Sex, Lies and Data Centers
Platforms reshape the world.
POD 145: Winners Take All
Out Friday AM. Listen.
If you thought the platforms were powerful before, consider this. Google just turned in a $96B quarter with 32% operating margins. Meta hit $47.5B with 43% margins. Google’s revenue growth was 14%. Meta’s 22%. Even the mighty Disney is a quarter the size of Google with half the margin. These aren’t companies operating in a different industry than media; they’re different universes. They’re hoarding compute, restarting nuclear reactors, and offering $1 billion pay packages to AI superstars—while laying off hired help.
If you thought that platform companies had outside power before, think about what’s next. Google will spend $85B in Capex in 2025. The new platform model extends from energy to silicon to massive data centers to algorithms straight to the palm of your hand.
While this may not surprise you, the scale of AI ambition and the generational industrial infrastructure being assembled around these advertising machines was made visible in an FT article yesterday, “Inside the relentless race for AI capacity.” It will have you contemplating the bubbliness of our time. For now, the market seems to have shrugged off the hyper-scaler’s capital ambitions — Meta and Microsoft’s market cap are about to hit $2 trillion and $4 trillion respectively.
Just 20 years ago Facebook set out to convince the world that advertising of social media was actually legitimate. Google was busy iterating a version of directory advertising with a novel bidding system. Today these ad systems are reshaping the industrial landscape of the country while completely upending the ad industry that they used to beg for support.
If there’s a shred of creativity left in the ad business it was highlighted by a savvy PR move by the here-to-fore unknown AI company, Astronomer, cleverly flipping a bad viral PR situation into global notoriety by hiring Gwyneth Paltrow, ex-wife of Coldplay front man Chris Martin, to star in a video that explained what the company actually does. Brilliant marketing judo turns unexpected negative attention into cheap corporate fame. This will win a Lion next year.
In a second ad story of the week, American Eagle pissed off some, delighted others with a steamy Sidney Sweeney old fashioned hot girl jean advertising word play, “Sydney Sweeney has great jeans”, that had dudes salivating, conservatives adopting her as their own and more conspiratorial minded liberal reactionaries calling it "eugenics-coded” Nazi baiting. Let’s not give the geniuses behind the campaign too much credit. A good primer from the Daily Show:
Over at the Atlantic, Charlie Warzel sees a bigger problem in “The Discourse is Broken":
What ends up happening in these scenarios is that everyone gets very mad, in a way that allows for a touch of moral superiority and is also good for creating online content. The Sweeney ad, like any good piece of discourse, allows everyone to exploit a political and cultural moment for different ends. Some of it is well intentioned. Some of it is cynical. Almost all of it persists because there are deeper things going on that people actually want to fight about.
Like it or not, the death of industrial media distribution means advertising has to work a lot harder to break through. Inevitably the most effective is like tofu, taking on the flavor of the current debate as it simmers in the cultural wok.
Elsewhere, a wake up call from the Economist outlines a future in which AI-driven productivity decouples labor from growth, leading to falling costs for digital goods and rising inequality. Imagine a world with 20%-30% productivity growth. Capital becomes the scarce resource; labor may be increasingly devalued except in human-dependent services (education, childcare, plumbing). AI researchers and capital holders are the biggest winners; middle-tier knowledge workers become redundant. The result, bifurcated economic structures: ultra-efficient digital production vs. high-cost human services. From the report:
Until 1700 the world economy did not really grow—it just stagnated. Over the previous 17 centuries global output had expanded by 0.1% a year on average, a rate at which it takes nearly a millennium for production to double. Then spinning jennies started whirring and steam engines began to puff. Global growth quintupled to 0.5% a year between 1700 and 1820. By the end of the 19th century it had reached 1.9%. In the 20th century it averaged 2.8%, a rate at which production doubles every 25 years. Growth has not just become the norm; it has accelerated.
If the evangelists of Silicon Valley are to be believed, this bang is about to get bigger. They maintain that artificial general intelligence (AGI), capable of outperforming most people at most desk jobs, will soon lift annual GDP growth to 20-30% a year, or more. That may sound preposterous, but for most of human history, they point out, so was the idea that the economy would grow at all. The likelihood that AI may soon make lots of workers redundant is well known. What is much less discussed is the hope that AI can set the world on a path of explosive growth. That would have profound consequences. Markets not just for labour, but also for goods, services and financial assets would be upended. Economists have been trying to think through how AGI could reshape the world. The picture that is emerging is perhaps counterintuitive and certainly mind-boggling.
Finally this tidbit from Puck’s new AI guy, Ian Krietzberg, stood out to me. Ian endeavors to understand the mindset of a deeply committed OpenAI researcher:
A remarkably strong, almost quasi-religious set of ideologies permeates the artificial intelligence industry, especially in the Valley. One tenet—not held by everyone, mind you—is that advanced A.I. will radically improve society, usher in some kind of post-capitalist utopia, and lead to longer, healthier, somehow better lives for everyone, yada yada. I had a brief exchange on X the other day with an OpenAI researcher, who offered a glimpse into how feverish some of the proselytizing around artificial general intelligence can get…
OpenAI researcher: Who cares whether A.G.I. is inevitable or not? If we can do it and don’t, we don’t deserve continued existence.
Me: Why?
The researcher: Skeleton of an argument—suffering is bad. Much suffering would be solvable if we were smarter. A.G.I. will enable us to stop suffering at scale.
Me: How? The “we don’t deserve continued existence” argument for not pursuing A.G.I. is a strong stance that I’d like to better understand, especially considering we have the capacity to reduce human suffering today in a number of non-A.I.-related ways, but seem to lack the will to do it.
The researcher: If someone chooses to go back in time and stop the scientific revolution, that person doesn’t deserve to exist. Likewise, if humanity collectively commits the crime of preventing a breakthrough like A.G.I., all the people who make that decision do not deserve to exist. [Emphasis mine…]
Enjoy your weekend.