It’s election season, and most of the national discourse is focused on the midterms and the increasing likelihood that Democrats will take back the House and perhaps even the Senate. But here in California, the eyes of the tech elite are focused on another target: Proposition 40, aka the billionaire wealth tax.
Prop 40 would enact a one-time 5% wealth tax on the 250 or so billionaires that reside in California, and redirect the funding towards healthcare and education. Predictably, billionaires are furious about the idea. Opponents, like Google co-founder Sergey Brin, have spent some $200 million to oppose the measure. And this comes on the heels of the AI industry and its ultra-rich executives working overtime to stop a slate of new laws designed to protect workers from AI.
Today, on Blood in the Machine, we’re going to dive into these fights, with a woman who’s been at the center of many of them. Lorena Gonzalez is a former state legislator and current president of the California Federation of Labor Unions. She’s a driving force supporting both Prop 40 and the newly passed laws shielding workers from AI abuses and surveillance. (Gonzalez is, for example, a big reason why companies are no longer allowed to surveil you in the bathroom, a law tech firms actually lobbied hard against.)
Gonzalez breaks down the importance of taking on the billionaire tech titans, what they’re really mad about (hint: it’s not just the money), and how working people can fight back against an increasingly oligarchic and dystopian-looking future.
This was a great chat, and I hope you enjoy it as much as I did. Show notes and links to articles cited will follow at the end of the post here.
I’m still breathing myself back to life after my bout with Covid—reasonably short, only truly brutish and awful for a day or two, but the long hacking tail of that special covid cough clings on—and a brief trip to the California state capitol to meet with researchers, labor leaders, and policymakers to hear about and discuss the AI policy agenda for 2027. Lots of interesting work and ideas coming down the pike, more on that soon. Next week, I’ll be headed to New York for the People’s AI Assembly, if you’re headed that way too drop by and say hello.
I’ll be back on a proper newslettering-and-podcasting schedule next week, but I did want to make sure to flag a few developments here that we should all be watching extremely closely.
First, Character.ai, one of the early headline-grabbing AI startups not named OpenAI or Anthropic, has declared bankruptcy. As 404 Media’s Jason Koebler notes, this can be seen as “one of the first dominos to fall in the long-foreseen AI bubble.”
He continues:
The circumstances of its bankruptcy are exactly what critics of AI have been saying would happen: Character.ai lit a huge amount of money on fire running its product, did not bring in a lot of revenue, and faced enormous legal fees after causing harm to its users. Enshittifying its product to try to make its expenses cheaper did not work, according to a narrative filed in bankruptcy court Tuesday…
Character.ai is one of the best-known AI chatbot companies that has become popular in the AI companion space. The company has faced various legal problems after being sued by the family of one of its users who killed himself after chatting with a Character.ai chatbot, and has been the target of regulators pushing for age verification tech because of its popularity with kids. In its bankruptcy filings, the company says that its enormous legal costs contributed to its bankruptcy, but that even without the legal problems, its business was wildly unsustainable.
Casey Mock has a good writeup of some of the implications of Character.ai’s bankruptcy, and lessons we can draw from it—namely, that, thanks to legal action taken by victims and supported by nonprofit advocates, it was made liable for the harms its products caused people, which was one contributor to its decline. Mock suggests that even if you’re worried about AI doom scenarios, such an approach is much more effective in reining in AI companies and holding them accountable than continual handwringing over doomer scenarios.
Regardless, there is fresh chatter, as Koebler indicated, that the AI bubble is under strain. Especially since Character.ai’s bankruptcy is only one disconcerting factor among many here. Anthropic released its third-quarter earnings as it gears up for its IPO, and its slowing growth rate worried some investors. Market Watch called it a “red flag” while other observers were harsher. Anthropic pulled in $16.8 billion, but it’s aiming for a valuation of *$2 trillion* and its overhead and committed costs are enormous.
Elsewhere, the VC firm Andreessen Horowitz laid off the bulk of its recruitment team, which observers flagged as a sign that fears of leaner times are ta
Finally, these concerns, as the Financial Times reports, appear to be hitting the banks and larger institutional investors, too:
Investors are losing confidence that revenues from the AI boom will be sufficient to support the vast debt piles financing data centres, pushing bonds backing some of the largest US infrastructure projects into increasingly stressed territory.
Prices of bonds issued to fund prominent data centres where Meta, Nvidia, Oracle and others will become tenants - such as “Hyperion” and “Project Excalibur” - have fallen well below par in recent weeks.
Investors are also dumping debt issued by so-called neocloud companies - of which the best known is Nvidia-backed CoreWeave - which have been the most aggressive in how they finance their Al build-out.
CoreWeave, whose stability has long been viewed as an indicator of the AI economy’s health, saw its stock tank this week, before recovering some value on Thursday.
There have been lots of ‘is the AI bubble finally bursting’ moments over the last few years to be sure, but it’s hard not to see some uniquely bad trendlines taking shape here.
Podcast show notes:
Blood in the Machine Newsletter
Brian’s Bluesky
Articles mentioned:
California just passed the strongest AI labor laws in the US
Paramount completes $111B Warner merger, creating “Skydance” behemoth - Ars Technica
AI in hiring and firing: California’s No Robo Bosses Act
An AI School, With No Teachers, To Open in Chicago This Fall
Billionaire Google Co-Founder Pumps $102 Million Into Fighting California Wealth Tax | Common Dreams
California Billionaires Are Spending Big in Costly Wealth-Tax Fight
The Blue Wave Could Reshape Politics in the South | The New Republic
$200 million-plus spent fighting and supporting billionaire tax - Los Angeles Times
Gavin Newsom backs measure to kill the billionaire tax and ban future wealth taxes
Gavin Newsom opposes California’s $100 billion billionaire tax. The fight may outlast the vote
Billionaire Tax Explained: What Proposition 40 Would Mean for California
Google co-founder Sergey Brin spends $102M opposing California Prop. 40 | abc10.com
California’s ‘carpet-bombed’ wealth tax measure runs into a wall - POLITICO
