DeepSeek, a Chinese AI company, is developing a program that could potentially lead to artificial intelligence (Aa.k.a. AGI) and artificial intelligence-like general intelligence (AGI). But what is it actually doing, and why is it important?
00:00:00.000So, what is remarkable about DeepSeek are two things.
00:00:24.040It's open source. So, the code for this AI and large language model and reasoning models, is what they said, are there to be inspected and looked at.
00:00:37.980There's also some indications that it's basically forking OpenAI back when OpenAI was, in fact, open.
00:00:49.680It's no longer open. It's a closed source for-profit company.
00:00:53.580It started out as, I guess, a charity, a 501c3 or something like this.
00:00:58.440And it's had massive investment from Microsoft, primarily.
00:01:01.480I think Elon Musk was an early investor, and now he's at war with Sam Altman, etc.
00:01:07.940Another thing that's remarkable about it is that it's Chinese.
00:01:11.120So, you ask yourself, is this political in some way?
00:02:02.920And I've seen a number of people react to this, and they say, ah, you know, this is the Sputnik moment for AGI.
00:02:12.520So, this is like the Ruskies launching a satellite into space.
00:02:17.600Sputnik, they've launched a dog into space, no less.
00:02:21.380And we've got to get back to basics, we've got to teach young people science, we have to make long-term plans, a moonshot, if you will, a going to the moon as a goal for the decade of the 1960s.
00:02:40.120We've got to get our act together because they are ahead of us.
00:02:43.240I've also heard the other side of this coin, which is that they stole OpenAI.
00:02:50.360There's actually a moment with DeepSeek where if you say, like, who are you as a program, it will say, I'm ChatGPT 2.3 or something like this.
00:03:01.460So, there is a high likelihood, maybe certainty, that they were using some of that initial code that they then developed themselves.
00:03:11.660But I think it's something different than that.
00:03:18.180What I would relate it to is the Quartz Crisis of the 1970s.
00:03:35.200It's one of the most famous monumental examples of disruption that has ever occurred in economic history.
00:03:45.080So, beginning in the 1950s, it was discovered that a quartz crystal could vibrate at something like 32,000 times a second or some unfathomable number.
00:04:06.000And it would do it with such a regularity that you could do many things with it, including keep time.
00:04:13.720And could you, with the use of a battery, send an electrical signal through a quartz crystal and keep accurate time?
00:04:23.280And you would have that ticking of the quartz watch that we're so used to, as opposed to the mechanical sweep of a watch that is wound and is using other sort of mechanisms.
00:04:36.780And it was 1969, I believe, Seiko introduced a quartz watch with a battery.
00:04:46.000I'm forgetting the name of it at the moment.
00:04:53.340The Accutron, I believe, was a famous one from Bulova.
00:04:57.760And the one that is maybe most iconic, at least for me, is Hamilton's Pulsar.
00:05:07.920So, if anyone's seen the James Bond movie Live and Let Die, Roger Moore, in the opening, the pre-title sequence, he actually looks at his watch and then he presses a button on his watch and a digital readout of the time is revealed.
00:05:27.020And it's sort of clunky when you see that now.
00:05:31.540And, of course, there's like an Italian secret agent in his bed and he's checking the time.
00:05:35.920But, you know, it reminds us of a decade earlier where James Bond, played by Sean Connery in Goldfinger, comes out of the water.
00:05:48.900There's a swan on his head and he's wearing a wetsuit or, I guess, a dry suit.
00:05:53.600And he opens it up and he's wearing this dinner jacket, tuxedo, basically.
00:07:02.880He's a total badass with this sport watch, but he's also a gentleman spy.
00:07:11.660And that's now lost in the sense that, you know, your broker who lives in Wall Street is wearing a Submariner.
00:07:19.660And it's no longer really a sports watch.
00:07:22.080It's a timepiece, although still cool.
00:07:26.240That was also what happened with quartz watches at the beginning.
00:07:30.780So when James Bond, played by Roger Moore, looks at his Hamilton Pulsar, and he has to press a button to see the time, and it's a digital, red digital display, that was super cool, in fact.
00:07:44.600And I believe President Ford wore that Hamilton Pulsar quartz watch, and it was highly expensive and kind of incredible.
00:07:56.720It was like the Apple Watch, but maybe even more radical or innovative, because the idea of wearing something that's computerized, the battery-powered on your wrist, it's a totally new thing no one even thought about.
00:08:12.840Well, very shortly after this high-end quartz watch came onto the scene, quartz became democratized to a point that it blew away the market for wristwatches in Switzerland.
00:08:33.740People started making watches in Switzerland because it was cheaper, in fact, many, many centuries ago, and because farmers had nothing to do over the winter, and they could make clocks and movements, etc.
00:08:48.580But certainly by the 20th century, Swiss watchmaking had become what it more or less is today, high-quality, fashionable, artisan craftsmanship, the equivalent of buying a German sports car Porsche or BMW or maybe an Italian sports car, an Italian suit.
00:09:12.620That was the vibe that the Swiss had acquired in watchmaking by that time.
00:09:19.200Well, that's all fine and good, but when you democratize the quartz watch, it starts to go low-end in a radical way that undercoats cuts everything.
00:09:30.180Why would you pay $250 in that time for a Rolex Submariner when you could pay $25 for some new quartz watch coming from Japan in Seiko?
00:09:45.520And it was just a radical undercoats, and it was just a radical undercutting of the entire industry.
00:09:52.780I've read, because I was reading up on this last night, that there were actually 1,600 Swiss watch companies in 1969, and by 1989, 1,000 of them had gone bankrupt, disappeared, and were no more.
00:10:11.880So the kind of devastation to the industry just can't even be put into words.
00:10:19.680I don't know if we've seen anything like that in other industries.
00:10:23.840Maybe someone could come up with an example.
00:10:26.420So what did the Swiss watch market do in the face of democratized watches from Japan?
00:10:35.020And also, not only was it much cheaper, but it was actually much better, at least from a certain point of view.
00:10:43.640So a Swiss watch that's well-made might be off two seconds a day, forward and backward.
00:10:51.080It might be off five, ten seconds a day.
00:10:53.640Now, five or ten seconds a day, who cares?
00:10:56.440I mean, it's still keeping very good time, and you could always reset it once a month.
00:11:03.140It's not like it's a terrible instrument or anything like that.
00:11:07.820The quartz watch, it's like one second a year.
00:11:10.620The watch that you buy in Walmart for $9.99 is far more accurate than the watch that some rich guy, the Patek Philippe that a rich guy buys for $100,000.
00:13:38.900I might even, I'm sometimes tempted to go buy, like, a super 1980s Swatch from eBay or whatever that just looks like a Duran Duran album or something.
00:13:52.080They're fun and cool, and they still exist today.
00:13:54.500So, they embraced quartz, and they embraced cheap, high profit margin, or maybe low profit margin, but definitely cheap, high volume, I should say, watches.
00:14:05.320And that certainly brought in revenue to the overall conglomeration of Swiss watchmakers.
00:14:40.060They now sort of had to say it, and they went up market.
00:14:44.480So, quartz started up market at the very beginning, but quickly went way down market.
00:14:51.180And that is the idea of classic disruption theory of a down market solution that is good enough or, weirdly, in quartz's case, better than the mid or high market solution, and it just upends the industry.
00:15:09.020So, Rolex, Omega, Patek Philippe, Audemars Piguet, et cetera, et cetera, they did new designs, but they leaned into the mechanical watch.
00:15:20.840To wear a quartz watch is sort of cringe or declassé.
00:15:29.000You know, they leaned into the snobbery of, I inherited this Patek Philippe from my father, or I am successful enough to buy a Rolex, or a speed master, the watch that went to the moon, quote unquote.
00:15:47.340That kind of stuff that they have basically been doing for decades and decades.
00:15:52.540They've never stopped it, and I don't think they will stop it, because that's sort of all they've got.
00:16:13.080So, I think what is dramatic about Deep Seek is that it's basically the quartz watch of AI.
00:16:25.320And in this hilarious, you could say, way, it's proving how AI is not all that it's cracked up to be.
00:16:37.360So, maybe they did fork open AI from a couple of years ago.
00:16:45.540Maybe they're copying from other companies, and other companies are copying from other companies, et cetera, in some big circle.
00:16:51.880Regardless, on a fraction of the investment in training, they have basically produced something that is good enough.
00:17:04.220And I've even seen some evidence out there that it's, in fact, better.
00:17:09.860And so, you don't, like, open AI, the way I view it, it's almost like the Swiss watch market without any of the romance.
00:17:23.300So, what I mean by that is that it's not open AI.
00:17:26.460It's a closed system that has received billions of investment with the assumption that it's going to be highly profitable from groups like Microsoft, et cetera.
00:17:35.320But why would you pay for this service if you can get something much simpler and easier from the Chinese knockoff company, the Seiko of our time?
00:17:52.480The Swiss watch market was able to survive because they leaned into the romance.
00:18:41.760And look, we have this $500 billion investment.
00:18:45.040It's going to cure cancer one day, maybe once we get there.
00:18:48.760But keep the money flowing in because we need these massive, massive server farms to train this data and to build it up.
00:18:58.260I don't think an LLM is ever going to merge into AGI.
00:19:05.920That is something that has a thanks for itself and in a way has a will of its own.
00:19:11.260That's just actively solving problems, reproducing itself, maybe destroying the world in order to make more paperclips or whatever.
00:19:19.720I have never bought into AGI doomerism, but I also don't buy into AGI utopism as well.
00:19:26.540I use AI on a, if not daily, weekly basis for sort of things, but I'm really not sure it's much of anything than if-than statements on a search engine.
00:19:42.040It's a kind of development of Google giving you responses that are, in effect, averages.
00:19:59.880Don't you think that, to some degree, it might be cheaper for them to do what they're doing because they don't have to train it on so many, like, on all these racial grievance stuff and all this, like, feminism stuff?
00:20:16.260That may be, but, I mean, this is the other problem with these companies like Gemini with Google, and I assume Llama has the same thing, and also OpenAI, is that, you know, with, say, the Swiss watch companies, people loved these companies.
00:20:41.180You know, like, Google came out of the gate with this image generator that was making George Washington black and gay and female.
00:20:50.700And that pissed off the conservatives, but I think it sort of pissed off everyone and created a huge credibility crisis.
00:21:01.040I don't think DeepSeek is better able to do that because there's not the political correctness overhang, but maybe that had an effect.
00:21:08.240But I think the bigger issue is that it's not, like, the political notion that we can dominate the world in AI and that we can prevent China from catching up because you need all of this massive investment in infrastructure.
00:21:27.540I just think that's been revealed to be fake.
00:21:33.440Large language models aren't that great.
00:21:36.280At some point, they're going to produce the cheap Seiko that is good enough or weirdly better than the stuff that they have dedicated hundreds of billions of dollars towards.
00:21:55.120And selling people on the notion that HAL will one day save us all is nonsense.
00:22:02.840The overwhelming truth is that they have produced an LLM that is just as good as Claude, Gemini, Llama, OpenAI, ChatGPT, et cetera, et cetera, et cetera.
00:22:21.960And that this notion that they're years behind or we could prevent them from catching up or that there's something altogether special about these LLMs, I think, has just been debunked.
00:22:35.960It's also of interest is the degree to which little tech, David Sachs, who's the AI and crypto czar, and Andreessen and all these people.
00:22:57.900They covered AI in this veil of populism or nationalism or conservatism.
00:23:08.140And it's like, we've got to win this war.
00:23:11.760You know, and it looks like they've lost.
00:23:18.440And I'm sure Trump is exceedingly furious at them because he imagined that last week's announcement of, you know, we're going to cure cancer one day was this huge win for him, this way of appealing to a base beyond MAGA.
00:23:37.280I mean, MAGA probably hates the idea of mRNA vaccines created through AI.
00:23:42.760They're like the least prone to liking those kinds of things.