Big Technology Podcast - The Taylor Swift Deepfake Problem, Tech All Time Highs + Layoffs, Quitting Amazon Prime

Episode Date: January 26, 2024

Ranjan Roy from Margins is back for our weekly discussion of the latest tech news. We cover 1) Why nude Taylor Swift deepfakes could be a problem for generative AI 2) Whether the technology slows due to this Taylor Swift episode 3) Google's latest video generator, Lumiere 4) Are Generative AI margins lower than software margins? 5) Why tech layoffs are happening at a time when tech stocks are hitting all-time highs 6) Are media layoffs a result of generative AI? 7) Are tech investors overexuberant? 8) Why canceling Amazon Prime is easier than you might imagine. --- 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]

Deep fake nudes of Taylor Swift are circulating online, leading the calls from all sides to ban the practice. So what does it say about the future of generative AI? Let's also talk about the weirdest tech recovery, where stock market all-time highs are being met with mass layoffs, and why quitting Amazon Prime might not be a bad idea. All that and more 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. back here for another week of news big week of news consequential week of news we're streaming live on linked in once again so you might take some questions from the audience and for those listening on the audio feed we appreciate you uh ron john roy john roy joys this as always uh ron john

welcome we're so familiar no introduction needed alex so um before we get started i just want to share something very quick we got such a nice review uh on apple podcasts from someone whose username is K. Parwani. K. Parwani writes, this podcast is my tech sanctuary in a world filled with digital noise, no tech babble, no smoke and mirrors, just straightforward, insightful discussions that cut through the BS. We asked for the reviews because people who are evaluating the podcast, they tend to use them as a proxy for how many people listened, listened to the show, and whether their executives

should be on. And we've had a couple of really close calls. We had some great guests last year, of course, Brian Chesky from Airbnb. among others. And we want to definitely deliver the top-tier executives to you this year and the way that you can help us do that. Not for our egos, but for the guest recruitment is to do a five-star review on Apple Podcasts or Spotify. Now that I have gotten out of the way, just want to make that plea and say thank you to such a nice review. Let's get to the news of the week. And it's been a bit of a troubling story, Ron Dun, where there's been AI porn of Taylor Swift circulating through

the internet uh basically people using image generators to make naked naked images of taylor and now it's become this huge story was it was it inevitable that we were going to get here with image generation it was inevitable and as i read a couple of places it's not a big deal until it happens to taylor swift and i think this is where the rubber meets the road this is where generative we've known it's going to have to be addressed at some point so what better platform than Elon Musk's X slash Twitter. I'm still having trouble calling it X and who better than Taylor Swift. And I think regulation around generative AI is at some point there's going to be

some kind of platform standards that are needed. There's going to be some kind of regulation that's needed. Most image generators have protections in censorship against this, but clearly lots of people are able to do this. But yeah, we've all been talking about this and we've known who's coming. so it's it's here yeah and you could totally you could jailbreak these uh these image generators and even if there are protections there are ways to always like in i guess inject prompts and get around some of the protections which is going to be a bigger and bigger issue and you're right the fact that

it's taylor swift has now brought everybody's attention and the new york post as it tends to do just so artfully put it it's no big deal until it happens to taylor swift now that you have your attention, Houston, we have an AI-generated porn problem. An oozing societal store, many folks were seemingly happy to ignore until it ran afoul of America's sweet sweetheart. This week, deep fake images of the wholesome singular digitally altered photos portraying her in a compromising sexual position circulated on X to Swifties discuss. And now, this is important. Swifties are wondering how there are no regulations against someone creating fake porn using the likeness of real people and distributing it for the whole world to behold. So, of course, I try to consume a good

deal of media on all sides of an issue. And what I found interesting here was that the interests of the New York Post and folks on the other side of the aisle or the other side of the political spectrum are lining up saying that this is a real problem and needs to be dealt with. Here's Casey Newton and platformers saying generative AI has many positive creative uses and I still believe in its potential to do good. But looking back over the past year, it's clear that any benefits we have seen today come at a high cost. And unless those in power take action and soon the number of victims who pay that cost is only going to increase. That is notable to me that we're seeing this as an issue that is starting to drive consensus. And of course we've seen consensus for regulating big tech across the aisle

and you know it never amounted to anything but when this stuff starts happening taylor swift do you imagine that it's going to be a pretty important legislative issue fairly soon already i mean it is ironic that we've already seen examples of a deepfakes around i mean biden and trump for a long time around in other political races so the future of american democracy and global democracy did not create this call to arms in the way that taylor swift has in the in the last week, but it's still good that it's happening. I think this is the year that the technology has become as democratized as possible

and effective as possible. Just anyone who's used mid-journey version 3 versus where it is now in version 6 has seen how quickly the technology has just exploded and just how effective it is. But yeah, I think going into this election year, this is going to be such an issue. We are going to see certainly,

certainly some very, very viral deepfakes and, you know, that are circulated, that are confusing, or like in this case, I don't think, I mean, I'm guessing vast, vast majority of people who see the Taylor Swift deepfakes are not thinking it's actually Taylor Swift. It's more a very clear coordinated harassment campaign. But overall, it's now and it's happening. But I get one question. You had said big tech regulation. Do you think this is an issue of platforms? Do you think that this is an issue for the tools like Mid-Journey, Dolly, stable diffusion, whoever else, or who gets regulated or who gets controlled or the user? It's a great question because there will be a big movement that will say it's only a problem for the folks that distribute it and the platforms that allow the distribution, which is a great legal argument. But I think ultimately, when it comes down to who's going to take heat for it, it is going to be the tools that enable this to be possible.

Like Twitter existed, you know, despite all of its issues, before this happened, right? This is a new technology that's enabling it to take place. And so therefore, the new technology will be the thing that gets the spotlight. And yes, of course, it will play a role in politics. But I also think that, you know, maybe like an image of Joe Biden, a fake image of Joe Biden or a fake image of Donald Trump, I think a lot of people can can, like you mentioned, pick out the fact that that's fake, the same way that they picked out the fact that Taylor Swift image was fake. But when it comes to creating these nudes, that's the real problem, fake or not. And to me, one of the most interesting things about this is, and the post is right,

it has opened our eyes to the fact that this has been a problem for many others. There was a post that Case Newton picked out that was talking about how on 4chan, they're finding women that are testifying in court and then deep faking them with, out their clothes on. And this is sort of like a way that like they, you know, sort of revel in the technology. And that's a huge problem. And I think that like my eyes are open now in particular about how widespread this already is and how and where it's going to be. And maybe it's not going to rise to the point where it's going to throw an election, but certainly to the point where like everyday people are going to have to deal with the fact that nude images of them are circulating

deep faked or not. That's a problem. No, that's that's a good point. I think that distinguishing between disinformation and harassment, and when this is clear that this is pure harassment, not disinformation, basically, and the example you made, which is terrifying, is pure harassment or intimidation, yeah, that's actually, I mean, a really good distinction that I hadn't thought of as much, and probably up to this point, has not been the center of the discussion and needs to be more so. but yeah this is this is a tough problem and it's and it's also tough because again i'm like the first to say that this technology is incredible and is going to have so many positive and interesting and amazing use cases and i love talking about it and using it so yeah this is going to be an interesting year on this ronjohn this is such a new technology also and so it's it's coming into an environment where there are broader awareness of the downsides of technology.

And maybe in an instance like this can alter its trajectory. Can something like the Taylor Swift nudes actually set back progress in generative AI? Or is that something that is still so far-fetched given the direction of technology? That's, okay, one thing I would take issue. And I think any time in discussions around regulation of technology is the phrasing set-back progress. Because I think, you know, is this progress, Taylor Swift nudes, deep fake nudes being circulated? Like, I think a lot of the times language around regulation, especially from the technology side of the industry, especially the ones benefiting or profiting, is that everything is progress and you'll be setting it back. I think it's, I guess, in a way, it's a good thing because you can imagine seven to 10 years ago, no one would have even really thought, like this might even happen and everyone would just look.

look the other way and just let things go. Whereas I think we're in an environment now, as you said, where at least everyone is a lot more conscious of risk in technology and at least willing to think through how to work with it and work to prevent it. But I don't know. Let me attach this specific definition of progress then. Progress in terms of, okay, we can like talk about like the broad definition of progress.

I'm talking specifically about building better technology in this vein. Yeah, yeah, no, will it set that back? Yeah. Progress in that way. Better technology, meaning like if mid journey version eight has more safeguards implemented to prevent. I got to ask, I got to get the real answer here though. Like yes, of course,

but I'm talking about more sophisticated. Like we have been on an innovation curve with this generative AI movement where we've seen this stuff improve its capabilities. So yet I'm not. not saying we shouldn't build for safety. I'm just trying to say, like, can this be a screeching halt moment? Or are we still going to see folks continuing to build this technology? I don't think this will be a screeching halt moment. I think this is going to be, it's good that these, it's not good that this is happening, but it's good that it's brought it to the forefront and the discussion. Because again, maybe there is some law around. I mean, there already are definitely laws

around harassment. And if you generate it and distribute it, not the platform, the user, that can be, you know, maybe there's actual legal recourse that can be taken and is like very structured and created in a way that, you know, the legal system recognizes. So I think, I think it's going to not bring it to a screeching halt and will be built, will be built in a better way. Yeah, I think all the companies thinking about bringing out the next generation of this stuff, had how we're watching this now and being like are we are we sure are we sure because this stuff is moving quickly and we spoke a little bit last week about how video generation is going to be the next thing and then like literally two days later this happened this week google released a

video generator called lumiere uh which is a i video generator uh this is from ours technica does a great job of creating videos of cute animals in ridiculous scenarios such as using roller skates driving a car, playing a piano. And one of the things that I thought was so interesting about is how it could alter. You like, you like, it can alter existing video. So you say, you know, make that person's white shirt black or make that person's, you know, gray hair blue. And it will be able to do that just with AI, which is unbelievable.

So we talked about how this video generation stuff is really going to, I mean, if you thought, if you think bad images of like, let's say Taylor Swift, are causing a problem, just wait till the videos come. If I may rant about Google for just a moment, they did not actually release Lumiere, and we'll definitely get into this in a segment later. They released a paper, and as they often do,

saying that this capability will be possible. I think it's really reflective of how Google has approached product development in generative AI overall, just a small rant that'll come back in this episode. But yeah, I agree video is going to be a major area but video is still far away video if you've used runway ML if you've used the video generation capabilities that people can actually use at this point there's still a ways to go so I think photos are still going to be where the where the like kind of behavioral norms

legal norms all these things are kind of set it would be interesting to get someone who's like working on training some of these AI generated videos to come on the show I'm just kind of curious they must see all sorts of in the in the development process they might see must see all sorts of like i don't know fun house hell that these video generators are created i i've worked on i've trained a stable diffusion model and like on custom images and stuff and yeah it it's wild and weird and especially this was about like a year ago so it was i mean it's progressed very quickly since then but you know that's like the 12 fingers eight hands 10 arms that kind of stuff was very common before, which is why I think we do have time.

There is a window here, but I also agree it's, I think the point you made, the people create, someone working at Mid Journey is a product manager, someone working at OpenAI on Dolly, like this Taylor Swift situation will make them at least think, which is at least a start. It's at least start versus I feel there was probably like, you know, a three to four year window where people probably did not, like almost willfully ignored potential use cases of what they're doing. It is kind of sad that it takes something like this to like make them pay attention. Like you would imagine that the idea of people being AI generated naked after appearing in court would be horrifying enough. But I guess it takes Taylor Swift.

Larger statement on society and culture. And look, we're here spending the first 15 minutes of the first 15 minutes of the, the show talking about it when it was Taylor Swift. So I mean, where is she going to be sitting at the AFC championship? That's all we know in the box. That's for sure. You got the chiefs or the Ravens. I'm going to go Ravens. I also think if Taylor sat in the cold, could you imagine how powerful that would be? Could you imagine how? Nothing would bother her. Nothing would bother her. The cold of the people, Taylor, I mean, with bodyguards all around. I understand this is like a case in point. that being too close Jason Kelsey shirt off in the among the people has a different

different you know wherewithal but but yeah I mean he's a 300 pound all the way what about you what about you Ravens or Chiefs I think my Super Bowl is going to be Chiefs Lions let's see how it goes yeah I'm I'm lines this year I'm rooting strongly for the Lions Detroit you know it's a it's a feel good story I mean the coach is amazing bite the kneecap off guy you know potentially taking Detroit to the Super Bowl. We're going to get up. And on the way up, we're going to bite a kneecap off, all right?

And we're going to stand up. And then it's going to take two more shots to knock us down. All right. And on the way up, we're going to take your other kneecap. Anyway, before we get too deep into the sports stuff, let's talk quickly about the business side of GenervaI, because there was a very interesting story about anthropic. Like you and I are always trying to determine, like, how much of a business this is. Will margins come down, et cetera, et cetera.

this is a story from the information anthropics gross margin flags long-term AI profit questions okay it's it's a bit of a jumbly headline but basically it means that they're not making as much money off of it as as other technology and this is interesting so it says new data show that profit margins for startups may end up lower than for existing enterprise software firms just talk about AI startups right after paying the cost of customer support and service to power its AI Anthropics gross margin, so gross profit as a percentage of revenue, was between 50 and 55% in December. And this is according to two people with direct knowledge of the figures. That's far lower than the average gross margin of 77% for cloud software stocks. So we are looking at the fact that

there are so much money involved in running these models that the margins are fairly low. And it's interesting because, or not failure, about 55 is still pretty good, but not as high as traditional software. And it does make me wonder a little bit about like what is the, what is the business future of this? I mean, think about all the billions, trillions may be invested into AI. And if you can't make a lot of money off of it, does that eventually come back to roost? I thought this was, this was such a good story and a good point. Again, every listener, remember, average gross margin of cloud software stock 77%, Anthropic reported 50 to 55, and 50 to 55% gross margin. You can see that in a good retailer, someone actually making clothes.

So, you know, you're getting into a very, very different space than traditional software. And it really got me thinking around how does generative AI scale? Because we know that generative AI is a more resource-intensive process. there's definitely hope that over time, again, as this technology advances and improves, the cost per query will come down, the way things work will come down. And, you know, this will all be the right models will be used for the right use cases. Because again, do I need the full power of GPT4 or for Anthropic the latest model of Claude to do simple text queries or, you know, generate like 10 email subject lines?

Probably not. So maybe that's one area where you can start to see some more cost efficiency. But overall, is this going to look different than traditional software? And I think it raises a really interesting question around that, that is this a new hybrid where the cogs behind technology are no longer just kind of infinite scale software like we've seen in most other industries where it almost looks more like, you know, at Tesla or Airbnb or someone else calling them a self's a tech company, but actually having a lot of underlying costs. Maybe it looks more like that.

And what does that say about where this is all heading then? I mean, it's still good. The valuations are, it says the valuations are insane. Actually, I think even more so, because these are not even being valued like cloud companies. These are being valued like COVID era, whatever Peloton, work from home, crypto. everything. So, so I think, you're in trouble when you're in Peloton, COVID territory. Yeah, when you're in Peloton COVID territory, raise the flag, you know, but yeah, I think, I think it says very clearly that valuations are out of control in this space because, again, it's, it's one thing to say this is a pure traditional software play that's going to dominate traditional software,

But if you start seeing that the underlying economics are different than traditional software already, then those like 50x future sales or whatever they're trading at right now definitely look a bit, a bit rich. Yep. And speaking of COVID-era valuations and market madness, can I briefly tease Wednesday's guest? Please, please. Okay, I'm going to do it. Vlad 10 of the CEO of Robin Hood is coming on. So we're going to have such a fun conversation. I can't wait.

So folks, stay tuned for Vlad coming on Wednesday. It should be about 6 a.m. Eastern that I dropped the episode. Just for listeners' context, I do not know ahead of time these guests. And Alex amazingly weaves into every conversation. Somehow, I tee him up perfectly to introduce the guest that's coming. Thank you so much. So, all right. Speaking of the economy, very interesting moment right now.

And I really, I think we're going to just have to figure out what the heck is happening here because it's so confusing to me. We're seeing all-time highs in the stock market and not just all-time highs in the stock market, but we're seeing all-time highs in tech, which is powering the stock market. And yet, it looks like 2024 might be a bigger year for tech layoffs than 2023 was. I would understand if so many of these cuts, and let's just talk about them quickly, we saw that Microsoft is going to cut 1,900 people from Activision. The Salesforce just announced a layoff.

We talked about the ones at Google. We've talked about ones continuing at Amazon. We're already outpacing January 2023, which is hard to believe. And courts says that we have 24,000 layoffs just this week in the tech industry. Why in the world are the tech companies company's performing so well and cutting so deeply.

So there's a really good article in the Atlantic from Andy Lowry around layoffs being contagious or the idea of copycat layoffs that I thought was pretty interesting. Yeah, can you explain that? Can you dig into that a bit? Yeah. So when a company lays off and their peers are not laying off, it gives the impression that your company is potentially in trouble or something's going wrong. When your competitors are laying off people and it becomes an industry trend, that is exactly the moment that not only if you've been thinking about laying off anyone, you do it, it almost looks bad if you are not laying off people.

Because at that point, like right now in the market, it started with year of efficiency and everything else last year. Layoffs not only have become normalized, it's almost a show of strength by tech CEOs and most of these firms. So I think it's clear that every leader has the incentive to layoff right now and in some ways is, again, incentivized to do it. And I think we can definitely discuss should they be doing it, who should be taking responsibility for the decisions being made that were made in the past few years. But it's clear this is going to continue. I mean, how do you do it? Like, okay, so you said maybe we should. Let's do it.

Like, let's talk about it. How can you lay off so many people when the valuations? are tonight all time high because you hired too many people during the last couple of years but isn't the market telling you you didn't if they're putting your stock at an all-time high well no but the market is still just trying the market just cares about your revenue sales growth ebida profit all this what i'm saying so if the stock market isn't punishing you for your costs it could be better well actually hold on but the the other major point and this is one thing that i know and i know and I will be a bit controversial here is I don't have the greatest sympathy for large tech firms

and employees at many of them. Because over the last number of years, I heard firsthand endless stories about people very, very generously compensated, barely doing anything at a lot of these firms, that they did become bloated. They did become, you know, just like kind of, you know, rest and vest or just places to relax and hang out, do a little, do side projects and get insane compensation packages relative to most people in the world and even most people in tech. But I think where it gets interesting is at what point does that hiring bloat negatively affect the actual work being done, the product

development pipeline? And if you can imagine, those additional layers of bureaucracy and complexity probably slow things down. Like Google, going back to what we had said earlier, Google has been a disaster in terms of product rollout, especially in the generative AI space. I mean, Bard is a mess, how that works within their existing products. Meanwhile, Microsoft has just been on fire. You know, is that because there are too many people?

I mean, that's what Mark Zuckerberg and Meta said. I was about to say, you're sounding Elon Muskish. I know, but this is something I will agree with Elon Musk. to an extent. But I will agree more with Mark Zuckerberg in the sense of, you know, culturally it changed the company. And then again, remember, it was in their year of efficiency that they launched threads in like how many. It was like three months. There was a great piece. I remember reading about the entire launch process. Like they got to work. They cut things down and really focused and started executing very well. They revitalized their entire ad business.

again, while downsizing and becoming more efficient. So I think there's something to be said where hiring bloat, even if the market is allowing for it, still actually will have negative long-term implications on the company, both culturally, in terms of actual product efficiency, development, all these things. So let's accept your argument. Why didn't this happen in 2023? Why did they wait until 2024? Was it that they were so slow that they couldn't figure out who they wanted to cut for a year?

this is like we're going to see more cuts this year than last no well one we did see many cuts last year i think that uh quartz had the graphic that cuts this year are outpacing on average for january every month from last year but still are just only slightly higher so there was plenty of layoffs last year and i do think it'll continue but as you said these companies have been running slow You know, these companies, there is a lot of bureaucracy and work within this, and it's not like you're at a early stage startup where hiring and firing are the fastest things that happen. You know, these things do happen slowly, but going back to the contagious copycat idea, now there's all the appetite in the world. Again, should Sundar and other leaders take more responsibility for the mismanagement or the over? hiring. I think that's a reasonable question. But is it the right thing to do for the company

at this moment? I think for a lot of these companies it is. Let's talk briefly because it involves like one of the themes that we talk about here. Let's talk briefly about the media layoffs, right? 115 people cut at the LA Times, I think 8% out at Business Insider Sports Illustrated, effectively demolished. We know there have been layoffs at Condi Nest. I mean, I could keep talking forever about the media companies that have laid off. My old employer, BuzzFeed News, no more newsroom, although that happened mid last year. I think there's a misnomer here that people are saying that this is because of generative AI. I just don't think it's like people have gone to generative AI to get their news. It seems to me that it's just like broader

business mismanagement. Can we agree on that one? I, well, one definite distinction for anyone listening is that media layoffs, I have a very different, at least, empathy for versus kind of like big tech layoffs. Because again, it's not like people's lives were super comfortable beforehand and, you know, versus a lot of the big tech employees. I think within the media industry, it's tough, it's been tough for a long time and it remains tough. But I agree. I don't think it has anything to do with generative AI. Maybe, like, if anything, it'll be used as an excuse by management to push through layoffs but I think this just still goes back to the class the business model problem that's plagued media for the last 15 years yeah I agree I just think they they

spent two money bills came due and I mean you're also like in the case of LA times relying on a billionaire to keep funding you and I it's you know maybe that works for a while but it's always a difficult position to be in to rely on one person's whims to decide whether you can fund a news or not. And then something like should Sports Illustrated exist is a it's a tough one because it's just, you know, so such an iconic brand that everyone has been around for so long and meant so much to America. But but does the athletic or whoever else have the same, you know, right to become that iconic of a sports brand? I think it's still capitalism. It's still open. And the, you know, Sports Illustrated for a long time, especially after the spin-off from, I believe it was Time Warner,

I mean, has not been in the greatest business situation or did not pivot online as well as it could have. So I think at that point, at some point it was inevitable. Exactly. And I would say that, you know, yes, Sports Illustrated did use Gen. VIII, but that is to me a trailing indicator of the fact that they had business problems. It's not like they figured out Gen. They're eye. It's like a desperation move at the very end of the journey. Do you remember when BuzzFeed's stock popped? I think it was like 35% because they put out a press release for generative AI. I think I do remember that.

I agree. That's a good right now media companies, when generative AI comes out is like that they're very publicly using it or using it at scale, it's a trailing indicator that things are bad. I think some companies are probably very smartly working on how it's going to augment their processes and workflows but but the ones when they the ones that are doing it too fast are definitely the ones that are in trouble we did get um though an incredible resignation letter from uh ross levinson who uh was the CEO of arena group and then he went to the board he was basically the person that was i think he was held accountable for a lot of the sports illustrated

scandal stuff he uh he writes this the members of the board take their fiduciary duties and responsibilities seriously. The company's decisions regarding operating expenses, strategic transactions, or otherwise followed thoughtful process and deliberation, oh wait, hold on. What does he say? Oh, this, sorry, he says, the feckless actions and the board's inability to stand up to the demands

of a minority shareholder and his two board representative has placed the company in severe distress. And watching what is transpiring in real time makes it impossible to continue to serve today's obliteration of sports illustrated storied newsroom and the union busting tactics is the last draw these actions and the inaction of this board are illegal riddleable self-dealing and will almost certainly lead to shareholder lawsuits and my more than 30 years inside of public and private companies i've never witnessed more negligence in my career that is pretty spectacular given ross levinson it's not like he's been the most

you know like of the people media executive yeah known he's been a known as a pretty kind of like high up cutthroat business guy so for him to write that i think that says something about what's going on i mean on the positive side we are seeing that in two areas right both the economy and the stock market things are looking up in a way that sort of have exceeded people's wildest dreams first of all this is from the wall street journal what we're recession growth ended up accelerating in 2023. The U.S. economy grew 3.1% over the last year, defying projections of a recession as a resilient labor market supported strong consumer spending. People are saying that this is that soft landing, so that's great.

And then we also, I mean, we saw all throughout this week, all-time highs in the S&P 500 and of a number of companies that we follow here. So I guess you could look at that as a very good sign for where we're heading this year. Yeah, I think that probably the biggest conversation going into the election, I think is going to be like, is the economy good or not? And this is a perfect example where media layoffs always have a much bigger media impact than other industries just because people are very, you know, already have reach and can say, I was laid off and we'll, you know, find readers and it'll become more of a story. And other writers will, journalists will write about it because it hits so close to home. So I think the scale, and this is, you know, is it a recession? The vibes are bad or is the economy bad?

I think it's going to probably be the most ongoing debate over the next year up to the election. Yeah. Okay. And where do you stand on that? It's a tough one. It's a tough one. I think like, one one one one one. One thing I was actually thinking about what's tough about it it's it's actually good one of a bit but here's the thing like inflation and how it feels i've really and i've been having so many conversations with friends and other family and stuff where everyone's like you know i still see inflation everywhere and it's a reminder that a decreasing rate of increase of inflation does not feel good that like inflation still is high relative to where it was before your grocery bill is still significantly higher things cost more so like

it's one of those because i studied economics undergrad and you know like learned all this stuff theoretically but then this is for me the this has been the first genuinely inflationary period i've lived through that i know so i can remember and uh like watching it how it plays out because it doesn't feel good when inflation goes from like 8% to 3% because it's still that that 8% inflation is still there is just now increasing at a slower rate so which is feels very theoretical and intellectual but in real life your milk still costs more and it's still costing a little more every time you go let me ask you this ronjohn whose fault is this okay because on one hand corporate profits and the stock market is about are in as about the best

ship as they've ever been, right? So on one hand, you could say corporations took advantage of a moment of stimulus and need during COVID and raised prices and they all and are, you know, reaping the reward and causing some of this inflation, right? Now, beyond the supply chain stuff. I'm talking about strictly from a corporate profit standpoint. On the other side, you know, we were just, uh, my wife and I, we went to see the Gutenberg show on Broadway this, uh, this week. And we were the standing room only section by the way a great life hack in new york if you can go if you go standing room you can see a show for 40 bucks as long as you can stand through through the show and you have great sight lines but someone we were speaking with was talking about how like they were

charging like 25 dollars for a drink in Vegas and something like 15 dollars for a drink in the theater and i'm like well they'll just keep charging it as long as people keep paying it like on one hand it's the price gouging from the companies but on the other hand it's like As long as we allow them to do this, they'll keep doing this. I mean, I guess it's like a broader market question, but who do you think the culprit is here? No, I mean, I think it's everyone starting with once you add in some trillion dollars into the economy of new, you know, new money that it's going to be spent somewhere and then people will have it. So I think, obviously, it's started with ZERP and, you know, stimulus. but then obviously corporations have taken advantage of that as well as they would and should.

And so, yeah, I think it's a tough one because I don't think blame is the right answer. I think, you know, what are you going to do? It's always my solution. Yeah, but that's the thing. It's everyone's fault. It's everyone's fault. But also, and I agree, if you don't want to, even going out to restaurants in New York City, it really is the point where, I mean, I've gotten to just you go.

out less because like you go to a meal and when you're spending you know like 50% more than you used to spend and the meal doesn't feel as good or doesn't feel like a premium thing then you go to less of them and and at some point that will you know flow back into economic statistics but right now we're still at that we're still you know feeling the effects of people are willing to spend because there was just more money interesting so now when we look at at the stock market. I mean, you could understand why people are feeling positive, but a big question, especially on CNBC this week, like right before I came on to talk about Netflix earnings, there was a big discussion of whether the market is over exuberant. And you are looking

at like a very frothy, it feels frothy, right? Like all-time highs in this kind of uncertain moment where everything needs to be perfect to sustain them. Company like Netflix, which I was on to talk about I mean doing good on earnings like adding 13 million subscribers which is excellent maybe like the second highest quarter of ads in its in its history but also trading at like a 35 times forward price to earnings multiple I mean that's crazy right I mean it's it's a media company to go 35x so do you think that the stock market is kind of getting ahead of its skis on this one it's tough but by the same token there's so many stocks I was seeing some chart around that like what exuberance and you know so many of the poster children of the

covid years or even before down 70 percent 90 percent from their highs so it's overall obviously the tan mama Tesla Apple Netflix Microsoft alphabet and so on and that or the magnificent seven yeah are have driven been a big driver of those gains but also this the increase was not just kind of like these are all companies that are in strong positions right like it's not it's not like their complete fluff or froth they're in strong positions as you said Netflix which has been questioned many times like how well they're executing on the ad supported tier of the business has been pretty impressive so that shows an entire new avenue of growth they're going into gaming they're you know they're innovating they're they're progressing so in terms of future growth

it could it there's a story there um i i will say i actually feel this is less over exuberance than certainly some of the past cycles and that there's a real story here hopefully i didn't just jinx the market completely right there now we're toast so i'm jim kramer right here i just did it exactly so listen there's something else that that has happened when i was listening to the compound in france you know which is a show that we like here i've been on a couple times um they were talking about how this moment it's you have so so here I just saw this that the S&P 500 sectors wait in the index of the technology sectors weight in the index just crossed they're above 30% for the first time since 2000 so technology sector above 30% in the S&P the we thought that higher

interest rates and maybe this was just me but we thought that higher interest rates were going to hurt the tech sector because they would emphasize profits and not future growth, and that's not really the bag of the tech sector. But what's actually happened is the big tech companies have thrived in this moment, while some of the smaller companies, like I think the Russell 1000 is trading 20% under its all-time highs, which represents like some of the smaller cap companies. And what they were saying on the compound is that those smaller companies have a harder time getting access to capital than the bigger companies.

So it's an interesting moment where like in a moment where rising interest rates you would think they hurt big tech actually they benefit big tech disproportionately than the small guys. So low interest rate benefits them high interest rates benefits them. I mean we're you know there's it seems like they are impenetrable. Well no I think the thing that happened was generative AI and the AI hype they all were well positioned for and have capitalized on that so that becomes part of the growth story. So then you can that with cash being cash machines and profitable and not needing the same access to capital or having being so big that they have easier access to capital. Yeah, I agree. It's definitely if we thought high interest rates would diversify the economy more, that definitely has not been the case. But again, what I see different now is with higher interest rates, the fraud, the peloton during COVID, the stories are not happening. And that's not where the action is the action is in you know highly concentrated highly profitable trillion dollar gigantic companies that have a growth story for what that for what that means for the overall economy and

vibrance and democracy you know there's debate there but they have a story i'll give it's a big technology economy huh yeah yeah why you named it and why you name the publication exactly so much to do a podcast about these things um yeah so rounding out the this segment, I just, this is going to kind of blow up our transition, but I forgot to mention this and it's actually this crazy thing that happened this week. So, you know, the Washington Post, which is owned by Bezos, like speaking of all the layoffs, there was a story on the Washington Post homepage that said something like billionaire funding is an idea, isn't ideal, but journalism needs it right now. And then you clicked on the story and the story was editor's note

And the body of the story was this file was inadvertently published. Wait, really? Yes. It was crazy. I couldn't believe what I saw. I wonder if someone was laid off for that one. Jesus. All right.

We're talking about years of efficiency. Why can't we have a year of efficiency on our own? When we come back from the break, we're going to talk briefly about the merits of subscribing to Amazon Prime and why, as I recently argued, in big technology. the newsletter might be time to unsubscribe. We'll be back right after this. Hey, everyone, let me tell you about The Hustle Daily Show,

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right now. And we're back here on Big Technology Podcast Friday edition, joined as always by Ron John Roy of Margins. So Ron John, we talked about this briefly on the show last week, but why don't we talk about it this week as well? Because now that I've written about it, I feel like really amped up and a believer in my argument. So my story this week in Big Technology is I canceled Amazon Prime and you probably can too. And I guess this is building off of a series of hot takes that I've dropped to start the year. And I will return to more AI coverage after this. But I guess these kind of built up over the New Year break. And I had to pump them out. I mean, why have a newsletter if you're going to keep your hot takes to yourself?

But basically, my argument here is that I, along with many other people, came to see Amazon Prime as indispensable during 2020 and 2021 amid the lockdowns. And the idea that, you know, in person shopping was closed for good chunks of time and you could get things delivered that day or the next day or two days later with prime solve that problem and made it an essential service but when the ftc started to talk about how it was so difficult to cancel prime i tried it and i actually did cancel prime and then it lapsed and i said okay i'm just going to wait and see what happens here and i waited and i said okay actually i don't need it because as long as my shopping cart is over $35. Amazon is going to ship those things for free to me anyway. And, okay, I have to wait an extra

few days. Who cares? And then, okay, I lose Amazon Prime, but I also have Max at Netflix. Like a lot of people, I had multiple subscriptions. We all know. We don't need all those. And so now I'm happily off of Prime. And I argue in the piece that by and large, it seems like I would, I would guess, and I didn't write this down, but I would guess half of the 100 million people, of the 200 million people who are prime subscribers don't really need it. What do you think? No, this is, I love this. And so I've had my own little experiment.

I am too cowardly to actually cancel Prime out of fear that my wife would destroy me. Because I actually, what has happened in the last couple of months? So last year, I was traveling a lot more for work. And I got the MX Platinum to get some lounge access. And one of the benefits is Walmart Plus for free. It's like 15 bucks a month. I think it probably costs around the same as Prime. So the last, basically a couple of months ago, I started trying to test, can I only shop

on Walmart Plus and not Amazon? And I admit Amazon I shop on a lot and have shopped on for years a lot. So like, you know, all the things that I buy on Amazon, if I go to Walmart, can I buy them and buy them and get them in a reasonable time frame off in one or two days? And it's been fine. It's been totally fine. It's equivalent in terms of assortment, equivalent in terms of delivery. You know, so I think Amazon already on the e-commerce side has competition.

I think the video side of it is also interesting. I've just been watching Reacher recently, and I've binged it over. Have you watched it? No, not yet. It's on Amazon Prime? Yeah, it's on. Oh, yeah, sorry. Of course you have it then.

Yeah, yeah. Not exactly the pinnacle of prestige TV. but an entertaining, uh, entertaining, uh, entertaining spy show nonetheless. But, but yeah, I really started to wonder, whereas if you asked me a year or two ago, like the Amazon Prime bill yearly subscription you would pay for before anything else. It was such a part of just living that like, I think a lot of people are going to start asking that question. The moment that question gets asked, that's huge. Because again, Amazon Prime customers, I think I'd read, it's like they on average spend $1,400 a year, whereas a tip of non-primes customer spends around 300. So it's like

almost a 5x multiple of how Prime locks you in. And we know it locks you in. Obviously, they're adding more and more to the bundle, the NFL, whatever else. But the moment that with these kind of things that feel like, you know, at a time, if you were not on Facebook do you even exist socially and then people myself included deleted Facebook and then actually you still have friends and still know what's going on in the world and suddenly it's not indispensable so I think so yeah the moment that question even enters people's minds it's big trouble for Amazon exactly and I still think most people will hang on to their prime subscription but if a certain large percentage left especially they added 50 million people during COVID

like those people didn't need prime you would imagine beforehand they signed on and a lot of people have forgotten like I did that you could actually get stuff shipped for free and that's been nice because it's really limited these Amazon impulse purchases that I would make so that's been fairly good and also like it does it does take a little bit longer but not that much longer for stuff to arrive so without impulse purchases how is the U.S. economy going to grow Alex it's the U.S. consumer that drives the economy and if we are not impulse shopping what's left this is why i think a 35 multiple for netflix is wrong all right that's fair that's fair but there are there is lots of great television out there we um you know being limited to max well very tough life but watched the entire

sopranos since october and that show is incredible have you seen well i oh yeah no i watched it Brilliant. Durr, as it came out and remember waiting for the finale that whole week. But one good point on that is I, for the last three years, let's say, maybe it actually last three or four years, any new subscription service that was launched for streaming entertainment, I probably subscribed to. And all these companies were, you know, launching $3 a month, $6 a month, first six months free and very clearly trying to get you hooked into their eco-eco.

system. But it's only recently that I really have been questioning what can I cut. I still haven't cut anything and still have most of them. But I think that question is going to come up because of price increases. And then you're right at a certain point. When I'm looking for what I want to watch, I have no idea where to start. I get lost versus if I had fewer subscriptions than it narrows down your choice and actually helps you in that journey. Oh, yeah, we've done, we were really plowing through the max. We've done all of Game of Thrones, which was incredible. Okay, so you just didn't watch any of the biggest shows of the 2007.

Well, listen, before I got married, I used to watch a lot of sports, and now I'm, like, actually watching series. So all sopranos. And now we're watching, we're about to queue up the wire, which I have watched before, but I can't wait to watch again. It's a classic. I could do a wire rewatch. I can think, yeah. Why don't we do it on the pod? Spinoff, yeah, exactly. Big technology spin off. By the way, these, these show podcasts are very popular. Just do one, you know, recap after every episode. People love that stuff. Maybe, maybe. I'd be down, Ron John. You've heard it here. Wire, rewatch, Big Technology Spinoff. Love it. By the way, just got a text. Flexport is going to lay off 20% after it raised 260 million from Shopify this week. 20%. Wow. Nearly 20% of its work.

force and they just laid off a lot of people so even beforehand after the Dave Clark thing happened so I'm still amazed Shopify how public they were on that investment as well that you know it's a company that's still trying to kind of find its footing again after being a Peloton COVID poster child but but very strong business overall but to kind of just very publicly make a big flashy investment like that was interesting But they've always, this is the thing, they were always competing with Amazon on logistics. So that could be an alliance that happens.

So we'll see. We have Ryan Peterson scheduled the Flexport CEO to come on next month. We're supposed to have them around New Year, but he was doing a lot of media and I said, let's wait. So it actually might be a great time for us to speak with him about it. Maybe I'll cancel my Amazon Prime in solidarity for the alliance. Exactly. Just wait. There's going to be like Shopify Planned.

or something, but it's all these individual merchants. Ooh, wait, Shopify Plus. Yeah. Okay, all right. I'm in streaming entertainment as well. Fast shipping from a curated assortment of suppliers. I think I'm in. I think you just branded that perfectly.

Gailed it. All right, everybody. Well, the big technology podcast brought to you by the future Shopify Plus has been proud to bring you this episode. Seriously. Call us, Toby. Well, anyway, this has been great. We'll be back next week to break down the news.

Ron John, thanks so much for being here. Have a good weekend. Have a great weekend, everybody. And we'll see you next time on Big Technology Podcast.