Prof G Markets
00:37:16 · Misha Laskin, Ed Elson, S3
Selling to those entities is like, yes, you have to win on the technical stuff, and you have to show really strong technical differentiation, but you also, right, they're looking at you as, are you gonna be the strategic partner that helps me transform my organization with open models? And the open model builders have a lot of kind of trust from that perspective as being the right kind of strategic partner to transform the enterprise. [00:37:50] S2: We'll be right back. [00:38:00] S3: Support for the show comes from Engine. When 1,600,000,000,000 moves through travel every year, it's a shock to remember that most of it still runs on tech from the eighties. I mean, work travel works fine, but it certainly isn't all that intelligent. That's why businesses and travelers book directly through Engine. Engine closes the gap between wanting to be somewhere and actually being there. Developers, expense tools, and AI agents all plug into Engine's API. And as AI spreads, Engine only becomes more valuable. Every AI agent that wants to book travel needs real supply, real pricing, and real payments. With 40,000 businesses relying on Engine and growing fast, they're powering travel for the masses with partnerships like Nivon and the Tampa Bay Buccaneers. Strong hotel partnerships, proprietary supply, real time rate shopping, and payment rails. That's the kind of foundation that takes years to build, eight years in Engine's case, and it can't be bought. The future of business travel runs on Engine. Visit engine.com/propg.
00:39:06 · Ed Elson
[00:39:06] S2: We're back with Misha Laskin. You mentioned that that there might be some sort of geopolitical strategy in Chinese... In the Chinese open models. And that seems... I mean, if it's the case that that the ecosystem is somewhat closed in China and then not closed outside of China. That I think fully aligns with what I think we are in agreement on, which is that it seems like the open... The the proliferation of the Chinese open weight models, which they have really doubled down on and and they've invested significant resources into was partly, actually, I think almost entirely a mission to, as you say, erode the margins of the existing AI businesses in America and upend the AI market. My co host on Prof G Markets, Scott Galloway, calls it AI dumping. And basically, the China goes in, they say, we're gonna we're gonna inject a huge amount of supply into the into the economy, and that's going to kinda screw up the businesses that have really gotten ahead in America. And that seems that seems to be true. At least that's what I think is going on. So I guess the question is, you know, your company Reflection is seen as the response to that. You've had significant investment from some of the most important firms in the world from NVIDIA as well. And Jensen Huang has has specifically stated his support for open models. He thinks it's really important. You've also, provided, sold your model to, government infrastructure groups. I believe the Pentagon is using Reflections models. There is this idea that reflection is going to be America's response to China. My question, how will this get back at China? Like, how will this change the market and put America in front again? What is strategically important about Reflection given things go right?
00:41:17 · Misha Laskin, Ed Elson
[00:41:17] S4: First, I actually disagree with the, you know, premise of AI dumping, and it's somehow being negative for the Western markets. [00:41:27] S2: Think Yeah, I kind of agree as well. I'm sort of framing it.
00:41:30 · Misha Laskin
[00:41:30] S4: Yeah. The fact that there are great open models out there, period, doesn't matter where they come from, is a gift to us all. So the fact that this happened in China or wherever, but it happened in China, and there are great open models in the world that people can build on is a gift. So they gave us a gift. It's whatever their intentions were, they gave us a gift. And how do we see that? Our best startups that started kind of getting tall poppied by some of the closed labs, and again, it's not anything bad or negative at closed labs, it's more that they have businesses to build. So of course, if coding is very lucrative, they're gonna go build a vertical product around it. Why not? They have to build businesses. But you want a competitive ecosystems where the startups that are also building coding agents can build businesses too. And what did those startups do? Well, they actually started moving to Chinese open models, building on top of them, customizing them for their workloads, and standing up on their own two feet. So this is a gift that China gave to actually American startups. And if you were to take away open source models altogether because of some geopolitical worries, it would actually hurt the American innovation ecosystem. So I think the first thing we have to think about is that actually, this is kind of from a builder developer innovation perspective, these things are gifts, and it's great. We could be in a world where there was no good open models, and that'd be a much more worrisome, darker world to be in. Yeah. And the other thing is that, again, AI is one of those... It's not kind of a fixed pie zero something. When you drive the cost of something, in this instance, the demand goes up. It's a sort of Jevons paradox sort of thing. So, when you take AI, so far, every time you've kind of driven down the costs, the demand has gone up for them, for these intelligent systems. And right now, obviously, enterprise is trying to get very cost conscious, not because, look, an enterprise would happily put in billions of dollars into AI if it yielded some multiple of that in value back to them. But it just takes some time for that to manifest, and it is the case that to date AI has been quite expensive. So, I think that on the first point, that the existence of great open models is a net positive.
00:43:58 · Misha Laskin, Ed Elson
Now, when we think about it from a geopolitical and strategic perspective for America, it's very important that America is the leader in open model building, and that there's an ecosystem that's distributed across the world. And the reason for that is that both domestically and abroad. So domestically, our Fortune 500 enterprises do not wanna use Chinese models for various reasons around risk, perception, regulatory. [00:44:25] S2: But some of them even have, which I've been surprised by. I'm pretty sure Microsoft was was testing out DeepSeek for a moment, which I was really surprised by. I might be getting that wrong, hopefully not.
00:44:36 · Misha Laskin
[00:44:36] S4: So some enterprise are testing it out because, again, it's sort of like the demand for it is so high, but it's very rare see Chinese open models go into production in Fortune 500. And what that means is that our domestic enterprises do not have the same competitive edge, let's say, as the startups that are able to assume the risk and don't care about it. So, we need to provide good solutions for, you can kind of think about enterprises who, instead of renting their intelligence, they wanna own it, or they wanna do something, they wanna do a bit of both. You have to provide them a good solution. And so, where we are at the market is that our largest enterprises, our public sector agencies are operating at a competitive disadvantage to Chinese companies, and also to other companies within our own ecosystem who are willing to take the right, the sort of risk around it. So, it's extremely important to have something that's competitive to Chinese models to support our own companies and agencies. And then abroad, it's really important that our allies build on American technology. And this is kind of where the geopolitical part comes in, is that the world abroad will adopt whatever the best stack is, right? Whatever the best technology stack, they'll adopt it. There's a reason why Linux and Android came from America, and not from China. America has been traditionally really good at building the best open source technology in the world. This is the first time where for something so major, it is not being originated in America, and what that means that the world abroad is building on Chinese technology. What that will lead to is that open models are... You can think about as Trojan horses for the infrastructure that they bring, because again, it's just the engine, you need the car around it. And what's the car? Well, it's the chips, right? So now, when Chinese companies go and sell open models into The Middle East, or other Asian countries, or Brazil, or what have you, they will now also start selling chips in their data centers. And what that means is that other governments, allied nations, will start getting locked into Chinese infrastructure, and that is really the risk to The United States from a national security perspective.