DeepSeek, Open Source, Tariffs, DOGE, Market Impact | BG2 w/ Bill Gurley & Brad Gerstner

Summary

• DeepSeek’s moment of maximum parity is already behind it. Gerstner’s team, speaking directly with DeepSeek, confirmed the ~$1B total TCO alongside the real $6M final training run (vs ~$10–15M for o1 — “30 to 50% more efficient”), but the log-linear scaling math now demands ~10x the compute to reach o3-class — with no Blackwell access, export controls binding, and most of their limited cluster consumed by inference demand. “This was the moment in time where their compute comparison to OpenAI was the closest it’s ever going to be.”
• Open source may have hit its tipping point. Hugging Face went from 500 R1 variants 48 hours post-release to 1,300 today under a no-strings MIT license, and Sam Altman conceded in his AMA: “I personally think we have been on the wrong side of history here.” Gerstner predicts closed labs open-source one-to-two-generation-old models this year while true frontier models — from OpenAI and DeepSeek — stay unreleased, with “only the agent” shipped.
• Gurley’s contrarian core: a foreign, open-source disruptor beats a domestic proprietary one — for safety, free speech, and innovation — and China is a 30-year open-source veteran (Linux donors, RISC-V) precisely because “if you believe you have the fastest, cheapest, most capable engineers… you’d rather live in a world where there’s no IP protection.” His warning: “Linux doesn’t have a geography” — the winning model may be a fork nobody’s country owns, and walling off the US could hand the rest of the world (DeepSeek at ~15% of ChatGPT DAUs in India) to China.
• Don’t be lazy in believing the “Bessent consensus” that tariffs are just a loaded gun rarely discharged. Gerstner’s variant view: Trump holds a decade-old, principled McKinley-era belief that pre-1910 tariff revenue built America and that swapping tariffs for income tax “gutted the middle class” — meaning tariffs as permanent tax-reform architecture, not negotiating theater. Gurley’s rebuttal: he doesn’t know of a long-term successful tariff program, the Fed’s 2018 washing-machine study showed prices up and few jobs created, and “you’re just going to make yourself Europe.”
• DOGE runs on two tracks, and track two could reach the Supreme Court. Track one is normal reconciliation (a signable bill by April/May); track two is Elon cutting by executive authority — asking “who sends out the wires,” shutting USAID (“no apple to be saved, it’s a total ball of worms,” $50B/yr). Gerstner expects a Schumer lawsuit on Congress’s power of the purse but thinks it’s “on pretty weak footing” against the doctrine he called “empowerment” — and if a credible $1T cut back to the 2019 baseline lands, “interest rates are going to come down.”
• The trade: fundamentals on fire, multiples at risk. Stacked technological, economic, and political uncertainty forces the discount rate up and multiples down even as Jevons-style demand explodes — “I think the super cycle is on fire… but at the moment it’s the Golden Age of uncertainty.” Gerstner tells his team to downsize risk (“you don’t do the tenth best idea”), expects heavy volatility for six months, and warns mid/late-stage VC marks lag but follow public multiples downhill.
• Second-order trap for NVDA bulls: loudly claiming DeepSeek secretly had more GPUs invites Washington to tighten sanctions that hit Nvidia’s own revenue — “you think you’re protecting Nvidia… and you may end up with sanctions that end up hurting Nvidia’s revenues.” A threatened Taiwan chip tariff is just a tax on Nvidia, AMD, Meta and Amazon that buys less AI research — unless structured as a 2.5-year-delayed lever tied to US fab buildout.

Deep dive

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