Big Technology Podcast - Amazon, Alphabet, Microsoft, Meta & Tesla Earnings, Cruise Pauses Operations, Zuck vs. Sam Altman

Episode Date: October 27, 2023

Ranjan Roy from Margins is back for our weekly discussion of the latest tech news. We cover: 1) Ranjan's Taylor Swift costume 2) The broader picture on Big Tech earnings 3) Amazon's impressive earnings beat 4) Investor metaphysics 5) Microsoft's AI uplift 6) Tesla's lower margins 7) Meta's impressive revenue and user growth 8) Meta's TikTok clone is working. 9) SBF takes the stand 10) Cruise pulls its self-driving cars off the road 11) That's good? 12) Mark Zuckerberg vs. Sam Altman You can subscribe to Big Technology Premium for 25% off at https://bit.ly/bigtechnology -- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

Big Tech earnings are coming in hot, but the Stark market is reacting cold. SBF takes the stand, Cruise hits the brakes, hard. And Zuckerberg is coming for Sam Altman, all that and more coming up right after this. Welcome to Big Technology podcast, Friday edition, where we break down the news in our traditional cool-headed and nuanced format. We have a big week of tech earnings alphabet meta. Amazon and Microsoft all reported, and the stock market is kicking the butt. of alphabet and not treating the others much better. So we'll get into that and plenty more as we go on.

As always, we're joined by Ron John Roy of margins. Ron John, welcome to the show. Hey, as the RBC Capital Markets Head of U.S. Equity Strategy said, the markets are in a spooky place right now. So I'm very excited to talk about tech earnings of four days ahead of Halloween. Bring on the scary puns.

Apple, of course, has its super scary event where it's going to introduce a whole lineup of MacBooks coming up on the 30th. You heard about that a little bit with Brian McCullough on Wednesday. But meanwhile, we can get down to these new tech stories. But first, on the subject of Halloween, I logged on to our little stream today. And I was like, Ron John, you got a haircut. But it turns out that I had misread the situation entirely. Can you share a little bit more about what's happened here?

like an observant podcast host Alex totally got the situation wrong and it was not a haircut I shaved my beard for the first time in three years but and for those on LinkedIn watching you can see in the stream but I will be Taylor Swift for Halloween and paired with a Travis Kelsey

but I have chosen to be Taylor Swift because it's just funnier that way so that's amazing well yeah I will say I've gotten Okay, very quickly, not to get too into Taylor Swift territory, but in researching this costume as only a big technology podcast co-host could do and writer of margins, I will admit I have gotten more fascinated into how she conducts business and how kind of baller she is about certain things. Even recently, the ERAs tour going essentially direct to distributor in terms and bypassing the studios and going direct to the movie theaters. all these kind of things. I went into a rabbit hole

and finally learned about how and why she re-released all of her albums and trauma on the masters and stuff. So I'll say Taylor Swift, businesswoman extraordinaire. I definitely want to go see that movie in theaters. And, you know, Ron, John, you know, sometimes you zig where others zag,

but you are zigging where others are zigging because Taylor Swift is going to be the most popular costume this Halloween, Travis Kelsey number two. and look at look at you go you're going to be tailored i know which is why i had to be taylor in this situation because otherwise it would be too basic and two two of the moment so we had to mix it up a little bit that was my zag okay so speaking of zigzags there you have tech earnings and the market reaction to them you have a really uh ugly slate of uh tech stock movement this week

led by alphabet which is down 10% this week off of like what i felt was a time tiny miss, but meta is also down 5%. After a huge beat, Apple's down 2%. It'll report earnings next week. Amazon just delivered this amazing, I mean, crushing earnings report in a good way, and it's up 3% this week. And Microsoft also had such impressive numbers, and it's up 2%. So you look at the reaction, and then you look at the way that the market has treated these companies, and it seems to be quite incongruous, right? They're basically delivering almost everything Wall Street wants and yet their share prices are falling and it's like they just went through this whole cycle of year of efficiency and try to get into line with what the macro environment demands and they're

still getting punished so what's happening rajan i think the market is starting to understand but but we should definitely dig into each company because i think there's there's uh nuances within the different reports but overall and going back to that comment from the RBC Equity Analyst about spooky season in Big Tech. These companies had made such a big comeback. In the last year, in all of the NASDAQ's growth, they comprised, I believe it's 86% of all of that growth. So the entire market, one of the analysts call them the Magnificent 7. It's no longer Fang.

Now it's a Magnificent 7. Oh, yeah, they use that term every day on CNBC. Okay, yeah, Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Invidia. So the market has come to depend on them, but again, we're heading into a moment where now that all of their valuations have both recovered and then some, now the expectations for continued insane growth remain. And, you know, AI and all the excitement around it has saved the market and pushed it back into a point where people are excited, but at a certain point, especially giving them,

in macroeconomic concerns, geopolitical concerns, and competitive concerns because can they all be winners in the AI space? I think finally people are starting to go one by one and really try to understand where these companies are really going. But here's the thing. They did have their run-up, but they still remain relatively cheap, and they're even cheaper now. And you would imagine there would be, I think they call it like a level of support where they don't fall this way, but they are falling this way. Just listen to something that Brad Gersoner, the investor, shared on top of his CNBC clip this week, that basically went into more depth.

So he said, when the market faces near-term uncertainties like war and higher rates, owning the future of tech and AI at multiples below Walmart and the S&P 500 for double the growth and much higher margins feels compelling. Zuck reduced his year-over-year head count from 86,000 to $66,000. while doubling free cash flow to 30 billion. So it almost seems that, yes, these are serious macroeconomic factors. But if you look at the logic of it, these companies are still, I mean, meta is what out of 15 multiple. So it's trading.

It's a less expensive stock than a Nike, which is effectively the point that Gersoner was making. So why are they continuing to fall? Yeah, but this is where I think it's interesting is that, and until you had shared that quote to me earlier, and I actually was looking up, Walmart is trading at 31 times earnings. As you said, Nike, I believe, is around high 20s, low 30s. But what's really interesting to me is maybe part of what's being signaled here is big tech companies have dominated anything technology.

And again, in their cloud divisions and around AI spend potentially, they could continue to dominate. But Nike and Walmart show that traditional companies outside of pure technology, are, I hate to say, becoming part technology companies. This isn't kind of, you know, Adam Newman, WeWork, BS, where it's we're a tech company when we're really a real estate company. It's that Walmart has built a huge technology operation. Nike clearly is, I mean, a very innovative retail company. So as technology becomes more integrated into these more traditional retailers and retail

or outside of pure technology companies, I think they become more interesting. that almost necessarily will limit pure big tech growth. Yeah, but if you look at a Walmart or a Nike, they still have higher capital cost than a tech platform. I mean, you know, the margins from a meta are insane compared to the margins from a Nike. So even though Nike has a website or Walmart has an e-commerce division, doesn't make any sense that, well, that meta is if you look at earnings, you know, twice as expensive. Yeah, no, no, that's fair.

I mean, we have to take Tesla out of that conversation, which we, we'll definitely give to in terms of capital costs. But I agree. It's, it's, but also remember, these companies are gigantic. So growing, again, Google's, this last quarter was 70 billion in revenue. I think it was 29 billion in profit. Microsoft 56.5 billion in revenue, 22.3 billion in profit, which was up 27%. So already the market has factored in these insane levels.

levels of growth on top of just gigantic bases. I think that to me, that's the thing. It's we become so accustomed to assuming, again, 27% profit growth on a base of 20 billion plus is just insane to me. And in any other market or economy would never have even been imagined, but in big tech, it has worked so far. I think it's just a reminder that a little bit of caution is not the worst thing. Yep. So here's kind of how I responded to Gersner's comments on air. And I don't know how if it came out well or not, but I figured it's worth bringing up. If you look at the valuation of some

of these tech stocks six months ago, the valuations were richer than they are today. Absolutely. They're cheaper now than they were previously. But I think what Brad is missing in the big picture is that investors are spiritually, metaphysically, they're a little bit nervous about being in equities

in a way that they weren't before. To take all a logic you want out of it, there's still a behavioral aspect to it. And I think that's something to concentrate on. I basically said that there's like a spiritual slash metaphysical aspect to this, which is that all the always on cable news getting into spiritual. I do. I love to talk about it. But basically like that's a fancy way of saying that there's a behavioral aspect to it, which is that these companies have made up such a large part of the S&P 500 for so long. And when the market feels a little bit shaky, investors get jittery and

they run away. That's basically the point I made is throw like you might have the logic, throw the logic away because there's the behavioral aspect that you can't ignore. What's your perspective there? Yeah, I'm certainly the first to believe in animal spirits in the stock market and the idea that psychology drives things much more than pure numerical and financial analyses. And it's true, yeah, these are the bellwetheres. These are where everyone's money is. And also, let's not forget that these are companies where so many. Many people in the economy have made so much money over such a long period of time now going on 13 years, let's say, or even 23 years if you got people who are very early, that it's one of those things that at any point, the idea that they've already made their money selling at the first sign of turbulence is not always going to be the worst thing. So, yeah, I think they represent such a big part of growth right now

that any sign of degrowth, they're going to be the first to kind of reflect that, at least publicly. So I can buy that. Man, I wish I would have said it the way that you said it. That's very, very well put. And it's basically the point that I was trying to get at, but just far less eloquent. So one thing I did get right, though, was that Amazon was in a really good position to thrive this quarter.

And if you look at it, they've had six straight quarters of, you know, of AWS, or maybe seven now, of AWS growth contraction in their web services, cloud hosting division. The thing is, you look at it and you're basically taking four quarters of comps onto COVID growth, like when you have AWS growing 39% in the middle of COVID, because that was basically the entire economy. And then you come and you say, well, growth decelerated.

It's like, well, of course it decelerated. The comparison was impossible to meet. You follow that up with two quarters of, you know, higher rates, unpredictable economy, maybe recession talk. And that's when customers go to Amazon Web Services and they say, well, we need to optimize our spend. And that basically means, you know, we're not going to grow our spend and help us take what our spend is today and get the job done. And so you end up with like, yeah, that's the recipe. It's not because of business weakness necessarily. It's because of the broader context.

And what Amazon's coming up now is it's going to be able to turn in quarters, looking back at those old expectations versus the impossible to beat expectations. And it's really set up for a really nice run here. And it seems to have its ducks in order when it comes to AI now with the anthropic investment and finally a coherent strategy with AWS. Retails picked up. We had a 4.9% GDP growth that we just turned in this week. So, of course, Amazon retail numbers were posed to be pretty good. And then advertising, right? Like when advertisers need to spend smartly, they're going to spend on Amazon advertising

because it's just the closest possible way to get an ROI. And lo and behold, the company did quite well. It blew out its earnings expectations. And it's up, you know, 3% on the week, but about 7% on Friday, which is quite impressive. Yeah, I think Andy Jassy. has had a bit of a rough go in terms of like public perception of his performance. But I think this was a good report for him.

Again, as you said, these numbers still, net income tripled to $10 billion from $3 billion just a year ago. And I think that's a good point. It's like we're finally, I don't want to say the world is certainly not normal. But any comps against COVID era, like the COVID era, call that six quarters maybe, maybe even up to eight, all of the Q2, 3, and 4 of 2020, certainly first half of 2021, maybe the entirety of 2021. Now at least we finally have companies being able

to have reasonable comps from a year ago. So being able to really understand, are they growing? Are they in a good position? It's starting to make more sense. And for Amazon, to me, the advertising number stood out that they beat expectations Now it's a $12 billion business. Analysts were expecting 11.5 billion.

As you said, Amazon Web Services beat expectations. So the two very high margin businesses for them are doing well. What's interesting to me as a company, and also it made me think is, is Andy Jassy going to become kind of like, could he be the Wall Street friendly version of Amazon CEO? Because he is going to be focusing on, again, high margin things. from AWS that Wall Street always liked versus Bezos, who was given plenty of leeway to do whatever he wanted, but still always focused on not making a profit and just growing. So it's going to be interesting for them. Yeah, the ship is definitely turning. I mean, you look at the

advertising business and that's coming in at almost half the revenue of AWS. And the margins are insane there. I mean, basically it's 100% margins. The stuff that that they're paying for is everything on the retail side, which tends to zero out. Oh, hold on. One thing I had to, in the report, one of the things that jumped out to me is net income for Amazon included, to get that 10 billion number, included a pre-tax valuation gain of $1.2 billion from their investment in Rivian. Are you familiar with Rivian? Not only my, have you ever been in a, oh my God, been in a Rivian. Ranja, let me pick you up because in November, I'm going to get, I think, a week-long lease or loan from Rivian of, I probably shouldn't say this, but I'm saying it.

It's common, I hope. We're speaking to them now about getting a week-long loan of their pickup truck. And I'm going to tool around New York with it for a week. And then RJ Scouringe, the CEO, is going to come on the show. So. Okay. All right. All right. Familiar. Yeah. I just interviewed him for GQ, but we're actually going to do another in-depth conversation

for the show, which I'm stoked about. Okay. Yeah. No, I wrote in one recently, and it was a very, very cool experience. So that one jumped out. It's just always a reminder of how certain line items can actually make a big difference in these earnings reports that you might miss or don't actually have that much to do with the company itself. But yeah, I think Amazon, I will still say, and this is something happy to rant about, but as a user of Amazon and the core product, it still just seems to get worse and worse. And I still wonder, you know, when they have prime day summer prime day October like trying to create multiple holidays every year and I don't

know overall the experience even things come arriving reliably it just seems to just continuously degrade so I'm still curious where this goes I mean competitively against Ashin and Timu maybe that's the only way to to play but it feels like I don't know if they're paying simply less attention to Amazon dot com but it's just gotten so much worse for me. So I have a column coming in big technology from Christy Coulter who, she was on the show recently, and she's going to talk about why the design of Amazon is so bad.

I just, we're going through an edit now. It's such a good story. So we can talk about that afterwards. It's bad. Sorry? On purpose? It's on purpose it's bad? I can't share anymore because I'm going to give away the story.

But when it when it published, is we'll definitely talk about it. Maybe Christy can come on to explain a little bit about what's going on there. All right, let's talk about Alphabet, right? Very difficult week for Alphabet, which is interesting because it sort of beat expectations across the board except for in one little area, Cloud. Cloud is not even such an important part of Alphabet's business. And it didn't even miss, well, it actually did miss fairly decently.

It was expected to bring in $8.64 billion in revenue and it brought in 8.41. It had its worst day in the stock market since the start of COVID since March 2020. And it looks like all of a sudden people are fleeing from Alphabet. What do you think is behind this exodus from the company as far as investors go? I think, okay, so I was surprised and felt maybe it is a bit of an overreaction. But I think it's a reminder again. And I mean, on the topic of Amazon.com core versus AWS and advertising, Google, Google's search and ad business has been a stable and steadily growing giant over years,

but their cloud business has been a major source of growth. I mean, it's pretty nuts. It was, you know, only $8 billion in total in 2019. It's growing 50% year on year. Still, sometimes it always just astounds me when you see those. Again, a company growing 50% or a unit growing 50% from $8 billion, now around $26 billion. I believe. So then if it misses and it's not growing at that insane rate, obviously that doesn't look good. And even more important is every investor understands right now that, you know,

where and how people make money in AI is, especially in generative AI, no one really knows what that model is going to look like and how it's going to look like. Even if we think about it, and we've talked about this a lot here, like Amazon's investment in Anthropic is either one billion up to four billion a lot of it is cloud credits how much of it is actual cash how much how do they even see a return what are they hoping to get out of it like this stuff is so convoluted and complex right now and uncertain so investors here they just want to know that alphabets cloud division google cloud or Microsoft and they Microsoft even breaks out what they call intelligent cloud and that business line which is their AI services that these are

they're growing, that they're actually figuring out, starting to figure out how to make money and showing they can grow. And it's, Google didn't. And, uh, and I think that that's going to cause more fear than anything right now, because that's really how people, when you're thinking about this three to five years down the road, that's clearly where everyone's betting on growth. So my perspective on this and this, I guess it plays off of what you're saying is that people are starting to have big questions about Google's ability to do anything big, again, outside of search. And cloud is a proxy for that because cloud is a proxy for AI. And even though AI is only accounting for like what, two, three percent of revenue in places like Azure where it's

actually doing well, if Google's missing its cloud number, people just see that as like a glaring red flag in terms of where its business is going while the others are growing. What do you think? Yeah, I think that's it. I mean, myself, like as a major user of plenty of generative services, is and how this stuff is going to be profitable is it's it's so up in the air and it's it honestly makes it for me the most exciting story to follow the topic as a user to actually use or technology to use because it's so up in the air like we might see some companies we're not even thinking about become giants right now because because the business model side of generative AI is so wild west still. So I think investors are just really desperate to see someone show

something. And I think, I mean, honestly, Microsoft, you have to imagine from an enterprise side, like to me it's almost like a tertiary benefit of the open AI relationship. Is there probably closing major deals solely based on the open AI brand and, you know, like big enterprises just being people using chat gpte and even when it comes to the stuff that has nothing to do with open ai just the idea that you're loosely connected to one of their models is probably helping some enterprise salesperson on a golf course close a deal versus uh versus i mean you can see how that that was a smart play like that absolutely it's like yeah hey one day you would like to your cloud to speak with you wouldn't you look yeah just give me next one of your

But if you think of it, now that I'm thinking about it, so meta has made a pretty good splash with Lama and, you know, we're taking this alternative approach of open source, but there's still a brand there. Amazon now is trying to associate its enterprise business with Anthropic, which as a user increasingly of Claude, the Anthropic chatbot, which is really good. I think it might be the best of the bunch. Really? Yeah, yeah, yeah, Claude. Because you can also, you can dump in massive amounts of text. I will admit, for this podcast, what I do beforehand is I basically copy the text of like 20 to 30 articles, dump it in Claude, and say, pull out all the numbers and then, you know, pull out like 15 to 20 insights or something like that. And then go back and then read more deeply into certain things that like were of interest.

but that's where I start now, because it can just take massive dumps of text. Have we been doing the show with an LOM the entire time? My goodness. I'm not even here. I know this is just generated. This is the future, for sure. Yeah. So, you know, instead of starting with reading all the articles, you start with the extractions of

insights in some reason, then dive deeper. To me, it's a research process is always better. But then Microsoft has OpenAI. Google does not have any kind of cool and sexy brand to any of their underlying models. You don't find Bard cool and sexy? No, neither do I? Still one of the worst namings. But actually, wait, wait, hold on.

Bard is pretty good. I will say. You've always been a Bard boy. It is true. A bard boy, never a Bing boy, always a Bard boy. What Bard I will use for is current events, anything recent. Actually, right now, you can give me the growth of Google Cloud over the last three years in terms of revenue and growth rates, and it'll make you a nice table, whereas ChatGPT will say, I'm sorry, my data is only drained up until whenever. Anthropic will say the same thing. So Bard for pulling together, and this is where I think Google could do something huge if they execute on this well.

Generative search, I think, is really impressive in Google. For anyone, and we've talked about this, who's experienced it, when you get what that does to their business model, I have no idea, and it's going to be really interesting. But if they become the leader in continuing to have people search there and then presenting you with the best and right information, and Bard is actually doing pretty good at that kind of current event search as well, or recent financial data or anything like that.

So I think that's a huge opportunity for them. But do you know the name of Google's main large language model that they use? It's text bison and then they have text a couple of other ones. But again, it's like these are not in headlines. So I think the branding element of all this enterprise AI definitely I think is playing a part and they're behind. I want to put a point on something that you said about Microsoft being able to close deals based off of the Open AI Association. because on a golf course. Let's move to that company and on the golf course. Let's move to that company's earnings because they actually gave us some numbers this quarter about how many deals they are closing directly linked to OpenAI, which does make you believe that there are more. So look, the company, the Azure OpenAI service now has 18,000 customers from CNBC, up from 11,000 customers in July.

I mean, to close an additional 7,000 enterprise customers in a quarter for this Open AI service is just enormous. It's enormous. I mean, jump 63% in a quarter is wild. So we do know that this is having a material impact. And like, while, you know, it might be 2 to 3%, they'll say, like, this is growth that they can count on for quite some time and we'll just expand. And that's why when you think about the winners this week, you have Microsoft that's up in a week that. But most other big tech companies are down. Yep, I think that's definitely fair.

That, yep, that captures it all right there. You know, one more thing about Microsoft earnings. So this is apparently something that has been around for the past week or so. They might owe the U.S. government like $29 billion in tax. And it has something to do with like trying to set up shop in Puerto Rico or something. And they're appealing this amount of this amount of fine. that's also something to, like, look at for Microsoft is that $29 billion is not something you shrug off. I mean, that's a tremendous amount of money that they could potentially owe to the U.S. government.

I mean, think about... That's finally a number that actually would matter for one of these companies. And it's not a fine. It's just the backtaxes element. But if and when they do actually have to pay that, that's seriously going to hit that companies. I mean, you think about the loss they'll have for that quarter. It's going to be enormous. But in terms of the other company, I definitely wanted to touch on this week is Tesla earnings. Because to me, this is one of the bigger earnings reports for Tesla because it wasn't a good one for them.

It was definitely, and I know we go back and forth in terms of I certainly lean more to the bearish side on the company. But what was really interesting was I have been certainly seeing more Teslas on the road. I have talked to more people who have bought Teslas in the last year. And it's because they had made the, I mean, to their credit, the very specific strategic decision to go for growth over profitability. And we're seeing it in their margins. Margins have compressed down to net margin was 8%, where it was almost 19% a year ago.

So I think in terms of profitability, it's already showing up in the reports. And it's a reminder because the direction of the company and the valuation demands extreme profitability. Obviously, certain analysts will say the dojo AI systems are super high margin items like robots that will manage your entire supply chain are how you'll get there.

But just on the cars alone, it's moving into a way where it's almost feeling to mass market. And when you bring down the price, I mean, as a traditional like retail problem, are they losing some of their cashier and allure when you can get it almost for cheaper than mid-level Honda? And what does that do to the overall brand as well? Okay. And this is why I feel like Wall Street is sometimes so unfair to companies, even though they've been very fair, beyond fair to Tesla, but sometimes the stock valuations and the incentives that companies chase on Wall Street have nothing to do with like the actual company health. Look, the environment right now for EVs

is extremely competitive. Not only that, we are in a moment of higher rates. And for Tesla, which is just basically getting to the point where it's able to make the amount of cars that it wants to make, getting those cars on the road, getting them into the, you know, into the hands of owners. I guess you don't really put a car in somebody's hands. But getting them into owners' driveways, I guess is how a car reporter would say it, is crucial. And like, is mass market something that you actually don't want? I mean, think about it. What better mark of success could you have for a vehicle than to be one of the most sold and most owned vehicles in the U.S. or in the world? And if Tesla is trying to get it, make its way there, and it can do that, and it's gotten

it's manufacturing to the point, or it's able to discount and still make profit, albeit less profit than before, I think that should be a good thing, especially. I mean, think about how many EVs are hitting the road. Ultimately, this is good news. That's good news in two ways. One, if every person who now buys a Tesla wants to buy a Tesla again and then again, or theoretically, in the perfectly executed world, subscribes to whatever additional services of full self-driving or other super high margin items Tesla provides, insurance, whatever.

Okay, that's good for them. But when you say Wall Street has been incredibly fair to them, Tesla, we were just talking about Google trade, or big tech trading at kind of like a 20x PE ratio versus Nike even around 30 and Walmart around 30. Tesla is at 66. Tesla's price to sales ratio is 7.5, whereas Ford trades at 0.5, Vokeswet, Toyota trades at 0.5. So for an established mature automaker, many of whom have pretty compelling EV offerings right now, Tesla is still trading at insane levels relative to them.

It's way too cheap, Ron, John. Absolutely wrong. Give it a 200 multiple. Okay, be done with it. And this was one of my favorite things that happened this week with Tesla, which was a little under the radar. Hertz, if we remember, bankrupt during COVID and then came out of it. And one of the big things they did was announced in 2021. And I'll never forget, I was on CNBC discussing this partnership that Hertz had announced that they would be buying up to 100,000 Teslas for their fleet. It was an amazing moment, and I was actually going back just to go back into that COVID time machine to October 2021 because Hertz makes this big announcement. It was at the time that, do you remember the Matt Levine companies are no longer valued based on financial future cash flows, but instead proximity to Elon Musk was something he said for a while. It was literally companies would say like something about being associated with Elon Musk and see their stock go up.

Hertz makes this announcement. Elon Musk weirdly came out and said it's not true right at that moment. But that was when it skyrocketed Tesla's valuation to the peak, the peak which was hit in November 2021. That was like the announcement that pushed this move. Now, about two years later, in Hertz's most recent earnings report, they missed on profit because their fleet of Tesla's has fallen in. value so much because of these price cuts that are happening on the by they're being generated by Tesla and this is one thing I hadn't even really thought about is a rental car company a lot of their business and is based on the potential resale value of their entire fleet. Oh, that's fascinating. Yeah, so because Tesla is cutting prices on its own side, Hertz is now getting hit

because their profitability is getting hit because the value overall of their Teslas has fallen so much, it's actually hurting their bottom line. And their CEO had said that Hertz is suffering a higher incidence of damage with its Tesla fleet relative to its regular fleet. Well, if the worst thing that happens when Elon Musk tries to get Tesla's in the hands of people around the world is that Hertz takes a hit on the resale value of their cars, sign me up a tesla in every driveway a chicken in every pot do you believe uh Elon is doing this for the people yes bring Teslas to the world even if it means losing money and watching that

stock absolutely plummet from its inflated valuations I mean but it's for the people what's the mission what's the mission maybe this is all maybe this is a appetizer course for everyone to upgrade to the cyber truck get me in one of those and the robots and the robots let's not forget that so speaking of elin must let's talk for a moment about his fake cage match partner uh mark Zuckerberg okay so oh wait did we ever have has anyone talked about the cage match recently no oh Elon did tweet about it this week and he's I think he's ready to fight fight suck he's back okay as Alex and I have debated endlessly on this show I believe you thought the cage match would happen.

I'm still ahead on this one. No, I'm ready to take the L on this. I don't think it's happening. I don't think Zuckerberg wants anything to do with this anymore. No, especially right now. So, and why would he? Because his company is doing great. It beat top and bottom line on earnings and revenue for META is up.

23%. It's the fastest rate of growth since 2021. Not only that, time spent on the apps are increasing dramatically, 7% times per cent. increase on Facebook, 6% time increase on Instagram. Zuckerberg calls it a result of our recommendation improvements. Translation, we have become TikTok and people are staying around longer. And not only that, we've now figured out how to make money off of it. Okay, great earnings report for meta, obviously in great shape. Stocks down 5% because the CFO talked about how the war in the Middle East is creating some uncertainty for the ad business.

So good or a bad moment for meta? I think it's still a good moment because the things they have said they would deliver on, they have delivered on. And I think that's the thing that, you know, especially Wall Street always wants to see, is that time spent, reels monetization and growth of reels and short form video products has done incredibly well. And especially again, monetizing reels is something that was a nascent business for them and that they have been building is, it's doing well. So that means that they can compete against TikTok. Certainly, like, my feeds and chats have been inundated with people sharing reels. And it's definitely increased as anecdotal evidence over the last six months, let's say.

Also, for me, this was big. They fixed their ad business. They figured it out. And honestly, it's back to tracking is so, or sorry, ad personalization has gotten so good. it again on Instagram, it's kind of creepy to me because, so for context, I always say do not track whenever given the option by Apple. And still, it gets me and knows what I'm looking at and thinking about. But as meta had stated, instead of in the past cookie-based tracking that you go click on a website elsewhere, it tracks you and then based on that serves you, now that

they had been developing machine learning, that based on who you follow and other attributes about your actual in-app activity across Facebook properties, it would be able to predict what you're thinking about and looking at. And you can imagine, it's if all of the people I follow, many of whom have opted into tracking, are looking at something and probably talking to me about it, then it'll know to serve me that ad. So they have come up with all these other ways to still deliver you that personalized ad, and it's working again. So I think this company isn't a good place. And we talked about this on Wednesday with Brian McCullough, but basically what's happened is advertisers have, and you probably know this well, right, taking their money

that they hadn't met it previously and said, okay, this isn't working anymore. We're going to go to Snapchat. We're going to go to Twitter. We're going to go to TikTok. And then basically come back to meta because the others have been hit so much harder by Apple's anti-tracking moves and can't do anything about it. And I'll tell you, like, I don't even feel like I should. Well, I feel like after what we talked about last week, this will be somewhat, you know, G-rated. But my, uh, my Twitter ad platform knows me so poorly that it regularly serves me ads for, uh, bras, uh, small cup bras. Okay. All right. And I'm just like, what? And then I remember, oh, I opted out of tracking. Yeah, but, but this is where you,

So if you think about it, for meta, think about how much signal they have within their own ecosystem, right? Like on Facebook, every person you are connected to the degree with which you're connected to that person, how many mutual connections you have. And then what those other people do create signal about you. But think about all the signal you have on Twitter, all the interests that you have. You have so many, everything you're interested in the world is on Twitter. I agree. that was always when Elon took over the most ridiculous thing to me was all they needed to do was just fix their ad platform again I agree I have Twitter has more insight into my interests than any other platform in over a 13 year period right now that to not be able to turn that in and oh my God my Twitter ads are are even weirder than getting small cup bras so I yeah I don't want to know that what you're getting. Okay. Let's take a break here and come back to talk a little bit more about

some of the other stuff we teased at the top of the show. Back right after this. Hey, everyone, let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than two million professionals read the hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for The Hustle Daily Show and your favorite podcast app, like the one you're using right now. And we're back here on Big Technology Podcast Friday edition with Ron John Roy of Margins. You can

get margins at readmargins.com. Very quickly, lightning round, maybe five minutes each for our next group of topics. First of all, SBF is in court. His lawyers this week said our client will testify, and the Washington Post has a headline describing that testimony where it says, Bankman Freed dodges waffles during cross-examination at trial hearing. Nick Thompson from the Atlantic pointed out that it's a very good thing. The headline writer remembered the comma, so didn't have him dodging waffles, just dodging and waffling. But it says during Thursday's hearing, Bankman Freed spoke coherently and precisely under questioning from defense. defense attorney Mark Cohen. He said his lawyers on FTX legal counsel had signed off on the bulk of his decisions. These are the people that obviously he's going to blame, right? I'm saying this.

And now back to the post, the defendant spoke with his usual mannerisms, often smiling, bobbing his head and sometimes answering the defense's questions with his signature, Yelp response. But when it came time for Bankman Free to answer questions from federal prosecutor Danielle Sassoon, he responded with the uncertainty of a man who may or may not respond. be responsible for losing billions in customer deposits. Huh? I mean, good idea, bad idea for him to testify. I think a terrible idea because everything I've been reading in terms of the coverage is he even had talked about, you know, like that wasn't the right question.

Like you would want to ask it this way. I can see the you don't understand crypto arrogance probably is just going to be seeping through. and the whole kind of cutesy, disheveled billionaire thing no longer works. So I think him testifying is going to be a terrible thing for his defense. And especially with just a jury of normal people. So I'm curious to see where it goes. Actually, have you made it any further in the Michael Lewis book? Oh, yeah.

I'm just about done. And I'm starting to get angry at this point. It was very, very good. I think the first third, two thirds were very, we're very. very, very good. And then Sam starts doing the crimes. And Michael Lewis is just like, just irresponsibly soft on him. It's very frustrating. Yeah, I think two stars. Two stars, two stars. To me, the, yeah, more needs to come out and we can cover this more. But my favorite exercise on the podcast is us trying to present SBF's defense. And maybe we should do an entire segment next

streak of each of us play the role of SBF's lawyer because I just don't see how it's going to go, but who knows? No, there's nothing he can say. Although, okay, let me just preview what the defense might be. Go, go, go. Have you seen the price of Bitcoin lately around John? Okay. Oh, 35? 35? It was up to 35. It's 33. Yeah. That's 27, up 27 percent in the month and 65 percent in the past year. All right? so crypto's back if it you could the FTX defense could argue if this world just waited a year they would see that Sam bankman series B investment in Anthropic is now worth almost the entire eight billion that he lost and the Bitcoin investment is now worth I don't know much more than

it was previously actually Michael Saylor is now apparently profitable on his Bitcoin bet for those unfamiliar the micro strategy what was previously consulting firm basically just became a proxy for Bitcoin yeah so yeah crypto's back so and they would say that if if the bankruptcy group liquidated those liquidated the Bitcoin sold the stuff on the secondary and they are responsible for this terrible shame it's their fault it's their fault your honor I arrest my case not guilty All right, apologies to Michael Lewis. No, no, clearly it's not going to be good for him.

Okay, Cruz is from the Times. Crews stops all driverless taxi operations in the United States. Cruz said on Thursday evening that it would pause all driverless operations in the United States. Two days after California regulators told General Motors, the General Motors subsidiary to take its autonomous cars off the state's roads. The decision affects Cruz's robotoxy. services in Austin, Texas, and Phoenix, or a limited number of public riders could hail rides. Non-commercial operations in Dallas, Houston, and Miami were also paused.

Terrible blow for cruise and self-driving, which I feel terrible about because I'm about to have Takedra Mawakana, the co-CEO of Waymo, on the show. On Wednesday, we already had that discussion, so we're not going to cover this part. I will say, so basically at the core of this is we now know that a cruise car may have dragged a pedestrian for about 20 feet after hitting them, and potentially it was like a human driver that hit that person. But the cruise car did drag the person, and that's an unacceptable failure of technology. So I guess like I want to make a quick point here, which is that I still remain extremely bullish on self-driving cars. They've obviously proven safer than anything

else. I'm excited to air the interview with Tekeedra on Wednesday, where we talk about Waymo's expansion and safety and the potential there. However, you're not going to get a lot of chances at this if you're the self-driving industry. Because if this stuff goes wrong, it is extremely dangerous. And

I don't know, I read this headline with concern, especially if it turns out true that cruised wasn't completely forthcoming here. I completely disagree. Why I'm excited about that headline. And at first I was, again, you know, like we both, you

especially have been very bullish on EVs and actual, and I agree with you that this is one of the kind of quiet stories that are revolutionary this year that we're going to, I think we're going to look back in a few years and be like, this happened, this was real. Why this is good is it's a reminder that now the companies are ready to, now companies are working with regulators. And again, it was, I mean, I think they, I saw, they have 50 on the road in San Francisco during the day 150 at night when obviously there's less pedestrian traffic so it's they're doing this in a smart way and I believe this is again I know Tesla ranting is something I may do more often than I should but to me it's that lack of coordination with regulatory bodies it's actually hampered the industry

it's it's because everything was done in a move fast and break things way versus now working directly with regulators being like okay it's just too 200 cars. We'll take them off the road. Let's talk about this. Let's come up with a solution. Because I believe that the excitement and the energy around this is going to grow so much that every policymaker and politician is going to know it's going to make them more popular and be good for them to actually support this entire industry. So I think approaching this in a responsible way is much better than in the past, you know, like just putting self-driving cars on the road and calling itself driving and videos leaking about people not actually driving

when they're supposed to be, I think that was much more damaging to the long-term health versus what's happening right now. So I liked this article. My mind has changed. That makes me feel a lot better than I did coming in seeing that headline. I felt stupid because, like, you know, obviously the Kejer and I will not discuss the cruise situation because we'll talk about some of the things that have happened, but we won't discuss it because it happened after we record it.

But, you know, it is good to know that there is some. above board stuff happening here and you know it's obvious riding in those cars they feel a lot safer than then if you're with a human driver and you definitely want to puke a lot less but by the way they are doing this partnership with uber which is very interesting to keadra and i will speak about that as well where you're just going to be able to start to hail waymos through uber which is super cool very interesting from a competitive standpoint yeah the news just broke yesterday i mean we talked about i wish i had done it like i wish they held that embargo for a wednesday as opposed to a thursday but they didn't so anyway but we'll have to air it next week but um and here i am googling just

to make sure it did even though i know it did yeah um yeah yesterday they announced it so anyway all right more on that with the keedra next week last uh last segment here um i wrote this story today about mark Zuckerberg and coming for sam altman and open ai um and basically the can see the story is that like open ai is actually a real threat to META's business. Not only did it have the fastest growing consumer product, but it's building a platform and chat, which is something META has tried to do.

It's a very attractive place as an employer to work and potentially threatens to poach META's AI employees who want the money, they want the prestige. And it's arguing for more regulation, where META really would like this research to be able to be done with limited restrictions. And so now Zuckerberg is coming for Sam Altman. as the headline says, he is, you know, instead of one general purpose chatbot, he's built 28 that are now in Messenger and WhatsApp, and he's released LAMA2, the open source LLM, and of course he's in Washington, are advocating against some of the alarmism, care, whatever you want to call it, that Open AI is pushing.

What do you make of this? Is this actually a, is this a real rivalry? Am I reading this right? I think so. I mean, as we had said, meta is back in a good place again. And I think clearly, you know, putting AI at the center, again, as the ad personalization that's driven by machine learning and machine learning prediction is clearly doing well. So they've figured something out. But on the consumer side, have you used any of the Facebook or the messenger chatbots featuring, I think it's Kylie Jenner, one with Snoop Dog. Yeah. I have. I've used the Tom Brady one. Oh, you did? I tried to get him to weigh in on the...

I talked about Colin Kaepernick and try to get him to weigh in there. Oh, what happened? He supported Colin Kaepernick, which is interesting. Oh, he did? I would have seen that happening. Okay, that's almost better because I would have predicted that it would have programmed in as a chat bot, I will not weigh in on politically

sensitive issues. Wow. So the Tom Brady generative chat bot was pro Kaepernick. Yeah. And by the way, we should definitely cover this in a subsequent show, but I do have this theory that we are really about to move

from this more general purpose, chat GPT type application into much more narrow use cases like Harvey, the legal AI or character AI or what meta is doing within spots where you have one that's a dance teacher, one that's a trainer, one that, you know, tells you jokes, one that's, you know, you get to hang out with Tom Brady. And so I think meta has really done a good job outflinking open AI on this front. And by the way, you take that

and you put that into, you know, three billion user or two billion user chat apps and maybe you do it in Instagram as well. I mean, you're cooking with Carese once you do that. Oh, actually, wait, wait, hold on, to add on to this, apparently we're going to end this episode just all about meta so broadcast channels so they just announced last week that facebook and facebook and facebook messenger are going to start having these broadcast channels i have it on what's app and so for to explain what they are it's a now it gets its own section on the bottom menu called updates and i follow the atlantic the major league baseball wall street journal cnn and basically all they do is kind of broadcast things in a fairly conversational way and I actually

have been using it on WhatsApp regularly for news consumption it's almost kind of creating my own mini news reader and I was thinking about it it's going after Twitter and clearly threads maybe not in my opinion the strongest Facebook product or rollout even though the fast is growing to 100 million and now who knows where it is but this was really interesting because even as another experiment that they're quietly doing is taking over broadcast. So I will now get like regular updates from Major League Baseball that could have been a tweet, but their highlights, their updates as the playoffs have been going on. The Atlantic will have short video interviews. So yeah, yeah. And they're bringing it to Facebook Blue and Facebook Messenger. So the idea that

they're going after Twitter's broadcasting ability is like, one-way broadcasting, essentially. You can even follow certain musicians and stuff have signed up, and they'll say, like, ticket sales are coming. So I think this, even on just on WhatsApp alone, this was very interesting to me. Nice. And yet another Mark Zuckerberg in the cage coming out on top.

Damn, like on one hand, like I'm excited about these channels. On the other hand, I'm just like, er, another thing to post on. I can't, man, I just can't. Oh, yeah, but. No, but wait, hold on. I think this is good. This is good. Now it's, things are fragmented in a good way.

It's that different people consume in different ways versus you only have Twitter and Instagram and just that one feed. So I'm pro. I think it's good for the ecosystem and bad for the creator, you know? Yeah. That's just my perspective. All right. Yeah.

We're running long. So let's call it here. Ron John, thank you so much for coming on again. great to have you yeah good to be here awesome enjoy your your weekend as taylor swift i i or is it going to be next tuesday it's for tuesday but okay um maybe i'll wear it all weekend sounds good you know all right and thank you everybody for listening thank you everyone who signed up for the paid edition of big technology it's been awesome to see the support this week you can do it at big technology dot com get 25% off for the annual which is 50% off

off the monthly for the next couple of days. And really great week of news. We managed to go through it without talking about World War III. We'll probably do that next week. So stay tuned for that. On Monday, my interview with Guar of Namade, who is the original product manager on Google's Lambda chatbot, which never released is going to come out on this feed and on my new Big Tech War Stories podcast feed. So stay tuned for that.

I'm going to drop it as a bonus. episode. And then on Wednesday, my interview with Tekeedra Malakana. All right, everybody, thanks for listening. And we will see you next time on Big Technology Podcast.