Call Zone Media. Hi, I'm Edzeitron and welcome back to Better Offline. As I've discussed in my last episode, there are four intractable problems that are going to stop generative AI from going much further. It's massive energy demands, its massive computation demands. It's hallucinations when it authoritatively tells you something that isn't true or makes horrible mistakes in images, and the fact that these large language models have this insatiable need for more training data. Yet I think what might pop this bubble is a far simpler problem. Generative AI simply does not deliver the magical automation that everybody has been fantasizing about, and I don't think consumers or enterprises are actually impressed. A year and a half after launch, it seems like the kind of immediate and unquestioning in fact youation with chat GBT and for that matter, or other generative AIS has softened. Instead, there's this rising undercurrent of apathy and mistrust and of course failure that's kind of hard to ignore. In June twenty twenty three, traffic to chat GPT's website, where people access the chat GPT bot in a web browser fell for the first time since launch, starting a trend that's continued for five of the following eight months. According to data from similar Web, people are becoming more aware of the technology's limitations, like as I mentioned, hallucinations, which, as I note, is when chat gpt confidently asserts things that aren't true, which can be in writing, when it gives you an incorrect fact, or in an image when it gives a dog eighteen legs to make matters worse. According to data from data Ai, which used to be known as Appanny, chat gbt's downloads in iOS have begun to drop from a high of just over seven hundred thousand a week to a plateau of around four hundred and fifty thousand to five hundred thousand a week since early twenty twenty three, which sounds impressive until you hear that only seven point three five percent of people who downloaded chatgbt in January twenty twenty four actually used the app again thirty days after they downloaded it, cratering from a high of twenty eight percent a month after the app launched in June twenty twenty three. In fact, things immediately appear to have fallen apart in July twenty twenty three, only two months after launch, only four point five nine percent of users opened the app for a second time. Numbers like these tell the story of a buzzy new application that isn't actually providing users with much utility. I think the generative AI engine has started to sputter for customers, for businesses, and indeed for the startups that create them. That's bad news for any industry that's yet to reach profitability or indeed sustainability, and especially for generative AI, which remains relying on a kind of an indefinite supply of cash to operate. Back in April twenty twenty three, Dylan Patel, chief analyst at Semi Analysis, calculated that GPT three, the previous generation of chech GPT current ones known as GPT four, cost around seven hundred thousand dollars a day to run. It's about twenty one million dollars a month, or two hundred and fifty million dollars a year. In October twenty twenty three, Richard Windsor, the research director at large of Counterpoint Research, which is one of the more reliable analyst houses, hypothesized that open AI's monthly cash burn was in the region of one point one billion dollars a month, based on them having to raise thirteen billion dollars from Microsoft, most of it, as I noted in credits for its Azure cloud computing service to run their models. It could be more, it could be less. As a private company, only investors and other insiders can possibly know what's going on in open Ai. However, four months later, Reuter's would report that open aye made about two billion dollars in revenue in twenty twenty three, a remarkable sum that much like every other story about open ai, never mentions profit. In fact, I can't find a single reporter that appears to have asked Sam Mormon about how much profit open ai makes, only breathless hype with no consideration of its sustainability. Even if open ai burns a tenth of windsors estema about one hundred million dollars a month, that's still far more money than they're making. There's not a single story out there talking about them making a profit, and I don't think they make in one. Here's one thing we can be certain of. Though things are getting more expensive, progress in generative AI means increasingly complex models, and as I previously mentioned open AI's attempted God damn it a Rakis model one, built specifically to wow Microsoft by making chatgiputy more efficient, failed to actually make it more efficient. Their attempts to make this a better company are not working. Windsor the aforementioned analyst in a separate blog also pointed out that there's nothing really sticky about these companies. There's nothing stopping someone from switching from, say, chat GPT to anthropics clawed two model. They're all trained on similar data sets, and they all produce very similar answers. And what one model might be better a one thing than another, they're fundamentally very very similar. There's also nothing stopping someone from simply giving up on generative AI altogether. It doesn't seem to be the plug and play automation god that everybody's been replicate to be, and judging by the plateauing Chat GPT user numbers, I think that might already be happening. It's also important to remember that while generative AI is shiny and new artificially, intelligence is absolutely not, and over the past decade it's found a number of homes from expensive security apps that detect when a hacker is trying to break into a corporate network. The spam filters proof for reading tools like grammarly, Plenty of Things, even Siri on your iPhone. In these context, AI is either a small component of a larger product or something that directly builds on human efforts. This stuff is actually valuable. AI based spam filters are typically better than those reliant on hand coded rules, for example, But it's also from a marketing perspective, can of boring generative AIS A law is that it can supplant humans either partially or entirely, producing entire creative works that otherwise would have taken hours and carried a real financial cost. But behind this glitzy technology and media hype, the unspoken truth is that generative AI holds way over the financial markets because it's regarded as a tool to eliminate an entire swarth of jobs in the creative and knowledge economies. It's a ghastly promise and it underpins the vast market value of otherwise commercially unviable generative AI companies like open Ai and Anthropic, and it's what is driving I believe the multi billion dollar investments we've seen from Microsoft, Amazon, and Google yeah, I see no evidence of mass adoption of generative AI, and by research suggests the enterprise adoption, which is the meat of what would actually make these companies money, it just isn't there. Deep within the earnings reports and the quotes of every major cloud provider claiming that the AI revolution is here is a deeply worrying trend. The AI revenue really isn't contributing much to the bottom line outside of vacuous media coverage, and I think the internal story is going to be much bleaker. In early March, The Information published the story about Amazon and Google tamping down GENERATIVEAI expectations, with these companies dousing their salespeople's excitement about the capabilities of the tech they're selling. A tech executive is quoted in the article saying that customers are beginning to struggle with questions, simple questions like is AI actually providing value? And how do I evaluate how AI is doing? And a Gartner analyst told Amazon Web Services sales staff that the AI industry was at the peak of the hype cycle around large language models and other generative AI, which is a somewhat specific code for it's not going to get much better anytime soon. This article confirms many of my suspicions that and I quote the information here, other software companies that have touted generative AI as a boon to enterprises are still waiting for revenue to emerge, citing the example of professional services firm KPMG buying forty seven thousand subscriptions to Microsoft's Copilot AI at a significant discount on the thirty dollars a c sticker price. Except KPMG bought the subscriptions without really have engaged whether their employees actually got anything out of it. They bought it, and I'm not kidding you entirely so that if any KPMG customers ask questions about AI, they'll be able to answer them. Was so clearly in the bot Oh my god. Anyway, as I've hinted, it's also not obvious how much AI actually contributes to the bottom line. In Microsoft's Q four twenty twenty three earnings report, gief financial officer Amy Hood reported that six points of revenue growth in its Azureine Cloud Services division was attributed to AI services. I went around the web and I read every bloody article about their earnings. I looked, and I looked and everyone was saying, Oh, this is really good. I found someone who said it was six percent of their revenue, and I went, that sounds like complete bollocks to me. So I went and spoke with Jordan Novette, who's covered Microsoft for many years. He is a great cloud reporter over at CNBC, and he actually covered Microsoft's earnings for the NBC itself, and he confirmed that what this means is that AI contributed six percent of the thirty percent of year over year growth in Microsoft's as your Cloud services. That is a percentage of a percentage. So by the way that that means, so thirty percent growth year of year. So six percent year of a year growth is from AI. Could be good, but also all of the rest of it came not from new products, just from the natural growth of the company. It's unclear how much money that really is, but six percent of the year over year growth isn't really that exciting anyway elsewhere. Amazon CEO Andy Jasse, who took over from Bezos a few years ago and was the chief of Amazon Web Services, said that generative AI revenue was still relatively small, but don't worry, you said it would drive tens of billions of dollars of revenue over the next several years, adding that virtually every consumer business Amazon operated in already had or would have generative AI offerings. Now they can just say that stuff. I really want you to know. You can say what you want on earning scores, as long as you're not just outright lying, like saying we have one hundred billion dollars in cash, but you have fifty dollars. That is a lie. You can't do that. But you can be like iah At We've got all sorts of AI and everything. Now it's bloody magically. Take you don't take a look, but it's there. I promise you. They can just say what they want. But don't worry, they're not the only ones. Salesforce chief financial officer Amy Weaver said in their most recent earning score that Salesforce was not factoring in material contribution from Salesforce's numerous AI products in its financial year twenty twenty five. Guidance software company Adobe shares slid in their last earnings. It's the company failed to generate meaningful revenue from its masses of AI products, with analysts now worried about its ability to actually monetize any of these generative products. Service now claimed to its earnings that generative AI was meaningfully contributed to its bottom line. Yet a story from The Information quotes their chief financial officer as saying that from a revenue contribution perspective, it's not going to be huge. Going to be a bit honest and feeling a little insane with this stuff. I feel crazy every time I think about these stories, because elsewhere in the media, so many people are saying how big and successful the generative AI revolution is, and it's going to be Yeah. Every time I look at the actual places where they write down how much money it makes, any of the actual signs of growth and significance and utility and adoption, it's just not there. It's just breathless hype, with this kind of whisper of stagnation and non existent adoption. And while there are startups beginning to mind usefulness out of general AI, and they do inside by automating internal queries and customer sport questions, these are integrations rather than revolutions, and they're far from the substance of a true movement. Maybe the darker truth of the generative AI boom is that it's a feature, not a product, and that these features might be built entirely off the back of large language models which are unsustainable to run, grow, or even make better. What if AI only drives a couple percentage points of real revenue growth of these companies. What if what we're seeing today is the upper limit, not the beginning. Honestly, I'm beginning to believe that a large part of the AI boom is just hot air, and it's being pumped up through a combination of executive bullshittery and very compliant media that's so happy to write stories imagining what AI can do, yet seems unable to check what it can do or what it's doing. It's so weird. Now, there's a bloke over at the Wall Street Journal called Chipcutter who should really look into if you want to know why your boss keeps asking you to go back to the office. Wall Street Journal's Chip Cutter. He loves to write things about how bosses are good and how returning to the office is good. He wrote a piece in March about how AI is being integrated into the office, and most of it was just hundreds of words of him guessing about what people might do but when he gets to the bottom and he starts talking about companies using it, it's almost entirely exact samples of people saying, yeah, it makes too many mistakes for us to rely on it, and we're just experimenting it. Elsewhere in the media, the New York Times talked with Salesforce is head of AI Clara's share and in this I think six hundred and seven hundred word article, didn't really get to say much of anything about AI or what their products do. All she said was that the Einstein Trust layer handles data. And you may think I'm being facetious here, that's all she said about that, and then she added that it would be transformational for jobs the way the internet was. What what does that mean? Why am I reading this in the newspaper? Why is this what I read in the newspaper? How is this helping? I know I rant a lot on this podcast, and I'm going to keep doing it. You're stuck with me, all right, it's free, Okay, you don't pay for this unless you do cooler zone media, which you should pay for anyway. I know I'm ranting, But the reason that this stuff really infuriates me is it's misinformation on some level. I know it's kind of dramatic to say, oh, they're misinforming people by suggesting that AI can do stuff, but it is. It is misinformation. When you're letting corporate executives go in the newspaper and talk about how amazing their products will be without asking them what they can do today, you're just giving them free press. You're not giving them credit for stuff they've done. You're giving them credit for things they're making up on the spot. And when you do that, you make the rich richer and the poor poorer. You centralize power in the hands of assholes, people who are excited, people who are borderline masturbatory, jumping around saying, oh God, I can't wait till and replace humans with fucking computers. Good news is they're not going to be able to, but that's what they're excited about, and that's what they're getting media coverage around. The media has been fooled, just like they were with the metaverus, by this specious promise train of the generative AI generation, and these worthless executives champions these half truths and this magical thinking has spread far faster due to the fact that AI actually exists and is doing something, and it's actually much easier to imagine how it might change our lives, unlike the metaverse. Even if the way it might do so is somewhere between improbable and impossible, it is easy to think about how my work. You know, you could use an AI to or make data entry or boring busy work. Surely all of this you can automate, right, And when you use chat GPT you can almost kind of, sort of somewhat see how it might happen. Even if when you open up chat GPT and try and make it do something, it's always a bit off, never seems to quite do it. I'm in a very in my day job, my PR firm. I'm in a spreadsheet and document heavy business. Of all the people who this could help, you think it would be me A lot of my work is hey, all of these things I need him in a spreadsheet. It can't bloody do it. And I'm sure you listeners will probably email me and say, oh, I've used CHATGPT for this, don't care. I really mean that this thing is not changing the world. And actually I think far more of you have already shared. Thank you. By the way, easy. At Better off Line dot com. You can email me your ideas and your angry comments, so you can go on the reddit to complain. But the thing I'm hearing for most people is, yeah, I've tried it and it didn't do enough. I tried it and there were too many mistakes. There was a Wall Street Journal article back in February about how Amazon and Google were having trouble selling AI services because well, when they went to sell them these companies, these financial services companies in particular, they were saying, yeah, but these hallucinations could actually get the sec mad at us. And the answer that they had was, yeah, what if we just made it so that the models would sometimes say they don't know stuff. Every time you get to a reckoning with AI where you want it to be better, where you're like, hey, AI executive, how will this actually be fixed these hallucination problems, for example, they come up with the most meanly mouthship. And I truly believe it's because there is no answer to these problems, as I said in the previous episode, and I think that's why I can't find any companies that have integrated generative AI in a way that's truly improved their bottom line other than Klana, which allows you to do zero percent interest free loans on almost anything. It's a very worrying company anyway. They claimed that their AI powered support bot was estimated to drive a forty million dollar amount in profit improvement in twenty twenty four, which does not, by the way, despite it being troubleted by members of the media, otherwise mean that they made forty million dollars in profit. I actually can't find what profit improvement refers to. And this is the classic AI boom story. By the way, there's always this weird verbal judo going on where they're like, yeah, sir, forty million dollars in profit improvement, upwards, downwards and side to sidemark, it's really good, And I think it's just headline grabbing. I think it's just buzz. And despite fears to the contrary, AI doesn't appear to be replacing a large amount of workers, and when it has, the results have been pretty terrible, like when Microsoft replaced MSN dot COM's editorial team with a series of AI bots that have spread misinformation and conspiracy theories, things like Joe Biden falling asleep. It's so weird. Interestingly, There was also a study in Boston Consultancy Group, and just as a note, if anyone would love the opportunity to just replace workers with robots, it's BCG, mckenzi, Accentia. All these companies were absolutely they would be giving, however much open ai wanted to do that, and then they would charge fifty million dollars for in integration that didn't work, which I guess makes AI perfect them putting that aside. In a study from BCG, they found the consultants that solved business problems with open AI's GPT four model performed twenty three percent worse than those who didn't use it, even when the consultant was warned about the limitations of generative AI and the risk of hallucinations. Yeah, really great stuff. To be clear, I am not advocating for the replacement of workers with AI. However, I'm saying that if it was actually capable of replacing human outputs, even if it was even anywhere near doing so, any number of these massive, horrifying firms would be doing so at scale, and planning to do so more as the models improve. They'd be fuddling cash right up. Open ayes ass it would be incredible, but the reality of the AI boom is kind of a little more boring. It recently came out that Amazon's cashless just walk out technology in some of their stores. You could walk in, scan a QR code, and then you could just grab your rouse tomato sauce and your condoms or whatever, your weird magazines. I don't know what they sell, and there I'm not giving any more money to Amazon than I need to. Anyways, everyone thought, oh, it's just AI. You could just walk in. It's the cameras would tell you through computer vision what you had bought. It would be great. Now it turns out that there's one thousand workers in India that were monitoring these cameras and approving transactions. Worse still, open AI used Kenyan workers who were paid less than two dollars an hour to train chet GPT's outputs, and they currently pay fifteen dollars an hour. I think for American contractors, no benefits of course, you know, fuck workers, right, that's the thing underneath this whole thing. It's just this undercurrent of disrespect for human beings, and it pisses me off. And I realized I'm pissed off about a lot of things. You'd be listening for like an hour now half an hour in this episode. Anyway, I'll keep going. But yeah, like I said, if AI was changing things, if AI was actually capable of replacing a person, it would have happened. It would be happening right now, It'd be happening at scale. It would be so much worse than things feel now, unless, of course, it just wasn't possible. What if what we're seeing today is not a glimpse of the future, but actually the new terms of the present. What if generator of AI isn't actually capable of doing much more than what we're seeing today. What if there's not really a clear timeline when it will actually be able to do more. What if this entire hype cycle has been built, goosed, and propped up by this compliant media, ready and willing to take whatever these career embellishing bullshitters have to say. What if this is just another metaverse, but with a little bit more product. Every single time I've read about the amazing things that artificial intelligence can do, I just see somebody attempting to add fuel to a fire that's close to going out. When the Wall Street Journals Joanna Stern wrote about Sora open ayes yet to be released video generating chatbot. She talked about how its photorealistic clips were good enough to freak her out. And I get it at first glance. These do look like people, these images do. They look like something approaching a video. They look almost real, kind of like text some chat GBT is almost right or it's right fully, but it doesn't feel right. But much like the rest of these outputs, you look a little closer, and they have these weird errors like cars disappearing in and out of the shot, or a different car coming out from behind something, or completely different images between frames. Are these strange, unrealistic moments of lighting, and they're never much longer than thirty seconds. Stern, who by the way, I deeply respect, isn't really afraid of what Sura can do. But what would happen if open ai was able to fix the hallucination problems that makes these videos kind of unwatchable. Well, it's easy to imagine tools like Saura could eventually play a role in online disinformation campaigns, churning out like lifelike videos of politicians saying or doing appalling things. We can all breathe a sigh of relief in knowing that the videos themselves are often so flawed. You can pretty much instantly see their AI generated Also, SRA is not available to the public yet, and I don't even know if it ever will be. You just need to look at the hands or the backgrounds. Look at the people in the background of any AI generated photo or video. They often contain too many fingers so you can't see their faces. Or in Sora's videos, their legs don't look right. It's so weird and I don't I don't know how to put it perfectly, but they don't feel human. Just to be clear, though Sora is dead on arrival, no one actually has access to it. It's unclear when it will come out. Every journalist that has quote unquote use Sura has just given a prompt to open ai to run. But there's also a very obvious problem that kind of relates to something I mentioned in the previous episode. Open AI and every generative AI company, they're all dependent on high quality data to train the models, and video data is so much larger, more complex, and harder to find. There's less of it because it's visual media, and it's just a much bigger, more complex model and a much harder computational task to create video moving image is it's actually kind of putting aside my anger about Generative AI. It's amazing they've done even this, but to be clear, as amazing as it might look, it isn't enough to do anything. It's just a kind of a do hickey. And this data is so much more complex than the text based data that open ai is running out of to make CHATGBT spit out words. Even if there were enough data, there's pretty good reason why open ai is coy about when they'll release the model. Like I said, it's expensive and complex to run, and at no point has anyone on how the fuck this actually makes them any money, how they sell this. It's so weird, to be clear, when you use surra it turns text prompts into a video. You can't edit the video, you can't change the video. The video is what the video looks like. There's no way to make Sora make the same thing multiple times, which makes the very basics of making film, which is multiple angles of the same thing, completely goddamn impossible. In fact, consistency between the same two prompts is impossible from these models because they're all probabilistic. We've recently seen some of the first quote unquote movies made with sourra and the first one was called Airhead, which is about a minute long. It's this man with a balloon head walking around and it's got this it's very twee. It sucks. It's just putting aside the aipart. It's just crappy, and it's got a guy being like, yeah, having a balloon head is difficult. Yeah, it's weird. I hate having a balloon head. I hope I don't get popped. It sucks. It's really bad filmmaking. But also each shot, and there's multiple mbile shots of this guy with a yellow balloon head looks completely different. It's a different balloon every goddamn time. And it's so funny because you have these guys on twittering like, oh my god, oh my god, I am crying and pissing myself. This is the best thing I've ever seen. But it isn't. It's so close yet so far away, And the only reason it's impressive is people are willing to sit there and say, but what if it wasn't shit? But it is it really is like every other generative output. It's superficially impressive, kind of sort of lifelike, but once you look at it for more than a moment, it's just flawed, terribly, irrevocably flawed. It's time to wake up. We are not in the early days of AI. We're decades in and we're approaching the top of the s curve of innovation. There are products being built, don't worry, but it's all things like Claude Author, which creator Matt Schumer calls a chain of AI systems that will write an entire book for you in minutes, and I call a new kind of asshole that can shit more than you'd ever believe. Generative AI is the ugliest creation of the rot economy, and its main selling point is that can generate a great deal of passable material. Images generated from generative AI models like open Ayes Dali all have the same kind of eerie feel to them, as they're mostly trained on the same data, some of it licensed from shutstock, some of it outright plagiarized from hundreds of artists. Without sounding too wanky and philosophical, everything created by generative AI feels soulless, and that's because it is no matter how detailed the problem, no matter how well trained the model, no matter how well intentioned the person writing that prompt these are still mathematical solutions to the emotional problem of creation. One cannot recreate the subtle fuck ups and delightful little neurological errors that make writing a book, or a newsletter or a podcast special. While this podcast is admittedly trying to generate what I believe AI might do in the future, it's not generative, and it's not generated as a result of me mathematically considering how likely an outcome is. My fury is not generated by an algorithm telling me that this is the right thing to be angry at. I'm pissed off because I feel like we're all being like to and treated like idiots. What makes things created by humans special isn't doing the right thing or the best thing, but the outputs that result in us fighting past are on imperfections and maladies like the strep infection I've been fighting for the last few days, and like, look, to my knowledge, you can't give a generative AI strep throat. But if I ever find out it's possible, I will make it my damn mission to give it to chat GBT. All of this hype is predicated on solving problems with artificial intelligence models that are only getting worse, and open AI's only answers to these problems are a combination of will work it out eventually, trust me, and we need a technological breakthrough in both chips and energy. That's why Sam Moultman has been trying to raise seven trillion dollars and that's not a mistake, by the way, to make a new kind of AI chip, because there's no sign that this or even future generations of chips will actually fix anything. Generative AI's core problems, it's hallucinations, its massive energy, and its massive unprofitable compute demands are not close to being solved. I've now watched a frankly alarming amount of interviews with both open AI CEO Sam Moultman and their CTO mirror Marati, and every time they're saying the same specious empty talking points, promising that in the future chap GPT will do this and that as all evidence points to their models getting worse and through the last years, by the way, they've just said the same thing in every interview. They always talk about chat GPT being like something or help creatives, they never really say how, which just kind of weird. But yeah, generative AI models they're expensive, they're compute intensive, and they don't seem to provide obvious, tangible, mass market use cases. Marathi in Oltmund's futures depend heavily on keeping the world believing that development and improvement of these models capabilities will continue at this rapacious pace of progress, even though it's unquestionably slowed, with open AI even admitting themselves that their latest model, GPT four, may actually be worse at some tasks. I study from UC Berkeley last year found that GPT four was actually worse at coding them before and that chat GPT was at times refusing to do certain tasks. Nobody wants to work anymore. Well, I feel like I'm walking down the street telling people their houses are on fire, only to be told to stop insulting their new heating system. These models aren't intelligent. They're mathematical behemoths generating the best guess on training, data and labeling, and thus they don't really know what they're being asked to do. You can't fix that. You can't fix hallucinations. You can't just make these problems go away with more compute, you can mitigate them. The current philosophy, by the way, is that you can use another model to look at another model's outputs, which, as I mentioned in the previous episodes, is very silly. But seriously, everyone telling you hallucinations are going away, look a little deeper and look at when they actually failed to tell you how they were. It's just very silly. Look. Every bit of excitement for this technology right now is based on this idea of what it might do, as I've said, and that quickly gets conflated with what it could do, which allows Sam Mortman, who by the way, is far more of a marketing person than an engineer. His one startup, Looped was a failure. He's failed upwards. He was in Why Combinat he did this. It's actually ridiculous. He's so famous. All of this bullshit it allows him to sell the dream of open AI, and he's selling it based on the least specific promises I've seen since Mark Zuckerberg said we'd live in our bloody oculus headsets. And it's frustrating because this money and this attention could go to important things. We have real problems in society. I believe that Sam Moortman and pretty much anyone in a position of power and influence in the AI space has been tap dancing this entire time, hoping that he could amass enough power and revenue that his success would be inevitable. Yet I think his hype campaign has been a little bit too successful, and it's deeply specious, and he, along with the rest of the AI industry, has found himself suddenly having to deliver a future these not even close to developing. I am always scared of automation taking our jobs. I think it's always worth being scared of. But I don't think that's the thing the tech industry is working on right now. I don't think they're close, and I think there's something more imminent to fear, and that thing is the bottom falling out of generative AI as companies realize that the best they're going to see is maybe a few digits of profit growth. Companies like Nvidia, Google, Amazon, Snowflake, and Microsoft, they have hundreds of billions of dollars of market capitalization as well as expected revenue new growth tied into the idea that everyone's going to integrate AI into everything, and that they'll be doing more than they are today. You can already see the desperation coming from these companies, like Microsoft, for example, which in March effectively absorbed a company called Inflection AI into itself, kind of an acquisition by Stealth. Inflection AI is a public benefit company that portrays itself as a nicer, gentler version of open AI. It's called product, a chat GPT style chatbot touts its empathetic tone, its humor, and its emotional awareness. Inflection was created in twenty twenty two with an all star founding team that included Reid Hoffmann, the founder of LinkedIn, and most of Fars Suleiman, the British born co founder of deep Mind, which Google acquired in twenty fourteen. In mid twenty twenty three, Microsoft took part in a one point three billion dollar funding round which saw the company acquire a significant stake in Inflection, alongside other AI players like Nvidia. Inflection's core product has the same inherent underlying issues as every other generative AI product, Hallucinations, for example, but it has an accomplished team that has taken a different approach to its competitors. Whereas chat GPT and clored two tend to be, or at least aspire to be, functional tools that provide information or complete tasks. Inflections sought to make its product feel a bit more organic. For Microsoft, the appeal was obvious. It has so much riding on its AI ambitions, but in terms of money spent as well as its share price, that it can't really afford to appear stagnant or worse as though it made a bad bet. Acquiring Inflection would help it maintain its image, especially with idiot Wall Street analysts. But here's the problem. Microsoft already holds a massive stake in Open AI, and regulators both in America and Europe are wary of market consolidation. Acquiring Inflection it'd give them a little too much scrutiny. So Microsoft took a third, nastier path. Instead of buying the company, it bought the employees, with Suliman and the majority of his coworkers jumping ship to found Microsoft's new AI division. It secured the talent a subsequent six hundred and fifty million dollar licensing deal, yet another example of Microsoft basically paying itself, and then gave that deal to the shell of Inflection. You know, the one without any of the staff left, giving it access to the company's tech its IP and there's nothing regulators could do to stop him. To be clear, Microsoft is in a position where it could easily absorb the shock wave of a potential AI bubble burst. It still prints money from its other business units like office and cloud computing, Microsoft Windows, and the Xbox gaming system, and the same is true for the other big names like Google and Nvidia. They're well insulated for any slowdown in AI investment or from a growing apathy towards AI enterprise customers. I will note, however, these massive investments in data centers, if they're all for nought, you will see a form of crash. I can't say the same for startups, though other companies aren't going to be so lucky. Stability AAI, the developer of stable diffusion, a generative AI that can produce images from written prompts innovative for the time, is perhaps the canary in the coal mine of PKI. Stability AI rode the same waves as Open AI, especially in twenty twenty three, but now that money is tighter and skepticism is higher, it's struggling to stay aflow. Although the company raised one hundred million dollars. In early twenty twenty three, it burned through nearly eight million dollars a month, and in a recent attempt to raise further cash they fail. The company routinely missed payroll and, according to Forbes, a master sizeable debt with the US tax authorities that culminated in threats to seize the company's assets. They owed debts to Amazon, Google and core Weave, and each compute provider that specializes in AI applications. With negligible revenues and rapid cash burn combined with no obvious way to monetize the product, stability Ai is now in turmoil, with its key talent leaving the company in March, followed by the company's CEO and co founder, Amount Mustak. Its ongoing existence is in question, with The Financial Times writing in March that the company's future, despite once being seen as among the world's most promising startups, is in doubt. While it would be fair to say that stability Aii was unique at its internal turmoil, its external pressures, the ability you or lack thereof, to monetize an expensive product, and its reliance on external funding to survive much more common across the industry. Its survival depended on investors believing in a lofty future for AI, where it's integrated into every facet of our lives and it plays a role in almost every industry, which, of course we now know it doesn't. While that belief hasn't been shattered, or at least not yet, it's fair to say that expectations and aspirations are increasingly tempered after reaching the apex of the AI pissfest. The tech industry is getting a hangover, and companies like Stability can't survive the headache. But to be clear, I am not excited for the AI bubble to pop, and on some level, as weird as it sounds, I kind of hope it doesn't. Once it bursts, the AI bubble will hit far more than the venture capitalists that propped it up. This hype cycle has driven the global stock markets to their best first quarter in five years, and once the markets fully turn on the companies that falsely promised an AI revolution, it's going to lead to a massive market downturn and another merciless round of layoffs throughout the tech sector, led by Microsoft, Google and Amazon. This will in turn suppressed tech labor and flood the market with techtile. It's going to suck for everyone involved in software. A market crash led by the tech industry will only hurt innovation, further draining the already low amounts going into the hands of venture capitalists that control the dollars going into new startups, and once again, the entire industry will suffer because people don't want to build new things or try new ideas. No, they want to fund the same people doing the same things or similar things again and again because it feels good to be part of a consensus. Even if you're wrong. Silicon Valley will continually fail to innovate at scale until it learns to build real things again, things that people actually use, and things to actually do something. I don't know if I want to be right or wrong here. If I'm wrong, generative AI could replace millions of people's jobs, something that far too many people in the media are excited about, despite the fact that the media is the first industry that open AI kind of wants to automate. If I'm right, we're going to face a dot com bubble s town turn in tech, one that's far worse than what we saw in the last few years. In any case, I do wish the tech industry would get their heads out of their asses. I'm tired. I'm tired of watching tech firms life their teeth about the future that will live in the metaverse, that our future will be decentralized and paid for in cryptocurrency, and that our world will be automated with chatbots. I truly think that these companies think regular people are stupid, which is why Microsoft put out a minute long Super Bowl commercial for their Copilot AI that featured several prompts like write the code for my three D open world game that don't actually do anything that prompt I just mentioned. Go type it into Copilot. It will give you a guide to coding a game no code created. Also in the commercial, he types in classic truck shop called Pauls. But none of these image generators can actually do words, so it just looks like go and do it. Trust me. It's funny. But every time that these big tech booms happen, every time they say, oh, we're going to live in the metaverse and oh we're going to be able to automate everything, every time they lie, the world turns against the tech industry, and this particular boom is so craven in its falsehoods that I think it'll have a dramatic chilling effect on tech valuations if the bubble pops quite as severely as I expect. And Sam Mortman desperately needs you to believe the bubble won't pop. He needs you to believe that generative AI will be essential, inevitable, and intractable, because if you don't, you'll suddenly realize that trillions of dollars in market capitalization and revenue are being blown on something it's kind of mediocre. If you focus on the present, what open AI's technology can do today and will likely do for some time, you see in terrifying clarity that generative AI isn't really a society altering technology. It's just another form of efficiency driving cloud compute software that benefits kind of a small amount of people. If you stop saying things like AI could do or AI will do, you have to start asking what AI can do, and the answer is not that much and probably not that much more. In the future. Surra is not going to generate entire movies. It's going to continue making horrifying human adjacent creatures that walk like the atats from star Wars and cartoons that look remarkably like SpongeBob SquarePants Chat GPT isn't going to run your business because it can barely output a spreadsheet without fucking up the basic numbers, if it even understands what you're asking it to do in the first place. I think that AI has maybe three quarters to prove itself worthwhile before the apocalypse really arrives. When it does, you're going to see it first in the real infrastructure companies, starting with Nvideo, who's grown to about two trillion dollars in market capitalization because of the chips they make, which are pretty much the only ones that can power the AI revolution. There are other companies that AMD in Micron, but m Video is the one that's really grown. If you watch any of their notes, they're insane. They're just full of fan fiction. Once Nvidia starts to see growth slow, and Oracle in particular Oracle massive data center company, massive data based company as well one of the largest customers Microsoft building data sentence for them. Once that starts slowing down, that's when you should start worrying. But the real pain's going to come for Amazon, Microsoft and Google when it's clear that there's not really that much revenue going into their clouds. Once that happens, once you start seeing Jim Kramer on CNBC saying I don't think the AI boom is here, despite having saying it just was, that's when things get nasty and the knock on effects will be horrible. It's going to be genuinely painful, worse than we've seen the last few years. And it's all a result of the same problem. It's all a result of the growth of all cost tech economy. When things are made to expand, when things are made to build more rather than build better, When you're building solutions to use compute power to sell cloud computing services rather than helping real people make their lives better. Tech is not building for real people anymore. And the AI revolution, despite its spacious hype, is not really for us. It's not for you and me. It's for people at Satching the Della of Microsoft to claim that they've increased growth by twenty percent. It's for people at sam Altman to buy another fucking Porsche. It's so that these people can feel important and be rich, rather than improving society at all. Maybe I'm wrong, Maybe all of this is the future, maybe everything will be automated, but I don't see the signs. This doesn't feel much different to the metaverse. There's a product, but in the end, what's it really do? Just like the metaverse, I don't think many people are really using it. All signs point to this being an empty bubble. And I'm sure you're sick of this too. I'm sure that you're sick of the tech industry telling you the futures here when it's the present and it fucking sucks. And I'm swearing a lot, and I'm angry, but I'm justified in this anger off feel and I'm not telling you how to think. And I've heard from some of you saying, oh, don't tell me how to think, and I agree. I agree. I'm not here to tell you to be angry about anything. But I want to give you at least my truth, and I want to give you what I see is happening, because I don't feel like enough people are doing that in the tech industry. And that's what better Offline is going to continue to be. I really appreciate you listening. It's been about a month month and a half since we started. It's only going to get better from here. Thank you, thank you for listening to Better Offline. The editor and composer of the Better Offline theme song, It is Mattersowski. You can check out more of his music and audio projects at Mattasowski 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 check out Better Offline to find my newsletter and more links to this podcast. Thank you so much for listening. Better Offline is a production of cool Zone Media. For more from cool Zone Media, visit our website cool Zonemedia dot com, or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.