Monologue: Silicon Valley is A Cargo Cult

focus myself. I've also been enjoying a lot of the responses to my exclusive about open Aiyes twenty twenty four

and twenty twenty five financials Now. Some have been mighty confident about Inference being profitable due to a seven point five billion dollar cost of revenue on thirteen point h seven billion dollars in revenue, but overlooked my reporting from last year verified by the Financial Times, by the way, that showed open Aye spent eight point six seven billion dollars specifically on infrared in the first nine months of

twenty twenty five. It's very very clear that open Ai moved around numbers to make things look better than they are, and I believe that inference costs are being dumped into sales and marketing How else can you explain how a company spends more than forty three percent of its revenue five point seven three billion dollars on sales and marketing, more than the Coca Cola Corporation, which has three ad agencies and a vast web of different print, digital and

physical ads spend. I think they do some influence of things as well. Hotously, if the Diet Coke Corporation wants to get in touch, please do. Nevertheless, Microsoft also had five hundred million dollars of sales and marketing spend too via open Ai. What do you think that is open ai spending five hundred million dollars on sales and marketing through Microsoft? Or is it them itemizing promotional spend or

the inference and free users as a sales and marketing cost. Now, if you disagree, and I'm sure some of you do, please explain in any detail, love any level of detail, really, how open ai has spent five point six seven billion dollars and sales and marketing otherwise. Its first major advertising campaign was in September twenty twenty five. If it's spending let's say two hundred and fifty thousand dollars a year on its five hundred sales stuff that's still only one

hundred and twenty five million dollars. Unless open ai is one of the single largest accounts in digital advertising and speaking with people all over the shop, I don't think that's true. I think it's far more likely that there

are actual costs being hidden. And this is the kind of thing a company does when it has utter loathing for its investors, the media, and the general public, a brazen attempt to bury costs to make things look better for an audience that's directly incentivized to take any shred

of proof that things are okay. Nowhere is this more obvious than in the FT's story, and I'm specifically referring to a quote where a source familiar with the matter suggested that somehow open ai only lost eight billion dollars in twenty twenty five, rather than the twenty point nine billion dollars it actually lost. Accountancy voodoo doesn't work on me.

Clam you well, I'm better than that. But this comment, in my opinion, was not actually meant for the readers of the FT, but for the larger AI cargo cult. As I wrote in my free newsletter this week, Silicon Valley as exemplified by the AI bubble, has abandoned its supposed principles of rationality and meritocracy, and now more closely resembles a cargo cult desperate to recreate bygone eras of growth.

Open AI and Anthropic are not interested in operating with honesty or integrity, nor are they particularly concerned with building real companies. They lose billions of dollars. They always have and they always will. Nothing changes that. They must keep the mythology of their company's going so that they can keep raising money in perpetuity until someone works out how to build a real company. Not that that will happen.

But nevertheless, the things that they say they exist to feed the tech media in AI Booster's symbolic proof that the great prophecy that Open Ai and Anthropic will grow and be the biggest companies in the world. They'll be profitable, and AI will be the next Big Three. Well, they need that, They need you to believe these things so that the great prophecy will come true. It must come true. Don't you understand if it doesn't come true, Well, Warrio

Amiday can't be an elder statesman forever. And this is why both companies have used annualized run rates and never really addressed the profitability question outside of dario Amidae's stylized facts, because they know that Silicon Valley is a monoculture dominated by people who don't interact with society outside of sand Hill Road, who they believe are gullible enough to accept and promote any rationalization that confirms their beliefs or indeed

the great prophecy. And I mean they've they've been completely right so far. The AI industry doesn't feel the need to prove itself because it has complete contempt for its customers, the media, and the markets, believing they'll slurp up whatever slot they get and take it as proof that that great prophecy, my friends, will come true and all of us, all of us will be purifer And why wouldn't they. The media is accepted basically every single narrative the AI

industry is created. AI boosters will accept effectively any proof that things going well, and we'll actively attack and ostracize any non believers. And if I'm honest, there are members of the media who do this too. And if you're listening, I'm not scared. You only make me stronger. You only make my posts longer too. But really, this is how it all works. This is how it's worked with AI. It's how they tried to make crypto and the metaverse work. But it really worked with AI because lllm's two do

that kind of cargo cultish evans generation. Oh, it could potentially replace software engineers because it can burp out some code. Oh, it can look at my taxes and say stuff that means it can do my taxes, just enough symbology to push this bullshit through for an indeterminate end. Let's be honest, it's not going to be a government bailout. I've covered that in a previous monologue. Go back and listen to it.

Not repeating myself, but this is Silicon Valley, and Silicon Valley stands for rugged individualism, rationality, and meritocracy, unless, of course, everybody in Silicon Valley agrees that idea is good, at which point all that bullshit goes out the window. Any singular piece of information that even slightly brings positive is proof of the grand prophecy of growth that AI promises, and chosen are those who take said proof, and cursed are those who question it. You dare to report an

open aiy's actual revenues. No non believer help with him. It's we're going to put him in the wicker Man. We're going to put the man with the revenues in the wicker Man. Except this is this is more like that. Yeah, I guess this would be the wicked Man, except I'm not like a sexless British policeman. They're more on that. Later, I'll go deep down the wicked man hole. Nevertheless, this is Silicon Valley. Now, Silicon Valley is just a cult.

It's a cargo cult where everyone's trying to shuffle shit around, put things in the right order to try and usher in the next Steve Jobs or the next Bill Gates. You ever notice as well that that's all they talk about. It's always the guys, it's never the product. You also, ever notice that all of these extremely well paid AI guys like a Nome shazeog or bought He left Google and got bored for two point seven billion dollars by Google to go back to Google, then went to open

ai a month ago. What do you think he did at Google? What do you think Barrett Zaff, who left open ai too, went to thinking machines that he came back to open ai and knows left open Ai. What do you think he's done? And now Andre Carpathy he just went to Anthropic and he wasn't doing anything for two years. Isn't it weird that Andre Carpathy, one of the co founders of open Ai, formerly of Tesla, he sat around for two years and really didn't do anything.

He had that Eureka Labs education startup, nothing happened with that. It's almost as if the valley moves around different forms of symbology hoping that when they're in the right place, the next era of growth will begin. And doing this allows them to get away from the horrible fact that they're out of hypergrowth ideas, that they don't have the people who have the ideas anymore. The original iPhone was created by a competing teams Tony Fadell and John Forstall.

I believe the software and hardware teams coming together and actually built something people with real industrial expertise. The valley now is just I don't know, trading different kinds of AI scientists and mathematician in the hopes that one of them can usher in the digital god. It's fucking depressing. It's depressing, and make no mistake, it will lead Silicon

Valley to its ruin. Faith can't fill your belly, or cover one point one trillion dollars in spending commitments, or magic up the more than two trillion dollars in revenue that big tech needs to make AI worth it both twenty thirty. I don't think it can paid Larry Ellison's bills either. In fact, faith can't really do much other than create speculative wealth, and speculative wealth can't pay for everything forever. I'll got you on Friday. This has been better offline, and I bet ed Zetron