How OpenAI Could Cause a US Recession With Steve Eisman

Steve Eisman (0:00)

What's an LLM? It's just a fancy word retrieval system. It predicts the next word in the chain.

And it's great. I'm not saying it's, but that's not thinking.

Michael Batnick (0:14)

Yeah, why is it going to kill us?

Steve Eisman (0:15)

Well, it has to be sentient. It's not sentient, it doesn't think. It just retrieves words or creates software, which is another form of words. So my thesis as to why they've done this is that Dario Mori and Sam Waltman right now are petrified.

They are petrified because token maxing is done. So for those of you who don't know, token maxing was basically people who run software and enterprises were ordered by their companies to use AI 24-7 to hell with the cost. And then the price went up and Uber went through its entire AI budget in three months.

So now-

Michael Batnick (1:10)

Was that this year or last year? I can't remember. It's just last year.

Steve Eisman (1:12)

It was in the spring.

So token maxing is done. You've got open weight models that are a tenth the price. They're not as good as the models, but you don't need a Mercedes Benz for every road trip. So they're losing market share. There's pretty good evidence that a price war is starting. And they're petrified. And so they created this, the world's going to end unless you regulate us, because they think if they get regulated, they can manipulate the regulation.

Josh Brown (1:49)

Or they could stop the open weight models from taking too much share.

Steve Eisman (1:53)

They can manipulate the regulation to keep the Chinese open weight models out, and so they can have a duopoly. And the basic problem with the entire AI enterprise is that there are no motes, none, absolutely none. One model is good one day, and then people switch to the next. It's not like Google, everybody was on Google forever.

You were on Google forever so much, the concept of not being on Google, you couldn't even think that. Today, you use Claude, Claude one day, you don't like that, you go to Gemini, you use that for a while, you go to ChatGPT, there are no motes. People are spending a trillion dollars on this, there are no motes.

Josh Brown (2:34)

Are you surprised by that, how easy it is for people to switch from one to another?

Steve Eisman (2:40)

I'm not surprised or surprised, it is what it is.

Josh Brown (2:43)

Right. Okay, because I always thought the one that would win was the one that remembers the most.

Steve Eisman (2:50)

It doesn't remember.

Josh Brown (2:52)

Or the one that could recall the most about you every time you use it.

Steve Eisman (2:57)

But they're all like that.

Josh Brown (2:58)

They could all do that.

Steve Eisman (2:59)

They all do that.

Josh Brown (3:00)

Which one, what's your favorite LLM for the work that you do?

Steve Eisman (3:04)

For my purposes, it's just research. They're all fine.

Josh Brown (3:07)

They're all fine. Okay. You don't have one that you're... So we standardized on Claude Enterprise for the firm.

And what ends up happening is like everything I used to do in ChatGPT, now I just do it in Claude because we're paying for it anyway. And you just get used to it. I sort of think the Enterprise LLM is a sneaky way to build a moat because you get all the workers of the Fortune 500 accustomed to using it. And then why would they go use another?

Steve Eisman (3:38)

Well, they'll use another if it's a lot cheaper.

If an open weight model can do more or less the same thing for one-tenth the price, they'll use the open weight model. That's the point. It's not that they won't use Claude. It's just I think that Claude's going to have to cut its price. I'm already hearing that it is cutting its price.

Josh Brown (3:54)

Okay.

So then the founders of these AI labs are coming out and they're saying, please regulate us. I mean, they did a skit on Saturday Night Live. So it's now like in the mainstream that this is a thing.

Steve Eisman (4:09)

Right.

Josh Brown (4:09)

And you're saying like, yeah, because they don't want any competition. And so once you're big enough, you basically can write the rules.

Steve Eisman (4:17)

The statement that some of these guys have made that LLMs are going to destroy planet earth is a lie. Yeah. Plain and simple. It's just a lie.

Okay.

Michael Batnick (4:28)

Let's start the show.

Steve Eisman (4:28)

I like it.

Michael Batnick (4:29)