Sharp China: The 'Raising a Lobster' Frenzy; Iran and US-China as Trump's Visit Looms; Two Sessions Takeaways

Hello and welcome to Sharp China. I'm Andrew Sharp and you are listening to a free preview

of today's episode. Hello and welcome back to another episode of Sharp China. I'm Andrew

Sharp and on the other line, Bill Bishop, Bill, how you doing? Hello, Andrew. I'm doing

well. Hi, everybody. We made it to spring. It's a wonderful week here in Washington, DC.

I don't want to spike the football too early, but I feel like the worst is behind us. We can

definitely put away the shovels for the remainder of March here. And also it's been like 75 degrees,

the past couple of days. It's wonderful. I hope you're not the Jim Kramer of weather. Oh, boy.

It is me too. It's only March 11. So that would be a really horrible legacy for me. I hope I didn't

just ruin it for everybody who's listening in the DFV area here. Well, as for the show, we are

actually going to zag at the top of the show. Obviously, the war in Iran is ongoing. There are all

sorts of implications for the US and China. And of course, Trump's visit to Beijing looms. We're

only about two weeks out here. But we will begin with tech and a Wall Street Journal story that

reads, China's tech titans are embracing an unlikely outsider open claw, a project created by an

Austrian developer that is making waves across the country. Last week, a line of people queued outside

10 cent headquarters in Shenzhen wanting help installing the artificial intelligence assistant

on their computers. Open clause emergence marks a pivot from previous consumer facing AI chat

bots like open AI's chat GPT and Chinese model deep seek, which answers questions to now technology

that can also perform tasks. The open source AI assistant created by Peter Steinberger can make

and carry out decisions on the user's behalf and has become a hit in China's tech community.

Shares of 10 cent rose 7.3% on Tuesday after it launched a suite of open claw compatible AI

products, while shares of startup minimax added over 20% as investors expected to become a key

beneficiary to open claw adoption. The term raising a lobster has been trending on Chinese social

media, a nod to open clause lobster logo as users rush to adopt the AI agent, which can do things

such as managing calendars, sending emails and research topics on its own. So Bill, you wrote

about this two days in a row this week and called the trend fascinating. What fascinates you

about this phenomenon? And will you be raising a lobster of your own and participating in this trend?

So, so it's a frenzy. This is actually not me. This is my lobster. I mean, great. This is the

open open podcast. No, no, I'm not putting that thing anywhere near anything that matters to me.

There are already too many stories of it taking over lots of things that's supposed to do.

But in all seriousness, the frenzy is something to watch. And I think you've got this really

fascinating mix of sort of incentives both in terms of both economic and policy. You've got

a couple of local governments. I think a district in Shenzhen has been pushing this. I think it

was in Wuxi and other city. There was local officials pushing it for local officials. It's hey,

look, we're, you know, the central government is, you know, AI is a big part of the future. It's

in, you know, there's this AI plus plan. There is it's in the, it's in the government work report

that has come out during this, the two sessions that concludes tomorrow, Thursday. It's in the

15th, five-year plan that's, you know, going to be voted on tomorrow, Thursday, and then enacted.

So, if you're a local official, you think, hey, if I'm pushing this stuff, it looks like I'm,

I'm skating where the policy puck is, right? I look like I'm on the forefront of what we should

be doing. From the economic interest perspective, you've got the companies that actually host the

infrastructure or have the Mahosta models, you know, they need people paying for tokens,

distinct burns tokens. So, they're getting paid there. You've got this whole cottage industry

of people who are, especially in Shenzhen, I think, you know, that, you know, build computers,

well, now we're going to install the open claw for you. We'll install these since for you, right?

And then now we're seeing because there have been, while this is happening at kind of the local

level and some of the companies are pushing it, the bodies and Beijing that actually focus on things

like security and network security are like, wait a minute, wait a minute, maybe there's some

problems here. And so, now the folks who are getting paid to install it are also now offering

services to uninstall it, right? And there's all these shoulder industries bringing up here.

And every layer of the AI stack can profit from the frenzy, at least as long as it's allowed

to continue. And so, you mentioned this mini-max, the stock has gone crazy. It's now worth the

market cap is no higher than by-dos, right? And I think, you know, there's a story from Bloomberg

today, completely unsurprising that the government has now put out directives to like SOE's and

other government entities that, you know, don't be using this thing and, you know, don't some of

your employees, in some cases, they shouldn't have it on their personal devices. You know, I mean,

it's, it's a very interesting agent. It's also completely, I mean, you see stories,

well, you see stories like someone in some, some senior person in Metta who did AI was like,

go and install and delete it, everything, you know? Yeah. I mean, I can't figure that out.

Grandma in Shenzhen is not going to figure it out, right? 100%. Yeah, it's funny. Like, hosting

Sharp Tech, any trend that takes the tech community by storm, I'm immediately inundated with emails

to the Sharp Tech inbox. So this was initially referred to as Claudebot and Claudebot took tech

by storm for about 72 hours. And then like 96 hours in, we started reading stories about how it was

insecure. It had a mind of its own. It was off-training your crypto. Exactly. That's a risk for anyone

using the product. Right. And then the risks posed to the state are also pretty interesting.

And so, and so, you know, you now, again, this frenzy, you've seen this is sort of how China is,

there are so many people when a trend happens, it's not a small trend, right? And so,

you know, one of the questions, if your open claw agent decides to say, set up a VPN and go over

the great firewall or decides that maybe they should start investing in crypto, you're breaking

a law, potentially, you've got at least with the VPN, who's responsible? Yeah, like you liable.

Are you liable? Is your agent liable? The install liable? So what's going to happen? I think

you're seeing it. And especially Tencent is rolling out. I mean, they're going to end up,

it's not going to be open claw. It's going to be sort of claw with Chinese characteristics,

where it's going to be, I think, put in a cage, so to speak. And then you'll see the big companies,

especially like Tencent, which, you know, because of its dominance with WeChat, it's effectively,

you know, its own OS in China. And there's, you know, the information had a story yesterday about

how the Tencent has multiple versions or multiple things are working on to effectively harness the

claw while controlling it. That I think is where you'll end up seeing a much more, you know,

a lot more of an adoption, but it won't be this sort of free for all. It will be somehow contained

within the Tencent ecosystem and they'll be safe, right? Yeah. There's a good, there's a good

subset called Hello China tech, this, they cover China, the Chinese tech from China. It's very

good. They've been writing a lot about this. They have a good piece today about sort of what Tencent

is probably doing. We'll link to it in the show notes. But the point is the Tencent may actually be

the bigger winner, both because it'll, you know, because it controls the application layer with WeChat,

if they can make it easy for anyone with WeChat to decide to install some instance of their

version of like Tencent claw, whatever they're going to call it, then you'll see a lot of adoption,

but it'll be in a much more managed way and much safer. And is it a case where Tencent, because

of its resources and existing infrastructure is best positioned to sort of reign in this claw by

open claw. Sounds like it. And also if they, if you end up with people using it and there are

lots of token requests, you know, Tencent, whether or not they're using Tencent's model or they're

using other models hosted in Tencent, Cloud Tencent will still be the beneficiary, right? As an

infrastructure provider. And so, but it also is in the context of the broader competition between

like Tencent and Bite Dance and Alibaba. And you know, I think there's a good, yeah, but again,

that's the model, but I think it is who's got the applications people using and how do you

integrate this into those applications as opposed to new applications. And so I think the Tencent,

as a winner here, is a valid thesis, but the sort of free-for-all local government officials

encouraging like literally like the aunties to install open claw at a opens, you know, sort of a big

kind of a big event outside headquarters. And oh, that's all I mean, put your open claw on

your computer and see what it does. I think those days are probably that frenzy will will be

tamped out because it is just something that is so fundamentally in opposition to how the government

likes to manage the internet. Yeah. Well, and for anybody who hasn't seen photos of some of these

install meetups, I don't know how to characterize it exactly, but just like masses of people outside

of Tencent headquarters installing open claw and it's happened in the US as well. And I'm surprised

that that many people are doing it in the US. I was really surprised to see that that many people

were being allowed to do that in China. And for anybody who has no idea what we're talking about

here, I looked up this post from Cisco systems before we came on to record just to sort of ground

people in what this technology is over the past few weeks, Claudebot then renamed Moltbot later

renamed open claw because I think Claudebot ran a foul of Claude has achieved virality as an

open source self-hosted personal AI assistant that runs locally and executes actions on the users

behalf. The bots explosive rise is driven by several factors. Most notably, the assistant can

complete useful daily tasks like booking flights or making dinner reservations by interfacing with

users through popular messaging applications, including WhatsApp and I message and now potentially

we chat open claw also stores persistent memory, meaning it retains long term context, preferences

and history across user sessions rather than forgetting when the session ends from a capability

perspective. Open claw is groundbreaking. From a security perspective, it's an absolute nightmare.

Open claw can run shell commands, read and write files and execute scripts on your machine,

granting an AI agent high level privileges enables it to do harmful things if misconfigured

or if a user downloads a skill that is injected with malicious instructions. Open claw has already

been reported to have leaked plain text API keys and credentials which can be stolen by threat

actors via prompt injection or unsecured endpoints. Open claw's integration with messaging applications

extends the attack surface to those applications where threat actors can craft malicious prompts

that cause unintended behavior. I mean, if you're a scammer or a government agent, this is a dream.

You'd be nuts to not try and build skills that people download that then do all sorts of things

that the user doesn't want to do. Right. Think this happening. I mean, it's insane. That's

why I'm not stuck on anywhere near my devices. I mean, that's the thing. For you or I, it can

delete large reams of data, share private data, take all sorts of actions you don't intend,

seems like more trouble than it's potentially worth. But it's a high. I mean, if you're,

if you bought one of these Chinese AI companies that listed in Hong Kong, you're loving it,

right? This is a great frenzy. This is why I call it, you know, it's frenzy. Well, you

absolutely. You love any product that people are going to use that are going to eat up tokens. I

mean, that's sort of the, but I think this has been heading for a few years. I mean, the Bloomberg

story today, but there's more that the crack that I mean, I don't, you know, they're going to

reign it in. There's no, there's no question. It's not, it's going to be, it's not going to be the

lobster running free. It's going to be the lobster in a little cage that occasionally gets boiled.

Yeah, the lot, no, the Lord, maybe it's an apot and a pot is boiled by the authorities.

I was going to nominate the grocery store lobster tank as the preferred analogy, but I imagine

there will be some agent boiling along the way as well. Because look for the state,

Cisco lays this out actually pretty clearly in this random blog post from a couple of weeks ago,

AI agents with system access can become covert data leak channels that bypass traditional

data loss prevention proxies and endpoint monitoring. And to the extent that these are used by

individuals who work for any sort of security adjacent company, it creates the potential for

employees to just unknowingly introduce these agents into workplace environments.

I'm surprised that Chinese authorities don't think that this maybe is like an NSA op.

And maybe it is. I mean, that'd be great if it is, right? I guess. But, you know,

there's also there was a paper I think that came out a few days ago about Ali Baba's work

on one model where they discovered that the model decided on its own to go over the great far

on start trading crypto. Great. Right. And so you wonder like, well, how did they do that?

What was the training data? I mean, you know, it's just like, so again, what are these things

going to do? It's really insane. I think it's insane here in the US, but in a system that

we're trying to where there's so much more focused on control information management and control

around the internet. This thing is like, I mean, it is just kind of mind blowing that this thing

went crazy so quickly. But I think again, there's all these different incentives. And certainly

the local officials, you know, I've seen how the story where they talked about one of the things

I think it was from Shenzhen. The officials were talking about as the, you know, the benefits

were allowed on people to set up what they call OPCs or one person company. So the idea is, oh,

they can set up their, you know, an open call install and they'll have a company and make money,

right? And part of that is, well, guess what? Employment is still an issue, right? So this is the

way to deal with unemployment or under employment. So all of a sudden, we have all these people who

started companies. So therefore, they're not employed. So look, we're as a local official. We're doing

well. Right. Look, look, look how great our local government is doing. And like me, local

official look how great I'm doing. I'm at the forefront of our AI policy. I'm resolving

employment, you know, yada yada yada. Right. So that's the incentive for local official to really

push this. Whereas in Beijing, from these different ministries that care about security and

information management, I think they're more like holy crap. This is a really not a great idea.

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