Video · 2026-07-24 · 1h 34m · 11 moments

The Fight Over Open Source AI, Anthropic's $1.5B Payout, NYC Socialists: Evictions = Violence?

✦ AI generated

GUEST David Friedberg GUEST David Sacks GUEST Chamath Palihapitiya GUEST David Sax GUEST David Freeberg

timeline · colored by role

Claim◆

Banning open-source AI models would be a tragic mistake that hurts America's position in the AI race, because you cannot punish American developers for Chinese distillation and American companies must be able to use everything in the public domain.

Sachs argues that banning open-source AI would backfire on America, as the rest of the world will still use Chinese open models, and American companies need access to all public-domain contributions.

transcript

David Sacks: I think it would be a tragic mistake if the government were to take action against the open source ecosystem. That would do nothing but hurt America's position in this AI race. It would backfire badly. And I think that the key point here is that regardless of what you think about distillation, you cannot punish American developers for it. So, you know, you can't say that American companies and American developers can't use Chinese contributions to the public domain. That's just cutting off our nose to spite our face.

supports · 3

Claim◆

Banning open-source models would be a tragic mistake that hurts America's position in the AI race.

Sax argues that banning open source would backfire badly, that American companies must be able to use everything in the public domain, and that Anthropic's push for a ban is regulatory capture from a company that doesn't need government protection.

transcript

David Sax: I think it would be a tragic mistake if the government were to take action against the open source ecosystem. That would do nothing but hurt America's position in this AI race. It would backfire badly. And I think that the key point here is that regardless of what you think about distillation, you cannot punish American developers for it. So, you know, you can't say that American companies and American developers can't use Chinese contributions to the public domain. That's just cutting off our nose to spite our face. I mean, obviously, American companies have to be able to use everything that's in the public domain because the rest of the world will be using those things. And let me just say, I've said for a while that Anthropic is guilty of regulatory capture, of attempts to seek government protection. This is a company that is the fastest growing tech company at scale in history. They started the year at 10 billion of ARR. They're now over 70 billion of ARR. This is not a company that needs government protection. This is not a company that is under threat from competitors or or whether they're Chinese or otherwise. And yet they have been very successful at trying to panic everybody into thinking that they need some sort of government protection. And the tell on this, the way that you know that this whole distillation thing is fake is because if stopping distillation was their primary objective, Anthropic would push to ban Chinese access to American models, not American access to Chinese models.

Claim

Anthropic is guilty of regulatory capture — they could stop distillation themselves by KYC-ing their customers, but they'd rather push for a ban on competitors than slow their growth.

Sacks argues that if distillation were truly a national security threat, Anthropic would block Chinese access to its own models at the source rather than seeking government protection against American open-source developers.

transcript

David Sacks: The tell on this, the way that you know that this whole distillation thing is fake is because if stopping distillation was their primary objective, Anthropic would push to ban Chinese access to American models, not American access to Chinese models. ... they're the ones in the best position to block it. If distillation, if industrial scale distillation is a national security threat, they're the ones who need to stop it because that is the place where distillation occurs. You have to stop it at the source. Once you allow Chinese companies to distill, the horse is out of the barn. ... the reality is that I think that what's happening here is that in their lust for growth, Anthropic has done a very poor job at stopping distillation.

Mechanism◆

Distillation is a common industry practice, not IP theft, and the real issue is that closed labs like Anthropic could stop it with KYC but choose not to because it would slow their growth.

Chamath and Freeberg explain that distillation—training on another model's outputs—is a standard practice across every industry, that Anthropic could stop it with KYC but won't, and that it's hypocritical for Anthropic to call it IP theft while they themselves train on all the world's output without permission.

transcript

Chamath Palihapitiya: Distillation is when you fire up a model and you ask it a question and you observe it and you take its output and you use that in training of your own model. Now multiply that behavior by tens of millions and what you exfiltrate is essentially trillions of questions and answers. And Sax is right. If you really care about distillation, you implement KYC. You force people to make an account, not just with a username and a password, but with some form of identification, maybe with a bounded credit card. There's all kinds of steps that you can take that would frankly slow things down in terms of revenue traction, but would solve the distillation problem on its face. So, that isn't really a thing. It's a bit of a red herring. The other thing on distillation is everybody has at some point distilled. The question is who is distilling from whom? And it looks like that funny meme where there's like nine Spider-Man all pointing at each other. That's what this is because Anthropic has distilled from all of these publishers. They just pay a $1.5 billion fine. Apparently, Open AI distilled from the New York Times. There's still an ongoing lawsuit. The Chinese labs have distilled from anthropic.

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Prediction

Government intervention to ban open-source AI would tank the stock market by forcing American enterprises to pay artificially inflated costs, destroying their competitiveness.

Chamath argues that if the government bans open source, American companies will be forced to pay 50-100x more for AI than global competitors, destroying their cost structure and causing market chaos.

transcript

Chamath Palihapitiya: If the United States government intervenes it will tank the stock market. Period. Not debatable. Now you can debate which companies get tanked and we can probably play that scenario out. But for example, if they said no more open source, American companies cannot use open source. Okay, let's just take at it from a stock perspective. Let's take an average normal company, Coca-Cola. Hey, Coca-Cola, you're trying to use AI to improve your business. You know what? You can only use these two options. And those things cost 50 to 100 times more than your other best alternative that you may use otherwise. That will eventually show up in your costs because AI is supposed to be this incredible thing that just kind of solves every problem and does everything for you. And so this incredibly important input into your cost model is now orders of magnitude multiples greater than your competitors that are outside the United States simply because you're in the United States. So what would the capital markets do? They're going to say, 'Wow, you have a crazy cost structure. This doesn't make sense. You're forced to absorb costs that aren't rational nor market driven.'

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Prediction

Open-source AI will diffuse economic value to everyone, just as open-source software did for the internet — preventing a future where a few companies capture all AI value.

Freeberg argues that just as open-source browsers and servers enabled the internet economy to flourish for millions of businesses, open-source AI will ensure AI value proliferates broadly rather than being captured by a handful of companies and their shareholders.

transcript

David Friedberg: If open-source AI takes off, then all the worries that Bernie Sanders and Elizabeth Warren and all the socialists are harping and larking about are not going to be the case anymore because you're not going to see all the value of AI acrue to two or three or four companies and their small group of billionaire shareholders. What will happen is AI proliferates and a million AI integrated enterprises all over the world will benefit. Everyone will benefit. The economy will grow, jobs will be created and AI becomes a power for good for creating an open economy.

supports · 1

Example

Open-source AI, like the open-source internet before it, will diffuse economic value to everyone rather than concentrating it in a few companies, and the real long game for China is to commoditize the knowledge economy so that their manufacturing and energy advantages become the dominant source of global value.

Freeberg argues that open-source AI will proliferate value across millions of enterprises just as the open-source internet did, and that China's strategy is to commoditize the knowledge economy so that their 8x electricity and 20x manufacturing capacity become the world's core dependencies.

transcript

David Freeberg: If open-source AI takes off, then all the worries that Bernie Sanders and Elizabeth Warren and all the socialists are harping and larking about are not going to be the case anymore because you're not going to see all the value of AI acrue to two or three or four companies and their small group of billionaire shareholders. What will happen is AI proliferates and a million AI integrated enterprises all over the world will benefit. Everyone will benefit. The economy will grow, jobs will be created and AI becomes a power for good for creating an open economy. So the I know that some people that are listening to this in the government and that are on the other side are going to say but but but Chinese open source versus American open source let it all proliferate. And frankly if the Chinese are violating copyrights, stealing software, go after them for that. Put in place trade sanctions. Do all the you can do to stop that from happening. But fundamentally open-source AI will transform the global economy and it will ensure that the economic value of AI will diffuse to everyone and not be held captive by a small number. Why the 1% that controls open source if they have it the oligarchs are going to get their clocks rung and we don't need to have a wealth tax. Chamathy we're going to add to this. ...If you think about the global economy of the last 50 years, the US has acrewed so much value by being at the core of the knowledge economy and effectively a services economy. And in that sense through the development of intellectual property of IP of knowledge and then the conversion of one bit to another bit we've been able to derive trillions of dollars in GDP. Meanwhile we outsourced manufacturing and created a sleeping giant in China where they have this incredible manufacturing capacity. And at the end of the day, if you think about the course of like human technology evolution and human prosperity, it's largely driven by our capacity to convert molecules from one form to another and use the least amount of energy possible to do that. That's that all of technology ultimately leads to that simple equation. Molecule conversion. Making that beautiful couch behind you at the lowest cost possible. Making materials, making semiconductors, making all this stuff. Everything in our world is driven by molecule conversion. So at the end of the day, if the knowledge economy and the services economy gets compressed, much like AI and open source AI in particular, effectively flattens that value because all of that value is now open source. It's free and it's simply a function of turning on a switch and running it. The value of the US and the western economy has been largely degraded. And what's left is the value of the molecule economy. The ability to convert molecules and use energy to do that. When you look at the juxtaposition of China versus the United States today, we have one terowatt of electricity production capacity in the US and they're on their way to having eight. We have about 10 billion square ft of manufacturing capacity. They have 200 billion square ft of manufacturing capacity. So they have 20x the manufacturing capacity, 8x the electricity production plus all of their other sources of energy. And I think that's the long game for China over a decade, two, three decade process is by compressing the knowledge economy and the services economy, commoditizing it completely, they are left holding all the value in the global economy because they can make stuff and they can make it cheaper than anyone because they have the most electricity production.

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Claim

Anthropic's $1.5 billion copyright settlement reveals their hypocrisy: they train on all creators' output without permission but call it IP theft when Chinese companies do the same to them.

Sax and Chamath argue that Anthropic's position is hypocritical—they believe they can train on everyone's content under fair use, but they call Chinese distillation of their models IP theft, and they have never publicly made that claim because it would poison their own fair use lawsuits.

transcript

David Sax: Let's just be very clear about what this judgment was and was not. So, okay, what Anthropic did is they pirated all these books from LibGen and they trained on them. The reason why they got in trouble is because they basically took stolen books. They didn't even pay for one copy of them. But if they had paid for just one copy of each book, they could not have been nailed for piracy. They would have been potentially under fair use, which I understand Jal is still being litigated in the courts, but that would have been their defense. So, the reason why they got nailed with this $1.5 billion judgment is they wouldn't even buy one copy. It is still Anthropic's position and it's OpenAI's position that they should be able to train on all these books under fair use if they buy one copy. And that issue has not been resolved yet. Now you should be able to see the total hypocrisy of their point of view relative to the previous issue which is they believe they should be able to train on every creator's output in the world. You know as long as I guess they bought one copy of it against the will of those creators whether those creators like it or not. They believe it is fair use to train their models and derive their own weights based on fair use. However, they say that the one type of content that you should never be able to train on is their output. That is currently their position. It's completely hypocritical.

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Fact

Anthropic's position on distillation is hypocritical because they and OpenAI train on all the world's output without creators' consent, yet condemn Chinese models doing the same to their outputs — and they never even called it IP theft in their own blog post.

Sacks highlights the hypocrisy: Anthropic and OpenAI argue they can train on all the world's content under fair use, but call it IP theft when Chinese models train on their outputs — a position they themselves won't publicly assert because it would undermine their own fair use lawsuits.

transcript

David Sacks: It is still Anthropic's position and it's OpenAI's position that they should be able to train on all these books under fair use if they buy one copy. And that issue has not been resolved yet. Now you should be able to see the total hypocrisy of their point of view relative to the previous issue which is they believe they should be able to train on every creator's output in the world. ... However, they say that the one type of content that you should never be able to train on is their output. That is currently their position. It's completely hypocritical. ... Anthropic did not claim even though they were trying to coin this new concept and brand this idea of industrial scale dissolation attacks. They did not have the hutzbah to claim that it was IP theft. Why? Because they maintain that it is their right to train their models on all the world's output even if the creators don't want them to. IP for we but not for thee.

Context

Calling evictions 'violence' and eroding private property rights through rent control policies is a foundational attack on liberty that leads to anarchy and tyranny.

Freeberg argues that attacks on private property rights, however well-intentioned, are the beginning of a slide into tyranny, citing John Quincy Adams. Sax adds that these policies hurt the working-class tenants who actually live in the buildings by preventing evictions of problematic tenants and disincentivizing landlords from maintaining properties.

transcript

David Freeberg: The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. ...Property must be secured or liberty cannot exist. ...Fundamental to the foundation of the United States of America was this idea of private property rights. Because if you think about where everyone that came to America was coming from, there were these tyrannical governments, monarchies or whatever, where some overlord or some cabal could decide at any point to take the things that you have. You had no private property rights as an individual. They could come in, they're like, 'That farm is my farm. You're actually a surf. I'm the lord. That thing is my thing. You have a right to use it because I vest you that right to use it. I am the all powerful. I am the tyrannical overseer of these lands.' And it was that stasis that drove so many to come to the United States and say we want a place where individuals, one person can say, I own something and no one can take it from me. Private property rights are the foundations of liberty in America. This idea that you can then claim acts of violence, that you can then claim circumstances of extraordinary, extravagant wealth and say to that individual, I now have a right, the government now has a right to take your private property ultimately leads to this tyrannical form. And it starts out as being an anarchctic because, and remember, anarchy is a temporary state. It's always in between one state and another. All anarchies end up in tyranny.

Context

Evictions are not violence — private property rights are the foundation of American liberty, and the socialist framing that property owners are evil to justify taking their property is the beginning of a transition toward tyranny.

Friedberg argues that the socialist movement's characterization of evictions as violence and landlords as evil is a repeat of the classic pattern: morally justify taking private property, which ultimately destroys the foundation of liberty and leads to tyranny.

transcript

David Friedberg: The moment the idea is admitted into society, that property is not as sacred as the laws of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence. ... fundamental to the foundation of the United States of America was this idea of private property rights. ... this idea that you can then claim acts of violence, that you can then claim circumstances of extraordinary, extravagant wealth and say to that individual, I now have a right, the government now has a right to take your private property ultimately leads to this tyrannical form. ... It always starts with this framing of moralistic intent. We are good. You are bad for the following reasons. You have committed violence against the people that live in your building. ... the first framing is that the private property owner is evil and that the private property owner has committed an act of injustice against those who don't have the private property and that is the justification for taking away their private property rights and it is the beginning of this transition towards a tyrannical system.

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Highlight slides

Banning open source backfires✦ from: Banning open-source models would be a tragic mistake that hurts America's position in the AI race.The Core Warning✦ from: Banning open-source AI models would be a tragic mistake that hurts America's position in the AI race, because you cannot punish American developers for Chinese distillation and American companies must be able to use everything in the public domain.Regulatory capture at work✦ from: Banning open-source models would be a tragic mistake that hurts America's position in the AI race.Why It Fails✦ from: Banning open-source AI models would be a tragic mistake that hurts America's position in the AI race, because you cannot punish American developers for Chinese distillation and American companies must be able to use everything in the public domain.The real test of distillation concerns✦ from: Banning open-source models would be a tragic mistake that hurts America's position in the AI race.Global Consequence✦ from: Banning open-source AI models would be a tragic mistake that hurts America's position in the AI race, because you cannot punish American developers for Chinese distillation and American companies must be able to use everything in the public domain.Distillation Is Standard Practice, Not IP Theft✦ from: Distillation is a common industry practice, not IP theft, and the real issue is that closed labs like Anthropic could stop it with KYC but choose not to because it would slow their growth.KYC Would Stop It — But That Would Slow Growth✦ from: Distillation is a common industry practice, not IP theft, and the real issue is that closed labs like Anthropic could stop it with KYC but choose not to because it would slow their growth.Everyone Distills from Everyone✦ from: Distillation is a common industry practice, not IP theft, and the real issue is that closed labs like Anthropic could stop it with KYC but choose not to because it would slow their growth.

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