AI’s Strange Paradox
The Weekend Leverage, September 28
I’ve been thinking about Dickens lately. You’ve heard his line from A Tale of Two Cities, “It was the best of times, it was the worst of times.” That is the way it feels in technology (and the broader world) with the change that AI is bringing. This week we saw releases that showed some of the risks of AI slop, while my research turned up new areas of AI software that made me feel incredibly optimistic. Is AI terrible? Yes. Is it incredible and exciting? Also yes. It’ll make people poor; it will make people rich.
We’ll get to all that. But first, this email is brought to you by Notion.
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MY RESEARCH
Can AI fix education? Sorta. Maybe. It is rare for a software category to get me truly excited anymore, but AI education has definitely lit a fire for me. Students would obviously do better with individualized learning but that has never been economically feasible. AI can so drastically reduce the cost of creating/customizing course materials that suddenly the math can make sense for each student to study at their own pace. There are early signs of this working and startups that are scaling rapidly, but I would like to see much, much more effort done here. Great opportunity to make mucho bucks and make a difference.
Notion is betting the farm on AI agents. The company is gambling that you will prefer to connect your applications and workflows, versus merely accelerate individual tasks. Said with 92% less jargon, they want to use AI to automate all the extra work surrounding your job. To do so, the company is doubling down on its block-based technology which allows AI agents to navigate your data with more ease than typical file-based systems. It’s honestly a very cool product.
TECH YOU’LL DIG
Pure, unadulterated, AI slop from Meta. This week the company released “Vibes,” a feed for AI generated short form video. It is…eerie. I don’t advise you to use it, so if you would like a pasteurized, safe to consume way to look at it, I recorded this short demo video. This release was swiftly dunked on.
But rather than pick on this obviously flawed launch, I think it is important to point out that this sort of product will happen. On the demand side, people already have the habit of killing time and scrolling short-form video. On the supply side of the equation, AI video’s quality is already high enough to act as a substitutable good. It’ll only get better at generating and cheaper to make from here.
We should acknowledge that market reality. Thus, the task is to build a product that harnesses those same supply and demand curves to make something superior. Is there a form of “Vibes” that is net good for humanity? I hope so! And, if you are working on it, I would like to feature you!
Amazon pays the largest civil penalty in history. The company settled with the U.S. government for $2.5B over a lawsuit focused on the Prime subscription sign-up flow. The timing of the settlement was a bit weird, but the thing to point out here is that obviously this was happening? The entire internet is chock-full of dark patterns that make signing up too easy and canceling too hard. The issue isn’t that Amazon got this fee, it’s that every service in my life should probably get the same fee applied to it!
This TikTok deal keeps getting weirder. This week President Trump signed an executive order about the sale of TikTok. It is a BIZARRE deal on multiple levels:
The asset is priced at $14 billion—pennies on the dollar. I talked with multiple growth investors, all of whom pegged the price at over $75 billion.
One of the largest investors in the deal is MGX from Abu Dhabi, which is weird because the Trump team has, over and over again, talked about putting American investors first.
The two key assets of the deal are the data and the algorithm. While the data contract is being given to Oracle—as I wrote about last week—the algorithm will be “licensed” and “retrained with American data.” That retraining process will supposedly clear out Chinese influence. If the goal was to remove Chinese influence, why is it licensed? Who controls the algorithm after the retrain? There have been zero details on any of this! Which is weird because it was supposedly the point of this entire debacle.
ByteDance, TikTok’s previous owner, is getting 50% of all profits!
Oh, and by the way, the Chinese government has not acknowledged the executive order.
The cynic in me is saying that this deal is a devilish cocktail of cronyism and poor negotiation. But as always, I am not a political commentator, I’m just an expert on technology markets and I am telling you in that capacity that this deal stinks in every way. Businesses with the potential to be worth a trillion dollars are not handled like this.
TASTEMAKER
There were 3 really wonderful albums released on Friday that I think are worth your time.
Getting Killed by Geese: A riot of angles and sharp edges, this album thrashes. The guitars don’t sing so much as scrape, the drums stagger forward, and yet somehow it all coheres into something feral and luminous. My favorite of the week! I listened to it twice in a row on my long-run on Saturday. If you like The Strokes or Interpol, you’ll dig this. Track highlight is 100 Horses.
bones by Rainbow Kitten Surprise: Don’t let the incredibly silly band name throw you. This is music as confession. It swells and contracts—one moment intimate as a whisper, the next spilling outward into communal chant, as if grief itself wanted company. The group blends lots of genres, but I catch notes of Modest Mouse, Mt. Joy, and Hozier. Track highlight is Hell Nah.
The Art of Loving by Olivia Dean: Is this music that would play in a movie montage as a divorced woman finds herself again? Yes. That doesn’t stop it from being excellent. Each new track is like opening a curtain in the morning, getting warmed by a fresh beam of sunlight. It is poppy and soulful and pleasant. If you like Amy Winehouse, Corinne Bailey Rae, or Adele’s earlier records, you’ll dig this. I’ve been humming its lead single Man I Need for weeks now.
Stay safe, hug your loved ones.
Evan
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Agree that the TikTok deal smells super fishy, but after digging into it more I actually think it’s a win for both sides.
How much of TikTok’s value is in the algorithm? 50%+?
Reading between the lines, giving up ownership of the algorithm was clearly a nonstarter for Bytedance, so they had to swallow a big haircut on valuation.
The US gets control over the data & the content that gets served to US users. Bytedance takes a $10-$20B bath on the stake they sold, but they’ll make that back in a few years from the profit share.
Lots of fascinating insights as always Evan. I think the opening sentence of A Tale of Two Cities is perhaps the best start to a novel ever written. And the whole long but intense thing applies to our current times - let's hope the journey is smoother than the French Revolution.
“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way—in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”