The ‘AI-First Company,’ Big Tech Mega Earnings, NVIDIA vs. Anthropic

Channel: Alex Kantrowitz

Published at: 2025-05-05

YouTube video id: TfzjmjQfVrk

Source: https://www.youtube.com/watch?v=TfzjmjQfVrk

CEOs everywhere are calling their
companies AI first. But what does that
mean? Plus, we cover a major week of big
tech earnings and Nvidia and Anthropic
exchanging harsh words. That's coming up
on a Big Technology Podcast Friday
edition right after this. Welcome to Big
Technology Podcast Friday edition, where
we break down the week's news in our
traditional coolheaded and nuanced
format. major week of news to speak with
you about this week as every CEO
seemingly has this new memo out calling
their company AI first. So, we're going
to talk about what an AI first company
means and why the companies that we're
going to discuss, including Dolingo Box,
and Shopify, have decided that it's
important and whether that can expand
beyond tech. We're also going to cover a
major week of big tech earnings. We have
Apple, Amazon, Microsoft, and Meta all
reporting. We're not going to go so deep
into the numbers themselves, although
we'll site plenty of numbers, but really
what we're going to look at is the
trends, what it means for big tech and
the economy in general. And then towards
the end, we'll talk about Nvidia and
Anthropic getting into it. A great
letter that we got from one of our
listeners about AI consciousness. And
then we will close out with a new gadget
that Ron John has and loves and he can't
wait to tell you about it. Joining us as
always on Fridays, I already gave it
away, is Ron John Roy of Margins. Ron,
great to see you. Welcome back to the
show. This is an AI first podcast. Alex,
how have you uh how have you used AI as
a fundamental expectation of podcasting?
As Toby from Shopify said, I will say
that it is interesting that we're going
to talk about how all these companies
are AI first because in order to insert
their memos into our show notes or our
show document, I had to use AI. Every
CEO seems like they want to post their
memo as a screenshot. I mean, there are
longer tweets now. You can just give us
the text so we can read it as opposed to
having to zoom in on your screenshot.
Best possible way to make that happen.
Save those screenshots, drop them into
Claude, and have Claude spell it out.
That's exactly what I did. So, I I did
my part as an AI first podcast, Alex.
And I know I I pasted it into our
document and the first line was, "Okay,
here is the text from that screenshot."
And I was like, I better delete this
before Ronjan sees it. Otherwise, he's
gonna think that I'm using chat chip to
do my homework. Hey, you know what? AI
first. That's what we are. That's what
we are. So, this is a big trend. Three
is a trend. And we have three now where
there have been three CEOs who have
written memos to their companies talking
about how they are now AI first. That
includes Shopify, which was the first,
Dulingo, and Box, which just showed up
this week. So, Ranjan, I'm going to
we're going to go through a little bit
of these memos because I think this is
important and I think we're going to see
many more companies going to that will
go this route, but why don't you start
us off by giving your thought on what it
means to be an AI first company because
it does sound like jargon. So, look at
the what the three are saying and tell
us what you think it means.
So reading these three memos again from
Dolingo, from Box, and from Shopify,
each one had a slightly different tone
or intensity to how they said their
employees need to be AI first, but
overall the idea is you always need to
start with an AI tool. Can the task
you're trying to do be done in a better
way with some kind of AI tool? And I
think it's right. I think getting just
everyday people in your company really
fluent in whatever new tool is happening
and figuring out how they can actually
change the way they do work is actually
far more important than any largecale
effort that any company's going to try
to implement. So, I actually I like that
this message is going out and we can get
into, you know, the tone and the nuances
of how they're actually trying to
communicate this, but I like that
they're saying this cuz I do think these
are the companies that will do better
that are I mean, it's just the same way
and even Dolingo, they talked about the
shift to mobile. If they had missed that
as a company, they would have been dead.
I mean, Facebook/ Meta was one of the
most famous transitions to the mobile
era from desktop. So, when these big
transitions happen, you need everyone at
the company not just exploring the tech,
but actually integrating the kind of AI
or whatever that big transition is into
their their daily work. So, there are
definitely a few themes that I saw in
these memos. First is a desire to share
information within companies. I would
say the second is probably a desire to
cut costs or at least minimize headcount
increase and then the third is to scale
up what you do uh in ways that you
couldn't before AI. So Aaron Levy in his
memo to Box he told uh his employees
that um we're focused on building an AI
first company just as we ask ourselves
what our product would look like uh if
we started Box in 2025 we need to ask
ourselves what would work look like if
we started in 2025. So it's basically
just his way of saying we need to
collaborate better. Now is it a
coincidence that he's driving this
writing this memo and releasing it in
public and he has a company that is
explicitly built on document uh storage
and collaboration and uh a tool that can
make you more efficient at work.
Probably not a coincidence. He's
probably going to talk a little bit
about what Box can do and then release
this to the world and you know try to
get others to follow. uh but but some of
these things that he brings up are quite
interesting. So to to me he starts
really in the knowledge sharing area. He
says we want to use AI to ensure more
time on average is spent on the things
that really matter. So we'll use AI to
help onboard onboard boxers faster get
everyone access to experts on any topic
like box AI in hubs which I think is
like an internal help desk to make
decisions more quickly. iterate on new
ideas more quickly, augment our code
writing safely, and better serve our
customers and more. So, Roger, let me
ask you this because this has been one
of like the big questions about AI right
away is can AI help companies be more
efficient, sort through internal
documentation better, get access to
better expertise,
um, and basically spend time on things
that matter more as opposed to like
going through these like long arduous
onboarding processes and trying to cut
through red tape to find out
information. You think AI is at the
point today where this can actually help
with this task? Yeah, 1,00%. And and to
Erin's credit, I think Box is certainly
one of the players in that space. And
which also I will say the fact that
Dolingo came out with it, I thought was
pretty interesting because they have no
real vested interest in kind of pushing
that narrative and in fact they got a
lot of backlash because thanks to Duo
and their social media marketing, they
become a bit of a cult favorite, but
also with the the anti- AI persona. So,
so putting it out there definitely meant
something different. But I think the
most important thing there and and like
what you were saying or what Aaron said,
starting a company in 2025, if we did it
today, what would it look like? That is
the most important question that every
company has to ask themselves. And I
I've thought about it a lot because the
last few years it's been a more at most
organizations trying some experiments,
testing some out some stuff out, seeing
what works. uh there's a lot of internal
inertia towards most AI efforts as well
but upandcoming startups that are built
completely from the ground up on these
kind of technologies are going to just
do stuff way faster like much more
efficiently probably better for the end
consumer as well. So any kind of
incumbent has to rethink the way they do
it and and in reality the technology to
to actually like access large amounts of
information especially unstructured and
get an answer that is correct they're
avoiding hallucinations whether that's
through rag type technologies whether
that's other like it's gotten so like
really long context windows and Gemini
and open AAI like it's gotten so much
better that this will become completely
completely table stakes for every
organization. So the ones who do it
faster will do better. By the way, I
think this is the reason why it's
important for us to read these memos and
why we're leading here because we know
that this is going to be the way that
everybody in the economy ends up
operating if not everyone a large
majority. And it starts to answer some
of the big questions that you might ask
in terms of what the impact is going to
be both on business and society. And I
think there was a theme throughout, but
I'm just going to start with box here.
that the idea is and I know I cited
efficiency as one of the things uh that
they are aiming for aiming for and they
definitely are but like what do you do
with efficiency and you have to remember
that every company that's beginning in
2025 is going to start with many of
these tools natively in their approach
like if you need a internal knowledge
hub which I hate to use the term
internal knowledge hub because anyway
it's a thing it is but if you need one
of those just yeah I don't know it just
feels like very like put me in my
cubicle and make me read the internal
knowledge uh hub but when you have
everybody has internal knowledge shared
internal knowledge in a company um the
newest companies will build with that
centralized in AI queryable by large by
by natural language and so the question
is modern companies what are they going
to do they do they become efficient and
kill everything or do they become
efficient and do more and I think this
is kind of the most underrated part of
the uh Aaron Levy memo and then we'll
move to Duingo. He says we'll bias
towards a keep what you kill mentality
with AI which means that when an
organization frees up resources or saves
money with AI will aim to reinvest those
things back into more strategic thing
again. We want to use AI to get more
great work done not the same amount as
before. This to me is the thing
companies using AI are not going to say
we are happy doing what we did before
and this will just enable us to do it
more efficiently. Therefore, we will cut
our spending and we'll cut people. I
think the smart companies, companies
like Box, run by a person that really
gets this will understand that this is a
mechanism to push even harder and grow
and take that money and reinvest and it
doesn't mean job loss and it doesn't
mean cost cutting. What do you think?
Well, yeah, I think there's always two
ways to look at the potential benefits
of AI. There's cost savings, but then
there's also doing things that you could
never do before. And in the Dolingo memo
loose man on he talks about doing
implausible tasks and like again you you
imagine an online shopping we talked
about this a lot last week to there's a
world where you can truly personalize
every bit of messaging that is now being
that going out to any kind of customer
and when you say internal knowledge hub
it makes us think again you have to like
check with HR what the vacation policy
is I think think about it more like
internal knowledge is even all the
actually like aggregated product
knowledge to product data uh customer
data all of that kind of knowledge and
being able to quickly leverage it and
generate new types of content in new
ways and that you can serve customers
and just make more interesting things
than you could ever before and again to
me it's interesting because we you know
AI a lot of the industry is trying to
push the narrative that it's potenti you
know the most transformative technology
since fire or whatever else. I still
kind of am in the camp that it's it's
like cloud or it's like mobile. And you
just have to think like if you were at a
company that or even computers call it
30 years ago, if you're at a company
that's an incumbent that is not
investing and not becoming fluent and
native in that new technology, you're
going to lose. So to me, it's not, you
know, this
earthshattering once in a millennium
thing, but it's a pretty important thing
that everyone's going to have to get
their hands around, right? And just to
the subject of building more, I know
we're going to get to meta earnings and
what Mark Zuckerberg said about AI. He
made uh Mark Zuckerberg made the podcast
rounds this week and we'll we'll talk
about that or maybe we should just talk
about it now. I thought he had a a
fairly miserable showing on Theo Van's
podcast, which was very very difficult
to watch and just not the right host for
the per for the guest. I mean, Mark
wants to talk about technology and Theo
wants to talk about basically everything
that makes Mark Zuckerberg squirm. In
fact, there was a great moment where
Theo looks at him and he goes, "Uh, do
you think?" And he goes, "Is social
media bad?" Mark is just like, "I don't
think so." Um, which was hilarious. Uh
but otherwise that that interview really
wasn't worth listening to. The one that
I thought had some good moments was
Zuckerberg and Dwarish Patel. Dwarkish
of course has been on the show and they
start talking about AI, what AI will
enable Meta to do. And Zuckerberg says,
"Look, we're too big to have a customer
service organization, but could we have
uh AI enabled customer service that has,
you know, voice potentially and then,
you know, enables us to build something
that can serve 3 billion people and uh
have limited need for like human
oversight, in which case we're going to
hire more customer service people uh
because they'll be able to maximize what
they do with AI." And I think that was
what you saw with Duolingo. So just as
Luis Van, the CEO of Dolingo releases
this memo about going AI first, uh
Dolingo doubled its courses. It said
it's launching 148 new language courses
um and 28 uh supported user interface
languages. And um this is what uh Luis
said. Oh no. Uh the senior uh senior
director of learning design Jesse Becker
said this uh by using generative AI to
create and validate content we're able
to focus our expertise where it's most
impactful ensuring every course meets
Duelingo Dulingo's rigorous core
standards. So it's pretty amazing that
AI can enable a company like that to
provide what it's doing just at a much
greater scale which creates a much
larger moat over any language company
that's not AI first. And to me I think
that's really uh the promise. Well,
yeah. And that's again a good example of
increased efficiency. It took 12 years
to create a 100 courses and now they
just created another 150 that they're
confident or at the same quality and
scale as the original ones. But then I
mean language and I'm a I'm proudly on
day 334 of my Dolingo streak in French.
I don't know if my French has actually
gotten that much better, but I'm
obsessed with uh the Dolingo widget and
making sure I don't lose my streak. But
how much more weirdly and almost
amazingly personalized like now they
actually have these video calls you do
with an animated character and talk to
them. And you know like there was a lot
of talk after OpenAI released voice mode
that Dolingo is dead. It's even more
reason that a specialized language
learning company like Dolingo, if they
leverage this technology well, they're
going to create some amazing stuff that
will we can interact with and learn
languages with in ways that I mean when
I was sitting in a sixth grade French
and with a textbook trying to conjugate
verbs could only dream of starting to
learn a language today. So that's the
stuff I think that's like again
efficiency over here, but then creating
new amazing experiences is that's the
next phase. Now I'm not opposed to those
video calls, but I just think that
they're awful. You like it's No, it's
good. Like you can act you can't I try
to mess with them sometimes and it
actually like they reel you back in to
ask you questions about the vocabulary
you've been learning. And again, it's
like I don't know, weirdly because it's
French. I think it's like a animated
really like blaszeé girl with purple
hair. I don't know. It's weird. But
that's I think that's a character for
all of them. They're not impressed with
your with your language skills, the
dualingo characters. See, but wait, but
in a way when we're talking about is
Open AI going to kill everybody or is it
the product and not the model? Such a
good example. They have a whole brand.
They have a whole animation style with
which they deliver the courses. They
they have like an entire vibe to them
and and that's it's a reminder everyone
everyone can still win right now. I hate
while I'm that I'm grudgingly coming
towards your opinion. But that is great
support for your the product matters.
But then again better models enable this
type of experience. So uh you and I will
let that debate run another day. You
know, I was so optimistic leading into
this segment talking about how companies
are just going to double down and grow.
But then I look at some of the things
that did cause the backlash for Dolingo.
And that of course is the human cost
here. So Van an in his memo said we'll
gradually stop using contractors to do
the work that AI can handle. AI will be
part of what we look for in hiring. AI
uh will uh AI uh use will be part of
what we evaluate in performance reviews.
And this is really important and this
was also mirrored in the Shopify memo.
Headcount will only be given if a team
cannot automate more of their work. So
when you look at the sort of culling of
contractors and then the fact that
you're going to have to justify
headcount, it'll be much more uh more
difficult to get headcount because the
AI should do this stuff. And then I
wonder like okay so if this does get
applied across the entire economy uh are
we going to see any growth in jobs? Like
could this really lead to a lot of job
loss? I just saw a tweet this that come
across um my feed this week talking
about how new graduates are really
struggling to find work right now. Now,
maybe it's because of the uncertainty in
the economy, but I don't think it's uh
out of school or or even a remarkable
insight to say that a lot of companies
now are not hiring their most junior
level because they're turning uh some of
this over to AI. What do you think,
Rajan? I mean, it's tough, but to me,
it's an inevitability. Like if you are
able to build and run a company a
certain way and you don't someone else
will. I mean I think it's just that
simple that the way work is done is
changing and there's certain tasks and
and I mean Dualingo is the perfect
example. They had contractors simply
checking the output. Now, with
generative AI, you can safely and bu if
you build the right system, which I'm
sure they did, check thousands, hundreds
of thousands of answers very very
quickly and efficiently. You're not just
because you now that you can do that,
you're not going to do the opposite. And
if you don't do that, someone else will.
So, I think to me, and this is going to
be an ongoing discussion, don't get me
wrong. This is this is going to cause
dislocation the same way like in the '9s
globalization and more lowcost
manufacturing were feeling the effects
30 plus years later. So like it's not
like this stuff is not going to cause
some kind of dislocation. The the only
thing is like this is where if in a a
perfect world there's some
thoughtfulness put into what it is doing
and there's I don't know I even hate
saying but some kind of more mass
upskilling of people and as I say this I
literally am like this will never happen
in the current moment but but you have
to prepare for this and any economy that
does will be better off the same way any
company that does will be better off.
What do you think? Right. No, I I agree
with you completely. I just think that
it's sometime it's going to hurt and if
you're looking for a job, uh it's going
to hurt. It's going to be much more
difficult to find a job and to keep your
job, you're going to have to really show
that you're using AI. I mean, I'm just
looking at the again looking at Toby
Lutk's memo in Shopify. He says, "We're
going to add AI usage questions to our
performance and peer review
questionnaire. Uh learning to use AI
well is an unobvious skill. My sense is
that a lot of people give up after
writing a prompt and not getting the
ideal thing back immediately. Learning
to prompt and load context is important
and getting peers to provide feedback on
how this is going will be valuable.
You're also um going to every time
you're going to create a protoype, you
have to uh do it with AI exploration. He
says you can learn to produce something
that other teammates can look at, use,
and reason about in a fraction of time
it used to take. Actually, I think this
is smart. Like, I think that if you're
going to try to get this uh to take off
within your organization, you need to
create this incentives and people will
respond. Yeah. I mean, when he writes
that, in a way, it makes me happy
because I know he gets it. It's kind of
like when the Clarice CEO was on, I was
a bit skeptical about some of the stuff
that was coming out in the press at
first, but then the way he talked about
your first prompt, you won't get the
right output and then your job is to
keep working till you get it and learn
how to do it. And I think him pushing
that, it's exactly correct. And and I
actually think the new grads article
that came out, I'm still going to I
don't know attribute it maybe at least
more to the current state of the economy
because honestly I would rather be a new
graduate coming out right now than I
don't know having been in the workforce
7 8 years and become completely habitual
in the certain way of working. And and I
do think the idea of like these skills
are necessary. I remember probably like
even three or four years ago sometimes
you would get people putting Google Docs
on their resume as a skill. And I'm
sorry, I'm sorry. Like no, no, come on.
That that's like Microsoft Office back
in the day. Like those things might have
a certain window where it is considered
an actual listable skill, but I don't
know, man. Do you have resume, Alex? I
definitely had Word in Excel on my first
resume. There's no doubt about it. I was
still learning PowerPoint. The first
one, when was that? Early ones. It was a
long time ago. Long time ago. But uh but
Shopify in particular wants to be able
to do this because it seems like they're
going to just integrate more and more uh
with AI. In fact, last week we talked
about how you might want to shop in uh
Chat GPT. And then this week looks like
we were on to something. OpenAI rolls
out new shopping features with Chat
GPT search update from uh from Reuters.
So, it's going to it uh OpenAI uh said
it updated Chad Chipd's web search
capabilities to improve online shopping
for users with personalized product
recommendations with images, reviews,
and direct purchase links. So, if you're
Shopify, you definitely have to do this
because this is where it's going. It
might end up being that your front page
is not going to be the vendor pages uh
that you've created, but the actual user
interface of Chat GPT. I tried to get uh
Jamil Ghani, the head of Prime, to bite
on this question in our interview on
Wednesday, but was was unsuccessful.
Although I imagine that they're going to
be thinking about this quite hard. Well,
that that's actually a perfect example
that if you don't have AI native
employees, you're not going to realize
the urgency of how shopping can change
and they might not have pushed and
worked and actually delivered probably
being I think like the first major
e-commerce platform to actually deliver
a native integration into chatbt because
I I I believe perplexity for their
shopping. I don't think it's with
Shopify. I think they it might be
in-house or like this is a big deal but
this is only going to happen because
internally people understood what is the
shift taking place in terms of how
people are shopping and when everyone
marries chat GPT and needs to buy it
stuff which is listeners can go back to
last week's episode if that sounds we're
bullish on the relationship yeah buying
them buying it some GPUs but you got to
know how this what it looks like you
have to really understand the overall
picture and flow of these things.
Otherwise, you're not going to do the
right things. Now, how many companies
are going to go out and say that they're
AI first to distract from the fact that
they're struggling? I mean, when I first
saw these headlines come out about
Shopify, I had a couple of people that
reached out and were like, "This is just
them trying to paper over a disastrous
business." uh in March 2023, for
instance, they laid off 20% of their
workforce and gave up on logistics. And
then they also did another big layoff
recently. Um and the suggestion that
some made to me was look, this is just
them trying to sort of distract us from
what's actually going on and have us
look at the new shiny object. I don't
think Shopify is a d disastrous
business, but we can look at the
headlines and see that they've
definitely had uh to use another term as
bad as internal knowledge hub, they've
had some speed bumps, they've had some
headwinds. I think if any of this
messaging came from a CEO or management
that typically did not make public
statements or was not in the public
conversation, I would be more skeptical.
If like someone it was just kind of like
a silent CEO who suddenly is coming out
and is like AI AI, I'll be a little more
skeptical. But again, Toby, he doesn't
show up. I mean, like actually he goes
on podcast too, right? But I mean, he
certainly I've been asking on Shopify,
if you're out there listening to this
show, get Toby on the show. We'll ask
him good questions. I think you should
do it. There's nothing to be afraid of.
I uh but but I mean he certainly tweets
and is in the conversation. Dolingo is
like though I mean they their their
brand persona is one of the like
strongest out there. But uh they're
public and Aaron Levy I mean is like I
would say probably like the single most
quality voice but also prolific voice on
aentic AI as well. So yeah. All right.
Let me ask you two big questions and
then we're going to go on to big tech
earnings. The first is can this be top
down? Like can this really be something
that a CEO commands a company to do and
they end up doing it?
So, normally I would have said no, but I
actually think the Shopify memo has an
interesting take on it. Again, the idea
that if you want budget, you have to
demonstrate it could not be done in a
different way, that is a good top- down
like actual like behavioral way to push
the change. If it's just everyone spend
two hours a week using whatever internal
AI tool or system we're building, that's
not going to work. But this is actually
the way you get it done. So I think it
could be done. I think it's going to
cause some internal tension and speed
bumps as you uh said, but uh I I think
it can be done. What about you?
Definitely. Yeah, I was skeptical at
first, but then I think that when you
integrate something into performance
reviews, that's when it gets done right.
I think that like performance management
is what drives a lot of the tech
industry comp. I mean, as you might
imagine, money matters. And if your pay
is contingent upon you spending a couple
hours or, you know, building chat GPT
into everything you do, you're going to
do it. You want to you want to get paid.
Yeah. I mean, it's no different than any
other major tool set that came before.
Again, using docs collaboratively was
like transformational, I guess, but we
all just kind of did it, right? Okay.
Okay, here's my second question for you.
Obviously, this is happening within
three very techy tech companies, right?
Can we see this in non tech companies?
And if so, how long do you think that's
going to
take? That is a good question because I
do agree that I mean, yeah, if you are a
digitally native pure tech company
that's like lots of engineers, it's
going to be easier. But yeah, that
actually I don't know. I don't know.
That's a tough one. I mean it could
be I would like to see something kind of
dramatic soon in let's say in the next
few months but I I don't know if we
will. I think it will take years. I mean
that's one of the things that when we
think about the transformative power of
this technology the transformation takes
quite some time always. So even if this
does become a thing everywhere in the
tech industry for normal companies to
implement it, it's just going to take
much longer. It's my perspective. Years,
years, not months. I don't know. Maybe
as the tools get actually better and
more functional and intuitive. I think
there's a shot. There's a shot. You know
what? I'm more optimistic. I think you
know what helps those companies are
those tools become better, more
intuitive and uh and usable. Better
products. No, model
improvement. Good try, though. Better
UI.
All right. No, I mean there's a case to
be made for both. Uh let's talk a little
bit about big tech earnings. Actually,
it's been a very interesting earning
season. So, we're talking uh here
Thursday night. We're doing Friday
edition a little early cuz I'm about to
go to France. Um, let's talk about it.
We had Apple, Amazon, Meta, and
Microsoft all report over the past
couple days. And the reason why I pay
attention to these companies, I mean,
among many reasons, but one of the most
interesting things about them is they
can sort of be a read through to the
rest of the economy. If things are going
well with Amazon, then things are
probably going well with uh the
consumer. And if things are going well
with Microsoft, then enterprises are
probably fairing well. Companies by and
large beat their earnings expectations.
The big tech companies by and large beat
their earnings expectations in the
quarter that they just reported.
Remember this is Q1. So it's January,
February and March uh before liberation
day. But Apple uh reported, this is from
the Wall Street Journal, the uh highest
first quarter or March quarter revenue
it's seen in more than 2 years as people
moved quickly to buy smartphones and
other devices before the tariffs were
announced in April. The company said
sales rose 5% 95 billion which was ahead
of analyst
expectations. However, the China revenue
came in just a little bit lower than
expected. So, they're going to clearly
see some issues in the China uh market,
especially after the US and China go
head-to-head and China's putting out
propaganda like China won't kneel, which
is uh if you watch that and you're in
China and then you go to the store to
buy a smartphone, it doesn't seem like
you're going to run to the American
version given the signals your
government is sending. And also, iPhones
are banned within Chinese government
offices. And then you look at the the
another interesting thing that we heard
was um demand like uh uh production. So
this is from CNBC. Half the iPhones sold
in the US were made in India. And Gene
Monster analyst at Loop Ventures said he
expected the figure to be close to 25%.
So it's already the U the Apple seems to
be driving much of its manufacturing
capability uh to India especially for
the US market. One last stat and then
I'll turn over you. Mark German talked
about the tariff impact. Uh Apple said
there was no tariff impact in the March
quarter. It cannot precisely estimate
for June quarter, which is the current
one, but estimates $900 million in cost
increases in the period. This is with an
exception for iPhone. What's your big
picture take on what's happening with
Apple? It seems like it's weathered the
worst of it. You tell me.
I think anything that happened
pre-liberation day January through March
obviously tariffs people expected were
coming but I mean I guess attributing I
don't know like did you personally in
the months of January to March were you
like I got to stock up on stuff before I
were you panic buying or No I just
bought I mean I bought in April after
liberation day I bought a couple pairs
of sneakers from Amazon that was it no
see that's the thing I think any kind of
like even the conversation around panic
buying really started after liberation
day. So I mean to their credit it look
it looks like and the release of the
iPhone 16e was also cited as one of
those factors um and kind of like the
lower cost uh but still AI Apple
intelligence enabled phone. Um, so I
don't know. I think I still believe and
we're certainly going to get into Apple
the X tariff conversation, but I don't
know. I Apple still is the most
vulnerable, but the most promising part
of that was the 50% in India. That blew
me away. I mean, it blew Gene Monster
away, but I mean 50% already. I guess
supply chain Tim has uh been pretty good
on this stuff already. It's almost as if
Yeah. If you're going to take one uh CEO
who's ready for this, it is the guy with
the supply chain. Supply chain, Tim. But
I don't think this is going to be the
end of the story. I mean, okay, so Cook
uh also said that the tariff hit will be
about 1% in the June quarter, which is
less than most had been expecting
according to Gene Muser. Um again, Apple
had this exemption from tariffs. Uh but
that is the export side of things. So, I
I think the real thing is the China
market. 17% of Apple's revenue last year
came from China. It was 15% in Q1. Uh I
don't know the percentage yet for this
year, but I think it was kind of in line
on that front. Uh a a shrinking of Apple
revenue in China is going to be bad.
Yeah. No, I'll agree there. And actually
that's I mean not just bad but
potentially catastrophic cuz like I have
to imagine out of all things like an
expensive cell phone purchase like and
again we will get into Apple the product
side of it but the it's more of a status
symbol than anything in the same way
like I mean Tesla we've seen the brand
impact on the product sales like when
the iPhones one of its primary values is
that of a status symbol and suddenly
that status in China could be have a
very negative connotation rather than
this means you are cool and wealthy.
That could be a huge problem I
independent of any actual like uh
regulatory or legal restrictions just
from pure brand standpoint. And then the
other side of this is let's say okay we
didn't see any price hikes right but
let's say the price has to go up because
of this uh or we lose China downloads
because of this. The thing that Apple
selling uh and has growth potential is
services which is a hundred billion
dollar business and has been growing at
an insane clip and has and has major
margins. So, you want to be able to sell
as many phones as possible so you can
sell more services. And if tariffs cause
an issue there, then that could be a
problem uh for Apple. But I have to
say, candidly, my reaction to what we've
seen and heard from Apple in the call uh
so far and from earnings is actually
it's not as bad as feared to use a line
from Dan Ies. Yeah, I think that's the
market at least responded accordingly
that uh I mean I think we ended up today
as we're recording on Thursday and only
up a little bit. We were up more earlier
but uh well the stock did trade down in
after hours but not not tremendously.
It's down 2% in after hours. Oh yeah, I
guess Apple overall from the earnings
just this this this narrative that it's
not as bad as we were thinking even
though the time period that all these
companies are reporting for is before
liberation day. Still the idea that
there's some like good feeling that
actually the economy is humming along at
some capacity still that and basically I
guess if we go back to zero tariffs or
something like that everything will be
okay. again seems to be the the feeling
right now. Okay. But something beyond
tariffs can hurt Apple and that
is aimed directly at its services
revenue because for a long time Apple
had told app developers that they could
not tell other people that they could
buy subscriptions to their products
through mechanisms that were not the
Apple App Store. So, for instance, if
you were on Netflix, Netflix couldn't
say just go sign up on Netflix.com and
you will avoid the Apple App Store tax.
Then the federal government had
something else to say. Why don't you
queue us into the story, Ronan? Okay. I
think this is one of the biggest tech
stories in a long time and I think this
really poses a huge threat to Apple and
I'm I will inject my own personal
feelings about as a longtime Apple
fanboy but what I've been seeing
happening to the company. So there's
been this trial with Epic Games for
that's gone on almost 5 years that
actually and again it's amazing that
like through different administrations
through different political climates
actually ended with the judge ruling
that Apple not only is two years ago
that there was an injunction against the
idea that they take a 30% commission and
block any other way or are very overly
restrictive about how app developers as
you said that you can't include any
language go to Netflix.com to pay and
I'm sure many listeners have dealt with
this like if you try to buy something I
think if you try to like on Amazon
sometimes you're a book you're
redirected to the Amazon app on the
mobile web like it really creates bad
overall UX flows. So then what happened
is after that initial injunction, Apple
basically did a bunch of workarounds and
still were uh forcing app developers to
pay
27%. And the judge came out and said
that is completely not okay and now you
have to give allow the options to uh
actually let people go and pay elsewhere
outside of your actual like embedded app
payment ecosystem. There's two big
things that came out of this. First, so
in 2023 after the initial decision, Phil
Schiller had actually said that maybe we
move to a model where Apple takes no
commission, but apparently Apple's
finance chief had come up with the idea
around
27%. Tim Cook sided with the finance
chief, Luca Maestry. So you have a
situation where it's very clearly
documented and now in the public record
that even after this initial injunction
that they basically worked around for
circumventing this. The second thing
that this is actually the craziest part
to me because as a user I felt this. If
any if listeners have tried to go and
pay even like click out to a directly to
a payment site on an external website,
there is a Slack uh Slack conversation
that leaked through this or we're we're
in the court filings where they talk
about they're like, "Okay, external
websites sound scary, so the exacts are
going to love it." Basically like saying
you're going to an external website. And
I've you I've been in that position.
You're like, "Oh, wait. Maybe
something's insecure right here. And
then it even says, "Wait, to make your
version even worse, you can add the
developer name rather than the app name
just to make it look overall a little
shadier that if you're going to go do
this." To which the other developer
responded, "Oh, keep going." Like they
were sitting there like, "How do we make
this seem like this kind of like shady,
spammy transaction when in reality it
was not?" And it just made me start to
question like Apple's entire brand and
what has gotten them to where they are
today is the idea they're the ones for
privacy and security and the user
interest when all these other tech
companies are sucking up your data and
leading you through dark patterns and
suddenly you're seeing this was November
2021 this was being discussed like the
dark pattern thing they're in there and
that to me that can completely change
the perception of the entire company.
Well, I used to think that, but Apple
has been able to weather so many storms
like this and nothing seems to stick.
And I think it's just because people
love iPhones so much that like this is
not going to resonate with the
individual uh user. So, I I think that
that is not going to be a big deal.
Also, I just love that the term external
website uh sounds scary. Like, excuse
me, what what is an external website?
Like, what the hell am I on right now?
It's still a website. It's just a
website. Yeah, but to the average user,
I get it. Like, anything that makes it
seem Yeah. Anything that makes it seem
like you are no longer in the safe
walled garden of Apple's payment
ecosystem and your credit card is going
to get it could get stolen out there.
Who knows? But to me there's another big
thing and uh uh the pragmatic engineer
Gurgley Oros is that how you say his
name? Gerge. Gerge. Gerge. So he had a
great he had a great uh thread and he
talks about how the actual payment
ecosystem is like a perfect
representation of monopoly because it
has not improved. The whole idea is this
30% fee is supposed to allow you access
to this robust, safe, secure ecosystem.
It's good for consumers. It's good for
app developers. But he pointed out all
these things that I I hadn't really
thought about, but are table stakes for
any kind of subscription e-commerce.
giving a full or partial refund directly
like it providing customer service
messaging around any kind of uh any kind
of transaction or especially refund
providing certain types of discounts
rather than just a three or 7-day or
30-day trial. Like all of these things
are just so normalized and part of like
running a good subscription type service
and Apple doesn't allow them. And then
you start to think like and then as he
points out it's because they haven't had
to improve it at all. So again the
promise that it actually was the best
place to be and that's why you should
pay 30%. In reality this was like the
most cleanly a clean example of
monopoliz monopolizing behavior where it
just was pure market weight and
dominance. And in fact that experience
got worse and worse. And I'll say this,
like, have you canled a subscription on
iTunes/app store, whatever, whichever
one it's on now. I think so. Like, it's
10 steps. You have to log into your
iCloud account, which who goes into
iCloud ever? You have to go file a
dispute. You have to like like it's the
most heavy, ugly, annoying process ever.
And I'm so convinced that like they make
a lot of money off of people just not
knowing how to do that or not even
realizing or not caring. And again,
think about how many apps are like 7-day
trial and then $69.99 for one year. Like
they've pushed the whole ecosystem
towards the more scammy side of the way
this stuff can work versus the rest of
the internet. No, I'm with you. I think
this is the most egregious thing that
Apple does with its power or the most
egregious thing I can think of right
now. And I do love that the federal
government is trying to get them for it.
And frankly, the reason why I think it
is such a righteous crusade here is
because the one that ends up getting
hurt is the customer always. Like why am
I paying 30% more for Netflix? It's the
same service. I mean, I know Netflix
doesn't even take payments on on um
Apple's uh ad platform. So, that's uh an
extremely righteous reason to pursue
action here. And just to bring it back
to our discussion of where Apple's
business goes, app store fees are a
major part of its services revenue. Like
Apple's big revenue growth moment again
is services. Wait, what services does
Apple provide? Now, of course, there's
Apple Music and and um Apple TV Plus,
but a big part of the service, quote
unquote, that Apple provides is
extortion.
30 billion 30 billion. That's the
estimated revenue from the directly from
the payment side of it. That's a lot of
money. And what and what is anyone
getting for that? That's the question.
Yeah. Yeah. Now, of course, I don't mean
extortion like in the legal sense, but
sometimes it feels like there's, you
know, you you sort of, you know, be
terrible if something happened to the
nice business you had over there uh with
that company. All right, let's talk a
little bit more about what's going on
with big tech because this does again
have a read through to the economy. Very
interesting stuff with Microsoft which
crushed earnings expectations. Uh
Microsoft chief financial officer Amy
Hood said demand signals across the
company's business have remained
consistent so far this month. So
everything's still going quite well uh
in April and Azure grew 35%
year-over-year. I think that's open AI.
What's your read, Ranjan?
I mean I think the the general theme
from this week was AI is still powering
the economy. Like I mean maybe that's
that's why you got to be an AI first
company. But uh like I definitely think
and again in the whole how much is of
that money is Microsoft's own investment
money coming back to Microsoft uh I mean
this stuff gets a little difficult to
fully understand but but overall I mean
I mean when Azure is growing at 35%
yearonear that's uh that's pretty
spectacular and again I think it's a
sign that every company is moving
towards that paradigm and uh so you
better better get on. That's right. And
Amazon uh AWS grew 17% missing
expectations. Um I don't know. I think
that next quarter is really going to be
the interesting uh quarter to watch for
Amazon. Did you know that 60% of the
company's e-commerce sales came from
third party merchants? Uh okay. Come
from third party merchants that get many
of their products from China and then
sell on Amazon's website. I mean I try
to get this uh speak to Jamil Ghani
about this but he wouldn't give a number
also the head of prime but this is
coming out in places like the journal
the company is way overindexed on China
one way whatever way you look at it yeah
I think
Amazon potentially more than Apple or at
least equally is in trouble and actually
this is a good sign the like do you want
supply chain Tim might not make great
product with Apple intelligence but he
can ship supply chains uh faster than
anybody else. Um, but I mean, Amazon
made this strategic shift a number of
years ago to push for more Chinese
suppliers and allowing Chinese suppliers
directly onto the platform rather than
Chinese suppliers selling to American
businesses that then resell on the
platform. So, I mean, it's been a long
time coming and obviously they kind of
had to do it in many ways to compete
against Shien and Timu, but they're
they're going to this is going to be a
big issue and we're going to see this
stuff Yeah. play out a lot more directly
in the the months to come. But hey,
maybe you don't need $30, Alex. Maybe
two are good enough. Isn't that what
Trump said? Yeah, that's what Trump
said. What was the New York Post
headline?
Oh, they said uh something on the
Barbie. Let me see. I'm gonna I didn't I
didn't catch this one.
Oh, yeah. The New York Post headline. Uh
Trump admits tariffs uh will raise some
prices, cause shortages. Maybe children
will have $2 instead of $30. And there's
a picture of Barbie and Trump. And the
headline is skimp on the Barbie. Oh god.
How classic.
Do you think AI is gonna replace the New
York Post head in a headline front page?
Unfortunately, probably. You know what?
I don't think that's classic. It's very
human. Yeah, that's a good one, though.
No, you know what? AI can't come up with
that one. That's too good. That's
original. Yep. Skip the bar. It's never
been done before.
New York Post is uh probably the single
most defensive uh front page headline
writer is the most defensible job
against AI. Don't tell that to Mark
Andre who said this week that it was VC
early stage venture early stage venture.
Uh confirmation bias maybe. All right,
very quickly. Facebook 42 billion in
sales in the first quarter. Uh I think
that is kind of insane. Zuckerberg says
they're well positioned to weather
macroeconomic uncertainty. Capex
spending that they're going to go from
AI is going to go the original range was
65 uh 60 to 65 billion. Now it's going
to be 64 to 72 billion largely on
artificial intelligence investments.
Meta I have been through many cycles
with Meta and it's hard to keep them
down for long. They find a way.
Yeah, I think meta the the digital
advertising impact is almost going to be
like a second order effect versus the
manufacturing one which is going to be a
lot more immediate in this quarter.
We'll start to see that downstream and
we haven't I mean I know Snap issued
some like headwinds guidance. Um but but
I think Meta is overall relatively
pretty well well positioned right now.
And I also say that that now that it's
been getting warm in New York, I'll
admit I am loving my Meta Ray-B bands
even more. Like it wearing Meta Ray-B
bands, walking around New York City,
listening to music on it, asking it
questions while you're just wandering
around. It's a good product. It's a
really good product. Now, would you wear
them in a podcast interview like
Zuckerberg has been this this week?
Absolutely not. Absolutely not. That's
actually
I got them in December and I haven't
used them that much, but they're cool
like on vacation and when I was skiing
and stuff, but but now wearing them
outside when it's sunny out isn't weird.
So then you can just go around and
actually use them. I still will not wear
them. I I I don't have the transition
lenses though, so they're just the dark.
So I'm definitely not not wearing it
inside, but I I don't know if I'd wear
it. Maybe if we're an AI first podcast,
Alex, both of us got to wear those Ray-B
bands. Got to wear the Ray-B bands. All
right. Next time we're in person, let's
do it. All right. Okay. Let's take a
quick break and come back and talk about
Nvidia and anthropic uh going at it. And
then this great letter that we got from
a professor from philosophy from
Wilfford Laurier University. We'll do
that right after this. And we're back
here on Big Technology Podcast Friday
edition. Coming into the home stretch
stretch. Uh, very quickly, Ranjan, I
know we have this in our in our headline
of the of the story of the episode, but
let's just talk about it. It's kind of
interesting. Nvidia and Anthropic are
going headto-head. I don't know if you
caught this, but Anthropic really
doesn't like the fact that chips are
getting into the hands of developers in
China. And they said that the chips are
being smuggled in to China in baby bumps
or alongside live
lobsters and they would like an increase
of funding for export enforcement.
Export controls are only effective with
proper enforcement. Anthropic says
enhanced resources for the Bureau of
Industry and Security would
significantly improve control
effectiveness. Now, Nvidia, which sells
a lot of chips into Singapore, and I
think we can say with a good deal of
certainty, many of those end up in
China, is not happy about this at all.
And on Thursday said, American firms
should focus on innovation and rise to
the challenge rather rather than tell
tall tales that large, heavy, and
sensitive electronics are somehow
smuggled in baby bumps or alongside live
lobsters. Very interesting fight. I
mean, it's it is interesting that we're
going to start to see American firms
become more and more concerned about
what's going on in China and Nvidia,
which I think depends to some degree on
selling them, is going to fight back.
And we're seeing that play out and among
two companies who really don't want to
be publicly fighting with each other.
What do you think? I think uh I'm
convinced Trump is going to address this
one. I'm making the call right here in
the next three to four days because it's
just too perfect. If you hear smuggled
in prosthetic baby bumps or alongside
live
lobsters, I mean, that's just too
enticing to make a comment on, but I
don't know. I mean, we're going to start
to see more of these very nuanced
divisions like that you wouldn't quite
expect. And I agree like at that scale
and I'm sure Anthropic is a highly
dependent customer on Nvidia as well.
like it's pretty surprising that they're
doing this, but I don't know. And Nvidia
has to play both sides basically. So, I
think uh we're going to see more of this
coming out, especially as whatever
happens on the trade side happens. We'll
definitely see more. Not to be a guy
that plays both sides of the fence here,
uh but I definitely am on team anthropic
that
like we know whatever export controls
are in place aren't working. So, if
you're serious about the export
controls, you may want to try to enforce
them. And then I'm also on Nvidia's side
here that if you uh wanted to smuggle a
GPU cross borders, it's going to be very
difficult to make it look like it's just
a normal pregnancy. And a GPU certainly
does not look like a lobster. That's
just my opinion. I would I could pick
out a GPU server next to a lobster. I
don't know. For for my chip mule uh
behavior, I I like to go with the
lobsters over the baby bumps, you know?
It's just lobsters. Actually, are do we
export lobster to China? I think I
remember reading a while ago that is a
big export to China. So, might as well,
right? Makes more sense. This is why Red
Lobster went out of business is because
they started serving GPUs instead of the
actual thing. Actually the next one is
uh you know like another major export to
China from America is uh the like
leftover pig and cow parts because like
things that are or chicken feet as well
things that are not eaten in the US. So
yeah ne keep an eye on those chicken
feet to the customs officials. I have a
feeling that's where they're going next.
I'm just imagining a a man uh sitting
down for dinner at a Red Lobster and
tucking his little napkin into his shirt
collar and being so excited drinking a
little beer maybe. And they bring the
plate out and they say, "Sir, here's
your lobster." And it's an H100. It's an
H100 and a damn it.
Send it back. That's not what I ordered.
Can I send it back?
This is not well done.
I like that we went down that road
rather than the prosthetic baby bump
because that raises a whole host of
ethical issues. So,
I don't even know how how you would do
that. Okay. U let's talk about this
great letter that we got from Professor
Brian Williston from the department of
philosophy at Wilfford Laurier
University. So we spoke about AI
consciousness at the beginning of last
show and we always love hearing from
listeners especially when there's
thoughtful feedback that will help us
advance the discussion and think a
little bit more. So
um what professor will said was that we
talked about how there's consciousness
which is what you feel and intelligence
which is knowledge. Um he said here's
the problem in assessing whether or not
an ent any entity is conscious is
conscious. All we have to go on ever are
displays of intelligence. The only bit
of consciousness in the universe that we
can access directly is our own. And we
take it for granted that other humans
are indeed conscious. Why? because I
make an inference from their displays of
intelligence which I can access to what
I presume is going on inside of them.
This is exactly the same boat we are in
with respect to LLMs. Intelligence in
all cases, humans or machines uh is all
we have to go on. Well, that really
threw me for a loop. I would say I
definitely helped expand my mind here on
this question because wait a second. And
if the only thing that we can determine
whether uh something is conscious or not
is its intelligence, whether we
basically look at them and say does it
is it does it make um is when is there
something going on inside this being
that is like actually being versus just
existing like a rock? Um then who are we
to say that machines uh aren't conscious
or can't be conscious? Because I think
my implication was if you can't feel,
you can't be conscious. Um, but how do
how do we know? Now, I'm still on the
side of these AI isn't conscious. Uh,
but I do kind of think that it's a very
interesting prod at the ideas we shared
last week and want to turn it over to
you to get your response.
My first reaction on this was this is
why I love our listeners honestly like
actually genuinely intelligent,
thoughtful and like long uh responses to
what we say. I mean that's and it's kind
of like reflects the type of
conversation in the Discord channel as
well. Like this I love getting this kind
of uh email from listeners. But then the
other thing too is I agree it made me at
least be like who are we to say that
machines are not conscious? Like it's
one thing to be like I don't think they
are but to definitively say they are not
given kind of how he the framework that
he set up and even we were talking about
last week. Now I think maybe I am in the
camp of I I will not take a position and
I will recuse myself from uh because
again our displays of intelligence are
talking about uh lobsters and GPUs. So I
don't know what that says about our own
consciousness. Yeah, right. I don't
know. I guess like the other side the
other definition is self-awareness. And
you could say that these AIs today are
already self-aware.
How? Yeah. I mean, there's No, no, but
there's been a lot of behavior that show
actually no, but oh, we didn't even talk
about sophantic chat GPT. It did not
solve itself. They had to go into the
system prompt. So, so I think I don't
think we're at self-aware yet. Okay. But
I think that we can certainly see a path
to it getting there.
Maybe. I think we'll self-awareness is
is a I think is a lower qualification
than consciousness.
Is it before or after AGI?
Maybe it's right at AGI.
I don't know. Again, if a Whimo can
drive the streets of New York City, I'll
give you self-aware AGI. Not conscious,
but close. Well, maybe we can end with
the greatest sign of technological
progress we've seen in millennia, if not
the length of time that's longer than
millennia. Maybe eternity. I don't know
what's longer than millennia. Double
millennials. Double 10. I don't know if
there's a unit for 10,000 years, but
we'll check with AI because we're an AI
first podcast in a moment. And it is a
beautiful new gadget that you're going
to tell us all about called the Mag 2.
Um I am now as we've been doing more
video I with respect to the YouTube
commenters who are like why is Ron John
looking down at the camera like that and
what is this angle and I don't know
someone who enjoys
uh some good framing in in any kind of
video. Uh, this company Plexicam has
this new, it's a magnetic thing that
attaches to a webcam. So, you can put
your webcam in the middle of your
screen, right over the other person
you're talking to or right next to it.
So, you can look when you're looking at
them, your eye contact for the video is
actually looking into the camera. A lot
of people, I'm guessing if you've done
video, you know, you kind of try to
force yourself to look up to the middle
of your laptop. Um, I'm a big fan. This
is my first time using it. We'll see how
the video comes out, but I'm a big fan
of this. And uh I'm going to put this
under the camp of AI first podcasting.
All right. I don't know why it's it's
actually magnetic. It's one of the
oldest technologies in the in the world.
Magnetism. The original artificial
intelligence. Magnetism. There was a big
transformation where you had to go
magnet first, otherwise you were uh It's
going in the performance review. You are
magnet deficient. Get out of here.
Speaking of which, let's do that
ourselves. Ron John, great to see you as
always. Thanks for coming on the show.
All right, see you next week. All right,
everybody. Thank you so much for
listening and watching. It's always
great to have you here. Join us on
Wednesday for a discussion about whether
scaling is over with Gary Marcus, an AI
skeptic, and then Ronan and I will be
back on Friday to break down the week's
news. Until then, we'll see you next
time on Big Technology Podcast.