 | TL;DR: Galloway called this the biggest story in business right now — and the reason has nothing to do with model quality.
It's the price. A recent Juniper Research read already has Chinese models running up to 90% cheaper than the US frontier, with American labs' share of usage sliding from roughly 70% to 30% in a single year. Galloway and journalist Josh Tyrangiel spend this clip walking through the actual mechanism — subsidized distillation, the same undercut-then-lock-in playbook China has already run on the Silk Road, in Africa, in Latin America — now applied to the AI stack every CFO in America is currently signing off on. The discount isn't the story. Who ends up owning the decision once the discount does its job — that's the story.
I remember back in 2009, a group of us Malaysian were newly seconded to build the premium 5-block-condonium Rihan Heights, in Abu Dhabi, UAE. Weather was brutal. Figuratively, we're like commandos being air-dropped in the middle of nowhere. We have to source for local material suppliers — especially concrete. Those were tough times.
No local quarries wanted to supply us concrete — because we're foreigners and all. Eventually we managed to secure one — after much delay and negotiation. The price we've negotiated was super exorbitant. But we bit our tongue, and moved on.
After a while, we hit roadblocks. The sole supplier #1 kept ignoring our request for concrete, in favour of prioritizing their other local customers. I suspect there're some racism going on — I wouldn't be surprised that it might be true. Supplier #1 felt like they're the local king, and that they somehow subjugated us with their terms. My big boss was fed up with the whole shenanigans and injustice. He instructed my contract manager to go source for more options. And we did. Word spread that we're good paymaster. We had to. Who's gonna entertain us (especially in a foreign land) if we aren't? The minute we found concrete supplier #2 (at better terms), the situation shifted. The "crown" on supplier #1 was suddenly stripped away. We abandoned #1, in favour of #2 for concrete, since #2 was fast and compliant. For good measure, we even sourced for #3, just in case. Obviously, #1 felt a huge slap on their face.
Eventually, they came around and crawled back to our site office — with their tail covering their ass — for renegotiation. I witness the whole thing at the other end of our site office ground floor open layout. Sitting at the meeting table, the supplier #1 team lowered their voices with their ashen faces, in front my senior leadership team. Defeated, #1 yielded to our new terms. Their arrogance gone. Either we fight or we die. ____________________________________ Every cycle wears a new label — subsidized steel, subsidized concrete, subsidized compute. The mechanism underneath never files for a permit.
Drop your take: if your AI vendor doubled prices tomorrow, do you actually have a #2 lined up — or are you supplier #1's captive account?
Clip credit: Scott Galloway / The Prof G Pod — full video on their channel. DM for credit or removal requests.
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Predictive technology: computational social science
