(Preview) Fable 5.1 and Anthropic’s Data Retention Pivot, AI Civilizations and Related Matters, Q&A on Meta, Shopify, 3-D Printing

On today’s show Ben and Andrew begin with notes on a home networking project before turning to the release of Fable 5.1, including Anthropic’s announcement that it has walked back the data retention safety initiative the company announced earlier this year. From there: Reactions to a viral post on the OpenAI-Hugging Face incident, the problem with anthropomorphizing machines, and why Ben finds this discourse unhinged and unproductive. At the end: Follow-ups to last week’s Meta discussion on the tension between libertarian and conservative impulses, Shopify is a platform and not an aggregator (and that’s great), a well-timed question about 3-D Printing, an F1 app PSA, a listener’s girlfriend hates vibe coding, and apropos of last week, a pronunciation email.

• 0:00Speaker 00

  Hello and welcome to a free preview of Sharp Tech.

• 0:09Speaker 00

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, a sincere, how you doing? What's up?

• 0:21Speaker 01

  You know, what is it when you've been in the dark?

• 0:26Speaker 00

  You made it out of the server room. I wasn't sure I'd ever see you again.

• 0:29Speaker 01

  You emerge out into the sunlight or you're in a desert. You're thirsty. You stumble upon an oasis. I spent two days, Andrew, without internet.

• 0:40Speaker 00

  Isn't an oasis fake? Is that, I don't know if an oasis is a good thing.

• 0:45Speaker 01

  No, that's a mirage.

• 0:46Speaker 00

  Oh, okay.

• 0:47Speaker 01

  There are actual oasis in the desert.

• 0:49Speaker 00

  And that's what we're providing here.

• 0:51Speaker 01

  As we will get to, as we will get to in the, in this episode, I may not know how to say words, but I do know what words mean.

• 0:57Speaker 00

  Good.

• 0:57Speaker 01

  So that's how we could be a good partner here.

• 0:59Speaker 00

  That's more important, honestly.

• 1:00Speaker 01

  Yes. But yeah, I, so when I, before I moved to this house, I had like some AV company, wired up a rack and a bunch of TV stuff and all this sort of thing. Over time, as one does, if one is a computer geek and a nerd and all these sorts of things, one wants to use the rack for actual computer things. And the problem is that these companies do these racks, assuming no homeowner is ever going to touch them. They just sort of want stuff to work.

• 1:28Speaker 00

  Rightfully so.

• 1:28Speaker 01

  So they do shortcuts, like, like you have, so the good thing is, I knew as far as remodeling the house, I wanted, I wanted ethernet jacks everywhere. And so there are like, literally like, I think like 70 or 80, like ethernet runs all over my house. Like every room has multiple, it's actually awesome because it unlocks a bunch of stuff I kind of am thinking about wanting to do in the long run. And anything runs over ethernet, whether you run video over it, you can run sound over it, like it's just a, it's a universal transport mechanism. It's kind of amazing, this technology that like dates back so long, it's still under girt, you see those pictures of data centers? Like those are all ethernet cables. Like it is one of the, it is unlike the Mount Rushmore of great tech products, the ethernet cable.

• 2:12Speaker 00

  Right next to EZ Pass, sure.

• 2:13Speaker 01

  Right. So what you actually want to do for something like this is you have a thing called a patch panel or a, you know, a patch interface where all those run into, are terminated at sort of like the front of the server. And then all your computer gear is all next to it. And then you run those short little cables, like you're like, you know, a sound engineer or like a synthesizer from the seventies, like connecting different things together. That's how it should work. And then you have flexibility and you can change stuff and you don't make a huge mess trying to pull apart all these different cables and do this sort of thing.

• 2:46Speaker 00

  Organized.

• 2:47Speaker 01

  Right. So anyhow, I've been messing around with a lot of stuff. I've been talking about it's the year of AI, like hardware is back, baby. I keep getting more things like, and my rack was a disaster.

• 2:58Speaker 00

  You sent me a picture of it last night and it gave me a panic attack, looking at what you had before this little remodeling of the server room that has been taking place.

• 3:09Speaker 01

  Right. So yes, but what it needs to be done is you have to take everything out, take all the wires out, take all the equipment out, put it back in. You have to have all these patch panels. I think I have like six patch panels. You have to then reach in, you have to identify every single wire from over the house, plug it into the right one. It is like this mammoth, mammoth job. Anyhow, we are almost there. One more day tomorrow. The audio, video side's not done. Just the, but the internet side is done. I have internet. It's back. As part of this project, I, that's not, I wrote last night using the Starlink. I pulled out the Starlink, which was, which was a part of that.

• 3:44Speaker 00

  Yeah.

• 3:45Speaker 01

  And so I did have internet, but um, in the future, I now have a secondary network in the house, such that the whole house will have internet.

• 3:51Speaker 00

  Resilience is important, as always. I mean, it is, I will just say from my standpoint, one of the funniest parts about working with you is I consider myself pretty well versed in like tech and business at this point in my life, based on the last three or four years working together. At least fluent in the structural dynamics, the trends that really matter. Hard tech and how tech actually works, I will save that for another lifetime. So I'm going back and forth with you about this project. And I asked, like, what are you actually doing? And you hit me back with pictures of all the server racks and everything else that were a complete mess and this like color coded chart that I believe is the goal and

• 4:36Speaker 00

  what you're trying to create in this server room. And the chart you sent me is completely inscrutable. You sent it to me as if it would explain everything.

• 4:45Speaker 01

  No, it is so beautiful. So unfortunately, the chart very quickly reality hits and so it does fall out of date. So like, we printed a big one out and it's like, it's hanging in the room so you could reference it. It's already like, but I do want to update it once everything is final. Cause I mean, it's actually great. I found more runs in my house. I didn't really even realize I had stuff, some of it's got moved around, but we added a bunch of new runs.

• 5:09Speaker 00

  Yeah.

• 5:10Speaker 01

  And I want, that thing is beautiful. I want to frame it and hang it in the server room.

• 5:15Speaker 00

  Beautiful and it's inscrutable. And it, look, I enjoyed the colors on the color coded chart. In any event, we could update people on your progress next week. For now, the news this week, Fable 5.1 arrived. Anthropic stressed that it is the exact same model as Mythos 5.1. So why do we start there? Why did they stress that Fable and Mythos are the same model?

• 5:39Speaker 01

  I don't know. I just thought it was kind of funny, like the very first line, they're like, no, these are really the same model. I think probably the way it was released, I'm guessing there was concern, it was like, or you know, just from a branding perspective, like I think there's a bit, well, no, I think they did get the payoff from their scaremongering that they wanted to get. They sell like Mythos as this unbelievable scary thing that's going to take over the world and oh, US government, please stop us. We did it again.

• 6:06Speaker 00

  Look, I've been sitting here for the last three months being like, well, I guess Mythos is the internal model. I wonder how powerful that is. Fable is what they're allowed to release to the public. So yes, it's probably a useful clarification from Anthropic PR.

• 6:20Speaker 01

  No, it's like marketing. It's like, no, no, no, we're giving you access to the model that's so dangerous, the world's going to end. I mean, this whole release was very funny to me for lots of reasons. But this was one of them, just first line, like we have to say, no, they're the same model. I can't believe only 11% of our customers are using it or whatever the number is, because you have access to the model that is too dangerous to release.

• 6:46Speaker 00

  Just like everybody else, you know what I mean? Well.

• 6:49Speaker 01

  No, it's not that. It's like they spun up the project glass wing, the US government shut them down. Wouldn't you like that model for your business? Imagine what the software you could do with that. It's like, no, you have the same one. You really do.

• 7:03Speaker 00

  Indeed. Well, the company said that Fable 5.1 is more skilled at carrying out lengthy, complicated computer programming tasks, such as software projects or code reviews that require it to work across all the code for an application. The new version is also better at helping with scientific work, like coming up with experiment designs, simulating what could happen during, during an experiment and reading information in dense diagrams and tables.

• 7:32Speaker 01

  By the way, you know who understood my server rack diagram?

• 7:34Speaker 00

  Who's that? Oh, Fable and Codex.

• 7:38Speaker 01

  Yes. Great. This is great. You could write it there and they'd say, oh, you have a, you have a missing connection here or there's an inconsistency there or things like that. This was so beautiful, by the way. It was very satisfying when I had like the workers here who were doing a lot, it was funny, I do, I had to hire people to help me do this. And so they were working on it, but it actually, almost every one of those cables I plugged in, in part because this was such a like fever dream. I had the mental model in my head of like how the whole thing works, different zones and all these different bits and pieces. But it was very gratifying where they would come and ask me questions and I would explain it and they'd be like, oh yeah, you have it right there on the map. Like, that's right, I do. I thought about all this, but after like the third time that happened, I'm like, okay, I'm just doing it now. And so I, there's a server room all day long. Yes.

• 8:22Speaker 01

  So we are recording at night because I'm like, sorry, Andrew, you're going to have to wait.

• 8:26Speaker 00

  Yeah. Eight hours later, here we are. I'm just glad that you're still standing after dealing with that all day long. And I'm glad that your new best friends, Codex and Fable, were fans of the chart and knew exactly what they were looking at.

• 8:41Speaker 01

  So I'll finish reading for you, Anthropic said, companies are increasingly trying, I feel bad, no one wants an entire episode about my rack redesign. Companies are increasingly trying to justify and rein in the cost of AI usage at a time when open weight, lower cost models from China are rapidly improving.

• 8:58Speaker 01

  Andrew, are you supposed to ask me how is Anthropic responding to that challenge?

• 9:01Speaker 00

  How is Anthropic responding to that challenge? Well, I am very curious because I'm aware that they charge massive margins. Lots of people have complained about the token costs over the last several months. People are getting more price sensitive and the competing models are getting more performant than they've ever been before. So what's Anthropic's plan to counter competitors?

• 9:27Speaker 01

  See, this is where I, I, um, whatever, I'm frustrated with Fable and Fable just sort of like, just says stuff.

• 9:33Speaker 00

  Mm-hmm.

• 9:33Speaker 01

  And then I'm like, where'd you get that from? Can you, can you explain that? And then it'll come back and be like, yeah, I just kind of said that. I'm not sure why. Um, here's my question to you. What's the evidence that this is a problem and they need to respond to it? From what I can see, they're, they don't have enough compute and they clearly still don't have enough compute. Their servers are down all the time. They were down a bunch like last week. They, uh, they, in, in the face of them charging these very high prices. Like there is an aspect, and this was, this was kind of something that I was thinking about in the context of Nvidia's earnings, where all these like, it's really interesting to think about the long run of Nvidia, but I kind of wrote in the, in my update, I'm like, I, I'm talking about these structural things and I'm kind of bored by it because

• 10:16Speaker 01

  on one hand, it's really interesting. Who's going to capture value in the long run in a world where supply catches up to demand? Like in that world, someone's going to get squeezed. And as long as we're not there, it's all just theory, right? Like everyone's making high margins. The, the frontier models are making high margins out of these, on their, the margin cost of serving.

• 10:43Speaker 00

  Nvidia's margins are exploding.

• 10:44Speaker 01

  Nvidia is making crazy margins. The memory guys are making huge margins. TSMC is making big margins. Everyone is making big margins. It is exciting to be in a world where supply is constrained because of these crazy earnings and all the stuff that happens.

• 10:57Speaker 00

  Mm-hmm.

• 10:57Speaker 01

  It's also kind of frustrating as an analyst because there's no forcing function to see who actually is capturing value.

• 11:06Speaker 00

  Right.

• 11:07Speaker 01

  Because there's, there's just not enough supply. So.

• 11:10Speaker 00

  So the interesting questions are abstract and not particularly relevant for the next three or four years.

• 11:16Speaker 01

  From what I can see, Anthropic, Anthropic's problem is supply. They don't have enough compute. If they had enough compute such that they could, like, right now, for Anthropic to lower, meaningfully lower their prices is, uh, you know, where Fable 5.1, they lowered the cash prices, but not the actual generation of token prices. They're still insanely expensive. And in that world, why should they take compute to serve lower prices?

• 11:48Speaker 00

  Mm-hmm.

• 11:49Speaker 01

  Especially when they're a company that is spending tons of money, they have these huge R and D budget, they need the revenue, they need the cash flow. You could make some sort of fanciful, oh, for strategic reasons, they should charge less than they can to take the market. The reality is, the, no, the market is large enough at their price level to completely saturate their supply. They need money to fund their operations going forward. Given that, the fact that people are lower down on the price curve doesn't tell us anything. This goes back to my who's afraid of Chinese models piece. If the leading edge providers had infinite capacity.

• 12:28Speaker 00

  Right.

• 12:28Speaker 01

  They would serve their models not just at the same price, but at, I would argue, a lower price than these Chinese model providers do because they almost certainly have far more efficiencies in their infrastructure. So like, like we just, this, this whole thing is imposing business questions on an environment where there just isn't the structure to answer them.

• 12:53Speaker 00

  And the story is pretty simple as far as Anthropic is concerned. Well, had you asked me, where did I come up with that concern?

• 12:59Speaker 01

  Oh, sorry.

• 13:00Speaker 00

  One area of concern. No!

• 13:02Speaker 01

  Also, also another thing that, yeah, that Fable, just, just come in, it just, it has its own thing. Yeah, whatever.

• 13:08Speaker 00

  Well, I've seen a couple different charts over the last month or so indicating that Anthropic's growth has leveled off. Do you, and leveled off in very relative terms because Anthropic's growth was completely effing insane for the last 18 months or so. Do you think that's a function of OpenAI entering the market and succeeding or some other story?

• 13:33Speaker 01

  I don't know. I mean, I, I think that unless we have an, an understanding of what their capacity issues are, like, did their growth slow down just because they don't have enough capacity to grow anymore? That's Nvidia's problem. Nvidia grew 100% last year and they forecasted this year, we're going to grow 70%. And I think that Nvidia, Jensen Huang, who's very deliberate on his earnings calls, like he, he has a theme every single time. And I think that the message here was, it's the message that I wrote back in 2020, I think it was 2023.

• 14:04Speaker 00

  Mm-hmm.

• 14:05Speaker 01

  Where I basically said, I'm covering, it's funny, I, I feel compelled to cover Nvidia earnings and I've been saying for now three years, they're actually very boring events.

• 14:14Speaker 00

  Right.

• 14:15Speaker 01

  Everyone gets so hyped up about them, but the problem is, in a world where demand exceeds supply, that means your revenue is, is based on how much supply you have.

• 14:26Speaker 00

  You are selling every single chip you can make and you.

• 14:29Speaker 01

  And so when Jensen Huang comes out and says, we're going to grow 70% next year, what he's saying is, we are going to acquire sufficient supply to deliver 70, 70% growth.

• 14:39Speaker 00

  Yeah.

• 14:39Speaker 01

  Like.

• 14:40Speaker 00

  That's why in your Nvidia coverage, I believe it was a week ago, you said their real moat is their supply chains at this point, and that is true. Um, and as far as Anthropic is concerned, I guess it is sort of a mystery. It's been interesting watching OpenAI succeed as quickly as they have with their coding efforts and, um, their sort of enterprise efforts, but I'm certainly not concerned trolling about Anthropic.

• 15:04Speaker 01

  Well, I do think this, I do think this, uh, I don't think this is on the rundown, but, um, you know, there, there is OpenAI, uh, you know, is, is going to exercise the clause in their contract to no longer serve Cursor, which I think is understandable. Like it's a direct competitor, like it's flowing through their apps, like, I, I get it. Like it's just, at the end of the day, you, you are in a competition. Anthropic comes out right away on top that says, oh, we love Cursor, we support our developers. And it's like, what is the number one answer to their capacity problem?

• 15:35Speaker 00

  What's that?

• 15:36Speaker 01

  SpaceX, giving, selling them capacity. So yeah, I don't think they're going to sell out Cursor. SpaceX is like great hope, uh, that when either side can pull the plug with a month's notice.

• 15:49Speaker 00

  Wow. I didn't catch that, but that now makes the Anthropic response that much more delightful. Uh, so the other piece of the news this week with Fable is that Anthropic is rolling back its data retention policy. CNBC, it will change a controversial data retention policy for its business customers after, quote, "a lot of feedback." And the company said it plans to implement a new solution called Enterprise Frontier Safeguards instead. What do you think of that news? Did the popular uprising succeed?

• 16:23Speaker 01

  I think so. I, I thought, I mean, as I put it on Stratechery, you know, the release is top of tech being biggest news, everyone's talking about it. You know, tech being list, like social media commentary, there's like 75, like posts from Twitter about it. And you scroll down, down, down, down, down, and there's the news of, of this on the page. And number one, clearly no one cares. Number two, there's like no X comments and like eight LinkedIn comments. Um, and I'm like, this is my world.

• 16:52Speaker 00

  Uh, yeah. You just have to accept it, you know? You're, you're a son of LinkedIn, not Twitter.

• 16:59Speaker 01

  Uh, apparently, uh, but this is by far the most interesting part of the release to me.

• 17:03Speaker 00

  Mm-hmm.

• 17:04Speaker 01

  You go back to when Fable was released and I was on it like a, immediately, like the first day I wrote about it, I wrote another article about it the next week. This is nuts.

• 17:15Speaker 00

  Right.

• 17:15Speaker 01

  The idea that, the, the concept that they are not going to any longer honor zero data retention policies is insane. And, and it's not just insane in the context of AI, it's insane in the entire history of enterprise computing.

• 17:31Speaker 00

  Mm-hmm.

• 17:32Speaker 01

  The foundational divide between consumer and enterprise is enterprises are obsessed with owning their data and they would never, ever in a million years tolerate their vendors taking their data for themselves.

• 17:47Speaker 00

  Right.

• 17:48Speaker 01

  Never, would never, ever happen. Consumers?

• 17:52Speaker 01

  Consumers don't care. And that's why you get ads and you get free apps. It's the, and this is why it's so hard for consumer companies to serve the enterprise. And vice versa, to be honest, but particularly consumer going to enterprise. Like, you know, when I was talking about Dropbox in the context of a company that wanted to be a consumer company, but had to become an enterprise company. Part of that effort was building these, this entire infrastructure to manage access to data and,

• 18:22Speaker 00

  Right.

• 18:23Speaker 01

  You know,

• 18:23Speaker 00

  To store proprietary data safely.

• 18:26Speaker 01

  Yeah. Yeah. And it's like the core of enterprise software is, is who gets to, who gets access to what data? And the idea that Anthropic was going to just unilaterally change that was incredible. And like we talked about,

• 18:42Speaker 00

  Under the auspices of safety, because that was the justification for it a couple of months ago.

• 18:46Speaker 01

  That's right. And what happens under the auspices of safety? It's a, you start rolling down that slope and we need to hold this data in case an incident happens. We need to scan it for abnormalities. Oh, do you know how we stopped this? If we trained on this data, we could better understand what's going on. Suddenly they have access to the greatest asset in the world?

• 19:08Speaker 00

  The greatest asset that these companies have, certainly. Well, that's part of what made it so remarkable is you're stepping back. Like Anthropic is potentially coming for any number of these businesses and these industries.

• 19:20Speaker 01

  Absolutely.

• 19:21Speaker 00

  The idea that you're handing over your data.

• 19:24Speaker 01

  It was insane. It was, like, I could, like, so people, you know, I referenced it before, no one's buying Fable, partly because it's expensive, partly because these data policies are anathema. Athema? Anathema?

• 19:39Speaker 00

  You nailed it.

• 19:41Speaker 01

  This rundown has me nervous. I saw the question at the end. Anathema to any enterprise. And so even, doesn't matter, it was so fascinating because Anthropic was like laying down the gauntlet. We're going to make a model that's so good. Not only are, is the US government going to come shut us down, but you're going to,

• 20:03Speaker 00

  You can't afford not to use it. Right.

• 20:06Speaker 01

  Not having zero data retention because you need to have this model. And it failed. Here's the thing. If you want to say that, oh no, Anthropic always was going to build this new system, which is basically store your data wherever you want it. You just have to hold it for at least 30 years. And I think they, you have to give Anthropic some sort of automated access to search for, whatever it is. Even that is probably a bridge too far, but at least the data is like on your servers, not on Anthropic's where, oh, we changed our policy again. Now we're training on it. Like, that's at least not possible. Not only is that going to happen and you get, but number two, it's not launching for a few months.

• 20:50Speaker 01

  Which means this wasn't something they were working on. It just wasn't ready at Fable. And, and until the time it is available, Fable now operates with zero data retention. They, so what happened to the safety concerns?

• 21:05Speaker 00

  The issue, yeah. There was no imminent concern justifying all this.

• 21:09Speaker 01

  They absolutely made a play for all of enterprise data. And the fact that, I called at the time, this, they cloak everything in safety. They believe it internally with this insane understanding of AI, which we're going to get to in a little bit. And, and it is so perfectly serves their business needs. The audacity of coming for all of enterprise's data so that you can make your model better, take over their business, inspire Satya Nadella to have a blogging career. Have Alex Karp have this unhinged rant on CNBC, which was quite delightful. This was all triggered by,

• 21:48Speaker 00

  I couldn't sit through all 10 minutes of the Alex Karp rant, but I heard good things. It is what it is.

• 21:53Speaker 01

  The fact that they will make it zero data retention until this new program is available is the tell. This was not about safety. If it was about safety, you would not do it. You would just, you would say, we're going to continue with our policy until this is available. But no, the policy's gone.

• 22:08Speaker 00

  Right. Well, do you think that OpenAI's entry into the enterprise space as, as aggressively as they've been moving that direction over the last couple of months? Do you think that makes it easier for companies to say, look, we're just not going to use Anthropic if that's the policy?

• 22:25Speaker 01

  Absolutely. Absolutely. That's why competition is amazing. And by the way, why is Anthropic doing this? Because they need to IPO, because they need to make money. That's why the price is the way they do. This goes back to one of my longest standing takes about tech in general. And one of my longest standing criticisms of these AI companies, particularly OpenAI.

• 22:45Speaker 00

  Yeah.

• 22:46Speaker 01

  The best route to alignment from a societal perspective is the for-profit enterprise. The for-profit enterprise, you understand why they do things. You understand they have fundamental constraints on their behavior.

• 22:58Speaker 00

  The market is a check.

• 23:00Speaker 01

  The market is a check. And it is the only check that scales to the size and power of these companies. Even Facebook, where Mark Zuckerberg has total control, has to occasionally pull it back. And say, okay, we're not going to go that far. We're going to step back. We're going to like, and the fact that the idea that we're going to start a nonprofit for this, that is what concerns me. Not having a check. The check should not be the good intentions of the people in charge. Though that always ends badly. The, the check has to be external. And it's the external check. The only one that works is the market.

• 23:45Speaker 01

  God bless cop capitalism. God bless free enterprise. God bless Anthropic's IPO. This is evidence. Yeah, the IPO is definitely coming because they, they need enterprise contracts.

• 23:55Speaker 00

  And stepping back and watching the way this has played out over the last couple of months. I don't think it plays out the same way if OpenAI isn't going hard after the enterprise space. And also, they too were checked by the market and forced to go that direction and find a bunch of revenue in enterprise that they weren't finding elsewhere as they did 10 different things.

• 24:17Speaker 01

  We're not doing Sora or whatever it might be. Yeah. No, absolutely.

• 24:21Speaker 00

  The market pushed OpenAI in the right direction as well. All right. Another topic of conversation this week. Over the weekend, Dwar Kesha Patel published a post on the OpenAI hugging face hacking incident. All right. And that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharp tech.fm. Either option will get you access to a personalized feed that has all the shows we do every week. Plus lots more great content from Sir Tekkari and the Sir Tekkari Plus bundle. Check it out. And if you've got feedback, please email us at email at sharp tech.fm.