January 20, 2026 • 35 mins
In part one of this week’s four-part Better Offline Enshittifinancial Crisis special, Ed Zitron walks you through the enshittification of the stock market, where toxic companies appreciate in value despite their toxicity, recklessness and waste, aided and abetted by analysts who not only ignore the toxicity but actively celebrate it.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Zone Media.
Speaker 2 (00:05):
Hello and welcome to Better Offline. I'm your host ed
zechron That's right, folks, I am back. It's well. We've
gone past the Yes, you've had your Steve Burke episodes,
(00:27):
as ever by the merchandise, subscribe to the newsletter. It's
all in the notes, and you are here for the
first of a multi part series about the final and
terminal stage of in shitification, when the companies that turned
on their individual users, then turned on their business customers
finally turned on the markets and investors themselves. Now, it's
(00:47):
important to start this with a point, and that's a
good friend of mine once told me that the more
I learned about finance, the more pissed off I'd get.
And I cannot think of anyone who has made a
more egregious understatement in my life. I've spent the last
two years basically teaching myself economics and all of this
good stuff that I find genuinely really interesting. It's enriched
(01:09):
my life, and it's also driven me a little insane.
As I'm sure any of you are well aware, the
more I learn, the more frustrated I get. Because I'm
not a genius by any extension. I don't even know
if I think I'm that smart, but like this stuff
is just sitting there, you can see it. There are
many other people writing, like Edward grayso Junior Molly what
(01:29):
of course, I'm Brian Merchant as well. Like these people
have dug into these types of things, but nevertheless the
mainstream they're kind of missing something. And this four part
is about that. And it has of course a companion
newsletter where I will have most of the links that
you'd usually see in the link document. I feel like
nobody likes that document anyway, so I'm going to find
a better way of doing things. But let's get to it,
(01:52):
because there's this echoing melancholy to this entire era. And
we're watching the end of Silicon Valley's hypergrowth epoch, and
I'd say it's a horrifying result of fifteen plus years
of steering the tech industry away from solving actual problems
and only really looking for eternal growth. Everything's more expensive
and every tech product has gotten worse. Also that every
(02:14):
company can I quote do AI whatever the fuck that means.
We're watching one of the greatest wastes of money in history.
All this people are told that there just isn't the
money to build things like housing, or provide Americans with
universal health care or better schools, or create the means
for the average person to accumulate wealth in any way,
shape or form. The money does exist. It just exists
(02:36):
for those that want to gamble. Private equity firms, business
development companies that exist to give money to other companies
that are risky. Yet regular people are too risky. Venture
capitalists and banks that are getting desperate and need an
overnight shot of capital from the federal reserves, overnight repurchase
facility or discount window do worrying indicators a bank stress
(02:56):
I need to get into in the future. No, no, no,
The money does not exist for you, or me or
a person. Even money is for entities that could potentially
funnel more money into the economy, even if the ways
that these entities use the money are reckless and foolhardy,
because the system's intent on keeping entities alive incentivizes it.
We are in an era where the average person is
(03:17):
told to pull up their bootstraps, to work harder, to
struggle more, because, as Martin Luther King Junior once said,
it's socialism for the rich and rugged free market capitalism
for the poor. The free market is a fucking con
When you or I run out of money, our things
are taken from us. We receive increasingly panicked letters with
bigger fonts. We get phone calls and texts and emails
and demands. We are told that all will be lost
(03:38):
if we don't work it out somehow, because the financial
system is not about an exchange of value, but whether
or not you can enter into the currently agreed upon
con By letting neoliberalism and the scourge of the free
market's rule, modern society has created the conditions what I
call the Hitter financial crisis, the place at which my
friend Cory doctor owned Star of CS twenty twenty six
(03:59):
and history and shittavation meets my own rot economy thesis
in a fourth stage of in shitification. Now, I'm going
to quote an explanation of what in shittification is from
The New Yorker and Shertification unfoults in three phases. First,
the company is and I quote good to users, drawing
people in droves as funnel traps through Japanese beetles with
the promise of connection or convenience. Second, with that mass
(04:22):
audience consolidated, the company is and I quote good to
business customers, compromising some of its features so that the
most lucrative clients, usually advertisers, can thrive on the platform.
This second phase is the point at which say, our
Facebook feeds filled with ads and posts from brands. Third,
the company turns the experience into and I quote again
a giant pile of shit, making the platform worse for
(04:44):
users and businesses alike, in order to further enrich the
company's owners and executives. Now, I'm going to give you
a more direct example and kind of bridge on some
of the things said there. Facebook was at one point
a huge, free platform much like Instagram, that offered fast
and easy access to basically everybody you knew. It acquired Instagram,
of course, in twenty twelve to kill off a likely competitor,
(05:05):
and overtime would start making both products worse. Clickbait notifications
a mandatory algorithmic feed that deliberately emotionally manipulated hundreds of
thousands of people and stoked massive political division, eventually becoming
full of aislop and videos. Also that Meta could continued
to sell billions of dollars of ads a quarter Burkyle
Chaker of The New Yorker. The Facebook's feed, now choked
(05:26):
with AI generated garbage and short form videos, is well
into the third act of in shitification. The third stage
is critical in it's when the company also turns on
its business customers. A Marketing Brews story from September of
twenty twenty four told the tale of multiple advertisers who
found their campaign switching to different audiences, wasting their money
and getting questionable results. A New York Times story from
(05:47):
twenty twenty one described companies losing up with some seventy
percent of their revenue during a Facebook ants outage. Another
from twenty eighteen described her meta then Facebook deliberately hit
issues with its measurement of engagement on videos from advertisers
for over a year. That's their pivot video, and more recently,
metas ads tools started switching out top performing ads with
AI generated ones. In one case, Targeting managed thirty to
(06:08):
forty five with an AI generated Grandma, all without warning.
The advertiser Meta doesn't give a shit because investors and
analysts don't give a shit either. I could say cell
side analysts here too, and those are the ones that
they are trying to get eat to buy a stock.
By the way, but based on every analyst report I've
read from a major bank or hedge round about a
tech company, I truly think everybody is complicent. In November
(06:29):
twenty twenty five, Reuters revealed that Meta projected in late
twenty twenty four the ten percent of its annual revenue,
which was sixteen billion dollars at the time, would come
from advertisements for scams or band goods. Mere weeks after,
Meta announced the ridiculous twenty seven billion dollar datacent A
debt package, one that used deep accountancy magic to keep
it off of its balance sheet despite Meta guaranteeing the
(06:50):
entirety of the loans. It's completely insane and what would
think this would horrify investors For two reasons. One, metas
business is both supporting and profiting from organized crime, and
at ten percent of its revenue, it's also kind of
dependent on it. And also number two, Meta is using
deliberate and in citious accounting tricks to act like a
dead decenter that is paying to build and will be
(07:11):
the sole tenant of is somehow an off balance sheet operation.
One will be wrong. Morgan Stanley said in mid December
that is one of the handful of companies that can
leverage its leading data distribution and investments in AI and
raised Morgan Stanley's target seven hundred and fifty dollars with
a one thousand dollars a share bull case, meaning like
(07:31):
they think, if things go well, it will be a
one thousand dollars a share. Web Bush raised Metas priced
nine hundred and twenty dollars in Bank of America staunchly
held firm at eight hundred and ten dollars, which is
one hundred dollars more than where we are today. I
can find no analyst commentary on Meta making sixteen billion
dollars on fucking fraud because it doesn't matter to them,
because this is the rot economy and all that matters
(07:52):
is number go up. This is this is going to
be It's going to be a tough four part of folks.
I'm on my blood pressure is going to go through
the fucking reality such as whether there's any revenue in
AI or whether it's a good idea that Metas spending
seventy billion dollars this year on capex even though the
product generates no revenue. And by the way, if you
(08:14):
say to me metas ai ads play that whole story
is nonsense, and I love for it for but they
got it wrong to They are using bullshit metrics. They're
not proving anything anyway. None of this matters to analysts
because stocks are thoroughly inextricably inshitified, and analysts don't even
realize that it's happening, or if they do, they're just
really craven and horrible fucking people that deserve to not
(08:36):
have a job, let alone the job they currently have. Now,
let's go back to the whole in shitivigation thing. The
stages of inshitification usually involve some kind of Devil's deal,
which I actually think handalysts are in them. But let's
get going. In stage one, things are good for the users.
The platform is three. Things are easy to use, and
thus it's really simple for you and your friends to
have become dependent on it. You don't really trade anything
(08:59):
quite yeah, than the fact that you're going to use
this easy, good platform that people like and all your
friends are on. In stage two, things become bad for
customers but good for business customers. The platform begins forcing
users to do profitable things like show them advertisements by
making search results worse, such as with Google, or while
making it difficult to migrate to another one, either through
(09:20):
locking in your data or the tacit knowledge that moving
platforms is hard and your friends are usually in one place.
Take Instagram, for example. No one's leaving Instagram right now
because there is no other competitor. Kind of by design,
Businesses sink tons of money into the platform, knowing that
users are unlikely to leave and make good money buying
ads against the populace that increasingly stays because it has
(09:41):
to as there are no other options. In stage three,
things become bad for consumers and businesses, but good for shareholders.
The platforms begin to deteriorate to the point that usability
is pushed to the brink, and businesses who are now
dependent on the platform because monopolies have pushed out every
alternative platform to advertise or reach customers on, begin to
see their product crumble, all in favor of shareholder capital,
(10:02):
which only cares about stock value of net income and diebacks.
You've probably seen where we go in, folks. We're now
entering in certifications stage four, where businesses turn on shareholders
(10:24):
and listen. Investors have become trapped in the same kind
of loathsome platform players, consumers and businesses and face exactly
the same kind of punishments through the devaluation of the
stock itself. Where platforms have prioritize profits over the health
and happiness of users or business customers, they're now prioritizing
stock value over literally anything, and have, through the remarkable
(10:44):
growth of techtogs in particular, created applicated and thoroughly whipped
investor and analyzed sect that never ask questions and always
celebrates whatever the next big thing is meant to be.
And I hate to dunk on one guy, but go
look up Daniel Newman on Twitter if you want to
see what I mean. Someone just winky and every fucking
thing that a company says like what in videos going up?
These people are very popular and people make stock decisions
(11:08):
based on what they say. They're a problem and the
value of a stock is not based on whether the
business is healthy or its future even certain, but on
its potential price to grow, and analysts have, thanks to
an incredible run of tech stocks going on over a decade,
being able to say I bet software will be big
for most of the time going on CNBC or Bloomberg
and gladly repeating whatever it is that a tech CEO
(11:31):
just said, all without any worries about responsibility or the truth.
And I just want to say, any analyst who might
hear this, I'm taking a lot of screenshots. I've been
taking screenshots for several years. And this is because big
tech stocks and many other big stocks, if I'm honest,
have made their lives easy as long as they don't
ask questions. Number always seems to be going up for
(11:52):
software companies, and all you need to do is provide
a vociferous defense of the next big thing and come
up with a smart sounding model that justifies eternal growth.
This is entirely disconnected from the products themselves, which don't
matter as long as, like I've said, number go up.
If net income is high, meaning profit, and the company
estimates it will continue to grow, then the company could
(12:13):
do whatever the fuck it wants with the product it
sells or the things that it buys. Software has eaten
the world in the sense that Andresen Mark Andresen who
wrote it. Of course, God is wish with investors now
caring more about the intrinsic value of software companies rather
than the businesses or the products themselves, and because that's happening,
investors aren't bothering to think too hard about the tech
itself or the deteriorating products underlying these tech companies. Because
(12:37):
these guys have always worked it out, and these companies
have always managed to keep growing. As a result, nobody
really looks too deep. Minute changes to accounting in earnings
filings are ignored, Egregious amounts of debt are waved off,
and hundreds of billions of dollars of capital expenditures are
seen as the new AI revolution versus a big, huge
waste of money. By incentivizing the rot economy, may stocks
(13:00):
disconnected from the value of the company beyond net income
and future earnings guidance. Companies have found ways to enshitviy
their own stocks, and shareholders will be the ones to suffer,
all thanks to the very downstream pressure that they've chosen
to ignore for decades. You see, while one might correctly
say that the deterioration of products like Facebook and Google
Search was a sign of desperation, it's important to also
(13:22):
see it as the companies themselves orienting around what they
believe analyst and investors want to see you can also
interpret this is a weakness, but I see it another way.
Stock manipulation and a deliberate attempt to reshape what value
means in the eyes of customers and investors. If the
true value of a stock is meant to be based
on the value of its business cash flow and earnings
(13:42):
and of course future growth, a company deliberately changing its
products is an intentional interference with value itself, as are
any and all deceptive accounting practices used to boost valuations.
But the real problem, well one of them, is that
analysts don't well, they don't seem to analyze, not at
least if it goes against market consensus. That's why Goldman
(14:05):
Sachs and JP Morgan and Futureroom Group and Gartner and
Forester and McKinsey and Morgan Stanley all said that the
metaverse was inevitable because they do not actually care about
the underlying businesses themselves, just their ability to grow. On paper. Now,
I'm just going to click through to the FUTUREO Groups thing.
Let's see contemplating market criticism of Zuckerberg's metaphors focus. Now,
this is a really funny piece because you read it,
(14:27):
analysts take in some parallel universe, Zuckerberg will be credited
as an entrepreneurial hero and an executive willing to invest
in something big in order to create something bigger. Unfortunately
for Zuckerberg, he lives here with us, in this universe,
where fifteen billion dollars in investment so far has created
a nerdy, cyber wasteland that few people seem interested in visiting.
The numbers are undeniably ugly blah blah blah blah blah,
(14:48):
and of course we would have hoped for more progress
blah blah blah. Meta's most deadly sin in managing the
Metaverse initiative is nothing to do with adoption metrics of
the money that has been allocated to these efforts, Rather
metas failure stems from its inability to commutne his vision properly.
It's an ironic twist, giving the company's heritage and creating
social media platforms designed to help billions of people communicate. Well,
why this was written to defend the Meta Us, and
(15:11):
I just want to be clear. The defense appears to
be give zuck a chance. Now. The met of us
is quite fucking dead, I should be clear. And many
of you have emailed me about this, and I'm kind
of calling one person out because I see these cell
side analysts as genuinely harmful to society. I think people
going out there and misleading well in articles. Actually, let
(15:33):
me take in a side here. You're going to love this.
This is not in the script, Matt, I apologize. But
analysts have two customers. They have investors, and then they
have you cell side analysts. They've burpen fart on CNBC
or Bloomberg and they say, hey, I will be big.
Then behind the scenes they have a completely set different
set of institutional investors they give the real info to.
(15:53):
That should bother you. You ever read an analyst and an
article and be a little bit suspicious. I like Guiluria
of D A. Davidson, except even gil just raised the
target for core Weave. Nothing has changed. Things have actually
got worse with the economics. But because the bullshit of
the markets exist, analysts are tweaking things in public in private.
I don't know what they're saying because you need to
pay well, I think tens of thousands, if not more,
(16:15):
to get those reports. Anyway, that all aside, regular retail
investors are the first to get in shitifed in stage four.
And by the way, if you ever need proof that
none of these people actually give a fuck about value,
it really was the metaverse and the seventy seven billion
dollars that Mark Zuckerberg burned on it, and they create
little revenue or shareholder value and burned all that money
(16:37):
without any real explanation as to where it went. No, really,
does anyone know where the money went. Seventy seven billion
dollars went Nowhere? You think it went into fucking glasses?
Are you crazy? Even if they made hundreds of thousands
of those glasses and they took ohn't no five billion
dollars for Oryan and the meta rabads that I'm still
(16:58):
having trouble working out where this cat. When I think
one day we're going to find out, I think we're
going to find out something dodgy happened there. But nevertheless,
the street didn't give a shit about the metal us
because metas existent ads business continued to grow, same as
it didn't give a shit that Mark Zuckerberg burn those
seventy billion dollars on Capex, even though we also don't
really know where that's going either. In fact, that really
(17:21):
is the story of the GPU era. We don't know
where the money is going. These companies don't tell us anything.
They don't tell us how many GPUs they have, or
where those GPUs are, or how many of them were installed,
or what their IT load capacity is, or how much
money they cost to run, or how much money they
even make. Why would we Why would we know that?
Analysts don't even look at earnings beyond making sure they
(17:43):
beat on estimates. They've been whipped trained for twenty years
to take a puddle deep look at the numbers, to
make sure things vaguely look okay, look around at their
peers and make sure nobody else is saying something bad,
and go on and collect fees, and go on fucking CNBC.
And the same goes for hedge funds and banks propping
up these stocks rather than ask meaningful questions and demanding
even more meaningful answers. In the last two years, every
(18:05):
major hyperscaler has extended the useful life of its servers
from three years to either five and a half or
six years, and in simple terms, this allowed them to
incur a smaller depreciation expense each quarter as a result,
boosting their income. To explain, really simply, when you'd depreciate something,
you say, Okay, the useful life for this is six years,
and I'll spread the cost of that across six years.
(18:27):
Or in this case, you'd probably say three years for
a GPU, but no, they've just said, due to the
magic of math, it's six So they get to spread
it out for longer and claim it's more useful for longest.
They don't have to do an impairment, which is when
you admit the real cost of something anytime soon, it's wank.
Nobody seems to cares. Nobody seems to cares. I'm keeping
that anyway, Those who were meant to be critical and
(18:49):
listen and investors sinking money into these stocks had effectively
no reaction, despite the fact that meta used by the
Wall Street Journal this adjustment to reduce this expense is
by two point three billion dollars in the first three
quarters of five. This is quite literally disconnected from reality
and done based on internal accounting that we are not
party two. Every single tech firm buying GPUs did this
(19:11):
and benefited to the tune of billions of dollars in
decreased expenses, which bump their revenues, and analysts thought it
was fine and dandy because number went up and they
don't fucking care. Shareholders are now subordinate to the shares themselves,
reacting in the way that the shares demand they do,
being happy for what the companies behind the shares give them,
and analysts, investors, and even the media spend far more
(19:32):
energy fighting the doubts than they do showing these companies screwtiny.
Much like the user of vineshitivied platform, investors and analysts
are frogs in a pot, the experience of owning a
stock deteriorating. Since Jack Welch and General Electric talk corporations
that the markets are run with the kind of simplistic
mindset built for grifter exploitation, and much like those platforms,
(19:54):
corporations have found as many ways as possible to abuse shareholders,
seeing what they can get away with, seeing how far
they can put things as long as the numbers look right.
Because analysts are no longer working in any sort of
rational headspace, nor are they looking for sensible ideas. Let
me give you an example I've used before. Back in
November nineteen ninety eight, Windstar Communication signed and I quote,
(20:17):
a two billion dollar equipment and finance agreement with Lucent
technologies where Windstar would borrow money from Lucent to buy
stuff from Lucent or to create and I shit you
not one hundred million dollars in revenue over five years. Now,
We're going to go even further back in time now
to December nineteen ninety nine, to a piece in Barns
called in nineteen ninety nine tech ruled. Allow me to
(20:40):
quote a few paragraphs from itm ha, Okay, here we go.
George Gilbert, who manages the Northern Technology Fund, predicts the
web centric worlds of consumer services and software will fare
well next year two. A lot of people are increasing
their access to the Internet, says Gilbert, and e commerce
and business networking are very hi high priorities for the
(21:01):
Fortune one hundred. Lawrence Yorke, leading portfolio manager of the
Www Internet Fund, is bullish on semiconductors, telecommunications, and business
to business or B two B e commerce software, but
he's wary of online retailers that model won't work long term.
He asserts his top B to B picks AREBA and
(21:21):
official payments in wireless. He likes Windstar, CNA and Anet Communications,
which went public earlier this month. So what do you
think Larry's scoreboard is do you think Larry did well?
Did he do badly? Let's find out anet bankrupt. Windstar
horribly bankrupt, had to sue loosened while Sienna survived. It
had spent over a billion dollars to acquire other companies,
(21:43):
all in stock, of course, only to see its revenue
dwindle basically overnight from one point six billion dollars to
three hundred million dollars as the optical cable industry collapsed.
Now one would have been able to work out that
Windstar was a dog, or that all of these companies
were dogs, if you were to look at the numbers,
such as how much they made versus how much they
are spending and the demand for their services. I mean,
(22:03):
I just put out a premium piece about the dot
com bubble that I'll inevitably turn into a long one
like this. But basically the signs were all blatant and obvious.
But instead analysts, the media and banks chose to pump
up these stocks because the numbers kept getting bigger, and
when the collapse happened, rationalizations were immediately created. There were
(22:24):
a few bad apples Enron, windsty WelCom. The fiber was
useful and thus laying it was worthwhile and otherwise everything
was fine. And just to be clear, some of those
statements were true. It doesn't mean that any of these
companies should have existed or that this growth should have
happened at that speed. The problem in everybody else's mind
at the time was that everybody had got a bit
distracted and some companies that weren't good would die. All
(22:47):
of that loss money was only a problem because it
didn't pay off. This was a misplaced gambler. It taught
tech executives one powerful lesson earnings must be good without
fail by any means necessary. Otherwise nothing else matters to
war Stream. I mean companies, look, Lucent did this, WinStar
did this, Global Crossing did this. Outright frauds like Enron
(23:07):
did this. They proved it again and again and again.
It's all about incentives. A sel side analyst that tells
(23:27):
you not to buy something is a problem. A journalist
that is skeptical or critical of an industry in the
midst of a growth or hype cycle is considered a hater.
And god don't I fucking know that analysts that do
not sing the same tune as everybody else are marginalized, mocked,
and aggressively policed, and I don't fucking care. Stop being
fucking cowards. If you're an analyst listening to this, stop
(23:48):
being a fucking coward. Go read the fucking numbers, man,
I've been doing it. I'm reading the numbers. I'm reading
them to you on this episode. Go read the numbers
as a reason that people want to fucking talk to me,
as a reason that only the same fucking people want
to talk to you. You're useless. You're fucking useless. If
you're still saying this is a big My frustration I'm
going off topic again, is that people are going to
(24:10):
get hurt here. Retail investors who believe what they read
in CNBC and Bloomberg about the AI bubble are going
to get hurt. And the cowardice is what's going to
hurt them. Now, the dot com bubble was actually a
great time to start reevaluating how and why we value
stocks the way that we do. To say, hey, wait,
that two billion dollar deal will only make one hundred
(24:30):
million dollars in revenue. That's a pretty big minus frieto
or this company spends five dollars for every dollar it
makes that's not good. But nobody, it appears, remained particularly
suspicious of the tech industry or a stock market that
was increasingly orienting itself around conning shareholders. And because shareholders, analysts,
and the media are refused to retain a single shred
of suspicion. Leaving the dot com era, the media never
(24:54):
actually subsided. Financial publications still found themselves dedicated to explaining
why the latest type cycle. Journalists still found themselves told
by editors that they had to cover the latest fad,
even if it was nonsensical or clearly rotten. Analysts still
grabbed their swords and rush to protect the very companies
that had spent decades misleading them and would continue to
(25:15):
do so for decades more. Much like we spent years
saying that Facebook was a good deal because it was free,
analysts and investors say tech stocks are great to hold
because they keep growing, even if the reason they keep
growing was a series of interlocking monopolies, difficult to leave,
platforms and impossible to fight traction and pricing, all of
which have an eventual cell by date. Now get emails
(25:40):
over this, I realize and pearl clutching over the amoral
status of capitalism the stock market. But hear me out,
what if we're actually in a fifteen to twenty year
long knife catching competition. What if all anybody has done
is look at cash flow, net income, future growth guidance
and called it a day. A lack of scrutiny is
(26:00):
these companies to do effectively anything they want, but ref
to warrisome questions like will this ever make it profit?
Or where's that money going? What if we basically don't
know what the fuck is going on? What if all
of this is utterly senseless? And then we get to AI,
which has accelerated the incentification of the stock market. Now,
as I wrote back in twenty twenty four, the tech
(26:22):
industry is run out of hypergrowth ideas, facing something I
called the rock coom bubble. In simple terms, they're only
doing AI because they do not appear to have any
other viable ideas to continue the rock economy's eternal growth
at all costs. Fandango, I think I'm just going to
go with fan Dango there yet, because growth hasn't slowed yet. Analysts,
the media, and other investors are quick to claim that
(26:42):
AI is paying off, even if nobody has ever said
how much AI revenue is being generated, or in some cases,
such as Salesforce, they can say nearly one point four
billion dollars of annualized recurring revenue, which sounds really big
until you realize a company with ten point nine billion
dollars in revenue or quarter is boasting about making less
than one hundred and sixty million dollars in revenue in
(27:02):
a month on something that has likely cost them billions
to spin up. Nevertheless, because Salesforce set a new revenue
target of sixty billion dollars by twenty thirty, which may
as well be in one thousand years at this point,
that stopped. It jumped four percent. It doesn't matter that
most agent forced customers don't pay for the service, or
that AI isn't really making them any money, let alone profit,
(27:26):
or really anything but number go up. Look ed, Number
go up. I'm an ape, I'm a buffoon. Number higher, yay.
The era we live in is one of abject desperation,
to the point that analysts and investors and shareholders by extension,
will take any abuse from management. They will allow companies
to spend as much money as they want in whatever
(27:47):
ways they want, as long as it continues The charade
of number go up, or charade for my British users.
Let me spell it out a little more though, using
the earnings of various hyperscalers as an example. According to
its latest quarterly filings, Microsoft spent thirty four point nine
billion dollars on capital expenditures, the most of any of
the big four hyperscalers, followed by Amazon with thirty four
(28:09):
point two billion, Googled with twenty four billion, and Met
with nineteen point three seven billion dollars. The common mantra
is that these companies are spending all this money on GPUs,
but that doesn't really match up with invidious revenues. In
Video's last quarterly earning, said that four direct customers made
up more than ten percent of revenue, twenty two percent,
fifteen percent, thirteen percent, and eleven percent, representing no more
(28:30):
than twelve point five four billion dollars out of fifty
seven billion dollars of revenue. And as you look back
through earlier quarters, you see the discrepancies grow. Where exactly
is this money going? In Microsoft's latest earnings first quarter
fiscal year twenty twenty six, it said that nineteen point
three nine billion dollars went to additions to property and equipment,
with roughly half of its total kapek spent on short
lived assets, primarily GPUs and CPUs. A quarterback additions to
(28:55):
property and equipment were sixteen point seven four billion dollars,
with roughly half of that spent on long lived assets
that will sport monetization over the next fifteen years or beyond.
What does that mean? Who fucking knows? I looked, I
went and I looked. I read every fucking analyst report
I could about that sorry souder bitch company, Microsoft, and
I could not find one person who went in what
(29:15):
Q three was? H Q four f y twenty twenty five?
Can find a single one of them that even found
that weird? Like, I don't know those of you got kids.
If they're like I did my homework, you probably want
to check, right, Yeah, But if they're a company with
like a four trillion dollar market cap, no problem, mate,
were all good? Oh you're public. I know I could
(29:37):
probably ask more, but I'm not gonna. But let's assume
that Microsoft is in Vidia's biggest customer every quarter. Those
pseudonymous customer a from Nvidia's earnings that it mentions in
its mandatory sec filings spent twelve point five billion dollars
within video at thirty four point nine billion dollars in
total cap ex spending from Microsoft, and before that ten
point seven billion dollars out of twenty one point four
billion dollars and in the court before that seven billion
(30:00):
out of twenty two point six billion. If we guessed
them up based on a split of various models of
nvidious Blackwell GPU systems and in earlier quarters older models,
that works to like four hundred and fifty seven megawats
of by t load for the first quarter, three hundred
and ninety one mega what's for the fourth quarter of
twenty twenty five, and two hundred and sixty three megawats
for the third quarter of twenty twenty five. So has
(30:22):
Microsoft built that many data centers one point one one
gigawats of data centers? Apparently? It claims it added two
gigawads of data centers in the last year, but such
an Adella claimed in November that Microsoft had chips an
inventory it couldn't installed, you to a lack of power.
In any case, where did those tens of billions of
dollars of where they go? We know there are finance leases,
(30:44):
which are basically just loans. What are they form more GPUs?
What's the actual output of the expenditures? Now, I previously
wrote in this script that we have no idea, but
I actually found out to an extent. So this will
be a future episode because it's a whole separate thing.
But the way that these these big companies, the hyperscalers
are doing it is they're actually threading their GPUs through Taiwan.
(31:07):
There are companies like on High Precision Corporation Limited, which
is better known as fox Conn, Quanta Computing, Wistron, we
wi In. There are others too. Nevertheless, these are big
Taiwanese server companies that buy the GPUs from Nvidia and
then then they ship them to Microsoft or Meta or
(31:27):
Google or Oracle. Nevertheless, why am I the person who
went and find that out? Why am I the guy?
I'm a I'm just a fella, I'm just one dip
shit with Google. What the fuck am I the guy? Well?
The answer might be because well, I have a theory,
and it's the analysts and investors are in an abusive
(31:48):
relationship with tech stocs. It is fundamentally insane that Microsoft meta,
Amazon and Google have spent seven hundred and seventy six
billion dollars in capital expenditures in the space of three
years and more so that analysts and investors, when faced
with such egregious numbers, sit back and say, ooh yeah, baby,
ooh yeah, they're building the infrastructure of the future. Baby,
(32:09):
we love this. Analysts and traders and investors and reporters
do not think hard about the underlying numbers, because doing
so immediately makes you run headfirst into a number of
worrying questions such as where did all the money go,
will this payoff? And how many fucking dupus do they
actually own. Analysts have, on some level become the fractional
marketing team for the stocks they're investing in. When Oracle
(32:30):
announced this three hundred billion dollar deal with open Ai
in September, when that open Ai does not have the
money to pay and Oracle doesn't have the capacity to fill,
analysts heaved and stammered like horny teenagers seeing their first boob.
Now I'm gonna quote see MBC here and do some artistic,
some editorializing. John Defuki, Sorry, John Defucci, I guess I'm
(32:53):
not fixing that From Googenhem Security said he was blown away.
T d Cohen's Derek would called it a momentous quarter,
and Brad Zelnig of Deutsche Bank said, who kind of, Oh,
we're in shock in a very good way. There's no
better evidence of a seismic shift happening and computing than
these results that you just put up. Selnic said on
(33:13):
the earnings call, adjusting his trousers, that trouser thing was
an addition. That's a parody anyway. These are the same
people that retail and institutional investors rely upon for advice
on what stocks to buy, all acting with the disregard
for the truth that comes from years of never facing
a single fucking consequence. Three months later, an oracle has
lost basically all of the stock bumpets sought from the
(33:34):
open aideal, meaning that any regular person, any retail investor
that yoloed into that trade because say, I don't know,
Analysts from major institutions in the media said it was
a good idea, and news outlets didn't ask questions. Well,
they got their asses kicked. They lost everything, and please
spare me, Oh they shouldn't trade off of analysts. Bullshit.
That's the kind of victim blaming that allows these revered
(33:56):
fuck wits to continue fighting out these meaningless calls and
making money doing so. In reality, we're in an era
of naked, blatant, shameless stock manipulation, both privately and publicly,
because a stock no longer refers to a unit of
ownership in a company so much as it is a
chip at a casino where a house constantly changes the rules.
Perhaps you're able to occasionally catch the house showing its hand,
(34:17):
and perhaps the house meant for you to see it.
Either way, you are always behind because the people responsible
for buying and selling stocks at scale, under the auspices
of knowing what's going on, don't seem to know what
they're talking about, or don't care to find out. You
want examples, I'll give you some fucking examples. June in tomorrow.
I love doing this show. I love doing these episodes.
(34:40):
Catch you then, thank you for listening to Better Offline.
Speaker 1 (34:51):
The editor and composer of the Better Offline theme song
is Matosowski. You can check out more of his music
and audio projects at Mattasowski dot com t O s
O W s Ki dot com. You can email me
at easy at Better Offline dot com or visit Better
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(35:13):
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go to our slash.
Speaker 2 (35:17):
Better Offline to check out I'll Reddit. Thank you so
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Speaker 2 (00:05):
Hello and welcome to Better Offline. I'm your host ed
zechron That's right, folks, I am back. It's well. We've
gone past the Yes, you've had your Steve Burke episodes,
(00:27):
as ever by the merchandise, subscribe to the newsletter. It's
all in the notes, and you are here for the
first of a multi part series about the final and
terminal stage of in shitification, when the companies that turned
on their individual users, then turned on their business customers
finally turned on the markets and investors themselves. Now, it's
(00:47):
important to start this with a point, and that's a
good friend of mine once told me that the more
I learned about finance, the more pissed off I'd get.
And I cannot think of anyone who has made a
more egregious understatement in my life. I've spent the last
two years basically teaching myself economics and all of this
good stuff that I find genuinely really interesting. It's enriched
(01:09):
my life, and it's also driven me a little insane.
As I'm sure any of you are well aware, the
more I learn, the more frustrated I get. Because I'm
not a genius by any extension. I don't even know
if I think I'm that smart, but like this stuff
is just sitting there, you can see it. There are
many other people writing, like Edward grayso Junior Molly what
(01:29):
of course, I'm Brian Merchant as well. Like these people
have dug into these types of things, but nevertheless the
mainstream they're kind of missing something. And this four part
is about that. And it has of course a companion
newsletter where I will have most of the links that
you'd usually see in the link document. I feel like
nobody likes that document anyway, so I'm going to find
a better way of doing things. But let's get to it,
(01:52):
because there's this echoing melancholy to this entire era. And
we're watching the end of Silicon Valley's hypergrowth epoch, and
I'd say it's a horrifying result of fifteen plus years
of steering the tech industry away from solving actual problems
and only really looking for eternal growth. Everything's more expensive
and every tech product has gotten worse. Also that every
(02:14):
company can I quote do AI whatever the fuck that means.
We're watching one of the greatest wastes of money in history.
All this people are told that there just isn't the
money to build things like housing, or provide Americans with
universal health care or better schools, or create the means
for the average person to accumulate wealth in any way,
shape or form. The money does exist. It just exists
(02:36):
for those that want to gamble. Private equity firms, business
development companies that exist to give money to other companies
that are risky. Yet regular people are too risky. Venture
capitalists and banks that are getting desperate and need an
overnight shot of capital from the federal reserves, overnight repurchase
facility or discount window do worrying indicators a bank stress
(02:56):
I need to get into in the future. No, no, no,
The money does not exist for you, or me or
a person. Even money is for entities that could potentially
funnel more money into the economy, even if the ways
that these entities use the money are reckless and foolhardy,
because the system's intent on keeping entities alive incentivizes it.
We are in an era where the average person is
(03:17):
told to pull up their bootstraps, to work harder, to
struggle more, because, as Martin Luther King Junior once said,
it's socialism for the rich and rugged free market capitalism
for the poor. The free market is a fucking con
When you or I run out of money, our things
are taken from us. We receive increasingly panicked letters with
bigger fonts. We get phone calls and texts and emails
and demands. We are told that all will be lost
(03:38):
if we don't work it out somehow, because the financial
system is not about an exchange of value, but whether
or not you can enter into the currently agreed upon
con By letting neoliberalism and the scourge of the free
market's rule, modern society has created the conditions what I
call the Hitter financial crisis, the place at which my
friend Cory doctor owned Star of CS twenty twenty six
(03:59):
and history and shittavation meets my own rot economy thesis
in a fourth stage of in shitification. Now, I'm going
to quote an explanation of what in shittification is from
The New Yorker and Shertification unfoults in three phases. First,
the company is and I quote good to users, drawing
people in droves as funnel traps through Japanese beetles with
the promise of connection or convenience. Second, with that mass
(04:22):
audience consolidated, the company is and I quote good to
business customers, compromising some of its features so that the
most lucrative clients, usually advertisers, can thrive on the platform.
This second phase is the point at which say, our
Facebook feeds filled with ads and posts from brands. Third,
the company turns the experience into and I quote again
a giant pile of shit, making the platform worse for
(04:44):
users and businesses alike, in order to further enrich the
company's owners and executives. Now, I'm going to give you
a more direct example and kind of bridge on some
of the things said there. Facebook was at one point
a huge, free platform much like Instagram, that offered fast
and easy access to basically everybody you knew. It acquired Instagram,
of course, in twenty twelve to kill off a likely competitor,
(05:05):
and overtime would start making both products worse. Clickbait notifications
a mandatory algorithmic feed that deliberately emotionally manipulated hundreds of
thousands of people and stoked massive political division, eventually becoming
full of aislop and videos. Also that Meta could continued
to sell billions of dollars of ads a quarter Burkyle
Chaker of The New Yorker. The Facebook's feed, now choked
(05:26):
with AI generated garbage and short form videos, is well
into the third act of in shitification. The third stage
is critical in it's when the company also turns on
its business customers. A Marketing Brews story from September of
twenty twenty four told the tale of multiple advertisers who
found their campaign switching to different audiences, wasting their money
and getting questionable results. A New York Times story from
(05:47):
twenty twenty one described companies losing up with some seventy
percent of their revenue during a Facebook ants outage. Another
from twenty eighteen described her meta then Facebook deliberately hit
issues with its measurement of engagement on videos from advertisers
for over a year. That's their pivot video, and more recently,
metas ads tools started switching out top performing ads with
AI generated ones. In one case, Targeting managed thirty to
(06:08):
forty five with an AI generated Grandma, all without warning.
The advertiser Meta doesn't give a shit because investors and
analysts don't give a shit either. I could say cell
side analysts here too, and those are the ones that
they are trying to get eat to buy a stock.
By the way, but based on every analyst report I've
read from a major bank or hedge round about a
tech company, I truly think everybody is complicent. In November
(06:29):
twenty twenty five, Reuters revealed that Meta projected in late
twenty twenty four the ten percent of its annual revenue,
which was sixteen billion dollars at the time, would come
from advertisements for scams or band goods. Mere weeks after,
Meta announced the ridiculous twenty seven billion dollar datacent A
debt package, one that used deep accountancy magic to keep
it off of its balance sheet despite Meta guaranteeing the
(06:50):
entirety of the loans. It's completely insane and what would
think this would horrify investors For two reasons. One, metas
business is both supporting and profiting from organized crime, and
at ten percent of its revenue, it's also kind of
dependent on it. And also number two, Meta is using
deliberate and in citious accounting tricks to act like a
dead decenter that is paying to build and will be
(07:11):
the sole tenant of is somehow an off balance sheet operation.
One will be wrong. Morgan Stanley said in mid December
that is one of the handful of companies that can
leverage its leading data distribution and investments in AI and
raised Morgan Stanley's target seven hundred and fifty dollars with
a one thousand dollars a share bull case, meaning like
(07:31):
they think, if things go well, it will be a
one thousand dollars a share. Web Bush raised Metas priced
nine hundred and twenty dollars in Bank of America staunchly
held firm at eight hundred and ten dollars, which is
one hundred dollars more than where we are today. I
can find no analyst commentary on Meta making sixteen billion
dollars on fucking fraud because it doesn't matter to them,
because this is the rot economy and all that matters
(07:52):
is number go up. This is this is going to
be It's going to be a tough four part of folks.
I'm on my blood pressure is going to go through
the fucking reality such as whether there's any revenue in
AI or whether it's a good idea that Metas spending
seventy billion dollars this year on capex even though the
product generates no revenue. And by the way, if you
(08:14):
say to me metas ai ads play that whole story
is nonsense, and I love for it for but they
got it wrong to They are using bullshit metrics. They're
not proving anything anyway. None of this matters to analysts
because stocks are thoroughly inextricably inshitified, and analysts don't even
realize that it's happening, or if they do, they're just
really craven and horrible fucking people that deserve to not
(08:36):
have a job, let alone the job they currently have. Now,
let's go back to the whole in shitivigation thing. The
stages of inshitification usually involve some kind of Devil's deal,
which I actually think handalysts are in them. But let's
get going. In stage one, things are good for the users.
The platform is three. Things are easy to use, and
thus it's really simple for you and your friends to
have become dependent on it. You don't really trade anything
(08:59):
quite yeah, than the fact that you're going to use
this easy, good platform that people like and all your
friends are on. In stage two, things become bad for
customers but good for business customers. The platform begins forcing
users to do profitable things like show them advertisements by
making search results worse, such as with Google, or while
making it difficult to migrate to another one, either through
(09:20):
locking in your data or the tacit knowledge that moving
platforms is hard and your friends are usually in one place.
Take Instagram, for example. No one's leaving Instagram right now
because there is no other competitor. Kind of by design,
Businesses sink tons of money into the platform, knowing that
users are unlikely to leave and make good money buying
ads against the populace that increasingly stays because it has
(09:41):
to as there are no other options. In stage three,
things become bad for consumers and businesses, but good for shareholders.
The platforms begin to deteriorate to the point that usability
is pushed to the brink, and businesses who are now
dependent on the platform because monopolies have pushed out every
alternative platform to advertise or reach customers on, begin to
see their product crumble, all in favor of shareholder capital,
(10:02):
which only cares about stock value of net income and diebacks.
You've probably seen where we go in, folks. We're now
entering in certifications stage four, where businesses turn on shareholders
(10:24):
and listen. Investors have become trapped in the same kind
of loathsome platform players, consumers and businesses and face exactly
the same kind of punishments through the devaluation of the
stock itself. Where platforms have prioritize profits over the health
and happiness of users or business customers, they're now prioritizing
stock value over literally anything, and have, through the remarkable
(10:44):
growth of techtogs in particular, created applicated and thoroughly whipped
investor and analyzed sect that never ask questions and always
celebrates whatever the next big thing is meant to be.
And I hate to dunk on one guy, but go
look up Daniel Newman on Twitter if you want to
see what I mean. Someone just winky and every fucking
thing that a company says like what in videos going up?
These people are very popular and people make stock decisions
(11:08):
based on what they say. They're a problem and the
value of a stock is not based on whether the
business is healthy or its future even certain, but on
its potential price to grow, and analysts have, thanks to
an incredible run of tech stocks going on over a decade,
being able to say I bet software will be big
for most of the time going on CNBC or Bloomberg
and gladly repeating whatever it is that a tech CEO
(11:31):
just said, all without any worries about responsibility or the truth.
And I just want to say, any analyst who might
hear this, I'm taking a lot of screenshots. I've been
taking screenshots for several years. And this is because big
tech stocks and many other big stocks, if I'm honest,
have made their lives easy as long as they don't
ask questions. Number always seems to be going up for
(11:52):
software companies, and all you need to do is provide
a vociferous defense of the next big thing and come
up with a smart sounding model that justifies eternal growth.
This is entirely disconnected from the products themselves, which don't
matter as long as, like I've said, number go up.
If net income is high, meaning profit, and the company
estimates it will continue to grow, then the company could
(12:13):
do whatever the fuck it wants with the product it
sells or the things that it buys. Software has eaten
the world in the sense that Andresen Mark Andresen who
wrote it. Of course, God is wish with investors now
caring more about the intrinsic value of software companies rather
than the businesses or the products themselves, and because that's happening,
investors aren't bothering to think too hard about the tech
itself or the deteriorating products underlying these tech companies. Because
(12:37):
these guys have always worked it out, and these companies
have always managed to keep growing. As a result, nobody
really looks too deep. Minute changes to accounting in earnings
filings are ignored, Egregious amounts of debt are waved off,
and hundreds of billions of dollars of capital expenditures are
seen as the new AI revolution versus a big, huge
waste of money. By incentivizing the rot economy, may stocks
(13:00):
disconnected from the value of the company beyond net income
and future earnings guidance. Companies have found ways to enshitviy
their own stocks, and shareholders will be the ones to suffer,
all thanks to the very downstream pressure that they've chosen
to ignore for decades. You see, while one might correctly
say that the deterioration of products like Facebook and Google
Search was a sign of desperation, it's important to also
(13:22):
see it as the companies themselves orienting around what they
believe analyst and investors want to see you can also
interpret this is a weakness, but I see it another way.
Stock manipulation and a deliberate attempt to reshape what value
means in the eyes of customers and investors. If the
true value of a stock is meant to be based
on the value of its business cash flow and earnings
(13:42):
and of course future growth, a company deliberately changing its
products is an intentional interference with value itself, as are
any and all deceptive accounting practices used to boost valuations.
But the real problem, well one of them, is that
analysts don't well, they don't seem to analyze, not at
least if it goes against market consensus. That's why Goldman
(14:05):
Sachs and JP Morgan and Futureroom Group and Gartner and
Forester and McKinsey and Morgan Stanley all said that the
metaverse was inevitable because they do not actually care about
the underlying businesses themselves, just their ability to grow. On paper. Now,
I'm just going to click through to the FUTUREO Groups thing.
Let's see contemplating market criticism of Zuckerberg's metaphors focus. Now,
this is a really funny piece because you read it,
(14:27):
analysts take in some parallel universe, Zuckerberg will be credited
as an entrepreneurial hero and an executive willing to invest
in something big in order to create something bigger. Unfortunately
for Zuckerberg, he lives here with us, in this universe,
where fifteen billion dollars in investment so far has created
a nerdy, cyber wasteland that few people seem interested in visiting.
The numbers are undeniably ugly blah blah blah blah blah,
(14:48):
and of course we would have hoped for more progress
blah blah blah. Meta's most deadly sin in managing the
Metaverse initiative is nothing to do with adoption metrics of
the money that has been allocated to these efforts, Rather
metas failure stems from its inability to commutne his vision properly.
It's an ironic twist, giving the company's heritage and creating
social media platforms designed to help billions of people communicate. Well,
why this was written to defend the Meta Us, and
(15:11):
I just want to be clear. The defense appears to
be give zuck a chance. Now. The met of us
is quite fucking dead, I should be clear. And many
of you have emailed me about this, and I'm kind
of calling one person out because I see these cell
side analysts as genuinely harmful to society. I think people
going out there and misleading well in articles. Actually, let
(15:33):
me take in a side here. You're going to love this.
This is not in the script, Matt, I apologize. But
analysts have two customers. They have investors, and then they
have you cell side analysts. They've burpen fart on CNBC
or Bloomberg and they say, hey, I will be big.
Then behind the scenes they have a completely set different
set of institutional investors they give the real info to.
(15:53):
That should bother you. You ever read an analyst and an
article and be a little bit suspicious. I like Guiluria
of D A. Davidson, except even gil just raised the
target for core Weave. Nothing has changed. Things have actually
got worse with the economics. But because the bullshit of
the markets exist, analysts are tweaking things in public in private.
I don't know what they're saying because you need to
pay well, I think tens of thousands, if not more,
(16:15):
to get those reports. Anyway, that all aside, regular retail
investors are the first to get in shitifed in stage four.
And by the way, if you ever need proof that
none of these people actually give a fuck about value,
it really was the metaverse and the seventy seven billion
dollars that Mark Zuckerberg burned on it, and they create
little revenue or shareholder value and burned all that money
(16:37):
without any real explanation as to where it went. No, really,
does anyone know where the money went. Seventy seven billion
dollars went Nowhere? You think it went into fucking glasses?
Are you crazy? Even if they made hundreds of thousands
of those glasses and they took ohn't no five billion
dollars for Oryan and the meta rabads that I'm still
(16:58):
having trouble working out where this cat. When I think
one day we're going to find out, I think we're
going to find out something dodgy happened there. But nevertheless,
the street didn't give a shit about the metal us
because metas existent ads business continued to grow, same as
it didn't give a shit that Mark Zuckerberg burn those
seventy billion dollars on Capex, even though we also don't
really know where that's going either. In fact, that really
(17:21):
is the story of the GPU era. We don't know
where the money is going. These companies don't tell us anything.
They don't tell us how many GPUs they have, or
where those GPUs are, or how many of them were installed,
or what their IT load capacity is, or how much
money they cost to run, or how much money they
even make. Why would we Why would we know that?
Analysts don't even look at earnings beyond making sure they
(17:43):
beat on estimates. They've been whipped trained for twenty years
to take a puddle deep look at the numbers, to
make sure things vaguely look okay, look around at their
peers and make sure nobody else is saying something bad,
and go on and collect fees, and go on fucking CNBC.
And the same goes for hedge funds and banks propping
up these stocks rather than ask meaningful questions and demanding
even more meaningful answers. In the last two years, every
(18:05):
major hyperscaler has extended the useful life of its servers
from three years to either five and a half or
six years, and in simple terms, this allowed them to
incur a smaller depreciation expense each quarter as a result,
boosting their income. To explain, really simply, when you'd depreciate something,
you say, Okay, the useful life for this is six years,
and I'll spread the cost of that across six years.
(18:27):
Or in this case, you'd probably say three years for
a GPU, but no, they've just said, due to the
magic of math, it's six So they get to spread
it out for longer and claim it's more useful for longest.
They don't have to do an impairment, which is when
you admit the real cost of something anytime soon, it's wank.
Nobody seems to cares. Nobody seems to cares. I'm keeping
that anyway, Those who were meant to be critical and
(18:49):
listen and investors sinking money into these stocks had effectively
no reaction, despite the fact that meta used by the
Wall Street Journal this adjustment to reduce this expense is
by two point three billion dollars in the first three
quarters of five. This is quite literally disconnected from reality
and done based on internal accounting that we are not
party two. Every single tech firm buying GPUs did this
(19:11):
and benefited to the tune of billions of dollars in
decreased expenses, which bump their revenues, and analysts thought it
was fine and dandy because number went up and they
don't fucking care. Shareholders are now subordinate to the shares themselves,
reacting in the way that the shares demand they do,
being happy for what the companies behind the shares give them,
and analysts, investors, and even the media spend far more
(19:32):
energy fighting the doubts than they do showing these companies screwtiny.
Much like the user of vineshitivied platform, investors and analysts
are frogs in a pot, the experience of owning a
stock deteriorating. Since Jack Welch and General Electric talk corporations
that the markets are run with the kind of simplistic
mindset built for grifter exploitation, and much like those platforms,
(19:54):
corporations have found as many ways as possible to abuse shareholders,
seeing what they can get away with, seeing how far
they can put things as long as the numbers look right.
Because analysts are no longer working in any sort of
rational headspace, nor are they looking for sensible ideas. Let
me give you an example I've used before. Back in
November nineteen ninety eight, Windstar Communication signed and I quote,
(20:17):
a two billion dollar equipment and finance agreement with Lucent
technologies where Windstar would borrow money from Lucent to buy
stuff from Lucent or to create and I shit you
not one hundred million dollars in revenue over five years. Now,
We're going to go even further back in time now
to December nineteen ninety nine, to a piece in Barns
called in nineteen ninety nine tech ruled. Allow me to
(20:40):
quote a few paragraphs from itm ha, Okay, here we go.
George Gilbert, who manages the Northern Technology Fund, predicts the
web centric worlds of consumer services and software will fare
well next year two. A lot of people are increasing
their access to the Internet, says Gilbert, and e commerce
and business networking are very hi high priorities for the
(21:01):
Fortune one hundred. Lawrence Yorke, leading portfolio manager of the
Www Internet Fund, is bullish on semiconductors, telecommunications, and business
to business or B two B e commerce software, but
he's wary of online retailers that model won't work long term.
He asserts his top B to B picks AREBA and
(21:21):
official payments in wireless. He likes Windstar, CNA and Anet Communications,
which went public earlier this month. So what do you
think Larry's scoreboard is do you think Larry did well?
Did he do badly? Let's find out anet bankrupt. Windstar
horribly bankrupt, had to sue loosened while Sienna survived. It
had spent over a billion dollars to acquire other companies,
(21:43):
all in stock, of course, only to see its revenue
dwindle basically overnight from one point six billion dollars to
three hundred million dollars as the optical cable industry collapsed.
Now one would have been able to work out that
Windstar was a dog, or that all of these companies
were dogs, if you were to look at the numbers,
such as how much they made versus how much they
are spending and the demand for their services. I mean,
(22:03):
I just put out a premium piece about the dot
com bubble that I'll inevitably turn into a long one
like this. But basically the signs were all blatant and obvious.
But instead analysts, the media and banks chose to pump
up these stocks because the numbers kept getting bigger, and
when the collapse happened, rationalizations were immediately created. There were
(22:24):
a few bad apples Enron, windsty WelCom. The fiber was
useful and thus laying it was worthwhile and otherwise everything
was fine. And just to be clear, some of those
statements were true. It doesn't mean that any of these
companies should have existed or that this growth should have
happened at that speed. The problem in everybody else's mind
at the time was that everybody had got a bit
distracted and some companies that weren't good would die. All
(22:47):
of that loss money was only a problem because it
didn't pay off. This was a misplaced gambler. It taught
tech executives one powerful lesson earnings must be good without
fail by any means necessary. Otherwise nothing else matters to
war Stream. I mean companies, look, Lucent did this, WinStar
did this, Global Crossing did this. Outright frauds like Enron
(23:07):
did this. They proved it again and again and again.
It's all about incentives. A sel side analyst that tells
(23:27):
you not to buy something is a problem. A journalist
that is skeptical or critical of an industry in the
midst of a growth or hype cycle is considered a hater.
And god don't I fucking know that analysts that do
not sing the same tune as everybody else are marginalized, mocked,
and aggressively policed, and I don't fucking care. Stop being
fucking cowards. If you're an analyst listening to this, stop
(23:48):
being a fucking coward. Go read the fucking numbers, man,
I've been doing it. I'm reading the numbers. I'm reading
them to you on this episode. Go read the numbers
as a reason that people want to fucking talk to me,
as a reason that only the same fucking people want
to talk to you. You're useless. You're fucking useless. If
you're still saying this is a big My frustration I'm
going off topic again, is that people are going to
(24:10):
get hurt here. Retail investors who believe what they read
in CNBC and Bloomberg about the AI bubble are going
to get hurt. And the cowardice is what's going to
hurt them. Now, the dot com bubble was actually a
great time to start reevaluating how and why we value
stocks the way that we do. To say, hey, wait,
that two billion dollar deal will only make one hundred
(24:30):
million dollars in revenue. That's a pretty big minus frieto
or this company spends five dollars for every dollar it
makes that's not good. But nobody, it appears, remained particularly
suspicious of the tech industry or a stock market that
was increasingly orienting itself around conning shareholders. And because shareholders, analysts,
and the media are refused to retain a single shred
of suspicion. Leaving the dot com era, the media never
(24:54):
actually subsided. Financial publications still found themselves dedicated to explaining
why the latest type cycle. Journalists still found themselves told
by editors that they had to cover the latest fad,
even if it was nonsensical or clearly rotten. Analysts still
grabbed their swords and rush to protect the very companies
that had spent decades misleading them and would continue to
(25:15):
do so for decades more. Much like we spent years
saying that Facebook was a good deal because it was free,
analysts and investors say tech stocks are great to hold
because they keep growing, even if the reason they keep
growing was a series of interlocking monopolies, difficult to leave,
platforms and impossible to fight traction and pricing, all of
which have an eventual cell by date. Now get emails
(25:40):
over this, I realize and pearl clutching over the amoral
status of capitalism the stock market. But hear me out,
what if we're actually in a fifteen to twenty year
long knife catching competition. What if all anybody has done
is look at cash flow, net income, future growth guidance
and called it a day. A lack of scrutiny is
(26:00):
these companies to do effectively anything they want, but ref
to warrisome questions like will this ever make it profit?
Or where's that money going? What if we basically don't
know what the fuck is going on? What if all
of this is utterly senseless? And then we get to AI,
which has accelerated the incentification of the stock market. Now,
as I wrote back in twenty twenty four, the tech
(26:22):
industry is run out of hypergrowth ideas, facing something I
called the rock coom bubble. In simple terms, they're only
doing AI because they do not appear to have any
other viable ideas to continue the rock economy's eternal growth
at all costs. Fandango, I think I'm just going to
go with fan Dango there yet, because growth hasn't slowed yet. Analysts,
the media, and other investors are quick to claim that
(26:42):
AI is paying off, even if nobody has ever said
how much AI revenue is being generated, or in some cases,
such as Salesforce, they can say nearly one point four
billion dollars of annualized recurring revenue, which sounds really big
until you realize a company with ten point nine billion
dollars in revenue or quarter is boasting about making less
than one hundred and sixty million dollars in revenue in
(27:02):
a month on something that has likely cost them billions
to spin up. Nevertheless, because Salesforce set a new revenue
target of sixty billion dollars by twenty thirty, which may
as well be in one thousand years at this point,
that stopped. It jumped four percent. It doesn't matter that
most agent forced customers don't pay for the service, or
that AI isn't really making them any money, let alone profit,
(27:26):
or really anything but number go up. Look ed, Number
go up. I'm an ape, I'm a buffoon. Number higher, yay.
The era we live in is one of abject desperation,
to the point that analysts and investors and shareholders by extension,
will take any abuse from management. They will allow companies
to spend as much money as they want in whatever
(27:47):
ways they want, as long as it continues The charade
of number go up, or charade for my British users.
Let me spell it out a little more though, using
the earnings of various hyperscalers as an example. According to
its latest quarterly filings, Microsoft spent thirty four point nine
billion dollars on capital expenditures, the most of any of
the big four hyperscalers, followed by Amazon with thirty four
(28:09):
point two billion, Googled with twenty four billion, and Met
with nineteen point three seven billion dollars. The common mantra
is that these companies are spending all this money on GPUs,
but that doesn't really match up with invidious revenues. In
Video's last quarterly earning, said that four direct customers made
up more than ten percent of revenue, twenty two percent,
fifteen percent, thirteen percent, and eleven percent, representing no more
(28:30):
than twelve point five four billion dollars out of fifty
seven billion dollars of revenue. And as you look back
through earlier quarters, you see the discrepancies grow. Where exactly
is this money going? In Microsoft's latest earnings first quarter
fiscal year twenty twenty six, it said that nineteen point
three nine billion dollars went to additions to property and equipment,
with roughly half of its total kapek spent on short
lived assets, primarily GPUs and CPUs. A quarterback additions to
(28:55):
property and equipment were sixteen point seven four billion dollars,
with roughly half of that spent on long lived assets
that will sport monetization over the next fifteen years or beyond.
What does that mean? Who fucking knows? I looked, I
went and I looked. I read every fucking analyst report
I could about that sorry souder bitch company, Microsoft, and
I could not find one person who went in what
(29:15):
Q three was? H Q four f y twenty twenty five?
Can find a single one of them that even found
that weird? Like, I don't know those of you got kids.
If they're like I did my homework, you probably want
to check, right, Yeah, But if they're a company with
like a four trillion dollar market cap, no problem, mate,
were all good? Oh you're public. I know I could
(29:37):
probably ask more, but I'm not gonna. But let's assume
that Microsoft is in Vidia's biggest customer every quarter. Those
pseudonymous customer a from Nvidia's earnings that it mentions in
its mandatory sec filings spent twelve point five billion dollars
within video at thirty four point nine billion dollars in
total cap ex spending from Microsoft, and before that ten
point seven billion dollars out of twenty one point four
billion dollars and in the court before that seven billion
(30:00):
out of twenty two point six billion. If we guessed
them up based on a split of various models of
nvidious Blackwell GPU systems and in earlier quarters older models,
that works to like four hundred and fifty seven megawats
of by t load for the first quarter, three hundred
and ninety one mega what's for the fourth quarter of
twenty twenty five, and two hundred and sixty three megawats
for the third quarter of twenty twenty five. So has
(30:22):
Microsoft built that many data centers one point one one
gigawats of data centers? Apparently? It claims it added two
gigawads of data centers in the last year, but such
an Adella claimed in November that Microsoft had chips an
inventory it couldn't installed, you to a lack of power.
In any case, where did those tens of billions of
dollars of where they go? We know there are finance leases,
(30:44):
which are basically just loans. What are they form more GPUs?
What's the actual output of the expenditures? Now, I previously
wrote in this script that we have no idea, but
I actually found out to an extent. So this will
be a future episode because it's a whole separate thing.
But the way that these these big companies, the hyperscalers
are doing it is they're actually threading their GPUs through Taiwan.
(31:07):
There are companies like on High Precision Corporation Limited, which
is better known as fox Conn, Quanta Computing, Wistron, we
wi In. There are others too. Nevertheless, these are big
Taiwanese server companies that buy the GPUs from Nvidia and
then then they ship them to Microsoft or Meta or
(31:27):
Google or Oracle. Nevertheless, why am I the person who
went and find that out? Why am I the guy?
I'm a I'm just a fella, I'm just one dip
shit with Google. What the fuck am I the guy? Well?
The answer might be because well, I have a theory,
and it's the analysts and investors are in an abusive
(31:48):
relationship with tech stocs. It is fundamentally insane that Microsoft meta,
Amazon and Google have spent seven hundred and seventy six
billion dollars in capital expenditures in the space of three
years and more so that analysts and investors, when faced
with such egregious numbers, sit back and say, ooh yeah, baby,
ooh yeah, they're building the infrastructure of the future. Baby,
(32:09):
we love this. Analysts and traders and investors and reporters
do not think hard about the underlying numbers, because doing
so immediately makes you run headfirst into a number of
worrying questions such as where did all the money go,
will this payoff? And how many fucking dupus do they
actually own. Analysts have, on some level become the fractional
marketing team for the stocks they're investing in. When Oracle
(32:30):
announced this three hundred billion dollar deal with open Ai
in September, when that open Ai does not have the
money to pay and Oracle doesn't have the capacity to fill,
analysts heaved and stammered like horny teenagers seeing their first boob.
Now I'm gonna quote see MBC here and do some artistic,
some editorializing. John Defuki, Sorry, John Defucci, I guess I'm
(32:53):
not fixing that From Googenhem Security said he was blown away.
T d Cohen's Derek would called it a momentous quarter,
and Brad Zelnig of Deutsche Bank said, who kind of, Oh,
we're in shock in a very good way. There's no
better evidence of a seismic shift happening and computing than
these results that you just put up. Selnic said on
(33:13):
the earnings call, adjusting his trousers, that trouser thing was
an addition. That's a parody anyway. These are the same
people that retail and institutional investors rely upon for advice
on what stocks to buy, all acting with the disregard
for the truth that comes from years of never facing
a single fucking consequence. Three months later, an oracle has
lost basically all of the stock bumpets sought from the
(33:34):
open aideal, meaning that any regular person, any retail investor
that yoloed into that trade because say, I don't know,
Analysts from major institutions in the media said it was
a good idea, and news outlets didn't ask questions. Well,
they got their asses kicked. They lost everything, and please
spare me, Oh they shouldn't trade off of analysts. Bullshit.
That's the kind of victim blaming that allows these revered
(33:56):
fuck wits to continue fighting out these meaningless calls and
making money doing so. In reality, we're in an era
of naked, blatant, shameless stock manipulation, both privately and publicly,
because a stock no longer refers to a unit of
ownership in a company so much as it is a
chip at a casino where a house constantly changes the rules.
Perhaps you're able to occasionally catch the house showing its hand,
(34:17):
and perhaps the house meant for you to see it.
Either way, you are always behind because the people responsible
for buying and selling stocks at scale, under the auspices
of knowing what's going on, don't seem to know what
they're talking about, or don't care to find out. You
want examples, I'll give you some fucking examples. June in tomorrow.
I love doing this show. I love doing these episodes.
(34:40):
Catch you then, thank you for listening to Better Offline.
Speaker 1 (34:51):
The editor and composer of the Better Offline theme song
is Matosowski. You can check out more of his music
and audio projects at Mattasowski dot com t O s
O W s Ki dot com. You can email me
at easy at Better Offline dot com or visit Better
Offline dot com to find more podcast links and of course,
my newsletter. I also really recommend you go to chat
(35:13):
dot where's youreaed dot at to visit the discord, and
go to our slash.
Speaker 2 (35:17):
Better Offline to check out I'll Reddit. Thank you so
much for listening. Better Offline is a production of cool
Zone Media. For more from cool Zone Media, visit our
website cool Zonemedia dot com, or check us out on
the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.
Host
Ed Zitron
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