Big Technology Podcast - OpenAI's GPT-5 Looms, Apple's Antitrust Problem, Sports Betting's Big Scandal

Episode Date: March 22, 2024

The Information's Jessica Lessin and CNBC's Steve Kovach join us for a star studded Friday episode breaking down the week's news. Lessin is the CEO and founder of The Information and co-host of the More or Less podcast. Kovach is a technology correspondant at CNBC. We cover (with Lessin): 1) Rumors of GPT-5 being shown to founders, and what it might look like 2) Whether OpenAI is vulnerable now that model quality is converging 3) Satya Nadella's claims that Microsoft effectively controls all the value of OpenAI 4) Inflection leadership heads to Microsoft 5) Inflection investors are pissed 6) Why Inflection failed 7) Google and Apple's potential AI agreement 8) Would The Information use Google's new tool for newsrooms. And with Kovach: 9) Outline of the DOJ's case against Apple 10) How Apple is feeling about the case 11) Merits of the case 12) Shohei Ohtani's betting problems. Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

Open AI's GPT-5 is coming. How exactly did Microsoft hire a key AI CEO to run its co-pilot division? Is Apple so far behind an AI that it needs Google's Gemini to power its AI search? We'll also talk about Apple's big antitrust case, Johei Otani's betting problems, and plenty more, all 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. Ron John Roy is out this week. He's in France, but he'll be back on Wednesday this upcoming Wednesday to talk with me and Yahoo CEO, CEO, Jim Lanzo. And yes, the Yahoo episode is coming on Wednesday. But we have a great show for you today because we have two great guests. Jessica Lesson, the founder and CEO of the information is here to talk about all things AI. And then after the break, Steve Kobach, a CNBC technology correspondent, is going to be on to talk about the Apple case. Jessica, so great to have you here. Thanks so much for coming on the show. going. Thanks for having me, Alex. I love listening to the pod and man, what a week. So excited to dig in. Yeah, we got you out of a great week. You're our first byline on a big story at the

information. And by the way, kudos to you and the information. Your publication has just been scooping like crazy on the AIB. We reference it every week here. So we'll get into that in a moment. Let's start with this report that GPT5 might be on the way. So Business Insider has this story that says OpenAI is expected to release a materially better GPT5 for its chatbot mid-year. And they basically talk with CEOs that have been briefed by Open AI about this new model that's coming. It says sometime mid-year, likely during the summer. And a CEO says it's really good, like materially better.

And they're actually demonstrating new capabilities, including what Business Insider says is the ability to call AI agents being developed by OpenAI to perform tech. tasks autonomously. I mean, this could be the big one. So I'm curious what you think about this report and what we should be looking out for. So make no mistake, I think Open AI is actively, constantly working on a new model. And my personal opinion is it's sort of arbitrary where they kind of slice it and say, okay, this isn't four, it's 4.5 or this isn't 4.5, it's 5. I think a lot of that decision is frankly kind of marketing and messaging to the talent out there, how they sort of benchmark their progress.

But absolutely, they're working on new capabilities. We first broke the news at the information about the agents a month or so ago. This would be, you know, AI, not just being able to answer a question for you, but actually do a task, book your reservation, something like that. So that's the agent concept. We know they're working on it. And yeah, they're trying to push the envelope. I mean, it is a full-on race between Gemini, OpenAI, Meta's Lama, Anthropic.

And I think when I see a story like what Insider did, it just says to me also that Open AI wants the ecosystem to start talking about their next capabilities, which I think, you know, make sense. We're in this war for talent, war for enterprise customers. And while Gemini has kind of had mixed results in some way, there's no question that it is a hugely powerful model with incredible capabilities. And Open AI feels like they need to respond. It's just interesting to hear that perspective because it means Open AI is vulnerable. And that's kind of like the theory that I've had this whole time is that these models are going to commodify. are commoditize and then you're going to basically be left with these like seemingly

impenetrable research houses now with products on par with the others so as your understanding that this is sort of the beginning of that and this rush to differentiate is kind of what we're seeing here open AI is absolutely vulnerable Alex and that doesn't mean that they haven't done incredible work and are incredibly well positioned in terms of talent but you know think of their distribution relative to Google. And just the fact that Google can embed Gemini in products that billions of people use every day, open AI can't do that. And as we move into other phases of this AI war, I think that they face a lot of challenges, as well as opportunities because of their sort of research and technical know-how. So we are absolutely entering a phase. I, I,

completely agree that these models are converging. And, you know, when you secretly talk to the people who are building these models inside the big companies and you say, oh, look at that benchmark or whoop-de-do, this thing's a little bit better at that, even they roll their eyes and kind of admit, you know, that's all the sort of pre-work before these models are in the wild. They're all converging. And so it's a very exciting time, but it's also, I think these companies in turn face a lot of major challenges. On one hand, they have to keep that research going, right? They have to keep pushing the capabilities. But at the same time, they really need the business models, the distribution models, you know, that's critical. Yeah, and you did get that agent scoop. How critical

do you think this agent factor is going to be? Because there's risk there, right? If you trust agents to do things for you, they make mistakes, and then who's responsible? Personally, I'm not like an agent hype person. I mean, I think it is a step in a capability that can be used, but I don't think it means that, you know, these models are kind of fully autonomous and that we can use them in new ways. But I also am struck by how early it is. You know, we recently wrote a story at the information

where we asked early adopters and people building tech, people at Open AI and so forth, how they were using AI. And I read the piece and I was like, shoot, I'm doing it all wrong. Like I'm sort of querying these chatbots a little like search and, you know, meanwhile, there are all these use cases such as like teaching yourself French and then quizzing yourself. And so, you know, it's hard to say any one feature is or isn't important at this point. but it would be silly to think, you know, that this next model is the cat's meow and is, you know, a big leap towards AGI.

I mean, we're so far away from that. Right. And so we're talking about all these different research organizations and the distribution that they might get, right? Google has, obviously, Gemini, they can throw it into any Google product. Open AI has Microsoft. There's a couple of interesting developments with the Open AI Microsoft. Microsoft partnership this week. First of all, we're going to talk about the inflection deal.

But first of all, did you see this quote from Satya Nadella? I think it was from like the Elon Musk lawsuit where he was like describing how Microsoft is so insulated from open AIs, you know, ups and downs. He's like, we're above them, we're below them, we're beside them. We own their data. We own their models. Like, what do you think that was all about? I love that quote, Alex.

And I quoted in a column I wrote in our briefing column last night. So I thought a lot about it yesterday. I mean, what, now this is a quote that Elon is using in his lawsuit against Sam Altman in Open AI from an interview Satya gave. And this was when Open AI was imploding. And Satya was trying to assure people that Microsoft could progress in AI without them. But to your point, he was saying, we don't even need them. We have their IP.

We know how to train it. We've got all the talent and so forth. And I think we're at this very very. very interesting moment, also in the relationship between all these startups and emerging companies. I mean, OpenAI, you know, almost $100 billion. It's hard to call it a startup. But, you know, the reality is we don't know a lot about the relationships between the big platforms that are investing in the next generation. If in the olden days, AKA five years ago, Microsoft would acquire a hot new technology or Google would acquire it, Amazon would acquire it.

For a host of reasons, including the fact that regulators are breathing down their neck and scrutinizing every acquisition, Microsoft and others are taking a different tack and structuring these investments where they, you know, put some money in, but they also are getting equity in exchange for credits on their own services, you know, so-called round-tripping or potentially. And it's crazy. So when we saw that Satya quote, it was like, aha, this deal is quite complicated between the two. And, you know, I think this is where you're getting to, but we broke some news this week with the terms of Microsoft's hiring the talent from a struggling AI company inflection.

And I actually think the terms of those deals, that deal, which we can talk about, were very similar to the list of things that Sotia. said they have an open AI. And so I think that's a clue that there is a playbook at work here for how Microsoft is trying to consume as much talent and tech in the industry without acquiring it. Yeah, because, I mean, we're obviously like, we're in the week where the DOJ has brought this case against Apple. We already know the FTC is like trying to shut down almost all MNA and tech when it comes to big tech at least. And that brings us, you're right, right, to this inflection story. This is like a fascinating story. So this guy, Mustafa Suleiman, he was a co-founder of Deep Mind. I think he got pushed out or like sideline because of bad behavior. Like even this week,

there were former or current DeepMind employees who were like, you know, look at this guy. So basically he got hired into Microsoft to be the CEO of Co-Pilot. It's a pretty big deal. After he was the CEO of inflection, which raised like $1.5 billion. So, like, of course, there's, like, concerns about what, what's the deal with this guy, right? Like, even for a CEO to leave a company like this in a lurch, really, and say, I'm going to go be the CEO at Microsoft and, you know, somebody will pick up the pieces when I'm gone. I think he took 70 employees or something like that. It is, it's a fascinating story. It just, like, kind of leaves me scratching my head on a number of fronts.

So we'd love to hear a little bit about, yeah, you're reporting on on what happened here, why it was, structured this way, are like the original investors in inflection going to be pissed that they put all this money in and then he jumps ship? So yeah, why don't you break it down for us? Yeah, I mean, it's a fascinating story. And I think there are a couple ways to look at it. But the facts are that Microsoft announced earlier this week that Mustafa and his co-founder were joining Microsoft to run their AI and that they would also offer inflection 70 employees the chance to work at Microsoft. And instantly, I mean, my phone was ringing from the investors being like WTF. You know, you don't invest.

You know, also the investors that invested in inflection, which had an early product called Pi chatbot that people liked, but really was not in the same league in terms of being able to compete. But Mustafa, off his name, relationships, co-founder of DeepMind, you know, raised all this money. And, but make me a mistake, like, they, the investors backed him. And then after two years, Microsoft was one of, one of the largest. Then after two years, to find out that he had jumped ship with taking the employees, it is not what you expect as a venture capitalists. Now, the deal is, it is so interesting because it's so complicated and you can kind of see the threading of the needle. But what changed hands is Microsoft paid inflection,

I think $620 million to license its IP. But what that is essentially doing is putting some cash in inflections pocket and then inflection says, okay, shareholders, you'll get your money back. and a little bit more. So if you were in the first tranche of investors, you got your money back in 50%. If you were in the second tranche, you got your money back in 10%. So they threw that bone there,

but none of these investors invested to get their money back in 10% after two years, right? That is not the kind of return you expect. And these investors now still hold some equity in inflection now, which is going to be a little more of a design studio or an AI studio, and who knows, but it's really, you know, a shell of what it was. And I think it is, you know, Microsoft is taking pains to say to shareholders,

this is not an acquisition. But, you know, you get access to the tech, which I don't think they really need, but was a way to structure some payment back for shareholders to recoup something. And then you get access to the talent, which I think, you know, all these companies are hoarding. So I think there are a couple of lessons from it too. I mean, to me, it's just very clear that if you're a traditional venture capitalist, I don't think you should be investing in AI. Like how, at least in the sort of LLM kind of models where the strategics are putting billions of dollars in.

And there are these complicated relationships that are, you know, really have the risk of like restructuring the deal on a moment's notice without the shareholders knowing, which also happened in a different way with OpenA.I. And so I think it's just, it's a different kind of investment. It's a different kind of game. I think it shows, you know, the leverage that these big tech companies have. There's a flight to them from the world of startups because they have so many advantages and can compete in ways that the smaller guys can't. And Tim O'Reilly wrote an excellent op-ed for us about this, where he basically said you're seeing, you know, really like the amassing of concentration with the big tech companies around AI is going to be very anti-competitive and squeeze all investors out.

So I think it supports that. Now, I will say on the other side, if you talk to entrepreneurs about this deal, they'll say, look, companies fail sometimes. and the best thing to do when companies fail is to acknowledge it for the founders to be honest with the team, not drag them along for years and years because you can get dragged for a long time on a billion and a half dollars and just kind of say, guys, it didn't work, we're moving on, and by the way, come with us. And we found you a kind of soft landing. So I think that is a very reasonable way to kind of look at it a bit from the point of the founders. I also think, you know, it's understandable why investors are pissed.

And so we'll see how it plays out. And I'm absolutely sure that Washington and Brussels are going to look at this. They've already said they're looking at these deals. I mean, this was definitely a dodge in terms of like having to get an acquisition approved. But before we talk about that, I definitely want to talk about why inflection failed. This is a tweet from Gavin Baker, an investor. He says inflection will likely be the first of many VC-backed foundation model companies to fail. Foundation models without proprietary, real-time data, and massive distribution for ROHF are the fastest depreciating assets in history.

I mean, it goes right to what we were talking about in the beginning, right? Which is that these models, like you mentioned, coming together. And unless you have an edge, you can literally light a billion and a half dollars on fire overnight because you can't compete. Is that what's happening here? I think so. I also think there's the current reality and then everyone is preparing for the next phase of training and the next phase of compute.

And I think we actually don't spend enough attention on that in the press sometimes because, you know, from, again, the people working on these, that's top of mind for them. Just, you know, even the architectures that got the training to this point aren't going to be the architectures to get it to the next point. And so the costs just compound. So absolutely, I think we saw this

over exuberance, as we often see in private technology, for anything with AI, whether it's a foundation model or an app and so forth. I guess the only thing I'd add to Gavin's statement is, well, I completely agree with it in terms of the pace of erasing value. But I think all AI startups are vulnerable. I mean, we've seen companies that we're trying to build features using open AI's APIs that have, you know, basically been obliterated because now you can do it in a model like open AI. So I think in the startup land, few areas are safe right now in this category. Right. And then going back to this, I don't know, anti-trust or anti-competitive angle or merge, whatever, regulatory side, this was an acquisition.

So how is it possible? Is it just going to be the new way that companies try to do aqua hires without, I mean, it screws the investors. It doesn't have to go through regulatory approval. It's great if you're Microsoft. It's great if you're Mustafa Suleiman. But otherwise, it seems like you're right. And any regulator would be like a red flag city right now.

Yeah. I mean, it's absolutely going to get scrutiny as it absolutely should. I think, you know, again, it is, it's. it's not unreasonable. If this was a tiny company that was failing, you know, this kind of structure is logical, right? There's not, I, so I, you can kind of see why they go this route. I mean, it totally, it benefits Microsoft in so many ways. So I think it's also, you could look at it as they structured it this way to get around antitrust. You could also look at it. They structured this way because it's better for Microsoft. You don't have to look at it. You don't have. to get all the complicated stuff you don't want. You just get exactly the pieces you do want. So I think it's a win-win for them in terms of economics and structure as well as regulation. But we'll see. I think it's so early in this industry, but at the same time, you know, regulators have their eye on it. At the same time, you referenced DOJ and Apple.

We've got, you know, a DOJ and Google search trial going on from, you know, a deal struck. I don't know, like when I was in high school, and that probably not. But like, we're, you can also, I mean, these big tech companies are right to kind of keep moving with their strategy. You can't wait forever. But it's just, it's going to be very interesting. And I think the piece I believe strongly is that we just need to know more about these arrangements. it may turn out that like they're not anti-competitive because there's enough competition in the space and but we just don't know and that's why satia's quote um was so jarring because

it sort of said oh wait this isn't it reminded us this isn't a traditional investment you know it's something it's something much bigger exactly so this has been one of those weeks where like every every day a bit of news is broken and it's like are they it's they Is Microsoft trying to distract from Nvidia, and is Nvidia trying to distract from Microsoft? And what about Apple and Google? Like, are they trying to steal their fire? And actually, it just seems like this is just the pace of change right now and the pace of the way that this stuff is moving. So it brings me right to this Apple and Google deal, because it was like at the beginning of the week and now almost forgotten.

But it is a huge deal in this of Bloomberg story that Apple's in talks to let Google Gemini power iPhones, the iPhone AI features. It just strikes me as a kind of a red flag around Apple that they're, you know, they just shut down their self-driving car program. They put everybody toward AI. They've been teasing this AI announcement coming at WWDC. To have to rely on Google to do your AI infrastructure and put Gemini in the iPhone, similar to the way that you couldn't do search and you have Google doing a search in the iPhone, just it seems to indicate that Apple is so far behind on this front that they they are bringing in the cavalry right which i think there was this picture of it looked like sundar and tim cook having dinner together it's just like man yeah i think it was maybe tamarand in

palo alto one of tim's favorite restaurants right it's a fascinating and also great reporting by bloomberg on this topic i um i think what's going on here is apple has way more AI strategies than meet the eye and some of those are hedges against their own efforts. But I do think they're doing a lot of other things. And within AI, we've got this big, large language model race where it appears that Apple is behind, you know, working to do their own thing. But as we know, I mean, Google deep mind, right, the roots there and talent go back a very long time. Open AI has been a pioneer as well. So I think Apple, looking at their position and saying, okay, when it comes to like these small AI models, you know,

doing cool things on your iPhone, we got that covered. And I think, you know, we'll hear a lot more, but I expect that will be an area, you know, where they could, you know, you could open your eyes and your photos or, you know, those kinds of on-device kind of features. And then they're saying, look, we need, you know, kind of why not try partner with Google to jumpstart our efforts in larger models and while continue on their own thing. I mean, I was at the Wall Street Journal covering Apple when it was doing this playbook with search and maps and YouTube and all the other services that they knew needed to be on iPhones and well-integrated into iPhones to make them popular, but they weren't experts in

themselves. And so I think that's probably the thinking inside of Apple. It's complicated, though. I mean, this court case I mentioned where I guess we'll find out later this year what was decided in the DOJ suing over the Apple search partnership where Google powers Apple search or search on iPhones on their devices, you know, a Gemini deal could look a lot like that deal. You know, that would be balsy to announce that amid that probe. At the same time, it's also, it's so early, like, what are the economics around partnering?

I think there are just a lot of questions. But it makes sense to me, given the history between those companies, that they would be attempting a partnership on this front. And I think it does show Apple being behind in a lot of ways, but I also feel like we need to look broadly across what AI is and why it's important to the next generation of these companies. And I suspect Apple has a lot up its sleeve that we don't know about. Right. Okay. Do I have time for one last question? Sure. Okay. So I wrote about Google's AI, generative AI for Newsroom product today. So basically this is the way that it's going to work.

A newsroom would take like a primary source. Maybe two. It could be a press release from a city council or a 500 page report or even a tweet. And then Google will build a draft of that story for them and then would like indicate places where they should fact check or, you know, make sure that, you know, there's no plagiarism there and then add potentially add their own information. You run a pretty successful newsroom. something you would ever think about using? I wouldn't use this tool, Alex. I think, you know, the information we're all about original reporting from our own sources.

And you can't piece together stuff that's out there in the world and get an information story by definition. I think there are a lot of potentially interesting ways AI can be used as a tool for reporting. Going through transcripts, searching transcripts, highlighting interesting parts of transcripts, you know, document research, data research, you know, basically taking all the tools we try to use today and, you know, putting them on steroids, right? I think that's incredibly exciting for the news industry. I also think AI will be used, you know, aggregating, summarizing that sort of thing. And overall, I think that,

that's probably fine but make no mistake it's it's not reporting all right i definitely agree um all right we'll be back in the second half with stevec to talk about apple jessica thank you so much for being here and thanks again for all the great reporting that you and the information are doing we're regular ciders and readers of the work and uh keep it coming thanks so much all right thanks for being here we'll be back right after this hey everyone let me tell you about the hustle daily show a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them.

So, search for The 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. In this segment, we're going to talk about, or the really next half hour, we're going to talk a lot about this Apple case, huge antitrust case that the Department of Justice brought against Apple. And then we're also going to touch upon the Shohei Otani betting scandal in baseball, which to me is such an amazing story. Before I bring in our guests, I just want to say,

I definitely noticed a lot of reviews come in after last week. And I can't thank you all enough. It's so great to see such an awesome outpouring of support, so many five-star reviews. That's going to help us a lot. Again, it's the only publicly available metric that people can really see about podcasts and that helps us show that we actually have listeners and it's worth coming on. So thank you all for that. All right.

Joining us for the second half is Steve Kovac. He is the CNBC technology correspondent, someone that I love watching on air I appear with on air every now and again. Steve, you are the guy on Apple. in Microsoft at CNBC. So major week for you. I'm sure there hasn't been a lot of sleep. And I'm thrilled that you're here with us. Thanks. I am quite exhausted. I don't think I've slept much in the last 36 hours, but we're good. Let's see if I can make it through a podcast. Oh yeah. You're going to be great. The big thing, of course, is that the Department of Justice

suing Apple, what exactly is going on in this case? Oh, boy. Let me try to boil down 88 pages. I know you can summarize this well. An antitrust. I've done it on air many times. So high level, the argument here is that the DOJ is making against Apple is, first of all, they establish or try to establish that the iPhone is a monopoly. And therefore, the ecosystem around the iPhone is designed such that it keeps you stuck in that ecosystem, in that Apple ecosystem.

So when you're ready to buy a new smartphone, they make sure that new smartphone is an iPhone and oh by the way not only do they make sure that happens they've been steadily increasing prices on iPhone over the years merrick garland the attorney general of the united states in the announcement of this uh this week uh basically said you know he held up an iPhone and said these things cost as much as 1600 bucks now um and apple is uh going through all these different practices to make sure that happened so Part of the argument is the same App Store argument we've been hearing a bazillion times over the last several years. It's the only way to download software to the iPhone.

We've seen this play out in Europe. The complaints from Spotify and so many other app makers about the fees that Apple collects and how that keeps Apple control over what happens on the platform. But then some other stuff that we don't hear quite as often, such as accessories, like hardware accessories, smart watches, Bluetooth headsets, basically saying things like if you buy a third-party smart watch, maybe a Garmin or one of Google's Fitbits, it doesn't have the full capabilities or features

that you might enjoy on Apple Watch, like getting rich notifications, sending iMessages, and things like that. It's kind of like a watered-down version. Same with AirPods. If you're used to having AirPods, you know that really cool feature where you hold it next to the phone,

you flip open the case and automatically pairs. You put it automatically pairs, between your Apple devices, you can't do that on a third-party set of headphones. So they kind of point to instances like that as demonstrations of how Apple is keeping people locked in unfairly and keeping third-party competitors off the platform. And the other thing I mention is, and this is like probably the most accessible one is iMessage. They say that is just a huge lock-in.

It keeps people upset about the good old-fashioned green bubbles and it keeps people, either convincing their friends to buy an iPhone or shaming people to buy an iPhone maybe and they even referred back to Tim Cook's famous comment I think it was about two years ago when someone complained about this issue to him at I think it was the Code Conference and he basically said well tell your mom to buy an iPhone

if they don't like the green bubbles if you're messed up with that so yeah whoops and then they also you know point to some emails which we've seen before between executives privately saying if we opened up some of these services messaging and whatnot, that would just encourage people to buy an Android phone, and that's bad for Apple. So lots of things going on here. Apple, of course, denies everything. They are going to fight this

till the very end. And like we've heard so many times for them, they say so many of their decisions are about privacy, about security, and providing the best experience for their customers on their own products. And that's why they do what they do. Partly true, but there's some holes in that argument too. Yeah. Now, Steve, before we get into the specifics of the case, I need to ask you about the vibe within Apple because so often, like right now we have Apple, Facebook, not Microsoft, actually, Google and Amazon. They all have caught cases from US regulators, big antitrust cases. But the vibe within these companies never is all too concerned about what's going on. And maybe that's just because like it's the frog boiling thing where like it's actually a problem,

but they don't feel it because it's in the background. But I also think it's an indication. that they're dealing with relatively feeble U.S. regulatory bodies who aren't well-funded, who don't have, you know, senior staff working on these cases, who they can afford to kind of outlast. And so I'm curious from your perspective, you know the vibe within Apple, you talk to Tim Cook, like every quarter after the earnings report. Are they, how is Apple responding to this? Like, are they feeling within the company that this is a problem or that this is going to blow over? this is a Category 5 hurricane or it's a drizzle? The impression I get is they know it's a problem.

They know this is likely to be a distraction over the next several years. But publicly, they're trying to make it seem like everything's hunky-dory and business as usual. You'll note, for example, at least it didn't leak out if there was one, a memo from Tim Cook to employees. They sort of rally the troops type of messaging. He'd even do that. he spent, by the way, the day this lawsuit dropped, he was in China just opening up a new Apple store in Shanghai. He was not focused, or did it at least publicly appear to be focused on this. So they're trying to play it both ways. At the same time, and I'm sure you've covered this already,

but, you know, in the last couple weeks in the European Union, very similar allegations and rules and so forth being brought up over there, they have anger on their face. They really had a PR blunder with the Epic Games reversal, you know, they're kind of being, I don't know, humbled in a lot of ways, thanks to these tough regulations in the EU, and I really think they're seeing that as a template for how things could end up here. But like you said, kind of a toothless regulatory body here in so many ways, we have yet to see Congress pass any meaningful tech legislation. For some reason, they're more interested in banning TikTok than they are potentially,

you know, protecting little kids online. So it really falls to the DOJ and the FTC to do this work. to make any changes if there is an idea that there should be a change. That's what the focus is, I guess. But yeah, they're just trying to pretend this is nothing, even though it's something. And Tim Wu was on CNBC earlier this week talking about how like they, regulatory bodies like, you know, was it win or not? Basically what we were saying was that they just want to let these companies know that they can't trample on other company's ability to do business. Do you think that they're fine. The regulatory agencies would be fine just kind of giving Apple like a real headache and

letting this drag out for a couple of years. Like is that a win for them? Potentially. So if you ask Jonathan Cantor, who's the antitrust official about who spearheaded this case or, you know, Lena Khan, the chair of the FTC, who is very much in line and of the same thinking with with Cantor on this kind of stuff, they would say even though we haven't been successful in so many of the cases we've brought, even though we failed to do things like block the Activision merger and stuff. They say thematically, it's kind of put this chilling effect on some of what they view as, you know, monopolistic activity. So they consider even their losses a win. So that's kind of how it's being viewed on that side of it too. So even if this just causes a headache, they can

also kind of claim victory and victory at the end of this. Let's just say we gained this out for four or five years. DoJ loses this case. They can still try to claim victory by saying, well, you know, we made Apple think long and hard about some of these things. Maybe they grab a concession or two and they still, they still consider that a sort of win. I will also note that we have an election this year and there could be a very easily be a Trump administration again next year, a Trump Department of Justice. Now, of course, this Apple case and the Google case started under the Trump administration. A lot of people forget this. investigation started back in 2019 and was carried on by this new Department of Justice

under the Biden administration and then, you know, what we saw this week. So there's also possibility, though, that because Biden did it, Trump won't want to do it and he might try to unwind or weaken this kind of stuff. Tim Cook, you know, in the first Trump administration, did a really good job, cozing up to Donald Trump, got some relief on China tariffs and things like that. Tim Apple, famous Tim Apple. He, it worked. though. So, yeah, it's going to be, it's going to be really interesting to see how the election plays out to see what the next beat of that looks like for sure. Exactly. And so that's from the regulatory side, from the Apple side, is the big problem here this, like you mentioned the

Europe thing. They had that big, you know, $2 billion fine. They also haven't grown very much. They've had, I think, declines in revenue four of the last five quarters and it's going to be five of six, right? So is this just like the real risk? is that this just kind of adds to a malaise around the company? Like, it doesn't have a good narrative, right? And Vida has the best narrative in the, in the tech world on the market right now. I mean, I would say Microsoft has the second best. We're not used to a world where Apple is, like, third place. We're losing the narrative. And when you talk about the narrative, it's artificial intelligence. What is the AI narrative? And I've even noticed a shift. You mentioned that I talked to

Tim Cook every quarter on earnings. When I talked to him last quarter, he was almost not a defensive almost about, well, we have tons of AI in our stuff, you know, and he just started rattling off features like, you know, the fitness detection and the Apple Watch and Vision Pro wouldn't even exist without artificial intelligence. All this stuff is happening under the hood, though. That's nothing new. In fact, it's just they're calling it something different.

I'll also notice there's new MacBooks that came out a couple weeks ago. They called it like something to the effect of the best. AI PC ever, you know, consumer AI PC you can buy. Val does protest too much situation. Yeah, exactly. Yeah. And so, but what they're also doing is really putting enormous pressure on themselves by teasing some sort of AI announcement later this year to really deliver.

They call, you know, Tim Cook is calling it, we're going to saying we're going to break new ground in AI. That's a hefty promise. And so the stakes are quite large. presumably it's going to happen at WWVC in June for them to deliver some kind of mind-blowing AI announcement to kind of ease these investor fears amid slumping sales, China looks bad, and all these regulatory headwinds. Yeah, and it better not just be we're going to run Gemini on the iPhone. You know, it's got to be more than that. Now let's talk about the actual case, right?

Because the DOJ has these weird definitions of monopoly, right? It says that Apple is 65% of the iPhone market in the U.S., but 70% of the performance smartphone market in the U.S. Like, dude, did you just make up a new category to add 5% to the market share? Like, what's going on there? And from what I understand, I mean, 70% is not a monopoly to me. It's a dominant position, but not monopolistic. Yeah, and then on the other hand, and just to be fair, you have Apple trying to say, oh, we're just a teeny tiny little company here.

We only, and they talk about their global market share, which is true. you know, 20% maybe less. Android is by far the dominant platform. But this is a United States case, and so therefore we're looking at United States, Parker, Churchill. Let's get that out of the way. This reminds me of the FTC lawsuit against Activision,

where they try to make this case of their different kinds of video game consoles. And there's the high performance video game consoles, PlayStation and Xbox, and then the, I guess, lower end consoles, like Switch. And they try to make this argument. They're two completely, different markets. That didn't fly in the courts at the time. I don't see how this could fly either. If you're using a phone, you're using a phone. It doesn't matter if it's a phone with a super duper

fast chip or if it's a phone that you got for free from AT&T for signing up with a contract. I don't think that seems tough. And that's also the crux of it too, right? You know, they have to prove that they have, you got to have your monopoly position. And, you know, so many comparisons. have already been made to the Microsoft case several years ago where they did have a monopoly. It was very hard to find a computer that was not powered by Windows

period. It was 90%. Not just in the United States, but globally. That is a monopoly. And it's harder and more difficult to make that argument here, but they're going to try. And we'll see what happens. And if they buy that. And then another novel

thing they could try is, well, most of the money is spent on the iPhone. You know, there's the wealthiest customers, so therefore there's more money at stake. I don't know. It's a novel theory. And if they can't even pass that bar, this whole thing's dead. Right. So let's quickly get into a little bit of the harm as we round out this conversation.

So the Department of Justice made some interesting accusations and some weird ones. I'll just run by like the most interesting and the most weird one for you. most interesting to me is this pairing like you mentioned of smart watches how the smart watches don't pair well to uh to the iPhone and like that actually is like real harm like it does if you're a smart watch company you can't pair well because apple has the apple watch that sucks and it is like real exclusionary conduct so that is a one area where I'm like okay I really agree with the DOJ here on the other hand it's like that is kind of the Apple strategy right is like locking you into their products. Like there was a line, I wrote it down because I was on air super early

this morning, like worldwide exchange early. And I was like, we got to talk about this, that Apple locked, they say Apple locked in users and developers while protecting its profits. And it's like, yep, that's the Apple strategy, right? So I'm curious like, you know, let's do the most interesting then I'll do the other part. But, you know, as far as the smart, smart watches and wearables go, do you think the DOJ has a point here? And what do you, do you think? Apple's defense will hold up. Yeah, it's true that it is exclusionary. I mean, yes, if you've ever tried to attach a Fitbit or a Garmin, which, by the way,

Garmin's super popular or special among runners, yeah, it just doesn't have that full feature set you can get on the iPhone. Does that cause people to stay locked into the ecosystem? I don't know. That's hard to quantify or say. but if they bring out evidence showing we're disabling these features because we to do that then we get then it becomes harder to defend so that is very interesting I think they talk about smart watches I really think even more popular than the Apple Watch

are these things I'm wearing right now the AirPods and that is such a mass market product more there are more AirPods in the world than there are Apple Watches for sure and so you know if you take all that together, just the accessories in general, maybe there's an argument to make there. And maybe that's a concession Apple would have to make, making pairing easier, making more rich notifications. Yeah, it would be awesome. Which would be great for consumers.

And, you know, maybe not that bad for Apple if you think about it. The Apple Watch is by far in a way the most popular watch in the world. There are plenty of watches that work with Android phones well. But I really want to know the weirdest thing that you, thought or the, how'd you frame it? Because I have, I have won. So I want to know if it's the same one that I have. The most ridiculous thing was the bringing up of I message. Like Merrick Garland seemed

like he seemed seized on this idea that you become a green bubble in Android or an Android becomes a green bubble in the iPhone. And everyone's like, yeah, yeah, no, that's proof of the Apple lockin. And I for a while was on that side as well. And I was like, look, look how, you know, what they're trying to do to make people switch to, to prevent people from switching. to Android. However, because Apple has been so insistent on this Apple I message lock-in and they don't make it interoperable, people have been moving to WhatsApp in the U.S.

Yeah, WhatsApp has really been on the rise in a real way in the U.S. I've reported the data and you could argue that Apple's actually hurt themselves by doing this. And it shows there's real competition because people are going to another compatible messaging app and effectively destroying value for Apple because, and that's how a market should work, right? Bad product. You lose your audience. And that's the Apple market or Apple argument rather almost verbatim. They say they're gazillion, I mean, go in the app store. Look at the messaging app tab.

I mean, there are billions of them, right? And WhatsApp is a perfect one. I personally use WhatsApp when SMS freaks me out, not because it's, it just does. It's also just a worse experience. Forget the encryption. It's just not good. And so whenever I have to text, I use iPhone. phone for the most part. And whenever I have to text someone who has an Android phone, I just use

WhatsApp. And it's fine. And it's great. But all that said, I think a couple of things are happening here. One, Merrick-Garland brings it up because it's such an easy to understand accessible things. So many people have experienced that, right? Your group chat gets messed up because someone green bubbles in there. Whatever. We all understand that. What they also do, though, is they show evidence. Like, there are literally emails from Apple executives saying, we can't put, we shouldn't put iMessage on Android or we shouldn't open it up or make it more compatible because they know it's such a good lock-in and we don't want people going to Android phones. So that's kind of a smoking gun there.

Apple kind of ignores that part that they said that as well. Everything's true that they said about messaging apps and, you know, good experience and so forth. The other true part that they don't talk about is that internally they kept it that way in part to keep people locked in. Right. Now, can I share my favorite thing of the weird? thing and the funniest thing the Apple TV argument and saying they there's a line in this

lawsuit I'm gonna I'm just gonna paraphrase it but basically saying Apple TV you know because of Apple TV plus the service thought the box because of the monopoly power Apple has it now has power over the flow of free speech because of Apple TV Plus which just is a bananas thing to say yeah that's like saying HBO has the control over the flow of free speech or CNBC has too much control over the flow of free speech. I don't think Ted Lassow really gives a shit about free speech. I think they're just trying to entertain you with Apple TV Plus. And oh, by the way, Apple TV Plus is available on Roku.

It's available on Android. It's available on Samsung TVs. It's not an Apple-only product. I think that just little things like that in this case just makes me scratch my head. It's like, have these guys ever used an Apple product before? Yeah, this is what I was saying about the junior developer, the junior lawyers. That's probably one of theirs. Yes, yeah, exactly, yeah.

So, okay, before we head out, I definitely want to talk about this Shoheyotani story. Have you been following it? It's definitely like one of the wildest stories. So for folks... And also, I'm a Mets fan. I think you are too, so I'm a little disappointed. We don't have show, and this was not a Mets scandal. But you wanted this to be a Mets scandal?

if we had show on our team absolutely dude but he might he might not play so i mean there's a chance he gets suspended from this because there's definitely been a cover-up so this from espn dodgers fire showy otani's interpreter amid allegation of a massive theft so basically they found out that he made a 4.5 million in wire transfers from otani's bank account to a bookmaking operation. And his translator, a longtime friend and interpreter, they say that he incurred debts. Now, the amazing thing about this story is he sat down with ESPN and gave this entire basically deposition talking about how, yes, I incurred all the debts and Shohay was good enough to pay them. And I'm thankful, but he had nothing to do with it. And then they basically

had to go back and say, actually, Shohay had no idea that this was happening. and he stole all this money. And it was a massive theft. And there's like a video of him and the interpreter hanging out in the dugout like 90 minutes before this news breaks and everything is fine. So like did that all happen within that moment? So for those, by the way,

Shohay, by that is a $700 million batter and pitcher for the Los Angeles Dodgers. He's the biggest star in baseball. I think this is interesting for a number. In sports, arguably in a lot of ways. Yeah. And so I think this is interesting. interesting for a number of reasons a number of reasons a the crime is fascinating uh but but really it's

just like we've seen all these tech companies uh fan duel um and draft kings bring betting uh into the mainstream right next to you know the broadcasts and sports leagues and stuff like that and it maybe it's become so commonplace that like now it's starting to have that negative effect where it's kind of starting to blend into the leagues i'm curious what you think about this story and what the takeaway is from your end. Yeah, it's also, it's gliding into the leagues. I mean, we've seen this with the NFL, you know, players getting in trouble for betting and so forth.

And this is something that's kind of concerned me basically since the beginning of gambling apps. And, you know, I know it's state by state. Was it North Carolina that just approved it? I forget. Anyway, my point being, just seeing how, you know, the companies that you and I cover every day use their apps to get you sticky to get you to stay in yeah that's one thing you know scrolling through tic-tok every day i'm sure they're but at least ticot's not sucking money out of your bank

account and like i understand vandal and all these guys they have you know you go set your own limits and things like that but just the ease of use i mean this is just right for stricter regulation uh just gambling apps in general um the showy thing the show atani and his interpreter thing is an extreme example and whether or not you know and those are also league rules too but uh you're not a lot of bet on yourself or your own games and your own league but i mean this is this just is the kind of thing it's i'm almost shocked like regulators haven't taken such a deeper look at gambling apps because it is so easy to lose money and you know what kind of a gamemanship are they using to kind of encourage betting and that you know sign up now and get a hundred dollars free and so

forth. That's, that's really my takeaway. I feel like the, the shoe is yet to drop on gambling apps. And that could be, that could be coming. It is interesting because it is sort of the product of a recent Supreme Court case that legalized sports betting across, well, let, allow states to make their, their decisions about whether they would legalize it or not and not prohibited on a federal level. We'll definitely have more on that. It's a really fascinating backstory. But last question for you, do you think Shohei was, was participating in this gambling? oh man because i think i i mean hard to tell yeah this is just my my own guess i think he was yeah he must have i mean i even my closest friends i don't give them access to my bank account

right um so story makes no sense yeah i mean the only people you give access to your bank account or maybe your accountant or like your if you're married maybe your partner that's it right uh so so he knew he had to have known um Which is bad. I mean, he's such an amazing guy. Like, otherwise, such an incredible athlete. What a, what a guy to, I mean, he's just, he's like not even human to watch him on the field, everything you can do. And, oh, poor Dodgers.

Right. And now the question becomes, will Major League Baseball? Their loss is my game. Well, Major League Baseball has been, is in this moment where it's losing audience and losing fans. It needs to do anything it can to make it exciting. And now they're faced with, like, do we suspend our biggest star? and stand on principle or do we allow this to slide and and you know let the games go on and it reminds me of this amazing moment in The Simpsons where Mark McGuire is caught doing some

terrible things and he goes up to like the town and he goes you want to know the deep dark truth about Major League Baseball or do you want to see me hit some dingers and the whole town is like dingers yeah right right yeah so that could be it too but anyway anything that's bad for the Dodgers is potentially good for the mess. Yeah, I'm cheering it. So, let's go to a game this year. It'll be fun. Hell yeah.

City Field, as soon as it warms up. Yeah, I'm there. Okay, sounds good. Steve, I know you've got to go on air. Thanks so much for joining us. Yes. All right, thanks, Ox. Take care.

All right, everybody. Thanks for listening, and we'll see you next time on Big Technology Podcast.