In a flash of insight combined with some open source deep learning sites (like kaggle), he's able to create the first self recursive AI, and he tests it out by telling it to maximise the amount of paperclips his factory makes.

You're kidding, right? Deep neural nets are very good at learning hierarchies of features, but they are still basically doing correlative statistical inference rather than causal inference. They are going to be much too slow, with respect to actual computation speed and sample complexity, to function dangerously well in realistically complex environments (ie: not Atari games).