, you look at valuation. I think actually, like one of the best internet analysts in the world is here, Mark Mahaney, if he's around, he might, he might tell me where he agrees or disagree.

It's a long-winded way of saying I agree with you. I think some of those, I think some of those

companies will be good buys. The concentration is incredible, though. When you look at what's happening,

the fact that the top 10 stocks now make up 40% of the entire market 30 years ago, they made up 20%. The fact that AI is expected to drive 40% of S&P earnings growth this year. That's the expectation. So it is just unbelievable. We all just have to kind of hope and pray. Like, let's just hope that this keeps going. Let's just hope this all works out. Because the level of dependency that we are seeing in this very small handful of companies, it is unprecedented. And if you were to see, call it like a 20%

drawdown in just those stocks. I'm not saying that's going to happen, but it's happened before and it could happen. That's an immediate impact on the entire S&P of 8%. And the question becomes, what kind of fear would that inspire as you go down the chain? What would that do to the capex guidance going forward? What would that do to earnings expectations? What would that do to multiples? The more you do this, the more you play it out. If those, those companies so much as

falter or stumble, the amount of destruction that you would see is going to be quite staggering. I wasn't very much conscious. I would say when this last happened in 99. But what I do know is that

kind of have to pray. It just doesn't happen. Is that none of these companies even so much is slightly miss on their earnings. Because if they do, then it's on the garden. But you also asked

“just about geopolitical ramifications. I think it's going to be enormous. When, if you look at”

the genico-efficient, zero is everybody has the same thing. That's communism, right? Or the dream of communism. One is one person owns everything. When the French started separating

people from their heads, it was a .83. It's a .85 now in America. And income inequality always

gets solved, but it gets solved through either war famine or revolution. I think we are in the midst of the second or third inning of revolution. But I think it's a series of tiny revolutions. Jeff Bezos or Sam Malman, anything rich white guy says right now, he's wrong before he opens his mouth. Because people are just fed up. And if you look at the protests around data centers, everyone's looking for a vessel to express their their dissatisfaction. So they show up at a data

center and they just go crazy because it represents sort of income inequality. My fear is that politically

we go is as crazy as we went to the far right. I'm personally concerned we go as crazy to the far

left. And I believe that fascism can come from the far left as easily as it can come from the far right. And I find that the stupidest, most dangerous idea is generally speaking when the far left and the far right agree on something whether it's anti-Semitism or anti-vaccines, you know what's fucking crazy. And I worry that I worry that because of the economic incentive of pushing people to the polls, extremism, distillation or reductive thinking to go to A or B and the inability

for America to have the nuance to really think about something in the middle that we risk

going way too far. And this is a weird thing to say in San Francisco, I worry we're going to swing

way too far to the left politically. If a question from Robert Tang in C L 113, I'm being told to read the question from here. Robert, how should ambitious professionals navigate the tension between using AI tools and the fear of being replaced over the next five years and he did add go, New York next, I love it. What do you think Scott? Well, you know we have this pathway statement that AI is not going to take your job, so I'm going to understand Zeya is going to take your job.

I'm now even beginning to think that's a bit overblown. I would argue that the only competence that's really important is storytelling and relationships and that is your ability

“to articulate your ideas. I would argue the best thing you can do for your career if you're”

under the age of 40 is to be as social as possible. And because so much of it now is based on relationships where if you think about and there's some really good things about AI, where a social media took us to the polls and made the world more divisive, one of the potentially positive things about AI is the LLMs try to guess the seventh word by taking the average of all the six words in a similar string. And so it's actually a little bit AI is moderating. It's pushing

everyone or thoughts to the medium, to the median, which is good in the sense that it's not creating more extremists. It's bad in the sense that AI is all chip no salsa. And the worst thing I can say to add or any of my analysts to come back with something is I say this sounds like it was written my AI that is literally the worst in so I can give in the company. And so your ability to form relationships, your ability to create, to be creative, your ability to understand people, your ability to be

super social, because if it's just AI recruiters and people punching out job applications and emails

“via AI, then the only thing that's going to differentiate us in terms of our own ability to get promoted”

or even get in the door is going to be relationships. And so I'm thinking about that with my kids. I want to get them super into storytelling. I'm trying to teach I'm trying to ensure they know how to write well, stand up in front of people, communicate well, and more than anything, I tell them they need to be out of the house. I'm like, "Have my credit card when you're out of the house." And I seriously tell them I'm like, "Go steal, go shop lift, whatever is we need, but I need you to

join a gang." And what I mean by gang is, and this is the brilliant Jimmy Carr, gangs get a bad

accountable and your ability to figure out the pecking order and establish strong relationships. If everyone's driven to the median in terms of their jobs and their capabilities, it's going to be like that study done at Google when they put out a job opening, they got 200 resumes within 60 minutes, they shut it down, and then 70% of the time, and then they bring the top 10 people, and 70% of the time the person that ultimately gets hired had an advocate within the

company, had a friend. So if you're thinking about how to advance your career, especially if you're under the age of 40, you just want to get out and meet as many people as possible. And if you're a manager, really trying to invest in young people's relationships, such that when one of them gets promoted,

“they think of you as being a good person. But I think relationships, creativity,”

kind of that salsa is going to be the point of differentiation, because the other stuff I think is going to be driven to the median. What I's question is from Jeff surface. Oh, and by the way, when I tell my I tell my I love this, I tell my kids whenever they go out a night, and I'm like, don't add to the population, don't subtract from it, and if you get arrested and incarcerated, established dominance early.

What's Jeff surface? So my question was Scott, you talk about your your troubles with the affirmation of others, frequently on various podcasts. So I wanted to get kind of add your take, and how you're early on in your career, and you have the spotlight now of how you deal with the noise and the stress that comes with this.

“That's what the money is for. It's all worth it. That's a very kind question. I mean,”

you know, I'm obviously new to this, but doing this with this whole group here and getting to see everyone in person. I mean, I saw everyone at South by Southwest when we did the live show. I feel very supported and very excited to be in this kind of community of kind of slightly nerdy, slightly obsessive people who want to be doing something with their careers, who feel ambitious. I feel like we're all kind of a similar type of person. So in a lot of ways, I feel really

supported. Honestly, a big piece of it is the team. I mean, we have just incredible support,

and I just would shout them out right now. Claire Miller, Mia Silverio, Dan Chilon, Isabel Kinsel, Chris No Dawn, and you like, I kind of want to just shout them out right now. And there are plenty of other names, but you know, we're a bunch of kids who Scott hired and Scott said to us one day, I want to make a podcast about markets. And we said, okay, and we didn't really know what we were doing, but then we eventually did know what we were doing,

and now here we are at the Castro. So, like it's been wild, but ultimately, this is so much fun doing this, I'm meeting all of you guys and doing this with Scott and Scott's been such a support for me the whole way through. So that's a really nice question. I feel good. I'm handling it. Okay. He seriously, the sum we all dream of, right? I don't think I've ever seen you stressed.

I don't, I've never registered you or maybe I just don't, I just don't really care.

You got to hide it, you got to hide it really well, never show your body. I've never seen you stressed. Avery Sarko, I hope I'm pronouncing that right. Avery has a question. He says, "What's your best advice for 17-year-old in today's day and age?"

“Avery 17, I assume. Well, there's a lot there. 17. Are you 17?”

Yes, sir? That's awesome. Yeah, 17. Be good to your parents, your allies. You're at a point in your life, or you're under the impression, you have this natural hormone coming over, you that makes it easier for you to leave the pack. So you become an asshole to your parents, try and skip that stage and go right on to realising your parents to your allies. Start investing in relationships. You're going to hear a lot of

TikToks about how, if you save 10 bucks a day and pass up a lot of day, that by the time you're

50, it's a million bucks. Approach relationships that way, trying to have the confidence I didn't

Start quick tax. You were great today, or I'm so impressed by you. It's so many young men

as they're developing sort of their sense of masculinity. They feel like it's a zero-sum game, and if they acknowledge it, someone else's impressive that somehow takes from how impressive they are.

“Also, really the key attribute you need to develop at the age of 17 is no. And what do I mean”

by that? You need to put yourself in as many uncomfortable positions as possible and get as many know as possible. And what I worry about with young men and the temptation, if I'd had the ability to be entertained on TikTok all day, I'm not sure if I would have ever gone into Westwood and

seen movies. If I'd had life likes synthetic porn on my computer 24 by seven, I'm not sure

I would have ever taken the risk to approach strange women on the campus who used CLA. I don't think I would have, if I thought I could trade crypto or stocks on Robin Hood or Coinbase, I'm not sure I would have ever, and I did this show up in the office of Morgan Stanley in the lobby with donuts, which was a cheesy thing and Sam, you know, I want to meet with somebody. So if you're not getting a lot of nose in your life, if you're not applying to jobs you don't deserve to get,

if you're not applying to schools, you shouldn't get into, if you're not approaching and expressing romantic interest on making someone feel safe with people that most people would perceive as high or character and hotter than you. If you're not getting to know a lot, you're not going to ever punch above your wayclass economically or romantically. So be good to your parents, start investing in relationships and try to get to know as quickly as possible and develop the sense of resilience

around rejection. And my fear of kids, you're a, especially men, is they believe they can have a reasonable fact suddenly of life with a screen and an algorithm, and they don't develop the resilience and don't ever get to engage in the really hard things that's the most rewarding thing, and that is relationships. And if they're not careful by the time they're 25,

one and three men on the edge of 25 is living at home, and they never develop the skillset

around rejection. And if anyone in your life that you really admire, the only thing I can guarantee is they've had a lot of no one in their life. So get, get really good at know, and also just recognize, and I wish I'd learned this earlier, nothing's ever as good as bad as it seems. So if you're applying your 17, you might be applying to college. If you don't get into the college of your dreams, if you get your heart broken, if you don't get the job you want, um, when you're

older, you're not going to regret not getting into that great school. You're not going to regret, you know, having your heart broken. You're not going to regret not getting the job you wanted. What you're going to regret is how upset you are and how much you beat yourself up. So just

“learn, try and just remember that and forgive yourself and recognize that, that people are”

young people are just so hard on themselves. Um, anyways, but more than anything, get out and just get to as many know as possible. That means you're, you're about to get to good, uh, good yeses. By the way, where are you? So I don't know where it what's his name again? What's the kid's name? Avery. Avery. So Avery, do you know what love language is? Love language is, is like either, everyone has a love language. So it's like, it's either acts of service, affection, gifts.

My love language is money. So here, brother, here's a thousand bucks. Take your mom out to dinner. I think he's upstairs. That's not Avery. That's Eric, but he's taking it to Avery. I hope. Hey, Scott. Yes, it's Mark Mahaney. Mark, I'm gonna ask you a question. Where did I get a ride and wrong on valuation? I'm not on valuations, but thank you for coming out, both of you. Thank you for coming out to San Francisco. I've read all of your books. I've given copies of your

“books to all of my sons. The notes on being a man was phenomenal, so thank you. I think you're true gift.”

Thank you. Thank you. Thank you for saying that. Thank you. Just so everyone knows, Mark Mahaney is one of the best analysts on the street, the tech analyst, I ever call like it's awesome he's here right now. All right. So I'm sure you're right

look at all the hugely hyped IPOs that you've watched over the years. Google, Meta, Amazon,

“Netflix, Uber, Spotify. I mean, you didn't usually make a lot of money if you bought them right”

at the IPO price, but they did become great assets over time, so you had to be really careful. But I just push you to think about the fundamentals and I'll just throw one or two things by you.

When you think about OpenAI and Anthropic, you've never seen companies scale revenue. This is not

a recommendation of these these things, but you've never seen companies scale revenue as quickly as they have faster than anybody. And you've seen with Anthropic what's been reported recently is that they're just about to turn operating profit profitable on an operating income basis, not funny, EBITDA, but like real profits. So there's a there there and the fact that Google and Amazon and Microsoft and Meta are spending so much money, though and after this, you've got some of the sharpest

minds in the world spending that much money. There's a there there and I whether it gets value right or not. I just I just push you just to think about what's the just you know, follow the fundamentals

first and then figure out your price later, but these are unprecedented fundamentals.

Appreciate that from Margaret. It's awesome. Yeah. That's all the time we have. Thank you, San Francisco.

“This episode was produced by Paul Key Media. Thank you for joining us live in San Francisco.”

You're likely to make sure you're following us on YouTube Spotify. You know the drill. Good night, everyone. Yeah.

Thanks again to Odu for supporting this show. Odu wants to be your ultimate

all-in-one fully integrated platform to handle everything. Seriously, everything. Inventory, CRM, accounting, HR, and much more. No more shopping around or settling for expensive services that it can only handle a fraction of your business. Thousands of businesses have made the switch, so why not you try Odu for free at Odu.com? That's Odu.com. Running a business is hard enough. So why make it harder with it doesn't

different apps that don't talk to each other? Introducing Odu. It's the only business off where you'll ever need. It's an all-in-one fully integrated platform that makes your work easier. CRM, accounting, inventory, e-commerce, and more. And the best part, Odu replaces multiple expensive

“platforms for a fraction of the cost. That's why over thousands of businesses have made the switch.”

So why not you? Try Odu for free at Odu.com. That's Odu.com. Support for the show comes from Odu. Running a business is hard enough. So why make it harder with it doesn't different apps that don't talk to each other? Introducing Odu. It's the only business off where you'll ever need. It's an all-in-one fully integrated platform that makes your work easier. CRM, accounting, inventory, e-commerce, and more. And the best part, Odu

replaces multiple expensive platforms for a fraction of the cost. That's why over thousands of businesses have made the switch. So why not you? Try Odu for free at Odu.com. That's Odu.com.