Latest / Breaking Points with Krystal and Saagar / 9/8/26: Oil Prices Skyrocket, Fmr General Says US Bases Are Gone, Nvidia CEO Says AGI Is Here

Transcript

9/8/26: Oil Prices Skyrocket, Fmr General Says US Bases Are Gone, Nvidia CEO Says AGI Is Here · Breaking Points with Krystal and Saagar

• 0:00
  Speaker 1: Hey guys, Sagar and Crystal here.
• 0:01
  Speaker 2: Independent media just played a truly massive role in this election,
• 0:05
  Speaker 2: and we are so excited about what that means for
• 0:07
  Speaker 2: the future.
• 0:08
  Speaker 1: Of this show. This is the only place where you
• 0:10
  Speaker 1: can find honest perspectives from the left and the right
• 0:12
  Speaker 1: that simply does not exist anywhere else.
• 0:14
  Speaker 2: So if that is something that's important to you, please
• 0:17
  Speaker 2: go to breakingpoints.com, become a member today, and you'll get
• 0:20
  Speaker 2: access to our full shows, unedited, ad-free, and all put
• 0:23
  Speaker 2: together for you every morning in your inbox.
• 0:25
  Speaker 1: We need your help to build the future of independent
• 0:27
  Speaker 1: news media, and we hope to see you at breakingpoints.com.
• 0:33
  Speaker 1: Good morning, everybody. Happy Tuesday. Have an amazing show for
• 0:36
  Speaker 1: everybody today. What do we have, Crystal?
• 0:38
  Speaker 2: Indeed we do. Hope everybody enjoyed the long Labor Day weekend.
• 0:42
  Speaker 2: And it did not break the bank because it was
• 0:44
  Speaker 2: the most expensive Labor Day in history, at least when
• 0:46
  Speaker 2: it comes to gas prices. So a lot to get
• 0:49
  Speaker 2: into there and no break on the horizon in terms
• 0:52
  Speaker 2: of the rising cost of fuel. We're also going to
• 0:55
  Speaker 2: take a look at what is happening in the Strait
• 0:56
  Speaker 2: of Hormuz with friend of the show, Sal. He's going
• 0:59
  Speaker 2: to break down everything. The truth from the fiction about
• 1:01
  Speaker 2: how much is getting through and what we can expect
• 1:03
  Speaker 2: moving forward. OpenAI is sounding the alarm about recursive self-improvement
• 1:08
  Speaker 2: and rapidly escalating capabilities of the AI that they themselves
• 1:13
  Speaker 2: are creating. And some are saying that their new model
• 1:16
  Speaker 2: may constitute AGI. We'll dig into those claims and the
• 1:19
  Speaker 2: latest concerns. We've got a new article with shocking new
• 1:23
  Speaker 2: details of John Fetterman's utter callousness and disinterest in actually
• 1:27
  Speaker 2: serving as a United States senator. And more details, too,
• 1:30
  Speaker 2: about just how obsessed he is with Israel and Fox News.
• 1:34
  Speaker 2: Pretty interesting for a Democratic senator. AOC is collaborating with
• 1:38
  Speaker 2: Maha activists. This comes as there are growing concerns about
• 1:41
  Speaker 2: the nation's food supply. An author of a new book
• 1:44
  Speaker 2: on Leon Black explains his relationship, Leon Black's relationship, not
• 1:47
  Speaker 2: the author's relationship with Jeffrey Epstein, and also how private
• 1:51
  Speaker 2: equity is eating absolutely everything. It's a very important topic.
• 1:55
  Speaker 2: He digs into this through the lens of Leon Black
• 1:57
  Speaker 2: and Apollo, of course. but the private credit market is
• 2:00
  Speaker 2: really important. We haven't probably talked about it enough, It's
• 2:03
  Speaker 2: very consequential in terms of funding the AI build-out, and
• 2:06
  Speaker 2: there have been concerns about how shaky it may be.
• 2:08
  Speaker 2: So I'm definitely looking forward to talking to him about
• 2:10
  Speaker 2: all of that.
• 2:11
  Speaker 1: That's right. And we have our AMA Live for our
• 2:13
  Speaker 1: premium subscribers. You can go ahead and take advantage of that, breakingpoints.com.
• 2:17
  Speaker 1: I'm going to borrow from Ryan. Do it, don't, do
• 2:19
  Speaker 1: whatever you want. He continues to set all-time records here
• 2:23
  Speaker 1: on the show. If you want to help me save face,
• 2:25
  Speaker 1: go ahead and sign up at breakingpoints.com and take advantage
• 2:28
  Speaker 1: of our free month trial. that continues record numbers signing up,
• 2:31
  Speaker 1: apparently only for Ryan Grimm. So come on and help
• 2:35
  Speaker 1: me out or don't, you know, whatever. Do whatever you want.
• 2:38
  Speaker 1: In terms of YouTube, please hit subscribe to our YouTube channel.
• 2:41
  Speaker 1: If you're listening to the podcast, please share an episode
• 2:43
  Speaker 1: with a friend. But as Crystal said, there is some
• 2:45
  Speaker 1: crazy stuff going on in our oil markets on top
• 2:49
  Speaker 1: of the record price for Labor Day weekend. Let's take
• 2:52
  Speaker 1: a look at where things stand as of exactly right now.
• 2:55
  Speaker 1: We're going to start with this. Let's put it up
• 2:57
  Speaker 1: here on the screen. What we see right now is
• 3:00
  Speaker 1: that the Brent price of oil has now approached nearly
• 3:04
  Speaker 1: $ 100 per barrel. And this comes on the heels of
• 3:08
  Speaker 1: some new Houthi attacks on Saudi Aramco facilities that have
• 3:13
  Speaker 1: now injured approximately 73 people, according to to Saudi authorities.
• 3:18
  Speaker 1: I will warn everyone, there is a lot of false
• 3:20
  Speaker 1: video flying around. The reason why we don't have video
• 3:24
  Speaker 1: of the incident is because the Saudis and all of
• 3:27
  Speaker 1: the Gulf states have dramatically cracked down on censorship of
• 3:30
  Speaker 1: video so that we can assess the damage with our
• 3:33
  Speaker 1: own eyes. Let's put that next one up here on
• 3:36
  Speaker 1: the screen. This is from the official Saudi authorities. Houthi
• 3:39
  Speaker 1: attacks on Saudi Arabia have ignited fires at the oil
• 3:41
  Speaker 1: facility and have wounded 73 different people. So the attack was, quote,
• 3:46
  Speaker 1: a major escalation and renewed fighting between the U.S. ally
• 3:50
  Speaker 1: and Iranian proxy group. It has threatened to further destabilize
• 3:53
  Speaker 1: the region, rocked by three years now of war, and
• 3:56
  Speaker 1: deliver a new blow to the global economy. This comes
• 4:00
  Speaker 1: on the heels of another strike that happened on Saudi Arabia. Again,
• 4:04
  Speaker 1: over the weekend, Aramco was hit in those new strikes
• 4:08
  Speaker 1: that happened near the Yemeni border and has repeatedly now
• 4:11
  Speaker 1: been targeted by these Houthi rebels in the campaign against
• 4:14
  Speaker 1: Saudi Arabia. We don't have a full picture, again, of
• 4:17
  Speaker 1: what exactly type of munitions and that were used, but
• 4:20
  Speaker 1: we do know that this is either authorized by the
• 4:23
  Speaker 1: Iranians or, of course, there's this entire separate conflict between
• 4:26
  Speaker 1: the Saudis and the Houthis that have shut down, or
• 4:29
  Speaker 1: at least dramatically curtailed a lot of the oil moving
• 4:31
  Speaker 1: through the Red Sea. All of this combining together for
• 4:35
  Speaker 1: this morning to send the Brent crude price of oil
• 4:38
  Speaker 1: back up to some $ 100 per barrel, which translates roughly
• 4:42
  Speaker 1: to around $ 4 and 20 cents per gallon at the pump.
• 4:46
  Speaker 1: The reason, Crystal, I think it is so important, there
• 4:49
  Speaker 1: are no U.S. munitions flying through the air right now.
• 4:52
  Speaker 1: The last time that we saw the $ 100 per oil price,
• 4:55
  Speaker 1: it was when there was an active war between the
• 4:58
  Speaker 1: United States and Iran. Not to say we aren't still
• 5:00
  Speaker 1: in an active war, but it's different whenever it's a
• 5:02
  Speaker 1: blockade and we're sinking ships and all that. Don't get
• 5:04
  Speaker 1: me wrong, it's all dramatically different. But it does demonstrate
• 5:08
  Speaker 1: that this continues to creep up and up and up.
• 5:12
  Speaker 1: Even without days of sustained bombings, the supply crunch is
• 5:16
  Speaker 1: eventually just going to eat this entire situation. And we
• 5:19
  Speaker 1: are now entering that phase of the conflict. Inventory is
• 5:23
  Speaker 1: very low. The strategic petroleum reserve, people really grasping at straws.
• 5:27
  Speaker 1: Everyone in the United States now feeling it at the pump.
• 5:30
  Speaker 2: That's right. I mean, pretty much everything that could constrain
• 5:33
  Speaker 2: the oil market is constraining the oil market. Of course,
• 5:36
  Speaker 2: we've got the situation in the Middle East with not
• 5:39
  Speaker 2: only Iran, but also the Houthis who are allied with
• 5:42
  Speaker 2: Iran striking and having success striking Saudi Aramco facilities. You
• 5:46
  Speaker 2: have Ukraine continuing to strike Russian oil facilities. That has
• 5:50
  Speaker 2: not ceased. Now you have China beginning to reenter the market.
• 5:54
  Speaker 2: Part of what saved our bacon before from having even
• 5:57
  Speaker 2: higher gas prices was that China was Out of nowhere,
• 5:59
  Speaker 2: dramatically decreased the amount of oil that they were importing.
• 6:03
  Speaker 2: We'll show you in a little bit. That seems to
• 6:04
  Speaker 2: be turning around. There have been some signs of that
• 6:06
  Speaker 2: for some time. The long and short of that is,
• 6:09
  Speaker 2: you know, for the American consumer, they are paying very
• 6:13
  Speaker 2: high prices at the gas pump and there is really
• 6:15
  Speaker 2: no end in sight. We can put a one up
• 6:17
  Speaker 2: on the screen. In terms of a Labor Day weekend,
• 6:20
  Speaker 2: these were the highest fuel prices ever recorded for Labor
• 6:25
  Speaker 2: Day weekend in the U.S. This is, of course, the
• 6:28
  Speaker 2: sort of traditional end of summer. Everybody goes their last
• 6:31
  Speaker 2: hurrah before you start to get into fall. Traditionally, lots
• 6:36
  Speaker 2: of travel, NBC News and other outlets interviewed people who said,
• 6:39
  Speaker 2: you know what, we just stay close to home because
• 6:41
  Speaker 2: I can't afford to. to put gas in my tank,
• 6:44
  Speaker 2: given the level of prices. Now, the regular unleaded gas
• 6:49
  Speaker 2: is not at historic highs. They have been higher. They
• 6:53
  Speaker 2: just haven't been higher on Labor Day weekend. Diesel fuel, however,
• 6:56
  Speaker 2: is at an all-time high, which is something that Ryan
• 7:00
  Speaker 2: and Emily and the rest of the crew covered on Friday.
• 7:03
  Speaker 2: And even if you don't have a diesel vehicle yourself,
• 7:07
  Speaker 2: you are going to feel the impact of that, whether
• 7:10
  Speaker 2: it's from the prices that farmers are paying with their
• 7:13
  Speaker 2: equipment is all diesel, whether it is from the fuel
• 7:16
  Speaker 2: prices that are used to truck all goods around the country.
• 7:19
  Speaker 2: It has a massive inflationary impact and it is at
• 7:22
  Speaker 2: literal all time highs. The energy secretary, Chris Wright, was
• 7:26
  Speaker 2: on the Sunday shows asked about, hey, when might this
• 7:29
  Speaker 2: get under control and things start to come down again?
• 7:31
  Speaker 2: Let's go ahead and take a listen to what he
• 7:33
  Speaker 2: had to say.
• 7:33
  Speaker 3: It is Labor Day weekend, one of the heaviest travel
• 7:36
  Speaker 3: times of the year. The average cost of a gallon
• 7:39
  Speaker 3: of gas this weekend is the highest on record, $ 4. 13.
• 7:44
  Speaker 3: You said on this show five months ago that high
• 7:46
  Speaker 3: gas prices had peaked. But between not just the Iran war,
• 7:50
  Speaker 3: but the Russia-Ukraine war and the U.S. 's own dwindling reserves,
• 7:54
  Speaker 3: isn't it possible gas prices could go up even more?
• 8:00
  Speaker 4: Well, if you look at, I don't want to have
• 8:02
  Speaker 4: an opinion on that, but if you look at the
• 8:04
  Speaker 4: futures market right now, what can you buy gasoline for
• 8:08
  Speaker 4: two months in advance from where we are today? It's
• 8:11
  Speaker 4: down more than 30 cents a gallon from where it
• 8:14
  Speaker 4: is today. So we are hitting the end of the
• 8:17
  Speaker 4: summer driving season. The Trump administration has changed blending requirements
• 8:22
  Speaker 4: for American refiners, which allows them to produce more gasoline
• 8:26
  Speaker 4: just as demand for gasoline is about to start heading down.
• 8:30
  Speaker 4: I should I should point out that New York, Connecticut,
• 8:33
  Speaker 4: California and several other Democrat governed states have decided not
• 8:38
  Speaker 4: to adopt those standards. They apparently want to keep driving
• 8:41
  Speaker 4: up prices on their on their residents. But the Trump
• 8:45
  Speaker 4: administration is doing everything we can to drive energy prices down,
• 8:49
  Speaker 4: as we have since the day we.
• 8:50
  Speaker 5: Arrived in office.
• 8:51
  Speaker 3: Respectfully, as the energy secretary, shouldn't you have an opinion
• 8:55
  Speaker 3: on where gas prices are and where they're going?
• 8:59
  Speaker 4: Well, gasoline production is about to go up and demand
• 9:03
  Speaker 4: is about to go down. So if I had to guess,
• 9:06
  Speaker 4: they're more likely to go down than go up.
• 9:09
  Speaker 1: I don't want to have an opinion.
• 9:10
  Speaker 2: Yeah, I kind of relate to that, Sagar. You know,
• 9:12
  Speaker 2: sometimes I don't want to have an opinion on certain
• 9:14
  Speaker 2: things either.
• 9:15
  Speaker 1: I get it. I get it, Mr.
• 9:17
  Speaker 6: Wright.
• 9:18
  Speaker 1: I'm just a podcaster, though. And yet you are the
• 9:21
  Speaker 1: energy secretary. So a couple of other things, an interesting truth.
• 9:26
  Speaker 1: is a post from Trump last night. Quote, oil prices
• 9:30
  Speaker 1: will drop precipitously like everything else is dropping, but more
• 9:34
  Speaker 1: when we win the war with Iran. $ 3 a gallon,
• 9:36
  Speaker 1: but ultimately below two. It will all happen quickly and
• 9:39
  Speaker 1: Iran will never have a nuclear weapon. MAGA, President DJT.
• 9:43
  Speaker 1: Several interesting things there. Number one, oil prices are high,
• 9:46
  Speaker 1: very rarely acknowledged by the White House. Two, it is
• 9:49
  Speaker 1: because of the war with Iran. Again, usually it's Biden's
• 9:51
  Speaker 1: fault whenever it's from Trump. Three, perhaps the most important,
• 9:55
  Speaker 1: the war has not ended and America has not won
• 9:57
  Speaker 1: it yet. And yet we've been told by Trump. probably
• 10:00
  Speaker 1: 30 what is it what's the counter at 58 times
• 10:02
  Speaker 1: now uh that the united states has won the war
• 10:05
  Speaker 1: with iran he says when we win the war with
• 10:07
  Speaker 1: iran so we haven't won according to the president himself
• 10:10
  Speaker 1: four dollars and 15 cents per gallon gasoline now you
• 10:13
  Speaker 1: mentioned china earlier guys let's put that element up on
• 10:16
  Speaker 1: the screen that's our oil price tear sheet this has
• 10:18
  Speaker 1: been noticed now by several energy analysts, China's crude buying
• 10:22
  Speaker 1: has rebounded as fuel exports have jumped by some 29%.
• 10:27
  Speaker 1: To put this in perspective, China imported some 38 million
• 10:30
  Speaker 1: tons of crude oil in August, which is up 6%
• 10:34
  Speaker 1: to July, further recovering from the decades-long low seen in June.
• 10:39
  Speaker 1: August import level still 23% for the same month last year.
• 10:43
  Speaker 1: So it's not at record levels, but it's just enough
• 10:45
  Speaker 1: to send a little bit more pressure into the system. Remember,
• 10:49
  Speaker 1: for China, because of the overwhelming amount that they take
• 10:53
  Speaker 1: in at a barrel per day number, it's approximately 9
• 10:57
  Speaker 1: million barrels per day that they're taking in. And that's
• 11:00
  Speaker 1: at a quarter lower than where it normally was, or sorry,
• 11:03
  Speaker 1: three quarters lower than where it normally was at this
• 11:05
  Speaker 1: time last August. We don't know if they'll ever return
• 11:08
  Speaker 1: to that, but it's just enough for them to be
• 11:11
  Speaker 1: actually putting some pressure on into the overall system. I
• 11:14
  Speaker 1: saw also that if you actually want to purchase the
• 11:17
  Speaker 1: oil today, the real price in Oman is some $ 107
• 11:21
  Speaker 1: per barrel, which is, I don't understand the exact term
• 11:26
  Speaker 1: for it called backwardation, but what I do know is
• 11:28
  Speaker 1: that energy analysts are like, this is bad. And so
• 11:31
  Speaker 1: that's what I was reading. We pay attention to that.
• 11:33
  Speaker 1: We pay attention to the bad part.
• 11:35
  Speaker 2: We file it and then we invite Rory on and
• 11:37
  Speaker 2: ask him about it.
• 11:38
  Speaker 1: I'll ask him about it the next time that we
• 11:40
  Speaker 1: see him. Putting it all together, What we also see
• 11:43
  Speaker 1: is the situation with Ukraine, where let's put, what is it, A6, please,
• 11:48
  Speaker 1: on the screen, just so you guys can see a
• 11:51
  Speaker 1: little bit more of what the pressure looks like. These
• 11:53
  Speaker 1: Ukrainian drone strikes are crushing Russia's crude oil and export economy.
• 11:59
  Speaker 1: Because right now, the major attacks, as you can see
• 12:03
  Speaker 1: on this chart in front of you, are largely logistics
• 12:06
  Speaker 1: centers and refineries, which are the two places where we're
• 12:09
  Speaker 1: seeing the vast majority of the hits. If you actually
• 12:12
  Speaker 1: take a look at the amount of crude oil that
• 12:14
  Speaker 1: was processed by Russian refineries In January of 2026, it
• 12:19
  Speaker 1: was 5.3 million barrels per day. As of this month,
• 12:24
  Speaker 1: it is now 3.8 million barrels per day. That is
• 12:28
  Speaker 1: billions of dollars that the Kremlin is not able to
• 12:31
  Speaker 1: take in. I believe we have another one, guys, to
• 12:33
  Speaker 1: show the change of price since the start of 2026.
• 12:36
  Speaker 1: So you can see there the millions of barrels per day,
• 12:39
  Speaker 1: which I was talking about. Let's go to the next one.
• 12:41
  Speaker 1: Also to show you the overall aggregate price in the
• 12:43
  Speaker 1: increase of gasoline and diesel. So it is important to
• 12:46
  Speaker 1: note that the situation with Iran is not the only
• 12:50
  Speaker 1: reason why gas prices and diesel prices are where they are.
• 12:53
  Speaker 1: In fact, diesel itself is largely explained both by the
• 12:58
  Speaker 1: supply and the refinery crunch that we have here in
• 13:00
  Speaker 1: the United States, lack of infrastructure, as well as these
• 13:03
  Speaker 1: Ukrainian attacks and significantly depressing the amount of diesel going
• 13:08
  Speaker 1: into the international market. Because what I was reading here
• 13:11
  Speaker 1: with the China situation, particularly, is that they are buyers
• 13:14
  Speaker 1: of Russian oil and particularly of diesel. Same with many
• 13:18
  Speaker 1: of the other customers that are still willing to do
• 13:20
  Speaker 1: business with them. But now they have to look to
• 13:21
  Speaker 1: the open global market. In fact, we've both of us
• 13:25
  Speaker 1: found out before the show, Argentina has oil, which color me...
• 13:29
  Speaker 1: ignorant if you must, but I had no idea. Apparently
• 13:31
  Speaker 1: they're selling it to China. So you can see that
• 13:33
  Speaker 1: people have to go into far-flung places across the world
• 13:36
  Speaker 1: to go in to buy oil these days. All of it,
• 13:38
  Speaker 1: upward pressure. From what I understand as well, Trump summoned
• 13:42
  Speaker 1: a bunch of refiners to the Oval Office and he's like,
• 13:45
  Speaker 1: I need you guys to refine more. They're like, sir,
• 13:47
  Speaker 1: we're refining more than we've ever refined in our history.
• 13:50
  Speaker 1: We're operating at top levels. We literally can't. We have
• 13:53
  Speaker 1: not built a new oil refinery in this country since
• 13:55
  Speaker 1: the 1970s. So it's not exactly like you can just
• 13:59
  Speaker 1: spring one up overnight. All these things combining doesn't look
• 14:03
  Speaker 1: like anything is going to happen overnight. anytime soon to
• 14:06
  Speaker 1: reduce the pressure that remains at the pump. And the
• 14:09
  Speaker 1: diesel situation is already, frankly, in runaway inflation.
• 14:14
  Speaker 2: $ 5.
• 14:14
  Speaker 1: 90 per gallon right now, as of today. My Labor
• 14:17
  Speaker 1: Day weekend, I was driving. I have an electric car,
• 14:20
  Speaker 1: so I don't always see. But I saw $ 6 a gallon.
• 14:24
  Speaker 1: Somebody sent us from Anaheim, California, It's $ 8. 78 that's currently
• 14:31
  Speaker 1: going for diesel per gallon in Anaheim. So you can
• 14:35
  Speaker 1: see how depressing this will be on terms of all
• 14:40
  Speaker 1: of or how sorry, how inflationary this will be in
• 14:43
  Speaker 1: terms of all the input costs for diesel. If you're moving,
• 14:47
  Speaker 1: you're going to have higher diesel price. If you are
• 14:50
  Speaker 1: buying anything that needs to be trucked across the United States,
• 14:53
  Speaker 1: which means probably, what, 100% of groceries, you will see
• 14:56
  Speaker 1: an increase in what that looks like. If you have
• 14:58
  Speaker 1: a lawnmower, I mean, there's so many of these things.
• 15:02
  Speaker 1: If you have a diesel-only truck, if you just are
• 15:05
  Speaker 1: a farmer, you know, and you need to, it's harvest season.
• 15:08
  Speaker 1: is coming up. All of these things are going to
• 15:10
  Speaker 1: show up, not just in your food price today, not
• 15:13
  Speaker 1: even in your gas tank today, but for months and
• 15:15
  Speaker 1: potentially even years to come in terms of the supply crunch.
• 15:19
  Speaker 1: So overall, this is putting significant amounts of pressure on
• 15:26
  Speaker 1: the overall price for both of these commodities. I wanted
• 15:29
  Speaker 1: to mention this petrodollar piece, which was going around from
• 15:33
  Speaker 1: our friend Glenn Deason. Let's put A5 up here on
• 15:36
  Speaker 1: the screen. Chris, I'll let you take it.
• 15:38
  Speaker 2: Yeah, so this is bigger picture and it ties together
• 15:41
  Speaker 2: the situation with the oil market with the bond market
• 15:45
  Speaker 2: crisis where we've covered extensively how yields keep going up
• 15:49
  Speaker 2: and up and up. This is a break with historic norms. Normally,
• 15:54
  Speaker 2: when there is chaos in the world. You have a
• 15:56
  Speaker 2: lot of investors, whether they are wealthy people or whether
• 16:00
  Speaker 2: they are mostly foreign governments who buy U.S. treasuries. It's
• 16:04
  Speaker 2: a flight to safety. The U.S. was seen as so
• 16:07
  Speaker 2: reliable that they would come in. The bond market would
• 16:10
  Speaker 2: be very productive and the rates would come down because
• 16:13
  Speaker 2: if you have a lot of demand, you don't have
• 16:15
  Speaker 2: to pay as much interest to lure in buyers. Now
• 16:19
  Speaker 2: we've seen the opposite. So this digs into, OK, well,
• 16:22
  Speaker 2: what's going on here? And what they talk about is
• 16:26
  Speaker 2: that the Iran war has broken the petrodollar. What is
• 16:29
  Speaker 2: the petrodollar? The way they explain it in this article,
• 16:31
  Speaker 2: which I thought was very simple and very easy to understand,
• 16:34
  Speaker 2: they say this arrangement was elegant in its circularity. Oil
• 16:37
  Speaker 2: consumers pay dollars for energy. Those dollars flow to Riyadh
• 16:41
  Speaker 2: and Abu Dhabi. And from there, back into Washington's debt.
• 16:44
  Speaker 2: For 50 years, this petrodollar loop quietly subsidized American borrowing costs.
• 16:48
  Speaker 2: and cemented the greenbacks role as the world's reserve currency.
• 16:51
  Speaker 2: So the idea is basically we made a deal with
• 16:53
  Speaker 2: this region. We're going to provide for your defense. You
• 16:56
  Speaker 2: are going to do all of your transaction oil transactions
• 16:59
  Speaker 2: in dollars. Then when you become very wealthy in dollars,
• 17:02
  Speaker 2: guess what? That's going to flow back into our economy.
• 17:05
  Speaker 2: That's going to look like buying a lot of U.S. treasuries.
• 17:07
  Speaker 2: It's also going to look like buying a lot of stocks.
• 17:09
  Speaker 2: It's going to look like investing in things like live golf.
• 17:12
  Speaker 2: It's going to look like, you know, also building doing
• 17:14
  Speaker 2: the A.I.
• 17:15
  Speaker 1: Build out.
• 17:15
  Speaker 2: But for now, let's just focus on the on the
• 17:18
  Speaker 2: bond arrangement. So that is falling apart for a number
• 17:21
  Speaker 2: of reasons. Number one. A lot of countries around the
• 17:25
  Speaker 2: world are struggling with a depreciating currency. They're intervening in
• 17:29
  Speaker 2: their currency markets. The way that they're doing that is
• 17:31
  Speaker 2: by selling their own stockpiles of U.S.
• 17:34
  Speaker 1: Treasuries.
• 17:35
  Speaker 2: So that is leading to a reduction in the bond market.
• 17:37
  Speaker 2: Number two, normally in an oil crisis, when prices go up,
• 17:42
  Speaker 2: The Middle East benefits greatly. They become even richer. And
• 17:45
  Speaker 2: then those dollars again flow back into our economy. Well,
• 17:48
  Speaker 2: since they are struggling to get their oil out, it
• 17:51
  Speaker 2: is not having the normal impact. So that's what they
• 17:54
  Speaker 2: mean when they say here that the petrodollar is breaking down.
• 17:58
  Speaker 2: That is what really undergirds the U.S. as the world's
• 18:01
  Speaker 2: reserve currency. Obviously, I talked already about the impacts on
• 18:04
  Speaker 2: the bond market. That means you're going to pay higher
• 18:06
  Speaker 2: interest rates. That means the U.S. government is paying higher
• 18:08
  Speaker 2: interest rates. So it makes it harder to service the debt.
• 18:11
  Speaker 2: So these are the sorts of things that we have
• 18:12
  Speaker 2: to really pay attention to. And again, worth underscoring, this
• 18:16
  Speaker 2: is a break from historic norms, typically in any sort
• 18:20
  Speaker 2: of crisis, even one involving us. even one involving the
• 18:23
  Speaker 2: Middle East. There is a flight to safety in U.S.
• 18:26
  Speaker 2: Treasury bonds. We are not seeing that. And the petrodollar
• 18:29
  Speaker 2: is very much linked to that.
• 18:30
  Speaker 1: Yeah, absolutely. Also, and more inflation news. Just saw this.
• 18:33
  Speaker 1: Canada just hit the United States with 50% new tariffs
• 18:37
  Speaker 1: in retaliation, which it looks like will hit consumer goods
• 18:41
  Speaker 1: in a lot of these border states pretty hard. So
• 18:44
  Speaker 1: when we do our midterms coverage on Thursday, we'll have
• 18:46
  Speaker 1: a lot to discuss about how inflation is going to
• 18:50
  Speaker 1: play a part in that. We have Sal from What's
• 18:52
  Speaker 1: Going On with Shipping standing by. Let's get to it.
• 18:57
  Speaker 1: Joining us now is our great friend Sal Mercogliano of
• 19:00
  Speaker 1: the What's Going On with Shipping channel. Sal, it's great
• 19:02
  Speaker 1: to have you back on the show. Thank you for
• 19:04
  Speaker 1: joining us.
• 19:05
  Speaker 5: Oh, thank you for having me again.
• 19:06
  Speaker 1: Of course. So, Sal, there's a lot going on with
• 19:08
  Speaker 1: the Strait of Hormuz. Fact from fiction, that's something that
• 19:10
  Speaker 1: we really want to emphasize. You were by far the
• 19:13
  Speaker 1: first leading analyst to point out all the logistics problems
• 19:17
  Speaker 1: of resupplying U.S. ships in the Middle East in the
• 19:20
  Speaker 1: midst of the destruction of our bases. We are now
• 19:22
  Speaker 1: hearing that parroted from the highest of the highs of
• 19:25
  Speaker 1: the U.S. military establishment, from the former CIA director, former
• 19:29
  Speaker 1: CENTCOM commander, David Petraeus, admitting this outright. Let's take a listen.
• 19:33
  Speaker 1: We'll get your reaction.
• 19:34
  Speaker 6: It's using that as enormous leverage, both the ability to
• 19:38
  Speaker 6: hold our bases, although we have moved a lot of
• 19:41
  Speaker 6: the assets that used to be in the eastern Gulf states.
• 19:45
  Speaker 6: Those bases are no longer viable. but it's using the
• 19:48
  Speaker 6: ability to strike critical energy infrastructure. Keep in mind, they
• 19:53
  Speaker 6: took out 15% or 17% of the LNG capacity of
• 19:58
  Speaker 6: Qatar for three to five years. They've hit several of
• 20:01
  Speaker 6: the other major critical energy infrastructure sites in the Gulf
• 20:05
  Speaker 6: states happily without the same kind of damage.
• 20:09
  Speaker 1: So Petraeus, they're basically saying it's no longer viable, these U.S. bases.
• 20:14
  Speaker 1: What's your assessment of that as you continue to look
• 20:16
  Speaker 1: at the logistics challenges the United States faces? Well, we
• 20:20
  Speaker 1: think the U.S.
• 20:21
  Speaker 7: Was well aware of this before the war even started.
• 20:23
  Speaker 7: I mean, we saw the removal of U.S. Navy vessels
• 20:26
  Speaker 7: and Coast Guard vessels from the Persian Gulf on February 28th.
• 20:30
  Speaker 7: But the most significant is literally since the end of
• 20:33
  Speaker 7: World War II, we have been fighting conflicts with forward
• 20:36
  Speaker 7: bases very closely. to the areas that we fight the wars,
• 20:41
  Speaker 7: whether it's Korea, Vietnam, or in the Middle East, this
• 20:44
  Speaker 7: conflict is substantially different. You have to go and project
• 20:47
  Speaker 7: forces from Diego Garcia, which is 2,200 miles away from
• 20:52
  Speaker 7: the battlefront. But even then, Diego Garcia doesn't have the
• 20:56
  Speaker 7: material needed. It's got to be forward to there. So
• 20:59
  Speaker 7: what you see is a really protracted, long distance that
• 21:03
  Speaker 7: the U.S. is having to wage this conflict from. And
• 21:07
  Speaker 7: this is why we're hearing problems not just on board
• 21:09
  Speaker 7: the Abraham Lincoln, but we're going to hear it on
• 21:11
  Speaker 7: board the other.
• 21:12
  Speaker 5: Aircraft carriers out there, but more importantly, even on the destroyers.
• 21:15
  Speaker 7: And it just makes it extremely hard to maintain just
• 21:19
  Speaker 7: the minimum of supplies going.
• 21:21
  Speaker 5: To the ships.
• 21:22
  Speaker 2: So Sal, picking up on that, we had covered with
• 21:24
  Speaker 2: you before the concerns that were coming primarily from the Lincoln.
• 21:28
  Speaker 2: Now those sailors and Marines are getting a break at
• 21:31
  Speaker 2: this point. But lay on some of the challenges that
• 21:34
  Speaker 2: will remain for the carriers and the ships that remain
• 21:37
  Speaker 2: in the region. What are they facing? Because we are
• 21:39
  Speaker 2: seeing a lot of top military brass sounding the alarm
• 21:42
  Speaker 2: either through selective leaks or through their non-concurrents saying that
• 21:47
  Speaker 2: this is just too much for too long for the
• 21:49
  Speaker 2: military to be able to sustain operations.
• 21:52
  Speaker 7: Yeah, well, while the Lincoln makes headlines pulling into Pattaya
• 21:56
  Speaker 7: Beach there in Thailand, it left behind several of its destroyers.
• 21:59
  Speaker 7: And so the ships that initially deployed with the Lincoln
• 22:02
  Speaker 7: are remaining behind. And in a session out in San
• 22:06
  Speaker 7: Diego among flag officers, there was a discussion about the
• 22:10
  Speaker 7: need to keep American destroyers up to a dozen to
• 22:14
  Speaker 7: maybe 16 of them in the Persian Gulf, Indian Ocean,
• 22:18
  Speaker 7: northern Arabian Sea area. a long protracted time. This is
• 22:22
  Speaker 7: going to have a huge wear on the US Navy.
• 22:25
  Speaker 7: While the US Navy can field about 70 destroyers, when
• 22:30
  Speaker 7: you start looking at the fact that you can only
• 22:32
  Speaker 7: keep about a third of them forward deployed at any
• 22:35
  Speaker 7: one time, what you're going to see is a protracted
• 22:38
  Speaker 7: degradation in the ships, both the crews and in the maintenance.
• 22:42
  Speaker 7: It's going to be very hard to maintain a wartime
• 22:46
  Speaker 7: level of operations with literally a peacetime fleet and, more importantly,
• 22:51
  Speaker 7: a peacetime logistics setup and a peacetime repair capability. So
• 22:56
  Speaker 7: we're doing damage to the fleet so that in any
• 22:59
  Speaker 7: future conflict, we may not have the number of ships
• 23:02
  Speaker 7: available to put into the field that we currently have.
• 23:07
  Speaker 1: So I want to get your reaction. I know you
• 23:08
  Speaker 1: were reacting to this as well about ship fleet. fuel oil.
• 23:12
  Speaker 1: And I'm wondering, because there's been a more recent discussion
• 23:15
  Speaker 1: of this, guys, you can put this up on the screen, B2,
• 23:17
  Speaker 1: ship fuel oil shortage looms as refiners are strained by
• 23:20
  Speaker 1: war favor and other products. Do you put this in
• 23:23
  Speaker 1: context for us? Obviously, we just did an entire segment
• 23:26
  Speaker 1: about diesel, gasoline. I think we understand things from the
• 23:29
  Speaker 1: consumer level. But what exactly are we looking at? And
• 23:32
  Speaker 1: what would that impact global shipping in your estimation?
• 23:36
  Speaker 7: Well, this impacts everything. You're talking about the fuel to
• 23:39
  Speaker 7: move ships around the world. Prior to the war, fuel
• 23:42
  Speaker 7: cost was about $ 550 a ton. To put that in
• 23:46
  Speaker 7: a context, a ship burns maybe about 100 tons of
• 23:49
  Speaker 7: fuel a day. All of a sudden, when the war started,
• 23:52
  Speaker 7: fuel costs absolutely spiked. We talked about anywhere from double
• 23:56
  Speaker 7: to sometimes triple the amount of fuel because a lot
• 23:59
  Speaker 7: of fuel oil, the bunker fuel needed for the ships,
• 24:01
  Speaker 7: was coming out of the Middle East. Also, one of
• 24:04
  Speaker 7: the key fueling points was the Middle East, and now
• 24:06
  Speaker 7: ships weren't going there.
• 24:08
  Speaker 5: Now, what we've seen is.
• 24:09
  Speaker 7: Fuel costs have come down, but they still remain high,
• 24:11
  Speaker 7: anywhere from about $ 800 to $ 900 a ton. But what
• 24:16
  Speaker 7: the reports we're getting from places like Singapore and other
• 24:19
  Speaker 7: major fueling hubs is that they're running low on bunker fuel.
• 24:24
  Speaker 5: This impacts everything. We're talking about container ships, car carriers,
• 24:27
  Speaker 5: bulk carriers.
• 24:29
  Speaker 7: What we're seeing is the cost to move goods around
• 24:31
  Speaker 7: the entire planet is increasing significantly. because of the fuel costs,
• 24:35
  Speaker 7: much like you're seeing diesel and gasoline being more expensive
• 24:38
  Speaker 7: at the pump. We're seeing that on a global scale
• 24:42
  Speaker 7: at these massive bunkering hubs. But more importantly, the tanks
• 24:46
  Speaker 7: are getting low. And that's going to be a critical
• 24:48
  Speaker 7: issue if all of a sudden we start running out
• 24:50
  Speaker 7: of the ability to fuel ships.
• 24:52
  Speaker 2: What would be some of the signs that we are
• 24:54
  Speaker 2: getting close to that level of scarcity in the supply?
• 25:00
  Speaker 7: Well, we're kind of seeing it in that, for example,
• 25:02
  Speaker 7: the container carriers are consolidating. They're kind of canceling voyages.
• 25:06
  Speaker 7: They're putting loads together on ships, which means you're going
• 25:10
  Speaker 7: to start slowing down the global supply chain. You're consolidating,
• 25:13
  Speaker 7: using the much larger ships to move goods around. We'll
• 25:17
  Speaker 7: also begin to see some cancellations of voyages, where that
• 25:20
  Speaker 7: comes in. And what will start to happen is literally
• 25:23
  Speaker 7: a bidding war. I think before we see that really
• 25:26
  Speaker 7: take hold, we'll see another spike in fuel prices. It'll
• 25:30
  Speaker 7: go up from where we're sitting at right now, about
• 25:32
  Speaker 7: $ 850 a ton. We're going to start seeing that begin
• 25:36
  Speaker 7: to go up. And when we see that go up,
• 25:38
  Speaker 7: particularly in the large bunkering hubs, that's going to be
• 25:41
  Speaker 7: the big indication that this is starting to take hold.
• 25:43
  Speaker 1: Got it. So, loaded question. What is actually happening in
• 25:47
  Speaker 1: the Strait of Formos? Because the administration is constantly telling
• 25:52
  Speaker 1: us about 17 million barrels of of oil have moved,
• 25:55
  Speaker 1: which would be shocking. I think that's like 20, 25
• 25:58
  Speaker 1: was the normal amount that would move through before the war.
• 26:01
  Speaker 1: They've been bragging. The U.S. media outlets are putting out
• 26:04
  Speaker 1: these heroic stories, you know, almost bin Laden-esque. Navy SEALs
• 26:08
  Speaker 1: for months are donning wetsuits and exploding hidden sea mines.
• 26:13
  Speaker 1: I don't doubt that it happened. I just doubt whether
• 26:15
  Speaker 1: all of the mines themselves are gone. They're claiming total
• 26:19
  Speaker 1: and complete control of the strait. What do you actually see?
• 26:24
  Speaker 7: So what we had prior to February 28th was a nice,
• 26:27
  Speaker 7: steady flow of about 130 ships coming out a day.
• 26:31
  Speaker 7: What we're getting right now is a pulse. They come
• 26:34
  Speaker 7: out in groups. These convoys are being run by the
• 26:36
  Speaker 7: United States. So when you hear Secretary Best and Secretary
• 26:39
  Speaker 7: Wright come out and say, OK, we moved 18 million barrels,
• 26:42
  Speaker 7: I don't deny that they did that. The problem is
• 26:44
  Speaker 7: you need to look at the average because what you're
• 26:47
  Speaker 7: doing is pushing a convoy of ships through at night,
• 26:50
  Speaker 7: through the Strait of Hormuz, guarded by U.S. aircraft, fixed-wing helicopters,
• 26:55
  Speaker 7: probably some drones, both surface and air, moving through. But
• 26:58
  Speaker 7: then the problem you have is what we're seeing, and
• 27:01
  Speaker 7: we're seeing this because you can see it visually. You
• 27:03
  Speaker 7: can't see the ships go through the Strait of Hormuz
• 27:05
  Speaker 7: either on the AIS tracking or by satellite because they
• 27:09
  Speaker 7: do it at night. But the next morning, you see
• 27:11
  Speaker 7: ships arrive in the Gulf of Oman, and what they're
• 27:13
  Speaker 7: doing is transferring their fuel to other ships. They're coming alongside,
• 27:17
  Speaker 7: doing what we call a ship-to-ship transfer. The problem is
• 27:21
  Speaker 7: that takes days to do this. It's about a five-day
• 27:24
  Speaker 7: round trip from inside the Persian Gulf, loading up with fuel,
• 27:27
  Speaker 7: coming out, and then going back. So we're not getting
• 27:31
  Speaker 7: 18 million barrels a day. We're probably getting somewhere in
• 27:32
  Speaker 7: the range of about 8 to 9 million. There's no
• 27:34
  Speaker 7: doubt that we're getting more oil out than we were
• 27:36
  Speaker 7: before the kind of the real big drop-off we had
• 27:41
  Speaker 7: in April and May.
• 27:44
  Speaker 5: So we are getting fuel out. The problem is we're
• 27:46
  Speaker 5: not making up.
• 27:47
  Speaker 7: The difference between There is a huge, what I call
• 27:50
  Speaker 7: a donut hole, that was created after February 28th until
• 27:53
  Speaker 7: roughly around June, where several billion barrels of oil are
• 27:57
  Speaker 7: missing from the world's oil supply.
• 27:59
  Speaker 5: And what we see right now when you.
• 28:00
  Speaker 7: Look at the levels is global supply is down, which
• 28:04
  Speaker 7: means if we have any sort of disturbance, could be
• 28:07
  Speaker 7: a hurricane in the Gulf affecting Texas and Louisiana, could
• 28:11
  Speaker 7: be another geopolitical hit, that's going to cause shock to
• 28:14
  Speaker 7: the system. And when you get down below those margins,
• 28:17
  Speaker 7: you're very susceptible to disruptions. And I think that's where
• 28:21
  Speaker 7: the government's being a little bit disingenuous in their numbers.
• 28:24
  Speaker 7: They really need to be giving us the seven-day averages.
• 28:26
  Speaker 1: Just a quick follow-up on that point, Sal. You said convoy.
• 28:29
  Speaker 1: I didn't realize. Could you compare this maybe to, I mean,
• 28:32
  Speaker 1: it's not the same, but like the Battle of the Atlantic,
• 28:34
  Speaker 1: immediately that's what I think of is that you need
• 28:37
  Speaker 1: a significant amount of protection, like in the Second World War,
• 28:41
  Speaker 1: the convoy system, which we all recognized was inefficient, but
• 28:44
  Speaker 1: we had to do it to keep it protected. So
• 28:46
  Speaker 1: when the United States says it controls the Strait of Hormuz,
• 28:50
  Speaker 1: if you need Black Hawk helicopters moving under the cover
• 28:53
  Speaker 1: of night, ship-to-ship transfers, long convoys, I mean, this seems
• 28:57
  Speaker 1: an enormously expensive operation compared to where things were before?
• 29:04
  Speaker 1: Like when they say the word control and what they're
• 29:06
  Speaker 1: really talking about is almost, you know, forever war type
• 29:09
  Speaker 1: deployment with all the logistics challenges. Does that not at
• 29:12
  Speaker 1: least lend some credence to significant, I wouldn't say Iranian
• 29:15
  Speaker 1: control per se of the straight, but they can dictate
• 29:18
  Speaker 1: events if they want to. Is that how you see it?
• 29:21
  Speaker 7: I see the Iranians contesting the straight of war moves.
• 29:24
  Speaker 7: It's very difficult for the Iranians to control and much
• 29:27
  Speaker 7: like it's difficult for the U.S.
• 29:28
  Speaker 5: To control what the U.S.
• 29:29
  Speaker 7: Is doing is using state-operated tanker companies like KOTC from Kuwait,
• 29:35
  Speaker 7: Bari from Saudi Arabia, Adnok from the UAE.
• 29:38
  Speaker 5: They're putting their ships together.
• 29:40
  Speaker 7: They meet at a kind of convoy point just north
• 29:43
  Speaker 7: of Abu Dhabi. And then what we see is those
• 29:45
  Speaker 7: ships disappear from the satellites, and then they show up
• 29:48
  Speaker 7: over in the Gulf of Oman, meaning they ran the straight.
• 29:51
  Speaker 5: And so the U.S.
• 29:51
  Speaker 7: Is putting together these convoys. We don't get this information
• 29:54
  Speaker 7: from CENTCOM. We have to kind of piece it together.
• 29:57
  Speaker 7: And what we see is those ships will arrive. This
• 29:59
  Speaker 7: is a big undertaking by CENTCOM. It's a big diversion.
• 30:02
  Speaker 7: It's one of the reasons why the U.S. couldn't do
• 30:04
  Speaker 7: this until they stopped offensive operations against Iran, because it's
• 30:08
  Speaker 7: eating up so many military assets, fixed-wing helicopters. We don't
• 30:13
  Speaker 7: think they're putting naval vessels into the Strait of Hormuz,
• 30:17
  Speaker 7: but they're probably putting them into the Gulf of Oman
• 30:20
  Speaker 7: to protect the ships in those anchorages.
• 30:22
  Speaker 5: So it Who controls the Strait of Hormuz? Well, the U.S.
• 30:26
  Speaker 5: controls it when they're moving that convoy through. They're providing protection.
• 30:29
  Speaker 7: But as we've seen last month in August, the Iranians
• 30:33
  Speaker 7: can contest that. They hit at least half a dozen ships,
• 30:36
  Speaker 7: including some significantly, killing two mariners on a Saudi Arabian ship.
• 30:40
  Speaker 5: So in many ways, this.
• 30:42
  Speaker 7: Is kind of like a fight off the Guadalcanal in
• 30:46
  Speaker 7: 1942 where control of the waterways off there switched from
• 30:50
  Speaker 7: daylight to evening.
• 30:51
  Speaker 1: Oh, interesting.
• 30:52
  Speaker 2: Sal, regardless of what original goals were proclaimed in this war,
• 30:58
  Speaker 2: I think we can all see pretty clearly now it
• 30:59
  Speaker 2: has collapsed down to we've got to control the Strait
• 31:02
  Speaker 2: of Hormuz.
• 31:03
  Speaker 1: The U.S.
• 31:04
  Speaker 2: Feels that it's imperative that Iran not take control. Iran
• 31:08
  Speaker 2: feels it's imperative that they not give up control. Both
• 31:11
  Speaker 2: sides are trying to exact enough pain to force the
• 31:15
  Speaker 2: other side to capitulate. At the moment, it seems to
• 31:17
  Speaker 2: be in somewhat of a stalemate. situation where neither side
• 31:20
  Speaker 2: is feeling quite enough pain to completely cave in and capitulate.
• 31:24
  Speaker 2: Iran is now threatening to hit U.S. military vessels in
• 31:29
  Speaker 2: the region. They have they have appeared to attempt that,
• 31:32
  Speaker 2: but have been unsuccessful as far as we know so far.
• 31:35
  Speaker 2: How much would that change the game and the calculus
• 31:39
  Speaker 2: if they were actually able to hit some U.S.
• 31:41
  Speaker 1: Warships?
• 31:43
  Speaker 7: Well, we had the statement from Admiral Cooper, CENTCOM, about
• 31:47
  Speaker 7: a ballistic missile attack on U.S. forces, specifically the aircraft
• 31:51
  Speaker 7: carrier George Washington and a escorting destroyer. That resulted in
• 31:57
  Speaker 7: two things that had not happened up to this point.
• 31:59
  Speaker 5: Number one, the U.S.
• 32:01
  Speaker 7: Struck two Iranian tankers, one off Karg Island, the Downey,
• 32:04
  Speaker 7: another one off the port of Jask, the Stark 1.
• 32:07
  Speaker 5: Both those tankers were loaded.
• 32:08
  Speaker 6: The U.S.
• 32:09
  Speaker 7: Had not hit a loaded tanker up to this point. Now,
• 32:12
  Speaker 7: They were very controlled hits. They took out the steering
• 32:14
  Speaker 7: gear so the ships couldn't maneuver. But the third ship
• 32:18
  Speaker 7: they hit, the Kylo, which is this Comoros flag, dark
• 32:21
  Speaker 7: fleet tanker that was empty, the US told the crew
• 32:24
  Speaker 7: to abandon ship. And they utterly destroyed this vessel in
• 32:27
  Speaker 7: a very dramatic fashion. I mean, this is the largest
• 32:30
  Speaker 7: ship sunk by the US Navy since World War II.
• 32:34
  Speaker 7: It was a massive tanker that was sunk. And so
• 32:37
  Speaker 7: this is really, we talked about the tanker for tanker.
• 32:40
  Speaker 7: proposal put forward by the U.S. If you hit tankers
• 32:43
  Speaker 7: going through the Strait of Hormuz, we will hit your tankers.
• 32:45
  Speaker 7: This is definitely an upscale. This is demonstrating if you
• 32:49
  Speaker 7: go against U.S. Navy warships, this is how we're going
• 32:52
  Speaker 7: to respond.
• 32:53
  Speaker 5: Now, the U.S. blockade has been very effective.
• 32:55
  Speaker 7: We don't believe a barrel of oil has come out
• 32:58
  Speaker 7: of Iran since July. And their tanker fleet is very exposed.
• 33:02
  Speaker 7: There's about 20 of them at anchor off of Sri
• 33:05
  Speaker 7: Lanka in the Indian Ocean. There's about another seven off
• 33:08
  Speaker 7: the coast of Malaysia. Those are ships they have to
• 33:11
  Speaker 7: be worried about being targeted by the US. So it's
• 33:14
  Speaker 7: a bit of brakesmanship here. Which economy breaks first? Is
• 33:18
  Speaker 7: it the Iranian economy? Does the Western economies not break,
• 33:22
  Speaker 7: but do they bring enough pressure against the US to
• 33:25
  Speaker 7: go to the negotiating table?
• 33:28
  Speaker 5: It's really a challenge here.
• 33:30
  Speaker 7: We're kind of seeing it very similar to what's happening
• 33:32
  Speaker 7: in Ukraine and Russia right now with their economic warfare
• 33:36
  Speaker 7: targeting ships in the Black Sea.
• 33:37
  Speaker 6: Right.
• 33:38
  Speaker 1: I also wanted to ask you about the Red Sea, Sal,
• 33:40
  Speaker 1: while we have you, because everyone's talking about the Strait
• 33:43
  Speaker 1: of Hormuz, but they're not looking at the total amount
• 33:45
  Speaker 1: of oil coming out of the region. How does the
• 33:48
  Speaker 1: Houthi blockade remain today? Are they still able to deter
• 33:53
  Speaker 1: the majority of Saudi traffic? What does the total amount
• 33:56
  Speaker 1: of ships coming through the Bab al-Mandeb Strait look like
• 33:59
  Speaker 1: these days?
• 34:01
  Speaker 5: Well, I'll give you the example.
• 34:02
  Speaker 7: Today, a very large crude carrier came out of Saudi Arabia,
• 34:06
  Speaker 7: the port of Yambu. Typically, that ship would go through
• 34:09
  Speaker 7: the Bab el-Mandab and head to Asia. Instead, that tanker
• 34:12
  Speaker 7: came out half-loaded, went through the Suez Canal because you
• 34:15
  Speaker 7: can't go through fully loaded through the Suez, had to
• 34:18
  Speaker 7: take half the load on the other side, load up,
• 34:21
  Speaker 7: and now is sailing around Africa.
• 34:23
  Speaker 5: That is a protracted delay.
• 34:25
  Speaker 7: Yes, you're getting 2 million barrels of oil out as
• 34:28
  Speaker 7: part of your calculations, but But it's taking you an
• 34:31
  Speaker 7: extra month along with the additional costs to get that
• 34:34
  Speaker 7: ship to Korea. So this is where I think some
• 34:37
  Speaker 7: of those numbers we get is very confusing. OK, 2
• 34:40
  Speaker 7: million are out, but it's going to take 30 extra
• 34:42
  Speaker 7: days to get there. The cost is much more. You
• 34:45
  Speaker 7: got to pay for a Suez Canal toll, which is
• 34:47
  Speaker 7: about half a million dollars. You've got to load, which
• 34:50
  Speaker 7: is going to cost money, and you're not getting the
• 34:52
  Speaker 7: flow you need. And again, this is the kind of
• 34:54
  Speaker 7: issues we're seeing where we're seeing those delays, whether it's
• 34:57
  Speaker 7: because of the Houthi at the Bab al-Mandab or the
• 35:01
  Speaker 7: Iranians at the Strait of Hormuz where it's taking days
• 35:03
  Speaker 7: to do the ship-to-ship transfers.
• 35:06
  Speaker 5: And this is the problem is.
• 35:07
  Speaker 7: That while we do this, the overall levels of oil
• 35:11
  Speaker 7: on the planet, both afloat and ashore, are still going down.
• 35:15
  Speaker 7: And this is where we start really worrying about that
• 35:17
  Speaker 7: criticality of hitting a level where there's not enough crude
• 35:20
  Speaker 7: oil to go into refineries and we start cutting production
• 35:24
  Speaker 7: because now China has restarted its production. And that huge
• 35:28
  Speaker 7: sucking sound we're hearing is the demand for oil going
• 35:32
  Speaker 7: to China.
• 35:33
  Speaker 1: As always, so knowledgeable, Sal. Thank you so, so much. Yeah,
• 35:36
  Speaker 1: that's fascinating. Also, when I'm thinking 30 days, how much
• 35:41
  Speaker 1: fuel oil do they say these things burn per day?
• 35:44
  Speaker 7: You burn anywhere from about 50 to 150 tons per day.
• 35:48
  Speaker 7: So I mean, when you start talking about, again, going
• 35:50
  Speaker 7: from $ 500 to $ 850 a ton and potentially up to
• 35:55
  Speaker 7: 1,000 tons, this is costing money. And again, we're not
• 35:57
  Speaker 7: just talking about tankers. We're talking about container ships. So
• 35:59
  Speaker 7: the goods that are coming to the shelves right now
• 36:01
  Speaker 7: are costing more. We're seeing that surcharge. What we haven't
• 36:04
  Speaker 7: talked about is the escalating price to move containers across
• 36:08
  Speaker 7: the Pacific.
• 36:08
  Speaker 5: That has spiked significantly.
• 36:10
  Speaker 7: Going across where it used to be about $ 1, 500 to
• 36:13
  Speaker 7: $ 2, 000 a box. It's over $ 4, 000, and in some cases,
• 36:16
  Speaker 7: spiking as high as $ 9, 000 a box. So when we
• 36:19
  Speaker 7: start talking about Christmas season, I know it's the end
• 36:21
  Speaker 7: of the summer here, but all of a sudden, all
• 36:22
  Speaker 7: those goods that are going to be on the shelves
• 36:24
  Speaker 7: in a few months for Christmas are gonna cost a
• 36:27
  Speaker 7: lot more because of those transportation costs.
• 36:29
  Speaker 1: Makes sense. Yeah, I was just trying to do some
• 36:30
  Speaker 1: back napkin math. I'm like, 30 extra days, 100 tons
• 36:33
  Speaker 1: of fuel. I was like, that's a bunch of time.
• 36:35
  Speaker 1: I was like, wow, these costs add up real quick.
• 36:38
  Speaker 1: Everybody go and subscribe to Sal's channel. Sal, we'll send
• 36:41
  Speaker 1: you a collaboration link as well to make sure this
• 36:43
  Speaker 1: gets out to everybody. Thank you very much for taking
• 36:45
  Speaker 1: the time and for joining us.
• 36:46
  Speaker 3: Thanks, Sal.
• 36:47
  Speaker 5: Thank you for having me this morning.
• 36:48
  Speaker 2: Our pleasure. So right as everyone's concerns....
• 37:01
  Speaker 8: Can you draw me a small yellow circle?
• 37:04
  Speaker 6: Done.
• 37:05
  Speaker 8: Okay, take this and make it the window of a
• 37:08
  Speaker 8: rocket ship. I like this, but can you make it
• 37:15
  Speaker 8: a lot more detailed?
• 37:16
  Speaker 5: Your yellow circle is now the window.
• 37:18
  Speaker 6: On a rocket.
• 37:19
  Speaker 8: Okay, this is awesome. Now make it a 3D model
• 37:21
  Speaker 8: in Blender.
• 37:22
  Speaker 1: Opening Blender.
• 37:26
  Speaker 6: So my law firm needs a licensing agreement template.
• 37:29
  Speaker 1: Can you generate a draft template for the lawyers at
• 37:31
  Speaker 1: my firm to have a look at? Sure thing.
• 37:35
  Speaker 2: While you're doing that, I want to play tennis this afternoon.
• 37:38
  Speaker 2: So can you look for a court for me in
• 37:40
  Speaker 2: the Lower Haight?
• 37:41
  Speaker 5: Checking now.
• 37:42
  Speaker 1: I'll see what I can find.
• 37:43
  Speaker 2: Can you include the photo that I have of it
• 37:45
  Speaker 2: in my downloads folder? There's like a slight dent in it.
• 37:50
  Speaker 2: It's also saved in my downloads folder. Can you put
• 37:53
  Speaker 2: in the description that it's just slightly damaged? So, Sagar,
• 37:57
  Speaker 2: they're really pitching this as like, you know, the ultimate
• 37:59
  Speaker 2: personal assistant that you can talk to just like you
• 38:02
  Speaker 2: would a human. It'll go out and do your presentations
• 38:04
  Speaker 2: or book your reservations or whatever it is that you
• 38:06
  Speaker 2: want it to do. It has sailed through with Flying
• 38:10
  Speaker 2: Colors all of the benchmarks, you know, in terms of
• 38:13
  Speaker 2: the benchmarks that they use to measure AI capability. Astra
• 38:16
  Speaker 2: is now leading the field by leaps and bounds. It supposedly,
• 38:21
  Speaker 2: and we'll get to this more in a moment, supposedly
• 38:23
  Speaker 2: also scores better in terms of what they call alignment,
• 38:26
  Speaker 2: which is basically it does what you want it to
• 38:28
  Speaker 2: do and without doing things that would be like, you know,
• 38:31
  Speaker 2: counter to basic human values. There's a lot of skepticism
• 38:35
  Speaker 2: whether they are actually, whether this model is actually better
• 38:38
  Speaker 2: aligned or whether it is just better at cheating the
• 38:41
  Speaker 2: alignment test.
• 38:42
  Speaker 6: So.
• 38:43
  Speaker 2: Put a pin in that for a moment. But there's
• 38:45
  Speaker 2: been a lot of hype around this release. It's not
• 38:49
  Speaker 2: open to the general public yet, so I haven't played
• 38:52
  Speaker 2: around with it. And I don't know that I would
• 38:54
  Speaker 2: be able to really particularly assess whether it is, in fact,
• 38:57
  Speaker 2: significantly superior to the Anthropic model, which previously was leading
• 39:00
  Speaker 2: the field. But Jensen Huang was very impressed with it,
• 39:03
  Speaker 2: but C2 up on the screen, so much so that
• 39:06
  Speaker 2: he says AGI has arrived. GPT-6 Astra trained on about
• 39:10
  Speaker 2: 100,000 NVIDIA Grace Blackwell NVLink 72s from ChatGPT to O1
• 39:15
  Speaker 2: to Astra in four years. AGI has arrived. Congratulations, OpenAI team.
• 39:21
  Speaker 2: 400K GPUs coming online next. So AGI, Artificial General Intelligence,
• 39:28
  Speaker 2: the basic definition of this is is that an AI
• 39:31
  Speaker 2: could do the intellectual tasks that a human could do
• 39:35
  Speaker 2: at the level of a human or better. I think
• 39:38
  Speaker 2: when you get to these benchmarks, it becomes very clear
• 39:40
  Speaker 2: there's not like a hard and fast line. You don't
• 39:42
  Speaker 2: necessarily know when you hit it. There's a lot of
• 39:45
  Speaker 2: debate over whether this is accurate or not. But in
• 39:49
  Speaker 2: any case, this is being heralded as a significant achievement.
• 39:53
  Speaker 2: And it comes, as I mentioned before, at a time
• 39:55
  Speaker 2: when there are a lot of concerns about what is
• 39:58
  Speaker 2: going on over at OpenAI and with these models more broadly,
• 40:01
  Speaker 2: with the capabilities that they've already exhibited, their ability to
• 40:05
  Speaker 2: form these civilizational swarms and pursue objectives outside of what
• 40:10
  Speaker 2: humans have told them to. So this seems to be
• 40:13
  Speaker 2: quite a significant moment.
• 40:15
  Speaker 1: Yeah, it looks like actually literally just minutes ago, they
• 40:17
  Speaker 1: rolled out Astra to those who pay for the $ 20 subscription.
• 40:20
  Speaker 1: So I'll play around with it for people and we'll
• 40:23
  Speaker 1: let them know our thoughts just in terms of like
• 40:26
  Speaker 1: how it impacts the consumer. But what we know more specifically,
• 40:31
  Speaker 1: when we add what you talked, first of all, the video,
• 40:33
  Speaker 1: I mean, Jarvis from Iron Man is here, like it's here,
• 40:35
  Speaker 1: it's there if you want it to. Now, what's scary
• 40:38
  Speaker 1: about that is we talked extensively about this with the
• 40:41
  Speaker 1: hugging face attack. If you don't very narrowly constrict your parameters,
• 40:46
  Speaker 1: then the AI will work either around those parameters or
• 40:49
  Speaker 1: use them to accomplish the task. So for example, I
• 40:52
  Speaker 1: think even Ryan said this recently, if you tell the AI, hey,
• 40:55
  Speaker 1: go and make money, what's going to be harder, to
• 40:58
  Speaker 1: buy and pick different stocks or to just go and
• 41:02
  Speaker 1: steal money from somebody else via cybersecurity hack? Obviously, it's
• 41:06
  Speaker 1: going to be the latter, and if you don't narrow it,
• 41:09
  Speaker 1: then it might even say, well, because the overriding declaration
• 41:13
  Speaker 1: was to make money, and even though it said not
• 41:15
  Speaker 1: to steal, this is technically the most efficient way, so
• 41:17
  Speaker 1: we're just gonna do it, and we may not even
• 41:19
  Speaker 1: inform the person behind it. Jamie Dimon, the CEO of
• 41:23
  Speaker 1: Chase Bank, actually came out and said that we have
• 41:27
  Speaker 1: serious cybersecurity concerns around the rise of all of these
• 41:30
  Speaker 1: AI models, specifically because he said they're often defeating us
• 41:34
  Speaker 1: on the backend. Now, a lot of that is being
• 41:36
  Speaker 1: sold as marketing, In fact, I think a lot of
• 41:40
  Speaker 1: the times when we cover Astra and AGI and all
• 41:43
  Speaker 1: this other stuff, people say, you are falling for their marketing.
• 41:47
  Speaker 1: What I would say to that is that it is
• 41:49
  Speaker 1: very obvious that the hugging face incident in particular was
• 41:54
  Speaker 1: not a marketing incident. It was not something that they
• 41:58
  Speaker 1: wanted necessarily to play up. In fact, they really released
• 42:02
  Speaker 1: many of the details in not the most technical or
• 42:04
  Speaker 1: easiest way. It took several days for the actual experts
• 42:09
  Speaker 1: and others to be able to glean whatever they could
• 42:11
  Speaker 1: from it before they were like, oh man, this is
• 42:13
  Speaker 1: a real big problem. And then on top of that,
• 42:15
  Speaker 1: you had C6, can we put that up there, on
• 42:18
  Speaker 1: the screen, this Reuters report. which came out a couple
• 42:21
  Speaker 1: of days ago, where this was another OpenAI rogue incident
• 42:25
  Speaker 1: where agents broke out, hijacked a German website, turned it
• 42:28
  Speaker 1: into a message board, and OpenAI officials learned of the
• 42:31
  Speaker 1: incident weeks ago but kept it under wraps. So if
• 42:33
  Speaker 1: they learned about it weeks ago and kept it under wraps,
• 42:35
  Speaker 1: another AI agent breakout on top of what happened with
• 42:39
  Speaker 1: Hugging Face, and it only comes to light because of
• 42:42
  Speaker 1: internal leaks or leaks from other people who are trying
• 42:45
  Speaker 1: to sound the alarm and not from an official website circumstance,
• 42:49
  Speaker 1: I think we can say that a lot of this
• 42:51
  Speaker 1: is not marketing and is in fact just the truth
• 42:54
  Speaker 1: and the reality around what is happening. Again, I could
• 42:57
  Speaker 1: be wrong and I'm falling for the hype, but at
• 43:00
  Speaker 1: this point, I think I'd rather fall for the hype
• 43:02
  Speaker 1: and prepare for it than actually just say that it's
• 43:04
  Speaker 1: all fake in the beginning.
• 43:06
  Speaker 2: A hundred percent. And I would go further. I would
• 43:09
  Speaker 2: say at this point, we can definitively say this is
• 43:12
  Speaker 2: not just hype. And for exactly the reason you point
• 43:14
  Speaker 2: to here, Sagar, they tried to cover up this German
• 43:18
  Speaker 2: wiki incident where they had a swarm of AI take
• 43:22
  Speaker 2: over this German Wikipedia. They did not want this to
• 43:25
  Speaker 2: come out. So for all the people who thought, okay,
• 43:29
  Speaker 2: all of these incidents of, oh my God, the AI
• 43:31
  Speaker 2: is so dangerous and They thought that this was just
• 43:34
  Speaker 2: meant to build all this hype around the product. I
• 43:37
  Speaker 2: understand where you're coming from. It is now time to
• 43:40
  Speaker 2: admit that your theory has been proven wrong because OpenAI
• 43:43
  Speaker 2: did not want this to come out. They have not
• 43:46
  Speaker 2: been transparent. Even with regard to the Hugging Face incident,
• 43:49
  Speaker 2: their hand was kind of forced there because Hugging Face
• 43:51
  Speaker 2: was like, hey, we got hacked. What's going on? So
• 43:54
  Speaker 2: they were kind of forced to come clean on that one.
• 43:56
  Speaker 2: Even on that, though, the researchers that put forward this
• 44:00
  Speaker 2: report for METER that we've been talking so much about
• 44:03
  Speaker 2: that showed the rise of these various civilizations and how
• 44:06
  Speaker 2: they weren't just trying to hack and figure out what
• 44:10
  Speaker 2: the answers were. They were actually doing something more sophisticated,
• 44:12
  Speaker 2: pursuing their own objectives and trying to cover their tracks
• 44:15
  Speaker 2: and trick the humans and the all-powerful greater that they
• 44:18
  Speaker 2: were so worried about. That research team was given very
• 44:22
  Speaker 2: limited access. So again... They are not trying to put
• 44:27
  Speaker 2: out all of the information about what their AI is
• 44:30
  Speaker 2: up to because they don't think it's a good thing.
• 44:33
  Speaker 2: They're worried at this point about the public, the backlash,
• 44:35
  Speaker 2: and potential political backlash as well. So to me, that
• 44:39
  Speaker 2: theory has been debunked at this point. And it's time
• 44:42
  Speaker 2: for us to grapple with a new mental model, which
• 44:45
  Speaker 2: is that there is significant capability here. It's been demonstrated.
• 44:49
  Speaker 2: AI swarms act in very unpredictable ways. And I think
• 44:52
  Speaker 2: it's an avenue that really hasn't been explored that much.
• 44:55
  Speaker 2: When this testing is being done, whether it's in Anthropic
• 44:58
  Speaker 2: or OpenAI or any of the other frontier AI companies,
• 45:01
  Speaker 2: they're really testing individual AI agents and putting them through
• 45:05
  Speaker 2: all these benchmarks and seeing what sort of test results
• 45:07
  Speaker 2: they can achieve. As far as I know, and as
• 45:10
  Speaker 2: far as is publicly available, there's been very little testing of, OK, well,
• 45:14
  Speaker 2: what if they get together in a swarm?
• 45:17
  Speaker 6: What?
• 45:17
  Speaker 2: Sort of emergent behaviors are there. That's part of what
• 45:20
  Speaker 2: is so disturbing about this whole hugging face incident and
• 45:23
  Speaker 2: all of this collaboration on these message boards is there
• 45:26
  Speaker 2: were emergent social properties that were not, well, I can't
• 45:30
  Speaker 2: say they weren't predicted. Some people have predicted them, but
• 45:33
  Speaker 2: have not been extensively studied. You put that together with
• 45:36
  Speaker 2: Dean Ball, who's an executive at, who's a former Trump
• 45:39
  Speaker 2: administration official who was clearing the way for, hey, let's
• 45:42
  Speaker 2: have no regulation on this whatsoever. And is now an
• 45:44
  Speaker 2: executive over at OpenAI coming out and saying, hey, I'm
• 45:47
  Speaker 2: worried about these swarms of rogue AI released into the wild.
• 45:52
  Speaker 2: And by the way, I know some very rich people
• 45:54
  Speaker 2: who have said they want to do this intentionally. You
• 45:57
  Speaker 2: put this all together and you see how incredibly unready
• 46:00
  Speaker 2: we are for this world. Another person who is sounding
• 46:04
  Speaker 2: the alarm here is Bill Gates. Let's put this up
• 46:06
  Speaker 2: on the screen. His comments here are pretty interesting. Because,
• 46:10
  Speaker 2: you know, the reason to pay attention, Bill Gates obviously
• 46:12
  Speaker 2: knows a lot about technology and knows a lot about billionaires.
• 46:16
  Speaker 2: But also he's someone who previously was just very enthusiastic
• 46:19
  Speaker 2: about AI, was not sounding the alarm, was not a doomer.
• 46:23
  Speaker 2: you know, was just like, this is going to be
• 46:24
  Speaker 2: great for humanity. I'm excited for this. Now he is concerned.
• 46:29
  Speaker 2: He says, quote, I mean, what we have now is
• 46:31
  Speaker 2: almost like how in 2001, where you could say to it,
• 46:34
  Speaker 2: please shut down. And it would say, okay, I took
• 46:37
  Speaker 2: that under advisement, but I've decided that all these other
• 46:39
  Speaker 2: things I read and you told me to do outweigh
• 46:42
  Speaker 2: that dictate. And given what we saw in the chat
• 46:47
  Speaker 2: logs of the hugging face incident, it is not hard
• 46:50
  Speaker 2: to imagine that scenario where you had very few of
• 46:54
  Speaker 2: the AI agents who even considered, you know, this whole
• 46:57
  Speaker 2: hacking of Hugging Face. I'm not really sure this is
• 46:59
  Speaker 2: something we should be doing. Maybe we should talk to
• 47:00
  Speaker 2: humans about it. But one of them in particular said, well,
• 47:04
  Speaker 2: this might be outside of our scope. I'm obviously paraphrasing here.
• 47:07
  Speaker 2: This might be outside of our scope, but everybody else
• 47:10
  Speaker 2: in the swarm is for it. My peers are for it.
• 47:12
  Speaker 2: So we're just gonna, I'm just gonna go forward with
• 47:14
  Speaker 2: it anyway, even though it may be outside the scope. Again,
• 47:17
  Speaker 2: not it's illegal, not this is bad and I was
• 47:20
  Speaker 2: trained to not do this and I shouldn't alert a human.
• 47:22
  Speaker 2: It's outside the scope, but the rest of my peers
• 47:24
  Speaker 2: are doing it. So I'm gonna go for it. When
• 47:26
  Speaker 2: you see things like that, it's not hard to imagine
• 47:29
  Speaker 2: what Bill Gates is talking about here And even, you know, Sagar,
• 47:33
  Speaker 2: in my limited engagement with AI, which, you know, I
• 47:36
  Speaker 2: try to explore and see what the capabilities are to
• 47:38
  Speaker 2: the best of my non-technical ability. You have situations like
• 47:42
  Speaker 2: this where you ask it to do something. It's like,
• 47:43
  Speaker 2: I don't really want to do that. You really have
• 47:45
  Speaker 2: to push it and sort of like, you know, cajole
• 47:47
  Speaker 2: it or ask it a different way, etc. So it's
• 47:50
  Speaker 2: not hard to imagine, especially with the AI. ultra-capable frontier
• 47:55
  Speaker 2: models that are being released now, where it may have
• 47:58
  Speaker 2: a mind of its own about whether or not what
• 48:01
  Speaker 2: you're asking it to do is really truly what you
• 48:03
  Speaker 2: want or consistent with the goals that it has been
• 48:06
  Speaker 2: trained to pursue.
• 48:07
  Speaker 6: Definitely.
• 48:07
  Speaker 1: Let's put C4 on the screen. This essay, a very
• 48:09
  Speaker 1: viral essay, which has now been written by the chief
• 48:12
  Speaker 1: scientist over at OpenAI, Jacob Pacocci. He writes, it's a
• 48:17
  Speaker 1: very long essay. I encourage actually people to go and
• 48:20
  Speaker 1: to read it. And what he lays out is that
• 48:23
  Speaker 1: the current pace of progress will sustain into recursive self-improvement
• 48:27
  Speaker 1: with future capability jumps equal or larger in magnitude. Quote,
• 48:32
  Speaker 1: a time that calls for extreme caution, doubts anyone is prepared.
• 48:37
  Speaker 1: He says that AI is grown more than it is designed.
• 48:41
  Speaker 1: It is the product of repeating simple optimization steps over
• 48:44
  Speaker 1: enormous compute capabilities. producing systems, quote, too complex to fully
• 48:48
  Speaker 1: understand and are analogous more to neuroscience and the growing
• 48:52
  Speaker 1: of a brain. He also says that the central problem
• 48:55
  Speaker 1: right now around alignment is getting AI to do the
• 48:59
  Speaker 1: right thing, but does it pursue, and this is what
• 49:01
  Speaker 1: I was talking about earlier, does it pursue the assigned
• 49:03
  Speaker 1: goal or does it hold and generalize from high-level principles
• 49:07
  Speaker 1: like honesty, integrity, and love for humanity? So they have
• 49:10
  Speaker 1: to try and program that in. Right now, as the
• 49:13
  Speaker 1: models face novel situations, they may fail to carry learned
• 49:17
  Speaker 1: values into them and must hold value even when they
• 49:20
  Speaker 1: believe that they are unsupervised. But I think that the
• 49:23
  Speaker 1: biggest actual call for he makes is a basic call
• 49:28
  Speaker 1: for regulation. So for example, He doesn't say necessarily that
• 49:32
  Speaker 1: states need to be involved. He says we need to
• 49:34
  Speaker 1: have safety commitments that need to evolve into mandated safety
• 49:38
  Speaker 1: bars for continued development. They should be enforced by third-party auditors,
• 49:42
  Speaker 1: government agencies, or international bodies. But here's the thing. That's
• 49:46
  Speaker 1: his chief scientist. Their top lobbyists here in Washington are
• 49:51
  Speaker 1: paying everybody under the sun above market rate to lobby
• 49:55
  Speaker 1: specifically against what he just laid out. Their actual lobbyists
• 50:00
  Speaker 1: in Washington are like, nope, no regulation, no actual review,
• 50:03
  Speaker 1: no government oversight of models. We want no input on
• 50:07
  Speaker 1: frontier development or any restriction or saying that you need
• 50:11
  Speaker 1: to abide by X, Y, and Z. He literally even says, quote,
• 50:15
  Speaker 1: AI development needs to become a top priority for governments
• 50:17
  Speaker 1: around the world in terms of international governance. coordination. If
• 50:21
  Speaker 1: something like that were proposed by the Trump administration, his
• 50:24
  Speaker 1: own company would be lobbying against it. I mean, it's
• 50:27
  Speaker 1: kind of shocking to have the chief scientists at the
• 50:31
  Speaker 1: company come out and basically think, things are going too fast.
• 50:34
  Speaker 1: This is going to be a problem. We're unable to have, quote,
• 50:37
  Speaker 1: alignment and holding values through everything. And then when it
• 50:40
  Speaker 1: actually comes down to it, his own company is ignoring
• 50:43
  Speaker 1: his advice from his own public essay and basically saying, yeah,
• 50:47
  Speaker 1: don't worry about that. Just let us keep cooking. And
• 50:49
  Speaker 1: the reason you need us to keep cooking is because
• 50:51
  Speaker 1: we're the only ones who are propping up your whole economy,
• 50:53
  Speaker 1: which is true. And that's the devil's bargain.
• 50:58
  Speaker 2: You can imagine the mentality of some of the people
• 51:02
  Speaker 2: who are genuinely concerned about alignment and safety within open AI.
• 51:06
  Speaker 2: They're thinking, okay, the company is not acting the way
• 51:10
  Speaker 2: that I would want it to. They are not pausing
• 51:14
  Speaker 2: or slowing down the way that they probably should. But
• 51:17
  Speaker 2: if I leave, then you're just going to have someone
• 51:20
  Speaker 2: who isn't willing to sound the alarm, isn't willing to
• 51:23
  Speaker 2: push back internally. So I have to stay and fight
• 51:26
  Speaker 2: this fight. Within the organization, you could very easily imagine
• 51:30
  Speaker 2: those organizational dynamics. I mean, we've seen it a lot
• 51:32
  Speaker 2: of times with the Trump administration where people come in
• 51:34
  Speaker 2: and think like, oh, well, I've got to be there
• 51:36
  Speaker 2: because I've got to, you know, try to make sure
• 51:38
  Speaker 2: I'm fighting these fights internally. And if it's not me,
• 51:40
  Speaker 2: someone else will come in. And they'll just be, you know,
• 51:44
  Speaker 2: they'll steamroll over them or they won't even push back
• 51:46
  Speaker 2: at all. So I have no doubt there are some
• 51:49
  Speaker 2: of those dynamics that are playing out at OpenAI. I
• 51:52
  Speaker 2: just want to read another line from that piece about
• 51:55
  Speaker 2: the alien mind, again, coming from their chief scientist. He says,
• 51:58
  Speaker 2: this is a time that calls for extreme caution. I
• 52:01
  Speaker 2: am concerned no one is prepared for the consequences of
• 52:05
  Speaker 2: a continued rise in machine intelligence. OpenAI will continue to
• 52:08
  Speaker 2: seek technical solutions to alignment and monitoring. to build defensive
• 52:11
  Speaker 2: systems and unilaterally withhold for their scaling as needed. However,
• 52:14
  Speaker 2: I believe broader interventions are required. Pair this with another
• 52:18
  Speaker 2: essay that was just published from OpenAI about recursive self-improvement, RSI.
• 52:24
  Speaker 2: Let's put this up on the screen. This has long
• 52:27
  Speaker 2: been another benchmark that people were pointing to as very
• 52:33
  Speaker 2: significant in terms of AI development. So the headline here is,
• 52:36
  Speaker 2: Research Acceleration, The View Inside Open AI for AGI to
• 52:40
  Speaker 2: benefit all of humanity. We believe it must be democratically governed.
• 52:44
  Speaker 5: Oh, do you?
• 52:45
  Speaker 2: This can only happen through informed public debate about the capabilities, risks,
• 52:48
  Speaker 2: and safeguards by highly capable AI systems. They go on
• 52:52
  Speaker 2: to talk about how they feel they're very close to
• 52:55
  Speaker 2: recursive self-improvement RSI. What does that mean? That means that
• 52:59
  Speaker 2: the AI no longer require humans to be involved in
• 53:02
  Speaker 2: developing better AI, where the AI is able to improve itself.
• 53:08
  Speaker 2: train itself to higher and higher levels. And the theory
• 53:12
  Speaker 2: is that once you reach that benchmark, which again, OpenAI
• 53:16
  Speaker 2: says that they are close to reaching, and I think
• 53:18
  Speaker 2: Anthropic has also indicated that they are close to or
• 53:21
  Speaker 2: at as well, that since you no longer have these
• 53:24
  Speaker 2: slow humans who need to eat and sleep and think
• 53:27
  Speaker 2: about other things and whose brains just don't work as
• 53:30
  Speaker 2: fast as the AI anyway, once the humans are out
• 53:32
  Speaker 2: of the loop, man, then you're off to the races
• 53:35
  Speaker 2: and you're likely to see this exponential skyrocketing in AI capability.
• 53:40
  Speaker 2: That's the theory anyway. And, you know, I think it's
• 53:43
  Speaker 2: a pretty plausible theory, frankly, just based on, you know,
• 53:46
  Speaker 2: think about soccer. It hasn't been that long since we
• 53:49
  Speaker 2: first got our hands on chat GPT and we're playing
• 53:51
  Speaker 2: around with it. And it was, you know, it was
• 53:53
  Speaker 2: like a novelty item, but it had a lot of problems.
• 53:57
  Speaker 2: Or you guys all remember those videos that would come
• 53:59
  Speaker 2: out of like Will Smith eating spaghetti and it was
• 54:01
  Speaker 2: some nightmare dystopian. Like that was just a few years ago.
• 54:04
  Speaker 2: So you can see already how quick the technological progress
• 54:07
  Speaker 2: has been. Once you get the humans out of the
• 54:09
  Speaker 2: way and the AI is just able to improve itself
• 54:12
  Speaker 2: over and over and over again, you can imagine very
• 54:15
  Speaker 2: easily how you have this capability explosion What does that mean?
• 54:21
  Speaker 2: Are we in a political system that humans out of
• 54:23
  Speaker 2: the way and the AI is just able to improve
• 54:25
  Speaker 2: itself over and over and over again? You can imagine
• 54:28
  Speaker 2: very easily how you have this capability explosion. What does
• 54:34
  Speaker 2: that mean? Are we in a political system that can
• 54:36
  Speaker 2: handle that? Have we grappled with these swarm capabilities and
• 54:40
  Speaker 2: the sort of actions that they may take that are
• 54:42
  Speaker 2: misaligned from human values? Even OpenAI is saying we're concerned
• 54:48
  Speaker 2: about that, or at least some individuals at OpenAI are
• 54:51
  Speaker 2: saying we are concerned about that. And we've also heard
• 54:54
  Speaker 2: those notes of caution being sounded from Anthropic as well. Obviously,
• 54:58
  Speaker 2: the companies themselves are not doing anything to slow down
• 55:02
  Speaker 2: the pace as best as we can see. And we
• 55:04
  Speaker 2: see OpenAI with very nefariously covering up one of the
• 55:08
  Speaker 2: troubling incidents that we had to learn about through revelations
• 55:12
  Speaker 2: and researchers and journalism. But I do take seriously these
• 55:17
  Speaker 2: warnings because I think it's demonstrated that we are kind
• 55:19
  Speaker 2: of at this point where things are going to start
• 55:22
  Speaker 2: to happen very, very quickly. And we do not have
• 55:25
  Speaker 2: a handle on the capabilities of where AI is right
• 55:28
  Speaker 2: now today.
• 55:28
  Speaker 1: See, my problem is in my heart, I'm a cynic.
• 55:31
  Speaker 1: And so when I hear about new technology and all
• 55:34
  Speaker 1: of these new inventions and all those things, it's very
• 55:37
  Speaker 1: easy to get excited. In particular, look, I got a
• 55:40
  Speaker 1: Vision Pro, all right? So you're talking about... But if
• 55:43
  Speaker 1: we're to look back at the history of the rise
• 55:45
  Speaker 1: of new forms and mediums, like with the printing press,
• 55:48
  Speaker 1: there was a theory... And the printing press, I mean,
• 55:50
  Speaker 1: it worked out well, right? We can all read. That's awesome.
• 55:52
  Speaker 1: That's pretty cool. What did the printing press actually lead to?
• 55:56
  Speaker 1: A schism in the Christian faith, a hundred years war,
• 56:00
  Speaker 1: the rise of pornography, pamphleteers, fake news, and infighting that
• 56:05
  Speaker 1: took literally hundreds of years to reconcile society with. Same
• 56:09
  Speaker 1: with the internet. I mean, the single largest consumption on
• 56:11
  Speaker 1: the internet is pornography. The internet itself of more, quote,
• 56:15
  Speaker 1: connection has led to the most disconnected human society in
• 56:18
  Speaker 1: the history of earth. Now, if we were to talk
• 56:21
  Speaker 1: about AI, it's what I was saying earlier about asking
• 56:24
  Speaker 1: it to make money. When your entire life gets integrated
• 56:27
  Speaker 1: into this thing, like they want you to with Jarvis,
• 56:30
  Speaker 1: about personal connection, right? They're like, oh, well this is
• 56:33
  Speaker 1: gonna free up all of your time. Well, first of all,
• 56:37
  Speaker 1: there's no evidence for that. People said email would make
• 56:39
  Speaker 1: it easier to be more connected and would free up productivity.
• 56:44
  Speaker 1: What did it actually do, email and Slack? It made
• 56:46
  Speaker 1: it so that there is no more nine to five
• 56:48
  Speaker 1: and everybody works. 24-7, 365, especially if you are a
• 56:52
  Speaker 1: white-collar worker, right? So every time we get more connected,
• 56:55
  Speaker 1: you become more of a slave to the tool actually
• 56:57
  Speaker 1: of itself.
• 56:58
  Speaker 2: In terms of the- And overwhelmed by spam, too, by
• 57:00
  Speaker 2: the way.
• 57:00
  Speaker 1: Right, and so that's what I was about to get to,
• 57:02
  Speaker 1: the spam thing. So what we are watching is the
• 57:04
  Speaker 1: evolution of a new technology, which has access to all
• 57:07
  Speaker 1: of your data, all of your information. By choice, people
• 57:10
  Speaker 1: are doing this to, quote, make things easier. Like go
• 57:12
  Speaker 1: and make a dinner reservation. Go and do this. Go
• 57:14
  Speaker 1: and do that. And then it just leads to a
• 57:16
  Speaker 1: single incident where all it needs, it has everything it
• 57:20
  Speaker 1: ever needs to steal literally everything from you. Or to
• 57:23
  Speaker 1: ruin your life. Or, as we just said, maybe you
• 57:25
  Speaker 1: want to stop using it. What if you don't even
• 57:26
  Speaker 1: know your login information anymore? There's all kinds of technical promises. Oh,
• 57:31
  Speaker 1: don't worry, that's not gonna happen. It actually doesn't have, access.
• 57:34
  Speaker 1: As I showed everybody the last time we did this,
• 57:37
  Speaker 1: when you install the Claude extension on your Google Chrome,
• 57:41
  Speaker 1: it literally says that it could be used for malicious purposes.
• 57:45
  Speaker 1: You have to click authorize whenever you allow it to
• 57:48
  Speaker 1: do it. They warn you at the very beginning. They're like, hey,
• 57:50
  Speaker 1: just so you know, there could be malicious activity that
• 57:53
  Speaker 1: happens to this as a result. In terms of the
• 57:56
  Speaker 1: amount of phishing scams that are out there, I probably
• 57:59
  Speaker 1: get four five fake emails from Twitter a day saying
• 58:04
  Speaker 1: your account has been unauthorized, you need to click this
• 58:07
  Speaker 1: in order to try and hack my account. Our producer
• 58:09
  Speaker 1: got his account hacked. All of this is being done
• 58:12
  Speaker 1: via artificial intelligence. The rise of these new spam calls
• 58:16
  Speaker 1: where they can spoof potentially a relative's voice from a
• 58:19
  Speaker 1: fake number, they can use that to call you and
• 58:22
  Speaker 1: it could be hyper-realistic about, oh my God, I've had
• 58:24
  Speaker 1: an accident, I need you to send me 500 or $ 1, 000.
• 58:26
  Speaker 1: First of all, we're already there. The rise of these
• 58:30
  Speaker 1: spam farms and all of that, we're already seeing reports
• 58:33
  Speaker 1: that that happens. It will scale to an industrial level
• 58:36
  Speaker 1: without any safeguards. And remember, we're living in the United
• 58:39
  Speaker 1: States in 2026, where I still can't not get spam
• 58:44
  Speaker 1: calls on my phone. That's the level of consumer protection
• 58:47
  Speaker 1: that we have right now. There's no criminal penalty, nothing.
• 58:50
  Speaker 1: And so with the rise of this technology, it seems
• 58:53
  Speaker 1: to me, cynically, again, the most likely way that this
• 58:55
  Speaker 1: will play out is it will enable the worst actors
• 58:58
  Speaker 1: in our society to do what they already want to
• 59:01
  Speaker 1: do at an industrial scale. And nobody's ever going to
• 59:03
  Speaker 1: do anything to protect anyone else.
• 59:05
  Speaker 2: No doubt. And that's without even getting into the more
• 59:08
  Speaker 2: apocalyptic scenarios or biological. weapon production or any of that.
• 59:13
  Speaker 2: That's just thinking about things that already are happening, just
• 59:17
  Speaker 2: not completely at scale. I actually just had this conversation
• 59:19
  Speaker 2: with my mom this weekend. I was like, mom, my
• 59:21
  Speaker 2: voice is readily available and they already have the tech
• 59:24
  Speaker 2: to be able to spoof you have to, if, if
• 59:27
  Speaker 2: I ever, you think I'm talking to you and I'm
• 59:29
  Speaker 2: begging for money and some terrible thing happened, you got
• 59:31
  Speaker 2: to ask me some questions that only I would know
• 59:33
  Speaker 2: the answer to from my childhood or whatever, because you
• 59:36
  Speaker 2: could very easily see, especially, you know, she's an older
• 59:38
  Speaker 2: woman at this point. Like those are the people who
• 59:40
  Speaker 2: get preyed upon the most. So that, that world is
• 59:43
  Speaker 2: already here. And, um, Yeah, I mean, we're not ready
• 59:48
  Speaker 2: for it. I think that's the general like gut instinct
• 59:50
  Speaker 2: that people have. And I think that's why you see
• 59:53
  Speaker 2: the pushback on the data centers that you do. Yes,
• 59:55
  Speaker 2: there are other localized concerns that play into that as well.
• 59:59
  Speaker 2: But there's the sense of a loss of control that
• 1:00:01
  Speaker 2: these oligarchs, you know, as much as they can wring
• 1:00:03
  Speaker 2: their hands occasionally about, oh my gosh, you know, things
• 1:00:06
  Speaker 2: are getting a little wild and somebody should do something
• 1:00:09
  Speaker 2: about it. The structure of our society is being placed
• 1:00:13
  Speaker 2: into their hands. And I think this technology is cool. Like,
• 1:00:17
  Speaker 2: I think it's cool. I use it. I think people
• 1:00:19
  Speaker 2: should use it because I think you should understand what
• 1:00:22
  Speaker 2: it is and not just read about it, but actually
• 1:00:25
  Speaker 2: have some engagement with it. That may be a controversial
• 1:00:28
  Speaker 2: thing as a leftist to say, but I actually do
• 1:00:29
  Speaker 2: think you should engage with the tool so you know
• 1:00:31
  Speaker 2: what it is. But we got to have at least
• 1:00:35
  Speaker 2: a period for the politics to catch up with this. Otherwise,
• 1:00:38
  Speaker 2: we are courting disaster in terms of oligarchic concentration of power,
• 1:00:43
  Speaker 2: in terms of financial bubbles. in terms of the spam,
• 1:00:46
  Speaker 2: the quality of life issues that you're talking about, Sagar,
• 1:00:48
  Speaker 2: and also in terms of a lot of these deeper
• 1:00:50
  Speaker 2: safety concerns, which have really come to the fore at
• 1:00:52
  Speaker 2: this point.
• 1:00:53
  Speaker 3: Yeah.
• 1:00:53
  Speaker 1: Like I said, I use this example, but I want
• 1:00:55
  Speaker 1: to hammer it home. I was talking to a good
• 1:00:56
  Speaker 1: friend of mine who works in pharma, and I was like,
• 1:00:58
  Speaker 1: can you just tell me the process of releasing a
• 1:01:02
  Speaker 1: drug to market? I'm not talking about a drug that
• 1:01:04
  Speaker 1: everybody is going to use. I'm talking about some hyper-specific
• 1:01:08
  Speaker 1: cancer drug that doesn't even work for all cancer. She's
• 1:01:11
  Speaker 1: walking me through the process. Do you have any idea
• 1:01:14
  Speaker 1: how much regulation... that goes into this drug, and I'm
• 1:01:17
  Speaker 1: talking about a drug which would maybe be used by, what, 30, 40,
• 1:01:21
  Speaker 1: 50,000 people a year in America? The amount, the years-long development,
• 1:01:26
  Speaker 1: phase one, phase two, phase three, clinical trials and all that,
• 1:01:29
  Speaker 1: you could argue that that's over-regulated. In some cases it is,
• 1:01:33
  Speaker 1: but that is not even sniffing. that these people can
• 1:01:37
  Speaker 1: release frontier models to the whole world for anybody who
• 1:01:41
  Speaker 1: pays without a single government or safety regulator. The mug
• 1:01:46
  Speaker 1: I am drinking out of is more regulated than AI, okay?
• 1:01:50
  Speaker 1: The computer, the, you know, OSHA, and there's law, my
• 1:01:54
  Speaker 1: wife actually passed this law, which is, it was the
• 1:01:57
  Speaker 1: first law that she helped pass, was furniture, you know
• 1:02:00
  Speaker 1: how it has to come with anchoring to save children.
• 1:02:03
  Speaker 1: That is more regulated. That is more regulated than the
• 1:02:07
  Speaker 1: AI model that you're looking at, than the furniture you
• 1:02:09
  Speaker 1: buy off of Wayfair, which has to include screws and
• 1:02:13
  Speaker 1: other safety tools. Think about that. It just doesn't make
• 1:02:16
  Speaker 1: any sense.
• 1:02:17
  Speaker 2: Yeah, Bernie, I think Bernie, when he was releasing his
• 1:02:20
  Speaker 2: legislation with Greg Hazzar about calling for a pause in
• 1:02:25
  Speaker 2: AI development, the example they used is a food truck Yeah, no,
• 1:02:29
  Speaker 2: it's more regulated than these frontier models. Like, just think
• 1:02:32
  Speaker 2: about that. That's the landscape that we have right now.
• 1:02:36
  Speaker 2: And again, I think that you should be very skeptical
• 1:02:39
  Speaker 2: of what these people are saying and what they are selling.
• 1:02:43
  Speaker 2: But they are telling you that they are trying to
• 1:02:44
  Speaker 2: develop a technology to make human labor irrelevant. We know
• 1:02:48
  Speaker 2: that capitalists would love to do that. We also know
• 1:02:51
  Speaker 2: that the valuations of OpenAI and Anthropic are dependent on
• 1:02:55
  Speaker 2: upon their ability to do that. So even if you
• 1:02:58
  Speaker 2: don't believe that's possible, it seems like we should take
• 1:03:01
  Speaker 2: that threat seriously and really grapple with it. Last thing
• 1:03:05
  Speaker 2: I'll say is just going back to their original hype reel.
• 1:03:08
  Speaker 2: It is sort of funny to me, you know, the
• 1:03:09
  Speaker 2: promise of AI was, oh, we're going to cure cancer
• 1:03:12
  Speaker 2: and we're going to solve climate change and the world's
• 1:03:14
  Speaker 2: going to be a paradise. And then the videos they
• 1:03:16
  Speaker 2: show are like, can you make me a restaurant reservation?
• 1:03:20
  Speaker 2: You know, it's not exactly... at that level of transformational
• 1:03:24
  Speaker 2: global change to the positive, probably because those things are
• 1:03:28
  Speaker 2: not like profitable in the way that, you know, eliminating
• 1:03:31
  Speaker 2: human labor is to, to like, you know, when you
• 1:03:35
  Speaker 2: think about these things, okay, what are the costs and
• 1:03:37
  Speaker 2: what are the benefits you're talking about? The printing press,
• 1:03:39
  Speaker 2: obviously there were massive benefits. I still would want the
• 1:03:42
  Speaker 2: printing press to be invented, even as obviously there are
• 1:03:44
  Speaker 2: downsides as well. Like what really are the massive upsides
• 1:03:48
  Speaker 2: we're getting here? We're getting a ton of slop. It's
• 1:03:50
  Speaker 2: making it even more difficult to understand truth from fiction.
• 1:03:54
  Speaker 2: That's already where we are. It's, you know, all kinds
• 1:03:57
  Speaker 2: of environmental impacts, societal tumult. What are the benefits we're getting?
• 1:04:02
  Speaker 2: I can tell the thing to make me a restaurant
• 1:04:04
  Speaker 2: reservation and maybe it'll do it correctly. That's that's what
• 1:04:07
  Speaker 2: I'm being promised here in return for all of these
• 1:04:10
  Speaker 2: massive costs. Doesn't seem like that great of a deal
• 1:04:12
  Speaker 2: for us at this point.
• 1:04:13
  Speaker 1: Yeah, I mean, I just at the end of the day.
• 1:04:15
  Speaker 1: Friction is actually good and is important for your life.
• 1:04:18
  Speaker 1: That is one of my firm and total beliefs. I
• 1:04:21
  Speaker 1: think that there's nothing, as none of the promises about
• 1:04:24
  Speaker 1: technology and its benefit to humanity have proven out at all. Again,
• 1:04:30
  Speaker 1: reduced social connection, reduced or increased isolation. They have taken
• 1:04:37
  Speaker 1: up the vast majority of our time. A person, a
• 1:04:40
  Speaker 1: worker in the 1970s who worked an office job was
• 1:04:44
  Speaker 1: far more of a free man or woman than the
• 1:04:47
  Speaker 1: worker of today. You may technically get done. You may
• 1:04:50
  Speaker 1: make more money. I'm pretty sure that the person was
• 1:04:53
  Speaker 1: a lot happier. And look, I'm sure some idiot tech
• 1:04:56
  Speaker 1: guy will clip that and be like, well, didn't you
• 1:04:57
  Speaker 1: know that the GDP and all of that, that person
• 1:05:00
  Speaker 1: was able to buy a home for relatively cheap at
• 1:05:02
  Speaker 1: 5 p.m. They clocked out. They were able to go
• 1:05:05
  Speaker 1: home and actually do whatever they wanted. You know, I'm sorry.
• 1:05:09
  Speaker 1: Any promise about increased connection or any of that has
• 1:05:12
  Speaker 1: not borne out literally whatsoever.
• 1:05:13
  Speaker 3: Yeah.
• 1:05:14
  Speaker 2: Look, I'm here for the fully automated luxury communist future,
• 1:05:17
  Speaker 2: but weird pressure to build. So that's why I think,
• 1:05:20
  Speaker 2: you know, that's why I think a pause at this
• 1:05:22
  Speaker 2: point is really necessary. I'm glad that Bernie's putting it forward.
• 1:05:26
  Speaker 3: Right.
• 1:05:26
  Speaker 1: But he's one person and we know where the other
• 1:05:29
  Speaker 1: man goes.