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CAUSO Media. Hi, I'm Ed Zittron and this is Better Off Line. Better Off Line. Welcome to Dotcom Week. I hope you enjoyed my chat with Matt Rozov to kick it off. And today is the first of a four-part special but why I think the AI bubble is that much worse than the dotcom bubble. So for almost five years, I put out a newsletter or article basically every week that addresses the underlying financial raw at the heart of the tech industry, whether it be the outright corruption of the crypto industry, the bullshit of the metaverse, or the AI bubble that I won't shut up about. It's been some of the most challenging work I've ever done. I've been forced to learn accountancy, economics and the names of at least 10 different guys I'd gladly see under a with a. I'm not on a Campton forensic or otherwise. I'm not a banker or a financial analyst. I've never worked as a venture capitalist or a hedge fund or at a hedge fund, I guess that would be. I'm just the guy with a laptop and a microphone. But I think I've picked up a great deal of knowledge in the last few years and the clarity of starting from a position of, oh God, what does that mean? Actually allowed me to see things in the way that many haven't, which is why I'm so utterly horrified when I hear people flippantly say that the AI bubble will work out fine because it's just like the dot-com bubble. While there are similarities, I need to be clear that I think the AI bubble is far, far worse and the calamity that follows will be far more destructive. Let's review. The dot-com bubble actually had two elements, the stable, sensible tech companies that actually made money and then the likes of pets.com and Webvan, both ideas that would eventually find margin positive existence in the form of Chewy and Instacart. I'd also add the telecommunications companies onto the side of this as well, but technically they weren't making the websites, they were just building the internet. What buried these companies was their obsession with growth and a rush to take them public. The idea of ordering pet food or groceries online was one that would have made a lot more sense if more people were connected to the internet or had faster connections. In the year 2000, only about 52% of Americans were online and well, both Webvan and pets.com were losing $2 for every dollar of revenue. I don't know, that shit didn't make any sense and it wouldn't have even if we had high speed internet, but I think by the middle of the 2000s, we only had most people on at best 400 kilobits per second. So we're talking websites that took time to load. Anyway, the economics also didn't make sense. Now, the AI bubble differs in so far as the, what we would have once considered stable, sensible tech companies are acting irrationally. Having doubled or in the case of Microsoft, tripled the amount of hardware known as PP&E that they operate in just a couple of years with no signs of slowing down. These companies are racking up debt, entering into multi-decade long lease agreements and it's accumulated so much hardware that the depreciation will erode any profitability for the short-term, medium-term future. For example, Microsoft went from having around $88 billion in PP&E, that's property plants of equipment, which is where the GPUs are by the way, in the beginning of 2023, to a remarkable $230 billion in PP&E as of its last quarter. And depreciation by the way, is not a cash expense. They've already bought the GPUs and the service and the like. What it does however is sit there because they spread it out over five to six years, I think it's five and a half from Microsoft, they spread it out so it eats into that net income side. So instead of taking the immediate upfront hit, they spread it out. So this means that each quarter, from here until fucking eternity at this point, Microsoft is gonna be taking billions of dollars of depreciation charges. Now, while the dot-com bubble was wasteful, it didn't involve the largest and most well-respected tech firms in the world, accruing hundreds of billions of dollars of GPUs that were obsolete a year or so after being installed. It also didn't involve billions in operational expenses or acres of data centers. In fact, there's really no comparison. Fiber doesn't compare at all. The scale of the fiber will get to it, but I just wanna be clear that fiber is also something that you can use on many things. Fiber is something that another company could come up and run with. AI GPUs are extremely limited in their outcomes. I've been over this before, not gonna repeat myself. Perhaps I'll do a more in-depth episode on that in the future. But look, in many ways, I fear the AI bubble is gonna be worse than the dot-com bubble. It's gonna make it look small. And we are already seeing some worrying signs. Now, let's start somewhere simple, though. Layoffs. Fun fact, even during the dot-com bubble, Microsoft barely had any layoffs, with the company growing its headcount, even as the tech industry around it was consumed in flames. The biggest round of firings I could find during the 1998 to 2008 period was between August 2024 and January 2025, when it canned 76 members of its Xbox group, as well as 157 test engineers whose jobs were off-shore to India. That gives you a grand total of 233 people. For comparison, Microsoft laid off 6,000 people in May of last year, or 3% of its global workforce. Now, that's not to say that people at other companies were equally fortunate. In 2001, some microsystems called 90% of its workforce, or 3,900 jobs. That was the first of many at that particular company. In 2001, the telecommunications sector cut, and I'm not shitting you here, 317,777 roles with the computer industry second ranked for that year, shitting 153,952 positions. Similarly, Amazon saw its stock tumble in January 2000, when it was discovered that it laid off 150 people, 2% of its workforce at the time, and would lay off another 1,300 a year later, or 15% of its workforce. Now, that, by the way, sounds like a lot, and also I think it's adorable back when the stock market cared when companies did layoffs. They don't today, and Amazon indeed is a very different company today, going from a fledgling digital book seller to one of the largest retailers and cloud storage providers in the world, and a very profitable one at that. Yet, this week, Amazon laid off another 14,000 people, 10% of its corporate workforce, around three months after laying off 14,000 more people in October 2025. Why? Well, it's two things. First, it's the scourge of Jack Welch. Go and listen to the shareholder supremacy from 2024, if you like that one, and the idea that laying people off, well, it boosts profits, which Wall Street loves now. Secondly, it's because Amazon is buying billions of dollars of GPUs, both from Nvidia, and directly from TSMC for its Tranium Custom Chips, that is TSMC, Taiwan Semiconductor Manufacturing Corporation. They build basically every chip, and Amazon, they build them internally using a company called Anapurna Labs. It's a whole thing, it doesn't really mean much, they're not as good as Nvidia's GPUs, but nevertheless, they keep fucking that chicken. And this is a massive burden on its earnings. These chips have their costs spread out, like I mentioned, as a depreciation charge, dragging down the profits that Amazon can report on its earnings in the process. While this isn't a problem when you buy one, or two, or 10 GPUs, it becomes one when you have hundreds of thousands of the fuckers. ["The Fuckers"] No gloss, no filter. Just stories, spoken without fear. Addiction is a disease, and it should be looked upon as any other disease. How did you cope with a reckless father like me? Join me, Pooja Bhatt, as I sit down every week with directors, actors, musicians, technicians, and beyond. You don't need to work with the biggest people and the biggest sound to have great music. I have gone through the Saab Siddhi Khachakar, the Rij, the Pinnacle, stung by the snigger that had fallen down again. Yeah, I am not writing actively anymore, and when I see my old work, it kind of saddens me. I'm only as good as the last shot that I gave. Mom's gone, but don't shut the theater. The show must go on. Listen to my weekly podcast, the Pooja Bhatt show, and the iHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Come for the honesty, stay for the fire. Hans, the GC here. I'm whispering because... As the queen. Queen of social media? It's about time for my ASGMR series. So I'm recording this on my phone, and then I'm going to use Canva to edit and upload it. Oh, sorry, babes. I'll make that whisper when I edit it. Anyways, Canva makes social media edits so easy. I'll upload this in a minute. Canva, make everything. How do I stop recording, Taren? Amazon had $16.7 billion of depreciation charges on its last earnings. That's a great deal. I think their net revenue was like $22-24 billion. Not great. In simpler terms, today's layoffs are happening, not because the companies are in trouble, but because they want to boost their profits at a time when AI services aren't providing a profit, and I don't think they ever will. Nevertheless, these layoffs are a sign of something. That these companies know that revenue growth isn't keeping pace with their ruinous expenditures. The only jobs that AI is taking are those that the hyperscaler cuts to keep paying for its existence. In any case, people really need to recognize that the dot-com bubble wasn't some small event that could be casually waved off, and other things that happen tell the story of what might before anyone left in or invested in the tech industry when it does. In 2001, VC funds raised 63% less than the previous year, and the amount of money going to startups, not just technology companies, dropped by slightly more. Then there's the stock market. If you held stocks in a company like Pets.com worth at its highest of relatively modest $400 million, or WebVam with a peak market cap of $8 billion, you were completely fucking screwed. Those companies went to zero, or near enough. Even those who invested in established firms like Microsoft and Sun faced their own haircuts, with Microsoft's share price dropping from a high of $120 to as little as $40, adjusted for the two stock splits that happened in 1999 and 2003. It would take around 17 years for Microsoft to reach its original dot-com bubble highs. The fact is, the dot-com bubble fucked a lot of people. The tech sector's share of employment wouldn't surpass the levels of the bubble era until 2015. In practice, this meant that newly graduated software engineers couldn't find much work, and what work they could find offered stagnant wages that didn't keep pace with inflation. That's the thing about the dot-com bubble. We like to think of it as something that happened around the turn of the millennium, but in practice, it took until 2004 for the contraction in the tech jobs market to finally bottom out. Existing workers faced threats, not simply from economic-related cut-bats, making the company do the same with the resources they already have, but also from outsourcing, which grew exponentially in popularity in the early 2000s. This, incidentally, was around the time that China entered the World Trade Organization, meaning that in addition to cuts in the service-related sector of the economy, a lot of high-tech manufacturing jobs went out the door too. The point I'm making is that the dot-com bubble was bad, and that the second-order effects, the things that didn't get as many headlines or as much pop culture weight, were really, truly gruesome. Now, there's a great line from the big short I always find myself returning to. It's when Ben Rickard, the retired finance guy who came back in from the cold in order to help Brownfield Capital short the mortgage market, castigates the two young founders for celebrating what would be the trade of the century. If we're right, people lose homes, people lose jobs, people lose retirement savings, people lose pensions. You know what I hate about fucking banking? It reduces people to numbers. Here's a number. Every 1% unemployment goes up, 40,000 people die. Did you know that? It's so fucking easy to talk about this period with statistical data, to talk about layoffs and abstract terms like tens of thousands or hundreds of thousands of jobs, or to say how the stock market contracted, but things would work out okay, that everybody would be fine in the future, and thus, the fuckups today would be okay. I need to be clear that anybody who traded into the dot-com bubble got washed out, and similarly, anybody who believed story after story about the eternal growth in telecommunications or web startups lost almost everything, if not everything they put in. Anybody who worked for Enrom, the people that didn't know about the illegal bullshit happening, lost every cent of their stock-based pension. Unemployment swelled to a peak of 6.3% in June 2003, and the NASDAQ lost nearly 80% of its value from its peak in the year 2000. Anyone saying that this is just like the dot-com bubble as some sort of defence of the reckless, monstrous expenditures of the AI bubble is trying to find rationalisations for irrational reckless actions. These are likely privileged people who defined that time, or have found ways to look back at a time of incredible suffering and believe that because things are better today that all of it was worthwhile. It wasn't. I know that the fibre build-out led to something, and I'll get to that in a future episode, I promise. But just because that happened doesn't mean any of this worth it. All of the wasted money in that time could have been spread out over a more thoughtful period. It wasn't, and people suffered as a result. I'm going to talk about this more next episode. Thank you for listening. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Osowski. You can check out more of his music and audio projects at matosowsky.com m-a-t-t-o-s-o-w-s-k-i dot com. You can email me at easy at betteroffline.com, or visit betteroffline.com to find more podcast links and, of course, my newsletter. I also really recommend you go to chat.wheresyoured.at to visit the Discord and go to r slash betteroffline to check out our Reddit. Thank you so much for listening. Better Offline is a production of CoolZone Media. For more from CoolZone Media, visit our website, coolzonemedia.com, or check us out on the iHeart Radio app, Apple Podcasts, or wherever you get your podcasts. No gloss, no filter, just stories, spoken without fear. Borson, who is not generous, cannot be an artist. The world will be at peace only when it is ruled by poets and philosophers. Listen to my weekly podcast, the puja bhajjo, on the iHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Come for the honesty, stay for the fire. Hello, I'm Roisin Conaty, and I'm hosting the Last Laugh, the Last One Laugh in podcast. This series I'll be joined by a load of the Last One Laugh in gang and some celebrity fans of the show to bring you all the big moments and gossip from series two of Last One Laugh in UK. We've got some absolutely amazing guests, including Diane Morgan, David Mitchell, Luz Sanders and Joe Wilkinson. You can listen now, on Audible, or wherever you get your podcasts. Warning, there will be loads of spoilers, so please make sure you've watched the current episode before listening.
