Okay, that makes sense to me. Matt and many others asked a question along the same lines. They said, "Why?" Matt says, "Why would a private business not be able to set the terms by which they do business with the US government?" This is freedom of contract, which Ben has spoken about several times before. Always in favor of businesses deciding who they will deal with and on what terms. How do you think about that particular question? Because I do think dealing with the government here is different because of the implications of the technology at issue.
I mean again, I'm pro contract. I'm pro the government abiding by the contract. I don't know what else to say. It's precisely because I agree with the emailers that I would like Anthropic to back down here or to find some face-saving way or within the limit of the law. I say this as someone who agrees with their concerns about surveillance. You risk though by pursuing a principle that I agree is above and beyond the law is both right and above and beyond the law. I do think the current law is insufficient in protecting the privacy of Americans.
I agree with Anthropic there. But everything is a trade-off. And my concern is by imposing your standard, which goes above and beyond the legal standard, you imperil all legal standards, including property rights.
Which I would like to preserve. I'm very pro property rights. I'm pro contract. Remember, I'm the corporate overload bootlicker. You made this point, by the way, like you're the antitrust guy. You're like, "Look, antitrust is about violating property rights, right?"
I'm like, "Yes, it is. Thank you. 50 years." Well, and it's just my understanding of companies and their relationship to the government is probably informed by my legal background and going to law school and reading cases from the last 150 years. In matters of national security, there's a lot of deference given to the United States government.
Another good thing in your article, you listed a whole bunch of examples of the US pretty blatantly violating private company property rights when it comes to national security. So, it's not particularly new. And when you talk about a technology that is this important to the future of military technology, it's not particularly surprising to me that the government would put its thumb on the scale and expect partnerships with all of the frontier labs and expect that those are not going to be equal partnerships. So, and look, a contract with the US government, the government is going to retain the power to change the terms of that contract. That's just sort of the way it has always worked.
Well, I think it's very fair to say, so as I understand it, correct me on the timeline, the initial Anthropic contract was with the Biden administration, but the Trump administration renewed the contract last summer when if they had these concerns, they should have brought them up then. So I think all those are sort of valid critiques. And I'm not defending the Trump administration. And I think it just bothers me that Anthropic was dishonest in the Super Bowl ads. It bothers me that Secretary Hegseth's tweet was asserting things that are not powers he doesn't have.
Yeah, totally. Like so and yes, I get the arguments, oh, you know, Trump always does this, asks for the moon, gets a street light, whatever. I can acknowledge that and also not like it. And in this context, you know, is very damaging and you know, Gregory Allen, it's just not surprising to me that the government would reach for any lever it has and marshal every tool it has to ensure that these companies fall in line.
And all the stakes here are quite low and small, which is actually I think a relief because I do think like I followed up on Tuesday by pointing out why is it that, you know, oh the government can make their own AI? Like no, they can't. Just like they don't make their own chips.
One of the, and this is about how technology works. When the upfront costs are so substantial and the marginal costs are basically zero, which like chips is really the first one that's like this, to actually make money and to actually not just to be profitable, but to drive R&D, to drive innovation farther, you need much larger markets than the government can provide. And so, you know, Bob Noyce with Fairchild Semiconductor. This started out with government contracts. The government's like, "We got all the IP and we're going to tell you what to do." And like most companies did that because they need the money for R&D. He's like, "No, we're going to sell chips to the consumer market because it's going to be much larger." The larger it is because of this concept of zero marginal cost, high fixed costs. The more you sell, the lower the price. You make it up in volume. Like that's the make up in volume is sometimes a joke but it's rooted in a very real concept of technology which is you can almost always make up in volume if you have these dynamics of high upfront costs and zero marginal cost because the volume doesn't cost you anything because it's zero marginal cost. So you spread out your fixed cost over more and more things. And within it took a very small amount of time. By like the late 1960s there were more computer chips being sold to non-government entities than to government entities. And obviously it's not even remotely close today. This is the late 1960s and Fairchild dominated that. They sold like 80% of that market and then they left, formed Intel because they wanted to actually make money. Fairchild wouldn't give them stock options. And so but it pulled the innovation forward as well because what the US government, and so what happened was in the 1980s the US government realized like we're actually, our military is in pretty poor shape. We're way behind. And they're like, we need to stop dictating and start buying. And actually, there's been this transformation in information technology. We need to buy chips off the shelf. And that was the foundation of all the technology you saw like the last real demonstration of US military might was the Gulf War. And that was downstream from the 1980s, where basically based on, you know, from the technological revolution in Silicon Valley in the 60s and 70s and they were buying off the shelf. And AI takes this on steroids, right? Like the US government, what's the DoD's, like the amount of capex that, what's the DoD's budget?
Oh, I don't know. I can look it up while we talk here, but all I know is it's not the same as Anthropic's. No. Well, that's the thing. DoD budget, this is great podcasting, but 2025, $850 billion.
Okay. The tech industry is committed to $700 billion in capex for this year.
So, same ballpark. Not just saying ballpark but we're on the verge of spending more every year on AI than the Department of Defense which has always been held up as the biggest spender in the world.
Yeah. And that's for, they don't have zero marginal costs. They're paying all the troops. They're paying all the staff, all that sort of thing.
Not all of $850 billion is going to technological development.
And I'm not sure. This is where I think Washington needs to wake up. I don't know to what extent do people in government understand how little they matter to tech companies from an economic perspective.
Yeah. I mean $200 million contract is a drop in the bucket for Anthropic which is currently getting into enterprise market making all of gains on consumer side. Yeah. So, the problem is but this is why this issue is so important because ideally like the government used to be able to guide lots of companies with carrots. It's like you want this government contract, do what we say.
Their carrots are not just baby carrots. They're like slivers of a baby carrot that honestly is just so hard to pick up with your fork. It's probably not even worth the trouble to eat. And if it's not there yet, it's getting there very rapidly with AI with these astronomical upfront costs and not zero, but close to zero marginal costs as far as serving in the long run. And so a little baby carrot next. This is why people have to be worried about this. If the government doesn't have carrots, all they have are sticks.
I would prefer the government not getting in a position where they feel we have no carrots, all we have are sticks, so we're going to use that. That's what happened last week. That tweet was not just a stick. It was also like someone's like putting a light behind them so the shadow looked very large so the stick looked bigger than it was.
Like it was kind of pathetic actually in a certain respect the extent to which Hegseth overstated what he could even do.
Like this and these are the people that are supposed to be worried about alignment. That's what's so frustrating about this. How can you not see this collision that's happening? And what happened last week was not a one-off. Just wait till the administration changes. It is a precursor of what's going to happen as AI becomes more and more powerful.
Yeah. I mean, I understood it as the government setting a precedent for any of these AI labs. But I guess more will be revealed in terms of tension in the future. Related to Hegseth, we got this email from Craig. He says there are two actors here. One which wishes to abide by the previously agreed to terms of its contract or barring that help with the transition to a competitor. The other expects the right to ad hoc change contracts or barring that will ignore the laws to implement punishment. Which one is pro-democracy?
So the answer, the Anthropic one is pro-democracy. Again this is my issue. This is why some of the response were driving me bonkers. Like yes, the following contracts and or helping transition better that is pro-democracy. That is pro property rights. That's pro all the things I believe in. But there's this assumption that democracy is in the ether, that property rights are these things that are notable. And honestly I mean from my perspective Pete Hegseth is not undermining democracy by exercising the government's own authority and leverage in this area like the system of government is a democracy and the leaders who are elected and abuse their power have the ability to be voted out of office if voters are unhappy with what they're doing. But the government acts in undemocratic ways using democracy to stand in for like the rule of law is actually super annoying. You could be democratically elect someone who violates the law and in line with what the people want. The point of law is to restrain in many respects the popular impulse. So yes, there actually is more of a, if you want to get into philosophy, there's often a tension between democracy and the rule of law.
And every executive branch in history is pushing the boundary of law. Well, yeah. And like if you're dealing with a government making a product that's so powerful it's going to implicate government interests, you have to be aware as an American company, you're ultimately going to be answerable to the American government. Terms of any contract can and will change. And like Sam Altman, he said earlier, private businesses shouldn't be more powerful than the government. And I'm sure a lot of people in the AI community will call him a bootlicker for that particular comment.
Oh, they've called it worse, including in the last week.
I know he's really taking it on the chin. I look to me as an outsider, I'm not part of the EA community. That's just true. And it's certainly how the actual government sees things and that will inform a lot of what plays out in this space in the years to come including to Anthropic if they are on a different page on a lot of these questions. I don't know.
Here's the question for you.
If you were to redo your tech take rankings where does Anthropic now rank?
