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Software giant Oracle corporation is laying off thousands of workers and killing their Texas data center plans, per Reuters and Bloomberg. It appears that their capital expenditures have gotten ahead of their ability to pay for them and now they face the regrettable need to say it out loud shortly before markets close on a Friday afternoon.
This may be indirectly tied to the Iran conflict as Mid East sovereign wealth funds have begun pulling back from investment.
I'm interested to see the fallout of this one. My understanding is that the Ellison clan is fairly tight with the Trump admin.
Beyond that, I have concerns that this may be the match that lit the fuse on AI spending. I have spent the last six months trying to figure out why these valuations made any sense whatsoever. The expense profile of companies like Anthropic and OpenAI looked a lot more like Caterpillar to me than Salesforce. When it came to Oracle, I couldn't make sense of it at all.
In terms of explanations, I only had three explanations I had were that I was:
I still don't know which one it is.
Some of you here are clearly smarter and more educated than me. What do you think I'm missing here? My gut prediction is that this spirals into an even bigger flight from capital in the next six months, which causes holy hell on the retail market because the average investor is more leveraged now than they have been at any point in my lifetime. I'm also assuming it'll kill quite a lot of "LLM Wrapper" companies, like the one run by fear porn expert Matt Shumer.
I assume Google will be OK.
Beyond that, I don't have any idea.
Any predictions?
How many important actors in the AI space need to be religious fanatics for it to start to alter the spending patterns?
There's some subset of people you run into who genuinely believe in the Singularity, that the moment AGI is cracked nothing else matters. The whole concept of worrying about debt load after your company cracks AGI is silly, if another company cracks AGI first then having good profit margins won't save you. If it ushers in the end times, or Gay Luxury Space Communism, worrying about whether you lied to shareholders? Stupid.
The religious fanatics will say whatever they need to in order to push ahead.
Son of a bitch. I hadn't even considered that.
The entire Oracle trajectory makes sense to me. Oracle was very profitable for a long time because they were a legal extortion company that grudgingly shipped a database. Once MS SQL Server and Postgresql got good enough to compete, and once new companies wised up enough to avoid Oracle in the first place, the writing was on the wall. If they didn't diversify they'd die. This mapped to the increasingly wild hail Mary throws they've been making. Each attempt that failed to materialize hyper growth made the next attempt even more important. After their cloud offering ended up a distant fourth place and nfts didn't pan out, what was left? AI, obviously.
Completely ignoring the potential of the technology, Oracle really has no place in the market. They don't have a foundation model: they aren't even trying to make one. At best, they seem to be aiming for some kind of position as a utility company for GPGPU compute. Less charitably, they seem to be selling their credibility by laundering dodgy debt through their corporate credit rating.
I'd assumed that everyone involved in this was as greasy as Ellison, and much like most of the tech industry, I have learned not to make the mistake of anthropomorphizing Larry Ellison.
Doing some more reading, it looks like Anthropic employs a disproportionate number of rationalists and effective altruists. Even if you think those two philosophies have some good parts, they definitely have some peculiar failure modes, and some are worse than others. This is the same philosophy that Anthropic's chief philosopher holds.
I'm not a fan of this at all. I grew up around true believers. I even held the snakes. They're scarier than a con man, because at least the con man has predictable goals.
In short, thank you for bringing this to my attention, and fuck you for putting this evil in my head.
I know this is an aside, but can anyone explain NFTs to me in a way that makes sense? I look at things like the linked article and I still can't figure out why anyone thought they were a good idea or even a workable idea. There must be some steelmanned case for "this is what they can be used for", I just haven't stumbled across it. 'Here's a thing that's totally digital. You can own a piece of it, except you won't own it. It's more like you have a licence for it. Yeah, just like paying Microsoft that subscription fee every month. But you can still make money off it by...' and that's the step where I break down.
If I squint, I can see that "I pay for the right to pixel number three thousand of this digital image" is kinda like owning a limited edition engraving or print. Fine. But it's still not the original. Maybe I can sell my print and get the price or even a bit more for it, but it's not the original drawing that is still in the artist's possession and that holds all the value. If the token is non-fungible, then my pixel three thousand can't be replaced by a swapped-in pixel.
Except it can? Or am I completely stupid? I can sell my token for money because nobody else can own a token like it. It's like selling a house.
But I can own a house to sell. I can't own the original digital piece of art that I'm selling my token from. Or can I?
This is what I'm struggling to understand.
It's basically a fancy, unbreakable, unforgeable Certificate of Authenticity that comes with your aunt's collectible plates. The thing is, Certificates of Authenticity are a huge part of the economy. A huge percentage of what people pay for in many consumer goods is essentially some form of branding value, the provenance of the good rather than the use value. The NFT is a way to totally detach that from the manufacturing process, while also making it more concrete.
Whine about it if you must, but a huge percentage of the global economy is run on the basis that a Rolex Submariner is worth more than an Armida built to the same specs, a shirt from Ralph Lauren or Lacoste is worth more than one from LAA, an Hermes purse is worth more than one from Quince, etc. The material cost or production cost differences between the fashion brand name items and the knockoff is minimal, or sometimes even reversed: LAA almost certainly pays their workers more than Ralph Lauren does. The use value difference is virtually zero for the consumer, except insasmuch as the consumer draws value out of having an "authentic" xyz.
You can argue that there is no material difference between an "authentic" Rolex and a superfake, or between an Hermes Birkin and any other leather tote bag, but a huge portion of the economy is built on the opposite assumption. Is there any sense in which any visual art is worth more when authentic versus printed at a sufficient resolution and quality? The industry is built on that assumption.
The NFT, if accepted as the financial representation of that branding value, allows that value to be entirely controlled and separated from the good itself. The sense of "participation" that people have when buying something from a stylish brand can be marketed separately from the good itself, leaving behind the current crisis level concerns about superfakes and copies.
That's the bit I don't understand. You buy a Rolex, you have a Rolex. Yes, it's ridiculous that we are paying for the branding, but the whole aura of luxury goods is involved with the reputation for quality built up (and we saw the reverse with Burberry, where their reputation as stuffy upper class brand nose-dived once they started selling to chavs, though it seems their sales soared, so that's one example of where taking a brand downmarket paid off).
Buying a certificate that says "You own a picture of a Rolex" is what does not make sense to me.
Exclusivity is what makes luxury goods sell for such a high price, the reputation for high quality, outside of sometimes the very initial push that started the company, is a cope so that one does not have to admit they are that so vain and easily manipulated that they bought a technologically inferior watch (automatics are technologically inferior to quartz watches) at car prices just to keep up with the joneses. Expensive materials and manufacturing techniques are also a cope. If Burberry had kept the exact same quality and sold their products cheaper at prices chavs could now afford, upper-class people would still have turned away from the brand; they were buying because it separated them from people like chavs.
In the digital world, exclusivity is difficult. Digital data is freely copiable. The only way you could get exclusivity of a digital product is through a database; a company would sell you an exclusive digital product and would ensure its exclusivity through control over their database. But that requires that you trust these people when they claim their product will be kept exclusive and that you trust that they will still exist in the future. If you bought an expensive pet or mount in a MMORPG, that lasts until the servers shut down, and if someone makes a server emulator for the game then anyone can have the pet or mount.
NFTs enabled true exclusivity in the digital world; not only is the ownership of an NFT on the ledger not copiable, but you can also guarantee exclusivity through code; the code itself limits issuance, meaning that at no point the issuer can decide to make your NFT mass market and destroy its value. What Yugo Labs and other collectible people figured is that the crypto crowd is ironic enough that they would be willing to purchase exclusivity tethered to something essentially worthless (generated ugly monkey avatars), after it took off they started adding a marketing cope to keep attracting less irony-pilled buyers to drive up prices, that it was actually membership into an club, that it gave you access to unique experiences, etc...
Note that I'm defending monkey pictures here not in the sense that I think they're a good thing, but that they're no more vapid than luxury goods that sell on being purposefully exclusive, they just have less of a fig leaf to hide that vapidness.
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Yeah I can't defend the monkey picture application of NFTs, I'm talking about the underlying technology.
Burberry's sales have been cratering. It's just the lifecycle of the heritage brand. Lately they've been trying to reset to their "heritage" items, but the efforts have been flailing so far. You can tell, because I've read their puff pieces placed in the NYT and WSJ fashion sections, and they don't mention WWI, which is basically the birth of the brand. In WWI the iconic Burberry "Trench" coat existed for the trenches, and it was so good that while it was never issued British officers would buy them with their own money.
What I think could be a useful application of the NFT concept is if we manage to culturally tie the concept of owning an authentic rolex (and the utils that produces for people who own one) into owning the watch + the NFT associated with it.
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It might be good to start with the much older fungible tokens(erc-20 tokens) that have at times been called colored coins. A fungible token is any token where every one is just as good as any others. A lot of erc-20s are used like stock certificates or company bucks, in polymarket bets for instance use the USDC erc-20 token which is pegged to the USD in transactions. There's all sorts of uses for these tokens in the crypto ecosystem, some great like stable coins, some silly, most meme coins you've heard of are erc-20 tokens. With an erc-20 you could sell general admission tickets to a concert so any who shows up can prove their wallet owns at least one concert coin.
Now, what if instead of general admission tickets you want to sell tickets for specific seats? You could create a new erc-20 token for every individual seat and only issue one for each, so whoever has that coin is the owner and no one else is, but that's a lot of overhead if you want to issue a lot of tickets. Enter ERC-721 the NFT. Now you can make unique tokens for unique assets.
Am I understanding this correctly, is the NFT not really "you can sit in this particular seat" because there's one seat but a zillion tokens? or is there some item that backs up the NFT so that you could cash it in or translate it into physical assets?
No, each nft is unique so you can address it to a particular seat. Fungible tokens are not unique so you can only use them for general admission.
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There's NFTs as in "monkey pictures" and NFTs as the technologies. NFTs enable digital property that escapes the issue of control over the database. Right now, digital ownership is based on a) the database admins will not tamper with "your property" and b) if they did, courts will adjudicate the issue and force the database owners to restore your property. In that context, it being your actual property is debatable, it's more of a contract you entered with the company to get certain services that is kept by that same company. The contract's original, binding version is not yours, the original is in the company's control and possession. NFTs means that this contract, for instance, digital show tickets, is inscribed onto a public ledger that is hardened against tampering, not just an entry in Ticketmaster's database. A house is actually a great example of what an NFT could represent; owning a house is not having the house in your pocket, it's having the deed in your name. An NFT could be the deed to a house; it would be unique, impossible to (practically) forge, kept on a public, safe ledger (again, not just an entry in someone's database), and there's all sort of neat stuff you could do with it; keys and locks that unlock with proof of ownership (or a revokable proof of access from the owner). Legal and financial transactions (like mortgages) that are adjudicated automatically by code, etc... Whether we'll get there anytime soon is questionable, but that's what the technology enables. Anything unique could be represented as an NFT.
The monkey picture kind of NFT is mostly just playing around with the economic effect of introducing exclusivity to a market, untethered from any other inherent usage value. The image is typically not even part of the NFT (as in, it's not written into the blockchain, as that is expensive, at least if you want to keep it on the base chain; it's kept externally), so what you're paying for is more like certificate. Often the image is created by an algorithm, so if you have the code and your token's properties you can recreate the image. You could recreate any of the other images too, but you wouldn't have the certificate to them. You can then use proof of ownership of that certificate programatically, for instance your ownership of a monkey could be verified by anyone and used as a ticket to access a party where you get your retinas burned.
Okay, your first example makes better sense, tethering it to something that is a physical store of value and then all the fancy tech comes in with ledgers and so forth.
The monkey pictures stuff never made sense to me.
And I see that FTX sank money into the monkey pictures, then
unsuccessfully suedwere named as colluding to artificially inflate the price in a lawsuit when the value went down after the hype faded:I have to ask once again, how the fudge did this guy fool all the smart EAs and Bay Area rationalists into being his cheerleaders? I think this is one of those cases where a dumb idiot like me would have said "this is too good to be true, also buying monkey pictures is stupid" but the smart people got fooled with "shh, it's all Bayesian calculation and the blockchain and crypto! Crypto is the future!" besides him throwing money at liberal causes (the Carrick Flynn election attempt will live in my heart for aye).
The Sequoia Capital interview will never fail to be a thing of beauty and a joy forever:
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An NFT ticket gives an unforgeable token, but this token only means anything as long as venues accept it, which they'll contract out to ticketmaster anyway, and they can revoke any access rights from a token as easily as if it was in their database.
NFT house ownership is a great example of something only useful for weird speculation. Otherwise, property rights only mean anything at all if enforced by violence, generally a state monopoly. But if you trust the state to respect that right, the state can just as well maintain the database. If you don't, the token being secure doesn't make the house any more secure.
Not that an NFT house deed is very secure, since by their nature they're bearer deeds. Which might be a useful concept to have for various legal purposes, but I don't think most people would be very comfortable with their house ownership being susceptible to burglary or 5$ wrench password cracking, since to the extent that they function as NFTs, transactions made under duress should be irreversible by courts.
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The best use case I've seen is for transferable, non-physical assets that provide value in the real world.
A concrete example would be a lifetime ticket to a band's shows.
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