Episode 76: Has OpenAI Peaked? Skechers Takes on Nike. Who should pay for the Wildfires? Has Gaming Lost the Plot and Bad Bad Airports
The guys discuss OpenAI's challenges, the history of Skechers, who should pay to rebuild LA after the wildfires, how gaming spent too much time on graphics, and why privatising airports is a bad idea.
The Contrarians catchup
Adir is in Tel Aviv and tells harrowing stories about constant missile attacks that he knows are coming because of sophisticated warnings in a targeted app.
The guys discuss the allocation of losses following the catastrophic wildfires in the LA region, which killed 25 people and caused over US $250B in damages. Adir asks “Are there places that it is just not economically viable to build anymore?”
Adir: “I'm supportive of interventions in capitalism because I don't like capitalism running uncontrolled. When you're going to intervene in capitalism, you need to be aware that there will be unexpected and unintended consequences. And not letting insurers raise their premiums, it’s pretty obvious what the consequence of that is going to be.”
Adir is having issues with WhatsApp calls not ringing, resulting in constant missed calls. Luckily, Adam is having the same issue: “One of the most annoying things in life is when you have a tech issue and nobody else has that tech issue.”
The guys discuss Nine’s new interim CEO (Matt Stanton), who has gone against the grain of a typical “night watchman” interim CEO (a lower-order cricket batter who comes in to bat higher up in the order to maintain most of the strike until the close of play), and is making big strategic decisions.
Adam had an issue landing at Sydney airport, with a delayed flight meaning the arrival gate was no longer available, and the bus to the terminal was a 40-minute wait - “I don't think governments should own assets. But, and there's a big ‘but’, governments cannot privatise an asset that itself is a monopoly.”
The section about how Adam has run 30-40km a week for the last 15 years barefoot might be the most fascinating part of this week’s episode.
Has OpenAI Peaked?
TechCrunch recently reported that OpenAI CEO, Sam Altman, said the company is losing money on its new $200/month ChatGPT Pro plan because people are using it more than the company expected.
Meanwhile, Anthropic (which operates Claude) is raising around $2B at a $60B valuation. This is just months after receiving $4B from Amazon and raising $18B last year.
In the past year, OpenAI has grown 3x, while Anthropic is growing at 10x in terms of revenue.
Adir: “My tip to younger users would be to make sure you ask AI chatbots to cite sources because it becomes a lot more precise and you get fewer hallucinations.”
Adir: “I think you’re better off with anything physical, for the time being, because you’re protected in that you’d require robotics and AI to replace your job. I think being a carpenter is a pretty good job right now. But I do think that like complicated tasks where the main part of the task is going and finding information and sharing it with a customer or internally, it's hard for me to see those jobs surviving for much longer in the face of large language models.”
Skechers Light Up Sales Numbers
The NBA's 2023 most valuable player and last season's top European goal scorer aren't Nike or Adidas athletes. In fact, they wore the same brand of shoes as Martha Stewart: Skechers.
Skechers gets two-thirds of sales outside the US and operates a franchise system, often waiting years before investing in its overseas operations.
The company recorded US $8B in sales in 2023 and executives say the brand is bigger than Nike in India.
Skechers was founded in 1992 by Robert Greenberg, who had previously founded LA Gear in 1983 (he stepped down as CEO of that company the same year he founded Skechers).
Adam: “It's just a great strategy to see an incumbent giant struggling and just chipping away at this huge revenue they had and making a bunch of money in the process.”
Adir: “When I look at them, I kind of feel like they're losers. But they're not losers. I mean, this business is a business of winners, frankly.”
Adam: “You go back to 2020, Skechers is up almost 100% - so almost doubled in five years. Nike and Adidas are both down about 20% in the same time.”
Has Gaming Lost the Plot?
Sony has famously sought after realistic graphics as the key to attracting bigger audiences with its video games, but with the rise of Minecraft, Roblox, and Fortnite, have gaming businesses prioritised realistic graphics at the expense of gameplay?
Adir: “Nintendo’s strategy for the last two decades has been not to chase after extreme graphics and to focus heavily on gameplay. It's been very smart, but the flip side is there are some games that are much, much better because of the realism that you get from the graphics.”
Mike: “I think there's a misconception that graphical fidelity means the game is better by default. But I think that's underselling the value of a fun game. The graphics can only get marginally better now, we're kind of at peak visual fidelity, whereas indie games are more focused on making the games good.”
Adam: “Both Hollywood movies and gaming went way too far on special effects at the expense of story. Both got sucked into the same trap of not understanding what the customer really wants.”
Listen in for Adir’s take on Steam and the Steam Deck, and why it’s a genius move for portable gaming.
Five other stories worth following:
Hours before taking office as the 47th US president, Donald Trump launched his own memecoin, $Trump. Trump Memes reached a market cap of $5.5B on the weekend. Then Melania Trump launched a memecoin of her own, which quickly garnered a market cap of $5B. Trump Memes fell over 35% on the news.
A positive bird flu case has shut down poultry activities in the US state of Georgia, and all commercial activities within a six-mile radius of the case northeast of Atlanta will undergo surveillance testing for two weeks. No humans have tested positive in the state.
In the US over the weekend, TikTok went dark about 90 minutes before midnight ET on Saturday, then President-elect Donald Trump posted to Truth Social that he would sign an executive order to bring back TikTok, then TikTok released a statement a few hours later that it was somehow returning.
The World Economic Forum begins in Davos. The newly sworn-in Donald Trump will take part virtually while fellow world leaders, top CEOs, and heads of civil society organisations rub elbows and listen to complaints about private jet fuel costs.
After multiple delays due to the wildfires in Los Angeles, finalists will be announced for this year’s Academy Awards. All eyes on Conclave, The Brutalist, A Complete Unknown, Anora, Emilia Perez, and Adir’s reaction because he doesn’t watch movies.