Big Technology Podcast - Salesforce Tumult, The ChatGPT API, Tinder Robberies

Episode Date: March 3, 2023

The Wall Street Journal’s Tom Dotan joins Ranjan Roy and Alex Kantrowitz for our weekly news recap show. We cover: 1) Salesforce’s recent struggles 2) Salesforce’s ‘monster quarter’ 3) Amazon hitting pause on HQ2 4) State of the market 5) OpenAI’s ChatGPT API 6) OpenAI vs. Microsoft? 7) Tinder robberies. --- 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] Rajan and Alex at SXSW: https://schedule.sxsw.com/2023/events/PP122865

Welcome to Big Technology podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. We're going to break down the news like we do every Friday here on the podcast. We're not broadcasting live this week on LinkedIn. I'm in a place with terrible service, but we're going to do the news. Nonetheless, joining us as always is Ron John Roy of Margins. Welcome to the show. Hello.

Great to have you back. Ron John, your piece on Alexa really went bananas over the weekend last weekend. I feel like we kind of undersolded it on the show last week. I will admit, it inspired me to buy two HomePod minis and start trying to home kidify my apartment. So we'll see how that goes. And we also have Tom Totan here with us. He is a reporter for the Wall Street Journal who just wrote a terrific story about Salesforce. And Salesforce has been all over the news this week.

largely thanks to Tom, so I'm super stoked that he's here with us. Tom, welcome to the show. Thank you so much for having me, Alex. Great to have you. You, like, joined the Wall Street Journal and just came out swinging. I've enjoyed listening to you on the Eric Newcomer's Dead Cat podcast, and this is your first time here, so I'm thrilled that you're here, and I'm thrilled that you're here in a week where you've really broken some very interesting news. Yeah, no, thank you. I am a lapsed podcaster. I guess one day, at one point we were rival podcasters for the tech space, but here I am betraying my former co-host, Eric Newcomer, who I believe is relaunching his show.

Dead Cat itself is no more. So I'm fully committed to being just a reporter, just a guy who, I don't know, curries facts. Okay, sounds great. So why don't we talk about those facts that you've curried, especially with the Salesforce story this past week. So Salesforce was like this company that was sort of flying high and has hit some harder times,

at least until it's earnings call this week. So talk a little bit about what made you interested. in looking into the story and what you found when he started digging into the company. Yeah, I mean, Salesforce, as anyone who lives in San Francisco knows, is this iconic tech company. They have their name on the tallest building in San Francisco, you know, looming over the rest of the city. And they're a massive software company. They sell this customer relations management software, which is basically tools that businesses use to keep track of what their customers are doing, aggregate their data. They've been a major acquirer of companies, too.

They bought Slack famously in 2021 and a bunch of other companies. And they have this, you know, celebrity, very outspoken, charismatic, really CEO and Mark Benioff, who's kind of a big swinger around town. I mean, like a big swinging guy. I don't know he swings, but you know what I mean. He's a guy who matters a lot in San Francisco and city politics and, you know, everything to do with city and political life here. And so generally just a fun company to look into. But But, you know, as a business, they've been so interesting because they have been this growth-oriented company. They've been this iconic example of what tech has really been over the last decade or two, which is we focus on growth above everything else. And so they have had this torrid growth rate over the last couple of years, you know, 20% or so more year-over-year revenue growth.

And as the pandemic kind of got into, you know, that post-pandemic slump that a lot of tech companies saw, you know, things were really great for a while, online commerce and everything related to it really took off. And then as things began to turn at the end of 21, Salesforce really took a turn and their stock was down, you know, prior to this most recent earnings, which I guess we can talk about, was down like 47% from its peak. And there was a lot of changes afoot inside the company. in terms of how they were going to run operations going forward, because for the longest time, Salesforce was able to justify lower profitability by saying, well, we invest all of our money in growth. And this growth funded a lot of things,

both like their strategy, their business strategy, in terms of acquiring companies and hiring lots of employees, but also this interesting company culture that they have, which I can talk about a little bit. So I guess my interest in the story was both like... Talk about the Ohana. The Ohana. Sure.

So Ohana is a Hawaiian word, which means family or familial bonds. And Mark Benioff is not from Hawaii. He's from San Francisco, but he's really taken to the Hawaiian spirit. He owns a big compound in Hawaii. And a lot of the company culture is suffused with Hawaiian lingo and Ohana is one of them. And O'Hana as best is. Yeah, his mentor, Larry Ellison, owns like, the whole island of Lanai. So, I guess he's just, he's always been this person in the shadow, and maybe this is just another awkward, like, I don't know, issue that he has being behind Larry that now he's trying to adopt his own version of, I don't know, appropriating.

Oh, yeah, with the Hawaiian stuff. Yeah, I, yeah, I don't know. I don't really know what to say about that. I have no real judgment on the usage of Hawaiian terms. That's not my battle. But, yeah, certainly billionaires do seem to love Hawaii. What can I say? But, but, yeah, you know, Ohana, as he defines it, is a connective line between Salesforce's employees and also their customers and the community that they live in.

And God knows, anyone else that touches the, you know, the same. I think I'm part of Ohana as well after writing this story. It's all very connected. And, you know, within Salesforce itself, it kind of manifests in a lot of different ways. they're very into wellness over there during the pandemic they instituted well-being days which was like a day off a month where you could reconstitute your mental self and and then they also have meditation rooms on every floor of Salesforce towers around the world so it's a big part of what they do around there and again with this story what I was interested in is like okay when times are

good you can fund things like meditation rooms and ohana and everything that comes along with it but as the, you know, as the, fuck, what am I trying to say? As things turn, it gets a little bit more complicated. Well, one question, I mean, I definitely want to get into the culture. But having studied the company closely, where in the pantheon of big technology companies do you think Salesforce lives? Because, you know, market cap, I think it got around to 300 billion, around, what is it, 160 billion now.

It's not as big as the Googles and the medas of the world. its product is Mark Benioff, more people probably know him than know what a CRM is, but it's obviously, as you said, it's kind of been perfectly representative of the entire software category, especially anyone in any kind of SaaS, anything enterprise, more than anyone else. Like, why do we all care about Salesforce so much? It's true that Salesforce is not really a household name as a tech company in the way that meta or Facebook is or Google or Amazon or Apple. If you work in business, their software is incredibly popular. If you are in, you know, a part of the industry that requires you to have

relationships with customers and manage data and all those things, then yeah, you're very well aware of them. And then buying this company Slack a couple years back, that's probably a better known, you know, general audience knowledge, a company. But, you know, they were pioneers in cloud software, which, you know, the idea is that this is software that lives in the internet. And rather than having to buy, you know, new physical hardware every couple of years and have IT and servers and all these things that companies would need to operate sophisticated marketing software, you know, Beniof really pioneered this idea of it existing in the cloud and you could have the subscription model. And it's a really good model, frankly. I mean, it's one that almost every software company

has adopted over the past couple of years. So even if they themselves are not an icon, and I iconic name in broadly, although again, in San Francisco, I think they're one of the largest employers in the city. So they're a big deal here for sure. You know, their model in what Benioff really pioneered in launching the company in 99 is something that has been, you know, you could argue the predominant model across software throughout all of tech. All right. No, that, okay, that makes complete sense. And that if they were synonymous with the cloud transition that everyone had to undertake afterwards, and that, you know, gave them, them that influence. Did you get a sense of where is Benioff trying to take the company? Because one thing,

and Alex and I talked about this the other week, you know, they bought Slack. The entire world was just ripe to disrupt enterprise software, the way companies and business software works. Google came in strong with Google Meet, Zoom came in, but then didn't quite realize its potential. I mean, it felt like Salesforce and Slack combined was going to be the start of something bigger, where they moved into all parts of the way you do business? I mean, is that where Benioff's trying to go with this? Or is it even clear what the actual bit larger vision is? It's a good question, Rajan.

I mean, Salesforce has historically been an acquirer. That's how they've gotten growth over the years. And it's something that we can maybe talk about in a little bit, but it's something that really raised the ire of a lot of activist investors who would look at some of these acquisitions and say, what is the synergy, what is the holistic video, that you're pursuing here, Mark, because, okay, their core product offering is enterprise marketing software, right? It's stuff that businesses need to, again, increase their sales by

having a very smart, data-driven look at what their customer relationships are like. And then you layer in other things that they acquired over the years like Tableau, which is an analytics, you know, analytic software. Okay, I kind of get that. And then you look at something like Slack, which they bought in 21. And that's workplace communication. I mean, you know, it's, it's really hard to see exactly what the direct line is between like marketing software and, you know, that annoying sound that you hear at work when people are messaging you. And, and I think, you know, that and the price that they paid for it really raised a lot of questions as to, okay, you definitely are buying growth here, but are you putting together a cohesive company? And if you're coming out to market

as Salesforce and saying, hey, why don't you sign up for a Salesforce marketing software? And while you're at it, why don't you switch your company over to Slack? It's like, why are we talking about these things at the same time? It doesn't seem related. And so, yeah, I do think there are a lot of people that have argued that there isn't really a cohesive. It looks a little bit more like conglomerate at times rather than like a, you know, a growing singular vision.

Well, can you talk a little bit about, so what I understand, the activists, there's three major ones involved or five, okay, okay, can you? Have this ever happened in this concert or like how is this playing out? So I'm probably not the right person to ask if this has ever happened before. I'm not really an activist reporter, but I know that this is to the people, you know, the reporters that I worked with on the story and talked to during the process, it is certainly surprising to see that many going in there. And they're pretty heavy hitters in the activist universe.

Like, Elliott Management was the kind of big deal one, and they're famous for a lot of kind of very disruptive activist stakes, including, of course, Twitter, which, you know, Alex would probably know better than I do, but played a part, at least a small part in Jack Dorsey stepping down. I think they're the reason ultimately that Twitter ended up in Elon Musk's hands, but they definitely, you know, led to Jack's out leaving for sure. So where does that leave Salesforce next? Yeah, so Elliot doesn't mess around. And then there's other ones like Starboard Value, Value Act, and third point. I mean, pretty big names within the activist community. And, you know, it's not really clear specifically what every one of them wanted to do within Salesforce other than, you know, make the stock price go up so they could get a good ROI. But, you know, Value Act, no, let me take that again.

Starboard put out a presentation at the end of last year, in which they basically pointed out. The thing that a lot of analysts have been pointing out, which is that sales force is not as profitable, their margins are lower than their peers. And at a time in which growth seems to be slowing, they should be focusing a lot more on profitability rather than just growth. And so I think that plus the kind of executive instability that had been going on at Salesforce, which we can talk about if you want, really made them sort of a ripe target for activists and saying, look, this is a business that has a lot of potential, but they need to come. a lot of costs and we don't see them doing it yet. So let's go in there and start kind of

savor rattling as a way to force management to do what we want. Can I, can I just make the counter argument here, which is kind of unnatural for me because I do think that Salesforce has always tried to be a little bit more than it was and might have just been better served saying we're a CRM company and as opposed to this sort of heal the world vibes that Beniof gives off. But what is the man? I mean, the company is is super, it's making a ton of money it is profitable um it's a very successful business it's grown fast so what is the problem of it having smaller margins i mean i know wall street might be upset about it but ultimately is this like a thing that we should really be upset about the fact that they're spending

on worker wellness they have these wellness these these these retreats that they take people to they pay for matthew mcana hay which i guess to be their creative advisor and pitchman which goes for 10 10 million a year or something like that like of course yes it's larger than life and it's not boring old software company but why why does i guess our our society or our market or wall street and and the narrative try to force them back into this like be this boring software company that you were born to be yes tom do you hate wellness and matthew mcconaughey uh i i don't hate anything i'm a huge mccanaughey fan um i i was fully supportive of the McConaughey Renaissance from a couple years back when he won his Oscar Dallas Byers Club.

Yeah, and true detective and everything that kind of made us re-appreciate him as a serious, dramatic actor and not just kind of a pothead from days and confused. So I want to be firmly on the record as being pro McConaughey. Also has a great book out, the Green Light book. I haven't read it, but I'm sure it's as good as everything else he does. Look, I think as far as margins go, everything is fine if you're growing. I think, it's just a matter of like the tech industry overall is having to reckon with it's like if you can show the street that you're able to grow at this you know 40% or 20% year over year level then they're happy to let you do almost anything that you want in terms of worker wellness and and progressive

social values and all this other stuff but it's when the music starts well it doesn't really stop but at least takes on a different tune that is less growth focus you're just past a point where you can this specific level, then I think there's going to be a lot more attention paid. I mean, do I think this is one of the great social questions of our time, you know, focusing on profitability versus growth? Not really. But I can hear the argument on the part of activists saying like, look, things are just different now and you're not adjusting quickly enough to the times. And we think there's a huge amount of upside to the stock if we can get you to do this one way or the other. On the question of going back to the culture,

I think Benioff had given an interview with Business Insider, I believe, where he said every CEO in Silicon Valley has looked at what Elon Musk has done and asked themselves, do they need to unleash their own Elon within them? Is he, I mean, I guess given all the Ohana talk, how are they trying to position this? Obviously layoffs are a natural part of this cycle, but I mean, is he the leader that is going to be able to, guide them to a place where they're trying to find a completely new path of growth that's able to kind of navigate a cost-cutting environment when his entire career has been growing and, you know, spending lots of money. Is Benny off that guy, as you're asking? Yeah.

Not Elon. Sorry. Maybe it will be Elon. Yeah. I don't know, by the way, what Unleash Your Inner Elon means. It evokes a lot of images. I think it means. Yeah.

Hopefully people keep track of their children. Look, I mean, Bennyoff is a survivor in that there aren't that many CEOs. He's been around since 99. There aren't that many CEOs of tech companies that I can think of. Maybe you guys can that have been at the top of a multi-billion dollar tech enterprise for as long as he has. So even though there's a lot of pressure on him that I wrote about in the story, you got to give credit to the fact that he's someone who's navigated the dot-com bust in 2000, 2001.

you know, the financial collapse in 2008 and, you know, whatever you want to define this period now. So, you know, I do think it's fair to give him at least some credit that he's been through pretty rough times in the past and has adjusted the company to a degree, you know, post these kind of financial crises. So as far as that goes, sure, why not? It seems reasonable enough to me. There's this lesson here, right, in terms of the Ohana, right? Saying that your company as a family and it's so obvious that it almost doesn't need to be said but it is something we should really talk about which is that like if when folks I understand that there's a a tendency to want to call your workplace to family but it's just not and you don't lay off your family and I do think

that it's sort of destructive to do that because you know ultimately what it ends up doing is getting workers to just work more for the same amount of money because of this you know intangible thing that they're working for. And clearly in this case, with the layoffs that the company did, you know, Salesforce was not exactly a family. Yeah, I can't remember the last time that I tried to trim 5% of my family to meet, you know, investor targets. Families do do that. Quarterly targets are tough at our family. Yeah. Yeah, you don't talk too often about unwanted attrition in your family. So Tom, can you talk a little bit about the earnings quarter, the earnings report that the company brought in because you had this big story in the journal talking about all these issues

and then i mean i think that saleshorse turns in this corner um yahoo finance says they shocked the heck out of wall street and they promised better margins they're disbanding their mna committee i think you mentioned that one of the investors or one of the analysts on the earnings call said that bennyas performance was oscar worthy um so so our you know how much should we read into this this big report that they have, and does that sort of change the narrative for them just in one quarter? Yeah, Oscar-worthy. I was dying to know, like, what category that Salesforce or Mark Benio... Special effects.

Yeah, exactly, or even just best actor. I mean, he was having a good time on that call. I'd encourage listeners to go back. If you're one of those people that like listening to earnings calls, and, you know, we always, as journalists kind of make fun of the analysts that go on there and say, congratulations for a great quarter before, you know, launching another question. This was like another level of that. People just like showering praise on Benny Off for, I mean, yeah, I guess let's talk about what they did. They beat on revenue, right? So there were expectations of them getting to, I think, like the

high seven billions in quarterly revenue and they were above eight. Their margins were, I think, their adjusted operating margins were at 29%, which was substantially above where they were like 12 months trailing, which was, which was like 19%. which again has been the knock on the company for a while because their margins are significantly lower than competitors like Service Now and Adobe. And then I think the thing that really got analysts and investors super hyped was the fact that they laid out guidance for the year that saw them getting to operating, adjusted operating margins or non-gap margins that were close to like 29%,

which was above the projections that they had shown in the fall last fall when they had an analyst day when already there was pressure on them to kind of do better on their margins. And they were like, we think we can get to 25%. And that was like, you know, I guess not enough for activist investors. So they really kind of turned up the heat to get there and, you know, did layoffs and, you know, all the stuff that we talked about. So I think the combination of, you know, they're being fairly low, a fairly low bar for expectations that they surpassed, you know, pretty handily. And then laid out this guidance that showed them entering this new era where they were going to be so much more margin focus, profitability, efficiency. focused. And like you mentioned, Alex, like they disbanded their M&A committee, which is like

No more slugs. Arguable as to, yeah, you know, right? So all the criticisms of the acquisitions, he was kind of addressing that head on by saying, you know, we've disbanded our committee. And I think they've also created a new like business efficiency committee or something like that, which I don't really know what that means, to be honest. But it's certainly... It is the year of efficiency right now. Yeah, exactly. It's basically that, right? And so, by the way, can't imagine that's like the most fun committee to be on just generally doesn't seem as exciting as like looking around for like hunting unless you're an ex-management consultant perhaps

sure sure oh and they've brought in bane speaking of management consultants oh okay they've brought in bane to kind of reorganize the structure of the company and figure out how the sales teams are going to look and and try to run leaner and you know less kind of sales heavy so all of that was exactly what excuse me i'm sorry i'm coughing so much when i think of ohana i do think of Bain consulting. Exactly. Well, yeah, Bain is also part of the Ohana. Oh, they are now.

You're right. Yeah, I think they are officially part of that. So you can imagine all the Bain consultants and their dockers, but also, you know, wearing lays and chilling at the luau. So, Tom, can you just wrap it up for us in terms of like, what have you learned about about this company? Because you had this story that was like, you know, pointing out a lot of different flaws earlier in the week and then they turned in an earnings report and you write the story

about their bombs away earnings report. So where do you sort of think Salesforce is heading? And then secondarily, what is what does the Salesforce, the broader Salesforce story tell us about our economy right now? Well, I guess like the Salesforce story that we tried to put together was like what does it mean for a company to have to adjust to the realities of the economic moment, which is, you know, lust growth, focus on profitability, what happens when you lay off your Ohana? And so, you know, I think what we revealed was that. that, you know, it's quite shocking to a lot of employees. It's frustrating. For Mark himself, who's very celebrity-oriented, you know, we brought up a lot of the ways that he had done business, which is, you know, things like signing Matthew McConaughey to this yearly $10 million,

$10 million a year deal. You know, in terms of what their quarter showed, it was that when you make these sort of changes, it affects the company's culture, but it also will improve your business as far as efficiency goes. And so I kind of saw it as, like, an explanation of what was to come, which was a company that's just in a very new era. And the question going forward is like, how do you hold on to that culture if, you know, the business that kind of was the engine behind it isn't the same? And then, look, across tech generally, I think we're seeing, you know, Google had layoffs, meta had layoffs, Amazon had layoffs.

It's just a very different time. The wind seems to be out of the sales for a lot of these major tech companies. And we'll see. Like, I don't want to make any predictions. But I think the culture that has been so. identified with Silicon Valley isn't what it going forward is not the way it it let me rephrase that it's just going to be different going forward and I think you know as a reporter and then people that just cover the industry it'll be very interesting to watch you know how

these companies adjust to the new realities of you're not being you know sky's the limit growth and you can do anything you want exactly and I think that when we look at this type of stuff you know obviously Salesforce is a fascinating company because of the outsized personality that Benioff has, but why I found this story so interesting is it really is the story of so many companies inside Silicon Valley that we're doing these wild things back in the zero interest rate days and now have decided, okay, we're going to play ball with Wall Street and are all following this year of efficiency path. So speaking of year of efficiency, right before we started recording, we just got some breaking news that Amazon is going to pause construction or building on its

HQ2 in Virginia. And this is going to be a delay of the larger phase of the project, according to Bloomberg, which has 322-story office towers in a 350-foot-tall helix, a corporate conference center, and an indoor garden that's designed to echo the spheres, which are these like giant plant-filled balls in Amazon's Seattle headquarters in South Lake Union. So, wow, it's going to be 2.8 million square feet, but maybe it will never happen because I feel like when you start pausing something like this, especially when you're under a new CEO that really has to cut costs, you're just like the chances that you resume at the scale that you planned in a better economy just is just really the probability

shoots way down. So Ranjan, let's just get your perspective on the HQ two pause. What do you think this means for Amazon? And do you think there's a chance that this thing ever starts back up again? My favorite part of this whole story is remembering back to all the things that every mayor in every city did to try to get HQ2 to come to them. If people go back to 2017, you know, Amazon announced that they would have this massive HQ2 project that they would give to, to one city that essentially, you know, whoever gave it the best package and pitch and showered it with the best tax breaks

and went through the entire country. And I mean, there's some, I had actually forgotten the Empire State Building, New York had actually changed the colors orange for one night to show support for the HQ2 bid. And remember the controversy that Amazon was reportedly very close to giving New York HQ2, but then there was actually a,

in retrospect, a pretty well-reasoned backlash to it, and it was a huge little controversy. Yeah, AOC was one of the leaders in it. And I think, like, it captures such a perfect moment thinking back to 2017, where they not only thought they could get away with that, they did. And it was this big celebration, almost. And in the end, you know, there was like inklings again of resistance in New York, in, you know, like the way they approach labor and the idea that should local governments be given? doing, doling out all these different breaks to Amazon.

And it's amazing that now, what is, six years later, almost, five and a half years later, it just kind of trickles into this really mundane construction pause of, you know, a few less helixes or the helixes will take a little longer. I think it's a good representation of the last six years and this entire cycle. Even more breaking news as we're talking, Amazon is now going to close. close Amazon Go stores in New York City, San Francisco, and Seattle. This is also part of its cost-cutting effort. And, okay, so a spokesperson told Bloomberg, we remain committed to the Amazon Go format, operate more than 20 go stores across the U.S. and will continue to learn

which locations and features resonate most with customers. That's pretty interesting. This was a flagship product, but maybe the move for them now is to platformatize this and make that technology available to other retailers. What do you guys think? I mean, it makes sense to me the idea. I mean, I had heard some arguments from people close to Amazon that they had viewed these stores

as basically showrooms for the technology at a certain point, that the idea that they were going to be making a ton of money from just sales in these convenience stores didn't really materialize and you saw that, excuse me, with a lot of their other commerce

you know, brick and mortar commerce projects just didn't really work out. I think they closed their bookstores already, right? Didn't they shut those, what are they call them, the five star? The five star, four star? Four star. Some number of stars that was high. Yeah, they just, those didn't work out. And so it's kind of like this, what is it called?

Checkout and Go or Grab and Go technology. I can't remember the name now. It's called just, it became like, yeah, Just Walk Out. Just Walk Out, exactly. Yeah, the Just Walk Out technology became sort of a showroom for that and anyone who wanted to license it could kind of, they could point to the stores. So not all that surprising to me, I guess. It does sort of affect me personally because it was a pretty convenient lunch option near the office. And so I'll have to figure that one out. But when they say closing in Seattle,

San Francisco, New York, that's basically the game, right? It's not like this thing is going to be flourishing in Columbus, Ohio or something, right? I used to love them in San Francisco. Yeah. One interesting thing to think about, though, is how does this affect competition? Because even in this kind of moment of inflection that we're talking about sales force and everyone's figuring out profitability over growth, someone like Amazon, you know, in the past could essentially do whatever they wanted and competitors would just have to go along with it. But if you are a physical retailer that has kind of dealt with Amazon, you know, attacking your business from a million different angles over the last few years, Do you buy their software? Is this something that, you know, they develop and do you have a friendly relationship with them?

And do they just become another SaaS provider to you while you're, you know, they're undercutting you or copying your products to sell online? Most likely not. Although, I don't know, the technology is so cool that I could see people being interested in it. Let's end the segment. We've covered sales source. We've covered Amazon's breaking news as we're recording. I'm just curious around John if we could get in time, if you want to weigh in also, I'd like get both your perspective on like what the deal is with the market right now.

I know that's a broad question, but I really do feel like my head is spinning in terms of everything that's happening right now. We have inflation that seems like it's done or it seems like it's just getting started and then rate raises seem like they're done or like, oh, maybe the Fed is going to go even higher. And I just think we're still in this period of uncertainty that has just thrown everything for a loop. Every time we're in this period of uncertainty, companies are like less interested in expanding like we're seeing with Amazon or can't really plan for what the future looks like. And

I don't know. I mean, Ranjan, can you explain why we're seesawing back and forth as much as we are and what the state of the economy is at the moment, given everything that we've been seeing? I do think I have an idea. And again, like, as Alex and I we were talking about this earlier, you know, last month's jobs report surged to 517,000 jobs, which almost doubled the job growth from December. Inflation had been easing, and everyone was getting more optimistic. It was up at 9.1% in July was down to 6.4%. But month-on-month inflation was up 0.5%, which was a lot higher than 0.1% in December. So basically, you know, the jobs, the labor market is still not just strong.

but incredibly strong. It's historically strong. Inflation, everyone had starting to get a little bit comfortable, but it's still incredibly elevated. My favorite thing is now the sell-side investor community is trying to introduce the idea of a no landing. Basically, inflation keeps going up, but economic growth continues, jobs stay hot.

Basically, stocks continue to go up. And we've outlined this new scenario, where instead of a soft landing or a hard landing, there's just no landing and we just stick with the status quo. I think what's really interesting is, of course we should not have an idea because all the data, even from a year ago, makes no sense.

2019 to 2021, the data, the patterns that emerge, you know, were so not typical of any normal growth cycle or even, you know, 10, 20, 30 year period, that we're still at a point that trying to take year-on-year data relative to the February 2021 when things were, sorry, 2022, which we're also comparing those to 2021, nothing makes sense. So I think this is where everyone trying to, you know, use the last two to three years of completely, you know, not randomized, but completely chaotic data in trying to use that to extrapolate and forecast into the future. I think that's why everyone's getting confused. And the only

answer at the moment is this really is a situation where no one knows. And it almost seems like yesterday, things were bad. Today, as we're recording, you know, the VIX is down 4%. Nasdaq's up, 2%. Things are good again. Probably Monday they might be bad again. And I think it reflects like this is where every company is trying to kind of find itself, whether it's Amazon, whether it's Salesforce. Yeah, and we're at the tail end of these, hopefully at the tail end of these rate raises. And I wonder, like, okay, well, if this is all as bad as it's going to get, it's not that bad.

It could be worse. But there's always, in my mind, the possibility that it just does end up getting much worse. Do you think that's still on the table, given where we are? Yeah, I mean, there's absolutely, there's a, you know, there's an, you know, there's an, equal chance that things get significantly worse as significantly better. When the prevailing kind of investment bank narrative is no landing that we're just going to kind of go along with the status quo of higher inflation, elevated inflation, but alongside elevated job growth, clearly people are

trying to ignore having to take a bet on either side. So I do think like things are comfortable again, which is good. And I mean, I think the cynicism that there was no way Jerome Powell and the Fed might, you know, orchestrate away or through this has subsided a little bit. But I don't know. I think it's it's it's not time to get comfortable just yet. Tom Duton is here with us. He is a Wall Street general reporter who wrote the story at Mark Benny of Salesforce. It's one big family until trouble hits. We've covered that here in the first half along with some Amazon and some market stuff. We're also joined by Ron John Roy, who you just heard. Ron John is a co-author of margins, which is a great

substack newsletter here with us every week. Ron John and I are actually going to be at South by Southwest. We're going to be talking about the direct-to-consumer industry. If you're there, catch us on the 13th of March. You can find the venue on the South by Southwest website. And I just think I can link it in the show notes here as well. we're going to go to a quick break. When we come back, we're going to talk about OpenAIs, API, TikTok, screen limits, and then people getting robbed while using Tinder. Okay, 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

two million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So search for The Hustle Daily Show and your favorite podcast app like the one you're using right now. And we're back here on Big Technology podcast with Tom Totu's reporter at the Wall Street Journal and Ranjan Roy of margins. Tom, have you been following the chat GPT situation? And I'm curious if you've seen the fact that Open AI has started to release these APIs and when you think of what that could mean from a business perspective of companies being able to build

on top of this API, is that something that merits some hype, or do you think that it's largely going to fall flat? Yeah, I follow it super closely because when I'm not writing about Mark Benioff in Salesforce, most of my job is writing about Microsoft. And so their investment in open AI and integration of that tech into Bing and everything that goes along with it is a super super major part of what I spend my time talking to people about. So I followed it pretty closely. Look, not to like echo the cliche that a lot of people like to use around here, but I think it really is early days with a lot of this tech. And it's probably one of the most hyped hype cycles I've seen in a while. And I'm including crypto within that. I know that

there was a lot of, you know, froth over the excitement of completely redoing our international finance system and, you know, fiat currency. and stuff like him with crypto, but when you talk to people around here about the possibilities of generative AI, they describe it as a literally as a new life form, and they don't really know what it's going to evolve into. So that's pretty hypey. When it comes to like this current release of the OpenAI API, it's very inexpensive. I think that was, you know, there have been releases of their API in the past. You could have licensed it in, you know, GPT3, its earlier model, a number of startups used it. And then Microsoft. This is 10 times less.

than the prior models. Yeah, yeah, yeah. So it's disruptively cheap, and that's going to get a lot of companies that didn't have a huge amount of capital to be able to try it out. And I don't know. I think I have not yet seen a use of this technology in an integrated larger software context that is going to completely upend everything that I knew about the way the industry works. I've seen some cool integrations like, you know, like a legal startup that uses a GPS.

use GPT3 to rewrite contracts, you know, that can generate clauses that a lawyer would then review in order to make sure it's accurate, things like that. You know, there's going to be a lot of talk next week. Sorry to bring Salesforce up again, but, you know, they're going to talk about their integration of GPT, like generative tech into, you know, their marketing software. And Microsoft is going to do the same thing. And there's no question that this is just going to be the topic that every software company wants to market themselves on top of for the next couple of months. But I think

the skepticism that I have around it is like show me, show me the substantial increase in productivity or abilities that users would have that's going to make this as disruptive as people want it to be. It's fine for it to be a cool tool and powerful in many specific ways. But when you talk about the level of disruption that I think a lot of VCs and tech examples, executives want and expect, we just aren't there yet. I'm not saying it can't happen, but we should at least be cautious and point to specific success stories rather than just see the potential there and assume it's like fate accompli.

I am so happy with that answer, Tom, because I completely agree. I think, I mean, when was the last time everyone got so excited about a Google Cloud feature release? I mean, I cannot remember that or Azure or anything else. And now they're literally, this is a change in the available API and everyone's freaking out rather than simply, you know, here is actually the end use case and, you know, here's what we can do with it. For me, I've been trying to think through this one. And this is part of what I'd written about last week where, you know, voice computing as a platform might have been hyped out of existence. Like, do you think the hype could have a negative bearing on the, you know, whatever innovative?

trajectory generative AI could have? Or do you think, you know, whatever is going to happen is going to happen anyways and it will realize its potential and we are actually in early days? I almost would just prefer to ignore the hype altogether, you know, positive or negatively. It's, it's marketing, right? It's just people's desire to see something new and want it to be big. Or, you know, from like a, you know, counterfactual point of view, think that it's not, you know, it's all a scam, which I don't think it is. So hype just kind of distorts the perception of any, any piece of technology. So I guess, I guess the thing that I'm most interested in is like, show me,

show me the things that you're building on top of it. Like, let's see how you integrate this tech into software and do something that is radically more powerful than, than what was capable in the past. And if you can do that, then sure, why not? I, I, there's no question that there's reason for optimism and excitement behind all of this. But I, I, I don't know. Like, the technology will advance to as far as its architecture will allow it to advance. And I know, Alex, you probably had Gary Marcus on here, who's pretty skeptical about large language models.

And yeah, yeah. So, I mean, he, he can speak to that much better than I can on, you know, what are the specific flaws within it. But there's so much money that's going into it from, you know, Google and. in Microsoft and then also startups that are raising hundreds of millions of dollars to further these foundational models that I think the technology will continue to advance whether or not it's hyped but advancing towards what right advancing towards what use case and what business case that's not something that the companies that are advancing technology can actually figure out that's it's going to take startups it's going to take you know users to sort of play around with and figure out and we'll probably

find out, I think within the year, that's a bold prediction, but I'll stick by it. Like, I think we'll find out within the year, whether or not this is as disruptive as people we're expecting, and it becomes like a one year, two year kind of disruption cycle, or it starts looking like autonomous vehicles where we're really talking decades. Well, our good friends and members of the Ohana, Bain, are already working with Coca-Cola on ways that they can implement this stuff in their marketing practice. So I think that... But for marketing practices, right?

It's not generating new formulas for code. of course and actually I would I think that fits very well into what Tom was saying is that how often do you hear about a Bain partnership with any corporation usually they try to hide those relationships until the actual end product is created and they can create you know like results driven case study around it but of course this is one where they came up before they've actually done any work or you know before there's actually any uh any captions written or advertisements generated. So, yeah, I think that definitely captures part of this.

But did Salesforce try to push any messaging around what it could look like in their systems? Because honestly, for me, having been on the sales side of the world, I know Alex says as well, there is a lot there that should be automated that was always kind of not human to start in terms of cold emails and email flows and trying to, you know, lead sourcing and all these kind of things. Were they trying to sell that they're very close? You know, it came up a couple times during earnings as Mike. We're very excited to talk about Einstein GPT. That's their AI label. And sorry for the coughing. You know, I'm not sure when this episode's going to come out, but next week they have a mini dream force like event

where they will be talking, I think, quite a bit about their generative AI. And, you know, There's a lot of people in this game. But I agree with you, Ron John. I think one of the already existing capabilities of generative AI is content creation and like fairly decent content creation. When it comes to marketing emails, that makes sense to me. You could just enter a few parameters and it's going to generate copy. And that's probably good enough to, you know, email out to hundreds of thousands of people. And it's a question of like, does that eliminate jobs?

Does it make the current employees more efficient? you know, we'll see. But I have no, no major skepticism that this technology would be very useful for at the very least marketing. Let me bring it home with this one. First of all, Tom, I'm curious to get your perspective since you cover Microsoft. Open AI is making this available through its API. Microsoft is making OpenAI's API available through Azure. Do these two partners compete in any way or who goes to Open AI and who goes to Azure? And then lastly, for both you, is this API business going to be a bigger business than, let's say, chat GPT itself or even Bing Search?

It's a very good question, Alex. It's one that, not to tip your listeners off too much to, it's one that I'm spending a lot of my time talking to people about because the whole relationship between OpenA and Microsoft is fascinating. It's one that I think we have a lot more to learn about. And as it evolves, I think we'll get more and more interesting because Microsoft has the stake in them, but they're also, like you said, competitive. editors on the API front.

When I was in Redmond a couple weeks back when they rolled out their big new Bing, GPT integrated Bing, their answer to me on that specific question, and this was before, you know, the recent Open AI API release was that Azure Open AI, which is the Microsoft, you know, version of it, that's more oriented towards enterprise and they have other features within that like security and other kind of things that they later. on to just a typical API plugin that they think is more appropriate for big enterprises, whereas, you know, the chat GP, sorry, the OpenAI API API is kind of more oriented for startups. That's their argument. I still see it as fairly competitive. I just do. I just don't see why a company doesn't look at one, the other, and just compare prices. So I don't know. I think that one's going to be a really interesting thing to watch. And then as far as like, you know, this being a business on just API plugins or the actual business of building software on top of it, you know, it's like a picks and shovels kind of thing. I would say, look, if you're looking

at Microsoft, what actually moves their business these days? It's growth in their cloud business. It's growth in Azure. If they can show quarterly growth in Azure, the street is happy. If they don't, they suffer. And so I think you're going to see a lot of companies that are cloud-oriented during this period of hype around AI using this AI moment to market cloud and market their abilities to serve AI needs within the cloud because that's really what drives the business and you know that that's smart that's smart business on their part but it isn't really the potential right that's just kind of like foundational tech that moves along the industry but isn't like the most exciting part of it absolutely I totally agree I think that's spot on

Okay, I want to end with one story that Ranjan and I have been talking about. I know Ranjan has a pretty interesting experience to share. Although the way I'm going to set it up is going to make it seem completely different than what actually happened. But I found this story in Resto World this week, which was so interesting, which is that people who are using Tinder and other dating apps in Brazil are getting robbed a lot. And in fact, nine out of every 10 kidnappings in Sao in the past year have occurred after a date was arranged through Tinder or a similar app, according to the rest of the world. I mean, that is, that's pretty unbelievable. And the thing that really makes these, these robberies or kidnappings possible is the fact that we have quick

payments available with digital apps like Venmo or its analogs in other countries. And, you know, I guess it seemed like, online dating always seemed a little bit if he, I guess, in terms of like, I'm really going to meet this person and I know this little about them. And maybe I haven't even spoken with them. But, but it almost seems like this was the inevitable end. of where this was going. And Ranja, now I turn it over to you to tell your story and give your perspective here. And this is not Tinder related, but similarly, so in 2013, and I'd written about this in one of my first margins posts ever before we had an audience.

And I was standing outside New York City. It was like 12 after midnight, maybe 1 a.m. I had my phone out. I was texting. Two guys came up. One knocked me from the side. The other grabbed my phone and they ran off. now like initially you're thinking okay you know this sucks I was mugged my iPhone is stolen I have

insurance on it I'm like all right do I even go to the police whatever then on Monday morning I check my bank account and $2,400 is gone in three payments of $800 to Venmo and then I put so this is also again 2013 it's before Venmo had two-factor authentication or is even standardized and so And it makes sense that, you know, if you see people out and their phone is unlocked, especially I was in the West Village of New York, Venmo is getting kind of popular around there. You know, you can just grab their phone and take a chance and either you get the phone, but then the bonus of actually having unlimited access to their Venmo account. For me, this was kind of this like inflection point of my relationship with tech.

Because up to that point, undying optimist, I just launched my own startup. Tech can do no wrong startups are the future. And I tried to contact Venmo. I get an automated response. You'll be, you know, like, get a response in 48 to 72 hours, you know, which after you had $2,400 stolen from your account, obviously, is not the most satisfying thing. And at the end, it was actually J.P. Morgan Chase that answered the phone and helped me take care of this. And it really was this moment.

I think that was the first time that I ever started to at least think about, you know, lack of friction, rapid growth, how these things actually affect your kind of day-to-day. And the crazy part is these things still go on. I hadn't thought about this in a while. You know, I just Googled Venmo robbery and still, there's a lot of Reddit stories. Nowadays, unfortunately, it's instead of just taking your phone, people hold you up at gun or knife point and then force you to send them money via Venmo. So I think this whole space is just a reminder that, you know, like frictionless payment.

are good in theory, but some friction is not the worst thing. And I'll add to that dating apps are good in theory, but some friction is not the worst thing. My goodness. The lesson to take away. I think one thing from today's conversation, this might have to turn into a post. It is kind of interesting for me because that was, you know, like thinking about the different eras.

Like right now, everything we've been talking about, you know, Salesforce is. at this inflection point. Amazon's at this inflection point. Mark Beniof is going to have to be a CEO like he's never CEOed before. The last kind of moment like that, I mean, this, for me, it really was 2013, 14, maybe 2015, where I started at least being a little bit more skeptical about tech. I don't know. For you guys, I know, Alex, you were very, you know, a glassy-eyed optimist around technology for a while. Was there a moment that, I'm going to, well. It shifted for you?

Let me push back on that. Now you're nuanced. I feel like I'm more optimistic now than when I started, but I started when I was working for tech. I was working in ad tech. And seeing the underbelly of ad tech made me extremely pessimistic about technology at a moment when everybody was optimistic about technology. So I sort of came in to the beat when I made my move from sales to journalism,

a little bit jaded and a little bit aware of like the bad, the things that could get. can go wrong. And then I think the pendulum swung just a little bit too far towards the negative to make me like, be like, wait a second. You guys understand that these companies actually help people's lives in some cases. Like, you know, it shouldn't be taboo to say that. And that's kind of where I am today. But yeah, Tom, do you want to take us home? Curious what you're, what you make of this. I guess I am. Yeah. I think if you looked at, the coverage of tech companies over the last, let's just even say Trump until a year or two

ago, the biggest fear was that they'd grown too powerful, right? They had swung the election to Trump. They were unaccountable in every way. They were all of these pointless. I shouldn't say pointless. I shouldn't editorialize there. They were very interesting and not interesting hearings in D.C. over how to regulate these companies. No one really has resolved that question at all. And then we sort of saw larger market forces do at least some of the work of decreasing the power of these companies just purely financially by making them less valuable. So I think just being, you know, I'm probably the only person here that's still in San Francisco, which I would still argue is still kind of the center of tech. There is a general grasping around for the next

thing, which I think is why there's been so much excitement over things like crypto, of course, and now generative AI because the platforms that have taken us to this point of great power, Seemed like they've maxed out in a lot of ways. And they just don't know what the next thing is. And until we figure that out, there's going to be this sort of period of searching and almost lassitude on the part of these companies. And so I think no one really, you know,

going back to even just the markets question, no one really knows what to do. The rules that have existed to this point just don't really apply anymore. And they're still good companies. I mean, just financially, right? the big ones are even if you're like super down on something like meta it's still a really profitable company that controls a huge amount of the digital advertising world so you know

you can be critical of them and skeptical of their long-term future but still recognize that they're very good businesses going forward I don't know it'd be stupid for me to predict at all but I guess my old podcast I used to talk a lot about the way the media writes about these things and I think the biggest thing that we as reporters are trying to recognize with right now is how do you cover tech in a downturn? Because we've never really experienced one in like the modern, you know, 2012 and beyond era. And I just, I don't think reporters in the media in general knows how to write about them. And that affects the public's attitudes on them. And it all just leaves us very confused from the tech companies to the reporters to probably the

employees at these companies. So I don't know. If anyone knows the answer, please let me know because I'm just sort of trying to figure it out day by day. Tom, so great to have you on, man. This was great. Great to catch up and terrific reporting, dude. Thanks, man. I hope I was cool-headed enough for your audience. Yes, well, exactly, perfectly cool-headed.

And Ron, John, great to talk with you, as always. Thanks again for being here. Thanks, Alex. And I'll see you in Austin in about a week. That'll be fine. 2.30 p.m. on that Monday, March 13th. Alex and I are talking. Okay, great.

Well, I feel like this was our best. Friday show so far so thanks again Tom for joining thanks again Ron John for joining thanks to all of you for listening it's great to have you coming back week after week and we'll keep doing these they're super fun so stay tuned next Wednesday I'll be on on our flagship edition of the podcast with an interview with Benedict Evans talking about how media and retail are converging we also go much deeper into the question of like what these AI APIs are going to look like so stay tuned for that and then Ron John and I will be back again, either Friday or Saturday next week, depending on our flight schedules to

Austin. And we may even do this live somewhere in Austin, so watch my Twitter account and LinkedIn account for that. Okay, that will do it for us today on the show. Thanks again for listening, and we will see you next time on Big Technology Podcast. You know, I'm going to be. I'm going to You're going to be.