Breaking news, and how the end might begin

Part I: Flashback

A couple weeks ago, Steve Eisman, who predicted the subprime mess (Steve Carrell played him in The Big Short ), interviewed me, and asked me how the AI boom might all fall apart.

For reasons I am about to explain, that interview, recorded May 22, now seems supremely relevant.

Here are two snippets. (Some parts of Snippet 1 are currently paywalled in a separate video but may come out soon for free; I will update with a link if they do.)

After that, I will explain why all this seems super relevant today.

Snippet 1: Stumbles from OpenAI could precipitate a tidal wave

Eisman: Assuming it’s a bubble. I mean if it’s not if if we’re wrong and it’s then and it’s not a bubble and and… they’ll they’ll be able to charge for the tokens and it’ll all become profitable and it’ll be and that’ll be clear within a year or so, then…

Marcus: Yeah. I mean I like to think of [the giant GenAI investments[ as it’s a bet. I think it’s a low probability of the bet coming through, but it’s not zero. It’s not

Eisman: Zero. But if it’s going to break, like in, you know, what what broke Subprime? What broke Subprime was the credit quality got so bad that the end user, the investor, stopped buying the paper. And that was the end. Because if the end user, the investor stopped buying the paper, the whole machine stopped dead in its tracks. The question I ask for you is: I mean, I wonder if maybe what will break it if it breaks is that the industry moves to this token pricing and people say, Screw you. I don’t wanna I don’t I don’t wanna pay.

Marcus: So that could certainly happen.

Eisman: And if or and if maybe that what what else do you think could happen?

Marcus: Well, so in a version of yours, and then I’ll give one of my own, what think might happen is that at some point one of these companies can’t really afford to keep losing money. Right? They’ll run out of VC money, they tap the public markets as much as they can.

My best candidate for this is open AI. Open A…