Big Technology Podcast - Gurman on Apple, OpenAI’s Deal Terms, Forbes vs. Perplexity

Episode Date: June 14, 2024

Mark Gurman is Chief Correspondent at Bloomberg. He stops by Big Technology Poddcast for a brief recap of the week's Apple news, including its no-money deal with OpenAI. Ranjan Roy from Margins is also back for our weekly discussion of the latest tech news. We cover: 1) Alex's Visit to NVIDIA 2) The Gurman interview - which covers a) Apple + OpenAI b) The stock market reaction to WWDC c) Apple's Robotics future 3) Ranjan and Alex react to the Gurman interview 4) OpenAI's relative strength after this week 5) Apple's position after this week 6) Microsoft's position after this week 7) Forbes vs. Perplexity 8) A new era of IP fights? 9) Elon's pay package --- 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]

Let's talk with Bloomberg's Mark German about Apple's big week, including the economics of its deal with Open AI. We'll also cover this new battle between perplexity and Forbes, and of course, Elon's pay package got approved. Ranjan and I are here, ready to take you through the week's news. All that and more is 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. And boy, do we have a lot of news to break down for you this week, not only Apple's WWDC, which we've covered in depth, on the podcast feed, we'll touch on that briefly, but really the aftermath, what's happening to Open AI after this? How do AI companies continue to go ahead and potentially train on copyrighted

and use copyrighted material for that matter? Why is Elon going to get paid all this money and plenty more? First of all, I just want to welcome Ranjan back to the show of Ranjan, great to see you. I've been waiting to talk to you all week, man, so this is going to be fun. Yeah, I've been waiting for this. Open AI, Apple, Elon, all of my favorite topics. All the stars. Elan. We'll be able to cover all the big stories this week. I've had a crazy week here in Silicon Valley. I've made visits, of course, to Apple for WWC and to do the reaction immediately afterward on CNBC,

but also got a chance to visit OpenAI Anthropic. I visited WorldCoyne, which was fun, meta, Google, and then yesterday spent the entire day at Nvidia, really morning till evening. So it definitely feels like a month or more of reporting baked into a week, and I can't wait to bring more of what I learned into the podcast as we move forward. I have to ask, Alex, what is the mood at NVIDIA right now? If you're actually at

that office, all I can think about, I mean, how are people feeling given what's happened with that stock, given what's happened with that company? Are people just running around celebrating? Is there champagne? Are their heads down and are they working? People were definitely heads down. It was great to speak with many of their leaders. And at the end of the day, we did go up. They have a couple bar, like they have a bar in each one of their buildings. And we walked up. up to, we saw both of them, of course, and we walked up to the first and Jensen was there hanging out. So, um, company really feels like it's hitting its stride. Very, very interesting moment for them. Wait, does he wear a leather jacket in real life? Oh, he sure does. That's just a stage

problem. That is a real life thing. Okay, good. I'm glad to hear this. I'm very glad to hear this. But yeah, I walked away super impressed and we, I think we are going to bring more of the, their folks on the show because they are the company that underpins all this. Like, you can learn about where things are going when you speak with them because they're the ones that it's all built on top of. And then I also got a chance to interview Mark German from Bloomberg who scooped like the entire Apple event. I basically interviewed him on this portable mic that I used for the Aaron Levy event sitting in the back of my car in the Google parking lot. So folks, part of the audio, we've done our best to clean it up. In this interview, it's brief about 14 minutes or so.

so Ronja and I will be back on the other side. German and I cover basically the implications of the Apple event, how the market is treated. And I think, honestly, most interestingly, what the deal terms are with OpenAI to bring chat GPT into the AI iPhone, quote unquote. And I'll admit, I expected a much bigger role for Open AI, and it turns out as you're going to hear from German,

that open AI isn't even being paid for this. So let's play that German interview, and then Ronan and I will be here on the other side to react. Mark German, welcome to the show. Thanks for having me. Glad to be back. It's been a pretty busy week, lots of Apple stuff, and I'm glad to talk about it for a little bit with you. Yeah, you must have had just a wild week.

First of all, congrats on scooping like the entire event. You just reported about how OpenAI and Apple aren't going to exchange cash in their partnership, which I thought was fascinating to me. These models are expensive to run. You run them across a number of iPhones. going to cost a lot of money, but Open AI seems content to lose money in the short term with the promise, the future promise of potentially making money on revenue upsells. So what can you say about that?

Yeah, so Apple's not paying OpenAI. The company believes that they're providing a tremendous service to, you know, Sam Altman and Open AI by pushing their models to more people. They're exposing Open AI to hundreds of millions of new customers and potential services subscribers that have never heard of Open AI before the integration into the iPhone. And the second part is the more people that use these models, it actually improves the underlying models for Open AI to benefit OpenAI, to benefit, you know, customers of the services even on non-Apple platform.

So Apple sees that as a fair trade. And of course, OpenAI is not going to pay Apple to put JetGPT into the iPhone, right? They're getting a tremendous service, you know, as I said. And the other part of it is obviously OpenAI is, you know, putting the bill to Microsoft to pay for the Azure cloud-based component here. And over time, you know, there's revenue sharing possibilities. The paid subscription component here where a user can buy a paid subscription to chat GPT on the iPhone that costs $20 per month for, you know, a single user license,

I think that's a powerful way for Open AI to make money. And obviously it uses the Apple payment platform when you subscribe to chat GPT. on the iPhone, so Apple's going to get a cut there. So the initial version of this deal, it's a pretty cut and dry barter situation with each site providing something, but not paying cash to each other. Over time, Apple hopes to strike revenue share agreements with Google and Ropic and potentially others in a similar vein to the Google search deal they have on the iPhone that generates, you know, somewhere between 8 and 15 billion a year for Apple.

Over time, people are going to go to these chatbots in Siri in other parts. of iOS to get information moving away from Google search. And so the ultimate play here is actually a revenue share partnership with Google Gemini that replaces the Google search deal or augments the Google search deal. So both those companies are basically moving from search to AI, and that is their new agreement. And is this a potential liability for Google because they, I mean, Apple starting with open AI first. Google, obviously, this is worth a ton of money for them because they're paying Apple $20 billion a year. and that rev share with search so what do you think about the implications for google well the

implications for google to me are quite clear they need to strike a deal with apple uh and get jemini onto the iphone and supplant open a i eventually as that default option or both parties are going to be hurt here right apple generates a good check and change uh from iphone search right taking a 40% cut or around there from Google's monetization of Google search in the Safari web browser. And then Google makes a ton of money monetizing searches from iPhone users. And so that partnership is going to have to be rewritten around Chatbaugh, around Gemini, around artificial intelligence, because this is next-gen search.

This replaces search, you know, by all accounts. And so that's a deal that's going to have to get done. And it's so much more complex than a straight, no-cash, open AI partner. partnership. So that's why this one's going to take quite a bit longer. Google and Apple have been hashing this out already for probably four or five months. And it's probably going to take till the end of the year for them to have that renewed partnership around AI. And I would expect them to eventually become the default option on iOS, just like they are for search. So ultimately, I think the future of chatbots on the iPhone is Gemini rather than Open AI.

Yeah, that's fascinating. And I mean, it kind of is a. bold move for Apple, right, putting open AI in there first, like, that is potentially disruptive to this huge amount of money they get from search. It's actually somewhat encouraging if you're thinking about whether Apple's willing to make big changes. I'm curious what you think about that and whether, you know, a lot of people are saying this was incremental. Did you view it as incremental or just risky enough to put Apple in place to really take advantage of this AI moment? Well, Apple had no choice but to include some sort of chatbot. They couldn't launch the new iOS and the new iPhone leader is here without one.

It is such a fundamental part of the overall AI story in society right now. So launching without that chat bot, I think, would have been detrimental to the company. And so they've done that. At GPT from OpenAI, technology-wise, is the best. It would be a bad look for Apple to start with Google, their biggest rival across the tech ecosystem, right? It has been that way for two decades. And so Open AI is that smaller player. and it was much easier to hash out

because there's really no money involved. And Open AI has a very strong API call-out system already, much stronger than the one that Google offers, much easier to integrate. So it all aligned for that Open AI deal to be the one that gets done from the get-go. And you'll see future announcements on Gemini

later in the year, I'd bet. In terms of how incremental Apple intelligence is, I think the beauty of Apple intelligence is how comprehensive it is, how broad it is, how much stuff there is, and how deeply integrated it is into Apple devices. This is just a ton of AI features just layered on top of the existing use cases

for the iPhone already. So it's been integrated pretty well. And if you want sort of that classic AI system that people think of today with ChatGPT, that's available there too. So I think they really left no stone unturned on this. There's not a ton of innovation here in terms of Apple intelligence.

There's nothing we haven't seen before. There's no whiz-bang feature set. There's nothing particularly earth-shattering or groundbreaking actually in any shape or form. It's the fact that Apple has done it, has integrated it, and has made it comprehensive enough, that makes it good enough. So they're not lagging, right? They're right there with everyone else now. But in rare fashion, Apple hasn't leapfrogged anyone, whereas that's the typical story. They come late to the party, and they come with a really nice gift.

They leapfrog everyone, the Vision Pro, much more advanced than any VR headset on the market. The iPhone was much more advanced than any smartphone on the market. The iPod was more advanced than MP3 players prior to it. Same with the watch versus other smart watches, the iPad versus tablets, the MacBook Air versus sub-notebooks at the time. AI is a rare case where Apple has shown up late and has done nothing new. But the fact that they've done it and they integrated it well and they had a good story to tell and it's comprehensive, I think that's good enough.

Right. And so you mentioned that Apple intelligence is from your Twitter. Apple intelligence probably won't be bringing a super cycle to the iPhone 16 this fall. But if the company can start turning out engaging new features on regular basis, it should bode well for the 17, 18, and 19 and beyond. But that being said, like, I think you also just kind of laid out the weakness here, which is that it didn't rebuhrug anybody. And so that a compelling event to upgrade an iPhone,

which Apple needs, because revenues declined, for five or the past six quarters, you know, might not be there. Like, the people I've spoken with have just been like, it's a cool set of features, but it doesn't make the iPhone 16, for instance, like a must upgrade. So I'm curious, like, what you think about that. Like, if it's just catching up, then why does it bode well for some of these later models? Well, I think by the time the 17, 18, 19, 20 come out,

you're going to be in a place where the AI features are much more comprehensive. I mean, this is a long road map ahead. I don't think this is something they're just tacking on to the 16 this year and moving on. I think there's a lot more to come in 2025, 2025, 26, and beyond on these AI features. So I certainly think that's going to be tied to more new hardware in the future. Now, people are going to have decisions to make when they buy new phones. Do you want an iPhone or an Android phone? And before today, the decision was easier, perhaps, to go for an Android phone

because it had all those AI features that everyone's talking about. Apple has them too now. And then on top of that, if you're going to the Apple store, carrier store to buy an iPhone later this year, and you're trying to choose between getting maybe a 14 or 13 or an S.E. Or what have you versus buying an iPhone 16. That's one more reason to get the 16 is because it has the AI features that aren't supported by anything below a 15 Pro.

That's a great point. Do you think they technically couldn't support the AI features on the earlier models or they just said, hey, listen, we're going to probably sell more phones if we make them available. just to the 15 pro and up? Well, I think that the marketing factor is one component of it. Another component is a lot of this stuff is server side, and you don't want to crash the servers by having too many devices support it.

And then I think the other component is indeed the chips. I think it's two components related to the chips. It's the Apple neural engine, which is sort of that AI processing unit inside of the phones, is more advanced than 15 Pro compared to the other models. But perhaps the biggest portion of this has to do with the on-device RAM or memory. A lot of these AI features are designed to work best with 8 gig bytes of RAM. That's why it works on all recent Macs, because all recent Macs had 8 gigs of RAM at a basis, at its base plus the Apple neural engine, the iPads, all with M1 and above have 8 gigabytes of RAM,

and the iPhone 15 Pro have 8 gigs of RAM. So you can simplify it as a RAM issue. Right, and let's talk quickly about the Wall Street reaction, kind of bananas, right? Down 2%, pretty much, day of WWDC, and I'm, like, doing the emergency pod from the side of Steve Jobs Theater and being like, well, it ran up 15% since they started talking about AI, so actually going down 2% leaves you net 13, and I kind of thought it would hover there. But then we're recording on Wednesday, right? The two days following have just been absolutely bananas, like gains of 5% and 3% approximately afterwards. So what do you think is behind Wall Street's just like initial, like whatever reaction? And then all of a sudden, right, adding, you know, hundreds of hundreds of billions to the market cap?

I mean, it's crazy. Wall Street does not care what the Apple features are if they work well, if they're impressive, if they're innovative. It's all triggered by automated trading based on the words, artificial intelligence. So I think that's the big factor there. I don't think anyone on Wall Street or I don't think many people in Wall Street necessarily understand the features. I think it's just important to them that the features are there. But doesn't that lead then to a potential letdown if like the, let's say it is algorithmic

trading inspired, you know, driving the stock up. Like Apple will have to meet that expectation in the market and they are going to meet the expectation because I think that their unique factor here is the is the deep integration and the privacy, right? how comprehensive and broad their approach to AI is, right? And so I think at some point they will meet those expectations. Now, the question is, what is the expectations of consumers? Is it a chatbot? Is it open AI like functionality? Well, you have chat GPT built in. So you are getting that. You're not missing out on that. Is it deep integration? You are getting that.

Is it daily use cases? You are getting that. So I think they are giving the market what it's demanding, despite the fact there's nothing new here. It was good enough for Apple to show up and we're the same outfit as everyone else. Yeah, it's really interesting. And it's like all the people who are deep in the technology, I would say myself included. And a lot of my audience were like, all right, well, that's somewhat disappointing.

It was cool, but not a wow. And when people thought it was it doesn't matter. It doesn't matter. It doesn't matter. I think that's the key takeaway, for sure. You just didn't have to come in any worse. You just couldn't come in any worse. You had to come in and you had to meet the expectations of the market.

It's a little disappointing, because Apple is known for coming in and exceeding expectations and bringing things to market that no one has ever seen before or heard before. The only thing you're getting different here is marketing and implementation. The same tech, maybe even a little bit inferior to everyone else, but it's in a really nice package. All right, and let me wrap with this question. In your report, you've been talking a lot about Apple's potential robotics and devices plays

and that this has sort of set them up to be able to start rolling their AI out in these type of devices. Can you give us like a preview of what might be coming? I've been most excited about the AirPods with cameras. I think I'm misdirected. So why don't we end on that front? Yeah.

So, you know, AI is really necessary to power a new generation or a new class of platforms, one of those being robotics. And a lot of the AI work actually had its inception on the self-driven car, and they're now repurposing that on robotics. work. And I think AI is fancy on the phone. It works well on the phone. It'll be tremendous productivity-wise on the Mac and potentially the iPad. But I think the real killer use cases

are new types of devices. You can build around large language models, tabletop robots that can move like a person's head on a swivel, a humanoid robot that can do your dishes, AirPods that can have a better sense of the environment around it by using algorithms that are based in AI on the cloud, mixed with cameras to have a better interpretation of where you are in space, enable slimmer form factors like augmented reality glasses. So I really think that's the next leap. This is going to take another decade for all of this to roll out, maybe longer, but this AI now provides a foundation for that to even be able to happen. Mark, you're the man. Thanks so much for joining. Congrats again on all the big scoops. I think

a legendary run for you. And we'll hope to speak with you again soon. Thanks, man. all right ronjan what did you think well first of all i'm kind of fascinated by the idea of big technology podcast taking place in cars like the uh jerry seinfeld comedians and cars uh i think that should be the new uh angle going forward much less glamorous there was no air conditioning i was sitting in the back seat and sweating uh but you i do i will do what i need to do for the big technology audience i'm here for you guys for the audience we're directly from mark german And I think he has obviously been leading in scoops with everything Apple for the last couple of years. And he got this one.

For me, this is a very bad week for Open AI. And now the reason, and there's a few of them. First of all, so much hype around what this partnership meant with Apple. We had talked about this last week. Open AI is GPT40. Are their models going to be at the device level for Apple? Is it going to be essentially kind of controlling? this, and it was very clear, that's not the case. Yes, they have distribution, as Mark's reporting

said, and that was kind of the idea here is that now it will put open AIs and chat GPT in front of millions and hundreds of millions of customers. It will allow premium subscribers to access premium features. So maybe, I'm sure it will drive some level of conversion on that side. But the actual, I mean, from a compute standpoint, it's still unclear to me exactly who. is paying for what. I would have to assume Apple is still going to be billed for the compute associated with any of these services. But this was supposed to be a bigger moment for Open AI because at some point and Apple said it that they are going to be introducing other available models and services. This is just the first and that's good. And we all know the power of default

behavior. But Open AI did not walk away from this as some, you know, like at a new level and stature within the entire industry in terms of getting that much more consumer-facing, you know, glamour within this. I think it actually was kind of a non-event for them. It's interesting, but it's not exciting to try to value this company at what it's claiming it's going to be worth. You used a fascinating phrase there, which was the power of default. And I think that's assuming that Apple, the OpenAI will be the default in the iPhone. And, To me, the biggest thing that I got from that conversation with German is that's probably not going to happen, that Apple gets $20 billion from Google every year.

And German thinks that this is going to turn into the new search. I'm less sure of that. I do think these chat GPT and generative AI experiences have different uses than search in some cases, but there's going to be some convergence there. And if Google found a way to be profitable enough that it's happy to pay Apple, not happy, but it will pay Apple the $20 billion to be default search because it's figured out the business model on the other end, then I think there's a good chance that Google,

and this is kind of what German was saying, which really stood out to me, opening I might just be holding the seat warm for Google because Google has a much longer track record of making money from consumer services. And if it can pay Apple more for that default spot to be the chat bot on the quote-unquote AI iPhone, then Google ends up being the one that takes,

that default position. What do you think? I'm going to make another call here. I think it's not going to be Gemini. It's not going to be Open AI. I think Apple is going to buy one of the other players, maybe an anthropic, maybe anyone who is at a slightly cheaper valuation, at a more reasonable valuation, making some analysis on whose technology could best integrate directly within to the Apple ecosystem. because to me, this is something that I think in the long run, because it's not just about a chatbot, it's about the way these services are all integrated into the iPhone.

This whole idea of Siri becoming an agent is going to be difficult. And it's going to, I'm very curious to see how things end up and how successful it is. But there is no reason for Apple to not own this part of the value chain. Search was such a big thing that was non-core to their regular business and operating systems, that they understood that it never made sense for them to try to take on that. But the way generative AI works, it's going to have to be more deeply integrated into everything within Apple. So they're going to have to own more of the value chain at some point.

So I think this is definitely here's an option that works well. People feel comfortable with to start. And then we are going to move to owning more of this. And soon it's just going to be Siri. It's not going to be, okay, maybe you should call it. chat GPT on this one. So if Apple buys Anthropic, I'm just kind of doing the math here. It's going to pay Google and Amazon for the right to own it because they've both invested a billion plus dollars in this company. I do think you're right that there's going to be an AI research house

that's going to be available on the cheap because I don't think they're all going to win. But I don't see it being anthropic. The one that I would predict is mistrawl. I think, think this French AI company that just raised, I think, $600 million this week. $600 million, right? They are, I would say, technically adept enough. Like they've pioneered some new techniques, which I heard about this week. But they are technically adept enough to be a really attractive acquisition target for Apple, but small enough that they're probably not going to win.

So I guess the real question is Apple going to try to like sort of fake acquire them like Microsoft did to inflection? Yeah, I think that's a good question. because from an antitrust standpoint, would they find resistance of buying a major player, which actually makes Mistral make a little more sense? And from what I've understood, Mistral's innovations really are around speed and cost relative to being able to do more. It's able to do equal amounts of things cheaper and faster, which makes even more sense for integrating a technology across an ecosystem like Apple. So I think from the Apple side, this is,

is all very good, and I think they're in a good position. But Open AI, they need to make revenue, because one thing I want to call out, there's this as a very positive thing. There's an information article being cited everywhere that Open AI is on track for $3.4 billion of revenue. The really interesting part of this to me was the actual article said that Open AI was at a $1.6 billion run rate in late 2023. There's a couple of flags that that raised for me is, how is this information getting out now conveniently that this is the run rate as of six or seven months ago? And what it was six or seven months ago, I have to imagine the ecosystem is so different right now than even six or seven months ago. Google has basically launched its entire infrastructure since then.

Microsoft has pushed heavily. There's endless other consumer options for chatbots and premium chatbots that, That information conveniently getting out there that's old and being extrapolated into some massive revenue growth to me felt a little off. And then you start to think, open AI is going to have to show some serious revenue growth. And I've never thought it's going to be on the consumer chat GPT plus side. I don't think they do, especially given they're giving away access to Model 4-0 for free now. So I think this raised so many more questions for me around how is open AI actually going to make enough

money to just, you know, fit into its valuation. Right. And so let me sort of make the argument that Open AI would be making here, right? Which is that they launched 100 million people use chat GPT within two months. Today, they have an update of that number. The whisper number that people are sort of talking about behind closed doors is 200 million. So think about it this way. They created the innovation that sort of launched a multi-trillion dollar revolution. They can't get more than 100 or 200 million users on it for them even if they're not getting paid like people are giving them shit for getting paid by exposure by apple like right it's like the true

loser move but for them this is going to introduce chat GPT to so many more people and there are different use cases for when you're on mobile I need something quick to when you're on desktop and if you get introduced to the capabilities then you might be interested in more and the fact that they are going to get to ride on Apple's operating system as the only choice is a deal that even if you're not getting paid, maybe you have to take. I think that sounds fine at this exact moment, but I do think, okay, if two years from now, it's still just CHAPPT as the only alternative, I think that was a great move by Open AI. But I think if pretty quickly, and I wish, I'm curious if within the deal terms, there is some kind of exclusive.

factor or exclusivity term and whether it's like six to 12 months or something like that. But I still think I cannot picture the amount of conversion to chat GPT plus unless they start really locking down the service and like pushing you into that funnel. I just don't see it being a massive moneymaker for them to the scale that it needs to be. To me, it's always been about the enterprise. it's been about actually like charging for the compute and usage of the models and these things obviously this deal doesn't really reflect that so this is kind of the point that you're making I thought this was interesting it's from Sam lesson in one of his traditional screenshots although

the text is bigger which thank you Sam I can read your stuff now okay he said Apple just put chat cheap PT in a tiny tiny box if you didn't already realize it was over you now can't ignore it. The deal is just terrible for OpenAI really spells the end for chat GPT. They just got Appleed. How? Well, it's one thing to be Google and have a super strong economy so you can pay Apple for search and distribution. But Open AI can't possibly afford that shit because they don't have a business model that works. So what happens? Apple puts them in a teeny tiny box as an optional upsell sometimes, which they can charge at will and offer alongside anything else they want. You know what that does? That makes Chad CheapT nothing more than

a dumb content provider. And you know what quickly commoditizing content providers are worth, BuzzFeed. I mean, that to me is way over the top, but it sort of illustrates the point. That is savage. But I think Sam lessened why I like following him is sometimes I vehemently disagree with him, but this is one of those moments. He captured exactly what I'm saying here. And Apple has done this to startups over and over and over again.

And even, you know, there was like, during the WWDC, I kept seeing these threads, like, here are the startups Apple just killed. And, I mean, password managers and other, like, image creation on device, all these other things. This is what Apple does. And as he said, startups can get Appled. And I think OpenAI is basically setting themselves up to get Appled. And it just feels like they were so desperate for some big, splashy partnership that they went. for this because they wanted to be part of the Apple partnership. They knew it would drive interest, especially if people didn't really question it.

But I don't know. I still think this does not look good for Open AI. I want to get your reaction to this because this was another sort of tweet about this news. Max Wolf, I used to work with at BuzzFeed, says this is the best argument yet that we're in a generative AI bubble. I don't quite understand that part of it in terms of the bubble side. I think to me, this is specifically an open AI story. I think it shows that, like, it actually, on the flip side, I would say how Apple demonstrated what their goals are for generative AI and really making it solve genuine consumer problems.

I think it was a pretty compelling vision, and I think people are buying into it a bit. Certainly the stock market is coming around to that idea, but I think it showed, this, actually, I was excited about this because this is the first genuine big generative AI show that really showed specific problems that can be solved and just understandable things rather than Open AI debuting SORA and saying that at some point you might be able to create movies using generative AI or even Google showing demos that aren't ready yet. like, and knowing that these products aren't ready yet and will be released over time. And it was a little disappointed that it's not all going to be available in September. It was supposed to be rolled out over a few months. But I think this actually almost shows that this is where generative AI is going in the true potential of it, rather than it's some kind of vague thing that people talk about in grandiose terms that's either going to kill us,

transform all of business, allow for one person. and billion dollar companies and the list goes on and on. This is more, you can find your flight and check the status of it just by asking Siri. And that's more compelling to me. I don't know, Ranjan. I almost feel like this is an emperor's new clothes situation where everyone's like, this is so great for Apple. And I wonder how much of that is driven by the stock market.

And they're like, oh, all the investors are saying that it's going to work out. And so it will work out. but we also know that as you mentioned we have like a very long wait time before we start to see some of these demos come out why is that obviously they're not fully baked yet and then the idea that this is going to drive this big super cycle for folks I just don't think it's a big enough like my gut tells me it's not a big enough improvement to drive this upgrade as Apple has struggled to sell phones at the rate that it used to as people hold on to their devices longer what's wrong with that? Okay, well, that allows me to give you my larger thoughts on WWDC. I think that

it is a big moment for Apple. And I don't think it's the stock market driving it. What I liked was this was the most Appley vision of generative AI imaginable. It's again, how do we make a difficult to understand technology that's niche and growing accessible to everyone in the the world. It's like, this is what they've always done well and this is what they're selling. Again, I agree that until I see, and as regular listeners know, I am the least enthusiastic fan of Siri in the world, I think. Yet I still use mostly Apple products. But this is, they told me they're going to fix Siri. They told me that I'm going to be able to actually execute complex actions just using Siri that span across different.

apps. And if that actually works, I'm going to be incredibly excited. And I think it's going to be very powerful for Apple. If I find out that Spotify is still not available via Siri, I'm going to be pretty annoyed. And I think that the whole thing is going to be all for not. I'm so with you. I was like on my phone today, like this week while I was driving through the Bay Area. And I was like, we have all this AI, but I can't just kind of hit a button on my phone and say, I mean, maybe I can. But I've so given up on Siri, play Spotify. You know, play the song from Spotify. It's annoying. Spotify now is the one resistant to being on Siri or they have been.

This is like one of my biggest pet peeves. So I've looked into this before. Apple, it actually opened up the API to allow for Spotify. At first it was blocked and when they launched Apple Music and pushed it very heavily. But now Spotify is the one resistant to actually going on Siri, which I get because the whole battle over the 30% tax slash you know in store fee so so i think but now the whole thing becomes a lot more compelling for everyone so no one's going to be resistant to being on Siri ideally because if this works like it's supposed to every app is going to build in actions directly and that's actually one of the most exciting parts because this is what shortcuts kind of foretold it was that there's already

developer actions that can be built into apps that could connect to Siri like this command will allow for this specific app action now that's going to become a more core part of how people think about building apps like you can imagine apps where the app itself you barely use like no one actually presses the app the entire thing is a bunch of Siri actions that allow for different things to happen and which i'm basically describing the rabbit r1 vision of a large action model yeah that worked i was thinking large action model the whole time i was watching the keynote but sorry go ahead imagine if they just said it they're like apple has invented a new type of model it's called the large action model voiced by scarlet johansen and enhanced with the stories of force the large

action model is an original apple feature okay the last thing i want to say here is that i stand by what i said on monday right after the event which is that it is catch-up and an interesting set of features with a strategy, which is personalized AI. But there's a story I also read this week that has sort of put this week in context for me, and I'm curious what you think about it. Last year at this time, of course, we were talking about the Vision Pro. It was pretty hyped, and this is Kevin Ruse in the New York Times. He says, today I barely use the Vision Pro at all. Every few weeks, I strap it onto my head to do some focused writing or watch a movie in bed while my wife sleeps. Otherwise, it sits on a shelf collecting dust. Apple hasn't released

sales figures, but analyst estimates suggest that the device has been a flop, selling fewer units than expected. Social media isn't buzzing with videos of enthusiastic vision bros wearing their headsets. Oh, yeah, wearing their headsets in public as it was in the days after the device's release. Some early adopters return their vision pros for refunds and lightly use headsets are selling for as little as $2,500 on retail websites. My perspective on VR, it is a enterprise thing? AI right now at the core is an enterprise thing. Do you think that in a year from now we could be looking back and saying, oh, same trajectory for both big releases? Well, first, I don't think this was catch up for Apple. I think this was like the appellification of AI for them.

I think they again, presented a pretty compelling vision in a very Apple way. But you don't agree with German that like where he said that the Vision Pro drove the format forward the iPhone drove the format forward all these Apple devices even the AirPods drove the format forward but we didn't see it necessarily with these personalized AI things that felt like a Google event no no see see that's what I think I think it very much drove the vision forward I think I think or the technology forward I think this is the genuine use like all the talk now agentic AI, all the hype around generative AI that people don't really feel and see in their day-to-day lives, that's what this can potentially do. I think that I really think that this is what made

it so interesting versus if it was. And again, I agree that a lot of this does feel a bit like the things Google has sold, but has not delivered on. And I think I have more faith that Apple on this specific consumer-facing utility vision of generative AI is they're the ones if anyone can do it they're much better position to where does this leave Microsoft let's close with this on this close this segment with this where does this leave Microsoft because Microsoft of course has been providing effectively providing the service for open AI but funding it and now open AI is giving away uh the chat GPT on apple devices although it is giving it away to everybody for free on the web as well baked in there There's a chat GPT Mac app.

There's no chat GPT, Windows app. Is Microsoft in this weird position to kind of be like footing the bill as OpenAI enhances Apple's products? Meanwhile, they have this recall function where it sort of falls along as you use your computer and tells you. And basically this built in memory for you. And that's delayed because I think of privacy concerns. So where does this leave Microsoft? Well, yes, the Microsoft recall. function was recalled. I saw that tweet a few times, and I just had to go with it. But I think

Microsoft, they, the rollout of recall in their most recent, like, here is our next phase of generative AI, I think was very poor. If we remember, we were all Bing Boys a year and a half ago, like Microsoft was commanding the lead in terms of exciting people around this, both on the consumer and enterprise side, and I'm not sure what they're thinking are doing right now. However, again, Microsoft, what they will win at potentially, the only thing that they're going to really win at is the enterprise, and I don't think their position on that side has been hurt at all. Every Office 365 subscriber, every Azure customer is going to lean towards Microsoft products and generative AI products, and this doesn't change any of that. Let's do one of our favorite

little segments here, which is beginning of the weekend of the week. So how did you, do you feel better or worse about Apple today than you did at the beginning of the week? I think better. I think that this was, I actually like this because it was not over the top. Wow, this is life changing. It was solid and good. And I think that actually has a, that is what's needed in generative AI right now, rather than over-the-top futuristic visions. Yeah, I'll go with better, despite like the line of questioning I've had today. I think that going into the event, I felt we needed to see Apple question some of the fundamentals. We needed it to say, can we put GenAI in our operating system?

Check. Can we do things that we don't usually do working with an outside partner like OpenAI? Check. I think the chat GPT integration, you know, despite the fact that it might not be a great deal for Open AI, although there's a chance it will be, will be absolutely good for Apple. And it articulated a vision. You know, again, I didn't fully blow me away, but there's something to be said about, I think MG's headline, and we used the headline on Wednesday.

Apple doesn't overreact to the AI revolution. So it seems right online. I'm definitely better on Apple, though maybe not as bullish as you are. Okay, Open AI, better or worse today than at the beginning of the week. I think much worse is clear from everything I've been saying. I'm neutral. I think that Open AI is just in the hits business. Like, we're going to see probably agents, reasoning, GPT5, and video generation,

and maybe 3D generation, and maybe robotics come from them. And it's just becoming clear that they are like not just the chat GPT company. And they still have the leading model. So I'm neutral on them. And maybe this is even a boost. Okay, let's talk about this Forbes perplexity thing. It's very interesting. so do you want to set it up have you been following it and you also are the one that

introduced perplexity to us so talk about what's happening here so perplexity has a feature called pages as their CEO would explain that basically kind of like is like a presentation of a topic that's much it's almost Wikipedia like and it's very very structured versus more kind of like quick summary type the way or chat or answering specific questions it really is an information tool. Forbes had realized that there's a story about Eric Schmidt and his new startup or investment on drones. And basically, it's a hard paywalled story. So the only way to access and read it is if you're a subscriber. And it published some of the words verbatim. It took, I mean, it really rewrote the story and summarized it very nicely. And this is a hard

paywalled story. It even took the artwork from the original story and it uses it kind of a preview image, no different than like Google News or whatever else, but it's still kind of prominent and big. So it really is this perfect case study of how hard paywall journalism that takes deep research and true journalistic work can be quickly summarized and taken by a system like perplexity. Yeah. And not only that, this is from Randall Lane. So first of all, I should just shout out my conflicts here. I used to play soft. I mean, I used to be a Forbes contributor and I played softball on the Forbes softball team. So I know Randallane, who's the editor in chief there. And John Patskowski, who was the editor on this tech story, was also my editor at BuzzFeed. So those are my conflicts. I'm shouting them out. But anyway, this was interesting from him. He said, perplexity sent this knockoff story to, its subscribers via a mobile push. It created an AI-generated podcast using the same reporting without any credit to Forbes. And that became a YouTube video that outranks all of Forbes content on this topic within Google search, which is pretty egregious. Perplexity hit back, right? First of all,

Arvin Serney Voss, who's been on the show, so there's another connection to this one. He said that perplexity was the number two referral source for Forbes. And also, it looks like the company went to semaphore and said that it is working on revenue-shared deals with high-quality publishers, and this is from Reed. I have also lost count of the Times' reputable publications simply refused to credit my and others' work, and any local news reporter can tell you what it feels like to be a victim of parachute journalism when a national outlet swoops in, rips off your reporting, and pretends to own the story.

For decades, media outlets have tacitly gone along with this kind of quote-unquote plagiarism, mainly because as long as the aggregated article included a link, it would send traffic back to the original publication. And so effectively implicit in that argument is, is this any different? What do you think? Yeah, this to me is such an interesting story. And I think there's two parts of it is first. And to me, I want to be clear, the paywall part of it is what makes it extra juicy and interesting is because it's one thing, even semaphore and Reed Albergati, how he kind of stated, like people aggregating other news stories is, I'll get to that. But this is something that no one should technically have access to unless they pay for it. This is not publicly on the internet. And I'm actually surprised that perplexity would scrape and use paywalled content like that,

not even metered paywall. Because to me, there is something to say about, like, anyone in the, it's a much easier case claim to make that anyone in the world can read this story, and our systems have scraped it and used it and ingested it or outputting something around it and you know using fair use or whatever but again the fact that this is no one other than a Forbes subscriber can technically read this makes this extra interesting but on the flip side I actually agreed with this

and I will say it's a little rich coming because Forbes has actually gotten a lot better recently but like for years they were the model of pure aggregation, rewriting. I mean, this is stuff that Business Insider kind of was like the OG in this in terms of like aggregating and rewrite, not rewriting, but you know, quickly summarizing and taking stories as their own. Like, this has been a regular model in journalism for a long time. So the idea that this is something completely new to the news business model, I don't think is the case. But then the third thing, it was interesting. on the referral traffic because Arvind, he had cited another tweet that I think it used either

ComScore or Simple Reach data to say that it was the number two referral source for Forbes. What was interesting for me is Forbes. They said it was maybe 3% of their total audience. Referral traffic is 3% of their audience. Oh, sorry, referral traffic overall. But do they, I think they had an even smaller number for perplexity. And to me, this is the kind of moment that if you really, want to get behind this story, yeah, show us, I know it's proprietary info, but that becomes a lot

more powerful if you show me 41, 2, and 3 and 1, 2, and 3. And I think, like, make clear that you have genuine data rather than you're just saying this, because at least the, whether it's ComScore or Simple Reach, that was something that was at least public and someone had pulled from a report directly. Yeah. And I was kind of, so I obviously published big technology. It's my part, It's my property. I've been aggregated. I've been ripped off by AI in the past. And so I know how it feels.

And I was kind of thinking like, well, what would the tradeoff be here for me? And on one hand, like, yeah, I mean, if I worked for months on a story and it got ripped off like this, I would be pissed. I think that the indignation from Forbes is righteous. On the other side of things, I think perplexity has a way to fix this, which is with the product. week. And that is that if I had a hard paywall story, I worked really hard on it. And perplexity, let's say, took a little bit less. So gave the summary and showed that I was the publication that did this and then prominently linked back. That's good marketing for a publication, right? I think that's good marketing. I think basically they're doing the distribution for you.

That's how I would have reacted if I was perplexity as opposed to like we might pay publishers sometime in the future, I would have simply said, this is a good point. It's our duty to send more traffic back to the original source. So we'll slim down some of these summaries. We're not going to rewrite stories and we'll prominently link and the economic value that Forbes will get will be significant from that. Yeah, I completely agree with that. I think the thing that's been the most interesting about this to me is we've talked about this before that like is this the death of the web? and I think this is actually like going to be probably remembered as like, you know, a central early case around this that has a lot of nuance and complexity to it because to me, this is a perfect

example. Like if this is allowed, then there's no incentive to economic incentive to continue creating more deep content. And then even if as of today, everything that's happened in the past can be summarized and reused by like via an AI system like perplexity then why there's going to be no more new information and I've been thinking about that a lot in terms of like what will those incentives be and like would perplexity at some point have to create a newsroom or you know whatever else like start creating the content if no one else is and I think that's going to be one of the more interesting parts of this because the more they create disendipers. incentivize any kind of content creation, the more they hurt themselves, but only about new

things. Anything in the past will be fine. Right. And it's interesting that we're looking at Forbes and not the New York Times. And the New York Times has been so litigious that like people wouldn't dare him, you know, do that to them because they'll get sued. And maybe that's actually the path forward because they're going to have to preserve their economic gains. Well, do you think from like a pure tactical standpoint, New York Times just sues you. Forbes is definitely kind of taking a, taking it to the streets,

just town square, burn the bridges. Like, I don't know, like, but then in doing so, even that whole thing around referral traffic, like they're creating a lot of potential, I don't know, legal complication if they do choose to sue. Which do you think is the more effective path

to try to remedy this kind of thing. Lawsuits, but it costs money. Like, I couldn't potentially bring a lawsuit. Like, I'm just at the mercy of tech platforms. I mean, Forbes is much bigger, but it's a, the Times has a massive legal department, so they can do it. It's harder for Forbes. Yeah, but we have the big technology audience to stand up for us if we...

Exactly. We know that you guys will, and gals, we'll rise up and help us fight a big AI if needed. So far, so far it's been pretty fine. All right. There's one more part of this that I want to talk about, which is that it does seem that as opposed to like aggregation and, you know, snippets in search or whatever social media, instant articles, like this AI thing is sparking a much more intense fight over intellectual property

than anything else I've seen before in the history of the internet. And I like said on a recent podcast list that the user gets what the user wants. But I might be rethinking that. Because it does seem that this has sort of gone to a new level where this generative stuff will take remix and then effectively copy, you know, whether it's a Forbes article or Scarlett Johansson's voice or a New York Times perspective. And it's actually much harder for the folks doing this to get away with it than I thought. What do you think is the case there? Is that a right observation? And if so, why?

No, I think this is an overall good thing because we are at a point where for the first, let's call it, like, you know, like late 90s to the late 2000s, there's just tech wasn't unadulterated good. And anything that happened, everyone celebrated, no one questioned what the negative potential implications are. Now we've clearly made that a central part of the conversation. And I think it's good. I think this is simply, rather than people on the other side, the publishers in this case, just assuming everything will work out and it could only be good for them. There's at least a heated and litigious discussion around what the future of this

could look like. And I think that's a good thing. I think this is a nuanced thing that, again, perplexity provides me an immense amount of value in a lot of ways. I love the app right now. Watching the NBA playoffs, I've actually been using perplexity to look up different players. And, I mean, it's just like something I have on and it quickly gets me in now. So it's very valuable, but without some underlying content somewhere, perplexity doesn't

provide value. So something's going to have to be figured out. Yep. All right. We have one more story we want to cover this week, which is Elon Musk's pay package. So let's take a quick break and 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 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, breaking down the week's news. All right, there's one more big story. Ron John, why don't you talk us through what happened with Elon's pay package. I'm sure that you're celebrating the fact that he's getting this money. So let's hear why. It's been Elon, there's been things that he's been doing recently that I actually think are positive, but this brought me back to classic Elon and just the absurdity of Tesla the stock. So I'm sure readers, most of our readers know there was this pay package debate. It was a 2018 pay package that a judge had invalidated and said was, like, illegally constructed because it was, essentially, Elon had publicly said he was negotiating with himself

in deposition. So this package, it was worth $56 billion when the stock was at the highest, $46 billion right now. It's one of the largest corporate pay deals in history. It allowed him $304 million. It gives them options to buy $304 million Tesla shares, which would be 12% of outstanding shares. And what makes this so, it's just crazy to watch me. I was watching these videos of the shareholders meeting. People are cheering him this going through. Meanwhile, this is so insanely dilutive for shareholders. And Elon already owns a significant chunk of the company. So this is only giving him more ownership. And he himself has said, like he wants to own 25% otherwise he does not feel he has the incentive to work or do whatever, you know,

make Tesla as successful as it has been. So you get into this point where people are celebrating being diluted, which other than GameStop shareholders, normally the typical investor does not do. Then you have Elon who has been threatening if he did not get this, would, you know, not say exactly what he would do, but very strongly hinted. that he would move away from Tesla. He's already said he's going to be diverting, and it's been reported diverting resources to XAI, even though the future of Tesla is dependent on AI

to at least achieve this valuation. And then the interesting thing to me about the scale of this is it's such a perfect representation of the stock versus the company because Elon has created an incredibly valuable rich shareholder base. It's, you know, up to it was, I think it hit a trillion at one point. Like, the stock price appreciation since the implementation of this package has been astronomical. The company has grown, but has grown nowhere near that valuation. And this stock, this pay package, the company itself has generated around $20 billion in cash flow since its existence. It's been around the net income

since it's been in existence has also been significantly less. So I think I'd read somewhere that this is more than their net income generated since inception. Meanwhile, you have like a Ford Motor Company generates $6 billion cash a year, and their CEO, I'm sure, is making, I think probably in like the tens of millions probably, but it's so outsized relative to the actual economic impact of the company. So it's a tough one because you get why, without Elon shareholders, understand that Tesla will collapse, the stock will, because the entire stock value is based around these grandiose promises and the personality of Elon, but it's also a reminder that

the stock price is based around the personality of Elon. Right, but okay, let me ask you this, because this has been the counterpoint. Elon had this approved. He met the numbers that a lot of people were skeptical about. The courts threw it out. the shareholders again voted to reinstate it so what's the problem here no i think it's a reminder of the like this was done without any true board oversight the largest one of the largest pay packages in history when he's essentially negotiating with himself in his own words i think again

the stock price appreciation and they did hit some of the profit targets as well so i definitely can see that, but like, it's such a perfect case study on, yes, certain things can be met and make sense, but the way these things are done in terms of precedent, especially legally, should not be allowed. And again, shareholders, they can create a new pay package for him if they want to. They can give him more of the company. It's just that this specific pay package, the way it was done, and only looking at it in that kind of at that time period, in the, the actual manner in which it was executed, it really is something that a judge in Delaware has deemed to be illegal.

But look, that being said, doesn't Tesla still win here? Like, they're going to get a more engaged Elon. It seems like the shareholders wanted this. So, I guess, where's the loss? Is it just, I mean, if you think about it, you can think about broadly, but like, when it comes to Tesla in particular, and that's what we should be focused on because it's a Tesla issue, doesn't Tesla win? even if it's an unusual situation.

I think we will see, as shares continue to decline and margins continue to decline, we'll see if it's the right decision. But I agree that shareholders did vote it through. It's a bad legal precedent. And I think that was the concern of the judge, especially because Delaware is supposed to be the most, not even strict. It's the most business-friendly state in the country. That's why it exists.

You know, like every company is incorporated there. but, and that's why Tesla also already just moved to Texas, but I think we will, it's one of those cases that we will see play out over a much longer time frame. Well, Tesla is down 2.36% today. So I guess that gives you kind of an answer of like how this has really helped the business. It doesn't seem like the market really appreciates it, but have no worries, because there's a headline in fortune that says, Kathy Woods, Ark Invest predicts Tesla stock will serve 1,350% over the next five years.

Elon talking about robots, Kathy Wood saying $30 trillion dollar valuation, this was a fun week. This one was good. Great speaking with you, Ranjan. Very big week in tech, so I'm glad we were able to recap it. Thanks to Mark Gurman for coming and sharing his thoughts

on Apple and OpenAI and WWDC. We'll be back next Friday with a new show breaking down the news. And in the meantime, I'm pretty sure next week's, Wednesday episode is going to be a conversation with Peter D. Amanda's. We're going to talk about AI hype. We're going to talk about longevity. It really is going to be a fun and his relationship with Elon, actually. So it should be a fun one. All right. Thank you, Ron John.

Great speaking with you as always. See you next week. All right, everybody. We'll see you next week on Big Technology Podcast.