E115: New Tariff Implications, DeepSeek and Open Source Analysis, and Meta’s Big Bets w/ Byrne Hobart

Feb 6, 2025

Byrne Hobart, a prominent writer of "The Diff" and co-host of "The Riff," joins Erik Torenberg to explore a range of pressing topics. They dissect the new tariff implications on global markets, the rise of populism, and the complexities of AI technologies like DeepSeek. The conversation also covers Meta's ambitious plans in the realms of VR and AI, along with the challenges posed by open-source models. Furthermore, they touch on innovative talent strategies and the evolving dynamics of the stock market, particularly in tech.

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INSIGHT

Tariff Targets

Trump's tariffs on Mexico focus on border issues, immigration, and drugs, not job creation.
Canadian tariffs seem less clear, as immigration and drug smuggling are smaller issues.

INSIGHT

China's Belt and Road Initiative

China used its trade surplus to build infrastructure, strengthening economic ties, and importing raw materials.
This strategy worked until they realized there weren't many railroads or ports left to build, and shifted focus to domestic economy.

ANECDOTE

Market Reactions to DeepSeek

When Nvidia's stock dropped, AI-adjacent stocks moved up due to investors offsetting bets.
Non-AI momentum stocks also rose as investors exited AI-themed momentum positions.

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Erik Torenberg and Byrne Hobart discuss the implications of recent tariffs, the impact of AI advancements like DeepSeek, Meta's investments in VR and AI, stock market dynamics, and differing perspectives on open-source AI models.

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RECOMMENDED PODCASTS:

🎙️Investor and writer of the popular newsletter The Diff, Byrne Hobart, and co-host Erik Torenberg discuss today’s major inflection points in technology, business, and markets – and help listeners build a diversified portfolio of trends and ideas for the future.

Apple: https://podcasts.apple.com/us/podcast/the-riff-with-byrne-hobart-and-erik-torenberg/id1716646486

Spotify: https://open.spotify.com/show/6rANlV54GCARLgMOtpkzKt

YouTube: https://www.youtube.com/@TheRiffPodcast

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LINKS:

Byrne’s writing: https://thediff.co

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X / TWITTER:

@byrnehobart

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HIGHLIGHTS FROM THE EPISODE:

• Trump's proposed 25% tariffs on Canadian goods highlight tensions between using tariffs as negotiation tactics versus long-term economic strategy.

• China's Belt and Road Initiative is essentially branding for existing Chinese international infrastructure investments aimed at extending economic influence.

• DeepSeek's AI developments caused unexpected market reactions, with non-AI momentum stocks rising as investors unwound their AI-focused positions.

• Forward Deployed Engineers serve as crucial bridges between complex technical products and business implementation, helping evolve products based on real-world usage.

• Meta's significant capital expenditure on AI infrastructure represents a strategic shift from being purely asset-light to more capital-intensive.

• A fantasy stock-picking competition aims to identify investment talent outside traditional recruiting paths through various categories like small-cap, mid-size, and event-driven investments.

• The transition from asset-light to capital-intensive business models can actually strengthen a company's competitive position by making value harder to replicate.

• Meta's metaverse investment might be premature, but AR (rather than VR) could emerge as the dominant future interface.