Big Technology Podcast - OpenAI's Financials Revealed, Tesla Robotaxi Debut, Shein's Weird CEO

Episode Date: October 11, 2024

Ranjan Roy from Margins is back for our weekly discussion of the latest tech news. Cory Weinberg from The Information joins us for the first half! We cover 1) OpenAI's financials leak 2) OpenAI plans to make most of its revenue via ChatGPT 3) OpenAI's staggering losses 4) Can OpenAI be a sustainable business? 5) Training costs vs. inference costs 6) You don't exclude training costs from profitability statements! 7) Tesla's Robotaxi event 8) Self-driving's importance 8) Ranjan gets the Snap spectacles 9) Shein's CEO oddities 10) Is Shein state run? 11) TikTok's impact on kids. --- 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 take a look at OpenAI's newly revealed financials and discuss its massive projected losses. Tesla is also out with its Robo Taxi, Robovan, an Optimist Robot. And we have some questions about Sheehan's IPO. That's 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 great show for you today because we're going to go deep into Open AIs financials now that the information has opened. in the books. They've gotten some exclusive details about the company's revenue projections, its costs, and its losses, and where it expects to go over the next few years. We'll also

talk about the Tesla Robotaxi event coming up in the second half. And then also, Ranjan has some questions about the Shee and IPO and its CEO. But we are lucky to be joined here for the first half by Corey Weinberg, the information reporter that broke the Open AI News. Corey, great to see you. Welcome to the show. Great to be here, Alex. And also, Ranjan Roy is here, as always, on Friday. Ranjan, good to see you. We got some numbers, Alex. I am excited for today.

Finally. Nothing really excites the big technology Friday crowd, like a bunch of financial projections. Line item expenses and compute amortization and expense allocation and stock compensation. We got it all today. It sounds like, yeah, that'd be a good rap. That's right. Yes, let's get it into Suno. And next show, we'll make sure to turn it in.

into our second theme song. But, you know, we might joke about it, and it does sound quite nerdy, but it actually is this amazing snapshot into not only open AI, but like what we can expect from the broader generative AI moment here because this story that you broke Corey actually has some internal information from open AI.

And it goes to show some like pretty draw-dropping projections that the company is making. I mean, specifically around the losses, which we've been talking about at length here on the show recently, but then also in terms of where it expects its revenue to go. So for me, the top line was that they're expecting their losses to get as high as $14 billion in 20206. Remember, the company just raised $6.6 billion in a round. So its losses could be that high.

But we also took a look at the places where it expects the revenue to come from. One of the things that astonished me was that ChatsyPT is what OpenAI expects to lead its revenue. which it expects to increase 100 fold by 2029, and the bulk of that revenue is going to be coming from chat GPT, according to open AIs projections, which flies completely in the face of everything we've been discussing on this podcast and everything we've expected, which is that the API and the other companies using this GPT technology

was going to be the driver of open AIs revenue, but it does look like the company's expecting chat GPT to be the bulk of that revenue. I mean, it already is, but throughout the upcoming history. What do you make of that, Corey? It surprised me, too, on the top line. I mean, I think, first of all, you need to view these projections and these numbers, like you view a lot of startup projections, which is this is, in many ways,

the best case scenario, especially on the top line. Right, I'm assuming this is what they sold investors on, which means that that big round was sort of predicated on investors believing this story. Yeah, 100%. And I think, look, when you have growth so far that puts them, you know, sort of in Google and Facebook territory in terms of revenue growth, you know, early in their history, you know, they're going to lean into it and be aggressive and say, yeah, by the end of the decade, we're going to generate as much revenue as Nvidia or Tesla. Like, they definitely

went big with it. And then, yeah, when you dig into that, it's like, okay, maybe you can view those revenue figures skeptically, and I think we all should. But I also think, you know, let's actually take some other forecast at face value. And I do think the actual breakdown of that revenue was pretty revealing and interesting. I mean, you have a company that says their main product right now in ChachyPT, which is both the consumer subscription subscription product. Also, there's, you know, an enterprise product for ChachyPT. I don't quite know how that breaks down between the two of them in that, in that revenue bucket. But yeah, they're saying this is going to be the moneymaker for, or at least the revenue driver for years to come. And it seems like

the API revenue is, you know, maybe they're kind of giving it away more than, or actually like charging the full value of it. And it's also more easily commoditized. So yeah, I did think that was pretty interesting. Roger, what did you think when you took a look at this projection and saw that basically the company is expecting to be, really, it's a chatbot company. I mean, that's what it is. If the majority of its revenues coming from chat GPT, it's going to be a chatbot company and not just a chatbot company, but a pay chatbot company. I mean, yeah, no, no, that that one jumped out at me and Corey just kind of hit at the most important point that the API revenue could be commoditized because actually, I mean, I have been arguing for a long time that that's

actually where the money is going to be. It's in the enterprise. It's in the API access side of things. And maybe they laid out the case. They're arguing it's going to be on the actual consumer facing side, which was interesting to me because even though I've so strongly believed the other way. Maybe it is in the user interface, the UI, the UX side, that they launch great products that everyday people will use. And that's where they're going to win. Do I think it's correct or right? I don't know. But it's an interesting way to raise $6.6 billion. Is there a limit to the way that this generative AI phenomenon can continue to grow if the leader, which is Open AI, and not really making a lot of money on the API.

Like at some point, it's like, why are you developing these foundational models? If it's, I guess, maybe it's just to make the chapop better. What do we think about this? Corey? Well, I think if you just think about it, if I, as a user of these products, as someone who is also trying to cover, you know, these companies that are growing quite big as a reporter, it's hard for me to keep up with sort of, of how each of these foundation model companies are actually moving ahead of each other

in different aspects of how they actually can do math, do science, do, you know, sort of legal stuff. Like, like, it seems like between Mistral versus OpenAI versus Anthropic, like, you know, it's getting somewhat, these foundation models are, you know, in very tight competition. with each other. And the value, I think Open AI is saying, is in the consumer and enterprise brand. Not sort of what you're developing

for other application developers, but they're kind of casting themselves, I think, as like an essential service that they can provide a lot of value to consumers on and can drive up subscription prices. And that's like an easier story to tell in a fundraising. So maybe that's why they're leaning into it.

And, you know, no one's going to necessarily hold them to account to it if it turns out any differently. But, yeah, I think it's an acknowledgement that they think the API business is more of a commodity. Right, which is amazing because that is effectively a tacit acknowledgement by Open AI admitting that it's not going to be able to stay ahead of its competition and building the state-of-the-art models. Yeah, I think that it's possible. But there's also, there's other products they say they're going to develop that are quite big. We don't know what that'll look like. But obviously, you know, we know there's a lot that's not out in the world that they've teased like SORA and, you know, kind of a perplexity type of competitor too. Yes.

The old future, quite big potential product. We know always comes through. Yeah, it is interesting, though. I was just thinking about like a company like Google, create the killer consumer-facing product and then build off of that, build an advertising business off of that, build. Google Cloud and Google Workspace and all these other more enterprise focused efforts, maybe that is the way they're pitching this because I think like versus some boring enterprise API type of company that just, you know, is people are trying to build on and where the cost of those actions go less and less and less, build it being the true consumer-facing

brand that introduces the whole world to generative AI. I know I've been incredibly bearish on Open AI and suddenly I sound like I'm pitching them for a fundraising. This deck really works for you, man. You're like, take my money, Sarah Friar. Brun John looks at one slide, all of a sudden he's knocking at the door. Yeah, show me a Masayoshi Sun deck and I'm first in line. But that's, okay, so that's just looking at the revenue and then things get really interesting because Corey, and you published this, this is again coming from Open AIs internal projections

and financials. It's a, I think this is my favorite chart I've ever looked at from a tech company. This is their revenue versus their costs. And it is one of those things where like, oh, you look at total revenue and I'm like, oh, that's pretty nice, $4 billion. And then it starts getting into the costs. So immediately, and this goes right to our question about we've talked about in the past couple weeks, so prime AI crisis and can AI, these AI companies sustain themselves?

And you look at these costs and you go, hmm. So Microsoft's revenue share right off the top of that $4 billion is $700 million. So it looks like what they're making, something like 20% of all open AI revenue. The compute to train the models then takes another $3 billion off. So, you know, thinking about profitability, with those two alone, you're just barely profitable. So then you get into compute to run the models, and that's another $2 billion. Now you're in the red. And then it just adds, research compute amortization, which is Ron John's favorite.

Outline item, down a billion. Employee salaries, down 700 million. General and administrative, 600 million. Data, 500 million. Hosting, 400 million. Sales and marketing, 300 million. And you go from this very nice looking, $4 billion in revenue after you add in all these costs to a $5 billion loss. And that excludes stock-based compensation, by the way, which is going to be another major cost. And Corey, when you first came across this chart, What was your reaction? At first, a bit of confusion and mostly trying to understand. I mean, look, I think this is like a new type of business.

And so how they run their numbers, how they do their accounting, is going to be an interesting thing to watch, right? Like, I remember I interviewed some startup one time, like maybe four or five years ago about like why they hadn't hit their reference. revenue projections or why their numbers were slightly off or whatever. And he was like, well, look, we're not running Alcoa here, where, where, you know, some like giant, you know, old company where like, we know how the business runs, it's run the same way for a long time, blah, blah, blah. So I think just first, like, understanding how Open AI is sort of thinking about its business and where the costs are coming from, that, you know, in itself is really interesting.

It also is not surprising. I think, like, Sam Altman has said himself, like, Open AI is. it's going to be one of the most capital-intensive companies in history. I think he said the most capital-intensive startup in history. So, like, if we take him out his word, which, as we know, maybe you shouldn't always do that. I do think in this case, like, he's probably telling the truth. He is not, you know, saying that, you know,

this company is not going to cost a ton of money to build. And that is, you know, by far the biggest cost is compute. It's the data centers. it's actually being able to mostly train these models. The smaller cost of the compute bucket is to actually run them, which is called inference. And that is, they're saying they're lowering those costs. But training is sort of, it's a huge, huge expense. Yeah, not much lower.

2 billion to run versus 3 billion to train. So, but yeah. Yeah, but that's going to expand over time, essentially, the training costs. Yeah, and I think the idea of, These are completely new businesses. There are two numbers that jumped out, which I think were that I had not seen anywhere else before, and I thought were really interesting. First, sales and marketing at 300 million out of 4 billion in revenue, that's around 7%. A traditional SaaS company is spending 40 to 50% on sales and marketing. And we have talked

about this a lot that, and people, if you've ever used them, they don't really have enterprise customer success. They don't have the old school SaaS sales guy out there. And maybe they'll create that all with agentic AI, but at least in the near term, if they're really trying to move in that direction, the spend is so low on the marketing side. It's amazing to me that they think, unless they're going to really understand how to scale that. Then the other was gross margin, which you'd reported 41%, where typically software is, I mean, 70% is the baseline. So the actual, like, you know, profit for revenue or margin relative to your revenue is so much lower because of all the actual foundation model building costs and how that actually scales. I mean, how they even, I'm curious what these discussions are like with investors. Like, do they actually present genuine plans around what these graphs look like over the next three years?

Or it's just kind of, we'll figure it out. No, I mean, I think they do. I mean, if you, you know, at the risk of insulting, you know, very well-educated, well-paid. I'm where you go on, Corey. Come on, go. Like, look, I mean, I wrote about this. But, like, if you look at the big checks that made up this round, you know, it's a lot of people that had reasons beyond just like a clear financial rationale for investing in open AI. You know, you had Thrive Capital and SoftBank writing really big checks.

Like Thrive is already very much. They are in the Sam Altman business. They are in the Open A.I business. They are deep in it. They very much have hinds their reputation, I think, on a relationship with Sam and with Open A.I. And Open A.I. is going to open an office in one of Kushner's New York buildings. It's just like, count the ways Josh Kushner has made money. off of Open AI.

Is any part of this industry not round-tripping? You have Microsoft investing in Open AI and Open AI using Microsoft to Azure credits. You have Kushner investing in Open AI and Open AI opening an office in his building. It's wild. No, totally. But more to the point, Ronan, I'm curious when you saw the numbers, did you, you know, we've been talking again about like, is this business sustainable? Now we've looked at the numbers.

What do you think? Do you have answers to the question? So this is a tough one because, again, as I seem to be like the ultimate open AI fanboy five minutes ago, I actually got less of a clear picture of where this company is going, bearish or bullish, after reading this. And the reason is the thing it made me most excited is to one day read the S1 filing of this company for the IPO because it's so weird and complex. I guess that's the only consistency from the last few months is everything gets weirder. Even Microsoft. It was reported, I think the cut of revenue was 20%, which was higher than previously thought.

You had some information in there around. They've been able to expense last year $500 million a cloud compute, I think it was. So first half of this year, yeah. Oh, so first half of this year already. So Microsoft's relationship with Open AI is bananas. I cannot think of another company, certainly at this scale, but even smaller, where I've seen something that contorted. And then even just the way from the accounting side, and it's fair, this is a completely

new type of technology. And I actually, what you're saying, Corey, I do kind of agree with that, that the idea that no one knows there's no standard accounting practice for how to amortize the value of a large language model, because it's so different. in the past, you build software, you have like essentially zero marginal cost. It can go forever. This is a much more cost intensive, like marginal cost intensive way of doing technology. So basically, no one, it became more clear to me.

No one has any idea how to actually do the accounting for this, to do the financial projections for this. And we're all in the same ultimate business, basically. And even, and I think you're right to put your finger on the, you know, the Microsoft Open AI relationship being really key to all of this, not just in assessing it. It does muddy the waters on its financial statements. I'll tell you, like I, you look at their, you look at sort of the actual cash leaving Open AI. And it's a lot lower than you would think compared to their income statement losses because so much of the expense is tied up in

Microsoft compute credits, which is not technically a cash item. So that muddies the waters a little bit. I don't know how long they'll be able to sustain that sort of pace. And then my call- Sorry, we have no idea. Was it ever finalized what of the initial $10 billion was cloud compute? I don't know if it's ever been fully reported. I think it's, it is the majority of it, is my understanding.

Whether that means it's 7 or 8 billion or I think it's in that range. It's my understanding. But my colleagues had a great story also earlier in the week, basically saying that Sarah Friar, Open AI, CFO has told employees that, look, we're going to spend some of the $6.5 billion dollars, you know, racing also to develop data centers with other potential sort of companies. And essentially, like, they're in a race to kind of. of get compute and to get data center space. And Microsoft as one company isn't necessarily able to get a lock on all of it. So that relationship is, I wouldn't necessarily, it is slowly,

they are very much joined at the hip, but both are trying to figure out how do we not become too dependent on each other. I think we should put this all together because we're now we're getting some projections in terms of what they're expecting to spend, right? They're expecting to spend 9.5 billion potentially on training alone, training alone, right, up from three this year in 2026. That's just in two years. And Corey, you report that their loss excluding stock comp could be 14 billion in 2026. That's a time where they're expecting, again, Chad GPT to be the lead in terms of their revenue. So let's just take our head out of the spreadsheet for a second and like think about this.

I mean, is there a chance they could potentially recoup all that money from chat GPT subscriptions? Like how much better would chat GPT have to get? Because I don't think it's an awareness thing at this point. Like Ranjan mentioned, it's they are getting as much word of mouth as they could potentially get. And they still are where they are in terms of chat GPT adoption. So how much better does chat GPT need to get to start to justify those costs? I would say like it would basically have to be AGI. I agree that it's interesting that I was just thinking about like is it the consumer or the enterprise side that gets commoditized and you can make a case for or against both and on the consumer side that idea of like how much better does it have to be I would say I mean

even out of people I know most people aren't paying 20 bucks I think I'm sure we all are to some one of the services but like for the every everyday average user Is this something you even need to pay for or want to pay for, given the current state of how these things work? I don't think so. So I think it would have to completely transform or revolutionize, I don't know, like entire new products and entire new problems being solved for everyday people versus it can just write you some stuff or it'll help you with code that only hit a certain segment or I'm trying to even picture what that product would be that every day. every single person would be ready to pay 20 bucks a month or more. Yeah, Corey, is this feasible? Yeah, I think it's going to have to be also just way deeper in the enterprise.

I think like just having a consumer product is, you know, it's going to have to be, you know, pretty, pretty insane. It's going to have to be very agentic, you know, where it's doing things for you to use their jargon. But I think if it's able to revolutionize, like, you know, actual, you know, there's a lot of money in the enterprise, I would say, like, if they can actually, like, improve, you know, sort of companies, efficiencies and bottom lines there. But, like, look, I think right now the bare case is, like, a lot of this revenue is from early adopters who are, you know, sort of playing around with the stuff. Like, that's how I would characterize my spending on chat, GBT. It's like, I haven't really figured, you know, like, yeah, I've listened to, like, plenty of people say, like, oh, here's how you really get into it. Here's how you do it really well.

And it just hasn't quite stuck. And I'm humble enough to, you know, maybe to say, like, maybe I just don't get it. And, like, maybe I just haven't integrated it into my practices very well. But, yeah, there's definitely, like, some early adopter sort of effect going on that will need to expand beyond that. Yeah. And on the enterprise side in particular, we've been talking about it, like, If enterprises all went in because they had to, and if they're not seeing a return, they could just as easily pull out pretty fast.

So we're going to see what's going to happen on that point. Okay. Last point for me, you mentioned in your story. We talked about this a little bit. We don't know what's going to happen. We don't know when their Microsoft credit is going to run out. And do they factor the fact that that credit could be completely gone? Maybe that's what's blowing up their costs.

And, you know, do they then, because you mentioned they're basically either giving away or giving that cost, what's coming through their AP? So does, do they then need to start charging a lot more to developers building on top of this stuff in order to sort of stem the losses they're already expecting to see? Right. Well, I don't think, well, there's nothing in the documents that really answers either of those questions necessarily. They, I do think they, when you see the, the compute amortization, it is a line that is going up in, in, in, the, they're going to be expending more on research compute in the coming years. And I would imagine it is with, my guess is that it's with the assumption that they won't be able to get as

many like research credits from Microsoft for it. Or they'll have to go to another vendor and have to pay more or something like that. So one quick follow up on that, on that front. When are they going to need to raise again? That's again. Yeah. Yeah. Yeah. I think that is like the question. I think, um, look, they had a billion dollars on their balance sheet when they went out to raise this $6.6 billion. Uh, and they also have like a few billions of like a credit revolver that they raised on top of it. So my very back of the end, and they still have, I think billions in research compute left from Microsoft. My back of the envelope would say 2026 at the latest. But, you know, this is their competitive advantage is over like

anthropic is clearly Sam Altman being one of the best fundraisers in the world. I think they're going to try to keep leveraging that and keep losing money to stay ahead. Like if no one's pushing them to like get profitable, you know, um, they're going to keep spending money on that compute. And on that, I'm glad we got to compute amortization. One thing I had to, I had to bring up my listeners, you should see the smile on Ron Jack's face when he says the words compute amortization, by the way. It's as happy as I've seen him in months. I know because it, I mean, from like a pure student to business, it's interesting. It's like something completely, the way they're approaching it and how large language models like should be thought of in a company's financial statements

is a completely new thing. But my favorite part of your piece was, is that open AI is emphasizing to investors a metric of profitability that excludes some major expenses, such as the billions at spending annually on training, it's large language models. And I have to give credit, there's a Bjorn Jeffrey who had tweeted back, it's time for LLM adjusted EBIDA. And for those listeners who remember the famous WeWork community adjusted EBIDA, I actually don't think it's crazy that they're going to say we are profitable and create a completely new type. And maybe it's going to be the future or maybe it'll be like the thing we all remember. but LLM adjusted EBIDA is, I don't think it's, I don't think it's impossible that we see that

phrase in a filing one day. I think you're 100% right. My brand went there. I covered we work. Like, it's a, it is very much a place where you're like, I've seen this movie before. I don't think we know all the answers yet in terms of what are the real drivers of the business that's like an area I'd like to still

be reporting on and actually try to answer is it legit to kind of strip a lot of your training compute costs out of your cost of good soul like these are the accounting questions and the business nerd questions that I think

are going to be relevant to like how do we actually think about whether this is a good business or not like that's kind of like the overarching question around AI is like is this okay the technology seems cool so far you know, it's really expensive. This is going to be a good business?

Can I weigh in here on the, should you include training costs in your profitability statement? Yeah. GPT3 becomes obsolete the second GPT4 comes out, right? So the idea that training costs are eventually going to like, you know, taper off or level out or you don't need them and they're not part of your overall mix to me is just so crazy. and, you know, I know that we're the cool-headed and nuanced show, but I just need to say you cannot take training costs out of your profitability statement. There's no basis in reality to do that. It's crazy. I love it. I have to get that off my chest. I think that's absurd. It could be cool-headed and nuanced and factual. Like, I'm losing my chill here.

I came into this very zen, but I'm no longer. Training costs don't include, are not including your profitability. We're profitable except for our number one costs. I mean, come on. Yeah, you nailed it, I think. Yeah. Anything else around John? I think that that captured it. The fiery, passionate statement, you cannot remove your goddamn training costs from your profitability statement. Corey, thank you for joining us. That's what we need. Thanks, guys. Have a great weekend. All right, everybody. We'll be back on the second half to talk about Tesla's Robotaxy event and a couple other big stories from the week.

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you're using right now. And we're back here on Big Technology Podcasts. That was fun having Corey on. You can't remove your compute costs from your profitability statement. And now let's talk about something that's going to make us less upset, which is Tesla's Robotaxy event. So yesterday, we're talking Friday on Thursday, Tesla introduced its Robo Taxi, finally, also a robo van. And it had a robotic optimists walking, many robotic optimists, robots walking through the crowd, talking with the crowd, pouring drinks from the crowd, making jokes with the crowd, playing rock, paper, scissors with the crowd. And then we found out that this wasn't AI. This was almost certainly going to be, this was almost certainly teleoperated by humans on the back end. So, Ranjan,

I'm curious if you watched the event yesterday and what you made of it. I did. I did. I was curious. Okay, on the Optimus robots to start, I think that's, it did kind of capture the whole thing on one side. I don't know if listeners remember the original Optimus announcement. It was one of the weirdest things I've ever seen. They had a guy come out in like a robot suit and dance. Do you remember this? Of course.

Yeah. They introduced the robot, but it was a guy in a costume. Yeah, it was a guy in a costume. So they have moved to kind of like a low budget Boston Dynamics style. robot that can move around. The dexterity of their hands can actually pick up a glass, but they're completely teleoperated. And like, you could see the people with laptops and remote controls and stuff operating them. So you could actually see that or you could just picture them in your head. No, no, no. There's, I definitely saw videos on Twitter and,

okay, not fully validated, uh, at least in reporting that I've seen. But it seems to be the, uh, generally general consensus that like, they were being tele-operated. No doubt. And so many people in the crowd thought that it was AI. And to me, that was like, it's kind of disrespectful to your top users and your top fans to sort of not make clear that these are humanoid robots. And I saw the robots and I was like, oh, they're making pretty good conversation.

Oh, AI has really, you know, come a long way. And then you hear people asking questions and you could just totally hear like the California accents of the operators being like, yeah, dude, of course. I'm like totally, you know, artificial intelligence, man. But why the, why the event was fun for me or pretty interesting is, and hey, I've been defending Open AI today, so maybe I'm even going to defend Elon Musk today. Today is a special day. Well, no, but in reality, this is no different than anything he's ever done.

Like, oh, not just overpromise, put on a, I don't want to say vaporware show, but a show of very, very early stage things and make big promises and on certain things he's delivered in the past. And so now the idea of seating this in every person, an investor, that this could be a reality. It's there. He did it. And what I kind of loved is he almost, it was like just, I'm going to put every, you want a robotaxie? Oh, wait, you talked about a van? Here's a prototype of a van. Optimus robots. Here's the optimist robot. Like putting every single thing out there rather than just focusing on robotaxies and here's how they will work and here's what it'll do. They went so big that it felt like open AI before a fundraise saying

search GPT and every other feature that'll help you fundraise. Unfortunately, the Tesla stock is down 8% today as we speak. So I don't know if it was received in that same way. But what did you think of it? So yeah, like first of all, all right, well, here's my perspective. So I I think they put everything out there because they knew what was going to happen, which is that everybody was going to see that they had promised robotaxies. I don't know. In 2016, they said it was coming by 2020, right? Or in 2024. Now Elon's saying it's 2027. And this technology infamously takes a long time to get on the road. And they knew that sharing further delays was going to make Wall Street mad. And it did. Wall Street dropped the stock 7% today. However,

I think that that being said, we still shouldn't lose sight of the fact that they did introduce a robotaxie yesterday. It's not going to be ready for the street yet. I'm sure it will go through the very, you know, regular, and as it should be, regulatory intensive processes. And we'll see if it can, you know, stand shoulder to shoulder with the Waymo. But I do think that there is something significant in a company like Tesla going so big into autonomous driving. I'm a huge believer in Autonomous Driving. We just got news, by the way, that Waymo doubled. It's global rise, I think, from 50,000 to 100,000 a month from May to October.

So that thing is growing like crazy. We've, of course, had the Cruz CEO, ex-CEO now on the show here talking about their plans for expansion, which slowed down. So I do think this is a very difficult discipline to get right. It's one of the hardest problems in technology today. maybe, you know, after AGI. But I do think there's a lot of good in Elon going for it, introducing a prototype. Yes, it was driving on a close course, but it was driving. And it's going to take some time to get on the roads.

And I think that this is one of the biggest net positives for society that technology can bring to us. And I'm just going to, you know, I will applaud for it, you know, every step of the way, even while noting that it's going to take a long time. okay so listeners Alex has just flipped me back my positivity's over I think uh no because the more I was listening I was the funny thing is the robo taxi part was one of actually the least interesting part for me and the reason is it is technologically complicated but it's also it hasn't been fully solved but as we you know waymo you've ridden in one I still haven't got to ride one, but, you know, they're on the streets. They're like autonomous vehicles and

taxis are out there. And they didn't really tell us anything new about what are they doing. They just had a really cool looking, admittedly Tesla type car that came and picked Elon Musk up and dropped him off in a closed course and put on a whole show around it. But we didn't actually learn what is different. How are they going to go? Because as you said, it's as much a regulatory challenge as it should be to do this safely as a technological one which out of all people I don't see how what Tesla's path is to actually solving that problem I mean this is the thing though waymo has paved the way for them to do it because now like to think about the lift to go from no autonomous cars on the road to autonomous cars that's the hardest part right so in some ways

that discipline has gone from zero to one. And now all Tesla has to do is follow in the footsteps of Waymo and get its cars on the road in a similar process and just either, A, not crash, which is impossible, they'll crash. But be honest about it when it happens. And make sure to, like, you know, crash at a rate that's much lower than human drivers. And then society, I think, needs to get over this fear of letting the robots do the driving because this is one of the leading causes of death and injury that we have. And technology can definitely do a better job. I believe that 100%.

And, you know, it's also important to make sure that there are safeguards there for everybody. And hopefully they'll get there. Yeah. No, okay. I completely agree with you. I'm very, very pro-autonomous vehicles and think it's still an inevitability at some point. But that's even more why what is Tesla doing different? I didn't quite get.

but I actually saw somewhere analysis around how Uber is almost the biggest beneficiary of this because it's is pushing robo taxis even more into the narrative and I kind of agreed with the idea that I actually think the taxi or the car itself at some point will be relatively commoditized but the distribution will be what matters so if Uber already is the network for transportation for a large majority of people, then just they're not being a driver in it and being significantly cheaper is going to be a much more direct way

versus, and it actually makes more sense, I think, for individuals and for society that you don't buy your own Tesla Robotaxe, keep it in your driveway and summon it for you. There's just a bunch. Yeah. You know, exactly, exactly. So like the actual, even if it's built correctly and succeeds in that sense,

like what the attractive business model is for Tesla, I don't fully see. This to me is just the biggest, most underrated tech story of our current moment. And I just think that this is going faster than a lot of people realize and having Tesla in the game is going to help move things even faster. So I think you're right. We're probably going to summon them on a network.

I mean, with Waymo, you use the Waymo app. You don't use Uber. I mean, I guess they are making them available through Uber. But the sooner we can get away from what driving looks like today to this envisioned future, the better we're going to be. No argument. I'm sounding like a broken record. I'm just so excited about the potential here. I just want to ride in a Waymo.

I need to go. Are they outside of San Francisco right now? They're in San Francisco. They're in Austin. I think they're piloting in L.A., I think, but also, like, we all know that this stuff is not, it's not going to deploy in cities like New York anytime soon, and the robot is at least five years away, probably 10 years away. But still 10 years. It's just crazy. It's like, oh, we're going to see that 10 years or now. Yeah, which is. You get there. That's amazing. I don't think. I can wait, too.

I can wait, too. But sooner is the better. Yeah. Okay. So you also. I also try of the, speaking of new breaking edge technology, you have the Snapchat developer AR glasses. Yes. It was your quick take on that and then we're going to move to some other stories. But I am curious what it's been like. It was, I loved it. I really loved it.

I got these Snapchat's developer spectacles. And it's interesting because I've tried the Vision Pro many times. I never ended up buying one. We talked about it a lot. It was so easy to start to understand, to put off. they're certainly not things you would ever wear around during the day. They look kind of ridiculous and they're not completely lightweight, but they're still relatively light.

But for really straightforward augmented reality experiences and being able to touch virtual things and move them around and the reactivity of your fingers pinching and these kind of actions, and they just have a very, very limited set of experiences available because this is for developers to build on. and I've actually started learning how to build in Lens Studio. I think it's this is the future. I genuinely believe augmented reality. And which is what I mean,

meta bet on it. And I think it's really interesting the difference between the two companies. Meta is still completely closed off with Orion and only giving it out to some maybe preferred developers versus Snap is like, let's go to the community and let's let people build on it before releasing this as a consumer product. So I really, really am excited about it. And honestly, to me, the most amazing part of it, I put them on my five-and-a-half-year-old son.

He said, he goes, this is, this is a vision, which is like the most profound thing. I was like, literally, I was like, okay, I'm going to go buy snap stock right now. And like for a five-year-old to just say something like that. And then the thing is, he got it right away. He starts pinching and he did the painting app where you can draw, which is the kind of thing I saw on Magically a few years ago, but you would have to wear a big battery pack and it like was kind of complicated to figure out. He figured that out in 10 seconds. So to me, the actual end adoption of this, I think it is going to be ubiquitous. It's going to be everywhere. If a five-year-old can start painting an augmented reality in less than 10 seconds, I think that's huge. Let's get your take. What comes first? Universal Robotaxies or we're wearing AR glasses?

Ooh. Oh. I think wearing AR glasses, not everyone, but like early adopters casually wearing air glasses that can allow you things like video calling and like basic AR interaction, I think is going to become normalized in three. to five years instead of five to ten there it is okay i'm on board with that that sounds that sounds accurate to me so this is just kind of like one of those shows where we hit all of our pet stories there's a lot going on and we want to talk about it i mean she has an IPO that's en route and it's it's quite interesting

because a they're like one of these companies that has been i don't know competing with amazon just this sort of massive and underrated first party marketplace that we've been talking about on the show, but they do have a pretty weird CEO, and how is that impacting their push to go public? Yeah, we'll keep this one quick, but I really wanted to highlight this this week. So Sheehan, when they IPO, and for how much has been a conversation for a while, they filed in London at around they're seeking to raise at a 64 billion. dollar valuation. This is a company that was once valued at $100 billion. That's down. But

they're still making growth rates slowed at first. They were growing 40 plus percent. Now it's gone below 30 percent. But again, this is a $30 billion company that just grew 30 percent last year. That's like, especially in retail is insane. To me, the most fascinating part, there's a Wall Street Journal story about the CEO of Sheen, was just in London starting to meet large institutional investors to pitch the IPO. And it's the first time most of them are ever meeting this person. And then the more I started digging in, it's actually crazy. There was reporting back in December where when they started pitching around the IP or like

announcing they could IPO where they gave him a little bit more of a public persona. But in his own offices, he is unrecognized. name is Sky Shoe, X-Yushu. My Chinese accent is not perfect. And he was not recognized in his own office by his own employees. He has such a low profile. In fact, in the Western press, there was a image that went around as the only image that was used in news stories of him that was of a different person, just who had the same last name, because no one knew who this person was. And this is the CEO of a potentially $64 billion company that it's just a it was just such like a another amazing sign of how these companies can grow to that scale and versus any American company.

We have said the name Sam Altman probably even my mother knows who that is like the leaders here and the way they approach the these kind of companies versus a company like she in. Well, let's talk about what's going on in China because they did have all those tech leaders that started to become prominent. Jack Ma comes to mind. Then they all were forced to step down, disappeared. Jack Ma, I mean, we haven't heard from him for a while. He surfaces every now and again. But clearly the word is stay out of the way. Do you think that this person's anonymity is a response to that? That's a fair point. Because also, if we remember, the bite dance CEO, Zhang Yi Ming, he had to, he had to. step down. And it was reportedly around, like, pressure from the government in terms of, like, just becoming too powerful in the way they were approaching themselves publicly. So, so that could be it. I almost just want to believe. I do kind of love the idea because, again, in the reporting, there was like, this guy was known as someone who people don't even recognize

in the office, but could recite from memory the average wage paid to the ever, like all 10,000, suppliers like you know just the idea of a CEO who's so detail oriented and obsessive and and like well at executing who just is like I don't need to tweet I like this this is the second this is well a conspiracy but I'm going to share it and see what you think do you think it's a state run company I mean is that also possible and he's just representative of the state That, I feel, is an interesting one. I mean, no, I actually, it's a good one. It's a good, because again, they have so thoroughly disrupted retail in the United States

in Europe, like Sheehan has just completely, I don't want to say destroyed, but certainly transformed the way every retailer in the West works. So it worked. If that was the plan, it has definitely worked. And how has it done that transformation? Well, no, I mean, just by being able to, so they can sell products at just like a fraction of the cost of other retailers. And there's always been this kind of mythical idea that they have this, they call it real time's fashion. It's like a supply chain that they can put just five items on a website if it starts to sell instantly,

order more because they're so closely knit and technologically connected to their supply network versus traditional fashion. You're ordering six to 12 months ahead of time. You have to order quantities in the thousands minimum. So it's this idea that you can do that in such a nimble and agile fashion that that's the secret to making the items so low cost. And because they're so low cost. Obviously, like what that does to consumers in the U.S. and in Europe and what that means in terms of pressure for a traditional retailer, that's why traditional retail in the U.S. is not doing as well. Maybe it is state run. When you said it, I'm trying to be nuanced here and not overly conspiratorial. I don't think I believe it, but it's, why isn't it a valid hypothesis?

I think it's a valid hypothesis. And if it was, it would be very successful at how they execute it. And in reality, like, it's funny because I'm almost like uncomfortable to think that. But I mean, we are subsidizing chip manufacturers to win the next generation of technology. And that everyone when it comes to microchips is totally okay saying state subsidies to win the larger battle is okay. So why not $5 t-shirt? Or actually, probably like $1 t-shirts, $5 dresses, $3 pants, all of the above. Yes, it's crazy. I guess consumers like it, but in a roundabout way, there's going to be harmed by it. It just goes to like your typical story of like if you're going to build the cars, you should be paying your workers enough to buy the cars. But, you know, you sell products for such low prices. It just degrades like what you pay.

I mean, of course, it's all international. but domestic businesses have to keep up, and it's not easy. Yeah, breakdown in society. Yeah, part of your five, $3 t-shirt. And you know, you just gave me like the perfect lead into our final story of the week, which is another company with links to China that is, you know, potentially harming our society. And we like to usually end on a positive note of the last week we ended on a depressing note. And we're going to just do it two weeks in a row because all these things,

States sued TikTok. And TikTok's internal communications that have come out in this lawsuit are quite damning and concerning. So this is from NPR. TikTok executives knew about the app's effect on teens lawsuit documents alleged. Here's the beginning of the story. For the first time internal TikTok communications have been made public to show the company was unconcerned with the harms that the app poses for American teenagers. This despite its own research validating many child safety concerns. It was made public as part of these lawsuits and a two-year investigation into TikTok by 14 attorneys general. And then one of the lawsuits filed by Kentucky, the Kentucky Attorney General's, the redactions were faulty. And the Kentucky

public radio copied and pasted excerpts of the redacted material and were able to like see what they said, which is hilarious. Like, what did you just like release a Microsoft Word document and highlight the redactions in black? Like, what were you doing there? Anyway, so the documents found that a company was aware of many features designed to keep young people on the app that led to a constant and irresistible urge to keep opening the app. Now, this is standard for, you know, par for the course for all social media companies. Here's what it's, here's what it said. TikTok's own research, and this sort of floored me, stated that compulsive usage correlates with a slew of negative mental health effects like loss of analytical skills, memory formation, contextual

thinking, conversational depth, empathy, and increased anxiety. And the documents also showed that TikTok was aware of that compulsive usage also interferes with essential personal responsibilities like sufficient sleep, work school responsibilities, and connecting with loved ones, and yet continued to press the gas pedal. And to me, as a TikTok user, that all felt like exactly right, felt all spot on, it was just astonishing to hear that TikTok had internal research,

explicitly stating these harms. And as soon as I read this NPR story, TikTok was off my phone. Now we'll see how long it stays off. But that's not something I want happening to me, and it certainly shouldn't be happening to kids. And I just felt that to be quite, quite concerning, more than, like, a lot of the other problems that we hear about TikTok. What do you think, Rajan? This is the one thing.

I do agree that when I was reading through all this, that these are the effects. It's like, yeah, we know, we all know. We still may use them. So I think on that side, and the idea that they knew about it, it almost feels like cigarette companies of the, 50s and 60s, everything was known and everything was even researched on and like internally reported on, but just not made external. To me, though, the one thing that in this conversation is I think Instagram, TikTok is their algorithm is probably better, but meta's algorithm to do short form video and to be able to show you content without following, meaning you can get like addicted more

quickly and instantly is catching up in a big way and we see it in the numbers around engagement with Instagram. So I think the idea that TikTok is unique in this, I don't necessarily believe or buy. I think they're all doing the same thing. So necessarily singling out TikTok in this, I think it should be a class action against all companies with platforms this addictive. Yeah. No, I'm with you. I mean, something's broken here. Let's just agree that. And I don't think it is TikTok specific. I think it's just across the board. Something's broken.

And it does seem like the public's interest in fixing it, despite these lawsuits, has waned. Yeah. I mean, when the presidential campaigns are on TikTok, even while we talk about banning it, like, I think that it's interesting because, and we talked about Mark Zuckerberg's kind of like image rehabilitation the other week, it's fascinating to me that, And because I was very involved in this research and conversation like 2018, 2017 around misinformation and like out problems with algorithms, no one's seeming to really care that much anymore. All the like algorithms are bad for you. That whole conversation seemed to die down.

Everyone became comfortable with Instagram reels and other all catching up to the TikTok model. so I'll say that is a little depressing. You know, you know what I just found on this receiver I have that goes into the microphone? It has all these voice-changing effects. Okay. I think this makes me a small robot. Small robot.

And then I got, I got Monster. I'm really scary. Anyway. I think that was the only way to end. My desperate attempt to do something that's not bringing us down and getting sad about society. Here's Megafar. All right. Hello, everybody.

Okay. I won't ever do that again. I think that could be a whole Jim Kramer style thing. It could be a thing. All right, everybody. On that note, we're going to be back next week, right? Yep. Let's do it.

Great. We'll be back next week. And I'm going to have Josh Brown. coming on the show next Wednesday. We're going to talk all about the markets and his new books. I hope you enjoy that. Thank you, Ron John. Great talking as always.

Thank you, Corey. See you next week. And we'll see you next time on Big Technology Podcast.