Mark Mills: AI's Dirty Secret Is Oil And Most Investors Have It Wrong

**Mark Mills** (0:00)
Howdy, shoppers.

**SPEAKER_2** (0:00)
Fire up that propane grill and settle in for a new season of Hulu's hit animated series, King of the Hill. Hank and Peggy are staying active in retirement. That's a dog.

**Mark Mills** (0:09)
You will not have to lift a finger.

**SPEAKER_2** (0:11)
Bobby and Connie hard-launched their relationship. Now that we're dating, it's important your parents know I'm a man. And the alley guys are, well, they're still the alley guys. Yep. Watch the new season of the Hulu original series, King of the Hill, now streaming on Hulu and Hulu on Disney Plus for bundle subscribers. Terms applied, this has been a paid advertisement.

**Mark Mills** (0:30)
Oil is and has been, for a very long time, the largest single commodity traded in the world. I'm very bullish on what the AI boom means on two sides. Infusion of smart logistics and AI driven logistics in the oil and glass supply chain has started a decade ago. If oil stops flowing, forget price, no commerce. There's no commerce. Everything stops.

**Maggie Lake** (1:09)
Are Americans sleepwalking on just how competitive China is on the AI front?

**Mark Mills** (1:19)
I guess I would say it's maybe the inverse. People are more worried about China on the AI front than I am.
I don't think anybody's sleepwalking on it. I think everybody is very aware now China is a very aggressive competitor in technology. And not just by stealing and borrowing illicitly, let's say. But the Chinese engineers and scientists, I've only been to China three times, maybe a dozen cities. But I visited probably 40 different companies, engineers and scientists at that time. This is a decade ago. I was deeply impressed by their technological capacity and the capacities of their engineers. They're very good, very smart, good science. They do some things extremely well and have innovated in areas especially in physical chemistry. The stuff we want to abandon significantly, battery chemistry is an obvious example.
So I don't underestimate the capacities, but I think they are a full generation or two behind us in AI. However, if you're a customer of something, it's just the analogy everybody likes to use, which is not a bad analogy, was the failure of the Beta Max back in the day to beat VHS tape, which will bait me because nobody has tape recordings anymore. The VHS was not as good as Beta Max, much higher quality, but they controlled the market, they had high pricing. VHS was good enough. Every entrepreneur, every technologist knows that if they may have the best, but if they exercise pricing power too aggressively, something that's not quite as good but good enough will win. This has been true in markets throughout all history. The relevance of this AI is that their AI tools are getting good enough for lots of uses.
If we restrict our ability to compete there, even though we have the frontier models are best, the market will go to what's good enough. That I think is the real risk, not that we won't win the race with the best frontier models, we have those. It's that we will lose the, I won't call it the commodity race, it's the real broad market race.

**Maggie Lake** (3:27)
Good enough and cheap enough because cost matters and we're hearing that. I'm certainly hearing that from Europeans.
If you raise that security issues, their response is, well, I'm not sure that I trust Americans any more than I trust the Chinese.

**Mark Mills** (3:42)
Well, yes, Europeans say that, but so I'll date myself skeptical. Yeah, I worked in the Reagan White House as a kid, and people forget that the Europeans turned a million people into the streets to protest Ronald Reagan. You know, Trump has not had a million people protest him in Europe, burning effigies of Reagan because they hated the United States, boom, boom, bang, bang, Reagan, shoot them up.
So the Europeans have had many, not all Europeans, but the European political attitude of the United States has been in that zone for a very, very long time. So it may be-

**Maggie Lake** (4:25)
Watch what they do, not what they say.

**Mark Mills** (4:27)
Yeah. Yes, I, sure, but I don't believe for a second that any serious European politician or analysts think fundamentally that their future is more secure being with China than with the United States. However, would they use it as a bargaining and negotiating tool? And would they buy things from China? Sure. The fact that Europeans will happily buy Chinese EVs, which are extremely good EVs, which are doubtless harvesting using their cameras, all kinds of useful data for the Chinese Communist Party and military. I mean, if you wanted to have targeting data that's hyper precise, you would just harvest the camera data from all the electric cars that have cameras on them. They're running all the time. And do we think that they're not harvesting that data? Well, we, Tesla harvests that data to train its model to make self-driving cars. Of course, they are. The big difference is Tesla doesn't report to the Pentagon.