SITALWeek #455
Welcome to Stuff I Thought About Last Week, a personal collection of topics on tech, innovation, science, the digital economic transition, the finance industry, and whatever else made me think last week.
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In today’s post: as the market gets anxious about advancements in lower cost AI, I see cause for optimism long term; production value is rapidly rising on YouTube as the platform continues to take share; intelligent task master agents will soon overtake humans for app and web usage with implications for the big platforms; Chinese robot dogs; AI doctors outperform; the homeostasis of GLP-1s; remembering David Lynch; the opposing forces in the economy are becoming stronger in both directions; a history lesson from the fourth century; and, much more below.
Stuff about Innovation and Technology
AI Angst
On Monday, January 27th, Nvidia stock dropped 18%, knocking over $500B off of its market value in a single day. The alleged culprit behind the fall of Nvidia and other AI-related stocks was China’s new AI model DeepSeek. Readers of SITALWeek might recall my November post titled How I Started to Worry About China Again wherein I discussed the failures of the US to curb China’s AI capabilities on multiple fronts, concluding:
I think it’s time that the US treats the issue of China's ongoing chip and AI access seriously. OpenAI recently called for a North American Compact for AI in order to "protect our nation and our allies against a surging China". Specifically, I think the US should consider cessation of all sales and service of chips, chip equipment, and related software tools, as well as enact cloud KYC restrictions. I would even question whether or not US companies should be allowed to make chips in China for export to the US. The dangers of malicious code injection, amongst other things, strike me as a risk not worth taking. I realize there would be significant geopolitical implications if Western governments were to attempt a wholesale exclusion of China from the semiconductor ecosystem, but if their AI advances remain unchecked, the West could be facing a far more dire existential threat in the not-too-distant future. At the very least, the current chip sanctions should be enforced through increased supply chain scrutiny, and all efforts to restrict equipment and chips that can be used in large parallel AI training and inference implementations should be stopped regardless of what manufacturing node they are. Five years ago, I penned How I Learned to Stop Worrying About China, which largely found its footing on the lack of homegrown chip progress and the clamp down on the creative and entrepreneurial spirit that had been allowed to flourish in the first couple of decades of this century. That sentiment from five years ago proved correct: since the date of that publication, the MSCI China Index is down 5.7% compared to a positive return of 68% for the MSCI ACWI Index and 100% for the S&P 500. Today, however, I once again squarely worry about China given how loose Western restrictions have been on China’s chip industry, their reported progress in parallel compute with trailing-edge processors, as well as their access to massive troves of training data and energy resources. One might even go out on a limb and suggest that the West consider the feasibility of implementing some type of oversight (e.g., akin to how we handled Iran’s nuclear program), concerning China’s AI tech. Hopefully it's not too late to implement some form of hostile-AI kill switch. If the decades of relative peace following the Cold War teach us anything about mutually assured destruction, one might argue for all sides to have equal access to leading-edge AI. But, the analogy breaks down given that we are dealing with a human-like artificial intelligence that is prone to making devastating mistakes. Remedies like the compact suggested by OpenAI could be necessary to stay ahead, particularly if no action is taken to slow down China's progress in AI.
Further driving angst for the AI sector was the notion that China’s DeepSeek model appears to train and operate in a much more cost efficient way. While there is controversy regarding the claims (e.g., the assertion that DeepSeek is 90% cheaper to operate vs. OpenAI’s o1 model is misleading), the point is very consistent with SITALWeek’s Timing for Mass Market AI post, where I concluded we are already very close to replicating human information jobs with current AI cost models. The implication is that we are very close to seeing AI agents that are more skilled and far cheaper than human workers. This basic idea is one that Bill Gates recently put succinctly on The Tonight Show: just like we saw compute power and information go from expensive/scarce to cheap/abundant, intelligence is now going from rare to free (Gates also dropped a new music video). Taken together, developments out of China and evidence for the attractive commoditization of intelligence (at a cost and energy consumption level that could lead to rapid, mass adoption) is, for me, a reason to be optimistic about overall spending on technology. It’s a reason to be optimistic for corporate margins and productivity, the future of immersive, interactive entertainment, as well as the potential for a new scientific revolution. And, it’s a reason to be on the edge of my seat wondering if ubiquitous intelligence will create a new era of human advancement or a scary level of despair and pessimism. The stock market may have taken a pessimistic view in the short term, but, as longtime readers know, optimism always wins in the end, so for the moment I don't see anything that merits an overly skeptical stance.
YouTube goes Hollywood
YouTube continues to post impressive growth, with Google reporting 14% constant currency ad revenue growth in Q4 2024 to $8.9B. As one sign of the shifting media attention, Google noted political spending on YouTube in the 2024 campaign was twice what it was in 2020 (Bloomberg also discussed the bro-casters that boosted Trump via YouTube, one of whom was even called out by name on Google’s earnings call last week). YouTube is now also the number one app for podcasts, as most popular shows are now produced in video format. What I’ve noticed over the last six months is a major increase in the production value of YouTube videos, both live and recorded. With Hollywood still descending from “Peak TV” during the pandemic and the lingering impacts of the writer’s strike, it seems like a perfect storm for talented and experienced production crews to embrace the rise of high quality shows on YouTube. As an example, here is a delightful interview Ted Danson and his wife Mary Steenburgen did with a barefoot, 99-year-old Dick Van Dyke from his living room. The video and audio quality are terrific, as is the multi-cam directing and editing. This is a broadcast-quality show, but it was just another episode of Danson’s podcast. YouTube’s success hinges on the high non-zero sumness of their business model (something discussed back in #357). In the past three years, YouTube has paid out $70B to content creators and partners. One of the more interesting things I’ve noticed on YouTube is how creators in one category support fellow competitors in the same space. For example, one live streamer can “raid” another’s by sending their viewers over when their stream is done. The community and social glue continue to grow across the platform. As Netflix increasingly turns into Tide Pod cinema (background viewable, glossy shows and movies that “dissolve into thin air”), YouTube is becoming the place to find large quantities of engaging content. Since half of my readers are probably only here to learn what my latest YouTube obsession is, it’s: satisfying task YouTube. Watch a fella pressure wash a driveway, clear a yard, or clean a rug and have your moment of zen. If that’s not your bag, watch another Hunter Pauley video.
Internet for Agents
Back in April of 2023, I wrote a post titled Discovery Engines about the evolving nature of Internet search and content curation as we move to an agent-based era. Here is an excerpt:
The Internet was a reinvention of the entire customer interface for myriad content and business sectors (before the Internet, we couldn’t access our bank account without a monthly mailed statement or a trip to the local branch!). Chatbots, likewise, will redefine our discovery gateways as we go from multitouch, screen-based systems to conversational interactions with intelligent agents. Indeed, a conversational Internet has the potential to bring about more paradigm-shifting changes than what we’ve experienced over the last three decades...It took decades for the Internet to fully take over our lives and devolve into the morass of misinformation and mediocrity we have today; however, since technological half-lives keep shrinking, we should not be surprised if chatbots are co-opted even more quickly (or, perhaps they already have been). There is a (albeit slim) chance here that AI platforms will develop a different relationship with advertising and be able to defend against spammers. However, it’s more likely, given the high cost to operate AI, that the multi-hundred-billion dollar advertising industry will be needed to pay for it. Maybe we can enable our personal AI chatbots to also consume all the content and advertising for us and face off against spammers, so we can all just get outside and go for a walk instead.
As I look back on that post now, one thing I didn’t have on my mind was just how quickly agents would become independent task masters. Today, OpenAI, Google, and others are all launching AI agents that can complete computer/phone-mediated tasks just like you would. For example, an agent will conduct a Google search, click on ads, go to a website, and complete a task, such as buying an item or booking a reservation. This protocol seems like a stopgap until agents can be piped directly into the system. However, the ubiquity of browsers/apps might mean agents interact with the world in a human mimetic way for some time to come; thus, the agent economy could drive real value for the existing digital platforms like search and social networks sooner than expected. Further, this shift in behavior is likely to remodel the platform content itself, including ads, to be geared towards agents instead of humans.
Quick Hits
For a growing list of diagnoses, an AI doctor alone is better than a doctor working with or without AI assistance.
Unitree is a Chinese robotics company with an impressive four-foot-tall homunculus bipedal robot. Unitree also sells an impressive robot dog for $1600, well below Boston Dynamics’ $74,500 Spot. Their YouTube channel is also full of impressive demos.
Over 20% of Harvard and MIT MBA graduates are failing to find a job three months after graduation, up more than double since 2022.
A bipartisan Senate report pins blame on private equity for rising healthcare costs and worsening patient outcomes.
Here’s Mark Cuban’s latest post on healthcare and how to fix it.
Households with at least one GLP-1 patient reduced grocery spend by 6-9% within six months.
Miscellaneous Stuff
Homeostatic GLP-1s
Eric Topol’s podcast recently hosted Lotte Bjerre Knudsen, a central figure in GLP-1 research going back to 1989. Of note, Bjerre Knudsen is currently focused on GLP-1s and neural diseases like Alzheimer’s and Parkinson’s. I particularly liked the characterization of GLP-1s as inducing homeostasis:
“So what if neurons are actually also an overlooked mechanism here, and both of these neuronal populations have the GLP-1 receptor and are accessible from the periphery, even though the child super paper in Nature doesn't mention that, but they do have the GLP-1 receptor. So there are all these different mechanisms that GLP-1 can have an impact on the broad definition maybe of neuroinflammation. And maybe the way one should start thinking about it is to say it's not an anti-inflammatory agent, but maybe it induces homeostasis in these systems. I think that could maybe be a good way to think about it, because I think saying that GLP-1 is anti-inflammatory, I think that that's wrong because that's more for agents that have a really strong effect on one particular inflammatory pathway.”
“A Damn Fine Cup of Coffee”
I had a hard time writing this paragraph, but I would have regretted not sharing some of my thoughts on David Lynch’s passing. When I saw Eraserhead in high school, it was the first time I was exposed to the surreal as an art form. If you dig into Lynch’s films and TV series, you see a recurrent theme of something akin to a fugue state (Lynch discusses the idea here) – a loss of balance in life that leads to a sudden dissociation from one’s prior identity. The concept is most evident in Lynch’s Lost Highway. Above all, I loved Lynch for his pure dedication to always having creative control (although Lynch disowned his 1984 film version of Dune because he lost final cut, I think it retained enough Lynchian genius to be a cherished classic). This hard line for creative control no doubt led to many projects never seeing the light of day, but the ones that did are pure Lynch. He left us with not just a legacy of films and shows, but also a terrific compendium of knowledge. His book on meditation’s intersection with creativity, Catching the Big Fish, is a favorite of mine, as is his biography Room to Dream. The latter, refreshingly, is an open admission that no one remembers the story of their life accurately, so that book features David’s impression of his life countered with a fact checked version every other chapter. If you explore these books, I highly recommend the audio versions narrated by Lynch, as well as his wonderful Masterclass. Despite all of those accomplishments, I perhaps most loved Lynch as an actor. His character in Twin Peaks The Return was delightful, as was his portrayal of the tortoise-seeking barfly in Lucky (a cinematic favorite of mine that features a purely existential late-career Harry Dean Stanton; Lynch had previously directed Stanton in a little known, heartwarming Disney movie titled The Straight Story, along with five other Lynch projects). In his final film appearance, Lynch was memorably cast by Spielberg to play director John Ford. Channeling Ford, Lynch delivers this line about art: “When the horizon is at the bottom, it’s interesting. When the horizon is at the top, it’s interesting. When the horizon is in the middle, it’s boring as shit...” I think Lynch was someone who never wanted to be in the boring middle horizon, and I’d say he definitely succeeded. He appeared (to this outsider) to exist in an existential fugue state of pure creativity, tapping into the heart of what it means to be human, navigating life by trying to make sense of a nonsensical world, one day at a time.
Stuff About Demographics, the Economy, and Investing
Economic Shock of Austerity+Deportations+Tariffs
The US economy in 2024 was held up in no small part thanks to strong consumer spending in the face of higher interest rates and an industrial slowdown. Looking forward, a host of storms on the horizon may knock a little wind out of US consumers' sails. The aggressive austerity goals of DOGE could lead to significant cuts in government spending and Federal employment. Federal spend is nearly one quarter of the US economy and directly employs around 3M people, or just under 2% of the civilian workforce. The government is a large customer in every sector, including a lot of software and technology infrastructure. Further, on the heels of net-positive immigration boosting the US economy in recent years, policy and deportations reversing immigration trends will have both supply and demand implications (on top of self and forced deportations, fear of such will play a role in labor availability). In particular, if food supply chains experience a labor outflow, we should expect inflation and potential supply shocks (e.g., as of 2022, 42% of crop farm workers had no legal status in the US). Tariffs, whether a negotiating tactic or not, could also be inflationary. These headwinds could be offset by the long-awaited cyclical recovery in the industrial US economy, as well as infrastructure build outs for re-shoring, AI, etc. I’m no economist (thankfully!), but a meaningful cut to government spending, a rise in Federal unemployment, inflationary pressures from a shrinking labor pool and/or tariffs could portend a recessionary trend or stagnation in the next year or so, in which case, the economy might need to find a new driver beyond the consumer. Perhaps the best advice is one we give often, follow the tenets of complex adaptive systems, and expect the unexpected.
Constantinian Shift
Recently, I was watching episode 8 of the original 1980 Cosmos miniseries by Carl Sagan titled “Journeys in Space and Time”. As is often the case with Sagan, education is intertwined with commentary, speculation, and meandering musings. The episode touches on some of my favorite topics like time dilation and time travel. But, there is one bit that, upon rewatching (probably for the 20th time), grabbed my attention more than prior viewings. Sagan wonders what the outcome would have been if the ancient Greeks' scientific progress had prospered instead of stagnating for a thousand years during the Dark and Middle ages. What if Da Vinci’s contributions had been made 1,000 years earlier, or if Einstein’s relativity had been discovered half a millennium prior? This line of questioning got me thinking: had the scientific method continued sans interruption (rather than requiring a reboot in the later part of the Renaissance in the 1500s when Copernicus published On the Revolutions of the Heavenly Spheres), would we have had the Information Age and semiconductors in the 900s rather than the 1900s? Would GPUs have been invented 1,000 years ago? Would we now be an established AI Age society? What problems and plagues of the human condition might have been solved? Would we be an interplanetary species already? Intergalactic? How did we lose that pace of progress, and was it inevitable? In the fourth century, Emperor Constantine embraced Christianity, a move that was an about face for the Roman Empire. The clinical historian might suggest that the religion was adopted due to its compatibility with the notion of Roman rulers being divinely sanctioned – and thus useful as a means to extend and secure Roman rule. Regardless of why, the church-state empire was created and the Catholic Church was ultimately cemented in 381. Christianity was then used as a blunt tool of oppression by the leaders of the age, discouraging (shall we say) individual thought, curiosity, and the ability to question the how and why of things, resulting in a lost millennium of progress. To be clear, this assertion is not a damning of the religion itself, but rather simply noting the heavy hand with which it was used to arrest progress in the name of something else. There is a creeping 21st-century notion that today there is a lack of societal advancement because the technology companies that dominate the landscape of progress are only innovating incrementally – that achievements in bits have come at the expense of progress in the analog world of infrastructure, energy, biology, etc. I am not sure I agree with this idea, especially in the context of those very tech companies being on the verge of making intelligence – which could very well reignite progress in the analog world – abundantly cheap. Those seeking reinvigoration in analog innovation might be surprised to find that their means to achieve that could stifle the desired objective (while China accelerates ahead of the US). One thing I am sure of: we know how progress can be stopped. History is replete with examples, and we should avoid that path at all costs. I suspect it will be much harder to stall progress now that we are in the Information Age, but stranger things have happened in the history of civilization.
✌️-Brad
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