The BS Bubble

They need to be a little more pointed because I've written tens of thousands of words about this. Now, I recorded hours upon hours of podcast and still to this day, people are babbling about the AI revolution. Is the sky rains blood and crevices open in the fucking earth, dragging houses and cars and dovestigated animals into them ores. Things are astronomically fucked outside, Yet the tech media continues to tell me to get my swimming trunks on and take

a long, nice dip in the fucking pool. As you can tell, this is going to be a little less reserved than usual. I've just I'm a little bit frustrated. I don't know why I'm the one saying this, and I frequently feel with the I a part time blogger and podcaster. I'm writing the things that I'm writing. Since I've put out the newsletter open ai as the systemic risk of the tech industry, and actually it's a couple of weeks back, I did the two parter about it too.

I've heard nothing in response, As was the case with how does open ai survive and how open ai is bad business. There just seems to be little concern or belief that there's any kind of risk at the heart of AI and open ai in particular. And there are companies that spent nine billion dollars in twenty twenty four

to lose five billion dollars. Well, I'd love to add a because here, if not, because it's important to be intellectually honest and represent views that directly can trast my own, even if I do in somewhat sarcastic and sardonic fashion. Nobody seems to actually have a cogent response to how they write this ship hard fork are case in Newton throwing a full scale Psycho Tante on a podcast and

saying I'm wrong because inference costs are coming down. Inference, by the way, is when an AI takes an input and produces an output. It's the calculations that take place right before Google's generativai assistant attributes the Voltaire quote to Michael Jackson or says that black tar heroin, when enjoyed in moderation, can help you lose weight. Newton is a nakedly captured booster that ran an infographic from Anthropic a few weeks ago, likes of which I haven't seen since

twenty thirteen. It was telling you all the ways that people use Genera ivai. It looks like some shit from I don't know, early day Mashable. No offense Christina, and they essentially treat this company propaganda as gospel. But he's really far from the only one with a flimsy attachment to reality. The information a publication that genuinely does some great stuff, which makes it even more heartbreaking to say this.

Ran a piece in early April that made me even more furious than usual, claiming that open ai was forecasting revenue topping one hundred and twenty five billion dollars in twenty twenty nine, based on selling agents and monetizing free users as a driver to higher revenue agents. I should add AI systems that can interact with other systems and do stuff. So an AI that can order pizza from door dash for you is that's an example of an agent. And when I say it can order piece of you,

I am talking entirely theoretically. Is they cannot do this right now and may never be able to do so. Indeed, the whole agent thing is just what we wish AI was and it actually doesn't work. And the piece reported based on things and I quote told to some potential and current investors, takes great pains to accept literally everything that open ai says is perfectly reasonable, if not gospel,

even if said things make absolutely no goddamn sense. So, according to the information's reporting, open ai expects agents and new products, and both of those are quotes to contribute tens of billions of dollars of revenue, both in the near term somehow contributing three billion dollars in revenue this year, which I will get to in a little bit, and in the long term with an egregious twenty five billion dollars in revenue in twenty twenty nine, even projected to

come from just new products. If you're wondering what those new products might be, I am two because the information doesn't seem to know and instead of saying open ai has no idea what the fuck they're talking about and is just saying stuff, the outlet continues to publish things with the kind of empty optimism that's indistinguishable from GPT generated LinkedIn posts. Must be clear, the information isn't generating

their articles they're writing and fresh. I want to be really, really clear about something we aren't in nearly in May twenty five, and indeed one of these will come out actually in May. The second part, I see no evidence that open ai even has a marketable agent product they can sell, let alone one will it will make three billion goddamn dollars off of and they definitely are not going to do so in the next six or seven months.

Oh my, for context, let's triple the revenue of open ai that they made reportedly at least from selling access to their models via at APIs essentially allowing third party companies to use GPT in their apps in the entirety of twenty twenty four, and those APIs and models actually exist in a meaningful sense, as opposed to whatever the far copenai is half baked last agents stuff is. In fact, no, no, no, no no. I'm not going to be mean, not would

be calm, be normal. I'm going to explain exactly what the information is reporting in an objective way, because writing it out really shows how silly it all sounds. I am going to rate they believe a lot, because I must be clear how stupid this is. Now, according to the Information's reporting, they believe the open AI will make three billion dollars in twenty twenty five from selling access to its agents. This appears to come from soft Bank, which has said it will buy three billion dollars worth

of open ai products annually. Earlier this year, we got a bit of extra information about how soft Bank will use these products. It plans to create a system called Crystal Intelligence that CRISTL and it's one of the most generic names I've ever seen, and it will be a kind of general purpose AI agent platform for big enterprises.

The exact specifics of that will shock you, and that there are none, but SoftBank intends to use the technology internally across its various portfolio companies, as well as market it to other large enterprise companies in Japan. I still do not know what the fuck this is Crystal Intelligence billions of dollars, billions of dollars, and they just don't. They can't even describe what it is, just saying yeah, it'll be an agent platform that does stuff with your business,

Like does that sound good? Can I have? I need forty billion dollars? I need forty billion dollars, give me okay. I also want to add that the Information can't seem to keep its story straight on this issue. Back in February, they reported that open AI would make three billion dollars in revenue only from agents, with a big beautiful chart that said three billion dollars would come from it, only to add that it would be soft Bank using open

AIS products across its companies. Based on these numbers, it seems like SoftBank will be the only customer for open AIS agents. Well, this most likely won't be the case, and it isn't because it excludes anyone willing to pay a few bucks to test it out. It nonetheless doesn't signal good things for agents as a mass market product, not that there were any good signals beforehand. Though agents do not exist as a product that can be sold

at scale. Yes, open ai teasted Operator it's first agent at the start of the year, but it doesn't seem to be able to do anything. The Information's own reporting from mid April highlighted how OpenAIS operate a agent struggled with comparison shopping on financial products and that's a quote. And how Operator or other agents are and I quote again tripped by pop ups or logins as well as prompts asking for email addresses and phone numbers for marketing

purpose purposes, which I think accurately describes most websites. And just to summarize from everything I've said, the Information is saying that the above product will make open ai three billion dollars by the end of twenty twenty five. Sounds very real to me, sounds extremely real. I love that the business media just prints this. I love this. I love this so much. I'm having so much fun. Jesus Christ.

According to The Information's reporting, they believe that open ai will basically double revenue every single year for the next four years and make thirteen billion dollars in revenue twenty twenty five, more than doubling that to twenty nine billion dollars in twenty twenty six, nearly doubling that to fifty four billion dollars in twenty twenty seven, and nearly doubling that again to eighty six billion dollars in twenty twenty eight,

and eventually leveling out a ridiculous one hundred and twenty five billion dollars of revenue in twenty twenty nine. Said revenue estimates as of twenty twenty six includes billions of dollars of new products that include free monetization free user monetization either and if you're wondering what that means, I also am. The information does not explain JESSICLLESSI must have been busy being horrible to people that work for her.

They do, however, say that open ai will start, and I'm quoting this won't start generating much revenue from free users and other products until next year. That's twenty twenty six. In twenty nine, and I'm still quoting. However, it projects revenue from free users and other products will reach twenty five billion dollars, a one fifth of all revenue, and then adds that shopping is another potential avenue. You still probably don't know what they're doing, and neither do iron

I have driven myself insane reading about this. I really cannot express my disgust about how willing publications are to blindly published projections like these, especially when they're all so stupid. Let me just read this to you, all right, and I quote. Open ai has already begun experimenting with launching

software features for shopping. Starting in January, some users can access web browsing agent Operator as part of their Prochat GBT subscription to here to order groceries from Instacart and make restaurant reservations on open table. Just want to be clear. This is a few episodes ago I mentioned Casey Newton not even being able to say this worked. I just want to be really clear as well what the information

is saying. So they're saying that this experimental software launched to an indeterminate amount of people that barely works, is going to make open Ai three billion dollars in twenty twenty five, and then somehow this is going to lead to open ai making twenty nine billion dollars in twenty twenty six, and then they're can eventually be up to one hunch and twenty five billion dollars. What the fuck? How? How?

What fucking universe are we all living in? There's no proof that open ai can do this other than the fact it has a lot of users and a lot of venture capital. In fact, I think we have real reason to worry about whether open ai even makes its

current projections. In my last multi part episode and then the newsletter open ai as a systemic risk for those of you who are like to read while listening to my fucking podcast, I wrote the Bloomberg had estimated that open ai would triple revenue to twelve point seven billion dollars in twenty twenty five, and based on its current subscriber base, open ai would effectively have to double its current subscription revenue and massively increase its API revenue to

hit these targets. These projections rely on one entity, SoftBank, spending three billion dollars specifically on open AI's services really shouldn't said specifically, because they keep changing what it means, meaning that they'd have to make enough on API course, so people plug in the models into their products to generate more revenue. In the open Ai made in subscriptions in the entirety of twenty twenty four and something else that I can only describe as an act of God,

and that I admit. It seems that soft bank spending commitment is based on usage and not like a flat fee where Softpak just hands them three billion dollars and gets infinite levels of access. Assuming it's the former, I'd be stunned if soft Bank's consumption hits three billion dollars in twenty twenty five, even with the massive cost of the reasoning models that Crystal Intelligence will maybe be based off of. Again, we don't know, and soft Bank announced

this deal with open Ai in February. Crystal Intelligence, if it works, and that is possibly the most load bearing IF of all time, will be a massive, complicated and ambitious product. Details are vague, but from what I understand, soft Bank wants to create an AI that handles a bunch of varied tasks that knowledge workers do. I mean, it's just the same marketing bullshit. It's the same thing.

It's the thing they've been lying about before. And to be clear, open AI's agents cannot consistently do well anything right now, what I believe is happening is that reporters are taking open AI's rapid growth in revenue from twenty twenty three to twenty twenty four, when they went from like tens of millions of dollars a month in the beginning of the twenty twenty three to three hundred million

in August twenty twenty four, genuinely a big leap. They've taken this to mean that the company will always effectively double or triple revenue every single year forever, with their evidence being open ai has said that this will happen in projections. It's bullshit. I'm sorry, it's bullshit. It's bullshit. As I wrote before in a newsletter, it's called there's

No Ai Revolution and the accompanying episodes. At the time, open Ai effectively is the generative AI industry, and nothing about the rest of the generative AI industry suggests that the revenue exists to sustain these ridiculous obscenes and frankly fucking stupid valuations and projections. What do I mean by that?

By the way, okay, let me get into it. Chat GPT is the only real generative AI product with any significant usage, or rather their nearest rivals or a fraction of said user base, or maybe I need to be a little bit blunter. If anyone held at Google Gemini user conference, all the attendees could probably share a cab.

Believing the open AI growth myth and yes, reporting it objectively is both endorsing and believing these numbers is engaging in childlike logic where you take one event, which is open AI's revenue grew seventeen hundred percent from twenty twenty three to twenty twenty four. Wow, to mean another will take place, which is the open a I will continue to double revenue literally every other year. Another insane thing to believe, and you're consciously ignoring difficult questions such as

how will they do this? And what's the total addressable market of large language models and their associated subscriptions exactly? And how does this company even survive when it expects the costs of inference the triple this year to six

billion dollars alone. Wait wait, wait, sorry, sorry, I really need to be clear with that last one, because it's a direct quote from the information hm M. The company also expects growth and inference costs the costs of running A products such as chat GPT in their underlying models to moderate over the next half decade. These costs will triple this year referring to twenty twenty five to six billion dollars, and rise to nearly forty seven billion dollars

in twenty thirty. Still, the annual growth rate will fall to about thirty percent. Then, okay, thanks Also, are you fucking kidding me? Six billion fucking dollars for fucking influence? Hey, ca C Newton, I thought those costs were coming down. KC case, KC. Wow, he's not here. He's not here anyway. That's not really great at all. That's actually really bad.

The Information reports that open ai will make about eight billion dollars some subscriptions to chat GPT in twenty twenty five, meaning that seventy five percent of open AI's largest revenue source is eaten up by the price of providing it. This is meant to be the cheap part. This is the one fucking thing people say to me is meant to come down in price. I've had assholes saying to me for the last year. Custom influence is coming down?

Is it? Are we living in different dimensions? Are there large as parts of the tech media that have fucking gas leaks? What am I missing? Tell me what I am missing near ed. You haven't take to people to Billy Sea. You don't need it it. Shut the fuck up. If you are one of these people who says I need to in Casey, you're included, man. Fuck like, I'm so sick of this, Oh you don't talk to people running these things. I am sick of people like Casey, you and and others too saying, Oh, you don't talk

to enough AI people. You haven't listened to them. You mean, I haven't listened to the problem of the people that make money off of lying about this dog shit? Are you really thinking you think that's what's missing from my analysis, interviewing people who work at these companies and understanding how the technologies work. I know other technologies work. I don't

need to talk to these fucking people. There are people out there like Simon Wilson and Max Wolf who know how these things work that I talk to fairly regularly, and both of them push back on me because they

know how large language models work. Those people matter. What doesn't matter to me, what will never matter to me is what Dario, Emma, Dave, Jack Clark and all the other fucking people anthropic thing and I think it's the tech and actively honestly malpractice in journalism to pretend that there's something ethical about speaking to these people and listening and taking in their marketing spiel. It's actually a little bit disgusting that this is even a critique leveled at anyone.

But you can have to forgive me. I'm gonna be a little rude, and I know that seemed like it, but I'm not even getting excited. In fact, you know what, I think it's time, Okay, everyone, I think it's time that I go through the most common critiques in AI. It's time for me to really sit down. And I'm going to do my Kevin Rooth's voice. And I know a lot of you like my Kevin Ruth's voice, and

some of you, not a lot of you. I'm going to say I'm being rude to these people, and it weakens my analysis, to which I say, kiss my ass, I will I will turn you, I will cube you like a car in a garbage dump. But let's start, shall we. The cost of inference coming down? That's one argument. Okay, source sauce, where is your source? If you are someone saying to me that the costs of inference are coming down. I want your source. I want you to show me

the costs. I want you to show me the costs at scale, because it sure seems like they're increasing for open ai, and they're effectively the entire user base of the entire generative AI industry. But Edward about deep U, sweet idiot child. Deep Seek is not open Ai, and open AI's latest models only seem to be getting more expensive as time drags on. GPT four point five costs seventy five dollars per million input tokens and one hundred and fifty dollars per million output tokens, and that the

risk of repeating myself. Open ai is effectively the entire generitive AI industry, at least for the world outside of China. On top of that, we actually don't know whether deep seak is even profitable to run at scale. It is definitely cheaper to run, but we don't know if it's actually profitable. Indeed, I don't know, even though how you calculate this, because running a deep seek model is just one person is one thing. The question is whether you could scale it up like open ai. We don't know.

But let's get up back to the other critiques. This is a company, it's growth stage. They can just hit the button, it all be profitable. You have the mind of a child. If this was the case, why would both anthropic and open AI be losing so much money? Why are none of the hyper scalers making profit on AI? Why does nobody want to talk about the underlying economics if they're at the growth stage? And also a little side point as well, why have we been at the

growth stage for years? And why are hyper scalers at the growth stage? They're not startups anyway, on to another one, though, these are the early days of AI. It's just that the early days wrong. Wrong. We have all the king's horses and all the king's men, the entire tech industry, and more money that has ever been invested into anything piled into generative AI, and the result has been utterly mediocre.

Nobody's making on money on AI other than Nvidia and maybe during a consultancy, but ed they're already showing signs that the AI is going to be powerful. No it's not. No, it's not like I'm If anyone brings these critiques, you just say no, no, they're not. Show me, show me, show me, why is it the only people I'm giving Simon Wilson credit here. He's one of the only people who'll show you anything cool. And it's cloud compute stuff.

It's like relatively boring enterprise stuff. It's exciting for the niche cases, like software generally is, but it's really not showing any power. We talk about this powerful AI thing, is it in the room? Like? Where is this? Where is this powerful AI? But then I have actually had a few emails saying, ed ed look at Open Eyes three model, and I just want to be clear that this new and extremely expensive reasoning model also hallucinates more. Is that AGI? By the way, is this AGI? Is

the AGI in the room with us? Did the AGI tell you it loved you? Did it tell you to leave your wife? Did it offer you sex? I hope you're.

my sex. People doubted those two, they didn't. I will drown you in an icy lake if another person comes to me and says, hey, ed smartphones. People doubted smartphones. Nobody darted smartphones. Why do people get I've read this point so many times, but no one seems to have

a fucking hyperlink because they're lying. They goddamn lying. Cavello of Goldman Sachs also noted and including an entire thing about how smartphones were fully telegram after analysts and Advance with hundreds of presentations that accurately fit house smartphones rolled out, and that said that no roadmap exists for AI. It's just we're years into this and I'm still repeating the same points, and I still don't have much in return other than the cost of inference that going down. But

here's another point of people like it. They go out ed, you're so bone and check out this article, and some of you love to emailed me this fucking thing. Not many of you, I must be clear. The listeners. You're wonderful. I love you so much, but there's one or two of you out there. Really you're very attached to your

generative ais and I'm never gonna like it. But some of you like to send me this article from Newsweek in nineteen ninety five from a guy who said that the web would not be a big business Clifford style. He said, why the Web won't be Nirvana? And this piece, by the way, is quite detailed. You should read it. I'm going to have it in the episode notes. But they think that sending me this that one guy one

guy was wrong. Once one guy he said that the Internet wonn't be big, And this proves that I add ze Tron what's that ninety nine us like twenty years later because one guy said that the Internet won't be big, that I am wrong? Summer motherfucker? Have you read the piece? That's actually the thing. All of these are things that

you can box up and use. Some people who use this half fast bullshit Clifford Stole basically says that the Internet at the time was pretty limited, and yes, he conflated that with the idea that he won't be big in the future. However, Stole's piece, also, as Michael Hiltzier wrote for The La Times, was alarmingly accurate about misinformation

and sleazy companies selling computerized replacements for education. In any case, one guy saying that the Internet won't be big doesn't make the fucking thing about Jennity, I v ai and you were a simpleton if you think it does. One guy being wrong in some way is not a response to a criticism. I will crush you like a bug. If this is your logic, I will eat you. I will put you in my mouth like Kirby, and I'll shit you out, and I will have the powers of

a dunce. Stole's analysis also isn't based on hundreds of hours of research and endless reporting. Mine is I will grab you from the ceiling like the war Master from Zelda, and you will never be heard from again. Anyway. Another argument, another argument that people are to give me is the open ai and anthropic of research entities not business, and that they are not focused on profit. Okay, so just so we're clear that if that's the case, they're just

going to burn money forever. Is that the case or are they going to hit like the be profitable button sometime. Also, if open ai was a research entity, why does it need forty billion dollars some soft bank or to change its weird corporate structure to become a full profit Actually wait, wait a second, that just occurred to me. Open ai is as many as eight hundred million weekly active users. That's proof of adoption, right, That's going to be an

argument that people have. There's some bloke on Blue Sky who has just been responding to me every few days with this kind of argument, saying, look, look at all the users, and look, I get the look. You might be a bit horny about this number, but something don't make no sense about this number. Or March the first twenty twenty five, open ai said that it had five hundred million people who used chat GPT every week. Two weeks later, Sam Mortman claimed that something like ten percent

of the world uses their systems a lot. They're referring to chat GPTs, and the media took this to mean that chat GPT is eight hundred million weekly active users. I just want to be clear about something as well. Sam Moltman didn't say that, he said the weird vague thing about something like ten percent of the world, like that's what he said, and everyone just went, oh shit, we gotta help help Sam Moorman out got to push

this bad boy over the edge. And there are three ways to interpret what he said, and you tell me which one sounds real. Number One, open AI's user base increased by three hundred million weekly active users in two weeks. Number two. Open ai understated it's user base in the announcement of their funding announcement on OpenAI dot com by three hundred million users or three. Number three, How about this,

Sam Moltman fucking lied. I get that some members of the media of a weird attachment to this damp little man, But have any of you ever considered that he's just fucking saying things knowing that you'll print them with the kindest possible interpretation. Sam Oltman is a liar. He's lied before, and he'll lie again. I wrote an entire newsletter called sam Oltman is Full of Shit. You should read it.

I'm gonna link to it, but way ed Google says it as three hundred and fifty million monthly active uses on Gemini eat shit Zichron No, you eat shit? Yes, Google Gemini has three hundred and fifty million monthly active users, and that's because they started replacing Google Assistant with Google Gemini in early March. You are being had, You are being swindled. If Google replaced Google Search with Google Gemini, it would have billions of monthly active users. Jesus Christ,

Jesus Christ on a goddamn cracker. Even reading this script out, I get like some of you have suggested that this is at all manufactured. No. Reading this stuff makes me very angry because I didn't grow up popular or intelligent in any way. I've had to pick this shit up as I go, and I don't think what I'm saying is crazy, but I am sometimes treated that way, and

this episode I realize I'm doing myself no favors. But anyway, back to the critics, really quickly open AI having hundreds of millions of free years as each losing it money is proof that the free version of chat GPT is popular, largely because the entirety of the media has written about AI NonStop for two straight years and mentioned chat GPT every single fucking time. Yes, yes, there is a degree here of marketing at partnerships of word of mouth of

some degree of utility. But when you remove the non stop free media campaign chat GPT would have petered out by now along with this stupid fucking bubble, but edits pouf sambody's doing something. Yeah, it's proved that something is broken in society. Generative AI has never ever had the kind of meaningful business returns or utility that actually underpins something meaningful, but it has had enough to make people give it a try. Do you not? Actually? No, I

know you listening. You're gonna get this. In some ways this episode has been I mean, in all ways it's been pretty rant. In the second one going to be even more so. What I'm trying to do here is show you how fascicle all this crap is, how ridiculous it is, how silly these posits are. These projections are the suggestion that what we have today will become something else,

when all we've had is proof that it won't. Do you see the obvious cracks in the wall here, No matter how strenuously people like professional credulous dipshits that the other big publications tried to pave over them, does any of this make sense to you? Because I, even when I try and steal man. My own arguments. Can't wrap my head around how any of this survives, let alone becomes an industry where the biggest player has annual revenue

is greater than some major industrialized countries. And I know some of you the emotions a lot, and I know the aggressions a lot. I'm frustrated because I truly believe this stuff's falling apart. I truly believe that this was never really anything well. I'm saying this. Kevin Rose is in the New York Times going, I believe that Agi is my friend. I believe AGI will rise out of the ground and hug me in the way no one ever has. I think that's disgusting on levels. But I

also think it's genuinely irresponsible. I think all of this is I think when this collapses, we're going to have to look back and take inventory of how we got here. And I need you to in the next episode listen to it through the kind of len listen to it

through the lens. That's how lenses work. I need you to just stick with it and realize that all of the what this is is trying to show you and hopefully other people that you talk to how silly this is, how ridiculous this is, and that we have a major problem in tech and business media. We have a problem where people can come out and just say whatever the Charlie Brown had hose of the tech media. And it's disgusting to me because there are startups that could use

this money. There are better things to be done with this money. Perhaps they're not hypergrowth markets, but there are things that actually exist that could be piled into instead. We've done this to make companies look like they can grow, to make Sam Altman able to buy another five million dollar koncig car. Is that the one he has? Either way, I'm not gonna lower the temperature on the next episode. I'm gonna be honest. It's gonna be just the spicy.

But I want you to know all of this frustration comes from a place of knowing that we can do better, and knowing that the tech industry could do better. Perhaps it won't be as big as it is today in the future, I don't know, but for it to get better, this shit needs to end. Stick around for the next part, where I'll talk about how we actually got here, how this bubble got inflated, and how nasty the result could be At the end, thank you for listening to Better Offline.

The editor and composer of the Better Offline theme song is Matasowski. You can check out more of his music and audio projects at Matasowski dot com, M A T T O. S O w Ski dot com. You can email me at easy at Better offline dot com or visit Better Offline dot com to find more podcast links and of course, my newsletter. I also really recommend you go to chat dot Where's youoead dot at to visit the discord, and go to our slash Better Offline to check out our reddit. Thank you so much for listening.

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