TikTok, Warner Bros, and the Rise of the Ellison Empire

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Today's number: 50%.

Cocaine levels in Nantucket sewage were found to be 50% above the U.S.

average.

Ed Schuster, I like to have my cocaine mixed with semen.

I call it a coconut.

Welcome to Prop G Markets.

You know, actually, true story, I've never done cocaine.

You know why?

This isn't a joke either.

Why is that?

When I was in high school,

I was playing soccer.

True story got kicked in the face.

And I had the most radical bloody noses.

I used to have to get up in the middle of the night, or my mom used to have to get up in the middle of the night and come in because I'd wake up.

I'd feel something warm and I'd be spraying blood from my nose

and my mom would sit up with me and level my head and she used to give me math problems i used to really like math to try and calm me down and i just figured out that oh cocaine is probably not the drug for the dog given that i'm prone to massive bloody noses also bloody noses and panic attacks

i'm so attracted it's hard to believe i didn't do better it's hard to believe i lost my virginity at 19.

oh yeah that's the kid who sprays blood from his face and has panic attacks uh that makes me happy now look at at me now.

I'm in Nashville.

I'm in Nashville getting paid 200 grand to speak to a bunch of people in Labalier talking about the cloud or whatever in healthcare.

You should just get up and do math problems on stage.

I didn't know that about you.

I love that.

It's very sweet, actually.

It's the image of you doing math problems in bed to calm yourself down.

Well, my mom used to do them for me.

You know, she'd have to get up three hours later and holler ass to the San Bernardino Valley to oversee a secretarial pool.

Anyways, fun reminiscing with you, Ed.

How are you?

I heard, are you still in Vegas?

Are you back?

I'm still in Vegas.

It's 7 a.m.

here in Vegas, speaking to PWC in a few hours.

PWC?

Such an exciting, vibrant company, and clearly indicated by their choice of speakers

at their event.

I was very impressive, this operation.

I was just

checking it out yesterday.

They had Richard Branson as the keynote.

And I was like, am I going to be on that stage?

And they're like, no, no, no, you're going to be on this other stage over here.

You're in one of the breakout rooms where we have to...

Someone said, oh, we need something on Gen Z.

And they're like, find that guy that's on MSNBC all the time.

What's the bold guy's name?

Yeah.

Wait, it's his psych.

It's the guy that looks, the guy that's like the younger, handsome version of that idiot professor.

Exactly.

That's how we do it here.

That's how we make our money.

All right, should we get to the headlines, my brother?

Let's do it.

Now is the time to fly.

I hope you have plenty of the wherewithal.

It was a huge week for the Ellison family.

David Ellison's Paramount Skydance is reportedly preparing a bid for all of Warner Brothers Discovery.

Meanwhile, his father, Larry Ellison, emerged as a potential buyer of TikTok.

As we discussed last week, early reports suggest a consortium of US firms, including Oracle and Andreessen Horowitz, will take an 80% stake in TikTok's US operations.

So in sum,

it's been a lot of attention, a lot of media for the Ellison family.

And it appears that this family may be coming in and taking over media, taking over, they've already taken over Paramount.

They look to maybe be taking over Warner Brothers Discovery and now maybe also TikTok.

So we thought this was probably the right time to...

do a little bit of a spotlight on this family on the Ellisons and Larry Ellison specifically.

Just a quick bio on Larry Ellison.

So he was born in 1944.

He's 81 years old.

He was adopted as a child.

He was born in the Bronx, but he grew up in Chicago.

Star science student, ended up moving to California to be a programmer in the late 70s.

He created Oracle.

And basically, Oracle was just building software for Fortune 500 companies.

And that's essentially the work that they do today.

Went public in 1986 at just a couple of hundred million dollars.

Company steadily grew.

It's quite an old company.

I don't think people fully realize that.

Now worth $850 billion, and he's got 40% ownership.

So that's where all of his wealth comes from.

He's also been on the board of Apple.

He's been on the board of Tesla.

He's Elon's mentor.

And he's also a big Republican donor.

And he's been close friends with Trump going back to his first term.

Then there's his son, David Ellison.

He was born in 1983.

He's 42.

He went to film school at USC.

He dropped out to make his first movie.

Can't make this shit up.

He founded Skydance in 2010.

He has since then produced pretty big movies, one of them being Top Gun.

And then, of course, he bought Paramount for $8 billion.

And now he's reportedly looking to buy Warner Brothers.

So we are seeing the consolidation of media into the hands of this very rich family, Larry Ellison and David Ellison.

Scott, your reactions.

There's no denying Larry Ellison is a visionary.

And I don't think his CEO, probably Saffra Katz, I think her name is.

That's right.

I don't think she gets enough credit, but he's clearly a visionary and one of the more important figures.

Also, you forgot to mention he's married to a really hot 33-year-old.

You know why 81-year-old billionaires marry 33-year-olds, right?

Why is that?

Because they can, Ed.

Because they can.

See above, richest man in the world right now.

Anyways, he's clearly a brilliant businessman, lower, you know, keeps a lower profile.

I mean, I remember talking about Larry Ellison when I was in business school.

That's how old he is, or how long he's been around, how long he's been a key player.

Look, he's essentially on the right end.

He's played this perfectly in terms of shareholder value.

And that is, we now have this oligarchy where

some of the wealthiest people in the world are Russians who were on the right side of Putin and in exchange for the loyalty and a Vig were given the nickel industry and Irkutsk and became billionaires and bought Premier League football teams and partiognes yachts off the coast of the south of France.

That is effectively what's happening here.

And that is it's not that Larry Allison isn't really talented.

It's not that he doesn't deserve to be one of the wealthiest men in the world.

But when you start carving up companies

and giving them and awarding them to your Republican friends,

I mean, the bottom line is they're engaging in something and,

you know, money, they're choosing money over any sort of, I would say, traditional American values of free play and capitalism.

But they're basically oligarchs being awarded, in this case, by dance in exchange for their loyalty to President Trump.

And this sort of moves me to solutions.

If I were the Democrats, I'd be drafting legislation right now that would not pass.

It basically says, look, be clear, folks, if you are awarded companies without the Democratic or

capitalism process, I don't know what the laws are, if we get back in control back of the House and if we get control of the White House, we're going to take the company away from you.

We're going to force you to sell it at what might be a huge economic cost to you.

So I'm sort of,

you know, with what happened with Kimmel, I'm sort of done with what I'll call the analysis.

We know this is wrong.

We know that you're not supposed to take companies and award them to your friends and then put members of the administration on the board.

That's socialism meets cronyism.

I'm now at the point where, okay,

what can we do?

And I don't know if it's,

you know, I don't know if it's trying to convince companies not to use Oracle for compute or be a client of theirs.

I don't know what it is.

You know, this morning I spent 22 minutes trying to figure out how to cancel my Disney Plus subscription.

It's not easy.

It was pretty easy to sign up.

It's not easy to cancel.

What do you know?

Did you get it done?

Yeah, I think so.

Anyways, I don't know where I am, Ed.

Bring us back.

What do you think?

Well, I think it's

concerning that the amount of power and consolidation.

I mean, we talk about this a lot on the show, the consolidation of power and wealth into the hands of a small few.

But I think what we're seeing this year is that this is happening most acutely in media.

And yes, media is just another industry, but media is massively influential in terms of the lives of everyday Americans.

I mean, it's the media that really defines and sets the trajectory of the national conversation.

And so, yeah, you can have some oligarchies emerging in

smelting and in industrials, and that's sort of been around forever.

But what we are now seeing is an oligarchy emerging in media.

And

it is political.

And that is something that I think is worth talking about, or at least being concerned about.

But just the start here, in 1983, there were 50 companies that controlled 90% of American media.

Today it's about six companies.

And now beyond that, you're having these companies that are being split up and sliced and diced into the hands of basically a handful of billionaire families.

I mean, you got the Redstones, which own Paramount, but

now that's gone to the Ellisons, so it's been consolidated even more.

You got the Murdochs, who own Fox and News Corp.

And of course, we just saw what happened with the fight over the trust, where basically Rupert gave all of the power to his son Lachlan, because Lachlan was the only one whose opinions and political views aligned with his.

I mean, the succession story literally played out.

You've got Bezos, which, I mean, he owns the Washington Post.

And then, of course, Amazon.

Amazon's becoming a big player in entertainment, Amazon Prime Media.

Salzbergers owning the New York Times.

Roberts family owning Comcast, or at least controlling all of the votes there.

And now you've got the Ellisons, who will presumably control Paramount and Warner Brothers.

So that means they're going to have CBS, CNN, TNT, TBS, HBO, HBO Max, Paramount Plus, et cetera, et cetera.

I mean, this is basically all of Hollywood.

And you've got this digital media thing going on, which is Google and Meta control basically half of the digital ad market, but the only company that's really on their tail is TikTok.

And it appears that the Ellisons will have control over that too.

We're not sure exactly how much control, but certainly a good amount.

And that basically leaves you with two companies left over in the media ecosystem that aren't really controlled by a family of billionaires.

And that is Disney and Netflix.

That's basically it.

And so I think the question that is worth asking is like, what does America look like in a world where the media is controlled?

by these billionaires and let's face it, by their children.

I mean, this is what we're seeing.

It's sort of the rise of Nepo-media.

What does that look like?

It looks like Russia with Chipotle and Disneyland.

I mean, we know the model here.

I mean, you said a lot there.

The consolidation of media, there's some nuance there.

So the most dangerous thing about the consolidation of media has already happened, and that is the majority, two-thirds of Americans are now getting their news from social media.

And two-thirds of social media outside of China is controlled by one company.

Search, obviously,

the fastest-growing streaming platform is one company, or the largest streaming platform is one company that controls 90% of search that's

alphabet.

So the consolidation or the fears around consolidation, I think it's more or less about political thought leadership than it is.

I mean, you mentioned Ted Sarandos.

He doesn't want to be in news because he doesn't want to step into this bullshit.

So he just produces, he uses cheap capital to produce a ton of content, and everyone feels like they have Netflix.

But the news guys,

the consolidation and the damage in terms of higher prices, inflation, a lack of concern,

they're not guilty.

The CEOs of these companies aren't guilty of

attacking democracy or disabling free speech or creating incendiary content that results in rage

and a disaffected youth.

They're guilty of malice by omission, and that is they just want to ignore it because they know that rage creates more clicks and more shareholder value.

The consolidation,

the only thing that's sort of, I don't want to say encouraging or not as bad, is the consolidation of traditional media.

It's the consolidation and concentration of power of companies that are becoming increasingly irrelevant.

And I was thinking about Jimmy Kimmel being kicked off.

Quite frankly,

all these traditional media being co-opted and losing relevance is good for new media.

So everyone from Puck and Axios and the free press and us are benefiting from this because increasingly people are turning to what I'd call more fearless real-time media because there's a chill now across all of traditional media.

When I was on, as I said, when I was on MSNBC and said we elected an insurrectionist and a rapist, Mika on the most progressive network on TV, MSNBC, stopped the show and said, you used a term there, he was found guilty of sexual abuse, which the judge went on to say is rape.

And so these guys are scared.

And as a result, consumers are going to increasingly continue.

It's only going to accelerate the decline of traditional media.

The other impact here, I don't wish for this to happen, but I generally find the people who work in Hollywood to find themselves really fucking precious.

And that if SpongeBob SquarePants needs three writers instead of 14, they find that, you know, a cultural, you know, a cultural crime.

I think Hollywood is absolutely about to get worse in terms of employment.

And so there's two things.

There's free speech and there's employment.

The free speech argument is a more important one.

But in terms of the real impact, I think, or one of the real impacts of Ellison's control of media is that

I went to see the Fantastic Four with my son, my 15-year-old, and I just couldn't get over how long the credits went on for.

And Mia did some great research.

More than 3,200 people helped make the Fantastic Four, which has made just over $500 million at the box office.

That works out to about $150,000 in revenue per employee, which isn't great.

Lyft made $5.8 billion last year with 2,900 employees.

Palantir made 2.9 billion last year with 3,900 employees.

So I think what's going to happen, the consolidation will not only result in cost cutting and a concentration of power, unfortunately, that leans more right because of the FCC and this authoritarian chill, but also I think you're going to see just an unbelievable adoption of AI and job destruction.

Because I went through each of these categories and thought, okay, they're not going to need 24 costume designers in Sweden.

They'll find a way to create an agentic layer between fabricators in China and AI-enabled costume designers and only three, not 22 people.

And the Ellisons are going to go line by line and using the incredible compute and relationships and insight of AI, and they're just going to clean out costs, quote unquote, they'll call it efficiencies.

Because here's the thing about Iger and Zaslob, they have come of age into their 70s by being really good to talent and really thoughtful and not wanting to piss off the actors' unions.

You know, essentially, Iger was sort of Neville Chamberlain and this very charming guy in a cashmere sweater trying to appease everybody.

David Ellison is Honey Badger.

Honey Badger don't give a shit.

They're going to try, I would bet within 12 to 24 months, they're going to try and create the equivalent of movies like The Fantastic Four for 20 million, not 200 million, using technology and AI.

And I just think you're going to see so many people crying into their TikTok about who were former producers, gaffers, lighting, casting.

I just think all that shit is going to get cleared out.

So culturally, there is, or

from a constitutional or democratic standpoint, we're in a very weird time with an incredible chill that is more reminiscent of much more authoritarian governments.

It usually doesn't end well.

And then economically, we're going to see

if Warner ends up in the hands of the Ellisons, we're going to see AI show up much faster, much faster than it would have otherwise from the traditional Hollywood players who are much more empathetic, sympathetic, and quite frankly, want to be invited to cool parties in the Hollywood Hills from actors.

They don't.

Ellison doesn't care.

He's got his 33-year-old girlfriend.

He gets invited to everything he wants.

He doesn't need to hang out.

He doesn't need to go to the Emmys or, you know, he'll let his kid go.

He doesn't, that's not why he's there.

We discussed this with Rich Greenfield of Lightshed earlier in the week.

He was skeptical, though.

He doesn't think it's going to happen this fast.

Well, exactly.

I think he was pointing out these are all rumors.

We don't know for sure, and nothing's been fully announced, which I think is a good point.

Stock was up 55% last week, Warner Brothers.

Exactly.

I mean,

the market seems to believe that this is going to happen.

But I thought his, I really liked one of his points, which was, you know, I was asking him, what is David Ellison's vision for this company?

What is his vision for Paramount?

What is his vision for Warner Brothers Discovery?

And he said that the vision is basically to connect SoCal with NorCal, to connect Hollywood with Silicon Valley.

And I think, you know, that's a simple way to put it, but I think that is right.

He has the connections in Silicon Valley through his dad.

He now has the connection.

I mean, he's the movie producer.

He's the guy who produced Top Gun.

And I think that is kind of exactly what we're going to see.

And just to quote him,

David Ellison said, quote, we believe it's essential for Paramount to be able to expand its technology prowess to be both a media and technology enterprise.

He said the mission involves improving algorithmic recommendation engines for Paramount Plus.

And he said that AI would, quote, turbocharge content creation and drive efficiencies.

So I think what you're saying is exactly right.

I think the vision here is

Hollywood is too dependent on these old ways of producing movies.

And we have this thing called AI.

We have this thing called technology.

For whatever reason, these production studios and

the folks over at Disney and Burbank haven't really been using this technology.

And so we're going to turbocharge the whole thing with AI and massively reduce costs.

And I think that is

probably what's going to happen.

And so I think David Ellison coming in and buying this company, it's only going to accelerate the decline of traditional Hollywood.

But then the question becomes, what is the replacement going to be?

I mean, what is media, what is the media landscape going to look like if Larry and his son own CNN and CBS and they decide these are not efficient businesses.

We also don't really like the editorial direction.

So let's have Barry Weiss come in and run CBS.

Who knows?

Maybe let's have her run CNN.

Maybe that's the plan.

But in addition to that editorial direction,

we're not going to pay Anderson cooper uh 20 million dollars a year to be our anchor we're gonna we're gonna i don't know hire some young scrappy person or we'll just hire some ai to do the job of reading the news well first off anderson cooper is worth 21 million he's dreamy he's thoughtful

i love anderson cooper anyways me too um

i mean a couple things one so first off

We want to bring the best of Silicon Valley with Los Angeles.

Like, we want to combine Northern and Southern California.

You know who said the exact same thing when describing her vision for this nascent company?

Meg Whitman said it about, it's a trivia question.

Meg Whitman said the exact same thing about another company.

Do you know what that company was?

Was it Quibby?

Quibby.

We want to bring together the best of San Francisco and Los Angeles.

And I remember thinking, what is that, In-N-Out Burger on a sourdough bun?

What does that mean?

I just thought that was meaningless.

What he's saying there is the following, and this is what's going to happen.

They're going to use AI to start producing the Fantastic Four with 300 people instead of 3,000.

It's just where it's headed.

And the drag in that, the thing that slowed that down is a group of executives making decisions that are used to making films and are really scared of SAG AFTRA and the WGA and want to maintain good relationships with them because they know these people.

And this is how they grew up.

They grew up in this ecosystem of talent.

You have a concentration.

There's the meaningful and there's the profound.

The meaningful is a lot of good people, very talented people, are going to have to find new ways to make livings.

The profound here is that what you just said, and that is CNN basically turns into, at any point, the Trump administration can call Larry and say, you know, I really don't like

You know, I really don't like what you used to Anderson Cooper.

I wanted to, I really don't like that Dana Bash.

She's too fact-driven and unafraid and calling bullshit bullshit on us.

Like she's a danger to our democracy.

And then all of a sudden, Dana gets the message, hey, we need you to tone it down or isn't it time for you to, you know, and she's a fantastic journalist and I think has been really brave on this stuff.

So the bottom line is, you know, they say democracy dies in the dark, which is a great tagline from the Post.

It doesn't.

It's dying in the full light of day.

So I think it's the good news is I don't think as long as there's the internet, there's going to be people who pop up and build good businesses saying it how it is.

All it's probably going to do is just expedite CNN just

it's not going to be good for CNN to all of a sudden be like hamstrung and start checking all their shit to make sure that it runs through the Ellison Trump filter.

That was what was so remarkable about what happened with Jimmy Kimmel is Jimmy Kimmel gets fired and then everyone's sort of asking questions, why did this happen?

And basically within a few hours, the whole internet came to the realization that this all has to do with the

coming acquisition of Tegna by Nexstar.

I mean,

the journalism of the people just sort of came together in basically a few hours and everyone said, hey, follow the money.

Why are they doing this?

They're trying to...

acquire this company, Tegna, for more than $6 billion.

They need to get the approval from government.

They need to get the approval from the FCC.

And so why did they do this?

Because the FCC told them that we don't really like bad comments or negative comments or comments that run contrary to the president.

We don't like what Jimmy Kimmel said about Charlie Cook.

And so they said, okay, let's fire Jimmy Kimmel.

Let's get rid of that show.

And

maybe this will greenlight our acquisition.

That's exactly what happened, Ed.

I mean, that's, and by the way, we saw this exact same thing play out with Paramount and Skydance.

But the idea that, as you say, you know, that's the kind of thing that would have taken like days, maybe weeks of investigative journalism, maybe 20, 30 years ago.

But what was so incredible is, you know, we hear the news about Jimmy Kimmel at whatever, 5 p.m.

And then maybe three hours in, everyone says, hey, look why this is happening.

And you see it all over your social media.

So you can try to suppress what.

what people think and you can try to suppress this knowledge, but I agree with your point.

So long as the internet exists, it's all going to be in the light of day.

We're going to know why all of this is happening.

This is a market show, so we should temper our political views.

So let's talk about my political views.

I spent, hey, I'm really fucking juggling.

I'm in Nashville on London time.

So I was up at 4 a.m.

like doing research on what to do about it.

I'm kind of sick of Democrats all clutching their pearls and bringing on constitutional experts and free speech experts to basically all come to the same conclusion that this is wrong.

Yeah.

Thank you, Captain Fucking Obvious.

We know this is wrong.

The question now is: what do we do about it?

And the relationship to markets is the following.

I think the only thing

there was a number yesterday in your markets episode

that really fascinated me with your host, Mark Zandy, who, by the way, I think is fantastic.

I really think he's such a huge asset for us, and he's going to get me my third fucking Ferrari.

So thank you, Mark.

But he said something that totally struck me.

The 10 wealthiest percent of households are now responsible for 50% of consumer spending.

That means the bottom 90 aren't doing very well, and it means that we have become like a third world nation where basically it's rich people have all the money.

And so that's bad on a societal level.

But I was trying to think, there's the opportunity.

And then he said something, and correct me if I'm wrong, that the top three and a third percent are responsible for 30% of spending.

Is that right?

25%.

Yeah, 3.3% are responsible for a quarter of all consumer spending in America.

I'm trying to move to action to try and figure out, okay,

everyone's kind of figured out, and we'll spend 7 or 14 days trying to confirm our beliefs with experts and Democrats and outrage statements from Senators Warren and Sanders, et cetera.

Okay, let's skip to the what the fuck do we do part of this.

And I'm increasingly of the mind that the only thing we can do here is not around

legislation.

It's not around media or expressing outrage or calling on Americans better angels.

And because if I walk around Nashville and I'm just someone trying to go to work, feed my kids, I'm not feeling a lot of difference.

I don't feel like I'm living in an authoritarian government.

So I don't know how worried I am.

I believe that we have to, or this is what I'm thinking, and it might be a function of sleep deprivation.

I think we have to move to the action part of this.

And I think the most effective means of trying to arrest this, not slow march, but steady, fast march, or even it feels like a sprint towards authoritarianism, is some sort of economic strike.

I have business accounts, personal accounts,

private wealth accounts with Northern Trust, Silicon Valley Bank, Bank of America, Goldman Sachs, and Northern Trust.

I am contemplating transferring all of my assets to HSBC or Lloyds and being very public about it.

And also

I think that we should think about calling for a general economic strike, especially lean on the top 3.3% of households.

Because quite frankly, wealthy people can reduce their spending much more dramatically without much harm to them.

You know, don't buy Van Cleef and Arpels for your wife at Christmas.

Don't go to St.

Bart's.

Maybe delay your mortgage payment.

Maybe transfer some of your assets out of a U.S.

bank into a European bank, such that

it would be striking

how

effectively the top 10%, maybe even the top 3% of income-earning households, who, by the way, tend to lean democratic and tend to probably be freaked out about this, and I would like to think have some fidelity or recognition of the great rule of law and capitalism, full-body contact capitalism to put them in the top 3.3%.

But I feel as if there needs to be some leadership around what I would call a general economic strike against some big American companies.

And by the way, it doesn't come for free.

It would be hard on the economy.

People would lose their jobs if it was effective.

But at this point, I don't know what else we can do because

we've lost control, all three houses of government.

The Supreme Court is now basically very conservative and supportive of the president.

And for all of the media hair on fire and everything, consumers really don't seem to be responding.

So I'm now of the mind, okay, one, the Democrats should shut down the government.

We no longer have a government that's upholding the rule of law or the will of the majority of the people of our nation.

So just shut it down.

We should stop financing it.

And two, I think we need to be thoughtful about how the wealthiest Americans can raise their hand in an economic way and say, this is bullshit, and we are going to find some soft tissue here and press on it.

Your thoughts?

I think that's the only way you make change, really.

And I think the best example is Tesla.

I mean, it wasn't screaming about how Elon is a Nazi that got him out of the White House.

It was that people stopped buying Teslas and they had to get back to work.

That's the reason he left, really, I think.

I mean, of course, he had the tussle with Donald Trump, but I think mostly what happened is he realized that Tesla sales were declining, what, 20%

just because of what he had said politically.

I mean,

it's a great way to enact change is to boycott.

So

I think you're on the right track if you want to enact change.

I don't know about completely bailing on America.

I mean, I don't know what moving your assets to HSBC or Lloyd's would actually do, but I take your point.

And I do think it is probably the best way to affect change if you want to do that, especially if you have money.

But we have another story to get into here.

So, can I move us along here?

Hold on, I'm a little tired.

Let me just do a little rail of the

magic powder here.

A little of the devil's dandruff.

His nose is is bleeding.

A little of the devil's dandruff.

Oh, God.

Okay.

Sorry, go ahead.

We'll be right back after the break.

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New data from OpenAI and Anthropic is shedding light on how people around the world are actually using large language models, and the differences are striking.

Anthropic's claud is primarily used for computer and mathematical tasks, such as coding support.

In contrast, OpenAI's models are more frequently used as an alternative to search engines, as well as for educational support and writing assistance.

So, essentially, what we have here:

I mean, we knew AI was a big deal, and we knew that everyone was using ChatGPT, and everyone was using Claude, which is Anthropic's large language model.

And we, you know, a lot of money has gone into these companies.

Everyone's been very excited.

But this is essentially the first time where we're finally seeing what are people actually using this stuff for?

What do people, why do people like ChatGPT?

What is the use case?

And I think the most interesting learning here is the fact that people are using ChatGPT barely to do their work.

I mean,

in 2022, around half of the prompts for ChatGPT were work-related.

It's down to 25%.

The biggest use case based on this study is practical guidance.

that that makes up 28% of all chat GPT prompts.

So, you know, asking for advice on what, what should my workout be today?

I have these ingredients.

What should I cook up tonight?

I need some help on my homework.

Just everyday advice.

That is the main use case for ChatGPT.

And then on the other side of the spectrum, you've got Claude, which is mostly being used for work.

This is the key stat here.

36% of Claude prompts are related to coding.

And you compare that to ChatGPT, which is at 4%.

Meanwhile, 7% of prompts are science-based, which basically means that 45% of the prompts that are going into Claude are for computer science and mathematical work.

That is a huge contrast to ChatGPT.

So a lot of different implications there, but let's just start off with your reaction, Scott, to this new data.

Super interesting that essentially,

to distill that, it sounds like ChatGPT is kind of B2C and Anthropic is carving out a spot as B2B.

And I think that's a really interesting insight.

The other thing that's interesting, me pulled together some data because I'm, you know, I know all these presentations or talks I do, I talk a lot about AI.

And basically,

by most metrics, all of these things are kind of hitting parity.

And that is in the 80s, it was hard to develop a manufacturing advantage because people would just buy a great car, disassemble it, reassemble it, reverse engineer any sort of...

You could have a two or three year lead in manufacturing excellence, but not much more than that.

I feel feel like in AI, there's a two- to three-minute lead because AI crawls other AIs, reverse engineers what they're doing.

It just feels like it's going to be very hard to maintain any sort of technical advantage.

And we see that, and that is they all seem to be converging.

They all are sort of basically being trained on the same data, and they're all using NVIDIA.

So the front end is getting increasingly hard to differentiate other than kind of positioning and what it's used for and going deeper around

certain use cases.

What I tell people,

you know, when I tell people about how to use AI or get good at it,

I like this second screen advice.

I always have a second screen now.

I mean, I'm in Nashville and I have ChatGPT up on my phone.

And I try to force myself to just use ChatGPT and Claude as often as possible to start thinking about how I use it.

What I have found, and this is pulse marketing,

and it's anecdotal, but it's still evidence.

I use ChatGPT for general queries and around data.

And I also like ChatGPT a little bit more because I ask things like, how could I have the biggest effect on sending a message economically?

And

Claude always says, you know, it gives me a bunch of bullshit.

Like you should be thoughtful.

And it's like, fuck you.

Just give me the answer.

I don't need a lecture.

And what's funny is that I've also said that these guys need to put in safety controls.

And when they do put in safety controls, I get angry.

But ChatGPT is less politically correct, which I like.

I use ChatGPT for my general queries.

I use Anthropic or Cloud for editing.

I find when I do my No Mercy, No Malice newsletter, and I'll go to it.

I don't use it for ideas.

I occasionally use ChatGPT to get some data.

But what I use Cloud for is I like to keep these things, the newsletter, each Friday to 1,500 words.

And I always end up with 20 to 30 or 2,500 words because just as I'm fond of hearing my own voice, I'm fond of reading my own words and I keep writing.

And I use CLOD and I find CLOD is better when I say, can you cut three or 700 words words here and highlight which words you cut or which sentences or which paragraph you cut and why?

And it'll come back and it's really outstanding.

It says, this paragraph is somewhat repetitive or it'll say, and it even uses my name like it knows me.

It'll say, Scott,

this paragraph is sort of off-topic, right?

So I find, and again, people will find their own differences, but I think to not have both up and use both and compare them is not only

not going to make your work better, you run more risk.

Because what I find on a regular basis is this shit starts to hallucinate.

And

it sometimes will just come back, one or both of them, with like crazy answers that are just flat out wrong.

So anyways, I use both, but like everyone, I'm finding there's a difference between the two, but increasingly similar.

And what I still hold on to what Robert Armstrong said, and he was on this morning's

markets, that I wonder if this is one of those technologies where the big winners are all of us, that it's going to be hard for any of these guys to maintain any sort of lead,

which will drive down prices.

And similar to PCs and airlines and vaccines, the stakeholders that capture all the value are the consumers and no one company is able to ring fence and have a tremendous amount of shareholder value.

On that point about B2B versus B2C, that is exactly what we're seeing.

In fact, consumer subscriptions are now making up three quarters of OpenAI's revenue.

Enterprise contracts make up the rest, make up 25%.

And then for Anthropic, it's flipped.

Consumer subscriptions make up 15% of their revenue.

Enterprise subscriptions make up 85%.

And I think this is

sort of a general business question

that I find very interesting, which is,

is it better to go for the consumer or is it better to go for the enterprise?

And my view on this has traditionally been, and in fact, one of my predictions from a couple of years ago is that we would see chat GPT kind of decline in relevance because I expected that OpenAI was going to invest heavily into the API heavily into the enterprise business and then just sort of let chat GBT kind of continue existing that's I was completely wrong they've gone the opposite direction massively investing in consumer massively doubling down on the consumer and they are presumably losing some enterprise business to companies like Anthropic.

And that's why Anthropic's been on such a tear recently.

And it does bring up this question is like,

what is the better strategy?

If, if, if this is, you know, if we're looking at the commoditization of AI and you can choose to go for big business contracts or you can try to get as many individual users as possible,

what is better?

What is a better business in your view?

Well, I have a bias here because I've always started B2B businesses.

I mean, I started a B2C business called Red Envelope and some e-commerce companies, and I found B2C was much more difficult because it's sexier and attracts more people, more human and more financial capital.

And two-thirds of our economy is consumer.

But the consumers are much more price sensitive and much more willing to like shop around.

Whereas my B2B companies had a strategy firm at a business school profit and then an analytics company or business intelligence firm, L2.

And what I found is if you establish a good relationship with a PNG or an LVMH, that they were less price price sensitive.

They just wanted really good work.

And that, I mean, there's huge, I was just trying to think who are the most valuable companies in the world.

NVIDIA, that's probably B2B, that's processing power.

Microsoft, that arguably is both B2B and B2C, but probably more B2B because it's corporate relationships around software.

Apple Consumer,

you know, what, if you go down the list of the most valuable companies, you would argue, I know it's tough to say, I have a tendency to go B2B just because that's my background, but you're right.

ChatGPT seems to be seeding ground.

The stat that Mia pulled, and you may have already read it, was that in November of 2022, 47% of messages

on ChatGPT were work-related.

Now that number is just 27%.

So it feels like it's definitely doubling down on the consumer.

And I don't want to say seeding ground to to Anthropic on B2B, but that seems to be where Anthropic has figured out their focus is.

Greg Chauvin's the CEO of Section,

the company that upskills, you know, helps corporations deploy AI.

He came on office hours and he said that there's been this curve where essentially all these businesses bought or purchased site licenses from one or both of these organizations.

And he said, all of a sudden, he said, kind of six months in, nine months in, these things have not been deployed.

In other words, their workers aren't using them.

And so now they're hiring Greg and Section to come in and say, how do we get this to permeate into the company and get people using it?

So there's definitely been,

and that MIT study just came out saying that a lot of companies are reporting they're not getting the ROI.

If you said, Scott, you know, try and predict in six months the NASDAQ's been cut by 30%, what happened?

Was it attack drones going into NATO countries and inspiring Article 5 and we end up in a hot war, a near-hot war with Russia and NATO, or

there's some sort of, you know, more civil unrest in the U.S.

I don't think that would be the most likely cause of it.

It's that now 40% of the S ⁇ P is based on kind of the hopes of AI and that if there's real evidence, you know, the MIT was sort of a warning, it felt like.

It felt like it was a bit of a,

I don't know, a crow showing up and

cawing or whatever it is they do.

But if in fact we find that, okay, AI is fun and companies spend all this money on it, but they aren't really deploying it,

you could see a serious unwind in these valuations.

But we're starting to see evidence on the front lines that at least in B2B, companies are having trouble

getting this absorbed or adopted into the company at the rate they had hoped.

I mean, I think a lot of people are, A, people are, you know, older people have trouble adopting a new technology or they know how to do their jobs.

They're also not in a real hurry to sharpen the sword that cuts their own head off.

Hey, I found out you don't really need me.

Just type in these prompts.

We'll be right back after the break.

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We're back with profit markets.

Just to Tybo on the enterprise point, I think to your point, there is more revenue in consumer, but there is so much more margin in enterprise.

And that's what we see.

I mean, you look at Amazon as an example, where, yes, they're making a lot, generating a lot of revenue from selling products to consumers, but I think it's like around like two-thirds of their profits are from AWS.

And a lot of that, that dynamic often plays out across many of the biggest companies, including Microsoft as an example.

And we're seeing that with Anthropic versus OpenAI.

Anthropic's got 60% gross margins.

OpenAI is at 50% gross margins.

So it's just expensive to get your product into the hands of consumers and to get them to keep using it.

Now, to your point about the clouds forming, what I find so interesting about this study is, you know,

the whole bull case on AI is it's going to transform the way we work.

There's this massive emphasis on how we work.

Companies are going to adopt AI.

It's going to make us so much more efficient.

As you say, it's either a trillion dollars in revenues or it's a trillion dollars in cost cutting.

And that's been the case.

That's been the idea.

But what we're kind of learning with this is it's not really affecting your work life.

It's mostly just affecting your personal life.

It basically just means that you're not, you know,

maybe you're canceling your subscription to New York Times cooking, as an example.

Maybe you're not spending as much money

hiring a workout trainer.

It's really all of the all of the creative destruction is happening in the personal life, which makes you wonder, is this going to be this gigantic cash cow that we thought it was?

And I think that's sort of the doubts that this sort of casts over the AI landscape.

I don't think, by the way,

I'm not an AI bear at all.

I think we are going to see massive adoption eventually.

I think we're probably just early to the game.

But this definitely calls into question how much money there actually is right now

in AI.

One other point I'd just like to make here in terms of how OpenAI is doing.

So 12 months ago, ChatGPT had 87% market share in the

large language model market.

Today it's at 76%.

And the big reason for this decline is because the number two

is now Gemini with 11% market share.

Up from seven, right?

Yes.

Yeah, that's really interesting.

So Gemini is emerging as really the big, I mean, I think we used to think Anthropic versus OpenAI.

It's becoming clear this is actually Google versus OpenAI.

And just some interesting stats as well.

You know, everyone thought, oh, OpenAI is going to destroy Google search.

Actually, Google search impressions are up 49% year over year.

It's got.

96 times the traffic of ChatGPT.

I guess we already knew that.

Google's already big.

But the most interesting stat to me, Google searches with over eight words are up seven times in the past year why do you think why do you think that is because they have the ai answer at the top now exactly google is now integrating ai into the google search product and people are using it like they would use chat gpt they're not just what was our big tech stock pick at google in november of last year bang and by the way Google Gemini, now the top spot in the app store right now.

It just ousted ChatGPT.

This is such great data from Mian and Dan and their team.

And it's shocking.

We keep talking about Claude.

Claude's market share has gone from 1.7 to 1.9.

So you're right.

The market leader has given up approximately 11 points a share.

As markets mature and there's more competitors, that's natural, but still 76% share is still dominant.

The big winner here are really two people or two entities.

Gemini, which is a point now, it's gone from 7 to 11.

And also a new player has grabbed 4%, and that's DeepSeek.

But right now, Grok, according to this data, has a greater percentage, has more share than Claude at 2.2 versus 1.9, which just blew my fucking mind.

And Copilot is kind of a pimple on the elephant.

It's gone from 0.9 to 1.2.

But the players here now

are, I mean, it just kind of reminds me some other data that Mia pulled.

She looked at the curve of Netscape.

and then laid it over the curve of OpenAI.

And it looked very, very similar.

And her point was actually, it looks like OpenAI, even at 500 billion, has a lot more juice in it because it looks like it's where Netscape kind of was in 96, 97.

And that it still had a lot of juice to run from there.

At 70, what is it now?

76.5% at a $500 billion valuation.

I mean, the question is,

is this similar?

I mean, the curve is the following.

These guys go way up, new technology.

There's a ton of excitement.

They get out over their skis and then, wham, there's a huge correction.

And then these companies come back.

We haven't had the huge correction part.

And in 1997, the economists called the dot-com bubble bursting, but they called it a 97.

And there was another like 60% of gains until 99

before the market crashed.

But these share gains, I would say the real difference in the last year is Gemini.

And I wonder if the analogy analogy here is Internet Explorer.

Everyone said Netscape was a better product.

It was the first.

It was out there.

And then, you know, Bill Gates and Balmer said, we're going to use our custody of the consumer and our interface and our custody and relationships with corporations to basically say, hey, we're going to bundle in Internet Explorer for free.

And by the way, if you keep using Netscape, we don't like you and we're going to punish you and we're going to withhold contracts or not give you Microsoft Word or whatever.

And before you knew it, Internet Explorer was

what everybody was using.

So I wonder if that's the same thing here.

I just, again, I think Gemini, I think Alphabet is

the way I would describe it from media terms is the empire strikes back.

100%.

And if we look at the,

I mean, we've seen this huge run-up in Google up around 30% year to date.

I mean, this was,

we were bang on the money here, but still,

eight times sales

or eight times expected sales.

and then you compare it with OpenAI at 38 times and Anthropic at 37 times.

I mean, this is basically

as ascendant,

really growing faster than ChatGPT at this point.

And again, it's still valued as kind of an old, sluggish company.

I mean, the multiple's gone up a little bit this year, but still, still not a tremendous amount.

So I still think Google is a good pick right now.

Just one final bull case on OpenAI, just to just to, I mean, we've been a little bit doomer on OpenAI in this segment, but one thing that we have to remember,

they haven't turned on the advertising.

If they want to make money, they just flip the switch, turn on the ads.

And my favorite stat here, you always talk about the white rhino of

advertising, which is young people.

46%

of OpenAI users are between the ages of 18 and 25.

God, that's just wild.

So that's half of their user base are young people.

It's just another reason why men that age won't actually go out and ask a woman out.

They're just going to sit around and exactly.

What's the best OnlyFans account?

Yeah, exactly.

Okay, let's take a look at the week ahead.

We'll see new and existing home sales for August.

We'll also see the personal consumption expenditures index for August, which is the Fed's preferred inflation gauge.

Scott, any predictions?

You know, the honest answer, Ed, is I'm I'm in sort of a, I want to ping it back to you because I'm grasping at straws now.

I'm a little bit in my head, a little too much.

I don't think I'm thinking clearly.

Sitting here in

Nashville watching some parking lot be destroyed by huge cranes is somewhat a metaphor for what's going on in the U.S.

I'm going to flip it back to you.

Do you have any predictions?

I don't.

You need to give me some time to prepare these.

Perhaps you have a prediction on what's happened here with NVIDIA buying this stake in Intel.

I mean, I wonder if

we've seen a massive explosion in Intel stock.

I wonder if that is again a case of

the government getting involved.

I mean, the government takes a stake in Intel and then suddenly NVIDIA is investing.

I mean, we are seeing the rise of.

Okay, so I'm going to bail you out here.

You're flailing.

But you did inspire me.

That was the idea.

I succeeded.

The next six months of the year, we're going to see M ⁇ A Lollapalooza.

We're about to see all of these companies, they have so much cheap capital.

They can't support it with their current business models.

So they're going to go hunting, big game hunting.

And Intel's a great example of that.

If they can just pick up some IP, some good talent, some good management, some

B2B relationships, supplier relationships, and it's the sweat off of the brow of NVIDIA.

All of these companies are going to go big game hunting.

We're going to see bankers are going to make a shit ton of money.

Some of the biggest deals in M ⁇ A in the last 10 years are going to happen in the next six months.

This episode was produced by Claire Miller and engineered by Benjamin Spencer.

Our associate producer is Alison Weiss.

Mia Silverio is our research lead.

Our research associates are Isabel Kinsell, Danjlan, and Kristen O'Donoghue.

Drew Burroughs is our technical director, and Catherine Dylan is our executive producer.

Thank you for listening to Prof G Markets from ProfG Media.

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