Menu
Sign In Search Podcasts Libraries Charts People & Topics Add Podcast API Blog Pricing
Podcast Image

Better Offline

Why AI Has No ROI with Paul Kedrosky

03 Jun 2026

Transcription

Transcript generated automatically by AI and may contain errors.

Chapter 1: What is the main topic discussed in this episode?

0.031 - 19.778 Unknown

This is an iHeart podcast. Guaranteed human. Run a business and not thinking about podcasting? Think again. More Americans listen to podcasts than add supported streaming music from Spotify and Pandora. And as the number one podcaster, iHeart's twice as large as the next two combined. Learn how podcasting can help your business. Call 844-844-iHeart.

0

19.758 - 27.376 Ed Zitron

Number one hits, millions of records sold, awards, sold out tours. You think the Jonas Brothers are satisfied? Nope. It's podcast time.

0

27.436 - 30.984 Unknown

We get to ask other people questions because we're sick and tired of being asked questions.

0

31.004 - 39.123 Ed Zitron

Hey Jonas is available now and their first guest is a big one, Paul Rudd. You know, Steve Carell is a great singer. Can you tell you not to audition for The Office or something?

0

39.203 - 45.298 Paul Kedrosky

I told him. Whoa. We were filming Anchorman. Clearly, I was the idiot. Thank God he didn't listen to me, right?

45.358 - 50.49 Ed Zitron

Listen to Hey Jonas on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

51.01 - 73.717 Unknown

Why are we all so obsessed with romance? On the Radio 831 podcast, join us, Sanjana Bhaskar, and Tyler McCall, as we unpack all the trending tropes, buzzy adaptations, book talk drama, and celebrity love stories with hot takes and sharp guests. Each episode digs into what these stories reveal about desire, fantasy, identity, and how we love now.

74.357 - 80.865 Ed Zitron

Listen to the Radio 831 podcast on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

80.845 - 86.092 Unknown

This is Saigon, the story of my family and of the country that shaped us.

Chapter 2: Why is there skepticism about AI's return on investment?

499.514 - 502.342 Ed Zitron

They don't know. They have no idea.

0

502.522 - 515.076 Paul Kedrosky

No, and this is the deep structural problem because they were brought in through the side door of bundled pricing and now that's becoming unbundled. And of course, that also is reflected in...

0

515.056 - 536.878 Paul Kedrosky

What we're told, and I think the Wall Street Journal and others have written about this, and it'll be interesting, we see the final S1s for some of the upcoming IPOs, that there is this attempt to try and even mask it in the financial filings where you get into this phenomenon of what we used to call earnings before bad stuff. And so what they're trying to do is hide the costs.

0

536.858 - 554.502 Paul Kedrosky

of training the models and saying that's not actually an operating cost, that's a capital cost, and we shouldn't have to show that as a function of what actually the margins are on producing tokens. And that is, of course, a cheat, right? Because if that's true, then you should be able to capitalize these things and expense them for a long period of time.

0

554.562 - 568.083 Paul Kedrosky

And we know full well that these are actually operating costs because they tell us that every 18 months we're launching a new major model. These things are not capitalized. These are operating expenses that should be treated accordingly with respect to the actual cost of token production.

568.124 - 580.534 Paul Kedrosky

So there's a multifaceted game going on here, both in terms of how it's being presented to users, but also in terms of how they're trying to sell it in the context of the upcoming S1s for the Anthropic and OpenAI IPO filings.

581.189 - 592.804 Ed Zitron

Well, what's really funny as well about the idea of capitalizing training costs is they're never going away. Because it's not just pre-training, shoving the stuff in the models. They have to constantly tweak them.

593.425 - 608.344 Paul Kedrosky

That's right. Which from a classic, my years ago accounting, whenever you have a regular predictable cost that you have to incur to continue operating your business, that is no longer a capital cost. That's an expensable item that should be expended.

608.324 - 627.283 Paul Kedrosky

So you get into, as I said, like back in the dark days of dot-com and even the telecom boom, you get into this problem of earnings before bad stuff where they want to exclude all of the things that make the numbers look bad. And then, of course, on the other side, you have this run rate problem where we continually hear about what the run rates are at these companies.

Chapter 3: How does the GitHub Copilot pricing model impact users?

962.243 - 975.582 Ed Zitron

No one. We have three, four years in and everyone's like, oh, we'll do ASICs. No, we won't. That didn't work. We're like two or three generations of Tranium, Inferentia, TPUs, still not profitable.

0

976.304 - 978.587 Paul Kedrosky

Still not profitable. Right. We know.

0

978.607 - 979.408 Ed Zitron

We would know.

0

979.388 - 1004.582 Paul Kedrosky

I was just looking at some data yesterday with respect to how small language models are increasingly closing the gap with large language models, which is causing training cycles on large language models to have to accelerate, become more expensive, throw more compute at it, more reinforcement learning. the costs are particularly not declining.

0

1004.602 - 1022.457 Paul Kedrosky

They're actually increasing sharply at the frontier because they're essentially being chased like the rabbits and like Wile E. Coyote and the Roadrunner. And so they're being chased into this very costly corner as a result. And that's a classic commoditization problem. If you go back to the 1900s,

1022.437 - 1041.417 Paul Kedrosky

I don't know, late 19th century, a very similar thing happened in railroads as people were racing desperately to try and find a way to build a corner and control themselves so that they could compete with all of these other upstart railroads. And of course, all that really happened was CapEx exploded, margins went to shit, and multiple railroads failed.

1041.457 - 1061.337 Paul Kedrosky

And we led to the crash of what, 1873, 1893, and arguably... was a cause in the Great Depression. So you're playing out this exact same game because you're sitting in this high capex world that's increasingly funded by debt and built on top of this duration mismatch with token prices being now exposed and raw in front of people.

1068.826 - 1071.21 Unknown

Run a business and not thinking about podcasting?

1071.57 - 1076.899 Ed Zitron

Think again. More Americans listen to podcasts than ad-supported streaming music from Spotify and Pandora.

Chapter 4: What are the implications of token pricing in AI?

1181.151 - 1182.374 Unknown

And that was the last time I saw him.

0

1182.835 - 1196.811 Ed Zitron

Listen to Season 14 of Family Secrets on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. If you're watching the latest season of The Real Housewives of Atlanta, you already know there's a lot to break down.

0

1197.211 - 1204.562 Unknown

Dorsha accusing Kelly of sleeping with a married man. They holding K. Michelle back from fighting Drew. Pinky has financial issues.

0

1204.883 - 1227.159 Carlos King

I like the bougie style of Housewives show. I think it looks like it's gonna be interesting. On the podcast, Reality with the King, I, Carlos King, recap the biggest moments from your favorite reality shows, including the Real Housewives franchise, the drama, the alliances, and the tea everybody's talking about. As an executive producer in reality television, I'm not just watching it.

0

1227.519 - 1236.972 Unknown

I understand the game. As somebody who creates shows, I'll even say this. At the end of the day, when people are at home, they want entertainment.

1236.952 - 1264.984 Ed Zitron

to hear this and more listen to reality with the king on the iheart radio app apple podcast or wherever you get your podcast and the other thing is as well is people just literally in my piece today people make this point about oh it's like the dot-com bubble in the we will we will simply just we'll reuse these things in the future like we'll just pick these up and it's

1264.964 - 1279.986 Ed Zitron

I hear this from very smart people, people who are not like beguiled by the AI industry, but it's like, okay, let's talk about what happened to the dot-com bubble. So when it exploded, you had those, some microsystems, the ultra, whatever it was, I forget.

1280.388 - 1300.962 Ed Zitron

43 50 grand a server but that one server could run an entire company you could run everything on it database databases uh messy crms they had like did they have on-prem lotus notes anyway um you had those things but you could run that and it you could probably run that in a garage you might need to use the washing machines plug but you could do it yeah

1300.942 - 1319.116 Ed Zitron

And those things were 50 grand, so you'd probably get them at, what, 20, 30 large. Okay, great. What happens when the AI bubble bursts? You can't just plug in an AI GPU. A B200 GPU is about 50 grand. It requires about, I think... I looked this up very recently.

Comments

There are no comments yet.

Please log in to write the first comment.