6 ms·

This reminds me of around 2002 when I wrote an article looking at how all the web behemoths at the time were claiming profitability through ad sales, but actual

This reminds me of around 2002 when I wrote an article looking at how all the web behemoths at the time were claiming profitability through ad sales, but actually the vast majority of ads were from one web behemoth advertising on an other's site and vice versa.

slaterbug 1y ago
Do you happen to have a copy of that article? I’d love to read it.
- o1bf2k25n8g5 1y ago
  No, but I could give you several articles that link to that article while talking about how great it is.
qaq 1y ago
Same as capacity swaps in telecom of that era
- Sam6late 1y ago
  This is How Larry Elisson beat Musk for a short while although Oracle was struggling.' The deals among Oracle, Nvidia, and OpenAI have raised concerns about their circular and potentially risky nature. Oracle is reportedly spending tens of billions on Nvidia's advanced chips, Nvidia plans to invest up to $100 billion in OpenAI, and OpenAI uses Oracle's cloud infrastructure through Microsoft's Azure, creating a closed loop of financing and business. Some analysts warn this creates a reflexive loop or "dangerous bubble" where valuations may be inflated artificially by the circular flow of capital and resources, reminiscent of past booms that ended in sharp market corrections.
  - deleted 1y ago
    [deleted]
  - heywoods 1y ago
    Is it fair to say OpenAI is in a sense “washing” the money passing between Nvidia and Oracle? And instead of taking a cut in the traditional money laundering they are enjoying massive valuation gains? When the fed investigates this does it matter if one of the 3 companies is not a publicly traded company?
    - scott_w 1y ago
      I guess you could see it like that but I don’t think it’s “wash trading” in the sense that they’re coordinating it. I don’t really know what the fed would investigate here.
    - XorNot 1y ago
      What you're missing is that real value can be created in these exchanges - Nvidia really makes chips for example. The issue is that it's an industry of investment which exists solely to power more investment in AI - the entire chain is still assuming that someone will eventually pay for this. At the end of the day all that money leaks out to employees and suppliers...but no one those people transact with may have any interest in buying what was produced.
      - neuronic 1y ago
        That's only really value if the chips are useful and if there are people buying the chips for something they want to do with them. It's entirely based on the perception that LLM training & inference is here to stay at ever growing scales when the shortcomings of Artificial Dreaming are increasingly scrutinized. Not all businesses want to end up paying refunds to their clients like Deloitte [1] because the LLM hallucinated crap into their reports (and they failed to correct it). [1] https://www.theguardian.com/australia-news/2025/oct/06/deloitte-to-pay-money-back-to-albanese-government-after-using-ai-in-440000-report https://www.theguardian.com/australia-news/2025/oct/06/deloi...
        re-thc 1y ago
        > It's entirely based on the perception that LLM training & inference is here to stay at ever growing scales when the shortcomings of Artificial Dreaming are increasingly scrutinized. Not all businesses want to end up paying refunds to their clients like Deloitte [1] because the LLM hallucinated crap into their reports (and they failed to correct it). This assumes Deloitte didn't make more $$$ from the deal by "outsourcing" it to AI than not. It was a partial refund.
  - re-thc 1y ago
    > while although Oracle was struggling In terms of actual earnings not sure Tesla is doing better.
  - nl 1y ago
    Oracle most certainly is not struggling. Even putting aside the NVidia deal, their cloud business is thriving.
    - Traubenfuchs 1y ago
      They give you 4 nodes with 1 vcpu and 6GB RAM each for free forever by the way. Most other stuff has a free tier too. I used it to learn terraform and have a kubernetes cluster running. I know it's always trendy to bash oracle and simp for AWS, but it is THE best option for learning and hobbyists.
      - NewJazz 1y ago
        Uh, you can get that level of compute locally easy peasy. Learning terraform isn't hard, it's what you stitch together with terraform that is hard.
        bartekrutkowski 1y ago
        I think the point here is that free beats easy peasy, especially when learning a new skill, where your easy peasy isn't their easy peasy. And getting something up and running on Oracle Cloud with Terraform is nowhere near easy peasy for someone who never did anything with Terraform ;)
        bravetraveler 1y ago
        'Back in my day' we learned with VMs for free! The computer you have works without internet, for instance
      - pta2002 1y ago
        You can also get all of that in a single node, which makes for a fairly beefy build server :)
      - jeswin 1y ago
        That's very cool. I was going to get a hetzner for some hobby projects. Can you get that without adding a payment mechanism? For some reason, I'd be more cautious about putting my card into Oracle's offering than anyone else.
  - athrowaway3z 1y ago
    It's worth noting Elisson is 2 years older than Trump. What's he going to do with all that money, and what does he care for the risk it's bad or shady? Worst case, he got to be #1 for a bit for a few dozen billion, best case he's hoping AGI will extend his life before he croaks.
    - pjc50 1y ago
      I miss the era when people like Dale Carnegie would sponsor some public buildings, instead of ruining the internet and the natural environment.
      - iamacyborg 1y ago
        The Sacklers donated a lot of money to cultural institutions while they poisoned society with opiates.
      - summa_tech 1y ago
        You may be thinking of Andrew Carnegie. Who was a steel industry tycoon, probably the #2 most polluting industry today. Back then - probably #1.
    - neuronic 1y ago
      What does Ellisons personal wealth have to do with this? The concern is that the circular pattern of shifting money between these companies is artificially inflating the stock market to heights that will crash very very badly when this bubble finally pops.
      - rhetocj23 1y ago
        The market is due a correction irrespective of bubble mania. The implied equity risky premium is getting pretty low - a sign of greed.
    - victorbjorklund 1y ago
      Doubt he believes that. Getting AGI (whatever that actually means) means we are still far away from reversing ageing.
  - HelloNurse 1y ago
    If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize, bubbles aren't completely bad.
    - re-thc 1y ago
      > If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize Only if those are the only actual real customers. It's not. The pie is a lot bigger. And with the current hype some other AI company will just take over and the bubble will continue.
    - passwordoops 1y ago
      You can't discount the impact this will have on global stock markets and what that may do to both individuals and, more importantly, pension funds, as a large swath of people are retiring
      - HelloNurse 1y ago
        Damage is unavoidable, we can only hope that it happens to someone deserving. Innocent individuals and pension funds still have time to retreat; if they don't it will be their fault.
        azan_ 1y ago
        We are moving towards gerontocracy - if pension funds will have large losses it’s very likely that young, working age people will be taxed extra heavily to keep the QOL of pensioners.
        zmgsabst 1y ago
        That would likely lead to a revolution: Millennials are 30-45 and they’re not in a good place; neither is Gen Z. We’re already seeing revolutions elsewhere — and it’s likely that trying to loot them further by generations who sold out the nation will simply lead to social collapse.
sbierwagen 1y ago
Also a pg essay from 2010: https://www.paulgraham.com/yahoo.html https://www.paulgraham.com/yahoo.html >By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"
- themafia 1y ago
  That's not how Ponzi schemes work. Yahoo had a defacto _monopoly_ and the market had bad discovery leading to bad price information. There was no point at which the internet was /not/ worth investing in and everyone who had experience with it knew that. The real problem seemed to be that you can only put so much money into pets.com before it becomes stupid. You had more short term investment capital than could be _effectively_ spent at the time. The long term players, as usual, avoided the Archimedian idealism, and were heavily rewarded anyways. pg has startup brains.
  - noitpmeder 1y ago
    pg has completely clairvoyant vision, if only about historical events
  - hn_throwaway_99 1y ago
    Why is it so popular to "akshually, Ponzi schemes are different!" these days? Words have meaning in context, and calling something a "Ponzi scheme" these days means any pyramid-like system that only works as long as new investors come to the table, because that new investor money is the sole source of gains for earlier investors. But once you run out of new investors, which is inevitable, the whole thing collapses. What pg described was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam. And that's very different from other types of business ventures that eventually fail because of the more "normal" reason that they just don't gain traction.
jongjong 1y ago
But you can't fake profits that way (without cooking the books); you can only fake revenue. That's why profits matter. Though I guess with high velocity of money circulating in tight loops, everyone involved can feel rich. 1 million dollars changing hands once per day can potentially mint 365 'millionaires' during the course of a year. If they just pass it back and forth among themselves to buy each other's stocks and products and don't let that money escape their network to actually pay for something useful, they can all be millionaires... On paper. Not to mention how relatively small amounts of money, moving at high velocity, can inflate asset prices... On Alice's birthday, Bob can buy 100 shares of Alice's shell company at a price of $10 per share. If Alice owns 1 million shares of the company (which she founded), it means that Alice's net worth is at least $10 million... It cost Bob only $1000 to give Alice a net worth of $10 million. Now imagine that same $1000 moving in and out of that company's stock, traded 1000 times per day between various people. With just $1000 circulating back-and-forth at high frequency (A.K.A. high-frequency trading), you can generate a trade volume of $1 million per day... So it all seems reasonable; a company with a $10 million valuation with $1 million daily trade volume... Nothing suspicious. So you can basically start a shell company and fake everything; from the market cap, to the trade volume; using only a relatively small amount of money. This is what they were doing in the early days of crypto. The same money can hop around in circles between an insane number of people when it's just 'revenue' because revenue is not taxed (after expenses). Only profits are taxed... But the same money, as profit, can barely hop between 6 people before it's taxed down to just 10% of its original number. High-velocity revenue can severely distort people's perceptions of the market, especially in the era of media filter bubbles.
- tim333 1y ago
  You can fake profits. Company A hands $1m to company B to buy equity in it. Company B hands the $1m to A to run ads on A. Under GAAP (normal accounting) A has a profit. In reality are they profiting? Who knows - it depends how A does as a business.
  - jongjong 1y ago
    Damn. Didn't think of that. Seems I have a very naive definition of 'profit'. It's crazy how all these small subtleties in definitions of various terms can create something so abominable in the aggregate. Makes one want to reach for a tinfoil hat. Not sure I can even trust the company which makes the tinfoil at this point.

slaterbug 1y ago

Do you happen to have a copy of that article? I’d love to read it.

o1bf2k25n8g5 1y ago
No, but I could give you several articles that link to that article while talking about how great it is.

qaq 1y ago

Same as capacity swaps in telecom of that era

Sam6late 1y ago
This is How Larry Elisson beat Musk for a short while although Oracle was struggling.' The deals among Oracle, Nvidia, and OpenAI have raised concerns about their circular and potentially risky nature. Oracle is reportedly spending tens of billions on Nvidia's advanced chips, Nvidia plans to invest up to $100 billion in OpenAI, and OpenAI uses Oracle's cloud infrastructure through Microsoft's Azure, creating a closed loop of financing and business. Some analysts warn this creates a reflexive loop or "dangerous bubble" where valuations may be inflated artificially by the circular flow of capital and resources, reminiscent of past booms that ended in sharp market corrections.
- deleted 1y ago
  [deleted]
- heywoods 1y ago
  Is it fair to say OpenAI is in a sense “washing” the money passing between Nvidia and Oracle? And instead of taking a cut in the traditional money laundering they are enjoying massive valuation gains? When the fed investigates this does it matter if one of the 3 companies is not a publicly traded company?
  - scott_w 1y ago
    I guess you could see it like that but I don’t think it’s “wash trading” in the sense that they’re coordinating it. I don’t really know what the fed would investigate here.
  - XorNot 1y ago
    What you're missing is that real value can be created in these exchanges - Nvidia really makes chips for example. The issue is that it's an industry of investment which exists solely to power more investment in AI - the entire chain is still assuming that someone will eventually pay for this. At the end of the day all that money leaks out to employees and suppliers...but no one those people transact with may have any interest in buying what was produced.
    - neuronic 1y ago
      That's only really value if the chips are useful and if there are people buying the chips for something they want to do with them. It's entirely based on the perception that LLM training & inference is here to stay at ever growing scales when the shortcomings of Artificial Dreaming are increasingly scrutinized. Not all businesses want to end up paying refunds to their clients like Deloitte [1] because the LLM hallucinated crap into their reports (and they failed to correct it). [1] https://www.theguardian.com/australia-news/2025/oct/06/deloitte-to-pay-money-back-to-albanese-government-after-using-ai-in-440000-report https://www.theguardian.com/australia-news/2025/oct/06/deloi...
      - re-thc 1y ago
        > It's entirely based on the perception that LLM training & inference is here to stay at ever growing scales when the shortcomings of Artificial Dreaming are increasingly scrutinized. Not all businesses want to end up paying refunds to their clients like Deloitte [1] because the LLM hallucinated crap into their reports (and they failed to correct it). This assumes Deloitte didn't make more $$$ from the deal by "outsourcing" it to AI than not. It was a partial refund.
- re-thc 1y ago
  > while although Oracle was struggling In terms of actual earnings not sure Tesla is doing better.
- nl 1y ago
  Oracle most certainly is not struggling. Even putting aside the NVidia deal, their cloud business is thriving.
  - Traubenfuchs 1y ago
    They give you 4 nodes with 1 vcpu and 6GB RAM each for free forever by the way. Most other stuff has a free tier too. I used it to learn terraform and have a kubernetes cluster running. I know it's always trendy to bash oracle and simp for AWS, but it is THE best option for learning and hobbyists.
    - NewJazz 1y ago
      Uh, you can get that level of compute locally easy peasy. Learning terraform isn't hard, it's what you stitch together with terraform that is hard.
      - bartekrutkowski 1y ago
        I think the point here is that free beats easy peasy, especially when learning a new skill, where your easy peasy isn't their easy peasy. And getting something up and running on Oracle Cloud with Terraform is nowhere near easy peasy for someone who never did anything with Terraform ;)
        bravetraveler 1y ago
        'Back in my day' we learned with VMs for free! The computer you have works without internet, for instance
    - pta2002 1y ago
      You can also get all of that in a single node, which makes for a fairly beefy build server :)
    - jeswin 1y ago
      That's very cool. I was going to get a hetzner for some hobby projects. Can you get that without adding a payment mechanism? For some reason, I'd be more cautious about putting my card into Oracle's offering than anyone else.
- athrowaway3z 1y ago
  It's worth noting Elisson is 2 years older than Trump. What's he going to do with all that money, and what does he care for the risk it's bad or shady? Worst case, he got to be #1 for a bit for a few dozen billion, best case he's hoping AGI will extend his life before he croaks.
  - pjc50 1y ago
    I miss the era when people like Dale Carnegie would sponsor some public buildings, instead of ruining the internet and the natural environment.
    - iamacyborg 1y ago
      The Sacklers donated a lot of money to cultural institutions while they poisoned society with opiates.
    - summa_tech 1y ago
      You may be thinking of Andrew Carnegie. Who was a steel industry tycoon, probably the #2 most polluting industry today. Back then - probably #1.
  - neuronic 1y ago
    What does Ellisons personal wealth have to do with this? The concern is that the circular pattern of shifting money between these companies is artificially inflating the stock market to heights that will crash very very badly when this bubble finally pops.
    - rhetocj23 1y ago
      The market is due a correction irrespective of bubble mania. The implied equity risky premium is getting pretty low - a sign of greed.
  - victorbjorklund 1y ago
    Doubt he believes that. Getting AGI (whatever that actually means) means we are still far away from reversing ageing.
- HelloNurse 1y ago
  If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize, bubbles aren't completely bad.
  - re-thc 1y ago
    > If this means that the fall of OpenAI will cause Oracle and Nvidia to crash and downsize Only if those are the only actual real customers. It's not. The pie is a lot bigger. And with the current hype some other AI company will just take over and the bubble will continue.
  - passwordoops 1y ago
    You can't discount the impact this will have on global stock markets and what that may do to both individuals and, more importantly, pension funds, as a large swath of people are retiring
    - HelloNurse 1y ago
      Damage is unavoidable, we can only hope that it happens to someone deserving. Innocent individuals and pension funds still have time to retreat; if they don't it will be their fault.
      - azan_ 1y ago
        We are moving towards gerontocracy - if pension funds will have large losses it’s very likely that young, working age people will be taxed extra heavily to keep the QOL of pensioners.
        zmgsabst 1y ago
        That would likely lead to a revolution: Millennials are 30-45 and they’re not in a good place; neither is Gen Z. We’re already seeing revolutions elsewhere — and it’s likely that trying to loot them further by generations who sold out the nation will simply lead to social collapse.

sbierwagen 1y ago

Also a pg essay from 2010: https://www.paulgraham.com/yahoo.html https://www.paulgraham.com/yahoo.html >By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"

themafia 1y ago
That's not how Ponzi schemes work. Yahoo had a defacto _monopoly_ and the market had bad discovery leading to bad price information. There was no point at which the internet was /not/ worth investing in and everyone who had experience with it knew that. The real problem seemed to be that you can only put so much money into pets.com before it becomes stupid. You had more short term investment capital than could be _effectively_ spent at the time. The long term players, as usual, avoided the Archimedian idealism, and were heavily rewarded anyways. pg has startup brains.
- noitpmeder 1y ago
  pg has completely clairvoyant vision, if only about historical events
- hn_throwaway_99 1y ago
  Why is it so popular to "akshually, Ponzi schemes are different!" these days? Words have meaning in context, and calling something a "Ponzi scheme" these days means any pyramid-like system that only works as long as new investors come to the table, because that new investor money is the sole source of gains for earlier investors. But once you run out of new investors, which is inevitable, the whole thing collapses. What pg described was exactly a Ponzi scheme in that sense, even if it wasn't a deliberate scam. And that's very different from other types of business ventures that eventually fail because of the more "normal" reason that they just don't gain traction.

jongjong 1y ago

But you can't fake profits that way (without cooking the books); you can only fake revenue. That's why profits matter. Though I guess with high velocity of money circulating in tight loops, everyone involved can feel rich. 1 million dollars changing hands once per day can potentially mint 365 'millionaires' during the course of a year. If they just pass it back and forth among themselves to buy each other's stocks and products and don't let that money escape their network to actually pay for something useful, they can all be millionaires... On paper. Not to mention how relatively small amounts of money, moving at high velocity, can inflate asset prices... On Alice's birthday, Bob can buy 100 shares of Alice's shell company at a price of $10 per share. If Alice owns 1 million shares of the company (which she founded), it means that Alice's net worth is at least $10 million... It cost Bob only $1000 to give Alice a net worth of $10 million. Now imagine that same $1000 moving in and out of that company's stock, traded 1000 times per day between various people. With just $1000 circulating back-and-forth at high frequency (A.K.A. high-frequency trading), you can generate a trade volume of $1 million per day... So it all seems reasonable; a company with a $10 million valuation with $1 million daily trade volume... Nothing suspicious. So you can basically start a shell company and fake everything; from the market cap, to the trade volume; using only a relatively small amount of money. This is what they were doing in the early days of crypto. The same money can hop around in circles between an insane number of people when it's just 'revenue' because revenue is not taxed (after expenses). Only profits are taxed... But the same money, as profit, can barely hop between 6 people before it's taxed down to just 10% of its original number. High-velocity revenue can severely distort people's perceptions of the market, especially in the era of media filter bubbles.

tim333 1y ago
You can fake profits. Company A hands $1m to company B to buy equity in it. Company B hands the $1m to A to run ads on A. Under GAAP (normal accounting) A has a profit. In reality are they profiting? Who knows - it depends how A does as a business.
- jongjong 1y ago
  Damn. Didn't think of that. Seems I have a very naive definition of 'profit'. It's crazy how all these small subtleties in definitions of various terms can create something so abominable in the aggregate. Makes one want to reach for a tinfoil hat. Not sure I can even trust the company which makes the tinfoil at this point.