“If you're looking for a sign companies back down and go: 'Got you, it's a bubble!' They're never going to do that. They'll keep pretending everything's fine until the last death throes.”
Mike and Nick describe the AI bubble not as a single failure, but as a stack of overlapping collapses. From the physical reality of energy constraints in the Strait of Hormuz to the shadow banking fueling data centers, they map out how the bubble isn't just an economic issue but increasingly a political one, too.
- Overlapping bubbles: The economy is experiencing 5 bubbles, with at least 4 of them concentrating around AI spending.
- The energy ceiling: Silicon Valley ignores the material world at its own peril. Between energy costs and supply chain chokepoints like the Strait of Hormuz, “scale is all you need” is about to hit a wall no amount of VC can overcome.
- Capital as labor (The Lie): The promise that AI replaces human workers is an economic fantasy used to justify mass layoffs and degrade remaining jobs.
- Enclosure of ML: For decades, machine learning was an open academic field. Big tech effectively enclosed this commons, rebranding a general-purpose architecture (the Transformer) as a proprietary product.
- The “Siri Plus” residual: When the bubble pops we'll be left with scoped, boring automation that works for specific tasks but never achieves the “general intelligence” used to justify trillion-dollar valuations.
Timestamps
0:00 What is the Last Enclosure?
2:38 AI bubble in context of Hormuz
8:03 Bailouts?
11:10 Bubble 1: Frontier AI companies
15:33 Bubble 2: “Wrapper” AI companies
17:13 Bubble 3: GPUs, infrastructure, and data centers
19:13 Bubble 4: AI financing (Banks and private credit)
22:33 What drives AI “value?”
30:18 The bubble in the real economy
33:37 Harms of the capital-as-labor myth
38:56 Residuals from the bubble
42:49 AI not causing layoffs
44:10 Why did this go on for so long?
49:08 AI is kayfabe and paper tigers
52:34 Types of bubbles
55:22 LLMs as the last enclosure
57:17 Accountability
1:02:56 Recommendations
Deeper learning
Mike on the AI bubble: misaligned.markets/what-to-expect-ai-bubble
Zitron - OpenAI Losses Increased Nearly 8X in 2025, Spending Hit $34 Billion: wheresyoured.at/exclusive-openai-financials
Harvey AI wrapping frontier models like Claude: help.harvey.ai/articles/what-ai-models-does-harvey-use
America’s Data-Center Build-Out Is Falling Way Behind Schedule: wsj.com/tech/ai/americas-data-center-build-out-is-falling-way-behind-schedule-e408a9a8
AI Boom Runs on Debt: aol.com/articles/ai-boom-runs-debt-global-144019676.html
Reach out
Site: rss.com/podcasts/the-last-enclosure
Bluesky: bsky.app/profile/lastenclosure.bsky.social
