DeepSeek’s real magic doesn’t have anything to do with AI

I know a technology event has really hit the mainstream when my brother-in-law asks me about it. “What’s this about some Chinese AI thing called DeepSeek?” he asked me recently with a quizzical look. I don’t think the AI technology aspect of DeepSeek was what sparked this question, since he doesn’t know anything (or care) about the details of AI. I think what probably triggered his interest was the same thing that triggered the interest of lots of non-tech types: the fact that news about DeepSeek’s AI advancements caused US stock markets to suddenly go into free fall. Nvidia — the chip-maker that is one of the most valuable stocks in the world — lost as much market value in a single day (~$600 billion) as the gross domestic product of a medium-sized country.

Was this justified? Not really. Suffice it to say that most traders and brokerage firms don’t exactly have a nuanced understanding of AI. Also, at its peak Nvidia was trading for about 50 times its projected earnings (it has been as high as 77 times recently), and about 30 times its projected revenue. Those are eye-popping numbers — by comparison, Apple trades for about 35 times its projected earnings and 10 times future revenue — and any time a stock is selling for that kind of valuation, even the slightest bump in the road will cause a massive selloff. Traders who invest in these kinds of stocks are a little like people who have drunk 45 cups of coffee — they are extremely nervous, and the finger that is perpetually hovering over the “sell” button is on a hair trigger.

I should point out up front that I’m not here to give you the technical nitty-gritty behind DeepSeek’s announcement, for two reasons: ) I don’t really understand it on the kind of granular level that would make my comments worthwhile for those who do understand it, and ) There are lots of other places you can find this sort of thing, including a great overview by Ben Thompson in his newsletter Stratechery. But for those of you who aren’t already experts in this area, the 10,000-foot view is that DeepSeek — a Chinese company run by Liang Wenfeng, who started an AI-powered hedge fund and then branched out into AI as a side hustle — built an engine that is competitive with or possibly better than leading LLMs like Claude and GPT-4, but at a fraction of the cost.

Note: This is a version of my Torment Nexus newsletter, which I send out via Ghost, the open-source publishing platform. You can see other issues and sign up here. 

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Does Facebook have a duty to the news or to journalism, and if so what is it?

As Facebook takes on a larger and larger role as a platform for journalism, the debate over what its duties or responsibilities are towards the media industry—or if in fact it has any at all—continues to heat up. The deal that the giant social network has cut with a number of media partners, including the New York Times and the Guardian, is that it will help make their articles look if they are published directly through its mobile app under the “Instant Articles” program. In return, Facebook agrees to give those outlets a share of the revenue generated from the advertising around those articles.

This seems like a fairly straightforward business deal: Media companies get better distribution and a better mobile interface, and they get either 70% or 100% of the advertising revenue, depending on whether they sell the ads or they let Facebook sell them. But the arrangement has raised all kinds of difficult questions about whether it is actually a Faustian bargain—one that provides a much greater long-term benefit for Facebook than it does for the media outlets that provide the content.

One of the questions at the center of this debate is whether Facebook has any kind of duty or responsibility to the news or to journalism. In a piece he wrote for Medium, CUNY journalism professor Jeff Jarvis tried to tackle some of these issues, and he splits it into two related questions: 1) Should an informed society be part of Facebook’s mission? and 2) Does the company bear any kind of civic responsibility for the news?

Note: This was originally published at Fortune, where I was a senior writer from 2015 to 2017

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