Big Technology Podcast - Are LLMs Hitting A Wall, Microsoft & Alphabet Save The Market, TikTok 'Ban'

Episode Date: April 26, 2024

Deirdre Bosa is the anchor of CNBC's TechCheck. She joins the show for our weekly discussion of the latest tech news. We cover 1) Whether LLMs are running out of resources 2) The costly business of AI 3) Meta's stock drop after Zuck talks costs 4) Meta's roller coaster 5) Microsoft's AI results 6) The virtues of Claude 7) Google's impressive earnings report and dividend 8) Sundar's comeback 9) TikTok's 'ban' goes into action 10) Is TikTok already dead? ---- 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/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [e-mail]

Are LOMs hitting a wall? Microsoft and Alphabet might have just saved the market and the TikTok ban is on. We'll talk about all that and more on a special Friday edition of Big Technology Podcasts 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 special guest for you here today to help talk through the big tech earnings along with the latest AI news. And of course, the TikTok band, Deirdre Bosa is here from CNBC, one of my favorite people. to watch on CNBC and to speak with. It's great to have you here, Deidre. Thanks so much for coming. Well, what a coincidence. This is one of my favorite podcasts to listen to. So I'm so glad we

could collaborate. I'm very excited to be on. And what a week. There was so much to get to. I know. It's crazy. I mean, it's so funny because like you kind of think you know the story going into a big earnings week. And then everything gets flipped on its head. Companies miss and their stock goes up. Companies beat and their stock goes down. And then you end up having, you know, real check-ins with companies like afflbets and Microsoft in terms of like where this market is going and you know some narrative reversal there as well and for us sort of the whole markets hinge on a few of these companies right because they just make up more and more of the broader market so whenever it comes along we like to say at cnbc that it's our super bowl but we have a super bowl every quarter

exactly i know just a series of super bowls and that's kind of what makes this news fun to watch And one of the things that I've been watching over the past week is just the amount of resources that these large language models consume. And I'm curious what you think about this. So last week, when I was speaking with the head of generative AI at Meta Ahmed Aldala, he said that they used 10 times the amount of data and 100 times the amount of compute to go from Lama 2 to Lama 3, right? And in fact, there was a story in the New York Times talking about how they needed to buy Simon and Schuster or something on that magnitude to get enough data to be able to. to keep pace with CHAPT. Then you have Mark Zuckerberg on the Dwarkish Patel podcast talking about effectively like,

the biggest constraint is gonna be energy and you might need a nuclear level plant in order to keep running these models. And so the idea of what these things have always been, you throw more data, you throw more energy, and you throw more compute at them and they'll continue to improve. And I'm curious from like the people

that you speak with in your view of the industry, whether you think that we might be close to hitting a wall, Or do you think that this is something to be worth paying attention to? Because the principles are speaking out loud about it. Yeah. And so there's compute power on one hand, which requires enormous amounts of power. And that requires enormous amounts of capital.

On CNBC this week, we had Dario Amadea from Anthropic. And he was saying that he was talking about the idea that these large language models would be commoditized. And he said the costs are only going up to your point. by the end of this year to create a large or to build a large language model, it's going to cost something like a billion dollars. But he said by next year, 2025, 2026, it could cost up to $5 to $10 billion. And that's really going to narrow the field. I thought it was interesting because the same day that he said that, there was this article out

from the Niki in Japan saying that SoftBank, Masa San, was looking to develop a Japanese large language model. And they had earmarked up to nearly a billion dollars. you just think that's not going to be enough. And even if they do get that money together, they need the compute power. They need the energy to be able to do so. But Alex, isn't there another camp that says that the chips, everything about this is going to become more efficient so the cost will actually go down?

Yeah, definitely. And I wrote about that in big technology this week, basically saying that if we keep going with the way that we're going, we're going to hit a wall or the tech industry really will hit a wall with LLMs. Like they're basically, if you think about it, out of data, almost out of compute. and running out of energy here. And so it is going to take these optimizations in terms of models and chips

and even potentially more energy efficient solutions to make it work. And they're going to do that all the while they're trying to get more and more of the natural of the ingredients here, right? So we're thinking about like, you know, there's going to be synthetic data that they're going to add to they'll have more data.

And then, you know, maybe someone does go build that nuclear power plant. Like seriously, like Zuckerberg's like, it's just a matter of time until it happens, which is crazy to think about. And then you have Sam Altman running around and saying, let's get $7 trillion for chips. And so, you know, what you might end up having right now

is this kind of dual action where you have effectively companies that are finding ways to build these things more efficiently. We think that's happening already off across the board. I speak with an Amazon executive yesterday who said that there's some researchers in Stanford who are learning to train these things faster with the same amount of data and 10 times less cost for inference. And it's like, all right, so that's happening.

And then on the other hand, the other side of it is, these executives see how important it is to have these ingredients and they're doing whatever they can to expand. And you're seeing that show up a lot in like the cloud infrastructure numbers and CAPEX numbers from big tech we saw this week is they're just spending so much more in this race. One of the best ways I heard this described is that like a typical or traditional Google search takes a certain amount of compute power. and then for a chatbot search, a chat GPT or Gemini or whatever search takes 10 times the amount of compute power, even though it may just be a simple question, like two plus two

equals four. They're still running the whole gambit to get to that if you're asking it through a chatbot versus a traditional Google search. So like that efficiency, it seems crazy to me that that's not going to be figured out soon. Exactly. And I mean, you know, we can get right into the earnings now because it sort of was a theme for everybody but especially for meta and with meta it was like they they are doing like they increased their ad their ad revenue like tremendously and you think about these companies going off

like the bases right like you're you're in the 30 billion dollar a quarter range and you're still growing at like you know 15 20 25 percent that is unbelievable but what happens in this earnings call is mark Zuckerberg goes ahead and says listen we're in this era where we're going have to spend a lot on AI. It's not going to get more efficient anytime soon. And this has happened to us in a number of areas like reels and stories and move to mobile. And you're going to want to hang along with us for the ride. But it's not going to happen overnight. And then all of a sudden, the stock goes down like 18% after hours. And everyone's just like, all right, meta's done. And I guess I don't understand why investors sort of bail on a company like this. Like it seems like very

sensible? Is it just the moment that we're living in right now? That's just like there's so much pressure because of the higher interest rates or is there something else going on there? We talked about this earlier this week in the context of a piece that we're doing over at C&BC, which is like the roller coaster ride that is Mark Zuckerberg and Facebook and meta. And coming off the year of efficiency, which he really pioneered for the rest of big tech. He made it okay to do lots of layoffs, to get fit. Kind of coming on the call. call and saying, okay, that year of efficiency was great, and we're going to keep that kind of discipline in terms of our workforce and certain costs. But when it comes to generative AI, we are

all in and we're going to be spending tens of billions of dollars. I kind of thought he was just more candid than the other CEOs. When I say others, I mean Google and Microsoft. They didn't give numbers. And they try to say, listen, we're monetizing generative AI, but look through it. We don't actually know. Sure, maybe they're monetizing it around the edges, but they're not breaking it out. They're not telling us exactly how much. We're just sort of trying to look through the cloud numbers and say, okay, maybe this is coming from generative AI, where Zuckerberg was a lot more, I think, up front and transparent saying, listen, the payoff for this is some years out. And yes, it's a different model, right? He's basically giving it away for free right now. He doesn't

have the cloud platforms that Microsoft and Google have. His company is not a hyperscaler. So, yes, it's further out. But I don't actually think the story is all that much different than what we heard from Amazon and Microsoft, which had huge reactions. Part of it, though, I will say, is that Facebook has a lot smaller revenue base, right? So as a percentage of their revenue and percentage of earnings, they are spending like kind of an unbelievable amount. And he's also spending on the Metaverse. Exactly. Got to keep those headsets going. And yeah, I mean, the revenue is incredible. So I'm pulling up the actual numbers. It was they jumped 27% to 36 billion on the quarter up from 28 billion a year before. And this is amazing because, you know, analysts have

talked to me about, hey, look, like there's only so much more room to grow in digital because you're just taking all the money from, you know, these other formats and you're going to eventually just hit a wallet because they'll still remain relevant. You don't have that much more time spent. And for them to increase 27% is crazy. I mean, maybe it's taking money from the rest of the open web. But you're right, you pair that money with sort of Zuckerberg's message of it's the year of less efficiency, right? You're saying by building the leading AI, we will also be a larger undertaking than the other experiences we've added to our apps. And it's going to take several years for this to play out. So it is, it is very interesting.

It's, I'm curious, like, from an investor standpoint, do you just kind of like run away from the stock when you see that there's going to be increased spending or is there a case? like you know i was seeing in my feed basically right after the market punished meta so bad that everyone's like all right this is the buying opportunity i mean i know you're usually the one asking those questions but i'm curious what you think it's a great question um because the morning after meta reported was also i believe the morning we got gdp so if you were watching cnbc you would hear on our air all morning fears of stagflation gdp came in lower than expected stagflation is obviously an investors, you know, worst case scenario. We haven't seen it in decades and it's very scary for the market. So there's this idea that you do flee for safety. You don't flee to a company or you

get out of a company whose earnings are way out in the future, right? And I make the argument often on air that the mega caps are safety. They've got pristine balance sheets, huge moats, no, like very little debt. But when you just heard Zuckerberg say, we're investing billions and billions of dollars and the payoff isn't till many, many years in the future, you just look at your discounted cash flow model if you're an investor and you say, I'm not going to buy this right now. I'm going to go to something that gives me earnings right now, especially when interest rates are where they are. Having cash in the hand is actually, you know, a pretty good proposition right now or something like gold, which has been rising and rising this year. So I love

that you ask that question. You always have to put tech, even the biggest tech companies in the context of what's going on in the macro environment. But I wouldn't be surprised. if you see what happened last year when interest rates were rising and when they were higher than they've historically been over the last decade, investors come back into tech because of the reasons that I first listed. They're actually kind of like these giant consumer staple companies because of their cash flows and their cash piles. And on that point, too, it was so interesting because it was last quarter that Zuckerberg

said meta was going to issue its first ever dividend. And the stock like went crazy, went to the races. So it's almost like we forgot that, spending billions of millions of dollars, but it has so much cash flow that it can still return cash investors, which is very, you know, not typical from a techie growth company. And of course, that could lead us into Alphabet's big announcement yesterday. Yeah, yeah. So I mean, Alphabet announced this dividend. Before we get into, it's just let's just touch on this point that we spoke about earlier in the week. that just like it is really a roller coaster for meta.

I mean, like last week you had Zuckerberg and the fur coats like releasing these AI models on top of the world. And this week he's like, we're going to spend on that AI. And everyone's like, what the? That's going to have this. You brought up this point. He's one of the last of a founder, founder CEO generation. He's one of the last guys standing along with Jensen Huang, who I don't know, has the boldness

or the confidence to. or I don't know what it is, just this founder quality to have a lot of conviction and what he's doing and not necessarily do everything for Wall Street. Like you have some of these operators who have, who are more, I don't know what the word is. Like, Zuck's done a really good job in speaking to Wall Street, like better than some of the other operators, CEOs that we have. But he also, this just proves that he's not afraid to, you know, upset them too if he thinks something requires a lot of capital. and a lot of risk. Yeah, and I definitely want to get to Google, but I kind of think, I'm dying to talk about Microsoft

because it's kind of the other side of this, you know, whether AI is going to sort of prove itself out. So we have this no business model kind of, I mean, maybe not no, but unproven business model, give everything away for free. Although I guess they are going to license Lama out through the cloud services, but that doesn't seem like it's going to be meaningful revenue for meta. And then you have Microsoft, which is just like, Yep, shipping it out, longest partnership with Open AI, and it's currently in market.

And so, like, we're starting to see, like, how valuable this stuff is, actually. And I can't tell whether the numbers that Microsoft announced yesterday are big or small and would love to get your perspective on it. So, first of all, they beat on earnings and revenue, and their stock is up. So they, between them and Alphabet, they seem to be saving the stock market. But this is from the report that Azure rose 31% during the quarter. And Microsoft said seven percentage points of the Azure growth came from its AI services up from six percentage points the previous quarter. And, you know, if you're telling me AI is a revolution, not you, but then, you know, they're telling us that AI is a revolution.

Like, all right, single digit percentage point on cloud growth is nice. Am I just being impatient or is there some real concern that this is not going to translate? I think the story with Microsoft has always been that they're well placed, right? And I think that Satya Nadella has done such a good job just saying, like, listen, we're out front in this. We're going to make Google dance. We're going to do all of these things, right? So stick with us. We're the play.

But I completely agree with you that revenue contribution is so unclear still. I think maybe investors realize and accept that. But 7% of Azure growth, I don't even know what that means. That could be, like, we need to know what exactly that looks like, right? That could just be like some services that they renamed AI or some existing services. And then when it came to co-pilot, like no details either, just kind of like some mushy talk around how important it is and no hard numbers on how well it's selling. So I agree with you.

I mean, they have all the right partnerships. They're saying all the right things. Just don't look too hard at the numbers. Yeah, right. And this is one of those interesting things about this AI moment is that it's progressing so fast like the innovation is like the fact that I can like live type and meta AI and see an image appear before my eyes is staggering or upload documents like me many meetings to Claude and ask it to synthesize them is is incredible but we

also just like don't really know exactly what the revenue uh picture is going to look like oh you were going to say something about Claude well because I was I was kind of like pointing at you because I saw your tweet which made me so curious you said you were happy to pay for Claude $20 a month it's the only one that I don't use. And I switch a lot between Gemini, chat TPT4, and perplexity. I haven't used Claude, and your tweet made me really curious to try it. Yeah. So now I'm going to vow Claudehead. I used to be a Bing boy. You know, Ron John, who's usually with us on Fridays, he's a Gemini guy. So we'll let him defend himself next week. But he actually

is the one that turned me on to Claude. And I think one of the cool things about Claude is just uploading documents. And one of the things that I've been doing recently is uploading full podcast transcripts. And of course, like, initially I was like, I'm just going to speak with Claude about like what happened in the show and like which questions I missed. And I'm also, I love saying, rate this conversation on a variety of metrics. And it really does. It does on chemistry and depth and breadth of the conversation. Has it ever offended you? No, it's actually been pretty good on that front. There's even been points where I've been like, you need a rate one aspect of the conversation, one of 10. This is not an option. And it's like, well, yeah, actually the weakest

part of the conversation was this. But I've been using it for recently is actually I go in and I say, listen, I have to make some video clips from my show. Give me some time stamps of things that you think might be compelling. And it does an incredible job. This used to be something that I wouldn't do because it would just be so time intensive that there was no justification for like sitting in the video and finding the perfect timestamps. And Claude is actually, I'm like, all right, those are good suggestions. Let's clip those. That's really fascinating. I tried to do that yesterday, actually. We do this tech check weekly piece, which is sort of a deeper dive on the week's biggest topic. And I put it into chat GPT4 and I said, give me, you know, like a condensed TikTok version of

this. And it was so bad. I just was like, I quit right here and now. But I think that's an interesting way doing it look at the time codes they can't do it all for you they can never do everything for you at this point but um i'll have to try it out yeah i mean so they have this like paid version that's gets you their most powerful model which is cloud opus and i used to like basically the reason why i sent that tweet was um i kept like logging in signing up and then immediately canceling the auto renew because i'm like yeah i'm only going to need this i'm trying it out and this was the week where i was just like, I'm not even canceling the auto renew. I need this. So it's like now definitely part of the mix. And is it going to cost me $240 a year or maybe a little bit more with the fees?

Yes. Is it worth it? Multiple. So. So that's like, oh, sorry, go ahead. On a slightly different note, I was telling, I produced a Lourbatchelor yesterday how, and this maybe gets us into Google earnings. Sorry if I'm jumping the gun here. But my method of working now is to have, and I guess my, I'm a GPT4 person, your Claude and Ronjana's Gemini, is that right? Gemini. Yeah. So I think, yeah, we'll put you squarely in second place here. Sure. I'll take it. But I was telling her how I always have that window open now. And I truly, truly use a traditional Google search. I use Google News a lot too in the past, but I use it way less than I ever have. And it truly is kind of my co-pilot to use that word that is so, you know,

buzzy and hot right now. But I use it, you know, I'm going to it, you know, every few minutes just for like idea generation to check something that I'm thinking, to get better wording on something that I'm thinking. And that is really like the worst case scenario for a Google. And we are journalists and we cover tech. So it's not surprising that we're sort of early adopters to using this. I don't know how that rolls out to the mainstream. But that was sort of one of the biggest fears going into the Google quarter is that search queries would be hurt or you would see any kind of softness as people use chatbots

more. And that hasn't happened at all. I mean, they also, they beat like crazy earnings per share, $1.89 versus 151 expected. And then they beat on revenue as well. And I think every category beat. So, yeah, I'm curious. I'm curious why you think Google's, I mean, the market reacted so positively to Google. I think it's up 10% today.

You know, between Google and Microsoft, I was getting texts like from people being like, thank God they saved the market. Yeah, it's true. It goes back to that point I made at the very top. If these companies performed really badly, it would take the whole market with them. And Apple will be another important test in video, of course, coming up. But when we look at alphabet, excuse me, it was that dividend, I think, that was so important that investors have been looking for.

And in the lead-up to earnings, I was saying, well, there's a small chance, but they absolutely can do a dividend. I don't know what they're waiting for. I asked Ruth Pora at that every single quarter when I got on the phone with her, like, what's your capital allocation plan? How are you thinking about it? Will that change? And them announcing the dividend is just such an important thing for investors.

It was 20 cents a share. It's very small. But this idea that they've reached a new phase, that they're shareholder-friendly, that they're returning capital to investors as a sign of maturity at the big tech companies that I think investors have been looking for a long time and just I think indicates that they're thinking about the shareholder more and they're balancing growth and value a little bit more, which shouldn't be all that surprising, but them doing it as like a big indication that maybe they've entered a new phase. In terms of generative AI not killing or materially

hurting search anytime soon. Maybe I'll highlight a few comments from the earnings call last night. Senator Pichai, the CEO, said that they're seeing an increase in search usage among people who use their new AI overviews. And then Philip Schindler, a top exec there, said that advertising is actually finding a place in their Gen AI products. And he said that he was really confident that the opportunity will expand. So it's not like either or.

They're finding opportunity. And I think the key people who aren't like us that have embraced these. chatbots early on that are still going to Google search, they're discovering generative AI queries through Google. And that is like so much more important than us, you know, debating Claude or Gemini or GPT. Right. It's just the distribution, I think, is what matters, right? And that's like what you saw with meta is they're able to ship their AI model and all of a sudden, you know, it's in billions of people's hands where Open AI was celebrating getting in a hundred, I mean, reasonably so getting in a hundred million people's hands in a month now meta has that scale

advantage and it's like it's mark versus sam and mark tends to win these battles especially if you look at you know the other victims in the in the wake you know evan speakel and tick tock and all that so it's the distribution that man that guy's a killer i feel like it's going to be a good battle i love it i think you know well you know we never got to see zuck versus elon i doubt we're going to see MMA between Zuck and Sam, but this business battle itself is going to be fascinating to watch because it is like, you know, people like we're framing a Sam versus Sundar or Sam versus, I don't know, Dario, but M versus Zuck, I think is going to be very, very interesting to watch. That's a cage match I would pay 20 bucks a month for. Definitely. I would too. One last word on

Pichai. It's so interesting that like he doesn't enter that conversation, right? It's Musk versus Sam Altman Musk versus Elon Musk or maybe Dario and Senator Pachai, he's just sort of never been seen as this wartime CEO, right? And I always question that because I think he's shown flashes of it last week when you had the sit-in, right? And they immediately, you know, fired the 28 employees and he came out with a memo the next day that said, this is a business in no uncertain terms. It's interesting. He takes a much more quiet route. And even you ask me, why investors were so stoked on the quarter of the last night, they're spending a ton in CapEx also, like the same if not more as meta. But then he also, you know, talks about

engineering durable growth. I hate that phrase so much. It just means that they're going to continue to be efficient. Like Zuckerberg knows how to talk to Wall Street. Maybe he goes a year of efficiency is a lot more catchy than engineer durable growth. But Senator Bichai and his team are keeping an eye on efficiency while investing huge amounts of money into generative AI while issuing a dividend. So he kind of like hit everything last night. It's like an investor's dream. Totally. It's a great point of pull out. It does seem like Sundar's like taking a very intentional path right now to sort of revamp like what he's seen as. And I think that like maybe he fired, I think it ended up being 50 people to sort of, because you can't really take over your cloud CEO's

office in the middle of a workday and expect to keep your job. job, especially when you're not being paid to take over your cloud CEO's office. Um, but it also sort of, I think pretty intentional that, you know, in the past, he let a lot of this go. There were protests over military technology in the past at Google. And he sort of, you know, said, all right, like, we're going to give you what you want in some ways and talked about AI principles and stuff. And now he's like, all right, we're done with that.

And I think he needs to show that, um, especially given how like the narrative on Google shifted, you know, as they were seen as like a company was slow. people were asking if Sundar was the right person. I kind of think that that eventually reached him. And some people advising him were like, all right, you got to change the way that this company is operating. More urgency, less bullshit, and away you go. And to combine that, and he even wrote about it with this like new mission statement, which Alex Heath and I spoke about last week. But you combine that and you combine that with better earnings, growth in cloud. And maybe the fact that, you know, Gemman like you're right these Gemini and even though I have you know I can sing

cludge praises all day long it's not replacing Google search and then you get a good quarter out of Google and all of a sudden everything shifts real quickly for them here's an idea maybe the year of Zach is ending and the year of Sunder Pichai it could happen wouldn't that be interesting we've seen I mean that would we've seen comeback stories like that in tech and so who knows like you know maybe we're going to see that with Google one one person pointed out to me that if Sundar serves like maybe another year or two he's going to be the longest tenured google CEO ever um and we'll we'll see if he actually i mean there've been some questions about him lasting much longer it seems like he's pretty solidified though in that position and these

recent moves have have definitely helped him i think so too and plus the people calling for him have been like kind of the loud people on x or twitter you know i tend to try i even asked um that activist investor TCI that wrote that letter a few years ago on something different, but just how Google needs to get fit quicker, more efficient quicker. I never got through to them. They never responded, but the fact that they're quiet at this time, I think says something. And I wonder if they're, they're happy now with the dividend and some of the cuts they've been making. Right. And they, they hit all-time highs recently, stocks up 10% today. They did, you know, more cost cutting. So, you know, if you're an activist investor, you're happy. Let's not ignore this point.

I almost forgot to mention it. On the call yesterday, he said YouTube and Cloud will exit the year with a combined annual run rate of over $100 billion. Like to me, that was Senator Pichai saying, look, we're not a one-trick pony. We're not just search advertisement. And that is really incredible. Like, just the amount of growth and success that YouTube and Cloud have had. And this may be his moment for Cloud. I know they're very distant number three in terms of the hyperscalers behind Amazon and Microsoft.

off. But if the next phase of the Cloud Wars is over generative AI tools, Google could be interesting. Yeah, like it had a very impressive cloud event. But I think you brought up this point that to serve a generative query costs, I think, 10 times more. Yeah. And to run a cloud business is more expensive than serving search. And YouTube is definitely more expensive than search because you have to host all those videos and run them. So then you, you know, just I'm thinking about this so you end up looking at a google where you're you're issuing a dividend your margins aren't as big as they once were your growth might be a little less and so i don't think they're fully out of the woods if you think about like the complete picture i don't know what do you think i like that take

it's not one that i've considered too much because um they have been able to find efficiencies in some places but i think you're absolutely right those businesses even that they're bragging about are very expensive to run. I don't know, maybe. And then I do think about the Google and Microsoft position over meta, why does meta have to spend more because they're catching up? They don't have the cloud infrastructure that they have. They don't have the scale to be able to get GPUs, I think, at the same scale as Microsoft

and Alphabet. So maybe they're catching up and there's efficiencies that you have by already being a giant cloud platform. Or in the background, Zuck is building that nuclear facility. Yeah, that would be interesting. So it's going to take some bold bets. I'm curious. I mean, some people, basically Zuckerberg is like someone's going to build that plant.

So if that happens, you know, or if Sam gets the money for his chips, we might be looking at a very interesting, you know, new chat. And that could be the new, that could be the new kind of like cloud platform in a way. Everyone needs the power. So you're renting out energy space. Absolutely. All right. Why don't we take a quick break and then talk about the ban, quote, unquote,

quote ban, whatever it is, the divestment that might turn into TikTok just not being able to operate in the U.S., so let's do that 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 2 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 Hustled 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 Deerjibosa from CNBC. Deirdre, great to see you. Thanks for being here. What did you think when the TikTok, you know,

divest or ban bill went through Congress over the weekend? I was like, oh, this thing's not moving. Next thing you know, Congress attaches it to a defense bill. Senate votes it in. Biden signs it. It happened way fast. than I ever expected, especially with all this talk. What was your reaction when that happened?

The exact same. I was like, wow, that was fast up the U.S. side. But then my broad thought remains completely unchanged, is that this lies with Beijing. And if you ultimately want to sell TikTok and make it, quote, unquote, American by having American ownership, there's no way that Beijing is going to allow a technology transfer of the most important thing about TikTok, the algorithm, its source code. And I lived in China for many years. My first job was with CCTV, the Chinese broadcasting, national broadcaster.

And so I kind of got a view of the inner workings. And I know how nationalistic it is. And I think that TikTok being the first, you know, major Chinese company to have real success in the U.S., they're not going to just hand that over easily. or at all. Right. No, yeah. I mean, that's the sense I get from people who've been close to that company is, you know, techs have come in saying there's no way they sell. They're going to fight this like to the end. And if they win, then they'll stay. And if they lose, they're done. So there was this idea brought up by the former Treasury Secretary Steve Mnuchin, who was on

CNBC maybe like a month ago or something. And he was saying, yeah, I'm going to get a consortium together to buy TikTok. And it was like, okay, well, what if Beijing doesn't give you the source code? And he said, well, we'll just rebuild it here. And a few of the people I spoke to just thought that was a laughable idea. And one person said to me, you know, you think Zach hasn't tried to do this going back to Zach being. Well, that's why he said he bought all those GPUs to do the reels thing close to TikTok and he still can't do it. And he still hasn't caught up to TikTok in terms of engagement, right? So, okay, Steve Mnuchin, you go get a billion GPUs and see what you can do. Sorry. Exactly. A billion GPUs and, you know, the best data scientists in the world. So I'm so

interested to see, you know, how this is such a bipartisan issue and how the U.S. is able to, the U.S. lawmakers are able to move so fast on it. But I think at the end of the day, I don't know. I think it's going to be slow going from here. The challenges here onward are, a lot greater than, you know, getting it through Congress and getting it on President Biden's desk. Right. Do you think there's a chance that TikTok can win in the courts? I don't even know, like, can you just sue a law? I mean, you go to the Supreme Court, but what are they going to do on First Amendment grounds try to get this thing pulled? I guess that might be the plan. I guess. And it's not, I don't think that that's crazy that the legal system would rule in favor

of TikTok based on the First Amendment. But that's not. That's the difference between the U.S. and China. China flicks a switch and Instagram, WhatsApp, Twitter, Gmail goes dark and there's no legal process. And that's why the U.S. is so great because there's legal process and it's not that easy to just ban something. The national security concerns though, I don't want to be glib about this. They are real, super real. And you've seen sort of the negative effects and consequences.

of TikTok as well on groups of minorities and teens. Yeah, and it kind of goes to show you that like, all right, they're like, we're not going to sell. So this is not a business for you then. And I don't understand if you had to sell it, you wouldn't take the money. It's kind of weird. And there's like interesting things that might happen in the intervening time, which is that this is M.Gie Cigler wrote about this in Spyglass. He goes, ban or not. This is the end of TikTok as we know it.

And he says, by passing this bill, Congress has draped the service in a scarlet letter and damned it to be bogged down in bureaucracy for its remaining days. And the points basically come down to this. It's going to be in the courts. That's going to take a lot of energy from it. Advertisers are potentially not going to want to participate in an app that's going away or, you know, maybe not to the same volume as an app that has been, you know, had this scarlet letter placed onto it by Congress. And then most importantly, and I think this thing has been overlooked as influencers and the people feeling TikTok with content are going to look elsewhere if they think it's going to be banned because

what use is it building an audience of a million people on TikTok if it's just going to go poof one day. I am skeptical of all of those points. I think that a scarlet letter for us in the media, for lawmakers, I think that there is a generation and millions and millions of users who love TikTok so much and think that if they continue to use it and continue to sort of be loud in their appreciation for the app that it will somehow survive. I think you just can't mess with how much people and users love an app.

And I think that could carry it at the end of the day. It could go poof. I'm not saying that's not a possibility, but I think that its users will use it until that moment. When TikTok was facing this ban and then they basically put this notification that got all their users calling members of Congress, Do you think that that helped the case?

Because even afterwards, Congress still went through with it. Yeah, it's a good point. No, it probably didn't make an impact, right? Because it went through Congress very easily. But again, I just think that folks will continue to use it. I think a scarlet letter is very much for us, not to them. It actually may have the opposite effect on youth that use the app. It galvanizes them to support it more.

one of the funniest things this whole chapter is so Biden signs this into law and then they asked the Biden you know he made this whole big deal of going on TikTok during the Super Bowl and they asked the Biden campaign are you still going to have a presence on TikTok and they're like yeah of course we are and it's like and that's the thing like why would advertisers go away when the president who signed this bill is using it himself and will continue to use it so skeptical of that idea that anyone's going to back off just because of the threat of a ban. all right i take it back yes that's no it's it's a good point yeah no no i agree with you i think now that we think about it this way biden's on it after i mean the inconsistencies in this government is nuts like there was this great moment um i think it was uh kela tausch she was a former cnbc correspondent she was asking the white house like why they invited bezos and tim cook to the um state dinner with japan if they're trying to you know take those their companies on and the justice department is saying all these things about like how terrible they are and the white house didn't really have a good answer and it's like goodness there's very little ideological consistency

here people and that's why we were so surprised at how quickly this tick to bill move but at the end of the day we questioned whether it actually means anything it was kind of like good job government, you got it together to pass something, but the next part's going to be a lot harder. Are you a TikToker? Do I post TikToks? Actually, okay, I'll reveal a secret. Yes, they're all private. Not like, like not just, I don't know.

I play around with the different things. I watch it sometimes. I truly cannot open the app. I have to, it's on my phone, but I had to delete it from my home screen. Because once I'm on, it's like an hour is gone. Oh, yeah, me too. I get into real TikTok holes. I'm just in insanely addictive. Yeah. So you are, are you a, um, like normal user? Like do you use it several times a week? Oh yeah, definitely. Yeah. I'm, I'm daily. Daily. Okay. See, I can't. I just, it's too much of a time suck for me. I can't. I know. It's, um, it's been weird in that it's like been something I've started to use to follow news where like you end up having like primary sources, like,

post a lot and oh I need your algorithm that an excuse to actually use it I just get like the dumb stuff yeah it was super helpful actually for me like I went up with my dad a couple weeks ago to see the eclipse and to like we've I followed like all the weather reports and there were like these meteorologists that were like reporting like where the best place to go was and that was super helpful and I like I opened my feed and I knew I was going to see the same guy if you know every day with his like daily update first video it was that good idea even on x i was talking to someone about this how if you can train your algorithm to serve you what you want and like this wide range um it can be really really useful but that takes a lot of work and i think i have yet

to do that with with ticot i have enjoyed some of the finance ticot videos that i think are really really informative and you get garbage thrown in too and that's that's hard especially if you're like not in the finance world yeah well that's that's the whole that's the whole game right they throw in the garbage to see which garbage you might like and then next thing you know you're living in in a trash pile that TikTok is I will say I don't touch reels I do not touch really I find it to be terrible what what do you like about reels my early usage of reels serve me up some really like jarring terrible stuff and oh I I I won't even say what, just really terrible, like kid stuff.

And I just said, I was so kind of like freaked out by what it was serving. I said never again. And even on Instagram, I turn off the suggested feed, suggested posts in the feed. But you have to snooze it every 30 days, which I find very frustrating because, again, it'll just be a time sec for me. And I want to be able to control a little more what I see. Yeah. Well, we've touched on what LMs hitting a wall potentially. meta Google Microsoft

and this TikTok ban or not ban I see it's a beautiful Reels usage. Yes and then Reels Lord Almighty. I see it's a beautiful day in California so I won't keep you any longer Deuter. Thanks so much for joining. Great to have you on. Such a pleasure. Thanks for having me, Alex. All right everybody. Thank you so much

for listening. We'll be back on Wednesday with a show with Alan Cohen who's the CEO of a very interesting company. It's called YUM AI where they basically take LLN's translated to voice and can engage emotion and respond to you in like really weird and human-like ways. It's a very interesting company, so stay tuned for our conversation for that.

And then Ranjan will be back next Friday and we'll be breaking down the news then. Thanks again for listening. We'll see you next time on Big Technology Podcast.