Chapter 1: What is the main topic discussed in this episode?
Broadcasting intimate details and useless information from an undisclosed location in New York City. The Last Show with David Cooper If you're a tech worker at a big tech company, why take all your compensation in cash when you can be paid in computation? Let me explain. Silicon Valley has invented a new perk of the job. It's not stock options, it's AI tokens.
Your paycheck now partly powered by computer processors crunching numbers for you. What the heck is going on with this story? Let's discuss it with Alistair Barr, a reporter and author of the Tech Memo newsletter at Business Insider. Alistair, welcome to the show. Thanks for having me. So to me, this is a sign that the AI bubble is about to burst.
But before we get there, okay, what exactly is AI compute as compensation? And who in their right mind working at a tech company would want that rather than just cash or stock options or a bonus or money?
Chapter 2: What is AI compute as compensation and why is it trending?
Yeah, I usually just want cash for everything. But yes, AI compute. Everyone's probably heard of ChatGPT and generative AI. So there's a version of that for when you're a software coder and it has become very, very good. And if you're a software engineer and you want to do more and produce more code and better code, You can use these AI coding tools to do it.
And that's really taken off, I would say, in the last three or four months, especially. And then the problem is if you're an engineer and you're using these AI coding tools, they use a lot of computational power. And if you're a company, the company has to pay for that. And if you use it a lot, that money can get very, very large amounts of money.
And so if you're the CFO or if you're the manager of the team and you're like, okay, well, I'm already paying you $500,000 in stock and cash and stuff. And then you just racked up a $500,000 like AI compute bill the last year. Okay. We need to basically, we need to change something and put that into the whole compensation pie. I'm going to come up with a simple contrived example.
I'm an engineer working on some software and there's like a really deep bug in there. And I see a couple error messages, but I don't understand the bug. And so I ask a really deep, really power intensive AI tool to find my bug, tell me about how it's happening so I can potentially fix it.
How much money in electricity and computer power are we talking here to answer these questions using these AI tools? Is it like $5 of electricity or more like $5,000? How expensive is it to run these computational models on code? I did a story last year actually about people using tools like Cursor and also just the original Claude Code.
And these are, again, AI coding tools that software engineers have really jumped on. Some of these people, I called them inference whales, basically like people who use these things a massive amount. They were racking up bills of $20,000, $30,000 a month on these things. So if you add that up over a year, that's a lot of money. And you add, if you have a hundred engineers, that's a lot of money.
Yeah, I did study math in university, but that's more than $5 at least, just doing a little napkin calculation here. But is the average engineer performing at a high level using these computationally intensive tools? Are they racking up bills that sort of mirror their own salaries? Are companies really needing to factor this into how much it costs to have an employee at a company?
I think you're right to ask that question. My story was basically that I've seen over the past maybe month or so that a lot of people who I kind of respect on Twitter and other social media and the AI circles have been discussing this as an emerging issue. So I don't think right now that the CFO of some big tech company that we all know is already baking in, but they're beginning to discuss it.
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Chapter 3: Who would prefer AI tokens over cash or stock options?
And it's basically saying we should do this because... To your point about a bug code fix, if there's a really large code base and you decide, yeah, I'm going to let Claude Code or some other one of these tools go to town on this code base and check it. If you don't say work for two hours and come back to me, these AI tools can work for like a day.
two days on these things and then every single time they do that for a long amount amount of time they basically generate these things called tokens which is just the way the ai models digests queries and and basically do the computation and every single token that is protect processed That is a certain amount of sense. And then, you know, there's millions and millions of these tokens.
So it adds up, adds up money wise. So I would say your question is, is very fair. It's like an emerging debate in Silicon Valley that, that they're gonna have to do something about this. And, and I would also say that actually, this is probably a really important point.
These AI coding tools are becoming so useful that really, really ambitious AI engineers, if they're thinking about going to another company or even moving up in their own company, they're like, well, in order for me to do a good job, I need access to this computation. And then the company will say, well, we need it for all these other AI things we're doing. So you can't have it.
And they're like, but I want it. And there's a fight going on. So. It's a valuable resource, a new valuable resource. So are we seeing this in job postings? Like I left the tech industry just before, well, a couple of years before AI became popular, like at the beginning of 2021.
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Chapter 4: How do AI coding tools impact software engineers' productivity?
Back then, job listings would list off things like sales. or stock or bonus or health benefits or a gym membership. Are we seeing it on job listings? Like if you come work for us, you can blow $50,000 a month in AI computation, maybe not that much, but are we seeing it in job listings? So I've seen it in a couple.
There was one that was for, is a pretty, I would say, kind of mid-level kind of software engineering role. And it was like a remote work thing. And it had every single kind of regular piece of compensation. And then it added a monthly subscription to Copilot, which is the Microsoft one. So that's a very basic one. So that comes included in this role that you need. you'd be doing.
And then I'd say less specific, but similar. Mark Zuckerberg last year, when he went on this massive AI recruiting surge that he did, that was very, very expensive. Like one of his main pitches is You come to Meta, you will have access to all the AI compute we can give you. Now, is the CFO of Meta baking that into everyone's comp? Yeah, I don't think so, but it's the same thing, right?
He's going out, building all these massive data centers, spending billions and millions of dollars on all this compute. And one of the reasons is not just we need to make good AI models, it's like talented engineers, you come here, you'll have it all. You don't have to wait.
So I think that's, again, it's like, so that isn't compensation, but that's like, should I go and work for Google or should I go and work for Meta? Well, at Meta, I'm going to have all this compute. There's a joke here about them needing all that compute power to make Mark Zuckerberg continue to function properly, but whatever, we'll make that joke another time. Where is this money going?
Is it just go into the pockets of OpenAI, ChatGPT's parent company or whatever? Is Anthropic blowing all that money on data centers? And so it's the hardware companies like NVIDIA that make the chips and then the memory chips and also the utility company that's powering the data center? Or is it just going in their pockets and they're going out for caviar every night?
obviously ideally some of it should in theory go into anthropic's pockets i don't know i don't know how much is going in there right now but yeah like if you go down one layer it would be it would be um the data center operators so anthropic has a load of deals with especially out at aws amazon so that money would go into amazon's pockets and then amazon has to turn around and buy
GPUs networking equipment from all these from Nvidia and everyone else and then and then it's like well how how are we going to run the data sensors it needs electricity so then it goes to I don't know constellation energy or whoever else it is yeah and then and then unfortunately some of it some of it comes out of our pockets when we pay more for electricity at the end
Yeah, I wonder who's getting rich here. And it sounds like maybe not the tech workers because now they're being paid in these compute tokens instead of cash. I wonder if we're in a bubble, a conversation that we didn't have time to attack, but maybe that's okay. On the one hand, it sounds ridiculous.
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