The Final Cash Out

David Trainer (0:00)

If you're using the stock to pay people, obviously they see value in it.

So how is that not an expense? New Constructs was, I think, the first to call WeWork out. We call it the most ridiculous IPO of 2019

And they never had a profit. They had created a new term called Community Adjusted EBITDA. It was a joke. And I think it's worse with Anthropic, honestly. This is all the people that get forced to own it. In their pension funds, in their index funds, in their 401Ks.

George Noble (0:30)

And you know what's really sad? People are going to get hurt.

David Trainer (0:34)

For me, the goal here is to stop the Anthropic IPO.

George Noble (0:42)

David, my friend, how are you?

David Trainer (0:44)

I'm doing great, George. Good to see you.

George Noble (0:46)

And you, likewise. It's been a while since you did one of these things. Kindred Spirits, I'm sure we're thinking a lot of the same nasty thoughts of late. There's no shortage of things to talk about. Stories write themselves, I'm sure. For me, it's like every day I wake up, and now what am I going to talk about? It's never...

It's too many things to talk about. So let's get at it. So you've been out there with some really insightful analysis. I know it's top of mind right now.

The Shiny Objects Azure is Anthropic. Usually I don't like talking about the Shiny Objects Azure. It's not how you make money. But given that there's so much ink being spilled on Anthropic and the release of their S1, and you've written some really insightful cutting work on Anthropic, why don't we start there? Channel your inner darkest thoughts about Anthropic, David. Take it away.

David Trainer (1:36)

Yeah. In Anthropic is in many ways the poster child for what's wrong with the capital markets. So many people out there who I think a lot of investors maybe trust that are willing to lie through their teeth and in the face of non-confirming information for contradictory information, in the face of contradictory information, just to make a couple more bucks. Some of these guys have made millions and billions, and they're out there talking about how great Anthropic second quarter numbers were when most of the world, all the world that I know of, had seen that the third quarter was a disaster. And so the idea that we still have people, so many people sort of trying to fake it kind of blows my mind, George. That's why I'm happy to talk to you today because, like you, I'm sort of surprised every day by how many people do seem to have seen behind the curtain and recognize Anthropic for what it is, which is just a cash out for Wall Street. The business doesn't make money.

Their margins are effectively gone to zero. Look, I mean, I always joke with people. I was at a football game with my son and he plays and we're hanging out with his buddies and they're asking me about tech stocks. I'm like, what if I told you there was a company that was selling a product and all of a sudden out of nowhere, China came out with a product that was 50 times cheaper and just as good. What would you think about that business? Oh, that's terrible. That's Anthropic.

They have no margin and yet there's this valuation that's absurd. I'd see it, George, as a real travesty of the American society and our capital markets if we were to concentrate so much value in the hands of so few there.

George Noble (3:24)

We're all just trying to do our best and make a few dollars, lose a few dollars, but you really touched on something I should think is front and center for a lot of folks, and that's just what's going on is wrong.

May not be illegal because they've carefully crafted things in a way to adhere to the obstacle course of Gap Accounting. So they're lying by omission, if not commission, but it's outrageous. And you and I both know, David, that Gap Accounting, it's the best attempt to try to portray what's going on in the business, but has its limitations. And the street is very good at wording things in a way where they avoid the tripwire, but they're misleading.

David Trainer (4:11)

And it's gotten super good at it. I mean, they started with the tech bubble and they started making these new rules around pro forma and adjusted, and what was allowed. And it was, you know, the main rule is that the market operates. And I've been to the SEC, I've been to the Senate Banking Committee.