Big Digital Energy

00;00;00;03 - 00;00;23;29
Unknown
What's up Marc? Welcome to another episode of b d e a checklist b d e. So it's going to be a it's going to be one of the better ones. Is what you're telling me. Now he's on a much deserved break from his frenetic life of selling software. Yeah, man. But those guys are rich, man. They drive like fancy cars and have jet.

00;00;24;03 - 00;00;48;06
Unknown
Pretty, pretty interesting trip is on. So we'll we'll save the mystery and let him download it. Hopefully next week when he's back and available, which is a bit hit or miss. But is he hanging out with Vlad or something or. No, no, it's way more interesting than that. Hey, no offense Vlad. I haven't seen Vlad in a while.

00;00;48;08 - 00;01;15;16
Unknown
I, I need to make sure that Vlad until our number one fan. Vlad, shout out to you keeping Richmond and Rosenberg area safe, doing what you do. Holding down the old man coffee klatch at. I believe Larry's. Maybe we could. Maybe I could show up and we could have a, a date tonight. Joseph. Man, what a what a solid.

00;01;15;16 - 00;01;50;03
Unknown
What a solid shout out, man. Thought we'd kick off with an Iran grab bag. It's getting a little worn in terms of lead off, but, you know, yesterday we had woke up to a pretty significant air pocket and crude. And what's going on? You know, the messaging from the administration, which has been going on for at least 48 hours now, is that the last 24 hours of discussions with Iran are going very, very well through an extra very in there, which is a favorite adjective.

00;01;50;06 - 00;02;17;28
Unknown
So kind of embedded in all that. Did you pick up on this with? There was an Axios report that essentially was characterizing what things are or are going quite well. Crude takes a hit. Apparently there was a $925 million short bet in crude that was put on about 70 minutes before that. That article was released and it's been going on there.

00;02;18;00 - 00;02;45;26
Unknown
Well, so naturally, I've sort of looked at into this the usual suspects weighed in, and a historian called it the most corrupt war in U.S. history. And Jessica Tarlov at Fox News wrote, quote, lives on the line so they can insider trade. So, I mean, Mark, when you have Fox News Morning host on the ethics of your war trades, you've got a problem.

00;02;45;29 - 00;03;18;03
Unknown
And my personal favorite, Marjorie Taylor Greene. Yes. MTG she wrote, quote, when is everyone going to start realizing that the manic on again, off again war peace rhetoric is really just insider trading in quote. So when MTG is now the most credible voice in the room on market manipulation, sit that for a second. I mean, just sit that for a second.

00;03;18;05 - 00;03;44;28
Unknown
This is this is I mean, you know, I believe in the total depravity of man, Mark. And I also believe in the efficiency of markets. And both can be true simultaneously. So what the markets are basically telling us is that someone knew something before the rest of us. That's not a market, that's a syndicate. With the news feed, I thought it was a sign that Pelosi had maybe open a commodities account.

00;03;44;28 - 00;04;06;08
Unknown
I thought she was just a stock girl. I mean, I want in on the grift. I mean, we should all be in on the grift. Apparently, the sum total of these somewhat murky bets that have been placed throughout this saga approaches like 2.5 billion.

00;04;06;10 - 00;04;35;28
Unknown
And apparently, the trade, the close out of that short, that $925 million short generated something on the order of 150 million and trading profits. So I'm sure we'll get to the bottom of it very shortly. I'm sure. Right. But it it appears that, you know, this this jawboning is, as it has been in the past, very effective, you know, what are your thoughts on.

00;04;36;00 - 00;05;19;12
Unknown
We've got a pretty important summit coming up here next week. President's going to meet with Premier XI or whatever you call them. As you Premier. Yeah, I guess he is the Premier. I think what are we used to call Noriega? He was he wanted to be referred to as the maximum leader. Anyway, obviously there's a real disproportionate pinch point as it relates to getting Iranian crude, especially flowing again, because prior to this, China was the high 90s percentage customer of otherwise sanctioned Iranian crude.

00;05;19;14 - 00;06;03;13
Unknown
Right. To the tune of, I think well over a million barrels a day, 1.2 1.3 million barrels a day. And so, my question is, does Trump hold this as a, as a, you know, a club or a leverage point in those upcoming discussions? I mean, good, great question. But I think right now we're seeing some I mean, if you just look at Wednesday's Department of Energy draw, it came in about half of Tuesday's API data, which was about half of the prior week's BOE, as we were all kind of bracing for another 2020 post million barrel total stock draw.

00;06;03;15 - 00;06;31;28
Unknown
Correct, which tells you the government's either running low on political will to keep releasing, I mean, running low on barrels or most likely someone did the math that releasing into a $100 plus market while simultaneously negotiating a peace deal looks bad optically. I mean, that's sort of that to me is is what sort of makes this upcoming meeting interesting.

00;06;31;28 - 00;07;14;05
Unknown
And in my opinion, we pulled back from the prior week on crude exports and the SPR draw, although still, you know, seasonally, very strong historically. I think record product exports, which goes to address the, You know, the, the looming problems in other parts of the world, particularly as it relates to, to jet industrial, it which are at 2005 lows in terms of US inventories meaning jet and it and so there's a lot of noise in the week to week numbers.

00;07;14;08 - 00;07;41;01
Unknown
You start to kind of anticipate some adjustments coming in. I didn't look at the what used to be called the crude to balance number and, and how well behaved or ill behaved it's been over the past several weeks, just kind of glancing at these numbers at face value. But, the big disconnect in my mind was between the Tuesday evening API's and, in the Wednesday morning dollars.

00;07;41;04 - 00;08;11;04
Unknown
So one of the, one of the, I guess, the amusing things that Shygirl pointed out, it caught my eye was the administration was through some form leaking out, and I think there was some wanting to remain anonymous sources about this notion of, an alternative to help refill the SPR, which is down below 400 million barrels full as 714 million barrels, just to provide some reference points there.

00;08;11;04 - 00;08;37;25
Unknown
But we've got a bunch of oil sitting underneath DoD lands. And is it DoD or is it DFW? Doesn't matter. Department I think it's DoD lands, which I didn't know. They had a lot of land, but I guess they do. So as you know, we've had in the past the Naval Petroleum Reserve and Teapot Dome, which were initially government run and operated, things that didn't work out so well.

00;08;37;28 - 00;09;06;10
Unknown
In PR, I believe oxy was the buyer of that way back. And I think teapot shut down in 2015 is over. Well, I mean, let's just take a step back and name any national oil company that runs anything. Well, yeah, that's a good point, I guess. Peroration before Chavez. But I mean, maybe I mean, the Saudis would Aramco count I don't know.

00;09;06;12 - 00;09;35;13
Unknown
Yeah. They they behave more like a private sector with, you know, their publicly traded piece I guess. But no, you're right. The but but putting out messaging like that and the notion that that's something we can start tomorrow. I think the last USGS assessment of what's, you know, what is the reserve potential is and the, you know, single digit billions of barrels.

00;09;35;15 - 00;10;11;29
Unknown
Yeah. I think they said 4 to 5 billion barrels of potential resource under these DoD lands. How many drilling rigs and frack spreads does the government own and operate at this point? It's none. And so it's going to need the industry over time to to be able to to maybe execute something there. But, you know, it's kind of a fantastic notion that is put out to the, justifiably uninitiated consumer of that hopeful news that somehow there's a whole bunch of oil that's easily accessible.

00;10;12;05 - 00;10;44;10
Unknown
The government controls it because it's on DoD lands and we're going to be on a straight vertical line to refill the SPR pretty quickly, which is you and I both knows beyond fantasy. So let me get this straight. The plan to solve the SPR problem is, is the reserve we've been drawing down because we need cheap oil now is to develop a new resource that's government controlled.

00;10;44;13 - 00;11;15;20
Unknown
That would take years of permitting, drilling and a production ramp up. I mean, does that I mean, that's ridiculous. And it doesn't even make sense. It's like telling your doctor that in order to cure my anemia, I'm I'm planning a vegetable garden. I mean, it doesn't make any sense to me. The government, you know, for decades has been the facto a landlord and tax collector or royalty owner.

00;11;15;23 - 00;11;55;05
Unknown
Yeah. And now they're the biggest thieves. I mean, all these congressmen making gazillions off of, you know, Ukraine now, Iran. I mean, it's just ridiculous. But I did some research and I was like, okay, is the U.S government have a good track record as a good oil developer? You mentioned the Teapot Dome, but the Naval Petroleum Reserve at Elk Hills in California, held by the Navy for strategic purposes from 1912 to 1998, 86 years of the US military sitting on prime California oil acreage and producing it like they're afraid of it.

00;11;55;05 - 00;12;28;18
Unknown
So finally they sold it to Occidental for three and a little bit over $3.5 billion. In 1998, oxy doubled production. It's just like, so if you're a private, entrepreneur out there, I just being like, you need to start, you know, giving money to mag or whatever you want to be first in line to, to produce this oil on the DoD lands because you're going to crush it depends on what the terms are.

00;12;28;20 - 00;13;08;20
Unknown
Well, of course, well, it doesn't get done unless, you know, it fits in the returns and capital stock of any private operator. So, you know, maybe there's some, some special cheap capital that incentivizes, you know, an operating entity, public or private, to come in and help the government do that. But the government standing up a national oil company or a publicly owned national oil company kind of quasi model is, I think the timeline there is is not weeks and quarters.

00;13;08;20 - 00;13;43;04
Unknown
It's years. Yeah. I mean, meanwhile, the national average gasoline is about $4.56. Diesel is over $5 nationally, not a single state or diesel is actually under five bucks. Yeah, that's, that's Patrick Dugan gas, buddy. Noted that the other day. So speaking of elevated prices, you know, we've been talking for a while since all this began. And the industry had that video conference with Chris.

00;13;43;04 - 00;14;10;11
Unknown
Right. Doug Burgum, please. You know, drill and invest and produce more. And we've consistently been stating that, look, it's it's kind of the longer tenors on the forward curve defined as 2436 and beyond, months and beyond. And we know earlier this week and Diamondback in its earnings announcement in conjunction with it, said, hey, we're we're adding back 2 to 3 rigs.

00;14;10;11 - 00;14;35;15
Unknown
We're going to pick up another five frac spreads and increase production. Started addressing some of the docs and etc. and those that were out there on the other side of this saying, what the hell's wrong with the industry? You know, we've got $100 oil on the screen now. Come. There's not an incentive there. Well, in the Diamondback case, they're just being very consistent in my mind with what they mustered several months ago.

00;14;35;15 - 00;15;04;27
Unknown
I forget which quarter it was, but crude was in the mid to low 60s. And you know, the question then was is there a further pullback coming into 2026 on on activity before we knew all this was going to go down. And what they told you was look 70 is kind of the threshold where we contemplate adding back activity and only recently has the back end of the curve.

00;15;05;00 - 00;15;29;06
Unknown
You know, the that more comfortable 24 to 36 month months moved above the $70 threshold, especially the longer out you go, 36 months plus. And so it is the back end of the curve. So they're being very consistent. And I kind of call BS on the victory lapping here by those who said, we told you I think they're you know, they're behaving as you would expect.

00;15;29;06 - 00;15;59;27
Unknown
And in the meantime this morning before we started, I saw a flash. I don't know the details, but he said we're we're not yet ready to start adding back rigs. I mean, by the way, the victory lap, I mean, it's literally economics 101. And people act like it's a miracle every time I think what what Diamondback is a really good strategy is that they have all these, you know, uncompleted, drilled but uncompleted wells.

00;15;59;27 - 00;16;30;03
Unknown
So they have the ability to, to, to flip a switch, which is great. And what's interesting is their completions team is also doing some generally interesting work. So they've been doing these surfactant trials on about 50 wells, delivering average production uplift near a hundred barrels per day, with some wells seeing 400 to 500 barrel gains. That's not just adding rigs, that's squeezing out more of the existing wells with chemistry.

00;16;30;03 - 00;16;58;10
Unknown
And that that to me, is what is interesting for the industry to actually pick up on them. Yeah, the industry has always been surprisingly good, and I've learned over multiple events, you know, when the capital side of of the budget, there's we always talked about capital and expense budgeting internally. And when capital got tired, it was always much easier to go out and find ways to spend off the expense budget.

00;16;58;12 - 00;17;32;01
Unknown
And these companies are all very good at what we used to call the golden screwdriver. And your surfactant example is just another, you know, that's that's rate bump that's not necessarily additive to reserves, which would migrate more back toward the capital side. And so there are all these things below the waterline that companies can do on the expense side to, you know, take care of, take better care of and improve the performance of legacy assets.

00;17;32;01 - 00;18;02;13
Unknown
So I assume these are older wells? No. I mean, look, any time you say reserves, I understand. It's like adding to the balance sheet, but that is only guys in their sort of, you know, the, the the what do you call this? What do we call the, the, the finance boys. But that's just a, a paper entrepreneurial ism.

00;18;02;16 - 00;18;15;07
Unknown
You're either drilling and you're they're finding new barrels by finding new resources. But any time I hear about, oh, we need to find reserves.

00;18;15;10 - 00;18;52;24
Unknown
That to me is a is a huge exploration problem. But but but during during this like coming into that, you know, 2000 789 is the sort of this entire, you know, frack boom started to kick off. That's good. The name of the game for everyone is is reserves. And that number like we're either profitable or unprofitable based on some magical reserve number that no one really can put their finger on, which is super interesting.

00;18;52;24 - 00;19;15;15
Unknown
So when we're talking about the expense line and surfactant growth, like that's something you can really control and understand, but size of your reserves, that is still a voodoo science to me. But say you Mark, well, as Percell used to say, you can I can add a lot more reserves with the pencil than I can with the drill bit.

00;19;15;17 - 00;19;57;08
Unknown
Another of the endless stream of quips. But, you know, depletion is a physical issue. And so you actually have to go out and find that backfill capacity to maintain your reserve base. We get into the accounting of it, you know, the SEC type that puts rules back in the earlier days of the shale revolution and say, okay, you got to have a capital plan for all of these proved undeveloped reserves that you're claiming that are offsets to, you're unconventional, you know, producing wells.

00;19;57;10 - 00;20;35;18
Unknown
And so that that's directionally a five year limit on being able to, to buck those reserves. And I think if you look at, you know, long term performance relative to kind of reserve bookings, you're going to find the answer because it is ultimately how much can you physically add and keep adding because you're continuing to drill at a, you know, either a endeavoring to drill at a main at a minimum, a maintenance level, and some feel more entitled to outsized growth and others.

00;20;35;20 - 00;20;58;09
Unknown
And so it's a real difficult balancing act. And when we go through the type of volatility that we're going through, how many of those pale fruit, undeveloped locations that are at the end of the five year sec window, how many of those fall off? Because your whole cadence is slowed down. And so it's always a moving target.

00;20;58;12 - 00;21;22;28
Unknown
I had a one of my first experiences with the global energy team at Goldman Sachs, and Charge. And most urgent was my colleague. Then we'll still get a chuckle out of this. We're on a global energy call with the with the London based, research team, who at that time were responsible for covering the Euro majors. And BP had just come out with its its mission.

00;21;23;02 - 00;21;56;20
Unknown
It's stated kind of this is what we're going to do. Just look at our reserve replacement ratio and tell us why that a 5.5% annual compound growth rate in production is not easily achievable. And I scoffed at that out loud on the call. And you know, the correlation between reported reserve replacement ratios and the ability to sustain organic growth had broken down many, many years before that.

00;21;56;20 - 00;22;30;16
Unknown
And it's this whole exercise of, you know, playing kind of the shell accounting game of lowercase shell accounting, game of booking reserves. And, and the rules were much more lax then, because you didn't have certainly on these conventional resources that had much longer development horizons. Because of the nature of the, the big project profile, you know, multiyear appraisal and then getting into, development and then ultimately commissioning production, particularly in Deepwater.

00;22;30;18 - 00;23;02;10
Unknown
And so the notion that and BP was much bigger at that time than it is today, from a reserves and production standpoint, the notion that you're you're going to be able to to sustain that level of growth on that production base was just nonsensical. And it was quickly proven to be the case. But I got berated. I got berated pretty heavily and with good English and very eloquently by my, by my peers over, over across the Atlantic.

00;23;02;12 - 00;23;41;17
Unknown
Oh, they they lectured you, Mark. They did it very civilly with and with great accents as you now of of course, with probably some a little cup of tea, China in their hand when they did it with a finger up. Well I mean the market's efficient. I play golf with these, some of these, young private school educated kids that are, basically I figured out their finance pros, and I figure out that they just come in and they look at sort of some of the and it's us focused because the you really have to play.

00;23;41;20 - 00;24;01;03
Unknown
I mean, God bless the USA for one reason. But if you just think about the ability for entrepreneurs to be able in and pick off opportunity, where there's mineral rights and there's land rights for oil and gas, I mean, you can't you don't see that anywhere else in the world. But these guys are just picking off risk tolerance.

00;24;01;03 - 00;24;29;03
Unknown
If someone just doesn't have the risk tolerance, these guys will come in and scoop up mineral rights. Whatever it is, it's primarily mineral, a lot of it's minerals focused non op. Sometimes or you know, whatever. But they're making a killing and it's just and it's not the fact that company aid doesn't think that there's value there. It's just below their internal rate of return or below their risk tolerance.

00;24;29;03 - 00;24;51;14
Unknown
And these guys come in and there's a lot of these guys doing this. I'm like, I wish I did. I should have come out of college just thinking that way. But I didn't, of course. But there's a lot of opportunity. The market is efficient here. I just want to be on the grift. Mark, coming back to the Iran Iran case, I just want to be an oil trader with inside knowledge.

00;24;51;17 - 00;25;13;21
Unknown
I don't think we can get away with it, nor should we and attempt to do so. It's morally, of course, and legally reprehensible. Not if you're with Trafigura or one of these those guys that don't care. There's no no morals there, but they do keep the market efficient. Well, that's you know, that's that's the Congress model too. That's true I bet.

00;25;13;26 - 00;25;56;29
Unknown
Yeah. Anyway, speaking of Europe and I'm, I'm adding this kind of slipping it in. There's now legislation being crafted in the EU apparently to back off or exempt companies from this ridiculous methane stipulation that they had they, you know, they've been threatening by 2027. And it basically says cutter. Cutter responded to it and said, look, we're not going to expose a fine of literally 20% of our total global revenue if we violate some EU methane stipulation.

00;25;57;02 - 00;26;34;04
Unknown
And so, lo and behold, it's I, I don't have to do business there, but you're you're overreaching and suggesting that not only the revenue that you make from from selling LNG to US or petroleum products to us, we're going to we're going to attach to your total enterprise revenue. And so now we're saying with, you know, dwindling fuel situation and, and the pricing that European consumers are facing, reality is smacking these idealists in the face.

00;26;34;07 - 00;26;56;07
Unknown
And so, you know, we I've had some conversations recently about, you know, who's talking about this in the US. And we're kind of out in front of it and preparing to, to be compliant with these rules. I, I personally think given what we've gone through in the last three months, we're, we're going to see that go by the wayside.

00;26;56;09 - 00;27;32;10
Unknown
We should I mean, look, Mark, I'm living this painfully in real time. I'm always been a proponent of we need to take care of the planet. Let's be smart about it. So I don't walk outside of my house and dump a bunch of gasoline and oil down that down the drain that goes to the city. You know, I don't do stupid shit like that, and no one else should, and that you should be fined for that.

00;27;32;12 - 00;28;05;05
Unknown
But there's this overreaching bullshit that that's literally a progressive agenda. I'm. Let's just talk now. I'm bout to relocate up to Nantucket and the same people that wanted and fried for these wind farms. And so they put them up and destroyed the whole south shore of Nantucket. It's so ugly. I can't even imagine to tell you how if you're a landowner on the South Shore, you've been totally fucked.

00;28;05;08 - 00;28;37;27
Unknown
But this same island that supported this, it's now, you know, it's all defunct now because blades fell in the ocean and blah, blah, blah. All this, it never made sense economically. But you know what? The same people that were for the wind farms are saying now, they're not upset over the fact that it was a scam. And the whole in the beginning, they're upset that the the company behind putting up the wind farm is decommitted.

00;28;37;29 - 00;29;02;17
Unknown
And they're like, they just so like, we want to get this working and and it's the company's fault. Now. Like this was a great idea. They just they just need to get it right. And I'm like, hey, this was a scam from the very beginning. It never made sense financially. And now you're blaming the wrong person. I it so the point is, is anyone promoting these regulations?

00;29;02;17 - 00;29;38;21
Unknown
The EU being the most corrupt of them all, they're clueless. They just they just ran out. I mean, the Netherlands just ran out. Shell, who's a huge taxpayer and headquartered in the UK because of their environmental policy. I mean, it's just ridiculous. Meanwhile, they're paying, you know, 15 to $20 in a MMBtu on the continent for, LNG for the Netherlands in particular is ironic because you shut in Groningen, which is our largest gas fields in the world.

00;29;38;24 - 00;30;01;16
Unknown
You left 16 TCF in the ground. Yeah. That was in response to some subsidence. And, you know, I did some research a few weeks ago on the seismicity issues there. And they were they weren't even close to the magnitude of seismicity in their maximum events. In terms of what we we've seen in Oklahoma, in the Permian Basin. Yeah.

00;30;01;16 - 00;30;24;14
Unknown
When I was, you know, I spent once a month in the Netherlands and I would tell you when there were protests outside of the shell headquarters, I'd walk through the protest to get into work because I thought it was just hilarious because people were pissed. I'm like, you know, all these tremors? And I would just walk through thinking, this is the most ironic thing in the world.

00;30;24;14 - 00;30;56;27
Unknown
These people depend on the same company they're yelling at for something that is a necessity. But hey, who am I? Well, let's bring it back to the original issue. Look, the industry has an incentive to release as little fugitive methane as it can. It's a value product, and it also has a responsibility with respect to emissions. I, I've never not chuckled at and cynically at the term routine flaring.

00;30;56;28 - 00;31;23;18
Unknown
There is no such thing. And in my mind, you know, the reality is you drill a bunch of wells, you don't have facilities and you're ready to start producing. So let me flare the gas. Because of my poor planning, logistics, execution, you didn't choreograph the infrastructure to meet up with the kind of drilling completion schedule. You got out, got out ahead of it, and therefore you're you're stuck with a bunch of gas that you can't flare.

00;31;23;18 - 00;31;51;06
Unknown
Well, that's on you. And so the the, the industry rewarding itself in terms of, of executive compensation for routine flaring mitigation is has always been laughable. Me so the you know, the industry has a responsibility and a license to operate issue to do these things. But emit less particularly methane. You know that that should be second nature, right?

00;31;51;08 - 00;32;18;11
Unknown
No, no, I mean, there's a place for Overwatch and making sure people are doing the right thing. I have no problem with that. And I think that's the right thing at the audacity of saying, well, I'm going to I'm going to fine you 20% of your total global revenue is stunning. And, you know, the Qataris said, well, okay, we just want to do business with you there.

00;32;18;17 - 00;32;42;27
Unknown
There's there's plenty of other desperate consumers or certainly urgently motivated consumers for our for our molecules anyway, let's move on to the future. Yeah. Let's do it. And it's it's here. It's upon us. Do you look at that grid? That chart I did, yeah. Someone sent that to me a couple of weeks ago. I think we were going to talk about it last week.

00;32;42;27 - 00;33;08;08
Unknown
But if you look at the entire global population of 8.1 billion people and what the degrees of penetration in terms of, of consumers and users of AI is stunning, given kind of where we are right now and all the Capital One activity that's going on. But if you look at the at the, at the chart, we're we're not even getting started.

00;33;08;14 - 00;33;44;14
Unknown
You got what, 1.5 billion or thereabouts, 1.3 billion. Just most of us are free chat bot users. You know, it's a it's an efficiency partner. For most of us that are curious about a lot of different things. And then you've got, you know, 15 to 25 million people out of 8.1 billion that are paying $20 a month, for a kind of higher capability subscription, and then only 2 to 5 million in this coding scaffolding.

00;33;44;14 - 00;34;18;06
Unknown
I'm not quite sure what that that's means, but I'm a, that's the type of user I am. I use cloud code, I use cursor, I use I'm a heavy user and it's great, but also has downsides. So if we're looking at stream grids today, PJM and Ercot being a couple of examples, and, you know, the intermittency of those grids going up, not down.

00;34;18;08 - 00;34;43;09
Unknown
And when you think back to now, the big for talking about just in 2026 alone, spending over $700 billion on AI data center development. What does that imply, given all the running room, the the the theoretical running room we have for free, adoption? Where does it all? Where does it all land and where does it, you know, where does it go from here?

00;34;43;11 - 00;35;08;23
Unknown
When we have such a, you know, a small proportion of the globe that is using more sophisticated AI, if you sort of follow the logic that. The, the, the AI infrastructure companies as well as the users are know as well as the, the, you know, the clods and the.

00;35;08;26 - 00;35;35;03
Unknown
ChatGPT OpenAI AIS, as well as the companies behind them, the Microsofts, etc.. They're capitalizing on a scale that implies that are expecting a minimum of of about ten growth over the next, you know, whatever, 12 to 20 4 to 36 months or this thing's going to implode. I mean, there's the compute buildout, the energy requirements, the GPU arms race.

00;35;35;03 - 00;36;14;29
Unknown
I mean, I just seeing like even AMD's stock is just booming. I mean, anybody in the chip space is booming. Everything's booming because of AI. I was just talking to someone yesterday. I mean, that what AI is done, and it's been bad for people at these companies because of the layoffs and the lack of hiring, is this company these companies are raising capital, and that capital is going to AI, which AI replaces people, but they also need to have fewer people because those people cost money so they can raise more capital to put in the AI.

00;36;15;00 - 00;36;49;04
Unknown
So it's a double whammy. And I was listening this morning CNBC and they had on the Sky I don't know Paul Tudor Jones, who was legendary for predicting and profiting from the 1987 stock market crash. He predicted the 87 crash, but he was talking about AI this morning and really interesting insights. He's a macro trader, really insightful. He's kind of I don't know where he's from, but he kind of has a southern drawl.

00;36;49;06 - 00;37;37;28
Unknown
But he says he basically said that that the AI revolution is he compared it to the PC introduction in the 80s and the internet in the 90s. He believes AI will drive a productivity miracle, increasing efficiency 25 to 500% every few quarters. But he also was talking about like they had the top 50 scientists from around the world to talk about AI, and one of the and and one of the people in the room said, how many of you believe in a soul that the human soul and out of actually 45 people in the room, you know, how many, how many people actually said they do believe in a human soul?

00;37;38;00 - 00;38;17;16
Unknown
Ten. Five. Wow. So. And his sobering view is that the the top scientists, the people in charge of AI, people from China, us, all over the world, only only 10% believe in a human soul. So what does that tell you about sort of it? What's going to happen with AI? So he was very sobering. And I was like, that's actually a really good point, because what you're seeing right now, it's an arms race to develop AI and it's replacing people on multiple levels.

00;38;17;18 - 00;38;56;23
Unknown
And and we talked a little bit about the fact that, yeah, maybe AI is overhyped, but what where are we going here? That was the crux. As I understand it. And this is, you know, really I think exemplified by the next in the last segment that we're going to talk about the crux of Elon's dustup with Sam Altman and OpenAI is, you know, this was originally designed to be a nonprofit because of the safety concerns around where all this was going and what you alluded to.

00;38;56;25 - 00;39;29;15
Unknown
You know, Rogan's had quite a few guests talking about, when do we get to this? Kind of AI superpower state? And, you know, which path does it take relative to, deciding on what the utility of humanity is? And that's I think that's a real question. And I look at it just from the sheer pace of developments over the last 5 to 7 years.

00;39;29;15 - 00;40;03;15
Unknown
It's it's incredible. There's this thing completely spiral out of control. And so I was very interested in what was announced yesterday between space AI and anthropic, which was, hey, we're going to rent you, for Claude, the entirety of Colossus one in Memphis, which is the world's largest supercomputer, 220,000 Nvidia GPUs, a mix of different series that, as you know, they've already got Colossus two running.

00;40;03;15 - 00;40;35;16
Unknown
And I, I've heard bits and pieces that Colossus three in that same area of Memphis, is, you know, on deck. And I think what? But this was a kind of a big middle finger to the Sam Altman with us. Now, I've got certainly the world's favorite rusticated model that has a big chunk of increased capacity in one fell swoop.

00;40;35;20 - 00;41;02;11
Unknown
That my understanding is it's already operating, that Claude is already operating in Colossus one 300MW. It's 220,000 GPUs. I think I saw something of, Elon calling the the GPT 300 the the best AI computer around. Now, you got Ruben Vera coming behind that. And so what he's been able to do starting we talked about it almost two years ago.

00;41;02;14 - 00;41;33;21
Unknown
Just the stunning speed at which Colossus one came online, which is 134 days from concept to first power. Yeah. Now that's Elon and team's miracle right there. And what you've been able to do is take existing industrial infrastructure and retrofit it for use. As, you know, a data center. It's already piped up for the gas. You, you know, you you I think you you stepped on some toes, particularly as it relates to the community.

00;41;33;23 - 00;42;07;07
Unknown
But it was unstoppable. They had 35 turbines up and running, emitting, most of them, if not all of them unpermitted. Half of those have been replaced because Memphis Light got its act together. And now Elon's moved across the Tennessee Mississippi border into South Haven and is building a giant, gas fired, permanent power plant. And we talked about this last week about and or two weeks ago about like if you're in the business for a turbine in oil and gas, it's going to AI and they're willing to pay more.

00;42;07;14 - 00;42;44;15
Unknown
That's part of the race here. There's a lot of dynamics go the timeline because of those critical path items, turbines and the components of turbines and and permitting and grid connections and other things. Most of the giga scale projects that have been discussed in the media are, I think, earliest middle to late part of next year are going all the way up to 2030 plus, which is just the the reality of the construction timeline, the supply chain and all of these things.

00;42;44;15 - 00;43;15;10
Unknown
And what I anthropic is telling you is we need power yesterday. And so they're immediately able to offer they're certainly they're captive and prospective, customer base, higher rate limits, faster response time because they've got, you know, they've got a fully equipped and online for 800 plus megawatt, set of clusters right there in Memphis. That was already, you know, being used for grok.

00;43;15;12 - 00;43;42;10
Unknown
And while I'm sort of happy about it because the anthropic guys left OpenAI because they didn't really appreciate Sam Altman's leadership, because Sam has this historical, you know, I think I, I like anthropic, I use Claude, I think it's the best model out there. But I like sort of this, you know, if you're going to have to eval, you know, it's probably the evil Empire.

00;43;42;10 - 00;44;19;10
Unknown
It's, you know, Star Wars all over again, which literally it is Star Wars. Because part of this bit reality is it was Claude and OpenAI on the, on on terrestrial. And Elon's been talking about putting his eye in space. But Claude actually anthropic expressed interest in partnering with SpaceX to develop multi gigawatts and orbital AI. So this whole discussion we've had about laughing about AI in space is maybe real, because because what is the big bottleneck here?

00;44;19;12 - 00;44;49;24
Unknown
It is energy. This is the energy race. Whoever controls large scale power, whether it's gas turbines in Memphis or nuclear in Pennsylvania or eventually solar arrays and low Earth orbit controls the frontier. And someone who knows a thing or two about reusable rockets in space, and has a track record of successfully launching and putting in orbit almost 9000 satellites over the last few years.

00;44;49;26 - 00;45;13;18
Unknown
Yeah, I think Anthropic Scott a if it's not an exclusive seat at the table, it's a very advantaged one. Yeah, this all plays out. In the meantime, they've got a big chunk of capacity that wasn't otherwise available. If it was waiting on a giga scale campus construction timeline. That's the point. Is that speed to power in this arms race?

00;45;13;18 - 00;45;53;17
Unknown
As I arms race is absolutely the primary value driver, at least at least where the competitive dynamics stand right now. And so, one of the things I was thinking about, there were some there was some, some humorous things going on asking grok about what does this mean for you? You've kind of been shoved aside, if you remember, when, the conversation was all around grok being superior to everything else based on Elon's ethos of making it maximally true, seeking,

00;45;53;19 - 00;46;34;08
Unknown
Called GPT or whatever they called it, was not immune to his criticisms of, you know, those various GPT offerings, your competitors being basically a woke. Right. So it's going to be interesting to see how this all kind of culturally plays out. And whether, you know, there is a, a, an infusion of the of the grok philosopher ethos into what, what anthropic is doing on the GPT side, it just reminds of I was just laughing, Mark, because it reminds me of that 1976 song Afternoon Delight by the Starland Vocal Band.

00;46;34;10 - 00;47;00;02
Unknown
Gonna find my baby, gonna hold her tight. Gonna grab some afternoon delight. My motto has always been when it's right, it's right. Why wait until the middle of a cold, dark night. When everything's a little clearer. In the light of day. And we know the night is always going to be here anyway. Sky rockets in flight, afternoon delight.

00;47;00;05 - 00;47;26;16
Unknown
Afternoon delight is playing out right in front of us. Man. One of the best sequences or scenes and an anchor man. And the story behind that is that that was originally not part of the script. And they learned that within, I don't know, 20 minutes. I mean, life is just funny that way, man. Here we go. We can laugh a little bit about AI before it takes over our souls.

00;47;26;18 - 00;48;13;14
Unknown
You know, Terminator is probably the reality. Let's just be on the good side of it. Well, I think it's, I think it's something pretty important to watch. So, you know, does does Elon then take the step? I've got the space. And look, I think the whole Memphis model is very intriguing because what what takes a significant amount of time and given the the weight and energy intensity of GPUs, backs and racks and all those things, why not take all the large footprint industrial sites that were built for manufacturing and that that kind of a a physical load and space and retrofit it, which is genius.

00;48;13;14 - 00;48;40;03
Unknown
And there's, you know, unfortunately, in in that part of the world and up through the Rust Belt, there's, there's got to be more of this type of existing infrastructure that can be repurposed. I mean, maybe I, I, I've always laughed at MAGA when the MAGA is, when they're like 40 chess trumps playing 40 chess. But maybe Elon really actually went to first order principles and thought about this a long time ago.

00;48;40;03 - 00;49;11;29
Unknown
That that compute power is going to continue to go up, and you need energy to do it, because when you think about space acts and what is done buying acts, I think he buying actually probably saw that coming was definitely because I was open his his issue with OpenAI before he bought X, I don't know. But the point is, is he figured out like, man, who's going to win the race, you know, was Rockefeller.

00;49;12;01 - 00;49;33;23
Unknown
Let's own all of the let's own the pipeline. If you need energy, I'm going to control the throughput. Well, he's controlling the throughput. He's got the ability to put rockets in space. I still don't know if data centers in space can actually happen, but solar sure works better up there than it does down here. Maybe he's on to.

00;49;33;27 - 00;49;57;19
Unknown
Maybe he actually foresaw this. And of course, Tesla. I mean, who's going to take over the world? A bunch of robots. So he's got it all, man. Maybe he really is playing 4D chess. Go back and listen to the cheeky pi conversation when you have time. It's it's very illuminating on the you know what it's going to take.

00;49;57;19 - 00;50;25;24
Unknown
And he did point out, look, this is not a kind of science research project. This is an engineering project which has everything to do with figuring out ways to surmount physical, technical challenges. And then there's the economics around all that. And approaching that way, you know, he's done things at an industrial scale very quickly because they've figured things out faster.

00;50;25;24 - 00;50;51;24
Unknown
Like if you go in the Collider office and see the the three series of the Raptor rocket engine and, and the simplicity that they, you know, they focused on. Yeah. It's crazy. And so I think, I think I think those first principles are alive and well and everything that they do. So it was just an interesting, I don't know, sideshow to everything that's, that's going on.

00;50;51;24 - 00;51;24;09
Unknown
And I do think there was no small amount of tweak tweaking Sam Altman's nose in the middle of this, court battle that they've got going on over OpenAI. So because when you're a trillionaire, you can do that pretty genius move. Anyway. All right. What a great episode, Mark. We've talked about a lot of things. Last thing, we're going to close it out with golf again I saw that Brooks has waited around on two signature events.

00;51;24;09 - 00;51;50;12
Unknown
He's waited around on until Thursday and has not gotten in. And he's taking a very I would call it humble. I deserve this approach. I appreciate the fact that there's going to be some penalties that I have to pay. And then contrast that with Jon Rahm and Bryson DeChambeau, who saying, basically, you need us. You want us.

00;51;50;15 - 00;52;17;18
Unknown
I tend to think, you know. That's the PGA needs as much star power as it can get in the best in the world, competing every week, particularly in the signature events. What say you or Brooks take the took the right strategy because Brian roll up and now sort of now with their new governance structure they can be bespoke any way they want.

00;52;17;22 - 00;52;39;02
Unknown
And if you talk to some of the players, I've listened to Jordan Spieth and others talk about this. Scottie Scheffler, of course, two Dallas guys. I think the attitude on tour is, yeah, you know, depending on like you have to be one of the best players in the world to get favoritism. Anyway. Brooks is one of them is a US open multi winner.

00;52;39;04 - 00;53;05;07
Unknown
But he's taking the right approach. He lives in Jupiter. He hangs out with all these guys. I think the tour is going to kind of give him more favor from who's taking it. And Bryson's a different subject altogether I don't know I don't know if Bryson was in a lawsuit that that really matters, but if people were in the lawsuit against the tour, they're going to be at the at the at.

00;53;05;10 - 00;53;26;11
Unknown
You can't sue someone and then ever ask and be friends again. I don't know if Rahm was there. I don't know. But those guys are taking an approach that maybe their financial guys told them to do. You know, it depends what their objectives were of their objectives were to make the most money. They did it.

00;53;26;11 - 00;53;48;17
Unknown
Maybe their did this way, but I think Brooks is taking the right strategy. If you if you want to play golf and be accepted. The big question does this Phil ever get his tour card? Never. Phil is never Phil isn't Greg Norman. For of his era. All right. With that, we're going to end it right on the nose at eight.

00;53;48;19 - 00;54;15;16
Unknown
Yeah, we nailed it. 1045. Good to see you, man. Great seeing you, Mark. I'm running that. Maybe maybe we can, end it with a baseball discussion next week. Although I'm much less engaged this year with the way the Worst ERA staff is performing. Well, the fact that I'm an Astros fan and now, like a new adopted Dallas guy looking at the games at both cities last night thinking, damn, that, that's ugly.

00;54;15;18 - 00;54;27;05
Unknown
Yeah. If all they pitched well and beat the Yankees in New York, I think he went for eight. I watched the tail end of that game somewhat begrudgingly, but yeah.

00;54;27;08 - 00;54;34;21
Unknown
All right, man, good seeing you. Have a good weekend. And, we'll get together next week. Hopefully Chuck's back. Tell us about his adventures.