Part Two: NVIDIA Isn't Enron - So What Is It?

In part two of this week's three-part NVIDIA series, Ed Zitron walks you through the history of Enron, why it differs from NVIDIA, and why growth-desperation led big tech to waste hundreds of billions of dollars on GPUs. This series took a lot of work, so if you want to support me, why not subscribe to my premium newsletter? Get $10 off a year’s subscription today: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/p94my1c5ya YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/ Discord: chat.wheresyoured.at https://discord.com/invite/QUUQUP9szv Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [email protected] mailto:[email protected] See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This is an iHeart Podcast. Guaranteed Human. OnDeck is built to back small businesses like yours. Whether you're buying equipment, expanding your team, or bridging cash flow gaps, OnDeck's loans up to $400,000 help make it happen fast. Rated A+ by the Better Business Bureau and earning thousands of five-star TrustPilot reviews, OnDeck delivers funding you can count on. Apply in minutes at ondeck.com. Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank. OnDeck does not lend in North Dakota. All loans and amounts subject to lender approval.

• 0:33Speaker 01

  My name is Jessa. One of the things I love the most about working for UnitedHealthcare is that everybody matters. Every moment matters. There's a person behind every problem. I care because it's what I was put on this earth to do.

• 0:49Speaker 02

  I'm Ben, and I work at UnitedHealthcare. I am just one piece of a larger puzzle, but every piece matters. It's more than just work. We want to make the healthcare system better for everyone. I care because I want to make a difference. That's what committed to care means to me.

• 1:04Speaker 03

  Empower is all about helping you invest well so you can go out and live a little. And their Free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals, and more. Whether you're saving for something big, want to treat yourself, friends, or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money, and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

• 1:35Speaker 04

  Running a small business takes everything you've got. But with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million customers. With a deep understanding of your day-to-day needs, they provide products and guidance built to help you thrive. Right now, earn $500 when you open a new Chase Business Complete Checking account for new business checking customers with qualifying activities. Offer expires January 21, 2027. Chase Business Complete Checking has the flexible tools you need to accept payments. Make deposits and manage your finances with confidence. Learn more at chase.com/podcastbizoffer. Chase, make more of what's yours.

• 2:20Speaker 04

  Fees may apply to Chase Business Complete Checking Accounts. The $500 offer is available for new business checking accounts with qualifying activities through January 21st, 2027. Eligibility and qualification requirements must be met. Additional restrictions may apply. Please speak with a business banker for more information. JP Morgan Chase Bank, N.A., Member FDIC.

• 2:47Ed Zitron?

  Hello and welcome to Better Offline. I'm Ed Zitron and I'm nothing like Enron.

• 3:03Ed Zitron?

  Now, this is the second episode in the Nvidia-Enron series and to give you a recap, a few weeks ago, a document from Nvidia leaked where the company denied that it was anything like Enron at all. But what was Enron? Now, some of you might know this, some of you might not, but I think it's time to remind everyone what Enron was and what Enron did and why Enron was so... I don't know if we should say special, but it sure was Enron. Now, the collapse of Enron wasn't just, in retrospect, a large business that ultimately failed. If that's all it was, it wouldn't command the same space in our heads as other failures like WorldCom or Nortel, which I'll actually get to later. I talked about WorldCom last episode, both of whom were similarly considered giants in their fields, by the way.

• 3:47Ed Zitron?

  It's also not just about the fact that Enron failed because of proven business and accounting fraud. WorldCom entered bankruptcy due to similar circumstances, though, rather than being liquidated. And this is kind of a mindfuck, so forgive me. It was acquired as part of Verizon's acquisition of MCI, the name of a company that had previously merged with WorldCom that WorldCom renamed itself to after bankruptcy. This era sucked. And unlike Enron, WorldCom isn't the subject of multiple films and even a Broadway production. And my editor saw the UK tour of that and apparently it was pretty good. You ask Matt Hughes if you want to know more. And it's also not the size of Enron that made its downfall so intriguing. Nor for that matter is it the fact that Enron did a lot of legally and ethically dubious stuff to bring about its downfall.

• 4:31Ed Zitron?

  No, what makes Enron special is the sheer gravity of its fuckery. The rotten culture at the heart of the company that encouraged said malfeasance and the creative ways Enron's leaders crafted an image of success around what was, at its heart, a big fat dog of a company. Enron was born in 1985 out on the foundations of two older, much less interesting businesses. The first, Houston Natural Gas, HNG, started life as a utility provider, pumping natural gas from the oil fields of Texas to customers throughout the region, before later exiting the industry to focus on other opportunities. The other, InterNorth, was based in Omaha, Nebraska and was in the same business: pipelines. In the mid-1980s, HNG was the subject of a hostile takeover from Coastal Corporation,

• 5:15Ed Zitron?

  which until 2001 operated a chain of refineries and gas stations throughout much of the US mainland. Unable to fend it off by itself, HNG merged with InterNorth, with the combined corporation renamed Enron. The CEO of this new entity was called Ken Lay, an economist by trade who spent most of his career in the energy sector, who also enjoyed deep political connections with the Bush family. He co-chaired George H.W. Bush's failed 1992 reelection campaign and allowed Enron's corporate jet to ferry Bush Sr. and Barbara Bush back and forth to Washington. Center for Public Integrity Director Charles Lewis said that there was, and I quote, "No company in America closer to George W. Bush than Enron." George W.

• 5:57Ed Zitron?

  Bush, and I mean the second one, even had a nickname for Lay: Kenny Boy. Anyway, in 1987, Enron hired McKinsey, the world's most evil management consultancy firm, to help the company create a futures market for natural gas. Well, that means isn't particularly important to the story, but essentially a futures contract is where a company agrees to buy or sell an asset in the future at a fixed price. It's a way of hedging against risk, whether that be from something like price or currency fluctuations, or from default. If you're buying oil in dollars, for example, buying a futures contract for oil to be delivered in six months' time at a predetermined price means that if your currency weakens against the dollar, your costs won't spiral. That bit isn't terribly important. What does matter is while working with McKinsey,

• 6:39Ed Zitron?

  Lay met someone named Jeff Skilling, a young engineer turned consultant who impressed the company's CEO deeply, so much so that Lay decided to poach him from McKinsey in 1990 and give him the role of chairman and CEO of Enron Finance Group. Oh, by the way, Enron had a bunch of subsidiaries and some had their own CEOs and boards. I mention this because you may be a bit confused as Lay was CEO of Enron and Skilling was CEO of Enron Finance Group. In essence, it's a bit like how Sam Altman is CEO of OpenAI and Fidji Simo is the CEO of Applications. That bit isn't important, but I just want to be as explicit as possible. I don't think OpenAI is Enron either, at least I hope. Anyway, Skilling continued to impress Lay, who gave him greater and greater responsibility,

• 7:22Ed Zitron?

  eventually crowning him chief operating officer of Enron itself. With Skilling in a key leadership position, he was able to shape the organisation's culture. He appreciated those who took risks, even if those risks, when viewed with impartial eyes, were deemed reckless or even criminal. He introduced the practice of stack ranking, also known as Rankin-Yang, to Enron, which had previously been pioneered by Jack Welch at General Electric, and you should listen to the shareholder supremacy from last year if you want to hear what I think about that redacted guy. Here, employees were graded on a scale and those at the bottom of the scale were terminated. Managers had to place at least 10%, other reports say closer to 15% of employees in the lowest bracket, which created an almost

• 8:02Ed Zitron?

  Darwinian culture and a drive to succeed that matched it. Staffers worked brutal hours, they cut corners, they did some really, really dodgy shit. None of this bothered Skilling in the slightest. Now, you might be asking, how dodgy, Ed? Well, in 2000 and 2001, California suffered a series of electricity blackouts. This shouldn't have happened. California's total energy demand at the time was 28 gigawatts and its production capacity was 45 gigawatts. California also shares the transmission grid with other states and, for what it's worth, the Canadian provinces of Alberta in British Columbia, as well as part of Barja, California in Mexico, meaning that in the event of a shortage, it could simply draw capacity from elsewhere. There's plenty to go around. So how did that happen?

• 8:44Ed Zitron?

  Well, remember, Enron traded electricity like a commodity and as a result, it was incentivised to get the highest possible price for that commodity. So it took power plants offline during peak hours and exported power to other states where there was real domestic demand. But how does a company like Enron shut down a power station? Simple, it just asked. In one taped phone conversation released after the company's collapse, an Enron employee called Bill called an official at a Las Vegas Power Company, California shares the same grid with Nevada, and asked him to, and I quote, "Get a little creative and come up with a reason to go down." "Anything you want to do over there? Any cleaning? Anything like that?" Very cool. The power crisis had dramatic consequences for the people of California

• 9:28Ed Zitron?

  who faced power outages and price hikes, for Governor Gray Davis, who was recalled by voters and later replaced by Arnold Schwarzenegger, for PG&E, which entered Chapter 11 bankruptcy that year, and for Southern California Edison, which was pushed to the brink of bankruptcy as a result. This kind of stuff could only happen in an organisation whose culture actively rewarded being a fucking asshole. In fact, Skilling was seemingly determined to elevate the dodgiest of characters to the highest positions within the company, and few were more ethically dubious than Andy Faustow, who Skilling mentored like a protege and who would later become Enron's chief financial officer. And you've got to wonder, how did the CFO hired by Jeff Skilling do? Well, even before vaulting to the top of Enron's nasty little empire,

• 10:13Ed Zitron?

  Faustow was able to shape its accounting practices, with the company adopting mark-to-market accounting practices in 1991. Now, mark-to-market sounds complicated, but it's actually real simple. When listing assets on a balance sheet, you don't use the acquisition cost, like how you paid for it, but rather the fair market value of an asset. So if I buy a baseball card for a dollar and I see that it's currently selling for 10 bucks on eBay, I'd say that asset is worth 10 bucks, not the dollar I paid for it, even though I haven't actually sold it yet, nor do I know if anyone's interested. Now, this sounds simple, maybe even reasonable, but the problem is that the way you determine the value of an asset matters, and mark-to-market accounting allows companies and individuals to exercise some, oh, what's the word? Creativity.

• 10:57Ed Zitron?

  Sure, for publicly traded companies, where the price of a share is verifiable and open knowledge, it's not too bad, but for assets with limited liquidity, limited buyers, or where the price has to be engineered somehow, you have a lot of latitude for fraud. Now let's go back to that baseball card example. How do you know it's actually worth ten bucks and not one dollar? What is the fair value of something you can't check on eBay, but what somebody told me in person it's worth? What's to stop me from lying and saying that the card is worth a hundred dollars or a thousand dollars? Well, other than the fact that I'd be committing fraud. Now, what if I have ten one-dollar baseball cards? And I give my friend ten dollars and I tell him, "Buy one of my baseball cards using that ten-dollar bill that I just handed him."

• 11:42Ed Zitron?

  And this allows me to say that I've now realized a nine-dollar profit on one of my one-dollar baseball cards. And my other cards are now, because I just did that, worth ninety dollars and not nine dollars. Now, what if I use that valuation, that phony valuation of my remaining cards to get a fifty-dollar loan, using those cards as collateral, even though the collateral itself isn't worth even one-fifth of the value of the loan? You get the idea.

• 12:15Speaker 00

  OnDeck is built to back small businesses like yours. Whether you're buying equipment, expanding your team, or bridging cash flow gaps, OnDeck's loans up to four hundred thousand dollars help make it happen fast. Rated A+ by the Better Business Bureau and earning thousands of five-star TrustPilot reviews, OnDeck delivers funding you can count on. Apply in minutes at ondeck.com. Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank. OnDeck does not lend in North Dakota. All loans and amounts subject to lender approval.

• 12:44Ed Zitron?

  All right, everyone, I'm back talking about Quince, one of my favorite clothing brands. And as we speak, I'm currently wearing one of their excellent cotton knit overshirts. I wear like a jacket, nice pre-fall piece to wear as things cool off a bit. I've also been eyeballing one of their heritage water-resistant Harrington jackets, too, for later in the year, to pair with their Mongolian cashmere sweaters I bought. And I have several of them, and I really can't recommend Quince's stuff enough. I love Quince because they focus on high-quality wardrobe staples made with premium materials, jackets, pants, fitted tees and polos, activewear and even travel gear. Everything at Quince is priced 50 to 80% less than similar brands and because they work directly with ethical factories and cut out the middlemen, you're getting more for less. Find the four pieces you'll reach for most at Quince.

• 13:27Ed Zitron?

  Download the Quince app for app-exclusive offers or go to quince.com. Get free shipping on your order and 365-day returns. Now available in Canada and the UK too. And when Quince asks where you heard about them, let them know it was on Better Offline. It's the best way to support the show.

• 13:44Speaker 03

  Empower is all about helping you invest well so you can go out and live a little. And their Free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals and more. Whether you're saving for something big, want to treat yourself, friends or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

• 14:15Speaker 06

  Hi, I'm Jenna Oshkowitz. You might know me from Glee. This is At the Table, the food allergy podcast, a show about food, connection and what it really looks like to live with food allergies. Each episode, we hear stories from real people like Daniel.

• 14:30Speaker 07

  People would always think I was lactose intolerant, so I just kind of shortened my explanation to I'm deathly allergic. In a big way that defined a lot of my childhood.

• 14:41Speaker 06

  And while there are challenges, there are moments that remind you you're not alone.

• 14:46Speaker 08

  One of the best guys that I dated, he made a point to memorize all my food allergies.

• 14:53Speaker 06

  So join us and hear their stories and more. Because living with food allergies isn't just about what you can't eat, it's about still having your seat at the table. Brought to you by Genentech and Novartis. Listen to At the Table, the food allergy podcast on America's number one podcast network, iHeart. Follow At the Table and start listening on the free iHeartRadio app today.

• 15:18Ed Zitron?

  While a lot of things people can do to alter the mark-to-market value of an asset are illegal and would be covered under generic fraud laws, it doesn't change the fact that mark-to-market accounting allows for some shenanigans to take place. Another trait of mark-to-market accounting, as employed by Enron, is that it would count all the long-term potential revenue from a deal as quarterly revenue, even if that revenue would be delivered over the course of a decades-long contract, or if the contract would be terminated before its intended expiration date. It would also realize potential revenue as actual revenue, even before money changed hands and when the conclusion of the deal wasn't a certainty. For example, in 1999, Enron sold a stake in four different electricity-generating barges

• 15:59Ed Zitron?

  in Nigeria— they're basically floating power stations—and sold it to Merrill Lynch, which allowed the company to register $12 million in profit. One little problem: that sale didn't actually happen, though that didn't stop Enron from selling pieces to Merrill Lynch—which, I'm not kidding—Merrill Lynch then sold to a special purpose vehicle called LJ M2. You'll never guess who owned that, that was controlled by Andrew Fastow. Yep, remember that guy? You're gonna hear that name again. Although the Merrill Lynch bankers who participated in the deal were eventually convicted of fraud and conspiracy charges, long after the collapse of Enron, of course, their convictions were later quashed on appeal. Thank you, government! But still, for a moment, it gave a jolt to Enron's quarterly earnings.

• 16:43Ed Zitron?

  Anyway, Enron was incredibly creative when it came to how it valued assets. Take, for example, fiber optic cables. As the dot-com bubble swelled, Enron saw an opportunity and wanted to be able to trade and control the supply of bandwidth, just like it did with other more conventional commodities like oil and gas. It built, bought, and leased fiber optic cables throughout the country, and then, using exaggerated estimates of their value and potential long-term revenue, released glowing financial reports that made the company look a lot more healthy and successful than it actually was or ever would be. Quick digression here: one of the funniest ironies of Enron is that it was, in many ways, ahead of its time. When most people were still connecting to the internet through screeching 56K dial-up modems, it saw a future in edge and cloud computing—even if said terms didn't exist

• 17:28Ed Zitron?

  at the time—and streaming video. Here's a funny one: in 2000, it entered into a 20-year deal with Blockbuster Video to allow customers to stream films and TV shows through Enron's fiber network, something that would take Netflix another decade to realize as a product. Now, there wasn't really much of a market for it at the time, because broadband was pretty rare back then, nor was it necessarily technologically possible, but it was such a fun idea, people really liked it, it was a good idea, everyone wanted it to happen, not really though, anyway, the deal collapsed after a year, but that didn't stop Enron's creative accountants from booking the deal, based on its projected future revenue, as a profitable venture. Mark-to-market accounting, baby, you gotta love it, we love it, don't we, folks? Alright, I'll stop doing the impression.

• 18:11Ed Zitron?

  Still, it's hilarious to think about a future world in which Blockbuster and Enron stuck it out, and the former didn't collapse around the time of the global financial crisis. Enron also loved making special-purpose vehicles that existed either to generate revenue that didn't exist, or to hold toxic assets that would otherwise need to be disclosed with Enron, then using its holdings in said entities to boost its balance sheet. One, Whitewing, was created and capitalized by Enron and an outside investor, and pretty much exclusively bought assets from Enron, which allowed the company to recognize sales and profits on its balance sheets, even when they were fundamentally contrived. Another set of entities, known as LJM, named after the first initial of Andy Fastow's wife and two children, which I mentioned earlier, did the same thing, allowing the company

• 18:54Ed Zitron?

  to hide risky or failing investments, to limit its perceived debt, and to generate artificial profits and revenues. LJM 2 was creatively the second version of this idea. Even though the assets that LJM held were ultimately dogshit, the distance that LJM provided, combined with Enron's use of mark-to-market accounting, allowed the company to turn a multi-billion collective failure into a resounding and on paper profitable triumph. So how did this happen? How did it go on for so long? Well, first, Enron was at its peak, worth $70 billion. Its fail would be a failure for its investors and shareholders, and nobody, besides the press, that is, wanted to ask tough questions. Remember when they did that? Anyway, it had auditors, but they were paid handsomely, turning a blind eye to the criminal

• 19:38Ed Zitron?

  malfeasance of the heart of Enron. Auditor Arthur Andersen surrendered its license in 2002, bringing an end to the company, and resulting in 85,000 employees losing their jobs.

• 19:50Ed Zitron?

  Well, look. It's not so much it only turned a blind eye as much as it turned on a big paper shredder. Shredding tons, and I'm actually being literal, that's a measure of weight and not figuratively, of documents as Enron started to implode, a crime for which it was later convicted of obstruction of justice. But I've already talked about Enron's culture, but I'd be remiss if I didn't mention that Enron's highest performers and its leadership received hefty bonuses in company equity, motivating them to keep the charade going. Enron's pension scheme I had was basically entirely Enron stock, and employees were regularly encouraged to buy more, with Kenneth Lay telling employees weeks before the company's

• 20:30Ed Zitron?

  collapse that, and I quote, "The company is fundamentally sound and that they should hang on to their stock." Nvidia did use the word fundamentally, they use that, but it's not, Nvidia's not Enron, it's not, it's really different, they're not doing this, I swear to God, I just don't love the language. Anyway, additionally, per the terms of the Enron pension plan, employees were prevented from shifting their holdings into other pension funds or other investments until they turned 50. When the company collapsed, those people lost everything, even those who didn't know about Enron's criminality. George Maddox, a retired former Enron employee, had his entire retirement tied up in 14,000 Enron shares worth at the time more than 1.3 million dollars.

• 21:13Ed Zitron?

  He was forced to spend his golden years making ends meet by mowing pastures and living in a rundown East Texas farmhouse. The US government brought criminal charges against Enron's top leadership. Ken Lay was convicted of four counts of fraud and making false statements, but died on a skiing vacation to Aspen before sentencing. May he burn in hell? Maybe Ronald Reagan and him could get in the hot tub together, the hot tub's got lava in him, not feeling particularly creative on that one. Anyway, Jeff Skilling was convicted of 24 counts of fraud and conspiracy and sentenced to 24 years in jail. This was, of course, reduced in 2013 on appeal to 14 years, and he was released to a halfway house in 2018 and then freed in 2019. He's since then tried to re-enter the energy sector with one venture combining energy

• 21:57Ed Zitron?

  trading and, I kid you not, blockchain technology, although nothing really came of him. I want to take this moment to give a big shout out to Quartz, which when covering Skilling's attempted comeback, had this opening line, and I quote, "Jeffrey Skilling knows of a thing or two about blocks and chains." Woo, get his ass! Andy Fastow pled guilty to two counts, one of manipulation of financial statements and one of self-dealing, and received 10 years in prison. This was, as ever, later reduced to six years, including two years of probation, in part because he cooperated with the investigations against other Enron executives. He's now a public speaker and a tech investor in a company, an AI company, called Keen Corp.

• 22:39Ed Zitron?

  His wife, Leah, who also worked at Enron, received 12 months for conspiracy to commit wire fraud and money laundering and for submitting false tax returns. She was released from custody in 2005. Enron's implosion was entirely self-inflicted and horrifyingly painfully criminal, yet it had plenty of collateral damage: to the US economy, to those companies that lend it money, to its employees who lost their jobs and their life savings and their retirements, and to those employees that the company's most entangled with Enron, like those at auditing firm Arthur Andersen. This isn't unique among corporate failures. WorldCom had some dodgy accounting practices, Nortel too. Both companies failed, both companies wrecked the lives of their employees, and these failures had systemic economic consequences, especially in Canada, where Nortel, at its peak, accounted

• 23:22Ed Zitron?

  for one-third of the market cap of all companies on the Toronto Stock Exchange. The reason why Enron remains captured in our imagination and why Nvidia is so vociferously opposed to being compared to it is the extent to which Enron manipulated reality to appear stronger and more successful than it was, and how long it was able to get away with it. What we may have forgotten the memory of Enron, it happened over two decades ago after all, we haven't forgotten the instincts that it gave us. It's why our noses twitch when we see special-purpose vehicles being used to buy GPUs, and why we gag when we see mark-to-market accounting. It's entirely possible, I genuinely believe this, that everything Nvidia is doing is above board. Really, it's great.

• 24:03Ed Zitron?

  Doesn't do anything to help the deep pit of dread in my stomach, though.

• 24:17Speaker 09

  OnDeck is built to back small businesses like yours. Whether you're buying equipment, expanding your team, or bridging cash flow gaps, OnDeck's loans up to $400,000 make it happen fast. Rated A+ by the Better Business Bureau and earning thousands of five-star TrustPilot reviews, OnDeck delivers funding you can count on. Apply in minutes at ondeck.com. Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank. OnDeck does not lend in North Dakota. All loans and amounts subject to lender approval.

• 24:45Ed Zitron?

  All right, everyone, I'm back talking about Quince, one of my favorite clothing brands. And as we speak, I'm currently wearing one of their excellent cotton knit overshirts that wear like a jacket. Nice prefall piece to wear as things cool off a bit. I've also been eyeballing one of their heritage water-resistant Harrington jackets, too, for later in the year to pair with their Mongolian cashmere sweaters I bought. And I have several of them, and I really can't recommend Quince's stuff enough. I love Quince because they focus on high-quality wardrobe staples made with premium materials, jackets, pants, fitted tees and polos, activewear, and even travel gear. Everything at Quince is priced 50 to 80% less than similar brands, and because they work directly with ethical factories and cut out the middlemen, you're getting more for less. Find the fall pieces you'll reach for most at Quince.

• 25:28Ed Zitron?

  Download the Quince app for app-exclusive offers or go to quince.com. Get free shipping on your order and 365-day returns. Now available in Canada and the UK, too. And when Quince asks where you heard about them, let them know it was on Better Offline. It's the best way to support the show.

• 25:45Speaker 03

  Empower is all about helping you invest well so you can go out and live a little. And their Free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals, and more. Whether you're saving for something big, want to treat yourself, friends, or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money, and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

• 26:17Speaker 06

  Hi, I'm Jenna Oshkowitz. You might know me from Glee. This is At the Table, the food allergy podcast, a show about food, connection, and what it really looks like to live with food allergies. Each episode, we hear stories from real people like Daniel.

• 26:31Speaker 07

  People would always think I was lactose intolerant, so I just kind of shortened my explanation to I'm deathly allergic in a big way that defined a lot of my childhood.

• 26:42Speaker 06

  And while there are challenges, there are moments that remind you you're not alone.

• 26:47Speaker 08

  One of the best guys that I dated, he made a point to memorize all my food allergies.

• 26:53Speaker 06

  So join us and hear their stories and more, because living with food allergies isn't just about what you can't eat. It's about still having your seat at the table. Brought to you by Genentech and Novartis. Listen to At the Table, the food allergy podcast, on America's number one podcast network, iHeart. Follow At the Table and start listening on the free iHeart Radio app today.

• 27:18Ed Zitron?

  Now, let's remind ourselves of what Nvidia is. It's a company that previously focused on gaming-oriented GPUs, graphics processing units, but thanks to a stroke of forethought, managed to be the company that sells the shovels for the current AI bubble. Its data center GPUs are expensive. They all rely on a technology that Nvidia created two decades ago called CUDA, which no other competitor has an alternative to, or at least one with the maturity and depth and functionality. And no other company shares its focus on this arena, at least not one with its history. These GPUs are expensive, and thanks to Nvidia's near-monopoly status, it's seen its share price grow by over 1,350% at the time of writing in the past five years. It's now the most valuable company in the world by market capitalization,

• 28:01Ed Zitron?

  and it's insanely, insanely profitable. If you're looking at this through the cold, unthinking lens of late-stage capitalism, this all sounds really good. I've basically described a company that has an essential monopoly in the one thing required for a high-growth, if we're talking exclusively about capex spending, industry to ever exist. Moreover, that monopoly is all but assured thanks to Nvidia's CUDA mote, its first mover advantage, and its actual capacities and capabilities. That the products itself on top of the massive shipping and hardware operation at bill, thereby allowing the company to charge a pretty penny to its customers. And those customers, well, if we've temporarily forget about the likes of Nebius and Core Wave, and how I wish I could forget about Core Wave permanently,

• 28:42Ed Zitron?

  we're talking about the biggest companies on the planet, ones that surely will have no problems paying their bills. But my worry is a little simpler and more direct, because I'm worried about the certainty that these purchases are being made for the right or most prudent of reasons. Back in February 2023, I put out the rot economy and how everything in tech has become oriented around growth at all cost, even if it meant making products harder to use as a means of increasing user engagement or funneling them towards more profitable parts of an app. Back in June 2024, I wrote and did an episode about the rot con bubble and my greater theory that the tech industry has run out of hypergrowth ideas. In simple terms, big tech, Amazon, Google, Microsoft and Meta,

• 29:27Ed Zitron?

  but also a number of other companies, no longer have a next big thing and jumped on AI out of an abundance of desperation. Shit, look at Oracle. This company started off by selling databases and ERP systems to big companies and then trapping said companies by making it really, really difficult to migrate to cheaper and better solutions and then bleeding said companies with onerous licensing terms, including some where you're paid by the number of CPU cores that you use in the application. Fucking Oracle. It doesn't do anything new or exciting or impressive, even when presented with the opportunity to do things that are useful or innovative, like when it bought some microsystems, it turns away. I imagine that deep down Oracle recognizes that its current model just isn't viable long term and so it needed something else.

• 30:10Ed Zitron?

  When you haven't thought about innovation ever, it's kind of hard to start and thus generative AI probably seemed like a godsend to Larry Ellison, who founded Oracle and despite not being CEO, still creeps around the building like the wrench.

• 30:26Ed Zitron?

  I'll get to Oracle in a bit, but we also live in an era where nobody knows what big tech CEOs actually do, other than make nearly a hundred million dollars a year. Meaning that somebody like Sachin Adella can get called a thoughtful leader with striking humility for pushing Copilot AI up every asshole in Microsoft's product experience, even Notepad, a place that no human being would want it, and accelerating capital expenditures in twenty eight billion dollars across the entirety of fiscal year twenty twenty three to thirty four point nine billion dollars in its last quarter. In simpler terms, spending money makes a CEO look busy, and at a time when there were no other potential growth avenues left, AI was a convenient way to make everybody look busy.

• 31:08Ed Zitron?

  Every department can have an AI strategy, and every useless fucking manager and executive can yell, as ServiceNow CEO Bill McDermott did back in twenty twenty two, "Let me make it clear to everybody here, everything you do, AI, AI, AI, AI." AI, that's a real goddamn quote. I should also add that ChatGPT was the first real meaningful hit that the American tech industry has produced in a long, long time. The last being, if I'm honest, Uber, and that's if we allow successful yet not particularly good businesses into the pile. I guess you could say Instagram Stories, but that was ripped off from TikTok. No, sorry, Snapchat. Christ, they, they nicked reels from TikTok. I hate this fucking industry.

• 31:49Ed Zitron?

  Now, look, if we're assholes about it and we insist on things like profitability and sustainability, ugh, US tech hasn't done so great. Snowflake runs at a loss, Snap runs at a loss, and while Uber has turned things around somewhat, it hardly created the next cloud computing or smartphone industry. Putting aside finances, the last major hit was probably Vemo or Zelle, and maybe if I'm feeling generous, smart speakers like Amazon Echo or Apple HomePod, but those, I think, I think Echo and Alexa has lost Amazon billions. Much like Uber, none of these were the next big thing, which would be fine, except big tech needs more growth forever, right now, you pig. To be clear, I'm not saying there's been no innovation, just nothing at the scale of smartphones and cloud computing.

• 32:33Ed Zitron?

  This is why Google, Amazon and Meta all do 20 different things, although rarely for any length of time, with these things often having a shelf life shorter than strawberries left on your counter, because the rot economies growth at all costs mindset exists only to please the markets and the markets demand growth. ChatGPT was different. Not only did it do something new, it also did it in a way that was relatively easy to get people to try and see the potential of. It was also really easy to convince people that it would become something bigger and better, because that's what tech does. To quote Bender and Hannah, "AI is a marketing term, a squishy way of evoking futuristic visions of autonomous computers that could do anything and everything for us." And because both customers and analysts have been primed to believe and trust the tech

• 33:15Ed Zitron?

  industry, everybody believed that whatever ChatGPT was would be the next big thing. And said next big thing was powered by large language models which require GPUs sold by one goddamn company, Nvidia. AI became a very useful thing to do. If a company wanted to seem futuristic and attract investors, it could now integrate AI. If a hyperscaler wanted to seem enterprising and like it was building the future, it could buy a bunch of GPUs or invest in its own silicon, as Google, Microsoft, Amazon and Meta have done, though Meta to only some extent, and of course shove AI in every imaginable crevice of an app. Investors could invest in AI companies, retail investors, regular people, could invest in AI stocks, tech reporters could write about something new and do access journalism even

• 33:59Ed Zitron?

  harder, LinkedIn perverts could write long screeds about AI, the markets could become obsessed with AI, and yeah, you can kind of see how things got out of control. Everybody now had something to do, an excuse to do an AI thing, regardless of whether it made sense, because everybody else was doing it. You didn't need to justify it anymore, everybody was doing AI. ChatGPT quickly became one of the most popular websites on the internet, all while OpenAI burned billions of dollars. And because the media effectively published every single thought that Sam Altman had, such as that GPT-4 would automate away some jobs and create others, and that he was a little bit scared of it. AI as a technology and an idea, and a symbolic stock trope and a marketing tool and a myth,

• 34:41Ed Zitron?

  became so powerful that it could do anything, replace anyone, be worth anything, even the future of your company. Amongst the hype, there was an assumption related to scaling laws, summarized well by Charlie Meyer, who was on the podcast a few months ago. You should go listen to his episode. In 2020, one of the most important papers in the development of AI was published, Scaling Laws for Neural Language Models, which came from a group at OpenAI. The paper showed, with just a few charts, incredibly compelling evidence that increasing the size of large language models would increase their performance. This paper was a large driver in the creation of GPT-3 and today's LLM revolution, and caused the movements of trillions of dollars in the stock market. In simple terms, the paper suggested that shoving more training data and using more compute power would exponentially increase the ability of a model to do stuff.

• 35:26Ed Zitron?

  And to make a model that did more stuff, you needed more GPUs and more data centers. Did it matter that there was compelling evidence in 2022? And gotta say, Gary Marcus was right, that there were limits to scaling laws and that they would hit the point of diminishing returns? Nah. Amidst all of this, Nvidia has sold over $200 billion of GPUs since the beginning of 2023, becoming the largest company on the stock market and trading at over $170 as of writing this sentence, only a few years after being worth less than $20 a share. You see, Meta, Google, Amazon, Microsoft, all wanted to be part of the future, so they sunk a lot of money into Nvidia, making up 42% of its revenue in fiscal year 2025. Though there are some arguments about how much exactly

• 36:09Ed Zitron?

  big tech's billowing capital expenditures are spent on GPUs, some estimate somewhere between 41% to more than 50% of a data center's capex is spent on GPUs. If you're wondering what the payoff is, well, you're in good company. I estimate that there's only around $61 billion in total generative AI revenue, and that includes every hyperscaler and NeoCloud. Large language models are limited, AI agents are a pipe dream and simply do not work, AI-powered products are unreliable and coding LLMs make developers slower, and the cost of inference, the way in which a model produces its output, keeps going up. The thing is, what comes up tends to have a habit of coming down, and I'm increasingly of the opinion that a return to a terra firma is coming sooner rather than later. But that's for the next episode. Join me then.

• 37:03Ed Zitron?

  Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Osowski. You can check out more of his music and audio projects at mattosowski.com. M A T T O S O W S K I dot com. You can email me at [email protected] or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat dot where's your ed dot app to visit the Discord and go to r slash better offline to check out our Reddit. Thank you so much for listening.

• 37:35Speaker 10

  Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, visit our website, coolzonemedia.com, or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

• 38:09Speaker 03

  Empower is all about helping you invest well, so you can go out and live a little. And their free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals, and more. Whether you're saving for something big, want to treat yourself, friends, or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money, and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

• 38:40Speaker 00

  OnDeck is built to back small businesses, like yours. Whether you're buying equipment, expanding your team, or bridging cash flow gaps, OnDeck's loans up to $400,000 help make it happen fast. Rated A+ by the Better Business Bureau and earning thousands of five-star TrustPilot reviews, OnDeck delivers funding you can count on. Apply in minutes at ondeck.com. Depending on certain loan attributes, your business loan may be issued by OnDeck or Celtic Bank. OnDeck does not lend in North Dakota. All loans and amounts subject to lender approval.

• 39:10Speaker 11

  She's been thinking about this sleepover all week, but I think about her food allergies all the time. Fortunately, her doctor prescribed Zolair, omalizumab. It's proven to significantly reduce allergic reactions if a food allergy accident happens.

• 39:23Speaker 12

  Zolair 150mg is a prescription medication used to treat food allergy in people one year of age and older to reduce allergic reactions due to accidental exposure to one or more foods. While taking Zolair, you should continue to avoid all foods to which you are allergic. Don't use if you are allergic to Zolair. Zolair may cause a severe, life-threatening allergic reaction called anaphylaxis. Tell your doctor if you ever had anaphylaxis. Get help right away if you have trouble breathing or if you have swelling of your throat or tongue. Zolair should not be used for the emergency treatment of allergic reactions, including anaphylaxis. Zolair is for maintenance use to reduce allergic reactions, including anaphylaxis, while avoiding food allergens. Serious side effects such as cancer, fever, muscle aches and rash, parasitic infection, or heart and circulation problems have been reported. Please see zolair.com for full prescribing information. Ask an allergist about Zolair. This is an advertisement for Zolair

• 40:07Speaker 12

  paid for by Genentech and Novartis.

• 40:09Speaker 00

  This is an iHeart Podcast. Guaranteed Human.