It seems as though every day we wake up to the market going down
and a new viral article that's being passed around speaking
doomsday of SAS companies and the world as we know it.
Now, we've seen this happen before with articles like Big
things are happening, right? There's ones about big changes
and disruptions in technology companies.
We've also seen ones that are essentially the doom of SAS
companies. That's caused a lot of companies
that we know and are invested in to go down dramatically every
single day. And there's more and more of
these articles again, every single day.
It seems like there's just two or three more of them that are
going viral around X, around social circles, around
investment circles. But the one that was shared over
the weekend is perhaps the final boss.
It's like a video game. You're getting to the end,
You've gotten through all the smaller bosses, all the bigger
challenges and hurdles along the way, and now we're facing the
final boss. This is Citrone Research.
Why is Citrone Research the final boss?
Well, because of out of all the hundreds and thousands of
different sub stacks out there, out of all the ones that you can
read, all the different financial authors giving takes
and thesises, there's one that's listened to and paid attention
to more than any others. That is Citrone, the top selling
financial sub stack in the world.
It's based on macro. It's based on large events, big
takes. Investors listen to it.
Hedge fund managers listen to it.
Thousands of investors subscribe to this and pay good money to
hear their takes. It's so influential that their
takes routinely land on Bloomberg.
They land on the Wall Street Journal, And what they wrote
over the weekend is no exception.
It is now on the front page of the Wall Street Journal.
This viral doomsday report lays bare Wall Street's deep anxiety
about the AI future. Citronee Research thought
experiment rattles investors already wary of tech
disruptions. That's right.
No, this is not a article that's on some obscure forms on the
Internet. This is mainstream.
This is all over CNBC, Bloomberg, the Wall Street
Journal, the Financial Times. Citrone's article went hyper
viral and it caused many of the most powerful biggest companies
in the world their stocks to get crushed.
DoorDash is down like 7% on the day.
American Express is down big 3%, plus we have Blackstone going
down. We have Visa and MasterCard, two
companies that you think are a little bit more resilient.
Yeah, those ones went down as well.
This article is impacting investors thoughts.
It's impacting their decisions. Investors are human and they're
selling as a result of this. Now, I didn't think I was going
to spend all of 2026 reacting to viral articles online, but here
we are. This is what we're doing, and
this is what I'm going to be doing in this episode.
We'll be going over the thesis of Citronee, why it is so
engrossing, why investors have so much anxiety about what
they're talking about. We'll be reviewing their
arguments, and importantly, I'll be tearing some of them apart
because frankly, some of them are ridiculous.
They deserve to be torn apart. Now, it's no blame of Citronee.
They say that this is all hypothetical, but I think even a
hypothetical argument can have severe flaws, and I'll be going
over many of them in this article.
Today I'll be going through in detail some of the core thesises
that are causing these stocks to sell off and addressing what I
believe are some of the biggest logical leaps and mistakes in
this article. This will be a fun episode.
We do have some other news we'll be touching on today.
For example, Warner Brothers Discovery received a revised
offer from Paramount. The higher bid, we don't know
what it is, but we're now in this limbo where we're waiting
for Netflix's next move. I'll be giving some thoughts on
that. We have Meta agreeing to buy
$100 billion more worth of chips from AMD, and we have the fail
of the week, which in this case is a DJI robot vacuum that had
security so poor that this man remotely accessed thousands of
them. This guy accidentally hacked
like 7000 robots. We'll be going over that as
well. Now, if you're not paying
attention to every detail, you're not listening to every
little thing going on. You may have missed what caused
this most recent panic, what caused many of the biggest
companies in the world to sell off 3 to 8% in the past day, and
that was this viral article. This was the cause.
Many people believe that Substack and these articles
can't 'cause this type of effect.
They can, especially when they have the distribution of a
Citronee Research article. They are one of the biggest, if
not the biggest publisher in the financial world on an
independent basis. The article that they published
is called The 2028, 2028 Global Intelligence Crisis, A Thought
Exercise in Financial History from the future.
Now they preface this and they say what follows is a scenario.
It's not a prediction. So they give a bit of a
disclaimer and say they're just modeling out a scenario.
Now, like most disclaimers, this has been ignored because many
people were fearful as a result of this.
And I'll note that this scenario they're modelling out also does
benefit them personally. See, Citrone is not just someone
that publishes takes and thoughts on the market, but
they're also investors and they are bearish on many of the
companies that they're sharing these scenarios on.
They have short positions on them.
We are constantly sort of, you know, turning our book.
And then we certainly had shorts in some of these businesses.
We generally have a set of shorts out against businesses
that we think are going to be disrupted by AI.
He mentions right away that we are short many of the businesses
that we mention in this article. So in a way, this is an article
representing their view, which there's nothing wrong with that.
I have bullish takes on companies that I'm invested in
as well. The difference is I'm not able
to move the market in the same way that Citrone is, so just
keep that in mind as you're reading this that they are short
sellers on many of these companies.
We won't go over the whole thing, but I want to summarize
what I believe are some of the biggest points of this article.
In a couple of years we'll move past vibe coding to agentic
technology, and agentic technology will cause what they
they say is when friction goes to zero.
And again, this is a future hypothetical.
They say by early 2027, LLM usage had become default.
People are using AI agents who didn't even know what an AI
agent was in the same way people who had never learned of cloud
computing was using streaming services.
They thought of it in the same way that you think of auto
complete or spell check. Just a thing that they just did
now. The next chain was already
breaking intermediation. Over the past 50 years, the US
economy built a giant rent extraction layer on top of human
limitations. Things take time, patience runs
out, brand familiarity substitutes for diligence, and
most people are willing to accept a bad price to avoid more
clicks. Trillions of dollars of
enterprise value depends on those constraints persisting.
It started out simple enough. Agents removed friction.
So they explore the consequences of agents removing friction.
Subscriptions and memberships that passively renew despite
months of disuse. Introductory pricing that
sneakily doubled after the trial period.
Each one was rebranded as a hostage situation that agents
could negotiate. The average customer lifetime
value, the metric that enterprise subscription economy
was built on, distinctly declined.
Consumer agents begin to change how nearly all consumer
transactions work. Humans don't really have the
time to price match across 5 competing platforms before
buying a box of protein bars, but machines do.
So part of their thesis is when you're buying something online,
you're just going to buy like the first thing that you see
because you don't have time to go look everywhere to save a
dollar. But if you can do that on an
agent, if you can say, hey, I want to buy this and it can go
and price match 50 different websites, you're going to let
the agent do that. The agent does have the time to
make those, to make those comparisons.
Travel booking platforms were an early casualty because they were
the simplest. By Q 4/20/26, our agents could
assemble a complete itinerary, flights, hotels, transport,
loyal loyalty optimization, budget constraints, refunds
faster and cheaper than any platform.
Insurance renewals where the entire renewal model depended on
policyholder inertia were reformed.
Agents that reshop coverage annually dismantled the 15 to
20% premiums that insurers earned from passive renewals.
Financial advice, tax prep, routine legal work, any category
where the service providers value proposition was ultimately
quote I will navigate. Complexity that you find tedious
was disrupted as agents found nothing tedious.
Even places we thought insulated by the human value of
relationships proved fragile. Real Estate, where buyers had
tolerated 5 to 6% commissions for decades because of
information asymmetry between agents and consumers, crumbled
once the AI agents equipped with MLS access and decades of
transaction data could replicate the knowledge base instantly.
So now they're saying that the real estate market is going to
be disrupted because the real estates, that intermediary layer
will be taken out by agents. This is all just fiction.
They're, they're making this up, they're exploring this
hypothetical. So this hasn't happened.
They're saying that real estate agents are, are getting
disintermediated by agents and that's just all in the future.
That's going to happen in the future is what they're
predicting here. We had overestimated the value
of, quote, human relationships. Turns out that a lot of what
people call relationships was simply friction with a friendly
face. That was just the start of the
disruption for the intermediation layer.
Successful companies had spent billions to effectively exploit
quirks of consumer behavior and human psychology that didn't
matter anymore. Machines optimized for price and
fit that do not care about your favorite app or your website
that you've habitually been opening for the last four years
nor fill the pole of a well designed checkpoint out
experience. They don't get tired or accept
the easiest option by default to quote.
I always just order from here that destroyed a particular
kinds of motes habitual intermediation.
OK, so that sets the premise of their main core thesis here.
Their core thesis is that agents remove friction.
They bring friction down to 0. So any type of company or
product that specializes in removing friction at a price,
that company will be essentially useless.
It won't need to exist anymore because agents will do that
already and not charge you in the process.
And this is where the thesis goes from what I think is an
intriguing premise to offering some of the worst examples you
could offer, logically flawed ones.
For example, one of the ones that they point out that will be
displaced or disintermediated is DoorDash.
And this was a stock that was hit hard yesterday.
DoorDash was the poster child of a Moat being disrupted by agents
and their removal of friction. Now DoorDash stock since this
released is down about 6%. So let's go ahead and hear their
argument of why DoorDash is going to be doomed when it comes
to agents coding. Agents had collapsed the barrier
to entry for launching a delivery app.
So now you can, you can code a delivery app very quickly.
They say a competent developer could deploy A functional
competitor in weeks and dozens did enticing drivers away from
DoorDash and Uber Eats by passing 90 to 95% of the
delivery fee through to the driver.
So again, this is hypothetical. This hasn't happened.
But they're saying now that vibe coding allows you to easily code
things like delivery applications, which is true.
Make it easier to code things. You can basically make a
competent functioning, competent competitor in weeks to DoorDash
and Uber Eats. Then those competent competitors
cannot have the greed that DoorDash has.
Instead they can just pass the savings along to the driver.
Multi app dashboards let gig workers track incoming jobs from
20 or 30 different platforms at once, eliminating the lock in
that the incumbents depended upon.
The market fragmented overnight and margins compressed to nearly
nothing. Agents accelerated both sides of
the destruction. They enabled the competitors and
they used them. The DoorDash Mote was literally
quote you're hungry, you're lazy.
This is the app on your home screen, and Agents doesn't.
Agents don't have a home screen. It checks DoorDash.
It checks Uber Eats, the restaurant's own website, and 20
new vibe coded alternatives so that it can pick the lowest fee
and the fastest delivery time. Habitual app loyalty, the entire
basis of the business model, simply didn't exist for the
machine. This was oddly poetic as perhaps
the only example in this entire saga of agents doing a favor for
the soon to be replaced displaced white collar workers
when they ended up as delivery drivers.
So there's the argument with DoorDash.
It's basically that DoorDash and Uber Eats contain high margins.
They charge a lot when you order from them.
So an agent could come along and it can shop.
It can shop across all the different food delivery
networks. And since you can vibe code a
new app in just a couple of weeks, there's going to be a lot
of them, 20 to 30 of them since the agent, which is like a
ChatGPT or Gemini since it can shop for you.
Frictionless and it can go to all these different potential
delivery companies or just the the website of the restaurant
itself. It can find the lowest prices,
which will naturally compress the margins to zero.
And that seems good. At first glance, it seems a
little bit convincing until you dive in a little bit deeper and
highlight some of the big problems with this type of
argument. One of the problems with this
thought process is if you just put yourself in the customer's
position here. Let's say that you're you're
using Chachi BT and you're getting hungry.
So you notice that you're hungry.
In that case, you notice that you're hungry, but you don't
know what you're going to eat. So you could tell Chachi BT I'm
hungry and it can say, hey, you've liked these type of
foods, would you like to order them again?
And you go, Nah, what are some other foods out there?
And then it has to assemble and create a list of foods that you
can order. It has to bring in all the
images and then you have to say, hey, what about you're typing
this in again, You're typing all this in.
What about restaurants that are within 30 minutes?
Because I want to get it fast. Then it has to revise and give
you another answer. Restaurants within 30 minutes.
But then you want to see the reviews of all those restaurants
to know which ones are are good and which ones aren't.
So you want 4 star reviews and up.
So you have to type that in. Now order them by by reviews.
OK, so then you're on the restaurant level.
You're looking at reviews of it. And let's say that you finally
narrow down which restaurant you want to order from.
OK, You say, hey, Chachi PT, I want to order from this
restaurant, but I don't know exactly what they have or what
the prices are. Can you tell me that?
And then it has to assemble a list of the the menu from that
restaurant of all the different items, what the feature is, what
the daily special is. OK, so you, you have that
assembled by Chachi PT Now and again you're having Chachi PT
build this menu on the fly as you continually type in.
Now you're on like the 6th message now and you say, OK, I
want to get a #3 I want to get that meal.
But there's lots of customizations in every single
meal from every single restaurant.
For example, if you order from Five Guys, do you want the small
burger or the normal one? Do you want the double Patty or
the one with cheese? Do you want the one with bacon?
Do you want it to have Mayo, ketchup?
Do you want to have onions on it?
Do you want to have Pickles on it?
There are hundreds of permutations and customizations
within a single order. Literally hundreds of them in
some cases. Chick-fil-A, just that
restaurant has hundreds of different customizations on a
single order. All the all the way to what type
of sauce you want to get. Are you going to prompt Chachi
BT all the way through this process?
By the time you're done, your fingers, your thumbs will be
sore from the amount of typing you do.
You'll have to gone through so many different customization
layers and the idea that ChatGPT will just know.
That's another thing that a lot of people argue here.
They'll say, well, you've talked to ChatGPT so much, it'll know
you inside and out. It'll know you better than
yourself. I was a top 1% user of ChatGPT
and Gemini in 2025, top 1%. And I promise you, it has no
clue what I want to eat tonight. It has no idea what what
restaurant, what menu, what items, because it changes all
the time. Food preferences change all the
time. And even though there may be
something that you order on a routine basis, maybe you get the
same Starbucks drink every morning.
When it comes to food delivery, this is something that's hyper
specialized. Thousands of different
customizations and orders, and of course different restaurants
that are open different hours. Every single time that you would
have to order through an agent, you'd have to rebuild a menu
prompted to death because you're doing prompt by prompt to
rebuild all these things to get to the point of actually
ordering your food. Now when we're talking about
friction, in this case, does the agent actually save you on
friction? Compare it to just opening up
the DoorDash app. The DoorDash app is already
hyper specialized in food delivery.
You open it up, it shows you all the restaurants that you
recently ordered from, all your favorite meals from all of them,
all the toggles and switches like 30 minute distances or
below. You have everything perfectly
tested in an AB tested user interface.
You don't have to prompt anything, but if you want to,
DoorDash has an AI search engine built into it as well.
So you have that option available to you if you want.
But you don't have to. And in most cases, people won't
because they rather just tap a couple images on the screen, hit
confirm order, then endlessly prompt an agent.
That's an open text interface. What you lose with agentic
ordering is an interface. You lose the ability to see the
food. People don't know exactly what
they want to eat. And any server will tell you
that they want to see images, they want to browse.
They want to see things that are brought up.
When you're looking at one restaurant, maybe there's some
food that's similar to an A different 1.
You want to see different colors and images.
That's what crates hunger. And that's when you say, oh,
that looks really appetizing and agents don't solve that problem.
So inadvertently by saying the agents are going to remove
friction by bypassing DoorDash and Uber Eats app, they're
actually creating more friction. There's no way around it.
It is more difficult to get to the point of ordering through an
agent than it is to just go to the app that's already hyper
specialized in the specific task.
A comparison that I would make is, you know how Amazon has that
ability to order through Alexa? Like you can have the speaker
there and you can say, hey, Alexa, get me some more Tide
Pods. Everybody has the ability to do
that. You have open-ended ordering on
Alexa devices, but how much has that really taken off?
Amazon doesn't really give the numbers because it's not that
popular. Sure, there's cases that you can
cite where people have done it and maybe it's actually growing
really fast, but in the whole, it's not popular at all.
And the reason why is because people don't just want to talk
to a, a bot. They don't want to talk to
something. They want to visually see
precisely what their order is, how much it costs.
They want to see it visually in front of them.
So most people, the vast majority, order through
Amazon.com. They go to the website, they put
in their order, they see it in the checkout, they know exactly
what they're ordering and they complete the process.
They don't like ordering through a speaker, just like most people
won't like ordering their food through an AI that has endless
prompting, endless texting. And that's not the only problem
with this one examle, which is DoorDash.
There are more critical flaws with this Tye of thought rocess.
One of them is the simple fact that when you're ordering food,
your goal is not to get the lowest price.
Now from a tech investor perspective, from Citronee, they
probably look at it as the only thing the agent really cares
about is getting the lowest price.
So you put your order in for a McDonald's burger and fries, and
the agent goes and finds 50 different delivery platforms
that can pick up from McDonald's and it selects the one that is
the lowest price. Maybe it's $0.50 lower than
DoorDash. So now your order, instead of
being routed to DoorDash, is now routed to some third party
smaller company that's offering a cheaper take rate than
DoorDash by $0.50. You save $0.50.
But in the process you got your order routed to a different
company, and that company doesn't have as good of
logistics. It's not as saturated with
drivers, so it takes longer to get your order.
Your order arrives 10 minutes later than it normally would.
Your food's soggy and cold. All of a sudden you're
frustrated at the agent for routing your order to some third
party delivery service that doesn't have its act together.
So you tell the agent please only route it to big mainstream
logistics companies like DoorDash and Uber.
All of a sudden the whole thesis of fractional cost going down is
gone and the biggest companies continue to succeed.
The truth is, people ordering from DoorDash and Uber do not
care solely about fees. If they cared only about the
fees and getting the lowest price, they wouldn't be ordering
food delivery. What they care about is a
combination of price as well as service and quality and
consistency and being able to get refunds and being taken care
of if there's any issues. And an agent destroys nearly all
of that. Consider the fact that part of
the reason that I can get refunds on DoorDash, part of the
reason they're so eager to refund me if I ever have a
problem is because DoorDash knows that I'm a a good
customer. I do lots of orders with them.
Most of them are good. So when something goes wrong,
they can look at my history, they can say, hey, most of the
orders from this guy are good. So when something goes wrong, we
should give him a full refund because he's overall a good
customer. We want to keep him happy.
Having a healthy order backlog is important to a customer.
It allows you more leverage as a customer.
If an agent routes your orders to 50 different companies, you
have no outstanding order backlog and therefore makes it
harder to be taken care of as a customer.
Because if you only have one random order from some random
place, then you're not going to be able to get a refund nearly
as easily as if you have 50 orders from them.
This destroys the customer relationship with the company,
their order history. You also have the problem of
memberships. Both DoorDash and Uber Eats have
extensive memberships. We have Dashpass and we have
Uber 1:00 which gives you lots of perks.
People that use a DoorDash membership are not going to want
to order outside of DoorDash and it will make it cheaper after
they already paid for that membership.
The same thing with Uber eats. So you have further customer
lock in by these memberships which make it even more
difficult to have the scenario where there are dozens of
different food delivery networks.
Why would anybody use multi app dashboards and different food
delivery networks when they have their membership with DoorDash
or their Uber one pass that makes this one uniquely cheap
where they get benefits from it and rewards from ordering
routinely? The whole scenario here, this
hypothetical, is that agents are making it so that there's way
less friction so that they can shop around.
They can lower the margins down to 0.
In reality, these agents would make it substantially more
friction on behalf of the user. Users want interfaces, they want
routines. They want to be able to know and
see what they're ordering with precision.
Ordering food is not an open-ended game where you just
want to be surprised of what comes to your doorstep.
So these are the type of arguments that are being given
here. And again, this one isn't just
some random argument. They highlight this as the
poster child, the prime argument.
This is the example of a company that will be disintermediated,
but it's it couldn't be further from the truth.
DoorDash is perhaps one of the most insulated companies from
agentic technology because of how difficult it is to replicate
a menu, to replicate the hundreds of of different
customizations for every single item.
Food is a very visual game. People want to see things when
they're ordering and it takes far more work to constantly text
and prompt something to build it in the way that you want.
Then already going to a well built application, already a
unified user interface, one that's familiar, one that people
have used, one that's AB tested for customers inadvertently, the
agent would be more friction and more situations.
And there's far more issues in it than just that.
So when I look at these type of arguments, they are convincing
on the surface until you really start to dive in to the nuances
and that's where you get lost. That's where a lot of investors
don't make it. They just sell because Citronees
said that DoorDash is going to be replaced.
The stock market goes down. These companies drop 6 to 7% in
a single day. Hundreds of billions of dollars
worth of market cap was wiped out on a completely fan fiction
false premise. Now the DoorDash example is bad
because it undermines the case that they're making.
They're saying it's the poster child, but in reality it's very
resistant. But the next example that they
name is it goes from bad to comical.
Now we're going from delivery food networks like Uber Eats and
DoorDash to the payment networks Visa and MasterCard.
They say once the agents controlled the transaction, they
went looking for a bigger paper clip.
There's only so much price matching and aggregation to do.
The biggest way to repeatedly save the users money, especially
when the agents start transacting themselves, was to
eliminate fees. In machine to machine commerce,
the 2 to 3% card interchange rate became an obvious target.
Agents went looking for faster and cheaper options than cards.
Most settled on using stable coins via Solona or Ethereum,
where settlement was near instant and the transaction cost
was measured in a fraction of a penny.
And then they have a hypothetical.
Again, this is a fake headline of the future.
MasterCard Q 12027 Net revenues plus 6% year over year.
Purchase volume growth slows to 3.4% year over year from 5.9%
the prior year. Management notes that agent LED
price optimization and pressure and discretionary categories.
Bloomberg, April 29th, 2027. It was Mastercard's Q 12027
report that was the point of no return.
Agentic commerce went from being a product story to a plumbing
story. MasterCard dropped 9% the
following day, Visa 2, but paired their losses after
analysts pointed out at stronger position stablecoin
infrastructure. Agentic commerce routing around
interchange posed a far greater risk to card focus banks and
monoline issuers who collected the majority of that 2 to 3% fee
and had built an entire business segment around rewards programs
funded by merchant subsidies. American Express was hit the
hardest, a combination from headwinds from white collar
workforce reductions gutting its customer base and agent routing
around interchange gutting the revenue model.
Synchrony, Capital One and Discovery fell more than 10% the
following weeks as well. Their remotes were made of
friction and friction was going to 0.
That's the whole thesis there, right?
Friction is going to zero. And this is where Citronee, with
all due respect, and I, I really like this.
I think it's an interesting hypothetical so I'm not trying
to bash them. With all due respect, they
couldn't be more wrong here. One of their assumptions, and
this is a very tech kind of nerd focused assumption, a lot of
investors have this assumption too, is that all customers want
is less friction. That's all customers want.
And that's an assumption that's correct.
In some cases, customers don't like friction in a lot of cases.
But in reality, there's some cases, some unique ones, where
customers do like friction, where they love friction.
They don't want friction to go to zero, and settlement is one
of them. Payments is one of them.
Customers love friction and payments.
They absolutely adore friction and they would hate for it to go
to 0. Customers reject.
They continually reject propositions where friction goes
to zero and payments. Let me give you a a couple
examples. The whole value of a credit card
is friction. That's why high income people
use credit cards. That's why people like me use a
credit card is because of the additional friction.
Allow me to explain. When I swipe a credit card, I
don't want settlement to happen instantly.
I want it to show that I paid money, but I want there to be
friction in the process. I want it to be routed through
my bank. I want it to be the bank's money
that paid that money, not mine. I want my money to stay put, to
have a delay. I want there to be a period of
review where I can look at what the bank purchased on my behalf.
I can review it and make sure that it was charged correctly,
that I received the product, and I don't need to dispute it.
I want to be able to review all of it before I actually put my
money into the process. That's friction that slows down
the process. When you're purchasing things
and you're transacting, you want to slow down the process.
In fact, the fact that I don't have to pay the money right away
to buy something means that I can hold it in my savings
account and earn 4% interest for another two weeks or another
month. That gives me the time money
value. So by having friction in this
process, by having a slower period of me paying for
something that is advantageous and consumers want to delay
payment for as long as possible. That's why you have buy now, pay
later. That's why you have credit cards
where you can buy something today and pay for it in a month.
That is friction. Furthermore, the thought process
of money immediately moving from my account to someone else's
account the instant I hit the buy button is terrifying.
That's the last thing that I want to do.
I don't want money to immediately exit my checking
account when I buy something online on some random website.
I want to be able to have time to review it and make sure I got
the thing that I ordered before money moves from my account.
And again, that's friction. In this specific case, I want as
much friction as possible. I wish there could be more
guardrails and time money value in the process.
So this is a a, a premise where the entire premise of what
they're building this on is wrong.
The premise that customers in the financial world want 0
friction is entirely wrong. Customers don't want 0 friction
in the financial world, they want as much friction as
possible. And so when you build an
assumption on a wrong premise, every single other assumption
based on that is also wrong. Another problem with the idea
that agents will just wipe away that credit card fee and save
the customer money is that in the eyes of the customer, that
fee isn't real. Customers aren't paying that 3%
fee. Customers get credit card
rewards whenever they swipe their card.
The merchants are paying that fee.
The merchants have hated that fee forever.
Merchants, any merchant doesn't like paying a credit card fee.
They don't like it at all. They wish that they could go
away. They've tried to legislate
reasons for it to go away. The merchant is already on board
with wanting that fee to go away.
And there's already many alternatives that would make
that fee go away, like a debit card.
But there's a reason that high income earners don't like using
debit cards because they're instantaneous, because they are
frictionless. We already have that option that
brings friction to 0, which is a debit card, and customers don't
like it because it has no friction.
They're hypothetical of what could destroy MasterCard already
exists today, and it's not destroying MasterCard because
when you study these companies, you know that the high income
earners want friction upon their purchases and they want the
rewards and they're fine if the merchant pays the reward.
See, whenever I swipe a credit card, I get a reward of 2 to 3%.
I get that money back When I spend hundreds of thousands of
dollars on business expenses, on paying AWS hosting fees or what
have it. I get lots of money as a result
in credit card rewards paid back to me.
I have no interest in using stablecoin, none at all.
Why would I want to give up the 3% fee so that the merchant can
save money? That's a bad proposition for the
customer, so I would never adopt A gentic technology that brings
that fee to 0, making it so that I don't earn a reward that's not
in my interest or any other high income earners interest at all.
Any American Express user signs up for those cards specifically
for the rewards so that they can get paid every single purchase.
By taking the friction to 0 and wiping away that fee, you also
wipe away the rewards. You can't have one without the
other. You cannot have the 2 to 3%
reward without the 2 to 3% fee from the merchant.
So in the process of wiping away and bringing friction to zero,
you also wipe away the primary value proposition of the credit
card. And that just won't happen.
I don't know anybody. I don't know a single person,
Not one wealthy person that wants to do transactions through
stablecoin. Not a single one.
So when your entire premise is built on a false premise that
customers want friction to go to 0, everything else falls apart.
Customers like friction in payments.
They like the time value of money.
They like the security of being able to buy something now and
pay for it later and dispute it in the process.
They like the credit card rewards.
They don't care if the merchant's paying them.
They never have. So all the arguments here fall
flat when faced with actual consumer behavior.
Now this doomsday article continues on, but this time it
expands its horizon. It broadens itself from
individual companies like a DoorDash and American Express or
MasterCard. That this time a Daisy chain of
correlated bets where everything starts to unravel 1 domino at a
time. And I will say this is one of
the most beautifully written and architected bear cases.
It's like a dream, a beautiful dream of destruction.
Let's go ahead and just take a look at it.
I I really do respect the riders.
This is fantastic riding. They go over how private credit
had grown from under 1 trillion in 2015 to 2.5 trillion in 2026.
A meaningful share of the capital had been deployed into
software and technology deals. Many of them leveraged buyouts
of SAS companies. So in the future SAS companies
are SAS companies are so toast in this future bear case that
the valuations go so low that private equities buying them up
left and right using debt and buying up SAS, SAS companies
taking them private. So that's the future of SAS.
It's just these companies that become worthless.
They're like dying burrito chains or you know, sandwich
chains, which we have a private equity coming in and buying up
left and right. We have a headline here again
from Moody's. This is in April of 2027.
Moody's downgrades 18 billion of PE back software debt across 14
issuers citing secular revenue headwinds from AI driven
competitive disruption, the largest single sector action
since energy in 2015. This is another fictional future
headline that's that's Moody's now talking about the
destruction of SAS companies. Secular revenue headwinds.
Everyone remembers what happened after the downgrade.
Industry veterans had already seen the playbook.
Following the 2015 energy downgrade.
Software backed loans began defaulting in Q3 of 2027.
Private equity portfolio companies and Information
Services and consulting followed.
Several multi billion dollar leverage buyouts of well known
SAS companies entered restructuring.
Zendesk was the smoking gun. Zendesk misses the covenants as
AI driven customer service automation erodes annual
recurring revenue. 5 billion direct lending facility marked
to $0.58. And this section continues on
detailing the domino effect of when all of these SAS companies
eventually go to zero. And like the rest of this,
there's a number of logical problems with these assumptions.
First of all, you again have Zendesk.
Here is the one that they highlight.
Now, when we look at Zendesk, this is also a company that's in
many of the Fortune 500 companies.
This article suggests that those companies will simply just RIP
out Zendesk and replace it with an agent.
But how long would that actually take?
Consider how deeply integrated HR software is in the processes,
the embedded nature of these products.
Even if agentic technology was vastly superior to Zendesk, it
would take half a decade plus to get to the point of actually
replacing it. And that's a big if.
But the integration cost, the cost of actually doing anything
is incredibly difficult in a Fortune 500 company.
In most cases, the solution has to be dramatically better to
even consider it. That's switching costs, which
are entirely ignored in this article.
The other thing that I I just look at when I'm reading this is
that when you're reading articles like this, they almost
assume that humans are inflexible, that humans don't
adapt, that humans don't have a brain and can figure things out
when things change, which is the complete opposite of all human
history. Humans are highly flexible and
adaptable. Humans take on new tasks all the
time. They they adapt to situations in
different disruptions all the time.
One of the big concerns here is that all these SAS companies go
to zero. Well, if that's the case, if
Zendesk and all these other SAS companies went to zero, that
means that all the other companies paying for them.
Imagine all those companies that are paying money to all these
SAS companies. All those companies would have
margins go up. So every company that's paying
for a SAS company, let's say you're paying for Salesforce,
adobezendeskmonday.com, you name it, you're paying for all these
different services. You're paying $500 a month per
employee for all these different licenses and seat based
services. If you could erase all of those,
imagine the margins of all these companies paying for all that.
Every other company that's not SAS would have dramatically
higher margins as a result. Every other company that's not
SAS would have entirely bigger budgets to be able to hire more
people, to be able to expand, to be able to do land grabs, to be
able to create entirely new products and departments and
developments, to compete in new verticals.
Which whenever you do that, no matter how technologically
advanced you are, it requires humans.
That's the problem with this assumption overall.
It's talking about the destruction of one category,
which is SAS, without mentioning that when that happens, the
companies that are paying for all of that, that now have those
services being automated by agents, are dramatically more
profitable. Profitable companies expand.
That's typically what they do all throughout human history.
They expand, they grab more territory, they go into
different categories and that requires more people.
So this is a a very rigid look at the future.
It's completely unrealistic. It ignores human behavior.
It focuses hyper focused on a few companies and then even
those companies that it hyper focuses on, it gives very flawed
arguments that don't really represent reality.
Saying that people want 0 friction in transactions with
MasterCard, saying that people want to order things through a
text message. These are assumptions on their
surface are just on the false premise.
Yet it's enough to move the markets down dramatically.
Now I don't mind responding to these type of hypotheticals and
and giving my defense of them, my rebuttal of them and explain
why I think a lot of this is completely ridiculous.
But I'd also ask investors, ones that are listening to this, ones
that are learning, investing and trying to take themselves
seriously as an investor, can we just get a grip?
I mean, can we? Can we for a minute in this
market just get some sense and have some stability and be level
headed? Can we go a day without the
market being ripped and tugged and pulled in different
directions by a hyper viral fan fiction article?
This reads like fan fiction. It reads like a Marvel story.
So much of it is completely flawed, so much of it is
embellished. So much of it ignores important
market dynamics. Now, again, no offense to the
author. It's an interesting article and
it's well written. But it's also completely
unrealistic. Yet it's moving the market, just
like many of these ones before them.
They have compelling narratives that sound good on the surface
and it's causing investors to question their own reality.
It poses a a future where AI is this unstoppable alien force
that takes over the world that no one can do anything about,
that destroys everything. In fact, in every time period
known to man, there's people talking about the end of the
world, the doomsday, the doom and gloom, how nothing will be
the same and the future will look like nothing you've ever
seen, and how the stocks you own today are essentially worthless.
This is what Peter Lynch literally talked about decades
ago. OK, now we'll get to the
important stuff. There's always something to
worry about. This is the difference.
This is what happens in the stock market.
Because, see, everybody's got the brain power to do well in
the stock market. Question is whether you have the
stomach for it. That's the key organ in the
body. There's always something to
worry about. I mean, there's always something
to worry about. In the 50s, it was depression
and nuclear war. The 50s was the best decade.
This century. Do you remember when oil went
from 4 to 40? You remember that period?
And all the countries of the world are going to go bankrupt.
And then and the big banks go bankrupt and we're going to have
a Great Depression and the stock market's going down and you're
going to wind up selling pencils and apples, you know?
Doesn't that sound familiar? You're going to end up selling
pencils and apples. The whole stock market's going
to go bankrupt. This is Peter Lynch saying this
prediction has happened before in almost the same exact way.
The only thing that's changed is the time history repeats and
we're seeing again another repetition of it.
So I'm asking investors today to realize that right now you're in
a time period where there's a lot of uncertainty, there's
questions in the air, and nothing about that is new.
Nothing's abnormal. You'll be in the same situation
in five years and in 10 years. As Peter Lynch highlights, his
entire investment career has been filled with uncertainties
and predictions of doom and gloom.
Whether it's oil collapsing the market, whether it's nuclear
warfare, the Great Depression or the recession or the the even
greater depression, whatever it may be, there's always something
to worry about in all times of the market.
So if you're investor, get a grip, lock in.
This is a time to be optimistic. Not to be greedy, not to be
unprudent, but we should be optimistic about the future.
Optimism is what makes money in the end.
You can look at the biggest examples and although there's
investors that try to look smart by always having bearish calls
and when the market will collapse and there's some of
them like that, you have the Michael Buries of the world.
There's always way more investors that have made way
more money through optimism of having realistic positive
assumptions of the future. Knowing that many of these
companies are going to be highly successful, extremely
prosperous. That if money is destroyed in
some companies that can't maneuver and adapt to agentic
technology, many of them will. And the ones that go away will
mean higher margins for the existing companies that will be
able to expand and grow in the process.
What we have right now is investors selling off great
companies for entirely unrealistic presumptions of the
future. Ones that are seeded in fear and
doubt, not realistic optimism. So that's my thoughts on this
and that's how I'm responding as an investor.
I'll continue to invest in the companies that I think will be
incredibly profitable in the future.
And I think that the disruption risk is dramatically overstated
by many of these articles. And this certainly isn't going
to be the last. As we see more AI technology
emerge, more demos, more clawed plug insurance, we're going to
see more of this doom and gloom. But that's the latest as of now.
Now moving on, we get to some big news.
Over the past seven days, Netflix gave the opportunity for
Warner Brothers to go back to Paramount and say, hey, look,
you have 7 days to revise your offer and give us your best and
final offer. And that has happened.
Warner Bros Discovery says that Paramount made a higher bid and
the board will weigh the offer against the Netflix deal.
Basically, what's going on here is the offer that Paramount
submitted as private. So we know that they submitted
an offer. It was higher than their
previous one, but the details are private.
We don't know the number. Everybody's speculating of what
it could be. It could be anywhere from like
$31.00 with better terms to $34 on the high end.
And either way, this is Paramount's last ditch attempt
to steal Warner Brothers away from Netflix to say, hey, Warner
Brothers, we want to go with Paramount over Netflix because
their offer's so much more attractive now.
They can't necessarily do that unless Netflix looks at their
offer and decides not to beat it.
So Netflix can look at it and they get the first call.
They can match the offer or beat it.
So Netflix is going to simply look at it, look at the revised
offer and see if they want to adjust theirs at all or if they
need to do anything to beat that offer.
And that's up to them. Netflix has all the power in the
situation. I think that Netflix is going to
look at it and say, you know what?
If we have to pay an additional four to six months of free cash
flow to buy this service, to make it so that we own all of
this for the next 20-30 years so that we can drop on this well of
incredibly valuable content and distribute it through our
massive distribution, that's probably worth it.
Internally, Netflix knows exactly what they're willing to
pay and what is overpriced. They already have that modeled
out. They already have their numbers.
So they can look at this and weigh it against what is their
price of what they believe this asset is worth.
And as Ted Sarandos says, they are disciplined buyers.
If they don't like the deal, if it's simply just too much and it
makes it not worth it, they will walk away and Netflix will be
able to collect over a 2 1/2 billion dollar fee.
So even if they walk away, they get something out of this.
But if I have to guess, and again this is hypothetical,
maybe they won't. My guess is that Paramount
submits a higher offer. I think that Netflix makes
theirs more attractive and locks it down and then it's done from
there. But we'll have to wait and see.
Now moving on, we have another bit of news here.
This is a big headline. Meta and AMD agreed to AI chip
deal worth more than $100 billion.
These deals used to be really cool, like we'd see these and
everybody would get excited. Oh my gosh, $100 billion deal
with a chip company between a big tech company.
But now that they've happened so frequently, it just seems like
another day, like every other day there's a deal like this.
It seems like I'm getting a little bit numb to looking at
these deals. The instant reaction to this
deal is AMD, of course, is up big.
They got a new customer, so they're up nearly 10% and Meta's
up a little bit. So Meta's not even being hurt by
this. Most investors already know that
Meta's they're buying big, that they're investing in CapEx.
So nothing is new about that. Now, I've recently invested A
substantial amount of money in Meta.
I've made it my third largest position.
It's about $150,000 invested in it and I love what the business
is doing. They're becoming one of the few
supercomputing powers. Many people are bearish on this
CapEx spend. I'm not.
Long term, I realize that it will hurt the financials in the
short term, it'll make it so that their accounting and the
fact that they're depreciating these assets over time will hurt
their earnings. But I think long term, this sets
these companies up to be so uniquely strong.
Meta will have one of the strongest moats in the world,
both a network Moat and an infrastructure Moat.
It'll be virtually indestructible.
So I view this company as incredibly Moat heavy, super
wide and deep Moat with ample growth opportunity priced at a
22 Ford PE. To me, that feels like a very
attractive value proposition and attractive situation to invest
in. That's why I continue to feel
good about this one. Finally, we move on to the fail
of the week. In this case, it's an
unintentional this is an accidental hacking of about 7000
robot vacuums. We have Sammy as Dewfall.
He claims that he wasn't trying to hack every robot vacuum in
the world. He just wanted to remote control
his brand new DJI Romo vacuum with the PS-5 game PS-5 game
pad, he tells The Verge. Because it sounded fun.
But when his homegrown remote control app started talking to
DJI servers, it wasn't just one vacuum cleaner that replied
Roughly 7000 of them. All of them around the world
begin treating as Dewfall like their boss.
He could remotely control them and look and listen through
their live camera feeds. This means that this guy
inadvertently hacked other people's robot vacuums, which
have cameras on board, meaning that he hacked cameras of other
people's homes. 7000 people. He would watch them map out each
room of a house, generating a complete 2D floor plan.
You could use any robot's IP address to find its rough
location. I found my device was just in
one of the ocean of devices. So it has a map here of like a
we have an area map of all the different devices that he's
found and here it has like a live camera feed.
Like some of these have on board cameras so they can see objects
and avoid them, but it also inadvertently operates as a
camera going around your home. You could just drive around and
film people at will and they don't even know they're being
filmed. They might just think that their
robot's acting a little funny. And this has to be one of the
worst hacking or personal invasion of people's privacies
possibly ever done. I mean, have we had a situation
where 7000 devices that are mobile and have cameras have
been hacked in people's homes? In most cases, if you hack a
camera in someone's home, at least it's just one location.
These ones are literally mobile. You can drive them around.
So he has a camera that he can stare in other people's homes.
He says right now that DJI hasn't even fixed all the
vulnerabilities that he's found. One of them is the ability to
view your own DJI Romo video stream without needing its
security pin. Another one is so bad, I won't
describe it until DJI has more time to fix it.
So DJI has a massive critical failure and there's security
here. And if you have one of these
robots, especially with the camera, you might want to just
put the robot away, take it off its wheels, flip it upside down,
make sure it can't drive anywhere without your
permission. Because as of right now, it
could literally be viewed by anyone with a clod code plugin.
And until the update happens, until the company publicly
acknowledges it and it fixes all these these security exploits,
it might be a concern. That's going to be it for this
time. Hope you enjoyed.
See you in the next one.