Why DeepSeek Will Disrupt Everything You Know About AI & What It Means For Markets | Tom Bilyeu Show

emergency podcast everybody the markets went crazy today due to the Deep seek phenomenon that seems to prove that the age of AI has shifted from training models to a model's ability to reason I'll explain why I think that is very incomplete and why this is the worst possible time in human history to be the average investor drew it was quite the weekend man deep seek took over the Internet number one on the App Store they beat open AI at number two Gemini at number four I seen people tweeting about it like crazy so please we

had to break our production schedules we shut down the the team meeting everything like please explain to us what deep seek actually is and why it matters in this moment to us so what deep seek did was go well you guys spent the billions of dollars to train uh chat GPT on what the world is like that's probably the easiest way to think about it what is the world like and what I'm going to do it's something called synthetic data I'm just going to prompt chat GPT over and over and over and over and over

like a lot I'm going to prompt The Living Daylights out of this thing to describe to me the model that it has hidden inside of it that it learned by crawling all of this data and so I'm not going to do the work of building that model I'm G to play a game oh this is probably a terrible example but like Battleship where I'm like is there anything here or maybe more accurately what's here when I ask this question what do you tell me about the world when I ask this question what do you tell

me about the world and now I can reduce educe all of these numbers again going from training cost 100 million to 5 million the gpus that I need to do it from 100,000 to 2,000 and so driving all these costs way down just by going well you know about the world let me ask you so deep seeks relationship to chat GPT is the same as our relationship to chat GPT so as we prompt CH chat GPT and feel like we're getting smarter about the world deep seek was like well I'm just going to do the

same thing I'm going to ask it all these questions and I'm going to build my sense of what the world is by prompting the life out of it which is why you could ask deep seek what are you and it would tell you that it's chat GPT 40 because literally it had prompted it so many times it was basically like well this is what I am so utterly fascinating but it really does beg the question of okay well then are the days of training behind us and now this is just about okay you have a

picture of the world in your mind dear llm and now it's about who can look at that picture of the world and come up with the most compelling answers so when I ask it for whatever you're asking it to do write a bit of marketing copy uh have it improve your screenplay which is something that I'm was literally doing this weekend as I'm reading all of this drama and getting really good at that is now the name of the game and if that's true and this is why the markets went crazy if that's true all

of these companies that we've been rewarding by buying their stock like Nvidia for making these chips that allow people to the train well all of a sudden you don't need as many gpus because you can do all that training on much less sophisticated Hardware uh and you can still get a really compelling answer so hey amazing gift to humanity that open AI went and spent all these billions of dollars but now there's no moat because that exists and I'm able to C query the life out of it to build on a much cheaper basis a

working model and as long as my reasoning is better or at least is good um I get you all the answers that you need so now it's like the market was like whoa whoa whoa then our whole investment thesis has changed the reason I think that this this is incredible I I do not want to skip past how amazing it is now that people can shift their focus to reasoning and getting really good at extracting the wisdom out of the model's trained sense of what the world is but would like to remind everybody that right

now what it's doing is just saying what is the most likely next letter running a bunch of experiments about which of those sequences is the most useful which is utterly transformative in and of itself but I really believe that the next moment is going to be okay that's awesome for copy uh for a lot of things like law and all that stuff is all going to be cognitive horsepower um but I think the next moment where AI really does the things we want to do like when you hear me talking about it's going to drive

energy cost to zero and all that stuff uh you needed to understand the physical world meaning you need that same thing at the level of physics now if I'm right about that then you're going to have to train the model on the world of physics and I think that's going to take another insane round of training and that probably shatters into a thousand different Avenues so understanding um chemistry understanding uh the way that it works inside of a closed biological system understanding quantum physics uh all that stuff it things that I can't even begin to

imagine things I don't even know exist that are lanes that people need to go down to figure out okay how does it work in this scenario um so it's that kind of that shift from I'm regurgitating internet information to now I understand these topics I understand physics I understand so imagine you're in llm and you're running those thought experiments but as you go down right now you're just running predictive analysis in a bunch of different ways What If instead you were validating your prediction again the known laws of physics so that doesn't help you in

marketing copy than maybe getting better at understanding human psychological responses like if you knew oh God this it ends up getting so complicated but just to finish the thought if you knew these words and that sequence triggers this dopamine response and this type of person holy hell that would be very powerful to know so that you would be going down the path of saying okay I think this is the right next letter or the right next word or the right next sentence based on what I know about neurochemistry yeah now that's a lot more powerful

than just saying this is the most common thing that I see and this right now is the advantage that humans still have is we understand like when I read this it makes me feel some kind of way and if I feel some kind of way then other people are going to feel some kind of way but the only way the llm has any sense that that is true is more people have put that sequence of question and answer uh or you know whatever strings of sentences right out into the world so I will assume based

on volume that it's better okay hopefully that gives people a complete sense of a very simplified version of this uh why the markets are reacting the way that they're reacting now if I'm right that this is all going to be upended again by the companies that have balls to still be a company that's going to spend the billions of dollars to train on uh physics or you know chemistry or whatever the case may be um but what scares me about that is this moment may stop all of that investment and watching the market over the

next weeks months we're really going to see if people like no no no I do not want to be holding the stock of companies that are making huge Capital expenditures into the physical infrastructure Stargate anyone uh because that's not the play anymore the play for the fast money which make no mistake is what people are here for the play for the fast money is is in that the logic part of it the inference okay if that happens and I'm right that the next big break through will require training these models on things like physics uh

then you may get the market being shy to do that because the second somebody spends the billions of dollars to do all that you're going to get another deep seek like technology that goes rad thank you for building that model of the world and now I'm going to extract everything that I can from that drive all the cost down to next to nothing and so how this will play out I cannot even begin to tell you I love to look at things as a Sci-Fi writer and say that it's entirely possible that we get into

people really being um protective of that data that they want to wall things off and you saw in the conspiracy around deep seek which is very fascinating to watch it it's all happening in real time but if you went if you go as of the time of recording this on Monday uh if you go to deep seeks website they have restricted access to deep seek now the initial take on this on X was that this is because um the CCP is behind deep seek and they launched deep seek R1 on Trump's inauguration day as a

way to say oh you think you're going to Isis out you guys tried to make it impossible for us to access these chips cool so that we couldn't build the training models and we found found a way around it using way inferior technology the ones that we could get made it way more efficient and we're still able to match you guys within months so you thought you had a year or twoyear head start on this you have a month two months nobody's going to care and so we're now at parody now what has actually happened

at least as it seems right now is that people have started attacking deep seek they said malicious attacks of our site and that's why we're restricting access so yes right now they're restricting it to people with Chinese phone numbers but everybody that already has it and downloaded already has an account can still get one now we'll find out what's true if this is really a CCP play to say haha you thought you were going to be able to limit us we dropped this on inauguration date now we're limiting access it's only for people in China

but now you know it exists wahaha uh I don't think that's going to be how this plays out there's certainly censorship and all that which is a topic for another day um but this is definitely a wakeup call to America uh so let's talk about what Mark andreson said that's exactly where I was going can we pull up that Mark andrion uh tweet about deep seek R1 is AI Sputnik M I honestly I don't know what sputnick is so you might have to break this down give me the the elementary level for me okay so

uh I'm sure for a lot of people so um Sputnik was what 1956 1958 something like that uh so Russia launches the first um man satellite into space not satellite they they sent somebody into space they didn't get him to the moon but I think he was the first person to orbit uh and so it was a big deal and it was like whoa Russia uh communist country they're ahead of us oh my God they're going to win the space race this lit a fire under America's ass and I would say leads to um JFK

saying we're going to get to the Moon by the end of this decade not because it easy but because it is hard okay so it's this whole Cold War mentality of we now have an enemy and they're making a sweat it's like everybody if you're trying to do something great in life having a worthy adversary is incredibly useful but I have a feeling that a cold war is going to be good for Humanity for sure uh may even be good for America because of this Spirit of we can't lose we absolutely cannot let China get

ahead of us now I think people are going to forget that as of right now deep seek is open source so it's on GitHub anybody can grab it they can download it um but there is something unnerving about seeing your opponent move that fast that you're like huh I don't know if we're ahead and it's going to matter a lot who wins the race on AI so I think that this is really going to wake us up I have I have felt like I've been screaming into the void for a long time about the thing

that if I really want to piss people off I'll just say you need to work hard you need to work smart and you need to work long hours if I say those three things it triggers the internet and and my X feed is going to be full of people hey dumbass uh if I'm working hard and smart why do I have to work long hours and I will just say because China's going to hand you your ass you're always going to have somebody else is like oh they're working hard and smart rad then I'm going

to work hard smart and long hours the somebody is going to do all three and when you meet them you will lose that's a riff on a famous quote um that I think is really true and I really hope that this does in the way that Mark andreon is nodding to inspire us to go hard in the paint my message to every young person out there genius is a young man's game I am doing my best Drew to outrun the truth of that quote and I don't think I'll be able to do it and so

it really is going to take this next Generation to be hungry and to say I don't give a if you torched the uh housing market I don't care if you're inflating my money out into nothing I'm still going to win so bad policy doesn't block dunks any more than booze don't block dunks now sadly that isn't true and bad policy will you up but you really can at least still in America I want to believe you can still overcome if you inspire people to go hard enough in the paint and I believe that national pride

is a huge huge thing for sure but individual Glory individual sovereignty and Freedom the ability to flex hard to get laid is still gonna drive this insane innovation in America uh and this now reminds me of how I felt growing up in the 80s where it was like us versus Russia now look it was all fake and it had us walking this Razor's Edge of blowing each other up but it also pushed us man like it was crazy and it felt dope it felt dope to be like we're winning and we've got this adversary and

we've got to outperform them and it really does rally people it hits them in this emotional level so anyway I feel like I've been screaming into the void about that for a long time because it doesn't come back to me with people being like yeah yeah yeah like I want to do that and when you get people that really want to win man like they are on the field and they are playing to win extraordinary things come out of that and I would say China is a very worthy adversary there's a quote in The Social

Network where um Mark Zuckerberg as a character says China has more uh Geniuses than we have anything more people with genius IQs living in China than there are people of any kind living in the United States that can't possibly be true it is now if that's true who it's going to it isn't going to be easy man like you really have a formidable Foe and people that want to throw racist racism on the situation you're going to lose because smart and hardworking people are the world over yeah and the second you try to be like

uh like paint Any Nation with any brush woof mistake mistake and so yeah taking these guys seriously I think it be wise there is still cause for optimism though David saxs put out this tweet deep seek R1 shows that the AI race will be very competitive and that President Trump was right to resin the Biden EO which hamstrung American AI companies without asking whether would do the same obviously not I'm confident in the us but we can't be complacent this this is the vibe for me and the fact that he is the AI and cryptos

are like having that come from him uh I think sets the right tone and here's the thing the youth get whatever country they want and so it's going to be a question do they want a country that is dominant globally or not and if they do they will get it because we have got we are still the place that people the world over want to come we are still the place as generation after generation after generation of Hardcore and so if we can harness that in policy and in cultural enthusiasm we've got a shot nice

now we have to Circle back to the investor markets because markets across the board were down this morning some people said Nvidia was done people were swinging I seen shorts I seen all types of stuff why did this deep seek announcement have such a rampant effect on the stock market okay so this is where uh I'm going to start at the beginning and I'm going to speedrun my analysis of uh life in 20125 your money is being inflated which either makes you know intellectually or intuitively that saving money is a losing strategy which it quite

literally is people that save money are actively losing money so you have to do something with it some people just spend it willy-nilly YOLO their way through life and they're never going to get ahead uh some people will Gamble and market and to get ah and if focus in on the that we are beinged to gamble at a time where the world is changing so rapidly that people are just going to get kicked in the face and people that win one day are going to lose the next that that is the reality when you are

trying to use any gambling mechanism as the mechanism to get ahead the way I would love to see it and I am a simple mind fine but the way I would love to see it is people know number one I save a certain amount of my money and then I take a certain portion of that and I'm going to try either longterm over the stock market I'm going to try to get ahead or I'm going to do day trading just because it's fun it's exhilarating and it gives me a chance to be right and beat

people so you have a lot of very smart people trying to put together a thesis on where the world is going and then they're going to bet in the markets that their thesis is correct now when you have a stable Market where changes happen over years hey you can do that you can get a nice stable way of looking at the world that pays off over time call it value investing when you have a world where you get over the weekend people's entire view of what the future is changes on a dime and PS The

Magnificent Seven which have carried the vast majority of the gains in the stock market are all predicated on technology technology right now largely being carried by ai ai suddenly over the weekend just gets wildly disrupted and so I'm sitting there going right now I am glad that I'm so certain I cannot see the future clearly that I don't make big bets in the stock market so uh go up go down I'm so conservative that it it isn't going to make a big difference to me but it means that I don't win big it also means

that I don't lose big which is great but I'm not winning big so that's where this really gets hard because if you go in and tell people stop betting on the market right now the future is so uncertain they're going to say well the part of the future that I can see pretty clearly is that my money is being inflated to zero and so they can't stop they literally can't stop you'll lose your money uh so I hate that and because the future is changing so rapidly this really is the worst time in human history

to be trying to make money off of a thesis about where things are going for the average investor I get that your super bright quants will be able to do it but Jesus now I remember you said last week we could barely see Over the Horizon so let alone trying to have a 30-year portfolio based on Nvidia or based on Tesla based on some of these companies where our the entire remote of AI was it costed too much to build a data center so we're the best that can do it Elon famously spent a bunch

of money and built a data center in six weeks everybody was kind of applauding how we can invest massive amount of capital to get this strategic Advantage just for to your point overnight that Advantage is now gone so is there any moat left in technology with AI like they what is this a day one rebuild if I'm open AI like how do how does the company respond to when their remote is fundamentally removed this is the part that I can't see I don't know if money so uh I call it the cover story of the

stock market the cover story of the stock market which is just gambling but nobody wants to call it that is that and this is true so it's not a fake cover story it just isn't why people put their money into it but the result of them putting their money into it is that these companies are able to aggregate capital and deploy that against some thing that they want to bring to Market that they think will be incredibly valuable to people people are going to spend their money on that thing cool okay we want that to

happen it's wonderful the markets are wonderful I love it the most I just don't love the compulsory nature of having to gamble okay so now the question becomes all the individuals that are allocating their Capital trying to get these fast winds off the stock market are they going to want to invest in companies that are making huge cap X outlays or not and if they're not then now you get back into and right now I am in Wild prognostication phase I don't know if this is going to play out but this is how it hits

me right now that we're back into the early days where like we were promised flying cars and we got 140 characters of if everybody is just going to just reasoning just reasoning just reasoning meaning inference that no nobody cares about training new models anymore it's just making do with the models that we already have that's saying that the models are now as good as they're ever going to be and we're just going to try to extract more out of them my intuition which everybody should discard but my intuition is that's not going to be the

play that until you have a working model that can make sense of quantum fluctuations or whatever the that is until you can map what dark energy is um until you can predict exactly how the particles collided in a um like the Large Hadron Collider a particle accelerator until you can predict all of that with 100% accuracy you have not yet mapped out the actual real world uh and I think that's ultimately where we want to end up but I can't imagine anything more Capital intensive than trying to solve those problems now could just be my

ignorance but I would be sad intuitively to see us collapse back to just make use of what we have now versus training the life out of these but Capital allocators are going to do what they think is going to yield a return to them period full stop end of story uh and so this is where you get into well that's what the government is for and they're supposed to invest in things like this and I don't know man we'll see if you are um pushing your government to do entitlements over everything you just don't have

the capital left for this uh it's going to be weird I I I have a vision of the future that I know will have a wrecking ball taken to it like every 72 hours it's it's crazy like that's not literal but that's directionally correct and so it just makes it hard to build a stable thesis yeah and then for this one I want you to kind of take off your AI hat put your entrepreneur hat on like how do you outrun your competition like to me like if my moot was gone over the weekend like

is all right let's pack it up guys like you spit you put your heart into this into this company your entrepreneurship journey is so important to you and then somebody on the other side of the world to your point is working faster longer and harder and then now your strategic Advantage is gone like that has to be all I can do is tell you how you think about it as an entrepreneur so as an entrepreneur you say Where am I making Revenue uh in fact here's a quick 101 for our entrepreneurs out there uh man

this is so simple to do it's very hard it's simple to do in theory and very hard to do in practice you stop telling yourself a story CU right now open AI all of them they're telling themselves a story stop telling yourself a story look at the reality of how you generate money the stock price for a lot of these guys is so important and so now our access to Capital is predicated on what's going on in the market okay well now then we have to do the things that the people in the market want

us to do I don't know what the people in the market are going to want to do for the medium to long term the short term is all eyes on deep seek and things like that so now we're moving over to inference or at least the market is like I think people are going to do that so we'll see so you look at that you look at what you sell to the customer what is the customer actually willing to pay for you look at Deep seek you see that o it's almost as good as um

open AI 40 and if they're doing it for uh an absolute fraction of the cost making this open source then that's not going to survive for very long so I know I'm going to have to find something else so they are going to ask themselves one question and one question only where can I put the smallest investment to get the largest return and if deep seek proves day after day that that's in being really good at extracting better Knowledge from the models we already have all the companies that are way too far over their skis

and building out these large physical things they're going to be in trouble and they may literally get relegated to the dust bin and then other people come in and go all right this is the new thing this is what people care about and so we're going to be able to give them that and that's it like that is how the world will play out what are people willing to pay for period full stop end of story man we shall see uh that's all I got all right everybody if you haven't already be sure to subscribe

and until next time my friends be legendary take care peace if you like this conversation check out this episode to learn more this just in an asteroid is hurdling towards Earth and it's called AI billionaire Chris Saka and the dinosaurs tell us to brace for impact all while X reminds us that Sam Alman himself