Sharp Tech with Ben Thompson - Why Nvidia Wants to Sell Chips to China, Answering Intel Objections, KPop Demon Hunters Conquers the World

Episode Date: August 29, 2025

Unpacking the latest round of Nvidia earnings and the questions that loom over the company's future in China. Then: Answering a few of the most common objections to the US government's plans for Intel, and why the current path may be the least bad option on the board. At the end: A look at KPop Demon Hunters, Netflix dominance, the modern movie business, and dual monitor desk strategies.

Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp. And on the other line, live from the United States of America, Ben Thompson. Ben, how you doing? I'm doing fine. You're framing this as like this is some novel thing recording both in America. You have technically been here all summer long, but now you're officially a resident, you know, and I've been waiting 10 days to celebrate live on the podcast.

commissioners that are listening. I was here for a few weeks in June. And then I was traveling and I was back in Taiwan finishing my house. I did not move here until August 1st. So let's just be super clear about that. Well, and you've vacationed here in summer's past. We did. I had to return to 9 p.m. recording sessions throughout July, which wasn't great.

But now you're back. We're recording in the middle of the day. the globalist era is over. It's a very exciting new era. How are you feeling in the midst of all this? Frazzled. I actually have this whole fancy setup that we're going to be using for Sharp Tech going forward. Looks great on video.

It was, I could not get it to work. So we are looking at like a blank wall in the background. Yeah. A unfortunate. But I do have extra cameras now. It's great because I have a setup in the U.S. and went in Taiwan.

Now I just have like too much equipment that I don't know what to do with. but we're working on it. High quality cameras all over the house. Eventually, I'm going to be projected into your basement on a big screen. It's going to be great. For now, we are going to kick things off with Nvidia. Always a lot of anxiety surrounding Nvidia earnings. Those came earlier this week.

And I'm going to read from the Wall Street Journal. They write, Nvidia sales set a fresh record on Wednesday as the world's most valuable public company continue to capitalize on strong demand for AI computing, but the company's lackluster outlook stoked jitters about future demand, sending its share price lower. Sales in the July quarter hit $46.7 billion, roughly in line with analyst estimates. The company predicted revenue of $54 billion for the third quarter, slightly higher than consensus estimates by Wall Street analysts. After several blockbuster quarters, the revenue projection was seen as underwhelming and stoked worries that growth in demand for AI chips might be hitting a plateau. So, Ben, there are a couple different interesting

threads from these earnings, which you wrote about on Thursday. We can take it one by one. First of all, how should we be thinking about Nvidia's results generally and specifically those worries alluded to by the journal that demand for AI chips might be hitting a plateau? What do you think? Well, number one, who knows? I mean, always like speculating on like market sentiment. And like the issue was that their revenue projections came in over consensus, but were short of the whisper number. Like it's just a bunch of nonsense, to be honest. It doesn't really matter. I think this is sort of a short term concern for people that are day trading in video stock, which is probably not the best idea in the world. I'm going to advise, advise against that. Okay. I mean, the reason I say who knows is until we have good evidence that there is some sort of supply demand balance, it's impossible to know what's actually going on. And the point I keep coming back to with all these Nvidia earnings is they're fairly pointless in the way that Apple's earnings were fairly pointless for the first six or seven years of the iPhone. And the reason is that you could. actually, like people at the time were remarking on it's incredible how Apple like hits their numbers every day. Or they were always like X amount over. Yeah.

And it's like like, you know, this is the best finance department in the world. Like they really know what they're doing. Actually, what it turned out was was Apple was slowly increasing distribution of iPhone around the world, which was a function of like signing up new carriers. And they would sign up a new carrier. And as part of signing up that new carrier, there'd be like a. purchase guarantee, like you have to sell X number of iPhones. And guess what? That gave you a very predictable view into how many iPhones you're going to sell over the next quarter and the next year.

And so they basically nailed every single quarter all the way through the iPhone 6. And the iPhone 6 was notable not just because it was the first large screen iPhone, but that was the phone that watched on China Mobile. And I think it was when on NTC Docomo. NGDocom might have been iPhone 5 or 5S. I can't remember. But those are like the two big holdouts as far as being sort of broadly available all over the world. And the first year after the iPhone 6, they wildly missed their projections. Suddenly they're not clairvoyant anymore.

What that will happen to those accountants? It turned out they actually had no idea how to break their market. It was actually one of the more embarrassing performances I thought by a CEO that I've ever covered was Tim Cook getting on the call. I think it was after the iPhone 6S or it might have been the iPhone set. I think it was the 6S. But it was like the first quarter and they wildly missed their numbers. And he's just like talking not. He clearly has no idea what's going on.

Yeah. He's just talking nonsense and oh yeah, this is why it's so blah, blah, blah. And then they had like a terrible whole year where they missed projections and it was a big deal, blah, blah, blah. Eventually they figured it out. They've gotten better at their projections since then. I actually think they had no idea. Like they, because the problem is that. their sales were gated by demand.

In that particular case, and as they increased demand, their sales gated. In Vita's kind of the opposite. It's gated by supply. Everyone, all the hyperscalers are out there, number one,

massively increasing their capax. And number two, saying the demand exceeds supply, and we can't get enough GPUs. We will buy everything that you're willing to sell us. Yeah, I mean, you wrote that the sales are governed

by the number of GPUs they can make. Well, it's also governed to an extent by Nvidia's choices. Like they choose to sell to the coreweaves of the world because core weave is like an Nvidia shop, right? They're wary of like, say, an Amazon that is really working to build up Traneum as an alternative. They'll sell the Amazon, but Amazon does not get nearly as many GPUs as they would like because Nvidia doesn't want to sell them the GPUs. And so there's also an aspect here.

It's in Nvidia's interest. On one hand, they do want to dominate. but kind of keeping a leash on some of these companies and having some leverage over them is also something they enjoy having and it would work to sort of preserve their moat, preserve their margins. And so,

and then we have this whole H20 thing, which we're going to get to. Like, they could sell H20s to other people or the production line capacity they're using for H20s could be used to build Blackwells. Yeah.

But they have reasons to, so Nvidia is also, not max like invidia's not going doing every single thing they do to have total supply and so there's there's a lot of internal deliberation at invidia choosing of customers who gets it there's also just real capacity issues which is why i don't know what's going on i think anyone trying to read too deeply into these numbers is making of a stake and then you also have the fact that presuming it is supply constrained. Supply, they're bringing new fabs online, new packaging facilities online,

like all these sorts of things. But that is not, they're not coming online as fast as demand is increasing. And also, in VDia, it's like the law of large numbers. Like if you add on 100 units of capacity on a company that's selling 100 units, you just doubled their sales potential. But if the company is now selling, a thousand units and you bring on 100 units, you've only increased

their growth potential by 10%. So there's a bit where Nvidia's base now is getting so large that of course growth has to ameliorate because they can't possibly, yeah, they can't possibly compete with the exponential curve that they were on like two years ago. Right. So their absolute

increase in sales may be higher than previous quarters, but the percentage increase might be lower. And to the extent their sales are gated by supply, by definition, the growth rate, if it's limited, if it's truly limited by supply, has to flatten out. So, number one, people reading too much to this, I think are dumb.

Number two, I'm saying they're dumb not in that I know the answer, but I think they're dumb because you're trying to read thing into something that is pretty, there's so many variables here. And the sort of core variable, if your assumption is that there's more demand than supply, it's impossible to know anything about the nature of that. demand. We won't truly know what AI demand is until there's sufficient supply to meet it. Okay. Well, speaking of demand, the revenue projections for Q3 do not assume any shipments of the aforementioned H20 chips going to China. CFO Colette Cress said, we're still waiting

on several of the geopolitical issues going back and forth between the governments and the companies trying to determine their purchases and what they want to do. So it's still open at this time, and we're not exactly sure what the full amount will be this quarter. However, if more interest arrives, more licenses arrive, again, we can also still build additional H20s and ship more as well. So question for you, what do you think of what's going on there? And Vindia seems very determined to sell into China right now,

but Chinese companies don't seem like they're willing or able to buy H20. So what do you make of this situation? Because regardless of what happens with the H20, there were also reports on Thursday. Invidias and talks with the White House to sell a modified version of the Blackwell chip to Chinese companies. So this story is going to continue to unfold over the next three or four months. There's news to say a lot to unpack here. The, from the, the companies in China are very willing to buy HG. 20s. Like, even though it's a relatively limited chip, uh, particularly for training, because the,

the bandwidth is constrained and it's sort of chip to chip bandwidth between the different chips. You can't build the, the huge systems. It is a very capable chip. It has a lot of memory sort of on board, particularly for inference to be very useful. And it's better than anything that these companies can get in China. Like, like Huawei's doing some interesting things, but they're fundamentally limited, you know, first by the chips they can get, which are most, see by TSMC. But it's just, of course, they'd be willing to buy it. The problem is this chip was designed to the Biden administration's specifications for exports.

So, I mean, I don't understand why people in Washington get mad at Nvidia for basically the Biden administration set down some rules. So they built a chip that fit in those rules. They're like, that chip's too good. It's like, well, then you should have done better making the rules, right? You should have done is just institute a blanket ban. on selling chips into China if you wanted to curtail that. By setting out these technocratic parameters, it incentivizes a company like Nvidia.

I mean, honestly, Nvidia would be irresponsible not to build a chip that works around the parameters they laid out. Right. Well, but also such a ban would have been a terrible idea for reasons, in my estimation, for reasons that we've talked about, which gets into why Nvidia wants to sell into China.

But just to review the timeline here, invita makes this chip to the Biden administration specifications the Biden administration i i believe was fairly annoyed at the H20 but again like what do you want invidia to do to your point uh and again and the reason they want to sell to China is because the invidia moat is about software it's about a lot of things it's about networking uh it's about overall performance which is really important in the u.s because we're going to be power constrained soon which means the number of total you can generate per watt of power is going to be your limiting factor. And Nvidia will be able to charge a premium if they can stay on the cutting edge there.

But stay on the cutting edge is hard. Nvidia has done it for a long time. But the other thing they have is CUDA. And when everyone is used to using CUDA and CUDA is used to actually like, that's the language to program these chips to sort of use them as a computer. And CUDA is clunky and it's hard to use. But it was totally groundbreaking. VINVVV.

I've sort of created this entire space of programmable GPUs and being able to use them as a supercomputer. And it's a real lock-in. Now, companies will work to get alternatives and build their own software stacks, but this is the same thing as like the whole Intel, X-806 versus risk, all the things we've talked about. This low-level software is very, very powerful as lock-in.

No one wants to do that work all over again. If you want to hire someone to work on AI models, everyone knows Kuda. Like, like, if you're a company, building something, you have optionality in the clouds you go to because everyone has invidia. Like there's real ecosystem effects that are very, very powerful.

And the reason why limiting Nvidia sells to China is such a risk for Nvidia is life will find a way, right? The Chinese developers will build an alternative. It's a sufficiently large market that that alternative, particularly

to the extent it's open source, actually the best thing that's happened to Nvidia is Huawei Kui Kee. keeps trying to like do their own version. That's proprietary to Huawei when they should be doing like a fully open source sort of alternative to Kuta and really leaning into that. But if that gets scale and traction in China, it's not just that Nvidia in the future is limited to sell to China.

It's that that will spread to the West. And suddenly there's there's a meaningful alternative with real developer support with widespread use to CUDA and it's going to work on chips other than Nvidia chips. And so from Nvidia's perspective, China building up an alternate, like them not be able to sign it to China. Right now, everyone in China would rather buy Nvidia chips because they're better. But if they can't buy Nvidia chips, then they will use something else. And in the process of use something else, they will be incentivized to destroy Nvidia's

software moat. And that destruction will not be limited to China. It will spread all over the world. So this is a big problem for Nvidia. It's not just a China problem. It's a future of the company problem. Their entire thing is built. So this is why it's really important to them to sell to China.

And from my perspective, it should be important to the United States to sell to China. Like there's this whole mindset about going into China where for a lot of people who have been appropriately sort of bear, not bearish, but skeptics about the whole outsourcing. sort of thing and have in many cases been proven right. They're being like, oh, yeah, another selling into China. Now they're like getting killed. No, this is, that was like transferring technology. Right. That was limited to a single object, car technology, metallurgy, like whatever it might be.

We're talking about network effects. Network effects are totally different than the technology that we're talking about. When Nvidia is trying to preserve are the network effects around Kuta, network effects depend on everyone using the network. And that's why they want to sell there. That's why I think the U.S. government should allow them to sell there. And they want to preserve it not only in China but all over the world. That's the long term existential concern.

It's going to seep out. Yeah. The software will seep out. Like even if you put a ban on Hawaii chips in the U.S., developing a Kuda alternative that has real mass and momentum behind it is going to diminish Nvidia's advantage, pricing power, all the sort of things in the West, it will, like, from an AMD perspective, this China band stuff, yeah, they're losing sales in China, but in the very long run, it's actually probably a good thing for them because it's creating the conditions to break down

the Nvidia moat, not just in China, but in the West. And once the moats broken down and you get to a more general purpose software that runs on anything, well, then I'll be able just buy it an AMD chip instead. Yeah. And like, and so this is why it is actually a really big deal and issue and problem for Nvidia. That's why they're very, very concerned about it above and beyond the fact that of course they'd like to sell to China because there's a whole lot of money you made.

It's the second most important market in the world. But that one's easy to understand. I mean, I felt like kind of an idiot asking that because obviously it's like $10 billion in revenue or whatever the number is. I mean, every quarter is. available in China if they were allowed to sell into it? It would be massively more than that if they could sell and constrain to China. But China is like all this money that they're selling these hyperscalers in the U.S., China would

get a whole bunch too. But it's interesting because to the extent that their sales are gated by their ability to create enough chips to meet demand, China has been an existential priority. I mean, like when the H20s were banned earlier this year back in April, there's been a lot of back and forth over the last six months. But the next day, Jensen Wong got on a private jet and flew to Beijing to meet with PRC leadership to sort of smooth things over. And so it's been a real driving concern for two years now. And now happening at a super interesting time in China because the Chinese government may realize some of what is happening here.

And they've banned companies for buying the H20s. And it's not clear why they're doing that or what the end game. is. This is where the Trump administration really screwed up. And they want to point, put all the blame on the Biden administration. And they, like, like, I think right now they got to the right place, which is you should let Nvidia sell into China. You should want the American technological stack to sort of be dominant all over the world.

The problem is they banned the age 20 cells in April. It was like, it was dumb. It raised the prominence of this issue. And it's like, they're trying to like. just undo it and it's funny you talk to them. They're like, we didn't ban it. We just imposed a licensing regime. Why you'm like,

the pedanticness that they want to engage these arguments instead of just being like, yeah, we screwed up. That was a bummer. If they just let it flow through in VDSL H20s, again, I hate ascribing

Chinese actions to the U.S. Right? Like China is an independent actor. They do things for their own reasons. They're smart, talented, all those, like a powerful country. All those things are true. Way too much China sort of analysis just ascribes everything to the U.S. A response to what we're doing.

Right. Yeah. Everyone else in the world is an MPC. We are the only actors. And that is a mistake. I say all that to say, why did the administration do this? Well, a couple things happen. And they're fighting domestically.

And they're like, oh, don't worry. We're selling to China because we're going to own it all. The Chinese government is, wait, wait, this sounds like a big problem. Maybe we shouldn't allow this to happen. That's what's funny about it. I mean, obviously, I think your point is, had they just continued selling H20s all year long with no back and forth on whether these are banned or export controlled, the Chinese government never takes note of whether these chips are strategically beneficial or not.

And then they unbanned it in July. And Howard Lutnik said on CNBC, We don't sell them our best stuff, not our second best stuff, not even our third best. You want to sell the Chinese enough that their developers get addicted to the American technology stack. That's the thinking. So explicitly laying out the strategy on the American side. Which is all totally correct is what you should do, but you probably shouldn't talk about it on TV.

And again, I think like the administration got to the right point in my estimation. I wrote before they banned it. Remember, we had the long discussion about chip precariousness and the whole thing about where I think they should let China build on TSMC. And I think they should let the chip ban is a bad idea. I'm fully opposed to it. And I laid out all the reasons why. But the problem is I'm glad they listen to me now. But and it's, again, it's frustrating talking to this team because they, you know, like, sorry, you screw.

Like, you don't get to undo it. Well, that was the most frustrating thing about your chip piece is I think the thinking there would have been really effective if it were implemented in like 2018 and 2019 before moving forward with various semiconductor controls and obviously it intensified under Biden. And now it seems like the horse is out of the barn to some degree. Yeah, it's tricky. Like is it already too late? I mean, the one single most effective chip control was not allowing UV machines. into China. And so was that one control sort of worth all the other ones?

That may be the case. So, you know, sort of a baby and bathwater thing. It's really easy, especially when you're dealing with government to, you can criticize literally everything that happens because it's never going to be as sophisticated as like perfect. And this is a mistake people make all the time because it's easy. You can point out the problems with everything. You have to sort of take the package.

as a whole. So if you take the package as a whole, with including the Biden administration, including the Trump administration, has the overall thrust been correct simply just thanks the EUV decision, which by the way was one of the very first ones. Like everything else has been bad, arguably. You could make a case. And by the way, a hulking piece of equipment that is easier to control and restrict than chips as they're true. transiting the world. Exactly, exactly.

So just a review. I'm happy to give Indvia, give China the best Nvidia chips. I'm happy to let them fab all they want at TSM and I want a total ban on on semiconductor equipment.

Because I want them dependent on Taiwan. And by the way, if the administration wants to sort of undo their H20 screw up, guess what might actually overcome the Chinese government's consternation at the U.S. flaunting their technological superiority. Selling blackbo chips? Actually giving the technologically superior chips, right? Like, they're just so much

better than what China can do domestically that the government has to be pragmatic and think, look, the benefits we will get from AI, instead of waiting an indetermined amount of time until we can sort of do better, we'll take it. Well, it'll be an interesting experiment because it's hard to know what's driving the thinking in Beijing on some of these issues. I think comments like Lutnik in terms of ascribing too much agency to the American side of these dynamics, like I think what Lutnik said was perceived as insulting, according to a Financial Times report. But the idea that that alone drove the policy shifts strikes me. I don't know.

I don't really buy that. You can know, you can argue that China's doing the right thing. Well, that's the thing. I'm like, I talked about this in the context of chip controls. The best thing that China could do is like when China released that chip that everyone flipped out about in Washington, that was almost like bad yield or whatever. I'm like, this is actually bad for China because what they need to do is build up their semi-equipment manufacturing industry from the ground up. They need to be fully indigenous because the U.S. has, you know, this is just as an analyst. Like obviously I'm on the U.S. side, but like the best thing for China in the very, very long run is to fully control the stack because clearly it's the most important technology in the world and the U.S. is going to leverage it. They already have. Right. So China making their own chips with a bunch of U.S. equipment is actually preserving U.S. control over their industry. And to the extent they can build up their own lithography, build up their own etching, build up all the actual pieces.

that go into photoresist, that go into these processes, that would be good. The problem is that's economically insane. Because if you can just buy it, why would you do it otherwise? Yeah. And so, and in the, you know, hey, we're making our own chips. Don't look at the fact it's all Japanese chemicals and all American equipment and European equipment or whatever it might be. That's sort of the reality today.

And so this is a similar situation where there's sort of a pragmatic decision that will be facing the Chinese government. Do we want the best chips for AI right now? Or do we want to fall behind potentially for years slash decades so we bring our own system to bear? But in the long run, we'll be truly independent and not dependent on the U.S. That's, it's a tough decision. Yeah. Well, and I think the reality is there are probably people within the Chinese government who want to just rip the Band-Aid off and go that direction now and comments like,

we got from Lutnik in mid-July. It probably helped them make good ammunition. Yeah. And there's also a possibility that they're just putting the screws to Nvidia and Jensen Wong saying go back to the U.S. government and lobby for relaxing restrictions on Blackwell chips. But if they are in fact allowed to sell black well chips, that'll be the tell.

They should be allowed to sell. And actually, they should be allowed to sell. And they might have to be allowed to sell to undo the April. screw up. Yes. Well, more will be revealed on that front. For now, two other notes from the call. CFO, Colette Cress, again, responding to a question about Nvidia's deal to pay the U.S. government 15% of its China revenue. When I first heard it, I said, I'm sorry, where's the regulation? I said, no wired money goes out of this company based on someone told me, I cannot do. I have policies, procedures, and rules, socks, everything else that will say there is nothing you can do

there. They understand, and we have been communicating to that. And I'm just saying, if nothing shows up, I've got licenses. I don't have to do this 15% until I see something that is a true regulatory document. So just keep that in mind. So I'm just noting that for the record. We didn't record last week and we didn't mention it two weeks ago. It's such an insane structure that the government has proposed here, not clear whether it's legal, not clear whether it will even move forward, at least based on the comments yesterday. So I don't know whether you have any thoughts, but just closing the loop on the bizarre story

from the last two weeks. Yeah, I don't know. I mean, I guess the administration position, because a lot of people, including me, whereas like this seems clearly unconstitutional, like you can't tariff exports. Yep. And the reason for that was the South insisted that be put in the Constitution

because they were worried the North was going to tariff, like their cotton exports and tobacco exports. It's like literally, this isn't an amendment. this isn't a law, it's in the Constitution. You can't do this. And I think the argument is, well, the invader chips are made abroad. They're never actually entering the U.S.

They don't touch our shores. That's right. It's not, so I don't know. That's for the courts to decide, but who knows? Yeah. I mean, who the hell knows? I guess I'm touching questionable legality topics

on a regular basis here, but it is what it is. It's all part of the fun. Well, speaking of controversial plans of questionable legality, a Reuters report this week, Treasury Secretary Scott Bessett was asked about the U.S. taking a stake in NVIDIA, and he said, I don't think NVIDIA needs financial support. So that seems not on the table right now. That was on Fox business. So we can all rest easy. All the libertarian babies can have their bottle. We're not nationalizing NVIDIA this week. But that brings us to segment two. So, for anyone who's not familiar with the particulars, I will read from CNBC, Intel on Monday

warned of adverse reactions from investors, employees, and others to the Trump administration taking a 10% stake in the company in a filing, citing, risks involved with a deal. The deal, which was announced Friday, gives the Department of Commerce up to 433.3 million shares of the company, which is dilutive to existing shareholders. The purchase of shares is being funded largely by money already awarded to Intel under President Joe Biden's Chips Act. Intel has already received $2.2 billion from the program and is set for another $5.7 billion. A separate federal program awarded $3.2 billion for a total of $11.1 billion, according to a release. Trump called the agreement, quote, a great deal for America and said the building of advanced

chips is fundamental to the future of our nation. So you wrote about this deal at length on Tuesday. We'll link it in the show notes. We've mooted the idea of a U.S. government Intel partnership at various points in the past on this podcast. No, I think on Sharp Tech specifically, I've said Intel is barreling towards nationalization. Yeah. Like, like, so I mean, this might be one of the all time being right points.

Like everyone, I was actually made this one of those things where I was surprised at how surprised people were about this happening. So was I. Just because we've been talking about it so much, but sadly not everyone listens to Sharp Tech. But like I believe we use the specific words, like Intel might need to be nationalized. So I mean like we get to why,

but this isn't out of the blue by any means. Yes. And I made fun of you when you raised that possibility. I called you Comrade Ben on the podcast. So again, foretold a lot of discourse that has been swirling for the last 10 days or so. Joshua says, Ben, why is the U.S. government taking a stake in Intel a better solution than further incentivizing investing in U.S. fabs, whether by TSM, Samsung, or Intel?

Your writing has shifted my opinion on how we should engage with China on chips. It's also convinced me that Intel is more likely than not a lost cause, but that incentivizing others to build U.S. capacity is feasible. In the event of military conflict with China or Chinese action against Taiwan, wouldn't TSM and Samsung be even more incentivized to support their U.S. plants? And in this downside scenario, nationalizing those plants would then be on the table. To put it even more simply, if China bombed TSM and Samsung plants, who would you trust more?

or Intel rushing in to adapt and meet bigger demand or TSM and Samsung executives rallying to accomplish this? What do you think? We got a number of fun responses, but we can start there. I think this is a misunderstanding or an incomplete understanding of what we're trying to preserve. It's not the equipment, right? Like this answer sort of is indexed.

And this is sort of like the same answer. you see a lot of people who they get a cursory understanding of the semiconductor value chain. And they're like, well, actually, ASML is the most important company in the world because they're the only one that makes a EUV, which TSM needs to make chips. And then they start talking about Zice or Zice. That's right. Oh, actually, Zice is the most important. Actually, no, it's Drumpf, which is hilarious, this whole thing. The U.S.'s key point of leverage over ASML is a laser that's made in San Diego by a company that was called

Drumpf, DRUMPF, which AsimL acquired, but it's all, you know, I mean, almost all of UV is U-S technology, but is it called Drumpf? No, then I'd be wrong about, it. It's something like Drump. What's the, uh, I don't know. Dr. Rumpf, the John Oliver meme? I hope it's not spelled the same way. Yeah, no, sorry, I got stuck on the, the John Oliver spelling.

No, it's Trump, T-R-U-M-P-F. So it's like, I mean, this whole, might be lending credence to this all being a simulation. It is a little ridiculous. the U.S. point of leverage over ASML is a company called Trump. That was based in San Diego that ASMO which then gives them the leverage to invoke the foreign direct product rule. Yeah, Trump, let's Trump, Trump, ASML is going to sell. I've literally not joking.

A wonderful way to close out this summer here. It's all to sense in the chaos on the podcast. There is tremendous expertise and the most irreplaceable expertise in the world in actually. in actually putting all this together, all the different, and a lot of the equipment, including ASML, comes from Intel. Intel invented EUV, like way back when. Like, so this, and TSM, like, co-designs a lot of these processes with their partners.

Like, the, the point of integration is the foundry and knowing how to do this and getting all this stuff together. And they are the point of coordination with all. these different companies that helps them figure out these problems and there's all co-developments and there's this tacit knowledge that builds up over decades to under and you can't just learn it overnight. It's like it's just you know what to do. You know how to solve this problem. You've seen it before. It's the like the pattern matching and the understanding that goes into it. It's irreplaceable. It cannot be replaced. So number one, your number one problem with the TSM in a war scenario is the people

with that in their heads are probably dead. Right? Now, there's like, oh, maybe we're going to get a plane and get them out of there. Well, maybe you will. Maybe you will not. That's sort of problem number one. Problem number two is TSM and the Taiwan government in particular, which obviously has a say in TSMC, which uses T like Trump complaining about TSM like, or sorry, Taiwan, like holding up the U.S. by virtue of chips is totally correct.

That is basically the foundation of Taiwan defense. They don't spend enough on defense. Their army's kind of a mess. They're like, you need TSM, you're going to defend us. Like, like, I mean, that's maybe a little harsh, but not that harsh. If we're being totally honest, I'm now in the U.S. They can't come get me. So I can be honest about this, right?

There you go. Welcome home. So the problem is all these, all those plants, yeah, they could nationalize. the plants, but the problem with nationalization that we talk about in like socialist countries or communist countries or apparently now the United States is, yeah, you got a bunch of equipment. What are you going to do with it? Right. And there's all these stories of like in the third world of like the nationalizing the oil company.

And they're like, oh, we're going to get all the money and profits. And then what happens? It all breaks down and their production falls. Because they don't know what they're doing. They don't know how to use it. And all the talent fled, right? So the problem is you can have all this stuff in the U.S. If you don't have the knowledge and like it might work for a while, but you've lost it.

And you're not going to rebuild it. The danger of losing intel is that you lose a source of the knowledge of the, of the understanding of how to use this stuff. And yes, TSM and Samsung might build foundries in the U.S. And that's definitely better than nothing. And I compliment both the Trump and the Biden administration for the extent to which they have incentivized and push TSM, which didn't and doesn't want to do. this and the Taiwan government is not with them to do it, but they've had so much pressure applied to them that they have done it and they are getting economies of scale like going in Arizona. That is a good thing from the U.S. perspective. It doesn't change the fact that this is

a Taiwanese company and this is a South Korean company. And number one, they may be allies. They're not ultimately loyal to the U.S. Number two, their most important people, most important salsa knowledge, most important R&D centers, all those sorts of things are within like a five-minute missile flight of China. Yeah. And like the reality is if we're in a real war, like you don't certainly get to coordinate an evacuation and like manage this sort of exit. It's just, this is just the root of it.

And it's a hard thing because of course our hope is this never happens. But you can't plan that way. Like if Intel goes, if Intel goes away and gets out of foundry, at the end of the day, you are basically committed forever to Taiwan and to South Korea funding the most important technology that exists. Yeah. Right now, if TSM went away and Samsung went away, Intel, despite the mess that they are, is by far the best option to fill in the gap. It's not even close. It's much a better option than a bunch of TSM plants in Arizona where all the head engineers died in Taiwan, right? Like there's, it's just, and so this is the, this is the core.

Like I completely get, understand and by and large agree with all of the objections to the deal. But what I find intensely frustrating about this discussion is there's sometimes, this goes back to my political session before. you like you're presented with an array of horrific options right and you have to pick one and there's a bit where did I enjoy writing this article not really I'm not a socialist I don't like and of course the Trump manner is objectionable like oh yeah we're going to take shares of lots of companies we're going to see it's like can you just shut up like uh so like and then you get sort of lumped in with defending all this sort of thing. And Intel doesn't deserve it. They're a poorly managed company. Their culture is a

problem. They've lost. Like all these things are just totally true. I just, I do think that chips are different. Now, why ownership? The problem is, I think a year ago, you could have gotten there with purchase guarantees. Like, we're go, your 18A is going to be viable. We're going to buy X number or have these incentives attached, blah, blah, blah, blah. The problem is, Since then, and by the way, Lip Bhutan might have completely played Trump, to be totally honest. How so? When he comes out on the earnings call and says, we're not going to do 14A unless we have an external customer, he's basically guaranteeing that Intel does not get an external customer.

Totally. I mean, it would be irresponsible for anybody to sign up to be Intel's customer when they might not be in that business in three years. You're not going to dedicate a bunch of resources to designing chips for a foundry that might not be producing chips. like in 24 to 36 months. Yeah, and I don't want to overly accuse Ton because he's, it's also likely correct.

Like if they'll try to do 14A and their only customers themselves, which by the way, their business is under massive pressure, they're gonna their ass kicked by AMD, like in particular. And X86 is just fading in importance generally. You know, particularly as like, you know, arm becomes a bigger thing.

Like, like, data center and all these sorts of things and all the money's going to GPUs. Like, this is all, this is kind of like the Lutnik thing. It's like he's, he's, might be saying the truth, but also he's kind of like guaranteeing like a certain outcome by saying that. That's why in my estimation, it had to be ownership. You need some sort of credible guarantee that Intel Foundry is going to exist and will continue to exist.

And at this point, beyond the fact that Intel needs financial help, as we've been saying for over a year, or maybe even longer than that, but very clearly for over a year, is the fact that they now need to credibly promise this would be external customer that we will be around. And they can't do that. Intel cannot do that on their own. And now it's more credible. And is the Trump, and then like some of the objections,

oh, Trump's going to browbeat companies using Intel and they better off using TSM. Yeah, that's kind of what needs to happen, right? There's no, this is the other, there's two pieces. It's the national security bit and there's the fact that no company wants to choose Intel. Because it's not worth it. Like TSM is there to serve their needs. It's reliable. Everything about the experience is better.

And so it's not a market failure. It's a market success. The problem is sometimes market successes are in direct conflict with, national security concerns. Not just in the next year or two, but in the next 10, 20, 100 years. That's the time period we're talking about. Yeah.

Well, I mean, TSM, it's like the rational outcome of a globalized free market, but the problem is that it's, I don't know, how many miles it is from... It's actually totally normal that TSMC won. The costs are so astronomical. It makes sense that one company,

and this has happened, like there used to be like... It makes sense for there to be one company doing it. That's the rational outcome. And every time it gets more and more expensive, foundries drop off. Like, you know, AMD split and then global foundries sort of fell off and then IBM fell off. This has been happening for a long time because it's so expensive that whoever sort of gets there first is the best financial position sort of like they survive and other people throw in the towel. And the economically rational thing for everyone involved is for Intel to give up. Right.

The problem is that's bad for the U.S. So what do you do then? What's the solution the people who hate this suggest? Yeah, well, that's the question. Do you want to read another objection to your takes here? Bring it on. This invokes any trust. TK says, subject, the road to hell is paved with USB Intel.

Andrew and Ben, the opening blurb from Ben, steel manning the case for US Intel spurred me to straw man Ben's. admittedly eloquent argument. The outline of the argument for partial nationalization of Intel parallels the original argument Ben had on antitrust intervention against Facebook regarding acquiring social networks. That is, and he's sort of paraphrasing you here, I am generally wary of state intervention, but this time it's different because the target company, be it intel or Instagram, is in this particular circumstance.

and three, intervention could be the best path in this case to get to this particularly targeted outcome, be it preventing social networks from requiring other social networks or maintaining U.S. chip fabrication capabilities. Ben seems to have recanted his position on antitrust because he found that government intervention is a blunt instrument and he has learned that he cannot count on the execution of policy to be nuanced enough to be actually effective. Given that, I'm keen to hear how he has thought around the long, second order, the long run second order effects of having a U.S. government that is taking equity stakes in private companies for the fulfillment of policy goals. Does this precedent establish a slippery slope? How far could the

concept of national interests be stretched? Is this a power that Ben would trust future administrations to wield regardless of their political stripes? Any thoughts on that, Ben? No, great email. I, I, think it's, I think it's a totally fair analogy. I do think it's different, which of course I will explain. But to his point, does this precedent establish a slippery slope? Yes. How far could the concept of national interest be stretched? Unfortunately far. Unconcifully far. Is this a power that that would trust future administration in regards the strike? No. Do I trust this power with this administration? Also no. Like, I'm not, and I think that, you know, the challenge, that was why I opened with the steel matting sort of bit. I'm like,

I acknowledge and agree with basically almost every single objection to this deal. Like it's terrible. All these things are true and bad. The distinction and so the point about, you know, are you to get appropriate nuance? I have learned that lesson. And I think his point that would usually have appropriate nuance here is fair. The difference is the stakes for the antitrust stuff, another shift in my thinking. is it's lower.

Like the extent, I think the way that TikTok took over and threatened Facebook was a learning for me too, right? Facebook's dominance was pretty short-lived. The market actually fixed the problem. And so that was a, so my recanting wasn't just like, do I think the government should have banned the action of Instagram?

Yes, I actually still think that is the case. The reason why I'm opposed to it is because I've seen, number one, they can't sort of distinguish between acquiring Instagram and all these other things. And number two, given this, the stakes aren't high enough to risk getting it wrong and screwing it all up. And actually the market works out pretty well anyway. Me, Mr. Pro Market, I'm questioning it now, but most of our emails over the years are annoyed at me being too pro-market in many respects.

Realize that the stakes aren't high enough to run the risk of government sort of getting it wrong. The distinction I would draw here is I acknowledge and accept all these things. It's probably going to go badly. It's going to be abused either by this administration or future ones. But the chip issue is so fundamental and Intel is so irreplaceable that I am acknowledging and accepting all of that and making a hard choice. And all I would encourage on everyone that pushed back on me is make sure you've thought through, make sure you've still manned the case. and the steel manning can't be. Like I was in an argument in a group chat about this.

And someone's like, China's not invading Taiwan anytime soon. I'm like, no, I agree. But the problem isn't in 2025 or 2026 or 27. It's in 2035, 236, 2037. You're not going to turn around and rebuild a foundry at that point. Like this is actually a 10, 20, 30 year decision. The other piece of this is that a lot of people who are advocating for the free market to solve these problems will say, it's healthy to let companies die.

Like, that's been sort of a consensus view. Which I agree with. Yeah, but if Intel dies, there's not going to be an American chipmaker that takes its place over the next 10 years. And that is a critical problem. Yeah, and people, and this is a real problem is people conflate Nvidia in AMD and Intel. Invidia doesn't make anything. Yeah. TSM makes it.

Like, there is, you have to distinguish between that. And what we're seeking to. deserve is not like Intel's rational course is probably to spin up foundry just folks in their X86 business, which, uh, it's profitable. It's shrinking. Like X86 in general is being threatened. And AMD is kicking Intel's ran in X86 specifically. But still, it's still a profitable company that, you know, they can sort of, they could be

a P throwing off lots of cash. They have lots of locked in customers, all that sort of thing. That's probably the very rational thing to do. From the U.S. perspective doesn't give a flying about X86. Actually, my preferred approach here is splitting off the foundry from Intel. Intel is the problem here. And no one wants to build stuff on Intel because they think Intel's going to steal their designs. Well, and also, I'm wary of endorsing what's happening here because based on all of our previous

conversations about Intel's broken culture, I'm skeptical that any approach is. going to work at Intel. Like, I understand why the government's doing this and it's coherent, but... This has been my maturing. What the Trump administration did this week is not the way I would have handled it. Okay. But it's what was done. So do I support it or not?

At the end of the day, I would have done it differently. I would have acted a long time ago. A year ago, in Intel honesty, I said very explicitly the government has to guarantee Intel demand. Mm-hmm. And everyone today is like, why does the government guarantee Intel demand? Because it's not 2024. That's the problem.

The problem right now is Intel basically signaled its death. And on the last earnings, that's just the reality. Again, this is like, was it intentional? Was it not? I don't know. It certainly was, I think, overall played very well. And so the choice isn't everyone when they present these arguments, they want to choose the ideal what they would do outcome versus what happened.

that's not how the real world works. The options in front of us is not taking a stake in Intel and Trump through whatever means in his own certainly unique style taking a stake. That's the choice. And this is the better choice in my estimation, even though it stinks up and down. And without the government backstopping Intel and lending a bit of credibility to the idea that they're still going to be in the chipmaking business five years from now, that business on the leading edge at least just sort of withers and dies on the vine.

in that scenario would be the fear. Right. And this ties into all the trade stuff, right? Oh, it ties into everything. And honestly, that's the conversation around this. It was frustrating for me to live through over the last seven or eight days. And granted, part of this is that you and I have been talking about it for a year and a half. So maybe I'm just closer to it.

And most people haven't really been paying attention. But like on the right, there was consensus horror because of what this means in the context of capitalism and the idea of nationalizing anything is a problem. The left is just happy to take shots at the deal because it's Trump. And it's crazy to me to see all these people in D.C. Like in D.C., everyone on both sides, very concerned about China. They see the relationship with China as an existential issue that should drive all sorts of different policies around this town. And then when someone actually does something. But you see news like this that produces these hysterical reactions.

And it's like, have any of you guys thought through three steps of what a conflict with China would actually look like and what the impact on American life would actually be? And the antitrust email, it's actually a good example because capitalism is awesome. And the free market does deserve deference. But there are certain cases where companies start optimizing for. for market share as opposed to profit. And at a certain point, that can break capitalism or at least be a threat to capitalism and produce worse outcomes than capitalism. Than capitalism generally does.

And the same thing is true when countries are not rational actors. And so China, I mean, literally in industry after industry, they're optimizing for market share as opposed to profit. But also China could bomb TSM, not an economically rational, decision, but it would be a big problem for the entire world. And so it was all economically rational to outsource all our manufacturing to China. Right. Would anyone like to undo that at this point?

It sounds like it. It seems like it. So now you're presented with a very similar sort of dynamic. It's only no one wants to do anything. Right. The problem is they're all bad choices. And people only want to endorse good choices. And it sucks to endorse a bad choice.

Right. Like again, not the sort of article that I. I enjoy, I was up until 4 a.m. writing it, in part because I knew my take and I just didn't want to write it. It's just like, but nobody wants to make a full-throated defense of what's happening here. It's an unfortunate situation. And it's not like either one of us are team intel at the end of the day. Right. And by the way, I do respect and appreciate everyone that is still opposed to it.

Like, it's not an easy issue at all. And I appreciate respect people on the other side of the chip controls and all. All those sorts of things. I just, my hope is the people that do oppose it. And I think part of my frustration was born. Like I said, there was some group chat arguing that was happening over the weekend about this. The people that were just like from the top rope declaring this bad and not even being willing to engage with the reasons why it might be justifiable because they're like living in theory land. Like this is bad in theory.

Therefore, I don't even need to listen to you. your argument because it's bad. And you see this in politics, you know, in political discourse a lot. Just not even engaging with the other side because I've decided there is this particular principle on which it is bad. And therefore I don't even need to entertain counter arguments. And all I would ask of the people that disagree is just make sure you've thought through

and articulated the counter arguments because they do exist. And don't be that person that just like, nope, this is. socialization, we don't do this in the U.S., it's bad. Yeah, well, and I would argue that the government is going to have to make these compromises in a number of areas over the next several years and will do so to preserve the long-term viability of the U.S. system, the Western capitalist system. If you want to undo globalization and our total dependence on China, it's not going to happen in the free market.

Right. Look at what we're doing with rare earths right now. We're going to have to do the same thing with shipbuilding. It's the exact same. No, rare earths is actually a purse. By the way, where were all the objections about rarest, which the Trump administration did the exact same thing like three weeks ago? It's literally the exact same problem. There is no economic rationale to build rare earth mining and particularly refining capacity.

It's extremely expensive. It is all the, it's bad for the environment. So you're going to deal with tons of lawsuit. It's just a horrible industry to go into. And if you did go into it, China can flood the market and you're, you are not going to make any money. So it's the rare earth issue on which China has the U.S. People complain about Trump going easy on China versus like the EU or whatever. It's because China has leverage on the U.S.

This isn't a kissing up to China. It's a reflection of reality. And because they have leverage on the U.S., the U.S. needs to develop its own rare earth capacity. Now, could we go back and undo the Clinton administration, selling it away? or Bush administration, whoever it was, whatever it was. I can't even remember which administration sold us up the river as far as worse. It might have been Obama. Like, whatever.

It was one of them. Unfortunately, we can't do that. We have to accept the world as it is, which is we don't have access to rare earths. We're totally dependent on China. And China has demonstrated a willingness to use it. So to undo that, there is no market solution. It has to be government action. By the way, and by the way, China understands.

version of China. Yes, this is the China debate we talked about with chips. Are they going to accept the U.S. having leverage over them, or are they going to brute force an alternative? Like, this is just the reality of the degree. And by the way, this is what should give people some comfort. All the things that drive us crazy about our dependence on China drives China crazy about their dependence on us. Like, it is a two-way road. I can promise.

Both countries have a lot of regrets, okay? So, which is actually, that's the good news. This is why there probably won't be a war. We probably will just sort of continue on in Taiwan's going to be in this weird sort of middle situation. And this is sort of my default position. Nothing's going to happen precisely because we are so amassed. And maybe this is a bit where the grand world planners, particularly post-world two, actually did get it right. If there were to ever be a world war, it's U.S. versus China.

And the reason it won't happen is because we're so freaking a mesh, we can't do it. We're just going to muddle along. Well, it would be irresponsible to proceed on that assumption. So I understand trying to save Intel and do what they can. What I would respect is an emailer, emailing in saying, actually the U.S. should not do this because the U.S. increasing its dependence from China. Ben, you said that you want China dependent on Taiwan and TSM. Shouldn't we also want the U.S. to be dependent on China?

Chinese rare earths? No, exactly, right? That, by the way, that takes out there. Someone can take it if they want. The U.S. should not be building chip independent. They should not be building worth of independence. We should all be invested in economic enmeshment because in the long run that is actually what is, It's basically like the nuclear strategy.

Well, that does require two to tango, though. It would require the PRC to stand down on its domesticating efforts on the chip side. But in any event, yes, we'll see what happens over the next couple of years. I'm not going to bet the house on Intel figuring this out, but I think it's worth a try. And I understand where the government's coming from. And all the concerns from the emailer, TK, very fair concerns to have. have. No, I mean, I'm probably very annoying to argue on this point because basically every

objection someone raises, I'm going to grant to them. Yep, that's right. That's a new problem. Yep, you're correct. Yes, I completely agree. Yep. And you're like, is this a slippery slope? It's slipperer than you can imagine.

But do you identify with my reaction? Like, watching people process this news, I was like, have you guys just not been paying attention to anything over the last 10 years? Oh, yeah. No, completely. It's like, it's, it's badding. It's pretty wild. In any event, to keep it moving and go in a completely different direction, I'm going to read a text message from my friend Ed who wrote on Wednesday, please tell Ben I was very upset to see demon hunters in my inbox.

My kids are obsessed and I can't escape it. It's all they want to listen to. Golden and this is what it sounds like are now stuck in my head constantly. So there you go, Ben. Maybe next time you consider a trigger warning of sorts for, you. young parents out there worried about K-pop-related daily updates. I don't know. What do you have to say for yourself?

I mean, that was a very abrupt shift. It's like we're into Intel, political things, war. And then it's like, wait, what are you talking about? Yeah, we're talking about K-pop, baby. Elsewhere in Asia. That's right. Speaking of South Korea. Yeah, no, I, I, the, the, the, the, the, the, the,

pop demon hunters. My kids wrote me into watching it a few weeks ago. And I was hooked. It's good. I recommend it. It's actually what's good about it is, I mean, the music is insane. It's like insanely catchy. Like, you know, basically every K-pop sort of cliche just on steroids.

But it's like there's an edge to it. Like there's like what my favorite scene is where like the heroes are kind of failing. and the risk of them failing is people losing their souls to the to the demons and they're in a train fighting and they fail and the train's empty because everyone like they just depicted the massacre of like hundreds of people like it's kind of it's kind of dark like which is great like there's it feels like there's there's stakes anyhow uh endorse the movie edgy tween content yeah um but it's it's a fascinating business business story yes i'll get to the business story moment Context for anybody who has no idea what we're talking about. This is the most popular film in the history of the Netflix platform as we record this. 236 million views was the number earlier this week. And by the way, the graph of those views is a straight line. That is not like it's not, it's not leveling out.

Yeah, we'll see where it nets out after the next couple of weeks here. It's an animated musical film developed by Sony. The movie centers on a fallen K-pop girl group that's secret. doubles as demon hunters. After their career falters, the group comes together again, balancing the flashy competitive world of K-pop with the supernatural battle against demons threatening humanity. It blends K-pop culture, action fantasy, and musical storytelling.

I'm sorry. Have you seen this movie? I have not seen this movie. And I'm all set. And number two, where did you get this summary of the movie? I got it from some article. Why? It's a terrible summary.

What is it? They're not a fallen K-pop girl group. They're the top of the game. They're their number one. Their career didn't falter. Look at you, getting all defensive on behalf of the K-pop demon hunters. Okay, fair enough. Yeah, you got to watch it.

Well, it was also released in theaters last weekend and was the biggest movie in America for the limited release that Netflix put together. Matt Bellany at Puck writes, Sony likes to say that it won the streaming wars by sitting them out and refusing to shovel money into the furnace of a mass market service. But here's an instance where the incentive to sell to the highest bidder ended up causing Sony to potentially leave massive amounts of money on the table, at least for this one title. Other vertically integrated entertainment companies would probably have held on to a theatrical window for a project that its execs believed could be successful, or hedged by sending it directly to its owned and operated streamer. In either scenario, a direct-to-streaming sequel that then could be elevated to theaters if desired.

Remember, Disney developed Moana 2 as a Disney Plus series, then refashioned it as a theatrical film, and it grossed a billion dollars. So Sony didn't do that. They shared the costs with Netflix. I believe Netflix bore the cost for $100 million to develop this movie. Yep. So Netflix, more the cost. So basically the deal was Sony gets a 25% guaranteed. Guaranteed. Very important point. Guaranteed 25% profit margin or $20 million, whichever is high. In this case, the film cost $100 million. So it was $20 million. So Netflix paid the $100 million. And which cost to do it. And then Sony made $20 million on top of it. So Sony is making money on this. They're not out. but they're not making a billion dollars on this. But you wrote admiringly of Sony's decision making.

So what do you think? Why is it ultimately a smart decision on Sony's part? I feel really embarrassed. I think I said Matt Belloni in my recording. Is it Bellany? It is Matt Bellany. I have previously screwed up his name. I'm pretty sure he's told me it before.

Man, that's a real bad one by me. Sorry, Matt. So I've been on his podcast. He's been out of mind. What a terrible. I made the exact same mistake and felt like a complete idiot about nine months ago. One of our mutual friends made fun of us in a group chat. The water's warm.

Don't worry. Really great article sort of exploring this tension, right? Why did Sony give away? It's not just the profits from this movie. It's like the future one, Netflix has rights to it. Like Sony will, they can renegotiate the deals for the next ones and Sony can say we want more of a share or whatever might be. It's Netflix's movie. Netflix is going to own sort of like,

I think we they own the merchandising rights, things along those lines. Like there's some debates about what exactly is owned by who and what. But this is a massive for Netflix. They've been wanting, they want franchises. Why are franchises so valuable? Because people flock to them without knowing what they are.

They're basically embedded free marketing. And they want to build up a gig. Guess what K-pop demon hunters do? They fight demons. Sounds like a good. good game. Like Netflix is trying to get this gaming. They're going to have this smash hit game around this. It's guaranteed. Like they, it's to Netflix's credit. I've been super skeptical about the whole gaming thing. It's like a waste of time. Well, they might have the last laugh because this is

going to be massive, right? And it's going to be all over the place. There's going to be sequels. Are they going to open a K-pop theme park? I don't know. I don't know. Like it's, it changes everything for Netflix. It's a huge deal. And so it's, so it's, so easy. And I'm not saying that Bellany was doing this. He was, you know, pretty clear about what when in his Sony decision making stuff, but it's really easy to sort of backwards mirror drive

and say, wow, Sony screwed that one up. Yeah. And the problem is, I don't think they screwed up. And it has to be, like they talk about, well, Sony, they could have put it on their streaming service. They had it. Guess what else? Guess what would go into that? You'd have to build the streaming service. You'd have to try to

acquire customers. You'd have to watch all the customers turn. You'd have to be losing billions and billions of dollars along the way doing things you're actually not good at and ultimately sort of like losing your shirt and selling to Netflix anyway, which is going to happen to everybody else, except for maybe Disney in my estimation. And oh, by the way, you got a hit along the way. Is that hit going to equal out all of what you did? Maybe it's going to be that large that it would be worth it. But as a Sony executive, which decided we're not going to do that. We are a studio that makes content. We're going to make content and we're going to make deals

and we're going to make a deal with Netflix. In this particular case, there was also the COVID bit, which Bellany touches on. Sony didn't have to do layoffs because Netflix swooped in and bought all this sort of stuff that was supposed to be for theaters. And so they kept everything together. They have an amazing animation studio that goes into the Spider-Man movies, for example, which are amazing.

Like, they're the best, it's the best animation studio sort of going right now in my estimation. And there's the desire to assume every decision should have made perfectly, but decisions are part of a systematic understanding of where you are and what you're doing. And Sony chose the, we're not going to sort of be the next Disney. We're not going to be the next Netflix. We're going to do what we do well.

Implicit in that choice was they reduce the risk. They don't have the risk of a failing streaming service. They don't have the risk of layoffs during COVID. They don't have all these risks that they issued. But whenever you limit downside risk, you limit. upside risk. And this is, it couldn't be a better example of this. And you know what? That's a choice they made. And I think it was the right choice. You don't get to look backwards and say, well, you should have known that a movie about K-pop stars fighting demons is going to be worth a billion

dollars and the franchise is going to be worth billions more. Not a fallen K-pop group, though. The number one K-pop group. No, you do like, Like, if you could rewrite history, would Sony like to have? Of course, of course they would. But that raises sort of the second question, which is, would K-pop demon hunters be K-pop demon hunters without Netflix? That's the most interesting aspect of the story. Can I just confess to you the synopsis that I read earlier? It wasn't from some website.

It was from chat GPT. I knew it. I just wanted you to admit it. It was so clearly chat GPT language. It's horrible. It's horrible. and I had flash facts to the mistake I made on the goat like two years ago trusting chat chvety. It will never happen again, I promise.

I should have looked at the actual. No, it was totally appropriate this way. K-pop demon hunters synopsis. In any event, that's the aspect of the story that's so fascinating because obviously you can look at like the world domination that K-pop demon hunters now enjoys and there's going to be sequels. There's going to be soundtracks. my friend Ed is besieged with the music all day long.

I wonder whether any of this would be happening, if not for Netflix as the massive funnel pushing this to the entire world, having invested $100 million in it. No, this is super important. Read this binary email because it actually ties into my perspective on this point. Perfect. Okay. So binary, as we're talking the entertainment business here,

Hi guys, here's a question for the party in the back portion of the episode. What are the economic and technological reasons that modern American movies are so derivative? Everything is a sequel or a remake of a popular movie from decades ago, i.e. 2024 Roadhouse, or a franchise, Marvel, Star Wars, etc. People have been bemoaning this for a decade now. Ross Duthot says that American society is now decadent, so we're not producing new creative works. Strategoria is a business and tech publication, though.

So let's put the cultural arguments aside. From an economic perspective, what is going on here? What do you think? Well, my favorite topic, newspapers. Why were newspapers, to use Warren Buffett's term, franchises, and not businesses? Because it didn't matter what chucklehead you put in charge. They were going to make a lot of money. Why are they going to make a lot of money?

because they were the default. Where else were you going to get something delivered to your doorstep with the news, the comics, the sports, all the sorts of things. Oh, there's classifieds in there. There's all these, like, of course, advertisers are going to go there because they want to reach customers. Like, it was a, it was a beautiful business. Then what happened? The internet.

You could access newspapers everywhere. And at first, like, this is amazing. We can reach everyone. This is so great. Oh, turns out everyone can reach everyone. You have to actually acquire customers. So most of them became beholden to Google. Like, hopefully people search and find us.

The ones that succeeded, like the New York Times, became destination sites. People didn't go through Google and follow an article. They typed NYTimes.com in their URL bar or download the app or sort of whatever it might be. And that's a great business. It's a business, not a franchise, because it depends on excellent management. It depends on maintaining your position. It depends on like you're trying to influence the choices of all. these people to decide to go to you in the midst of a sea of options. It's not you move into a house

and of course I got to sign up for the newspaper. That doesn't exist anymore. It's a constant pursuit of acquiring. And this is, it's amazing, it's 2025, the extent to which I was seeing some discussions about something. People still don't appreciate it. It's not about the technology. It's about customer acquisition. And like when you're the default, it's super easy. And when you have to compete, it's really hard. What did we used to do in the 90s? Just go to a movie theater. Did we even know what movies were in the theater?

No, we just went to the movie theater and, oh, I'll see that one. Bought a ticket. There's general admission. You didn't even like choose your seat anymore. Technically speaking, what we did in the 90s was open up a newspaper and see what movies are playing and then go to the theater on a Friday night, no matter what was in there. No, but some people would just go to the theater.

But regardless, that was the default entertainment option. Yeah. Life was actually pretty boring in many respects. We did have a lot going on in the 90s. Maybe you don't remember. You might be too young. No, I do. It was great, though.

I would, like, that was a thing to do with me and my dad is go out to a theater on Friday night and see whatever was playing. I just remember fondly looking through the newspapers to look at the listings. And then Fandango disrupted that business. But yeah, if you were in a theater, there was going to be audience. That's right. And if you want to like make an original movie, why did the 80s and 90s, why were there so many independent films and all these new sort of movies and things in the 90s? Because you had the hard part was getting the movie made, right?

You had to get funding for that. So you had authors choosing great movie or what sounds like a great idea. And they would make it. And just by virtue of being made, that was the hard part. you were in the theater and people would go because it was in the theater and the poster looks cool you have an interesting star i'll go see that the hurdle was getting approved to make the movie and so and you weren't appealing to the general public you were appealing to a very small number of people in hollywood who made those decisions and had by and large had good taste and like

that looks interesting go and make it and they didn't have to really worry about the economic outcome of course they wanted to make money but by virtue of of being made most movies would make money. So that was the real sort of hurdle. It's like back in the day with software, you had to get on the shelf at Circuit City. That was the hard part, right? The internet changed all this.

It took away the gatekeeper function. And we celebrate this by and large. Of course, who likes gatekeepers? And I actually wrote an article about the Harvey Weinstein sort of thing. And like the, you know, one of those gatekeepers. Real zag. Well, no, but he was one of those people that chose movies. Yeah.

And he exacted certain favors for who was in the movies. Obviously objectionable. The point I was making in that article was why was he in a position to do that? Because the structure of the movie industry relied on those gatekeepers and he was one of the gatekeepers. Yeah. Today, to be a star on YouTube, we're not going to have that problem because anyone, there is no gatekeeper. Anyone can go on there and do it. And the reality of movies today is they exist in a world with YouTube.

They exist in a world with TikTok. They exist in a world of Sharp Tech, of a gazillion things to do to occupy your time and to listen, which means movies have become a destination site. People have to decide to go see a movie. And that's why what's the best and easiest way to get people to decide to go see a movie? make a sequel to a movie Something they've already seen before. Yeah, exactly. That's right.

And are the alternative, if you do original content, you have to spend basically, what's the theory? If you spend $200 billion, you need to spend $200 billion in marketing if you want to make,

like that's the price. And so you're going to get movies that have to be widely applicable. You're not going to get niche movies because you have to do it sort of at scale. And that's the fundamental issue that's happening here. And this is how it ties back.

to K-pop demon hunters. K-pop demon hunters is not getting the audience it got in this world. Who is making a movie about a fallen K-pop girl group that secretly doubles as demon hunters? Andrew, what are you doing Friday night?

You want to go on a date? Right? Well, I've heard a lot about K-pop demon hunters because it's the most popular film in Netflix history. No, exactly. You've heard about it because it was

on Netflix. Yeah. And on Netflix, everyone's already subscribed to Netflix. It's just there. So some number of people in the U.S.

watched it. Then they told their friends. They watched it. Then it got social media. Then people started doing covers. Then you had, actually I've watched way too many videos of like, there's a whole thing on YouTube of like voice act or voice experts like

breaking down songs or whatever. It's actually pretty funny with this one, particularly the song Golden, because every single one has the exact same reaction. How the is she singing this song? It seems completely impossible.

Just like the repetition actually kind of abuses me. But the, this was so interesting. I mentioned that straight line chart. Every other movie on Netflix that has had huge numbers shot up and then leveled out. K-pop DMAs did not shoot up. It grew very gradually.

It was, it was just a very steady linear increase that hasn't halted. And the slope of the line is actually totally different than every other big movie. And the other big movies like had big stars. Like so you're on Netflix. It's like, oh, there's Leo DiCaprio and the Netflix movie. Wow, that's cool. I'll watch that.

Big stars are released over like a holiday weekend where there's a big spike at the beginning and then it kind of flattens from there. It's true. I didn't notice that about the chart. Yeah. So this, the chart shows this was pure organic growth. not to brag, kind of looks like how Chatechrie grew

where it was just like it was people expect this sort of exponential story you don't grow exponentially because the problem with word of mouth is yeah, one person can tell many people

but people run out of friends and they're like in friends group, right? So the chart of Chorchekry growth was like just, it was a perfectly straight line like very, very little wavering.

It was just sort of like you know, you're sort of you don't get exponential but you do get linear through word of mouth. And when I see that chart, I'm like, I know that. That is pure word of mouth.

And word of mouth in this case only happens because everyone already has Netflix. The risk of me watching this movie is just my time on a Friday night. When I'm watching a movie anyway, might as well watch this one. That's totally different than having to go buy a ticket, drive to the movie theater, get popcorn, stand in line. That's a commitment. That's a destination. K-pop demon girls. was not a destination.

It was a, and the great irony here is all these studios wanted to take on Netflix and thought they could succeed because we have the content. Netflix doesn't have content. And the reality is they're actually all reduced to binary's complaints of just sort of regurgitating content. Actually, the place to create original content ended up being Netflix. Netflix because the distribution gives the space for greatness. Risk taking.

Excelliveness. Original work. Original work as opposed to lowest common denominator stuff that you can count on to draw a baseline audience to the theater in 2025. The counter here is why does so much content on Netflix suck if they have this? That's actually part of the answer. It's the opposite of Sony. It's you throw a bunch of crap against the wall.

some of it will stick. And so the downside is higher, but the upside is higher. And by the way, that's how the movie business worked for about 75 years. It was not that no movies lost money, but the hits hit high enough so that the upside covered all the losses on everything else. And there were people in movie theaters every single weekend. And now there's just far less risk tolerance in that industry than there used to be because there's not. not as many like monster hits beyond like a handful of blockbusters, which themselves cost $500 million to produce and market and everything else. So the dynamics of the business are

just broken. They're not, I would say the outlook is a little bit better than it seemed to be like four or five years ago because you can still succeed with IMAX movies, but in general. Right, but IMAX is leaning into the destination aspect, right? You're going there because it's the the only place you can get the big screen and all the speakers and all that sort of thing. It's a concert experience as opposed to a movie experience. Which is totally rational. And that makes sense that that is what is remaining because you have to deliver something people can't get at home.

But it's interesting too that K-pop, I mean, it was a hit in theaters the past week or so. And so. Because all those people going had already seen the film. That's what I, it created the event community experience that we all year for. This is your concert point. right? Who goes to a concert and hasn't heard any of the songs? Yeah. The whole point is you've heard all the songs and now you want to have the commuter event and

seeing it live. That's what happened this weekend. Yeah. Well, and we talked about Netflix as the last bastion of monoculture. Six to 12 months ago. This is a killer example of that. Yeah. Keeping it alive. One K-pop movie at a time. Maybe I'll check it out. Probably not. Not going to make any promises to the audience.

As we close out here. It's good. Seriously. Yeah, for about 20 years or so, nerds have been telling me how good animated movies are, and they never are actually that good. But I've heard the music is catchy. I don't know. Maybe I'll get it stuck in my head. One question as we close out here. Yeah, as we close out one hour and 20 minutes since, I'm just going to let that comment fly. Fair enough. Sydney says, I know this. was a dithering digression, but I thought there was a better chance of you expounding on the virtues of dual monitors on Sharp Tech. So here we are. I've long thought that ultra-wides and dual

side-by-side horizontal monitors don't make any sense. I pine for the return of 16 by 10, but I won't hold my breath. Man, speaking of nerds. Anyway, here's my take, Sidney says, why spend all day shaking your head know when you can add some subconscious positivity by saying yes to your productivity working vertically? Everyone who sees my desk, this was easier a decade ago when I worked in an office, but here we are, thought I was nuts, but I feel validated, vindicated even to know there's someone out there who's taking it even further and cut a giant hole in his desk to sink the second monitor even lower. You inspire. You inspire. me to lower my lower monitor further, and I'm happy to report it's just high enough off my desk

to permit my keyboard cable to run underneath. The monitor is angled at a comfortable 38-degree angle as measured by my iPhone measuring app. Ben, do you want to tell people more about your monitor adventures that you did tease on dithering with like a 60-second digression? So I figured this out with the LG 21-21-inch ultra-fine. So the, yeah, turning your head. head right and left is uncomfortable and like unnatural and it's like stuff's out of your your field of vision. Mm-hmm. I like multiple monitors.

Like you have reference on one and typing on the other. I also like I don't like one big monitor. Like if you have two monitors, you have four quadrants. And so you can have like your writing one set or browser in the other. You can have like chat JPT in another or whatever it might be, right? And it's all sort of in your point of view. It just is so much more better to have it all in front of you. The problem is it's really bad for your neck.

uncomfortable over time to be looking up. And so what I, I love those 21 inch LG monitors because they were small enough that I could have them on top of each other comfortably. So they went bad because they're crappy monitors in many respects. So I bought new ones.

They were 24 inch. You think that would be good. It was bad. So what I had to do was I had to slope the bottom one like at a really severe angle and then have the other one on top of it. and it mostly worked.

The slope was a little too much. It would collect dust and like, you know, like my keyboard is what you were doing with your week off. No, this is what I was doing in Taiwan. I had the two 24 inches on top of each other with the bottom one massively sloped and then the one sort of on top of it. So it could be sort of ergonomically accessible or acceptable, but I could still have my view.

However, I knew coming back to the U.S., I've been planning this for ages. because the bottom monitor is at an angle, you think about where your eyes are, your eyes go past your keyboard, and you could actually have the monitor down inside, lower than the desk, and still be able to see it.

So that's what I did. I got a big rectangle in my desk, and now the monitor is at an angle, sunk down into the desk. If I sort of were to look at it from at desktop level, I'm not going to see the bottom inch and a half of the monitor because it's under the desk. I'm not sitting at desktop level. My eyes are a foot and a half above the desk.

I'm looking down at an angle so I can perfectly see my dock, which I put at the bottom of the screen, and I can have the whole thing. By the way, when you have them stacked with macOS, you have the menu bar all the way at the top one. It puts the dock bar all the way at the bottom one. It's actually a great setup. I have my four quadrants. It's amazing. The main problem is, so I have a standing desk.

I measure this all out. All the support is on the support. is on the sides. There is some bars that go across the middle and I cut the sort of hole just in front of that. However, the mount itself

is what's actually hitting the desk. This could go further down. So what I need to do is I need to cut out a part in the middle that let the support bars still run underneath.

There's actually more to cut out and then I could sink it even further. I will do this when I reached my ultimate plan of getting two sort of Apple studio displays. So I did have a studio display in Wisconsin that I'd use when I was here.

So my full setup was in Taiwan. Now that I'm back, I'm using the setup because it is better than a single studio display. The quality is definitely much better than the studio display. So the ultimate dream is to get two of those stacked. I'm not sure if I can pull it off with the size of the hole that I have. But yeah, life's great. My monitors are so low. I'm so ergonomically comfortable.

I have a better view than I did before. Did you consider the idea that you're encouraging subconscious positivity in yourself by nodding all day? as opposed to shaking your head, no, as Sidney lays out there. I can't say I ever considered that. I do still have monitors to the side, but I don't like working on them. I have, like, my messaging apps there. Like right now, the corner of my eye, I have our audio hijack.

I can see, like, the levels and things like that for our recording. So it's good for, like, status stuff, but all the work I do is just in front of me. I really don't like turning my head side to side. There you go. Well, my dream is for you to film whatever carpentry you undertake in terms of realizing your studio display dream. So maybe we can do a special YouTube video with you underneath the desk, drill in hand,

peppering in some profanity. No, no, I'm not drill in my office. I was a drill in the garage. Okay. Well, let's do it. All I want is that on film. Also, I want to read this one note from Spike. He says, I retweeted one tweet from some tech magazine

about Ben living in the United States. And now half of my for you page is founder bullshit. my Twitter has been full of founder bullshit for two years as I host this podcast. I'm glad Spike gets to enjoy that as well. And I enjoyed the TBPN shout out to you, draped in an American flag as you make your return to the state. So all is right in the world. You know what I mean?

All is right. It's interesting being here. The, you know, it's just, it's interesting when you change anything. like all the sort of bits and pieces in your life that were structured around certain realities that sort of get undone right and like I do think it's generally useful you're forced to sort of reconsider things from from first principles on sort of all sorts of things they're first principles I bet you see that in your tech funder bullshit oh boy but uh a lot of learnings and first principles man it's great yeah um the uh but yeah it's weird like this is I I've

obviously been back in the U.S. every summer. But when I'm here in the summer previously, I'm just sort of trying to limp along until I get back to Taiwan and my and you're doing like a lot of vacationy things. It's not like I live here and this is I'm structuring my life around work. Yeah. So that it's been really interesting to sort of like, um,

it was really good. I took the time. Sorry we didn't warn anyone I was taking time off. I got to Monday. I'm like, uh, this is reaching crisis point. Uh,

this whole, I was writing back Taiwan and cleaning and getting stuff packed up and all that. This has obviously been a multi-month process, particularly intense over the summer. And like I said, I didn't actually have a desk set up until I took some time off last week. So my apologies for no warning. But you're welcome for continuing to deliver you content while this is going on. But yeah, I'm here and we're recording at a normal time. And I think we went long.

Yeah, we went a little bit long, but we're going to be back next week. And in the meantime, you have to get out there, enjoy your first Labor Day in like 23 years as an American, a full-time American resident. No, no, I was back for four years. Oh, okay. I worked at Microsoft. So, yeah.

But it was 12 years continuous for this stretch. So it's a big change. But, yeah, it's good to be here. Nothing better than a holiday weekend to celebrate. We will be back next week. email at sharptech.fm. If you have questions, that's the address. Ben, enjoy the next several days,

and I will talk to you on the other side. Talk to you next week.