Episode 225: AI Bubble, Waymo Ditches Uber, Jacinta Allan’s Disaster, KPMG Scandal and Jim Chalmers Crashes Housing in All the Wrong Places
Finally, Adam and Adir back together in person!
H3: The Contrarians catchup
Adam and Adir are back in person for the first time in five weeks. Joel got a dramatic haircut. The pod broke the news.
Ed Husic went rogue at the Labour Party conference, targeting Albanese and Richard Miles. Adir: “He is prepared to spend his political career in purgatory for as long as Albanese is the Prime Minister. And his views are abhorrent. Like, anyone that says to me there’s genocide in Gaza, I just say what do you mean by genocide? No one can ever answer that question.”
Victoria’s unemployment rate rose to 5.1% while the national rate held steady at 4.4% with participation surging by 76,000. Adam: “This is clearly the Dan Andrews and Jacinta Allan governments. This is what happens when you run worker-friendly policy. I’m not hiring in Victoria, I’m gonna hire in New South Wales if this WFH policy comes in because it’s just a better place to employ people.”
The AFR ran a headline on Jacinta Allan’s government: “Allan’s latest policy alienates despairing business community.” The subheading: “A senior government source said Premier Jacinta Allan and her advisors have concluded that conflict with business wins them electoral support.” Adir: “Can you imagine something more cynical than a politician seeking to win votes by destroying the economy of her own state?”
The richest entertainers of 1998 quiz: Jerry Seinfeld was number one ($267M), Larry David number two ($242M), Spielberg three, Oprah four, James Cameron five. Mike nailed Jerry Seinfeld and Michael Crichton (number eight). Harrison Ford was number nine. The Spice Girls were number 49 at $49M. Tiger Woods came in at 44.
H3: Jacinta Allan: the end is near
Jacinta Allan’s leadership is collapsing, with polling suggesting Labor could lose up to 35 seats at the Victorian election. Victoria is the crime capital of Australia. The paper’s Monday edition reported her downfall was expected within 24 hours of recording. Ben Carroll is the likely successor.
Adir: “My advice to Ben Carroll, who there’s some chance he’s listening to the podcast, is don’t go down with this ship. Like this was not really your mess that was created. It’s hard to see how the Labor Party ends up in power after the Victorian election, hopefully.”
Adam: “Dan Andrews is able to sell the longest lockdowns in Australia. He was able to sell locking up people in their housing commission like a jail for a week. And he got re-elected on a landslide in 2022. That was extraordinary. And Jacinta Allan’s just an average politician. She couldn’t do what he did.”
Adam: “Someone as smart as Thodey who’s been around the traps, who’s worked at Telstra, who should know better, has just fallen for it now. It’s just actually incredible that we haven’t learned our lesson.”
Adir: “The only reason Victoria is not insolvent is because lenders are still prepared to give Victoria money. Victoria has no ability to raise enough tax to repay it. Victoria is very close to insolvent. We exist at the grace of our bankers. Absolutely. That’s Victoria right now, without a doubt.”
H3: The chip that could detonate NVIDIA’s moat
A company called Etched, founded by a team of Thiel fellows, Harvard and MIT maths olympians, ex-Nvidia architects, and the original iPhone supply chain leads, raised $300M last week at a rumoured $3B valuation coming out of stealth. Their product: a chip where transformer architecture is physically encoded into the silicon, making it potentially 200 times faster than an NVIDIA GPU for text-based AI inference, but capable of doing nothing else.
Adir: “What they are building is pretty crazy. They’ve basically said it’s possible to encode the transformer logic onto the chip itself. What it means is all this chip can do is transformer-based calculations, which is mostly text-based stuff. This thing can maybe be 200 times faster than an NVIDIA chip.”
Adir: “Five years time is so unknowable. There’s so many, like the problem, two years time is unknowable. It’s very hard to pick what’s gonna happen. And I think this little glimpse into Etched, whether they’re the winners or not, it just shows how the assumptions that people are making about this industry are changing every week.”
On the broader AI bubble and hidden earnings inflation:
Adam: “In the first quarter just three companies, Google, NVIDIA and Amazon, saw massive gains in their other income category from their private investments in companies like SpaceX and Anthropic. The total of $69B in other income was ten percent of the S&P’s overall net income for the quarter. So we’ve got double the reason why these earnings are just a fraud.”
Adir: “The capital stack in this boom is much more concentrated than it was in the dot-com boom. It’s basically three or four hyperscalers and then some Saudis and a few others, and a few American banks lending debt. And every time someone comes to the market and says we need to raise $100B from AI, there are not many places that you can get there from.”
Adir: “You can’t short AI because you’re gonna go broke waiting. It’s unknowable when this thing is gonna crash, and there are so many vested interests determined to keep this up. And they’re rich and a whole lot of them are the most valuable companies in the world.”
H3: Waymo dumps Uber
The Financial Times reported Waymo is looking to exit its deal with Uber, having already split from the network in Phoenix. Waymo has told Uber it will stop using its app in January 2028. Waymo is now valued at $126B, having 4X’d from its 2020 first raise of around $30B. Uber, meanwhile, is down 34% since September and is only double its 2017 valuation of $68B under Dara Khosrowshahi.
Adir: “I think Uber can still succeed as a ride hailing app for autonomous vehicles, even if they don’t have Waymo. And my guess is if they succeed excluding Waymo, Waymo will actually give them the ability to hail Waymos as well.”
Adam: “I suspect in five years’ time we’re all taking these self-driving cars everywhere. Or certainly in ten years time. The market becomes just so much nicer. The same thing happened with Uber in San Francisco, where people who weren’t taking rideshare something who didn’t take taxis preferred an Uber. I think we get the same situation with self-driving.”
Adir: “It’s very hard to know what this market looks like in five years’ time. Not just because we’re dumb, because there’s too many nodes that you have to multiply at the moment to work out what the likely outcome is going to be.”
H3: Revolut gets an Australian banking licence
APRA granted Revolut, Europe’s most valuable startup, an authorised deposit-taking institution licence in Australia. Revolut is valued at US$115B and has 75 million global customers. Its CEO Nikolay Storonsky holds a 29% stake worth US$33B, making him Britain’s fifth richest person. Revenue was up 46% and profit up 57% to $1.7B. The key surprise: most of its profitability comes not from lending but from subscriptions, ranging from $6 to $100 a month.
Adir: “People used to cry about $2 a month bank fees, and Revolut has said I can get $100 a month and people are going to be happy to pay it. It’s unbelievable.”
Adir: “So we’re entering an era where bank fees are coming back because Revolut’s called them subscriptions, and every other bank has been forced now to charge bank fees by these unnecessary RBA changes. It’s the return of the bank fee era.”
Adam: “The RBA change has given us these three benefits: fewer points, high interest rates, and bank fees.”
Adir: “It doesn’t matter what exists in the world. Ultimately there are just some ways to make money and one of them is retail banking. They’ve just figured out it’s good to charge bank fees and I don’t know why all these idiot other banks didn’t charge bank fees and just call them subscription fees.”
H3: It just keeps getting worse at KPMG
KPMG sacked recently demoted COO Eileen Hoggart from the firm’s partnership after finding she had stored printed copies of confidential Lendlease board documents in her locker, shared them with colleagues bidding on the audit contract, and then repeatedly lied about it. The board had overruled its own legal and HR executives to allow Hoggart to remain as a senior audit partner for two months after being named in parliament. The scandal has now claimed the scalps of the CEO, chairman, and multiple senior audit partners.
Adir: “Most people that do terrible things to other people get away with it. I’ve had personal experience on the receiving end of this. Mostly you can get away with doing terrible stuff. And I just think their view of this was no one is ever going to catch us stealing this stuff. That is pervasive in the corporate world.”
Adam: “I think you can tar every auditor with this brush. This seems to be even within the same firm, these people at the top who you’d expect to be whiter than white were the worst actors of them all.”
Adir: “Every now and again you hook one of these big fish and it looks terrible. But what you don’t realise is there’s tons of this stuff going on below the surface that you’d never even know about. That’s the truth of it.”
H3: The 5% deposit scheme is a timebomb for young buyers
With auction clearance rates cratering and one agent reporting six auctions with not a single registered bidder over the weekend, Adam and Adir spent time dissecting the mechanics of the government’s 5% deposit scheme and what happens to young buyers if property prices fall.
Adam: “The worst area in terms of the people who are most exposed, the most amount of debt, is these first home buyers. These idiots who believed the government, come with us, come roll up to the first 5% empire. They’ve written their own death road.”
Adir: “This country has just massively increased its risk exposure to rising unemployment. The biggest point is that fifteen percent of the country’s economy is linked to property transactions and it’s throttled property transactions. But if unemployment rises and people can’t service their loans and banks say we need to get our money back, we’re gonna flog your property, there’s no buyers.”
Adir: “Can you imagine a better way to get someone to vote against the government than we’ve sold your home out from under you and by the way you still owe $50K to the bank. That is instantly voting against you.”
Adam: “Jim has basically cost them half their revenue. All they’ve got is a bit of gambling and payroll taxes. Imagine how bad Victoria’s going to be in three years’ time with no properties transacting.”
Adir: “Jim Chalmers said his PhD on Paul Keating and he’s managed to create a housing system where every part of the market’s fallen except the one that he was trying to get to move down.”
H3: Five other stories worth following:
More than 50 technology companies, including NVIDIA, Microsoft, Hugging Face and OpenAI, are urging Washington to avoid early restrictions on open-weight AI models, arguing they lower costs, expand access and strengthen American innovation globally.
A CBS News/YouGov poll found four in 10 Americans are eating less produce amid a Cyclospora outbreak linked to iceberg lettuce, while confidence in the FDA response varies by political affiliation and staffing cuts.
OpenAI has launched ChatGPT Health for US users, allowing medical records and health apps to be connected for guidance. OpenAI says its models can outperform clinicians in reasoning, while stressing they should support professionals.
Colorado startup Lunar Outpost plans to send NVIDIA AI chips on future Moon missions, enabling rovers to navigate autonomously, communicate faster, create real-time maps, stream high-resolution video and potentially support NASA’s permanent lunar base.
Oxford spinout Moa Technology is developing herbicides that target weeds through biological mechanisms, responding to widespread resistance. After identifying more than 80 targets, it raised $30M to advance compounds and enhance existing herbicides.