Evaluating the Security Risks of AI

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Let's check in on yesterday's market vitals The major indices rallied on news that the US and Iran have an agreement, moreore on that in a second. The Tao hit a fresh high. Brent Crude fell below eighty dollars on hopes that the strait will finally and truly reopen. Meanwhile, treasury yields and the dollar fell. SpaceX shares soared twenty percent in their first full day of trading and Fox tumbled fifteen percent after announcing its acquisition of Roku twenty two billion dollars What else is happening The U. S. and Iran have reached a deal again. After one hundred and seven days of war, the two sides agrees to a memorandum of understanding. It includes a sixty day ceasefire, the reopening of the Strait of Hormuz, and a halt to fighting in Lebanon. A formal signing is set to take place on Friday in Geneva, but the big negotiations like Iran's nuclear program, sanctions relief and frozen assets are all deferred to the next two months. Meanwhile, Israel says it is not bound by the deal and its forces will stay in Lebanon indefinitely. Still, Brent Crude fell more than five percent on the news of the pending peace deal. Here to help us unpack what this deal actually means. We're speaking with Karim Sjipor, senior fellow at the Carnegie Endowment for International Peace Fream, thank you so much for joining us on the show today. This is reallyally important news. I think the place I'd like to start is a place of skepticism And that is we've had deals with Iran before Trump said we had a ceasefire back in April, then he said we had a framework of a ceasefire. He said that the deal was in its final stages in May. He said it was all largely negotiated. plenty of false alarms. And so the question on this news is, is this also a false alarm Or is this different I'm not going to try to disabuse you of your skepticism because I share it. I think there's a couple big questions. Number one is whether indeed we do have a memorandum of understanding At the moment, you could call it a memorandum of misunderstanding because the US version of this MOU is very different than the Iranian version of this MOU in terms of what kinds of economic relief are going to be provided what are Iran's nuclear commitments going to be, the future of the Strait of Hormz? Virtually every single major issue appears at the moment unresolved. So that's one of the big questions. The second is If indeed the two sides can agree on a common memorandum of understanding What happens next? The most difficult questions have been deferred for future negotiations The two sides have given themselves sixty days to resolve those issues of tension like most notably the nuclear issue There's very little chance that those issues are going to be resolved over sixty days. Bottom line for me, this isn't a resolution of the U.S Iran conflict. We may have temporarily paused a hot war and gone back to a Cold warar. But unfortunately these two sides are are going to remain adversaries. We haven't resolved the U.S. UrN conflict. and in fact As President Trump alluded to today, there's even a possibility we could go back to conflict if we doesn't see any flexibility from Iran on the nuclear file It's really fascinating that you say that. The first thing I was going to mention was that disagreement over these reconstruction costs because Iran says that the US is going to pay three hundred billion dollars in reconstruction costs that they were going to release twenty four billion dollars in frozen assets. And then JD Vance goes and denies those claims So memorandum of misunderstanding sounds accurate to me, and I guess the question then becomes What actually is this deal likeike we we don't We don't know yet because they've said it's happened. And to be fair to Trump, Iran has said they're going to sign it on Friday But I guess my question is like, what actually is it? What are we even agreeing to Well, phase one of this deal is supposed to essentially be a lifting of the mutual blockade in the Straits of Hormu. Over the last almost four months, Iran has been strangling the global economy, trying to spike the price of oil with their blockade of the Straits of Hormuz Simultaneously, the U.S. has been strangling Iran's economy with the naval blockade. Iran has suffered as a result of that. It's losing as much as four hundred fifty million dollars daily. It can't get its oil exports out of the country. So even though you hear a lot of bluster and bravado from the Iranian side It's an economy which has been decimated, even more decimated than it was before the war So what phase A of this deal is meant to be is to lift that blockade. And virtually the entire world wants to see blockade of the Strait of Hormoz lifted withith one exception, perhaps, which is Vladimir Putin's Russia, who has really experienced a cash windfall over the last several months But then as we talked about, the blockade is meant to facilitate a nuclear deal. and it actually could serve to do the opposite because once Iran gets some economic relief as a result of this lifting of the blockade, it may actually feel less inclined to make nuclear compromises. And likewise, President Trump may feel I can actually go back to war now that oil prices have dropped. This is exactly where my mind is going. Despite that, oil prices did fall five percent. So clearly traders and investors are more optimistic about the notion that the straight will be unblocked I guess my question, do you do you think it will The opened up and if so, to what extent for how long? I mean, how optimistic are you when it comes to the Strait of Hormuz specifically, which is the thing that impacts Americans the most in the form of inflation The Iranian regime has been saying consistently that the Straits of Hormz will not go back to status quoi to be what it was before the war, which was an international waterway. They want to figure out a way to establish a fixed revenue stream over the strait whether that is tolling, perhaps that's too ambitious for them to toll individual ships, but Perhaps some type of an administrative fee over this trade. That's what they've been talking about. I haven't seen any statements from senior Iranian officials saying they're gonna to go back to status quo ani The other way in which they want to use the strait is as a deterrent to essentially have this sort of Damocles hanging over it to send a signal to America, Israel, and others that if we're attacked again, we're going to take this strait hostage. And we've done it once, we can do it again, and we can wreck the global economy It's my view that it is a major U. S. priority and it's obviously an enormous priority for our partners in the Persian Gulf to have this strait be an international waterway. But I don't take it for granted that Iran is going to accept that Do you think it would be an overstatement to say that Iran is strengthened coming out of this. I mean, of course, their economy has been damaged. manyany of their military leaders have been taken out But it sounds as though they now have a point of leverage they have realized in a very big way that they perhaps didn't know they had before And it sounds like potentially this could mean highigher oil prices forever or at least a suppression on demand that lasts for the foreseeable future. Do you think that they are coming out of this feeling I guess. strengthened or optimistic I think psychologically, they certainly feel that they have been strengthened. It's been a major psychological boost for this regime that they were able to defy the greatest military power in the world, the greatest military power in the Middle East, Israel and the United States and survive. For them, the bar was set pretty low. didn't need to thri they just needed to survive and they achieved that. At the same time, it is a country. It's a deeply unpopular theocracy ruling over a society which very broadly dislikes it. They have a decimated economy, seventy percent inflation, triple digit food inflation. So if you're looking at this from the outside Iran isn't a country you envy. Few countries would want to be Iran But by virtue of the fact that A, they've survived and they've discovered this new foundound form of leverage in closing the straits of Hormuz, I do think that they feel they've emerged from this stronger What we know from history and from wars is that It oftentimes takes years, if not decades to really understand the true impact of them. But certainly in the immediate term, Iran looks stronger than it did going into the war You mentioned that you thought that this was more of a temporary pause in the hot warar that we've gone back to sort of a Cold War state that implies that we might return to a hot warall And this is probablybably the most important question in the markets right now arguably in the world, it is the multi trillion dollar question, which is Will we go back to fight him? And if so for how long I know that we can't the future, but if you had to If you had to make an estimate What would your estimate be on the probability that this is resolved permanently In my view, the probability that this is resolved permanently, I'd put it at less than twenty percent If we look at the probability of a return to conflict, there's a couple there's a few triggers at least. One is and negotiating phase two of this deal, which is to get Iran's highly enriched uranium out of the country. and to get Iran to cease its enrichment of uranium to priorities for President Trump, that the regime shows no flexibility. In that case, he may feel he being President Trump may feel obliged to return to conflict. And remember, this is a president who on two occasions in the middle of negotiations with Iran launched military strikes on them last June twelve day war and then this year's war. So I think the Iranian regime certainly feels that President Trump is capable of returning to war Another potential trigger come from the back and forth missile and rocket volleies between Israel and Lebanese Hezbollah. If Hezbollah continues its attack on Israel or Israel continues its retaliations At some point Iran may get in and launch attacks again on Israel. Israel may respond inside Iranian territory, and that could again trigger another attack. I should say there's one additional trigger, but I don't think it's a near term trigger. and that is if we have any intelligence that Iran is making a mad dash for nuclear weapon? I think that would like to trigger military action, but I don't think that's an immediate term possibility Just before we wrap up here What do you expect the messaging will be from Trump? I mean, part of me is trying to understand why He appears to be trying to pull out of this or at least say that we have a deal. I assume that it's related to inflation and the fact that his approval ratings are just tanking right now U but do you think that this is enough for him to go out there and claim victory? Do you think that that will be the strategy going forward It already is his strategy. I saw a statement today with in a press conference with President Macron in which he's declared victory. And his benchmark, his public benchmark for success is to say that this was better than Obama's twenty fifteen nuclear deal. And if you compare the two objectively, you know in this in the twenty fifteen deal, There was no war that was launched. So already this conflict has cused American taxpayers perhaps more than a hundred billion dollars Second, in Obama's nuclear deal in twenty fifteen, the United States handed over about one point seven billion dollars in economic relief to Iran, which is why President Trump called that the worst deal in history. But what is being talked about now is to provide Iran perhaps tens of billions of dollars in economic relief And then finally, the actual terms of the agreement between President Trump's potential deal and Obama's deal in twenty fifteen are not that dramatically different. So in essence, it's You know, will President Trump's potential deal vindicate the cost of this war. And in my view, the answer to that is almost unequivocally no. The other concurrent approach you may take is to essentially transition accountability for this deal to Vice President Vance. I saw it was Vice President Vance this morning who was trying to sell the deal. And know last thing I'll say before we part that is that what's interesting, if you look at the forty seven year US Iran conflict Iran has played a major role in essentially sabotaging American presidencies since nineteen seventy nine. They ended Jimmy Carter's presidency with a hostage crisis They tainted Ronald Reagan's presidency with Iran Kantra. And then you know, after that, you can count one by one George Bush's efforts to bring democracy to Iraq. We' sabotaged by Iran. The Iran nuclear deal consumed the latter part of Obama's presidency. october seventh, the Hamas attacks, Hamas being an Iranian proxy consume Biden's presidency. so this is another example of Iran consuming an American presidency and perhaps sabotaging the presidential campaign of JD Vance. Blame it on Vance. That's the new strategy. Karim Sarjiport is senior feellllow at the Carnegie Endowment for International Peace Cream, we really appreciate your time. Thank you. Thank you, I had my pleasure. After the break The White House anthropic feud returns. And for even more markets insights, you can subscribe to my weekly newsletter, simply put at simply putut. profgmedia. com Support for the show comes from OdDu. Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other? One for sales, another for inventory, a separate one for accounting? Before you know it, you are drowning in software instead of growing your business. This is where Odoo comes in OdU is the only business software you'll ever need. It's an all in one, fully integrated platform that handles everything CRM, accounting, inventory, e commerce, HR and more No more app overload, no more juggling logins, justust one seamless system It makes work easier. And the best part, OdI replaces multiple expensive platforms for a fraction of the cost. It's built to grow with your business whether you're just starting out or already scaling up. pllus it is easy to use, customizable, and designed to streamline every process. So you can focus on what really matters running your business. Thousands of businesses have made the switch, so why not you? Try Odoo for free at odoo. com. That's odoo. com Support for the show comes from BCX, the public ticker for private tech. For generations, American companies have moved the world forward through their ingenuity and determination. And for generations, everyday Americans could be a part of that journey through perhaps the greatest innovation of all the U.S. stock market It didn't matter whether you were a factory worker in Detroit or a farmer in Omaha, anyone could own a piece of the great American companies. 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This is a paid sponsorship Support for the show comes from Odu Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other Introducing Odu It's the only business software you'll ever need. It's an all in one fully integrated platform It makes your work easier CRM, accounting, inventory, e commerce and more And the best part, Odu replaces multiple expensive platforms for a fraction of the cost That's why over thousands of businesses have made the switch. So why not you Try Odoo for free at odoo. com That's O d oo d. com We're back with profty markets The feud between Anthropic and the White House has escalated yet again. Last week, Anthropic released its powerful Mythos five model to a small group of cyber defenders. It also rolled out Fable five, a more secure version of Mythos to the general public On Friday, the Department of Commerce imposed export controls on both of those models, restricting access for foreign nationals because the ban also applies to foreign nationals inside the US, Andthropic decided to pull the models offline altogether Anthropic disagreed publicly with the administration's decision, warning that restrictions like this could freeze AI development across the industry. Here to discuss the latest in this saga between Anthropic and the White House, we're speaking with Reid Albugotti, tech editor at Samapore. He's the one who broke news on this story Reed, thank you for joining us on Prof G Markets. There's a lot of drama going on here between anthropic and why there were these export controls and what was the actual reasoning and what was going on in the White House and the administration. could you just give us sort of this simplified version of what actually happened here, the sequence of events leading to Anthropic pulling these models offline The simplified version, I think is that Anthropics did a great job of marketing this model, that Mythos model back in April when they announced it and they said this thing is a danger to the world because it is so good at finding software vulnerabilities and bugs that hackers will be able to use this thing. I mean I was in DC in April right after they announced it. I mean, people were genuinely scared. And I think when The White House started to get reports from companies like Amazon, which is a big investor in Anthropic, an important partner, saying people have been able to jailbreak Fable five I think it actually scared them. And then I think anthropic saying you know, we're not, we don't think these jailbreaks are that serious, not responding with enough urgency, you know, it just led to I think this kind of cascading series of events that led to the export control. and it didn't help that they have just had one conflict after another with the White House for the past year, which I've I've been covering, I've been writing about this a lot It's really interesting that as you mentioned, Amazon goes to the White House and says there's a problem over at Anthropic. They say that this model has a security issue it can be jailbroken into is the term that is used. which looks a lot like Amazon is I don't know trying to screw over anthropic in some way saying, hey, you guys, you need to go figure this out. But as you point out, they're also a major investor in Anthropic. So maybe it's coming from a genuine place What do you think? Is that Was that a sabotage move or something else No, I don't think this is a sabotage move, but there were lots of companies. It wasn't just Amazon. And actually, I think there was from what I hear, it was kind of outgoing. L the White House, they were going out to people. Obviously, Amazon is an important vendor for the US government. whatever they whatever is happening on AWS is going to be important for for for the government. So this I think this is again, if you remember Amazon was a little bit like in the middle of the Pentagon anthropic clash as well, they just find themselves in the middle of this thing. and it's what's so strange about this whole situation. It just creates a very convoluted you know, network of friends and foes and frenemies. And I mean, it's fascinating and confusing. On the one hand, I kind of understand the White House's argument, which is Anthropic is saying how dangerous their model is Pople tell the White House, hey, there might be a sec an issue in the security here. The White House then says, you need to go fix it, to which Anthropic says, it's not a big deal. And then the White House goes well, three month ago you told us this all was a big deal and that we should be figuring this out. and now you're saying it's fine, don't worry about it. At the same time though I was suddenly made skeptical of the administration, the White House's motives when I saw a tweet that was posted by Pete Hegseth, Secretary of war He said, quote, threeree months ago, the Department of War kicked Anthropic out of our building forever. Every passing day proves why that was the right move. So I read that and now I'm thinking, maybe they're tallget anthropic because they've decided we don't like them. We're going to go after them Do you have a view on on who might be in the right or the wrong? I wouldn't read too much into the Heg stuff tweet. I mean, look, I It doesn't help for sure. It doesn't help that anthropic has been on the other side of the White House when it comes to state preemption of AI regulation laws, you know the certainly the Pentagon fight I think there's a lot of like distrust that is built up between these two groups of people and that needs to be fixed, especially if you're anthropic and you're trying to go public soon. I mean, they need the government for lots of different reasons. But I don't think this is like, oh, we're going to get back an anthropic. I mean, this can't be a policy, right? Because it what it says is like any AI company that builds something, there's now like a benchmark. If it's more powerful than Mythos, then, you know, we need to shut this down if there are jailbaks, et cetera. there're always going to be jailbreaks. L that is just the nature of these things They' basically shutting down progress on advanced frontier AI models, which cannot be the policy of this White House. No, I mean, it's I don't think they're sitting there going like let's wait for an opportunity to like snipe anthropic. This is you know, this is clearly like a one off situation and it has to get worked out too. What do you make of the fact that Anthropic said We don't think that there is a security risk here. because On the one hand, you might say Well figure it out and explain to us exactly why But on the other hand, you might say Anthropic knows best. They know their technology. they probably understand cybersecurity better than the White House does. It would be my guess when it comes to AI and their model specifically mean Why didn't that cut it for this administration I think Anthropic is actually correct. Like I don't think that it doesn't sound based on everything that I've heard and read it doesn't sound like these jailbreaks were going to be some massive security threat on their own. I think though they, you this thing has been sort of overblown from the beginning. I don't think you know these new models are going to come out and the world is going to have to adjust to them. L we're going to have to figure out how to deal with cybersecurity in the age of AI writ large. Um but I don't think one new model coming out shifts the threat landscape so dramatically that We need to take these these rash steps, But if you go back to what Anthropics said, I also can understand why people who are not in technology, who are noton cybersecurity experts would go, wait a minute, like I'm thinking of the worst case scenario here where all of a sudden cyber threats just bring our economy to its knees. And I get it, I get the fear before you go Does this dispute affect either one Anthropics business or two itss IPO timeline, which is of course what is on every investor's mind right now Yeah, I mean, for sure, if it stands, it will affect their business because now they can't sell their their most powerful model. Of course, I don't know what percentage, you, mythos and Fable five are going to sort of make up for their revenue. It might be very small. I mean, Anthropics is also know struggling with a lack of tokens, a token availability of compute power. So these things use up a ton of that. So I don't know if this immediately affects their bottom line in any way. I'm sure it does a little bit. Buts but if it's a long standing thing, it would be catastrophic. So I think they have to get through this, especially if they want to IPO this year All right, Read Albigatti teech editor at Semapore Read Thank you for joining us. We appreciate it. Great to be here, thanks So Iran and the US supposedly have a deal. If you're a regular listener, you know that I am incredibly skeptical of Trump's deals, especially when it comes to Iran. This was, in fact the basis of my prediction on our previous episode before this news came out My base case was that we would remain at war for many more months and that as a result, inflation would remain high for the foreseeable future. Well, my reaction to this deal is Cautious optimism. Unlike previous announcements of deals, which I completely wrote off and rightly so