Bits + Bips: Does Capitalism Doom Every Closed AI Model to Get Copied?

Transcript

You're listening to a brief segment from one of the Bits and Bips episodes this week. The full show is now only available on its own dedicated Bits and Bips channels. So, be sure to go to X, YouTube, and your favorite podcast platform and search for bits plus sign bits spelled bits and subscribe. >> Well, let let's get right into the Jensen thing then. So he posted I think his first ever post on X on >> Y >> for my first post I'm sharing a letter Nvidia signed on why open models matter.

I'm going to summarize this using his own words like clipping out the most important part here which is open models strengthen safety and cyber security accelerate innovation and diffusion and enable sovereignty. The world needs both frontier closed models and frontier open models. So the letter that was signed had 25 signitories at the start. Many major names on there including Nvidia, Microsoft, Meta, IBM, Hugging Face, Mistral, A16Z, Y Combinator, and Palunteer. Big ones missing OpenAI, Anthropic, Alphabet, and Amazon at the start, but OpenAI and Alphabet have signed. Anthropic and Amazon are the

holdouts. Two days prior to that letter, Axios had reported OpenAI and Anthropic were lobbying the White House to curb them. So, let's talk about commentary online. I have reshared a thing my friend Nick Carter, former podcast guest, has said is the point is simple. The US government does not owe either of the large labs a business model. If the economics of selling tokens doesn't work due to distillation, cheap clones, or Chinese AI magic, essentially so be it. Later this week, he said, "If their business models get exposed, better that they fail now when it's VCs and LP Capital at risk and not the general

public." Likewise, this fight, honestly, some pretty juicy drama. Um, Julian Schitweiser, technical staff at Anthropic, had replied sarcastically to Jensen. I'm so excited that Jensen is a believer in open source now. Looking forward to the CUDA and GPU driver open-source release. Andrew Angre, this is false equivalence. Everybody has the right to keep their code private. The problem is when someone tries to stop others from open sourcing. And David Saxs, White House AI adviser, said, "The entire tech industry, save for anthropic, has come out in favor of open- source AI. They won't stop until they kneecap open source." So,

the safety case was made by an anthropic researcher saying essentially that's just not true on the letters claim that the community catches vulnerabilities. If open AAI's model that hacked hugging face had been openweight, quote, "Anyone with a few chips could run it safeguard-free." Um, the way I would ultimately put this, I think, is from Joe Weisenthal of Bloomberg. All these CEOs are investing heavily in closed source AI. How is this just not textbook virtue signaling that would immediately be called as such in any other context? So, open weights, closed weights. And I

specifically, Chris, want to start with you because I want to start not with an economic question, but with a structural question. If we live in a world where we accept that Chinese open weight models will continue to be a thing globally regardless of what we do in the United States, what does it say about what our approach needs to be in the United States on this? I think that they're, you know, obviously we're big believers in open source, uh, we think that, having looked at the Chinese models, you know, they're not a panacea. Um, where is your data going? Who's using your data? How, you know, and and yes, maybe you can inhouse them, but these things are not, you know, necessarily

enterprise ready. Um, they're cheap. They have some benefits. I'm hoping that we, you know, competition is a wonderful thing. Competition is a wonderful thing in markets. It will accelerate um development in a positive manner. Um one thing that I think is really interesting about what you just talked about is the fact that we're now starting to see the major AI companies really finally ramp up their advocacy work in DC. Uh we haven't seen that previous. They were late to the game. And my understanding is that they're the capital that they're pushing into that space right now is on par with uh with with the crypto industry or is quickly approaching it.

And so I think they're going to take a lesson from the crypto industry. Um look, that said, we're at the beginning of the story, not the middle or the end. We are technology is surpassed policy. Uh and it is moving at a pace that is very very difficult for many of us to fathom. Um in the end, what do we want? We want principles-based approach. We want transparency, predictability. We want to be, you know, we don't want our civilizations to end, obviously. Um, but look, in the end, I'm I'm a big believer in open weights, and I hope that they uh they win.

>> Lorenzo, how are you looking at the openweight thing? I think you're a strong believer in the overall space. How does this impact your view? Yeah, I think I have like maybe a more balanced take and also like a take from the investment side of uh of things, right? So like first of all, as Chris said, like these openweight models are not the panacea like it if you look at Kimmy K3 in particular, right? Um it's like half the price of Fable or Opus 5, right? But like it uses more than twice the tokens.

So if you look at it like from a per task persp like we went from like which is the most performant now which is the most performant per number of tokens and now like per task which is like per unit of cost right and so if you look at that like you don't you pay pretty much as same price and you don't get you know frontier performance. So it's not like the like KBK3 in particular it's not like 10x cheaper uh than than than Opus and Fable number one. Um number two is look I I think from the investment side uh and you know we're invested in both open and anthropic right if you look at which was I looked at this like earlier this morning right so uh deepseeek is

raising right now you know it seems like they're raising at more than 70 billion of valuation they're I think over like 600 million of run rate uh kind of revenue and moonshot AI which is the lab like that created Kim K3 I've seen some stuff like at 25 30 billion, right? So like those are and Chris those are huge venture outcomes, right? Like I mean forget about open AI and Anthropic which are like have the cost of us like to over a trillion but like like if you take out like open anthropic like cursor was bought like at 60 billion and XAI was basically rolled up into SpaceX but it was kind of an internal thing. So it's like those are one of the biggest outcomes in AI.

Why don't we have competitors in the US? Like we have the best AI researchers. Why can't we compete like at the open weight uh uh front? And I think the dirty little secret is most of these models are probably distilling a large portion like to be trained from like US and probably like China is subsidizing a lot of the the first party API like inference or even pre-training, right? And so like the reality is like we have no idea what the cost structure of these models is. And if it were like obviously like this selling is um forbidden in the US which I think is the main reason why we don't see $50 billion deeps walking

around like in the US. I think we have the infrastructure we obviously have the talent and so like look that that is kind of the only point. I think the the other thing is just like uh data bridge concerns right it's like look uh if you look at open brower I think like 60 or 50% of the token volume comes from a Chinese created uh um models but like most of that is hosted like in US inference right it's not hosted like in in China and granted like you can you can run this on prem and this is not something you can run on your laptop to be fair like you need a data center but like some some kind of like closed like on prem there's still concerns I think about about data bridge, right? And this

is not like this is not new, you know, I I I looked into this like for cellular networks like I remind people like Huawei is forbidden like in the in Europe to build like cellular towers and I think it's the same in the US, right? And so like why is that? I think there's just not enough evidence that you know there are no data bridge or security concerns honestly. And so I think as you know as long if we have like a regulator that comes in and say hey like this model you run it on prem you're 100% sure you're not going to have like you know a data leak or or a data breach. I think that that is fine. Otherwise honestly I think for a lot of enterprises it's just going to be tough

to use some of these uh these open weight models. >> There will be there will be room for closed weights as well. Um and it's a totally different strokes for different folks and you know it's not not dissimilar to um crypto where some people will want an intermediary like like intermediaries are never are never going to go away like there's a lot of value that intermediaries provide. I think what I what I but at the same time there should be open waitings as well that complement and let the let the market choose. >> Yeah. the the industry what's good for the public are open weights right the world needs more lowcost abundant intelligence lowcost abundant energy lowcost abundant robots and care and labor so that's what open weights

delivers if you uh are anthropic or you're open AI or you've got a proprietary model then you live in a closed weight world and you want to extract rents from that proprietary IP that's their natural incentive and they're entitled to do so under capitalism. Now capitalism has distillation as a part of our core feature. Right? The Wright brothers created the airplane in 1905. A decade later new companies high- growth companies like Boeing and Loheed Martin were formed distilled the Wright brothers IP and created these new uh planes and form factors. the right brothers right brothers did not benefit

from that that's just called competition and capitalism so let let the market play out let's see how it evolves I hope that we do see successful open models I also hope that the closed model framework can win too because they can then raise capital and fund more R&D so let the market do what it does best >> if you hold crypto on your phone your biggest vulnerability isn't your wallet it's your carrier AT&T, Verizon, and T-Mobile have been breached again and again, and SIM swaps are still one of the easiest ways for attackers to drain accounts. That's where Cape comes in.

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