Uh, maybe why you think they were so early

... okay.

So Instinct, first and foremost, again, going back, I feel like the impetus for this piece was basically I saw Instinct blowing up at least on the social feeds.

And I feel like me with, in my own head, you know, having been a reporter for all those years, been a VC for all those years, dating back a couple decades, I've seen this story play out a number of times.

I just felt like, uh, we were seeing some inklings of the same things that we've seen before, and you've been in the same boat.

Like, you've seen a lot of this stuff before.

And so it felt like, okay, well, what is actually going on here? Why is this time potentially different, if it is? Or is it not different at all? And so again, so I signed up for Instinct.

Although it is scary to give that type of control to one of these things.

Um, so I'd love to hear your perspective just on like what this is gonna look like and, you know, I think we both believe that it's gonna be a hit, but why you think it will be a hit.

So I've had the past two Pixel...

I've had three different versions of the Pixel Fold.

Um, and I have the, not the current, the one that they just released, the 11, but I have the 10, the Pixel Fold 10, and it's a different form factor as noted, like it's longer.

Um, uh, you know, to your point, it's not sort of the Passport style.

But I basically buy them, it's my, you know, Android test device, my backup to my iPhone, but it's also, um, just to be able to test out the flip, you know, and what the foldable features feel like and, and how I would actually potentially use them.

I do think, again, this iPhone form factor I think is smarter.

So what's going on here? This is wild.

Maybe instead of, you know, you buying the iPhone at a higher price tag, you just subscribe to it monthly.

Yeah.

So, and this is what I was alluding to obviously and what we were just talking about.

This, I think, is strategically very smart of Apple.

Um, and, and I, um, feel like this is sort of the perfect strategy to launch with these, um, iPhone price increases potentially coming down the pike.

Because again, I, I laid out, I thought, like, Cook did the, gave the quote to Wall Street Journal, raised the prices of other Apple devices, and then the third leg was going to be eventually raising the price of the iPhone itself, obviously the most important thing.

But there was a one more thing happened before the iPhone price, which is that, as you're noting, um, basically they have this new, um, service called Apple Upgrade, which is effectively a way for you to pay a monthly fee for an iPhone.

Tell us a little bit more.

Is this the right strategy? Uh, is there a company that's going to stand out in its ability to, to deliver this? So I'll just throw both at you and get your take.

Yeah, the original genesis of this sort of thought was, of course, the, the realization that all of them are working on sort of sup- quote-unquote super apps.

But it's interesting 'cause they all view it slightly differently.

I think you talked to Greg Brockman about like OpenAI's viewpoint on it, but they're all coming at it from a different angle, right? 'Cause OpenAI obviously has, uh, ChatGPT right now, and, you know, we've talked about previously, they run a real risk of sort of changing the dynamic of how people have used, a billion people now using it, you know.

Um, the fact that it's been sort of this, this thing that, that popularized the notion of a chatbot.

And of course, over time they've brought more stuff into it like images and, and a few other things here and there.

But obviously they, they're sort of now in the, the position where they need to chase a little bit Anthropic.

Mm-hmm.

[laughs]

[laughs] But, uh, beyond that, um, so some people are able to test it out on that tier, but still, that's sort of speaking to some of what you're talking about.

But there's also, I go back to the notion of how long it took them to release a standalone app for Gemini, right? Like, Google thought, like, may- maybe they would just be fine doing this all in the browser, um, because, of course, they famously control the most popular browser in the world in Chrome, and Gemini is now baked into Chrome.

And so I think that they might have thought at one point that that would be good enough, and that might be their, you know, quote-unquote, app for, for AI.

And, and as it turns out, like, they needed to eventually roll out the standalone Gemini app, which they now have.

But again, to your points, it's like, it's hardly a super app.

It's super rudimentary.

Uh, state of Meta looks kind of rough right now.

Maybe the AI spending is coming.

At the very least, I feel like this is optionality, right? Like, this gives him the ability to basically go out and spend, uh, far more, to a far greater extent than Apple has to date.

Because to that, that point, like, this is a big moment.

Apple has a famous policy in place to try to be, you know, cash neutral, as you're noting.

They don't do...

They don't actually do that 'cause they generate so much, so much profit that they still hold a bunch of money on their balance sheet.

But remember, there was a time, I guess under the, in the Steve Jobs days, where their cash balance was ballooning to the point where it was just way out of line, out of band versus what everyone else had in the industry because they were generating so much profit and holding it all and not, but not doing major M&A and not doing stock buybacks.

[laughs]

Yeah.

And, and it's the fastest device mobile-wise, and so I think they're in a fine spot there.

Obviously, they're part- they're partnering with Google, but to your point, like, the main thing I worry about is just, like-... culture, beyond the, the binary bet where either they're gonna be right or very, very wrong with, uh, not spending on, uh, on, you know, these model build-outs.

But, uh, I, uh, regardless of that, I sort of worry that they just don't have the right, uh, sort of cultural setup to, uh, uh, sort of compete in the era of AI-

[laughs]

They, uh...

The other element of that, of that whole sort of general s- scene around those is, um, I was thinking of last night after watching it, uh, for another go around, if there is, there is a real possibility, which would be, uh, I'm sure just awful, because of course Nolan would never do it, but, like, they could, they could certainly do a sequel here where just one of the, the Hugh Jackman clones just escapes, right? And he-

So m- you know, it, it, it, it, it pu-

That, that whole situation, we're obviously gonna get more of it with Iger now retired, and like what actually happened there.

But it was very weird.

If you remember, I remember reading his biography before he retired the first time around, and he sort of, it did seem like he was telegraphing the fact that he would choose Chapek, because there's like a scene, a part of the book that I remember where there was an incident, I think a, a shooting maybe at one of the Disney parks, and Chapek was in charge of the parks.

And, and so the way that he handled it, he like just touted him as, as great.

And there was this whole swirl around, there was always a swirl around who would be succeeding Iger at Disney, in part because he had been having such a successful run with all the, the M&A he had done and, and obviously he r- after, after Eisner, he reinvigorated Disney to the point where it was by far the most successful studio.

And again, he executed those M&A transactions better maybe than anyone ever has in history.

Yeah

What do you think that says about where Meta is today, where it sa- what it says about Zuckerberg, the fact that they are unable to come up with that next hit, and certainly have not been able to diversify away from advertising?

Yeah, I've swung around a little bit here, 'cause when they first sort of announced, um, the Scale deal that sort of, you know, would, was the [clears throat] effective end of the Llama strategy and, you know, their new, their new path going forward, um, I wrote a post like just saying like, "Can Meta buy the future of AI?" And my thesis was no, that I felt like they were basically buying up mercenaries, and it would require a team of true believers in the mold of sort of Anthropic, I think was the main example I used, um, to be able to, to actually do this.

And then, you know, all this stuff happened.

A lot happened [laughs] obviously in the subsequent months, but like certainly with, um, with Elon spinning up xAI and, and how we got that data center up so quickly, and basically it felt like maybe, maybe you could just throw money at the problem, right? And, and you could basically get up to speed quickly.

Fast-forward, you know, a f- couple months ago, there's new reporting that, well, actually it looks like xAI, uh, for all that money spent, and the models by all accounts are, are good, but it's not good enough.

It doesn't matter, right? Like, what's the, what's the point? Like, what's, what's xAI doing? And, and Meta, all that money spent, the billions spent, and now they have to delay, they delayed p- you know, potentially their, their new work, and it seems like that work is definitely feels like it's being couched in the public comments about it.

It's like, "Oh, it's a g- it's gonna be a, a good first step," but it's not gonna, you know, be competitive with the, with the Geminis of the world and the cutting edge models.

But, you know, anything we know about Mark Zuckerberg is that, that has effectively been his greatest nightmare.

To blow it up over these terms, to me seems like complete, like a ridiculous thing.

I think there's a few things going on here.

So first and foremost, like hearing you talk through [laughs] one of those exact quotes, it's like I, I'm sure you've been involved with them.

I've been involved in, on, you know, in a deal side on a number of times, like with lawyer...

When lawyers get involved and wanna use very explicit language to, to make sure that everything is drilled down and there's no wiggle room, like, lawyers themselves, for lack of a better phrase, go to war over these little terms, right? And it's like, "No, we can't say it this way.

We have to say it exactly this way." And the other side's lawyers will say, "No, we can't let them say it this way." So like, there's definitely some level of that.

I, uh, I, I know that, you know, they're, they're talking about this on like the, the Emil and Dario level, um, certainly.

Let's talk a little bit about what you're seeing.

What, what do you think about the fact that this deal is not evaporating, but certainly much s- smaller scale than it seemed like at the outset?

To me, the, [exhales] more interesting element of this is almost like the meta layer above it, which is the way that NVIDIA, uh, you know, responded to it.

Um, which is that, you know, Jensen, Jensen Huang is trying to basically say that, um, it's no big deal.

Uh, and it's literally a big deal.

It was a deal that they touted, that OpenAI touted.

They did a live interview on CNBC, talking about the $100 billion.

And yes, it was always sort of just soft-circled or earmarked.

We better go get it?" [chuckles] If so, maybe that's a smart move.

So just talk a little bit about your thesis of why you think AI needs its own Steve Jobs and, and why you think we're not quite there yet.

Yeah, so this, this sort of kicked off, as many posts I assume do for many people these days, in sort of a, a group chat I'm in, where a lot of folks were sort of talking through some of these notions, mainly the idea, as you noted, that there seems to be this dichotomy between, um, the US and sort of, in some ways, the rest of the world.

I think it's more probably pronounced sort of US versus the Asian countries, at least from what, you know, is reported and what we hear.

But I, you know, I live in London, so I'm here in Europe, even though it's not part of the EU famously anymore.

Um, but still, there's, there's definitely a, I would say, a much more positive sentiment that I feel like talking to people here, and maybe that's, maybe that's some level of naiv- naivet- naivete, or maybe that's, um, you know, something, something else because you're not sort of living and breathing day to day, um, sort of all the AI news nonstop.

Um, but I do think per the post, I think a lot of it, you know, at least stems from the notion that people l- look to who are the, who are the folks who are sort of putting this out there in the world, and who's talking about it, and who's leading these, these AI companies, right? And obviously, it's all the big tech players.

And big tech is, uh, you know, problematic these days on some fronts because it's obviously, it's the biggest companies in the world right now in terms of market cap, but also in terms of employment and in terms of all different sorts of things that are important to the economy.

You almost kind of want them to not think about it, like being in a casino and not thinking about the days passing.

You know, obviously the Metaverse didn't work out, but the smart glasses seem like a real deal.So do you want to pick someone from hardware engineering for that, or do you want to put somebody from the services side, or from a more software background to run the company after Cook?

So this one's a little trickier to talk through.

First of all, I don't know, I, you know, I've, I've met a lot of Apple executives.

I've not met John Ternus, so I, I can't really ...

I can't speak from personal knowledge, not that I would know him that well anyway.

But like, uh, so all I'm going off of is the reporting here.

All the reporting and everything you hear from people who've worked at Apple, they do ... uh, y- you don't, you rarely ...

Burlington deals brands wow.

it- I guess, like, I'd just love to hear your perspective on whether- how seriously we should take this device, um, and whether it is gonna be a big part of the recipe as OpenAI goes towards IPO.

Um, I do think you're right.

Like, it's- it's a good part of the narrative 'cause that's obviously- it sort of layers in a- an Apple-like narrative, right, where it's like, "You know- you know the iPhone, you know Apple, uh, another- it's a $4 trillion company based off the back of their device, the iPhone.

Uh, largely off the back of the- the iPhone, um, you know, as the most successful product of all time.

Well, that's what we're trying to build as well, you know, the new version of that alongside everything else we're doing." And so that's- that's sort of, I guess, the narrative that they would convey.

"By the way, we have the, you know, chief designer of the iPhone, uh, building this for us." And so I think that that will certainly resonate with the market, um, and, uh, I do think- I'm glad you- you brought that part up of the interview because this is something that, um, I think I'm gonna write about, too.

It's like you honed in on- I thought it was super interesting that Sam said specifically locally, that these- that these models are gonna run locally.

Uh, the question that I have for you is, is it enough?

... just struggling here.

And again, this- this is sort of late-breaking news, so I haven't had too much time to sort of go over the details of it.

But at a high level from what, you know, the report is here, um, it does seem like...

There's a f- there's a number of things going on, as always.

Uh, but...

So the 10% thing is super interesting, right? Because that's also, oddly, the number that, um, you know, Intel, uh, you know, was- was supposedly selling, uh, to the government, right? Like, for- for their deal, and, um, there's, you know, there's other ownerships, um, trading hands obviously between Nvidia, uh, and Intel, and then, um, a bunch of other stuff going on.

So it's, like, it all feels like the same sort of general playbook just, uh, being executed in different ways, where it's like now all of the sudden ownership is sort of table stakes to these deals, right? Even when it's a company that's a s- that's technically still a startup in OpenAI, own- would be owning up to 10% of a very public, longstanding public chip company in AMD, and- and what on earth does that look like from a finance perspective, like their books? Like, how did...

... where the Meta verse Apple, uh, uh, product war stands and how you think each one of those companies', uh, product philosophy will be an advantage or a disadvantage as they move forward trying to ship these AI devices.

So, it's very interesting that, you know, what i- what are the c- what is the calculations, or what are the calculations that a company like OpenAI needs to do before any sort of change when you have people who have befriended, fallen in love with, uh, or, or, w- you know, I don't know, even deeper, uh, formed even deeper bonds with these models?

Yeah.

And it, you know, it's obviously just a new, a new thing that, that all of us as, as end users are, are, you know, dealing with, as them as a, as a company is dealing with, trying to figure out, uh, all the various layers to that.

And, you know, it, I think it's gonna take still a while for that to happen.

But you're exactly right.

Like, that leads, that leads to a whole different, um, level of these changes and, and how they impact.

Um, and I do think that they've talked about it enough and specifically Sam Altman has, you know, talked about a lot of this stuff enough.

So what's your perspective here, MG?

Uh, does that mean basically that like if this AI moment takes off, like big tech is just gonna be, you know, they're gonna be good whether it happens in a start- whether they build super intelligence at home at Meta or whether they, uh, a startup actually is able to do this?

I mean, obviously, to be clear, they want to do it themselves, right? And they wanna capture that full opportunity.

But it is, it is interesting to me that this isn't talked about all that often except around, you know, when new fundraises happen, in particular with Anthropic, right? Because Amazon and Google own such, uh, l- relative large portions of that company.

And famously, Anthropic, you know, apparently built into their, uh, fundraising, um, uh, documents that those companies can only own up to a certain threshold 'cause they didn't wanna be beholden.

You know, famously when, when Dario left OpenAI, there was some talk that he didn't like the Microsoft element getting involved, right, with, with OpenAI and what that was going to, to do to the mission.

And so, um, but yeah, all of these co- all the big tech companies aside from Apple as mentioned, you know, basically have their, their stakes in these different companies, and some of them with multiple stakes now because these companies have had to raise so much money.

Um, and I do think if you were just to sort of, yeah, extrapolate out in the ultimate success state of AI and say, say that OpenAI and Anthropic and maybe a couple others are wa- are, are, are the next multi-trillion dollar companies, if say Microsoft, again in the negotiations that they're going through right now, if they end up owning one third of OpenAI and it's one day worth $10 trillion, you know, that's, that's (laughs) meaningful money to, even to Microsoft.

(laughs)

So what do you think's happening in that negotiation?

Yeah, I mean, that, that was maybe the weirdest thing about that entire report, was, you know, the notion that both Anthropic might even just be asking for that, 'cause they have to know that Apple, you know, will be super reluctant to do anything for the reasons you're exactly talking about, right? They just, they historically don't spend money.

Even though they have all the money to spend, they don't spend money, uh, certainly on acquisitions.

But if this, this could be really larger than their largest acquisition, which is wild.

Um, I mean, from the flip side, I think Anthropic probably, you know, assuming this is accurate, they're, they're looking at it like, "I mean, uh, if we really are the main, um, focal point of Siri going forward, that is gonna absolutely blow up our servers to an extent we haven't seen, at least on the sort of user face and consumer side, to date." And, uh, you know, we see what happens or, you know, we hear reports about what happens when, um, sort of these viral integrations happen on the ChatGPT side, and how that brings down their servers, bores up the, the cost and everything.

And so, does Anthropic really wanna be in that boat, um, you know, without any sort of life vest, uh, you know, in the, in the form of payments? That was always one of the most surprising things to me about the Apple and ChatGPT deal, was the reporting that it was no money exchanging hands, right? Um, because it felt like, too, there was a real, uh, possibility that if one of those things, um, you know, went viral, that it was the weird situation where Apple would be causing such an influx of usage of ChatGPT, which, at the time at least, and, and presumably still mostly, is running on Microsoft servers.

And so, basically, Apple would be, you know, causing these huge increases in cost to OpenAI and Microsoft, um, by way of their deal.

So can you tell us a little bit about what an AI browser is and why you believe in that?

So what's going on, MG?

Yeah, I mean, I think that some of this is exactly what we're talking about with A- Apple, Amazon, and Google.

So all three of them notably had, uh, you know, assistants in the past, right? So, there was Siri, there was Alexa, and Google had, um, you know, the Google Assistant and Google Home products too, which sort of everyone sort of, you know, talks past now.

But that was also, you know, a multimillion, million-unit, um, device that was in a lot of people's homes, and still is in a lot of people's homes.

Um, and all of them, I sort of chalk up to, uh, having major problems sort of upgrading those, uh, both devices and mentalities because they had some level of success.

Now, you, we could argue about, you know, Siri's level of success, but it was the first mover in a way, right, in the market.

And, you know, it, it got a lot of buzz and, and had some early promise.

Maybe less about the fact that people are gonna get the AI phone and run away from Apple, but like, this company needs a spark.

Yeah. Well, let's call the, the executive shuffle that Gurman uniquely scooped today, let's put a tack in that and say preview of later in the show, and just go back to... 'Cause if there wasn't anybody inside who is saying, "Yeah, we could still ship this in 18.4 or 18.5 at the latest," right? If there wasn't, then why didn't... why did it only get postponed at the end of March, right? Why was Gurman still... Why was Gurman writing in February that there was an argument happening within Apple, right? So who... Somebody... I, I really... Without being able to name names, I don't have any little birdies telling me who was doing it. Was it Giandra? Was it other people in the Siri organization? I don't know. But surely somebody was in there saying, "We should still ship this. This is good enough to ship."

Well...And to me-A- and-... that speaks directly to, like, a broader potential issue here, a bigger picture issue of, like... And, and it actually ties directly back to the callback to the Steve Jobs days of MobileMe, and it's, like, the reporting when y- you know, when... In, in looking back on it now, it seems clear that part of the reason why MobileMe was a disaster and happened as it did is because Steve Jobs had just taken his eye off the ball with that, right?Yeah.He wa- he... There was other priority things that he was focused on. He trusted whoever he trusted at the time to sort of focus in on that, and at the highest level again with this situation, it seems pretty clear that A- again, at least from the outside, it's easy to say this, but it does seem to be the case that it's not like Tim Cook is making the call, uh, over whether or not they're going to ship the AI feature. Like, he delegates that out-Right.... to Federighi, like-Right.... ultimately, it seems like.It, it has been to his credit, greatly so. He said it explicitly ever since he took the job, I think, on an interim basis, like, while Steve Jobs was on a medical leave. But, eh, eh, certainly since he, Steve Jobs died and Cook became the full-time CEO and successor, that he's not a product person or designer and he doesn't-Right.... try to be. And that was clearly what led John Sculley wrong, to go back over 30 years-Mm-hmm.... was that Sculley, uh, saw himself as a general product person coming from Pepsi, that you didn't have to be a computer person, and I-

Yeah.

Like, this is like, it i- we talked about The Simpsons posterization earlier. It's like this is now the modern version of that has happened to Siri and it's become a laughing stock and they, you know, in all the keynotes and everything and they talk up all the, the billions of things. Like, but that is like, if anything, that's worse because it just shows what scale it's at and they're still okay with all of this ridiculousness that people know that it's sort of a laughing stock. And that goes back to what we were talking about where my fear wi- with Apple would just be that they didn't kno- they don't have the right person, again, at the senior level to understand, you know, that they're not doing a good enough job and/or to the earlier Steve Jobs point with Mobile Me, it's like whoever that person should have been or s- was supposed to be just didn't really have their eye on it. And, and maybe it's related to the fact, going back to the Giandra point where it's like, well, he was more of like an ML guy. And yeah, it's all AI, but it's not really the same thing as what like Siri, which predates it, was trying to do. And they've got a real problem that's very similar to what Amazon has been going through by all the reports on that before the new Alexa came out. They have the very real problem of they had so much early success in gaining users, both Siri and Alexa, that they got sort of locked into this old technology paradigm that they then couldn't just abandon and had to move forward. Google had some of this too with Assistant, which they've been slowly working towards rectifying that. But really Amazon was at a incredible scale with purpose-built devices for Alexa, and then Apple at an even higher scale, not with purpose-built devices, but with Siri on everything, a billion plus devices out there where it's like you can't just pull them out, you can't pull those features out, and so you've got to rebuild the engine on the fly. And that is insanely harder than just doing something new. But it also speaks to the point of like there might not be someone who was like either around long enough on top of those groups and knowing the new stuff going on to really be able to rectify those two worlds, right?

So what happens here? Because, you know, basically, if they if a lot of the industry has been driven based off of subsidies coming from other businesses and doesn't need that type of spend anymore, like does the party end?

So I think it's different for each company.

Probably Microsoft and Google are closest aligned in terms of where they net out.

And it's sort of interesting, the numbers you just rattled off with where the stocks are at.

That feels just like a very clear picture from Wall Street, what they think now, right? They think NVIDIA is going to get hit fast in this doomsday scenario because obviously they're the beneficiary from all of those companies, all those other companies.

that you mentioned uh big tech is is pouring as much money as possible as they can they can't get it get enough chips fast enough into nvidia and if they pause that that obviously is bad news for nvidia in the short term again i think there's longer term stuff that that's different for nvidia which we can talk about but to just hit on the rest of this question right now I think that Microsoft and Google, which are, as we just mentioned, you know, are trying to sort of figure out the right models for how to charge for AI.

I think that this puts them in a really tricky situation if the underlying economics just totally changed overnight of what AI's underlying economic model should be.

So which side