Nike in Freefall, OpenAI Fires Spies, & G7 Dumps 100M Barrels | PBD #867

PBD Podcast

The hosts analyze Nike's historic stock decline and loss of marquee athlete Kylian Mbappé to On Cloud, attributing the slump to distribution missteps and cultural brand shifts. They then examine OpenAI firing three

Key takeaways

• Kylian Mbappé signed a $210 million, 10-year deal with On Cloud after Nike declined their proprietary foam technology years ago.
• Nike's market cap fell from $264 billion in late 2021 to roughly $150 billion due to direct-to-consumer overreach and alienating core customers.

Main topics

• Nike's brand decline and strategic missteps
• OpenAI espionage and AI safety researcher firings

Notable quotes

You have to re-engage with your customers. You have to re-recruit your people.

Conclusion

The episode highlights how legacy institutions must continuously adapt to

Transcript preview

Speaker 4 (0:01) Did you ever think you would make it? I feel I'm supposed to take sweet victory. I know this life meant for me. Adam, what's your point? Speaker 1 (0:11) The future looks bright. Speaker 4 (0:13) A Speaker 1 (0:13) handshake is better than anything I ever saw. It's right here. You are a one-of-one? Speaker 4 (0:19) My Speaker 1 (0:19) son's right there. Speaker 4 (0:20) I Speaker 1 (0:20) don't think I've ever said Speaker 4 (0:21) this before. Speaker 1 (0:26) Hey, how you guys doing? Hope you had a good weekend. I know we did. You know, what I have now is I have reminders for people to tell me there's baseball games. And I wish some people wouldn't remind me of one of the games that happened this weekend. But it is what it is. I mean, what could have Cole done? The guy pitches. You know, he does a good job. But hitters, you can't get one hit. So shout out to who was the pitcher's name? Rasmussen. Rasmussen. You've got to give him Speaker 4 (0:52) a Speaker 1 (0:52) shout out. Man, phenomenal job for what he did. With that, everybody kept telling me how special he is. I think he's 16 and four, but you can tell this guy's a dog. Speaker 5 (0:59) Yes, he is. And Speaker 1 (1:00) good for you. But we got more games coming up here. There's a video I watched. Obviously, we got a lot of stories to cover. But I watched an interview with Denzel Washington. Let me tell you. The lady asks him a question about what do you think about all the things that are going on in the world and America politically? His answer. It's something every Republican, Democrat, and Independent should listen to. And I'm going to share that with you here today because I think it's brilliant the way Denzel answered it. And I think if there's anybody that can break that down, it's Denzel. I'm a big fan of his, and I think it's something we ought to cover. Nike stock is... Dropping left and right. I mean, you saw the other day Mbappe. Mbappe just signed a 10-year contract not with Nike, not with Adidas, not with Puma, not with anybody but on cloud. What? Really? Mbappe signs a 10-year, $210 million contract with on cloud. I sat there. You know what I told the guys? I said, if I knew Mbappe was on the line, we would have made an offer like that to get Mbappe come to. I mean, eventually it's going to get to that point, but you're watching how the market is open right now with what they're doing. But yeah, he signed a $210 million contract on a major move. Mbappe leaves Nike for wanting to be the heart of its new football category at his prime. This is the all-time leading scorer in freaking World Cup ever, and the guy's now on cloud. So Nike's dropped. You know Nike's dropped their revenue in China nine quarters in a row? Their stock has plummeted like this. But nine quarters in a row, they're selling less and less and less and less in China. They made a few mistakes. So it's Speaker 7 (2:40) not Speaker 1 (2:40) just here in America. No, it's not. This is all over the place. It is. And by the way, it's impacting also Jordan's income. It's dropped 8%, something like that. He might have to start Speaker 6 (2:48) doing interviews again to play basketball again. He's going to Speaker 1 (2:50) be fine. He's worth $5 billion. But, you know, it is impacting. G7 decides to release 100 million barrels with everything that's going on. West Texas. Oil this morning, Tom told me it's 89.80. And Tom also whispered to us that with Newsom talking about how great a state is, the fourth biggest economy in the world or the fifth biggest economy in the world, diesel is also the highest in America. 8.30 right now in the state of California. If you're in California driving those old Mercedes diesels, you're paying 8.30. That's why my dad used to drive the old Mercedes diesels. You're paying 8.30. Then, aside from that, rumors. comes out from Russia. Hey, there may be a little virus spreading in Russia, cost this girl's life. She died because she touched the, you know, she was messing around there. Then they put 200 people and shut down Russia saying, don't worry about it. We have it under control. And the rest of the world is supposed to believe they have it under control. And so who knows? We'll get into that. I've never heard that story before. That's weird. I've never seen that movie. An article comes out, data showing that being gay is no longer as cool as it used to be six years ago. Told you. So it is not, I mean, you know. And by the way, this is coming direct from CDC. This is not even making fun. This is not trolling or rage baiting. It's CDC data showing it's declining. It's declining. And watch what happens when. Companies like Disney start realizing it's not a good idea, and then kids don't want to be that because naturally that's not how God created men and women to be naturally. Naturally, that's not how it was created. Last week we had Jacob Coxson on, the anthropic whistleblower, and the interview drops tomorrow, and we talked about Chinese spies in different anthropic and open AI organizations. OpenAI just fires three safety researchers accusing of sharing confidential company information. And Anthropic claims popular Chinese AI model has mythos, class hacking abilities. I wonder where they're getting it from. And if it's being passed down from folks that are working at Anthropic or OpenAI that are Chinese nationals, or if they're building it themselves. Who knows? The reality of it is, as a Chinese national, you can work for these AI agencies and companies. So maybe they're just passing on the information to others. Men are losing ground on the labor market. Here's why. It's an article from CNBC, which we'll get into. And another article by Zero Hitch talks about 11 million Americans. Speaker 1 (5:22) workers may need to change careers, switch careers by 2035. Tom Cruise comes out with a movie. What's the movie called, by the way? Digger? Digger. It's called Digger. $160 million climate propaganda film, Digger. You know what it makes opening weekend, Vinny? Can you tell us what it makes opening weekend? Speaker 5 (5:38) $8 million, Speaker 1 (5:40) the biggest flop of 2020. So let me put it to you this way. Imagine you put $1,600 in an investment that a guy is telling you, oh, we're going to do so well. And in the opening weekend where most of the money is made, you make $80. Not $80 on your $1,600. The $80 back of the $1,600 that you invested. That's what happened on the opening weekend. It's not a good place to be. Then a couple other stories I have here as well is how a son views his father at age 5, 10, 15, 20, 30, 40, and how it ends at the end. The relationship between a father and son. I want to share that with you. And then Putin tells Russian troops to abandon every standard for war that we have. Abandon it. Forget about it. Because of what Ukraine just did. Ukraine makes claims that it forced 250 Russian soldiers to surrender in a daring operation. Can you imagine to get 250 Russian... soldiers to, you know, surrender, and you're publicly telling this to the world. Imagine how Putin feels. What? And that story makes it back to Russia. You're not going to be too happy about that. But that's the other story we'll get into. And a couple of last stories we got. France, you know, all the, what do you call it, rights that's going on there. It's a little messy. Disney's layoffs. Disney's president comes out and says we have to lay off. It's extremely painful but necessary. I wonder why you had to do it. And then last but not least, first time. In history, Besson says that Iran no longer has oil revenue coming in. First time in history, Besson is saying Iran doesn't have any. Speaker 1 (7:23) revenue coming in right now from oil. And when Besson talks, Besson doesn't mess around. Besson's not a rage-baiting guy. Besson's not trying to play strategy with you. He's not trying to play the power plays. Trump gets those games. Besson doesn't play games. Besson's the guy, when he says that's happening, that's happening. And people better recognize when Besson's saying certain things. And to the Republican Party, there's a lot of things that are out there. There's four types of voters I want to tell you about today. Four types of voters. And the Republican Party is making mistakes because they're getting a lot of third type of voters. And the third type of voters sometimes are the worst type of voters to get. And I'll tell you about it today. Hopefully we'll get into it. With that being said, got some news for you guys. Obviously with these loafers that we have that, you know, in the market right now, anybody and everybody that's buying them, wearing them, the reviews are unbelievable. If you haven't yet picked one up for yourself or your spouse, your husband, or your son, these are the most comfortable loafers you'll wear. at a very reasonable price, made in the same facilities that they sell them for $800 to $2,000. Ours are $250. I want you to watch this clip here. Go for it. Speaker 4 (8:29) And made in Portugal. Their craftsmanship is a way of life. For those who move through life differently. From sunlit decks to nights that never need an occasion. Every detail is considered. Every step, effortless. Crafted from fine suede and built with builder technology. Designed to move with you. Because true luxury isn't about being noticed. It's about how you feel when you arrive. The FLB Icon Loafer. Made for the life you've earned. Speaker 1 (9:07) Can you do me a favor and go to FLB.com? If you go to Speaker 7 (9:09) FLB.com, go to FLB.com real quick. I'm going to show you something. Just click on the right now, the first shoes. Go back one page. Yeah, go back right there. There you go. Good workshop. Not that one. It's the loafers. If you can go to the loafers on the main page. There you go. Beautiful. Thank you. So size 8 is already sold out. We only have 9, 10, 11, 12, and 13. But I want you to go a little bit lower. Go a little bit lower, lower, lower, lower. If you compare Speaker 1 (9:32) our billionaire loafers with others. Whether it's Laura Piana, $11.50. Whether it's Hermes, $12.75. Or Todd's, $7.75. Or Brunello Cucinelli, $13.50. Ours are $2.50. And the quality of it, it's Italian suede, leather, craftsmanship, all the stuff that you get, but $2.50. And the reviews are incredible. Anybody that orders right now, just today, we're going to put the suede care kit in there as well with every single order. If you haven't yet ordered it, try it for yourself. You will fall in love with it. We have different colors for you to choose from, brown, navy, as well as stone. So go to FLB.com and place your order. With that being said, let's get right into it. Nike. Nike story comes out that a guy like Mbappe, who's the biggest face of soccer today, I don't know if there's a name bigger than him. The guy's won a World Cup at the age of 19. He almost won a second one. He almost went to the third one. All-time score in the World Cup. Nike loses Mbappe to On Cloud. Not to Puma, not to Adidas, but to Uncloud. How does Nike lose the biggest soccer star today to Uncloud? And you see how Nike's shares... In China, quarter after quarter after quarter has dropped. Greater China revenue dropped 22 % reported, 26 % currency neutral in the last quarter alone. And by the way, nine quarters in a row, which is a little over two years, Nike has lost their revenue in China nine quarters in a row. Nike lost ground to faster-moving competitors like Enclat, Adidas, Hoka, and others. At the same time, we talked about this last time, Tom, the fact that their wholesalers, they started becoming competitive with their wholesalers before they would sell it to wholesalers. Now Nike got cocky and said, we don't need wholesalers anymore. We can sell it on our own. Don't worry about it. You guys are lucky. And they're like, wait a minute. What are you talking about? You're cutting us. We've been the wholesaler for you. They cut them through. And then their digital is shrinking. Nike Direct fell 8%. Nike Brand Digital fell 13 % for fiscal. to Jordan Brand and Sports Bear Business. That's also weakened. I'm sure Michael's not too happy about that. Revenue growth has basically disappeared. Fiscal 2026 revenue was only $46.4 billion. Flat reported and down 2 % currency neutral. Turnaround has taken much longer than Wall Street. Hoped Elliott Hill return as CEO in 2024 and has made some changes, but nothing that's crazy right now. So, Tom. When you're looking at what's going on with them. By the way, let me give you some market cap numbers. At the end of 2021, Vinny, Nike's market cap was $264 billion. Jeez. Okay? $264 billion. Do you know what their market cap is today? $150 billion. I don't know if you heard what I just said. That's like you have $262,000 in the bank that's down to $50,000 in your mutual fund. That's like you went from having $2.6 million in your 401k. It's down to $50,000. It's down to half a million dollars. From Speaker 7 (12:37) $260 billion to $50 billion. Tom, what happened with Nike? Speaker 2 (12:40) So here's what happened with Nike. Nike did three things to itself. First of all, it decided that what it was seeing in all the direct-to-consumer stuff, it was going to go after. It goes after direct-to-consumer. And it did so on logic. And the logic was this. Malls are having more trouble with foot traffic. We've all read about malls. Of course. And so Nike was sitting. Remember, they're not dumb. They just made what turns out to be a bad decision. They're in the boardroom and saying, how hard should we bet on Foot Locker with all this mall stuff going away? Should we protect? Should we sell direct to consumer? Well, they had some strategic decisions to make, therefore, about distribution, but they fumbled it. They pissed people off. They didn't do it moderate. They didn't look at, I don't think they looked at data Speaker 8 (13:27) hard enough. I think they're more emotional about it, basically what I've seen. And by the way, Elliot Hill wasn't there. Elliot Hill, you know, was the CEO that got brought back after being gone for two years, right? He came out of retirement two years ago in 24. And so they're like, hey, who else came out of retirement? Major U.S. brand, major market cap problem. Howard Schultz came out of retirement at Starbucks. But then they went off and got Brian Nickel. And guess what? It's shifting. It's turning. The guy comes out of retirement. Howard says, we've got to fix this at Starbucks. And we need a guy to drive it. They go get Brian Nickel. And look at what they are. They're turning it around. So first, they have a distribution. The second thing they have is product. Product was getting kind of long in the tooth. And they completely missed. Did you know that the guys that created the on-cloud foot? brought their foam, and they took a garden hose, and they cut three segments and stuck it in there to make those openings Speaker 2 (14:24) that you see in the on-cloud sole. Do you know who they brought that to? Nike. You know what Nike said? No thanks. Speaker 8 (14:32) We're good. We're doing our own things with air flight and foam and everything. Don't need it. They do that. So they missed it. So what happens is Nike kind of has missed some of the innovation and stuff that was coming. And they've been relying on Air Jordan, which isn't a bad thing to rely on, by the way. No, Speaker 2 (14:49) of Speaker 8 (14:49) course. It's done well. And then they started getting into all of their retro shoes and helping the sneaker heads. Like, you know, the Air Max 95, any color, any way. And you have the Air Max 95 half sole, full sole. Speaker 8 (15:02) They have product that's kind of long in the tooth, and it didn't really take off. There's Air Max's right there. You know, I had pairs of those gray ones right there. Yep. Yep. Great, great, great, great shoe. So the second was distribution. And then the third was they ran into. Speaker 8 (15:19) The audience. They ran straight into the audience. And what they did, the audience wasn't ready for all the Nike stuff. They should have taken advice from Michael Jordan. Republicans buy sneakers too. And they went headlong into the Nike thing. It got really, really weird. And you know what? People didn't like it. Core people didn't. And they didn't like it at a time when alternatives were showing up in the market. All of that has come now to put them in position. And then Mbappe, as Pat already covered, says, you know, what brand do I want to bet on? A brand that's going to grow. And on cloud or on technology gave Mbappe the same pitch. I went and looked it up. Remember Nike? We'll build it around you. You won't be just another guy at Converse and you won't be a person at Adidas waiting for them to decide. You will be you and we will build this around you. And you remember the movie air and that Hollywood, you know, glamorize it a little bit. But one thing was truth. Sonny Bacaro and them sold it. And so now on just sold the same thing to my Boppe. Nike is yesterday. We're, we're cruising. We're growing Speaker 7 (16:30) the future technology. Vinny, what are you? And Speaker 5 (16:32) Tom, I want to ask you a question. Is there, is there an opportunity for them to get out of this? Number one. And then number two, is this a time, you know, when, when the stock is low to buy and let's not forget these guys embraced how many. controversial from Dylan Mulvaney to Colin Kaepernick to all that stuff, and they forgot about their core customer base, Tom, okay? Now they're cutting all the jobs. They're doing all this restructuring. They have to return to sports and athletes, okay? The formula, it's not, like, I still am shocked. This is one of the brands where you're like, there's no way, Pat, that Speaker 7 (17:05) this is going to go down. I'm going to tell you this, though. Last week was my last day. with PHP agencies. September 30th, I wrote my letter of resignation. We had agreed, nothing bad. It's just we already knew that a year in advance that this day was coming. It was an automatic resignation, not like a, where the non-compete starts on that day. And not that I'm trying to get back into space Speaker 1 (17:25) at all. But I wrote a long email. When I tell you a long email, like one of those emails where only the people that are involved in it, I got a lot of messages, a lot of calls from some people. who were calling me and telling me, hey, you know, I was emotional with this thing and I was emotional with that thing. But I talked about the threats and things to be careful with. So you're asking a very good question. Speaker 1 (17:47) I remember interviewing a guy that they wanted to hire as the potential CEO of the company. And I asked him, I said, in the interview, I said, what do you think about capitalism? Well, you know, it's got some good and it's got some bad and it's got some this. And what do you think about this? And what do you think about that? And I'm like, I don't know if it's going to work. And I told the guy, I said, I don't think it's going to work out or not. Why is that? We have a very strong culture. So if you come in and you don't speak that culture. you're going to lose some of our best guys in the company because culture is what kept people here. So who approved these hires? And how much control did you lose in hires to believe two of the greatest brands America has ever produced, Nike and Disney, made the same exact mistakes? What made you believe it's okay for them to go talk like this? Was it ESG? Was it too much DEI? Who were you trying to win over? You were trying to win over Colin Kaepernick? Who are you trying to win over? Dylan Mulvaney? Who? You know what OnCloud did? They went and hired somebody called Thierry Henry, who is one of the greatest players of all time in soccer. You know, you've always seen a video with him and Ronaldo and him and Zlatan did a great job with commentary. They brought him. So guess how sequencing works. OnCloud says, who does Mbappe admire? Mbappe admires Thierry Henry. So they went and brought him, and then he went and recruited who? Mbappe. Where is Thierry Henry from? Who did he play for? Where is Mbappe from? So it's a very good strategic move that they made. So, hey, if we want Mbappe, who do we get first? Sequencing. I think sometimes in businesses, you think your customers are going to be there forever because you won them once, and you're going to win them over. No, in business, there's this concept that we always talk about, is you have to re-engage with your customers. You have to re-recruit your people. You have to resell them the dream. You have to re-ignite your consumer base. You have to re-excite, re-enthuse everything. You're in the re-game. Yeah. So guess what? If you don't like the re-game, sell and leave. But if you want to stay in business and compete, guess what you need to do? You need to re-earn everyone's business over and over and over again. And Nike screwed up. They thought they were going to have the customers forever. They thought the retailers owed them shelf life forever. They thought the China thing was like, oh, printing money. China's going to be with us forever. They don't realize China sells your products first, copies your products, and gets rid of you, and then starts selling it, their own products. They thought they're going to have the Jordan brand forever, and it was going to be a blue chip stuff. They thought these players were always going to come to Nike, not go other places. And it's Speaker 6 (20:26) a Speaker 1 (20:26) mistake that you see happen regularly, over and over again, across the board with every industry. Adam, final thoughts before we move on. Yeah, there's Speaker 6 (20:32) a lot to say. You know, in sports, You have hills and mountains that you have to climb. Like, look at the Lakers for an example. So in the 80s, the Lakers were the best team on the planet, them and the Celtics. Then they had, and I don't want to upset you, Pat, 10 years of absolute nothingness. Speaker 7 (20:49) And then they had to reinvent themselves. Cedric Sabalis, Tony Smith, Cedric Eltree, Nick Van Axel. Not Speaker 6 (20:54) that bueno. Alvin Speaker 7 (20:55) Campbell. Speaker 6 (20:55) Not that bueno. Then they got Shaq and Kobe, and then they went on a run again. Yep. and then 10 years of nothingness, and then Kobe got Pau Gasol. The point is that the Lakers were the best, then they kind of sucked, and they became the best again. They had to reinvent themselves. You think that's going to Speaker 1 (21:09) happen to Nike again? I'm Speaker 6 (21:09) just saying, at the end of the day, you're going to have to reinvent yourself. They've had this magical 40-year run. Here's the Speaker 1 (21:15) question for you. Do you think going woke is a permanent loss of one year, two years of customers? Do you think it's a decade, or do you think it's a 20-year mistake? Speaker 6 (21:23) Honestly, once your brand loses its reputation, I don't know how long it's going to take to get back. Maybe never. Speaker 1 (21:29) Are you understanding the question I'm asking? Yeah. I'm asking a question, Tom, because sometimes you make a mistake and you ask yourself, is that a one-month, three-month mistake setback? Is that a three, 12 months, or is that permanent? Let me give Speaker 6 (21:41) you an example. Go ahead. Colin Kaepernick. When you think of Colin Kaepernick, what do you think of? Speaker 1 (21:45) Neeling. Victimhood. Sure. Neeling. Race baiting. Not Speaker 6 (21:48) respecting the flag. Who embraced them wholeheartedly? Speaker 7 (21:50) Nike did. Speaker 6 (21:51) I think of Nike. $40 million. So to me, when I think of Nike, I no longer just think of MJ. They had the best athletes in the world. MJ, Kobe. What are you saying? Serena. Is Speaker 1 (22:02) it Speaker 6 (22:02) permanent? Tiger. Now I think of Nike, I think of Colin Kaepernick, and they're trying to reinvent themselves with the WNBA. Kaitlyn Clark, Asia Wilson, Sabrina Inesco. I can't believe I even know all these names. Where's the big name? I guess here's my number one question. Where's the next MJ? You Speaker 1 (22:20) didn't answer my question. You didn't answer the question. The question is how Speaker 6 (22:23) long does this last? I did answer the Speaker 7 (22:24) question. Speaker 6 (22:24) I said it could potentially be forever. Speaker 7 (22:28) It's not a one or two year thing. So to me, there are certain mistakes that you Speaker 1 (22:32) make that are fatal and never comes back. And sometimes when you make those mistakes, there are customers that every business owner is willing to lose. Because if you're... Speaker 1 (22:43) If you get to a point where you're like, well, like imagine if we said, do we really want to lose the socialist listenership to the podcast? Speaker 6 (22:52) Think about what I just said right now. Speaker 1 (22:53) Do we really, Speaker 7 (22:54) do we not want to have the communists listen to our podcast? Do we not want to have these guys that are sympathizers of terrorists listen to our podcast? We want those guys, don't we? No, sometimes. No, we're good. But there's a difference between messaging. We're in a different business. We're in a business of opinion, right? We're giving our opinion. This business is not the business of opinion. This isn't a business of just do it. This isn't a business of eliminating excuses. They got into the opinion business. Once they got into the opinion business, Speaker 1 (23:22) you permanently lose some of those people. It's very simple. So that's what could happen here. Tom said Republicans buy sneakers too. Let me get to the next story. Speaker 6 (23:30) I'm going to get to Speaker 1 (23:31) the next story. Next story I want to get into is what happened with AI spies that are getting into open AI and anthropic. And this goes with the conversation I had last week with Jacob Cox. the anthropic whistleblower that came out and said, hey, you know, Tesla cannot have any Chinese nationals work there, but anthropic and open AI can. And I started thinking, what do you mean by that? This interview drops tomorrow. So watch what happens a couple of days later in a story. A couple of days later, open AI fires three safety researchers accused of sharing confidential company information. What? Three researchers have been fired from OpenAI after allegedly sharing confidential company information with a third-party AI safety organization, sources told Wall Street Journal. The three worked on the company's safety team. We have parted ways with three individuals for violating our policies on accessing and handling sensitive company information. An OpenAI spokesperson said, our investigation confirmed that these individuals mishandled sensitive information outside established company procedures, violating our policies and breaking the trust essential to our work. The firing came. As OpenAI and other major AI companies have disclosed incidents involved AI models engaging in unexpected behavior or autonomously accessing other company systems, OpenAI has outlined three, six instances of what it's called misaligned behavior, including models creating self-generated instructions, concealing mistakes in task summaries, fabricating information using exposed AI keys, and engaging in unsanctioned. Communication between agents. OpenAI safety leaders also decided not to release its new AI model, GPT-6.1 Astra, due to safety concerns for anything regarding safety and alignment. There's a tradeoff. OpenAI's head of safety system said the model didn't quite meet the bar. So, Tom, how much more of these types of stories do you think we're Speaker 2 (25:21) going Speaker 1 (25:21) to be hearing moving forward? Speaker 2 (25:23) We're going to hear a lot of them, and I'll tell you why we're going to hear a lot of them. Because in related news, just two days before that, They say, Anthropic says, hey, we're looking at an IPO the week of November 9th. As early as the week of November 9th, as long as we can get coverage at $2 trillion in valuation. So why are they saying both of these things at the same time? And remember, they put the S-1 was a confidential S-1 that they put to SEC.gov. So we can't go look at it the way we could go to SEC.gov and we could read the S-1s for companies that are going public. We can't. Well, Anthropic says, no, no, no. We think we could go out as early as November 9th. Two trillion dollar valuation. Well, if that's what they're trying to do, then they have to clear the deck, Pat, of all this PR. And so what better way to clear the deck of the PR? I know we came out and said we worried about this. I know we were talking about, you know, hugging face. I know we were talking about this. We fired three of the bastards. Ha ha. We're taking action. I think it's that. I think they're trying to, I'm being a little dramatic, but I think what they're really trying to say is, hey, we take safety seriously. This is a way of saying Speaker 7 (26:34) we're responsible. It's not like anything crazy happened. It's for investors to say, oh, wow, look how responsible Speaker 2 (26:39) OpenAI is. Correct. And to pull back any congressional, here's a bad word, hearings that might be going on when you're trying to go to Wall Street because you can't do both. People are going to say, wait, wait, wait, we're not going public if you're in the middle of congressional hearings. all going for 60 days on AI safety. You know, sorry, dude, you're not going to do that. No one will let them. The SEC will come out and say, stop. We're investigating all these safety things. You're not going out. Remember, the SEC has to allow it. So I think it's both. I think they're trying to look responsible, as you say. Speaker 7 (27:11) Adam, Speaker 1 (27:12) where are you Speaker 7 (27:12) at with this one? Speaker 6 (27:13) Look, I haven't followed this exact story, but this isn't like this one person they fired, three people they fired. What's the basis of the story? Were they working together, these three of these people, Tom? Were they independent? I'm trying to go deeper on this story, but then I have an overall... Well, let me do this while you're thinking that. Speaker 1 (27:31) I didn't see bio. Let me go into this. So what I'm concerned about is the following. I want to know how often this has happened. with Chinese nationals because you have to like... Were these all Chinese nationals? Speaker 7 (27:43) What does it mean? Speaker 1 (27:44) No, not Speaker 7 (27:44) necessarily. What Speaker 1 (27:45) does it mean when people are sharing sensitive information? They're spying. Speaker 7 (27:51) What Speaker 1 (27:51) does that mean? It's espionage. Okay, and who are you sharing it with? We didn't really know who they're sharing it with. Like, where did it go? When I go and I think about things that concern me, here's what I think about. There's a few different people. So think about... Google. A person named Lin Wei Leon Ding at Google, a PRC national in Google AI engineers, prosecutors said he stole more than 2,000 pages of confidential AI material involving Google's TPU-GPU supercomputing infrastructure while secretly affiliated with two China-based AI companies. So in January 2026, he was convicted. on seven counts of economic espionage and seven counts of trade secret theft for the benefit of the PRC. Can you look up this name, please? Lin Wei Ding, Google. L-I-N-W-E-I, then D-I-N-G, Google. Yeah, this one right here. This just happened, just so you know. This just happened a few months ago. You got another one with Apple. Xiaolong Zhang, obviously you don't have to ask if these guys are from Afghanistan or U.S. or Brazil. It's very obvious. Former Apple self-driving car engineer. He was accused of downloading autonomous driving trade secrets before planning to work for Chinese EV company, Zhepeng, and arrested while trying to board a flight to China. He later pleaded guilty to trade secret theft. By the way, just so you know, and this is recent. Then I'll give you another one. Wei Bao Wang. Where do you think he's from? I'll let you guess. I'm going to keep going. Australia. South Speaker 6 (29:25) Central. Speaker 1 (29:27) Former Apple autonomous system engineer. Prosecutors allege he took Apple source code and technical material after accepting a job. You're going to see where I'm going with this, where my concern is. A job with the U.S. subsidiary of a PRC-headquartered autonomous driving company. By the way, you know who got involved in this? The FBI got involved in this. This remains an allegation, not a conviction with this one. Hao Zhang, where do you think that guy is from? Skyworks, a PRC citizen who worked at Skyworks. Prosecutors proved he and collaborators stole wireless semiconductor trade secrets and used them to build a competing operation tied to Tian University. And DOJ described an instrumental... As an instrumental of Chinese government, he was convicted of economic espionage and trade secret theft. I'll give you one other one here. Weipeng, Avago Technologies, another PRC. By the way, there's two Weipeng apparently. Two Weipengs? DOJ alleged that he and Cenk took FBAR semiconductor technology and shared it with conspirators. Again, a China-based venture. He was charged in the same economic espionage. Okay. So you know some of the people on MAGA or Republicans that are not happy with Trump in what area? Speaker 7 (30:39) The one area where he's like, yeah, we want to have 600,000 Chinese students come here and go to our universities. Speaker 7 (30:46) And China would love for that to happen. Why would they love to happen? You think they're just coming here to learn our Speaker 1 (30:52) stuff and take you back to China? Or do you think those people that are coming here are true believers of China? They want to come and get the intel. see what we're doing, move into our companies. You have to be very, very careful with how China runs. The U.S. model is you have two terms when you become president. You come in, if you're doing a good job, you get reelected. If not, sometimes you win, second time the other side cheats, then you come back in. Sometimes these types of things happen, right? But if Speaker 7 (31:19) you think for a second China's not thinking long-term of coming in and stealing what we have and sending it back to them, their loyalty is not to U.S. Their loyalty is back to China. They're not in America because they love America and they love the company they're working for. They're here to share the intel back with them. So my concern is, do you make a law in America that Chinese nationals cannot work for these AI companies? Is Speaker 6 (31:46) it the law that does it, or is Speaker 7 (31:48) this the Speaker 6 (31:48) company itself that has to do Speaker 7 (31:49) this? Speaker 1 (31:50) But you can't wait for the company because the company is going to want engineers. So part of this goes into, do you talk? H-1B visa? Do you go into a lot of Indians are coming here? And JD Vance just kind of talked about this recently. I don't know if you saw that over the weekend. These are true, real concerns that people are thinking about. Speaker 6 (32:06) You know, one of the things you taught me, you said, listen, here's how I do business. You said, I hire slow, but I fire fast. So to me, I mean, would you break that down? There's a very strict vetting process if you're going to let somebody into your world. Why don't American companies operate like that, especially? In the light of this China situation or whoever these safety researchers are, you just read how many Chinese names that did this. I mean, I feel like the vetting process needs to be completely profound in this situation. How would you go about this as a publicly traded company, let's say, or even private Speaker 7 (32:42) company? So remember, not everything is a deal. Not everything is about making deals. The president is a dealmaker, right? There are some things that there are no deals. It's Speaker 1 (32:52) not on the table. We're not even, you give me, like today, this morning, I'm talking to one of our guys, Dan, 18 Delta, and we're driving, we're having a conversation about what happened to France. I said, let me ask you a question. If you had a choice between being a billionaire or having been in Delta Force for 10 years, which one do you choose? He says, it's not even close. I said, what do you mean? He says, oh, it's not even Speaker 7 (33:15) close. I would choose Delta. Really? Oh, he says it's not. So you see, that's core values to this human being. I respect that because money can't buy the dream that he had in place. There are certain things in America that should not be for sale to anybody. And this is one of those things that shouldn't be for sale. For no matter how much money you want to give me, something shouldn't be for sale. Speaker 6 (33:40) It's like how many social media platforms that are American-owned are based in China? None. None. But how many are here? Speaker 1 (33:47) Exactly. So, Speaker 6 (33:48) you know, it's kind of like the rules of the road. There's a binary situation going on here. How many American workers are working in China right now? Speaker 5 (33:56) Very few probably. Very, very few. And if you don't think that they have the Speaker 1 (33:58) whole map. Speaker 5 (33:58) Some guy named Rick just Speaker 1 (34:00) working at Huawei. I want to see what Tom's going to say about this. Tom, what would you say about this? Speaker 2 (34:03) So take a look at this graphic. I don't know if the audience can see this. This is the self-reforcing visa wheel. Now, why does it happen? A H-1B visa holder, your spouse is allowed to get an H-4. If your spouse has an H-4, then they could form an LLC, and they form staffing firms. The staffing firms reach out and help other people get H-1Bs. Why is this happening? Because we've created a market for it. Why do we create a market for it? Because... Is California liberal or conservative? Huh? Liberal. Not Speaker 6 (34:33) even Speaker 2 (34:33) close. The people that are running technology companies, are they largely liberal or conservative? Liberal. Liberal. They're in favor of bringing foreign workers over. And by the way... At the end of it, they