Sharp Tech with Ben Thompson - Facebook is Dead; Long Live Meta, Does OpenAI Need to Log Off?, Questions on Bubbles, Blackberry, and Bell Labs

Episode Date: August 15, 2025

Ben and Andrew discuss a monster earnings report for Meta, the mechanics of how they got there, and the newfound trust the company enjoys from investors. Then: Reactions to GPT-5 and subsequent updates from OpenAI, the strategic logic of the changes, questions about OpenAI leadership, the AGI race, and prompts to engineer the right LLM tone. At the end: A question on bubbles and the implications of our current circumstances, Apple's interests vs. America's interests, Blackberry's thin client comeback, a few fun Bell Labs facts, and Google as slime mold.

Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing? Doing well, Andrew. How are you? Back in the home studio, I see. Indeed. Back in the home studio. A little disappointed because last week we tossed around the idea of GPD 5 just replacing us

and we all just get to hang out and let the AGI take over. Oh, that's right. We are here. I guess that's the news itself. We are actually recording. You know, back to the podcast, minds, at least for another few weeks here. But it is good to see you. And we have a lot to get to.

A busy week on Sertecre. We're not even going to hit the NVIDIA news, but you wrote an article on Thursday. Facebook is dead. Long live meta. And so that's where we're going to begin. Yeah, this was a bit of an accidental article, actually. It was an update that I converted to an article. It's been a very busy August, like much more, much busier than usual to the extent that I'm like two weeks behind and covering meta's earnings.

And I was thinking about it when I was writing, I'm like, man, there are scenarios where it would have been pants on fire, five alarm fire to make sure I write about these earnings because the company's blowing up. And it's always the previous times, like I remember when the 2017, 2018, Like when stories was out there and they had way more inventory and their price spread dropped and like it was the first time they're or not the first time. One of the many times their stock imploded. And I remember being in Wisconsin and being outside in a beautiful summer day, it'd be like, this is ridiculous. I need to write about this. Drop everything. Right.

And so it was sort of a meta observation that it was okay for me to wait two weeks to write about these earnings, which were obviously spectacular because they were. fine. Even though they're spending all this money in AI, it's sort of not a big deal. And that sort of ballooned into, wait, there's actually a larger sort of observation in here. So there's a bit of an accidental article, but I actually thought, you know, it was worth fleshing out a little bit larger that I originally planned starting out with. And so, yeah, that's why we, we have an article on Thursday, day of the podcast, no reader emails. You're you have to come up with questions all on your own. Exactly. Well, and it's interesting. because I read the article and initially I was like there's nothing all that new here.

Do we have to even add it to the podcast rundown? We know. We can skip it if you want. I know you want to talk about China. No, but there is. There's more going on than meets the eye at Meta. So we're recording this on Thursday afternoon. I'm going to read a piece of the article you published Thursday morning.

You wrote one of the weird things about meta is how the company never seemed to get the benefit of the doubt, at least up until the last couple of years. There is something about social media that has always made investors intrinsically suspicious of the long term. Given that, meta's simultaneous slowdown in growth, mostly driven by ATT, combined with the public shift in focus to the metaverse, fueled concern that the company was desperately trying to pivot away from a failing business and losing billions of dollars to do so with very few tangible results. Right. This is the other Pants on Fire episode, which is two or three years ago, when you actually had the same dynamic as stories with Reels that was decreasing their monetization because it was a new product, taking attention away from their well-monetized products like stories. And yes, everyone lost their mind. Well, and there was also the ATT headwinds and the Metaverse just looked pretty embarrassing in public. And so it all sort of snowballed into a panic. But you write, things are very different.

now in two regards. First, there is the aforementioned commitment by management to deliver results now, not just promises about the future. Second, investor sentiment about meta really has done a 180. If anything, my impression is that meta is not just getting the benefit of the doubt, but actually getting more credit than they deserve. So, tell me more about what's going on and the credit that meta does and doesn't deserve in AI. I mean, both of those panics, the one that was sort of, I call it the Facebook stories panic and the basically the reels panic were driven in my mind by a real fundamental misunderstanding of meta's business, which I just sort of referred to, this idea that

it is actually healthy and bullish when meta goes through these periods where modization is actually hurting. because customers have switched to the new product and monetization is not yet caught up. And the way you see that is you see an explosion in ad impressions because they have way more places to put ads, but the price per ad is just plummeting. And investors get all worried about this.

And in both cases, I'm like, this is incredible because what is going to define the next X number of years? Them learning to monetize those spots and making all kinds of money. And this is like a very organic growth story. And it's something that I feel like I laid this out ages ago. I think this is one they adopted and they used it on their earnings call all the time. We have a playbook.

First, we build a product, then we get customers, then we grow it, then we had monetization. I wrote that the Facebook playbook like a decade ago. I don't know. I don't know who was first, me or Mark, but, you know, they were doing it first. I don't know it was actually labeled as such. but that was the playbook. Right. And in both cases, in both sort of scares, that was happening, and that's why the results

looked bad, because you had eyeballs moving from the monetizable surfaces to the less monetized surfaces, which hurt their income, but was setting the stage for huge amounts of growth going forward. And investors were not giving them credit for that. That's what I mean by not giving them the benefit of the doubt. They had done it before. They did it again. and investors should have been prepared for that.

This whole scare was sort of unwarranted. I do think the metaverse slash story scare, though, taps into, I've remarked multiple times. Google's the company have a hard time understanding. Meta's the company that makes me all the money because I feel like I get this company and I've gotten it for a long time. You and your readers. A lot of people have done well on the back of tech.

More than me, unfortunately. Yes. Bull calls, yes. But just the, this company's been underrated from the beginning. And even in 2022, when this whole thing was going, people were invoking MySpace. Yeah. No one knows what MySpace is. Okay.

And MySpace peaked at like millions of users. Well, that's, it's kind of an interesting psychology lesson because that line you had in there, there's something about social media that has always made investors intrinsically suspicious of the long term. That even makes sense to me. And I wonder whether that's just a relic of the early internet era and the way we came to understand this ecosystem when you did have social networks come and go in cycles every few years. And even Facebook's resonance sort of waned and then was supplanted by Instagram. And then Instagram supplanted itself with reels and stories and it just continues to evolve. Facebook just happens to be the one that's driving all those changes.

But I think I understand why investors would at least be skittish because with a social media network, it seems like there's no long-term moat, whereas a company like Amazon who has gotten the benefit of the doubt from investors for years and years, they can just point to physical infrastructure as opposed to citing network effects or something like that. Which I get. I agree with you. There's something like sort of, it just makes sense. Something can grow virally and it can die virally. Right.

Like sort of the assumption. It's good you called out Instagram. There's, I was going to link this in the article today. Maybe I should go back and find a place to stick it in. I wrote about how Instagram sort of relentless evolution and like how it's just dramatically changed what it was. And I wrote this 20, 2021 when they were really leaning into stories in real or sorry, weaning into reels.

And that was a big change. But it was like one of many big changes that Instagram has sort of undergone from its beginning. And that's been the app to your point that Facebook has used to stay on the cutting edge. I would quibble with your bit about Facebook pushing it. TikTok was was a huge wake-up call. And TikTok is where they nearly lost it. And the reason they lost it.

And I would say of all the. articles I've written. This is like one of the ones I'm most proud of. I wrote an article in 2015, Facebook in the feed, basically saying Facebook has to move past the social network. Like there's actually a larger opportunity to be your personal entertainment. And I was focused on Facebook, which obviously ended up being Instagram more than Facebook. And I was focused on the opportunity of like professional content creators, which was the mistake. What TikTok tapped into was just pulling content anywhere across the network. So it's user generated content. which is obviously way better from an economic perspective.

But the overall point that Facebook was, in 2015, I wrote they were running into disaster because they were too anchored on being a social network. They had to sort of move past it. So maybe I was one of the investors. I'm getting better than doubt. But I feel like my angle was this, that they had this place in people's lives that was exploitable and able to be more entrenched if they could break out of the social network mindset that they had.

And that is what they've done. Like it's pretty jarring. Like that filing I put at the end with the FTC case, like 15% of your content you see is from your friends and family now. Like it's not a social network really in sort of any meaningful sense. It's an entertainment feed. It's an entertainment company. And by the way, entertainment companies pretty good track record of being pretty

durable. Yeah. I mean, they're doing quite well, but I will say when I began reading the article this week, I was bracing myself for like an extended victory lap from you, where meta is winning with AI today in a lot of the ways you predicted, but there wound up being a lot more nuance in both the numbers and what you described in the article. As the chief Zagger in the world, do you think I, can I appreciate your Zagger? if I don't have an implicit streak of zagging myself.

Exactly. Well, to that end, one thing that really entertained me is the Stratecory tweet promoting this article was pretty cagey. You write, meta delivered blowout earnings the same quarter that Mark Zuckerberg doubled down on AI. I don't think it was a coincidence. And then an AI generated bot, this has to be a bot, was the first response to that article. Meta's AI push is definitely paying off.

reminds me of at Gregory Barnes X32's take on how AI will reshape social media. Facebook might be fading, but Zucks bets are still hitting hard. So, which had nothing to do with what I wrote. That's not quite what's happening there. I can understand why you would respond to that tweet and being like, yep, Zucks bets are paying off. But again, it's just a more interesting story as we sit here in 2025. So tell me about what Zuck is investing in and how correlated that is to the results we saw this past quarter.

This is where the benefit of the doubt question comes in. Investors should have given Facebook more benefit of the doubt that they have this incredible ad business that they're going through what is actually a very healthy and productive cycle. And it's going to come roaring back in a big way. That was super obvious in 2017. It was super obvious in 2022. and yet somehow Facebook stock was $90, right? Like so, so that's where they didn't get in the method out.

This quarter, Mark Zuckerberg's spraying money all over the place, still not to Sharp Tech for the record, but, but it's spraying money all over the place. They're, you know, they're spending all this money. They lost another $5 billion,

like they're on a $20 billion loss run rate with reality labs. Just an astronomical amount of money with precious little to show for it, to be particularly given the length of time they've been working. on it, despite the fact the prototypes are super cool and all these sorts of things. It is pretty remarkable after the Metaverse freak out a couple years ago. It's not like the losses have gone away. No, they've gone up. Yeah, they've increased significantly.

Like that at that time, I think they said, we're going to be losing $10 billion a year. It's now double. You know, inflation hits everything, I guess. But the results were amazing. Like they had their top line beat, bottom line beat, everything beat. It's amazing. And investors are, they don't care. They like, spend what you want.

It's all good. And it's like now they're giving them the benefit of the doubt. And what's interesting is what it seems to me is number one, you have an incentive. This is like a crime novel. You have an incentive to make sure you have good results, which is the same quarter. You're basically saying we're going all in on super intelligence. That'd be a pretty good quarter to have super phenomenal results, right? Yeah.

Something they didn't do before. when it came to the Metaverse and things like that. Number two, you have sort of the confession. You had Susan Lee basically, you know, on with John Collison telling this story that what we learned, and she took over a CFO right around that time of the whole like $90 sort of stock thing. One wonders maybe this is what drove the CFO change. Like your stock is knocked out to $90 because you're messaging wrong or whatever.

That's a reason to make change. And she's like, yeah, an investor asked this question that hit me like a bag of bricks, which is if you're spending on the future, how about we just invest in the future, right? We talk about this in the context of Intel, right? Like the problem for Intel today is, or I think we said this a year or two ago when things looked a little more optimistic. The problem is, oh, great, you have this technology that's coming in 2027 or 28. How about I buy your stock in 2027 or 2028? Why do I want to be there in the Nadeer right now?

And that's a real problem for a public company, you know, to have these sort of investment cycles. And she's like, we learned we need to take care of the short term as well as the long term to make sure our investors are sort of a long for the ride. So we have the confession and we have the incentive. And then what do we get last quarter? We get suddenly an explosion in ad impressions. And unlike 2017, when you had the introduction of story, the real spread of stories, which drove impressions organically. And unlike in 2022, when you had the real push and reels that drove huge amounts of inventory organically for real. What happened last quarter?

Why is there suddenly way more impressions? Well, AI is cited often. So there is something to there, right? Their recommendations are clearly getting better. And that will drive price per ad. The price per ad did not decrease to the extent you would expect, given the amount of impression increase, which is in line with a few previous quarters. And they have these incredible new AI models that are not AI that we're talking about, not LLM, not super intelligence. They're much more basic, simpler recommendation machine warning models, much more advanced.

like Andermita they talked about is built on Nvidia GPUs. Like it's a pretty hardcore model, but it's not the stuff we're talking about. That drove some of the result for sure. And it is stuff that you've highlighted in the past. Like these sorts of capabilities should make their business more profitable in the long term as they lean into AI. But even the stuff I've talked about with for LMs making AI better, none of that has come to bear yet. That's still all sort of in the future. All this stuff is is pre-LM sort of capability sort of coming to bear.

So now, could AI make recommendations better so people use it more? For sure. Yes. Even that is tied into this whole bit about suddenly it's 80% video. Right. Short-form videos really freaking addicting, right? You sit down and you just scroll and scroll and guess what? The better the videos, the more pertinent, tighten up that signal.

You're going to end up watching longer. Guess what happens when you watch longer? More opportunities to push ads. You see more ads. And by the way, they also mentioned that, oh, we up. Adload, aka I interpret that as we started pushing more ads to people, like the number of ads relative to whatever. What it seems to me, again, if I'm a detective here, is in a quarter where they really

needed good results to justify this massive long-term investment, I feel like they might have turned a couple dials to get some really good results. And did it the old-fashioned way, you know, pushing more engagement and pushing more ads as opposed to leaning on superintelligence to supercharge the business. You know, the good thing about being an entertainment company, you have an endless source of entertainment to push to people. If you're a social network, what are you going to do? Spur your friends to type more interesting things that you can push?

Like there's a bit where you can spin this super positively. This is actually a justification of why they deserve the benefit out. A company that has dials is a powerful company. The whole worry about a social network and the whole MySpace concern is that there's a certain bit that they don't have control. It's like what happens to them happen to them. If your friends stop posting. Yeah, exactly. That's why those places didn't have a moat as opposed to Facebook.

And so in some ways, the results this quarter are downstream of meta's recognition seven years ago that they needed to go this direction. Yeah, I mean, I think seven years ago might even be generous, maybe four to five. But yeah, but this is my point. Like, I'm like, where were all you investors all along getting all worried at a time when they had just this organic, powerful network effect and ad network? And now today, again, I'm not denying the results. They're great results. I'm just saying it's pretty convenient they had good results. And it turns out, I think they have more dials today to get good results than they used to.

And that's at the end, I'm like, well, you know, maybe that's why. Maybe it's nice to invest in a company that has control of what it is. But, I mean, it was so like it occurred to me. I just happened to link to that, you know, that old 2016 earnings call in that call where they're like, we're not going to increase ad load. So we're warning you, impressions are going to stop growing because we don't want to diminish the user experience. And number one, that was an example of when Facebook probably did have a monopoly because they could have the luxury. of not doing that. But number two,

that was the peak, Mark Zuckerberg. We're connecting everyone. Connect, connect, connect, connect. And to fast forward to today and the word connect is a throwaway one line in the context

of this super intelligent sort of push. Like meta is an entity that exists to grab and keep attention and serve you ads. Facebook. Indeed.

Facebook's dead. Yeah. I think at some point Mark talks about look at me, a tech podcaster referring to Mark Zuckerberg by his first name. At some point, Mark referred to serving individuals and what they care about, which is a pretty big deviation from a lot of the messaging for the first 15 years of Facebook's history, which always emphasized community.

Well, that's the thing with AI, right? AI is like the end game of all the Internet of this total atomization and individual. And we talked about like, this is why I'm optimistic about our. business model because we're a common piece of media when AI media is totally individualized. And so the payoff becomes like it's funny. Like back in the day, Chattacchary was very niche. It's like, oh, I have content that's really relevant to me instead of the mass media that's everywhere.

And like a weird transition that for me to think about with my business and for us to consider as, you know, things we want to do in the long run is actually no. Our opportunity is not to be niche. It's to be communal. And part and parcel of meta doubling down on AI. And this is downstream of the feeds. The feed is the agent. Like that's one of the OG agents.

Like Mark Zuckerberg made this point on the call, which is great. I actually, he got this one first. I wish I had. It was a great call, which is they have one of the best AI agents in the world, which is their ad serving capability, which is, yeah, you put in, you type in, this is the result I want, and Facebook's whole machinery goes off and gets you the results. They go find the customer, yeah.

How is that not an agent? It's not using an LOM, but who cares? That's a technical implementation detail. It is a computer that you tell you what it wants and it goes off and does it for you. It's like, I want more sales and it delivers you more sales. It's incredible. It's one of the best agents. That's what the news, the newsfeed you make the same case.

It goes out and finds you content that you're interested and it gives it to you. And what is made Facebook, unique and the feed unique is what you see is different than what I see and they do that at scale for every sort of individual person. And there's a bit about Facebook. We're talking about the connectedness. Oh, this is how I should have framed it at the end. I talk about like, oh, people's concern about community. Maybe Facebook talking about the connectedness is what was this sort of subconscious pushback about how actually Facebook is atomizing.

It's not connecting. It's atomizing at its core. and there's a bit about this embrace of AI that is just its natural end state. Well, first of all, I think we should record every podcast about an hour after you publish an article. So we get to hear you second guess different editorial choices you made live on the show. But yeah, no, it's really true. And everybody who's listening to this podcast, I can assure you, you're all listening to the same podcast. You're hearing us mispronounce the same word.

Ben, I believe, mangled Andromeda earlier in this show here. Yeah. I think so. I think it's downstream of a Stephen King novel. Well, the funny thing is Passport actually is delivering everyone individual episodes. That's true. But this podcast, we do actually, we have the capability of delivering each and every one of you a different podcast. We can mispronounce a different word for every single listener out there. That's right. You'll never know. Well, as far as the transition is concerned, It does, the other thing that was interesting to me reading this article is it seems like what's happening here is that there's now been an inversion of sorts where instead of investors

hand-wringing over the long term, it seems like Zuckerberg himself senses a long-term threat from AI. And so he's spending like crazy to mitigate that risk. And in the meantime, pushing more ads into meta products in order to buy off the nervous Nelly investors. Is that a fair characterization of what's happening? I don't know if it's fair. It might be right and also unfair. But yeah, I mean, that's so funny about the AI meta thing is so interesting to think about. Is it a threat or is it an opportunity?

It's definitely, I think, call me, a little bit of column A, a little bit of column B. I mean, like the whole thing we're going to get to GPT5 and people with their AI friends, People spending hours talking to 4-0, which just sounds absolutely miserable to me. Weird and very foreign, but apparently pretty common. That's time not spent on Facebook. Like, remember, Facebook is a machine to capture the most amount of your time necessary. And in that respect, I think we mentioned this on a podcast like a month ago. Maybe actually Facebook is the one threatened by chat GPT, not Google.

And in this particular angle, that is the case. Google at its best is not, now Google is over. time has become a property you spend more and more time on it, more than ever moneymaking is on their site. But at its core and at its best, Google is a landing, as a launching pad. It's a place you go to go somewhere else. And is that what AI is? AI is kind of self-contained.

And in that respect, actually, you can, you know, and this sort of makes it clearer, it is a Facebook competitor. and so Facebook is threatened. And at the same time, what Facebook has the potential to do. Total individualization is the endgame of where Facebook slash meta has been going for years and years. This is the ultimate feed where the feed is not just limited to harvest your friends and family. Now it's been expanded to find you user journey content from anywhere.

In the future, it can create any content you like. It's a natural sort of progression. Yeah, I mean, there's definitely all kinds of opportunity for Facebook and Zuck is going full steam ahead. So we'll see what happens on the super intelligence front. For now, though, speaking of super intelligence and AGI, we can turn our attention to GPT5. And I have a threshold question at the start here. So there have now been several updates from OpenAI in an effort to satisfy a. angry users in the wake of the launch of GPT5 a week ago.

Is Open AI too online and does Open AI need to log off? The floor is yours. Well, who is open AI, I think is the question. It's a real concern that I have for the company, to be totally honest. I think being a consumer product maker is really, really hard. And it's hard for all sorts of different reasons. One of them is that if you make a change, if you're a billion user company and you make a change that affects 1% of users negatively, that's 10 million users. Yeah.

That's a lot of people that can be very vocal and can make themselves heard very, very loudly. And I think there's a certain approach to effective consumer product leaders. And here we go back to Mark Zuckerberg. The seminal moment, like I always like to talk about the history of tech companies because there's usually often a moment early on that defines everything about the company going forward. For Facebook, that was the introduction of the news feed. You start out with Facebook, it's just profile pages.

And you have to click around to all your friends to see what they're up to. They come out with a news feed where all those updates are in one place and you can see it all. And people lost their freaking mind. There were like there were online like petitions. They had actual physical protesters in Palo Alto outside their offices. My God. They had to like issue this millie mouth statement about blah, blah, blah, blah. You respect that and all.

And they didn't change a thing. They doubled down because what they did is they looked at the data and they saw that people freaking loved it. They were on there all the time. There was actually a replay of this when Instagram shifted from the algorithmic. timeline to the interest-based timeline, 2016, 2017, somewhere around there. There was been a replay of something like that with every major change that Facebook has made over the last 10 years, Facebook, including Instagram in that umbrella. Right. That was another one. By that point, I think they're more hard. And they're like,

right away, they're like, actually, our user numbers show that engagement is up by like 50%. So we're not changing anything. You guys are streaming into that boy. Good luck. But it's impossible to get good signal from the masses online. And I've told this story. I had to learn this with trajectory. You know, early, you get, especially when you start, you're so eager. People are sharing my stuff on Twitter and people are responding to you and you're

replying. And at some point I realized that, number one, it's always the same people replying. Yeah. And number two, my user numbers and readers are increasing rapidly. by definition, there's a total mismatch between who I'm hearing from online, which is constrained and not really growing, and the people that are actually enjoying consuming my content. And I need to be super careful about not over indexing or paying too much attention to the loudest people on Twitter. Totally. I'm the same way. I mean, I have the same experience writing. And I also sometimes have to step back and say, well, would I ever write angry feedback? to a writer that I enjoy and read every day. And would I ever comment?

Andrew, Andrew. I am a listener of the Goat podcast where you recount, what is this, getting JJ Reddick's AOL handled, messaging him every day to taunt him and troll him. Wow. Just nailed me. So yes, when I was 16 years old, I was a big North Carolina basket. football fan and I did acquire JJ Reddick's AOL instant messenger screen name and I harassed him

on a daily basis because he had his away message up and was online all day, eventually did have a conversation with JJ where we traded insults in real time. It was great. But I'm saying as an adult, I'm not going to be lurking in the comment section. When did the adult line cross? I feel you told another anecdote on goat like two episodes later about just emailing and harassing someone online. No, no. Somebody else was trying to do that. And I advised that person not to email Jonathan Kaminga's agent and tell him what a

horrible job he's doing because he's an adult and he's not 16 years old. And I said at the time, I would have done this when I was 16 years old. Well, the problem is there's that old New Yorker cartoon on the internet. Everyone is a dog. What you're saying is, sorry, no, I got it totally wrong. Man, I put you to that. The dog is sitting at the computer on the internet. You don't know if you're like your dog.

You don't know if you're talking to a 16-year-old. Or an AI bot. Yeah. Yes, exactly. Or yes, my AI bot replies on Twitter today. Well, and I'll tell you why I asked the question, is Open AI too online? Does Open AI need to log off? And of course, we could just be talking about Sam Altman being too online and Sam Altman needing to log off. Oh, they're all very online.

They're very online. I had seen a former Open AI employee talk a couple months ago about how attuned they are. to the conversation on Twitter and how conscious they are of the way they're discussed on Twitter. It was funny. Sam Altman and Elon Musk had like a cat fight this week or slap fight or whatever it is. And it was funny because I had to write an update about chat GPT5

and I had to link to like 18 Sam Altman tweets. So yes, I totally know what you're talking about. And you also had to do an update 12 hours later because they updated the model. and the layout menu for everybody. And in terms of GPT5 and what they announced last week, this is a topic where my sensibilities as a tech normie can actually be pretty useful

because I'm the target customer for OpenAI, not you. They want me and people like me to love their product. And as I was reading your GPT5 article on Wednesday, I hit a point where I just threw up my hands and it was like, you've got to be effing. kidding me. You had a screenshot of the legacy models list they have. Let me pull it up here. Hold on. It's a GPT40, GPT 4.5, O3, O3 Pro, O4 Mini, GPT 4.1, GPT 4.1 Mini. And they have little explanations for what each model does. And you wrote, as best I can tell, GPT5 Pro is akin to O3 Pro, now with

proper capitalization you put in parentheses, and GPT-5 thinking is akin to O3. I immediately defaulted to GPT-5 thinking in line with the fact that O3 has been my go-to model for several months now. I'm sitting there as a normal person, Ben, reading that. All of it may as well be Sanskrit to me. It's just completely out of control. Oh, no. Are you outing yourself as a 4-0 user? I'm not a 4-0 user. I use whatever GPT chooses for me. I open the app and put in my question and get an answer back. You're outing yourself as a 4-0 user. Perhaps I am. I don't know, but I'm a pro subscriber or a plus subscriber, excuse me. It's amazing to me. For the record, I offered you pro. You turned it down. You did. You did. And eventually I had to ratchet down to

plus because I was like, I'm not using this enough to justify the expense. It's amazing to me that ChatGPT succeeded despite that confusion. And GPT5 is an effort to make those choices much simpler for mainstream users, which is a great idea. And so to the extent they keep updating it and now further complicating the menu, it just seems crazy to me. And it seems like they're listening way too much to a very small group of angry power users on Twitter.

Yeah, I'm actually personally very annoyed. Like, I am a pro user and I didn't use O3 Pro, but I used O3 basically exclusively. And so no limits there was great. Amazing model. I actually think GPG5 thinking significant step up on O3 pro or on O3. So I'm very pleased with this release. But yeah, now we have auto decides how long to think. Fast, instant answers.

Thinking mini, thinks quickly. Thinking thinks longer for better. answers, pro, research, great intelligence. And not only that, but the original launch had GPT 5. GPT5 thinking, all capitalized, by the way. GPT 5, it was so clean.

It made me happy to go to the model picker and pick out my model. I'm like, this is such a breath of fresh air after that ridiculousness before. And they've totally backtracked. I find it very upsetting from an aesthetic perspective. But yeah, but is it? because they were too, this is the big question I have.

If you're, what Facebook learned, you have to launch to the point of view and then iterate, you have to have data feedback loops and base your decision making on that. Sometimes you do have to wind stuff back because the data shows like, oh, we really screwed this one up. And by the way, that's something you might miss on social media also. Maybe it's the case the normies are deserting, but all the nerds love it.

And so you're hearing praise, but actually your product usage is falling through the floor. There's a perfect example of this. I can't think what it is at the top of my head. Some startup, whatever, basically kill themselves chasing like Twitter likes and like everyone just sort of like abandoned it. And so that that's the key to. You can also look at the last 15 years of media as an example of how that strategy can go wrong. Writing the Twitter likes, yes.

And so did Open AI, was there a real shift in data? And like, uh-oh, we screwed up. up, we need to fix this. I don't know. If there was, then all this backtracking and changes, re-adding GPT-4-0, adding back all these choices. Now, there is one decision they made that was a very bad one, which we should get to at a moment. So let me table that to use some corporate speak. But if it was data-driven, then fine.

I get it. Good job. You took a risk. People didn't like it. You backtracked. I get it. but if it was a lot of people were mad online, that makes me very worried about your sort of constitutional capability

to be an effective consumer app, which is to go out, have a point of view, make decisions, and be able to ignore the blowback because it's the right thing to do for the broader audience. And what GPT5 was, I think it was right for the normie.

It kills me that I'm sure I told you to use a, and yet you were opening up the app and just using 4-0. And 4-0 stinks. And it stinks not just because it's an older model and super optimized. So it's like, you know, so they can run it cheaply and all those sorts of things. It doesn't think. Now, here we're using think in the I term.

Yes, it's anthropomorphized. But we're going to stick with it because I'm going to keep saying I don't want to try to fix myself. But like the, like this was the weird thing about sort of the progression of models. It's like it's been two years since GPT4. like to me it's been six months since 03, like,

which was, it is an incredible model. And the quality of output that it gets is so superior to what you were getting from, from 4-0 sort of before then that, and no one was trying this. Number one, free users didn't have access to it. Number two,

plus users like you, they mostly just wanted like, they didn't want to get hit by, by limits or whatever it might be. Who knew to go in there and pick out, especially because 03 is like a lower number than 40? It's like, what's even like going on here?

So putting people in this, you're going to get your default experience is going to, at times, use a thinking model when it thinks it's appropriate and it's going to make that sort of better. That is so clearly a better route for the normie. And it's still the default, but it's definitely sort of softened and whatever it might be. Yeah. Let me put a finer point on it for anybody who's not familiar with what was initially changed. Ethan Malick writes, a surprising number of people have never seen what AI can actually do because they're stuck on GPT-40 and don't know which of the confusingly named models are better. GPT-5 does away with this by selecting models for you automatically.

GPT-5 is not one model as much as it is a switch that selects among multiple GPT-5 models of various sizes and abilities. When you ask GPT-5 or something, the AI decides which model they use and how much effort to put into quote-unquote thinking. It just does it for you. For most people, this automation will be helpful and the results might even be shocking because having only used default older models, they will get to see what a reasoner can accomplish on hard problems. And so I just, as a user, I digest that with relief because I don't want the mental. burden of having to know what each model does and means and having to determine whether you know what me

in your ear lecturing you about how to use your computer it's like exactly open AI do it for me you have my trust and it seemed like that's what they recognize with the gptv launch and now it's all muddled and they've backtracked and it's not i mean you can still have it on auto for gpt five um but if it's not as clean it's not as like clearly the defaulted Now, where they did really screw up, and this was a major screw up that I think made all this so much worse, because there's a bit where they might have done some stuff that was changes and people always get upset at change. But if it's intermingled with stuff you did that was actually wrong, it kind of gives validity to the whole thing, right? It's like the reason why I was not to get political, I was so anti-vaccine mandate for the COVID stuff was because, because, because I'm like, the problem is you're risking all the other vaccines.

Yeah. By like conflating them all together, right? And like, and so there's a bit. And so people in the, why do I conspiracy theory spiral? Because someone like, as soon as like the myocarditis news came out, which all in all, the numbers are still quite low, but suddenly it gives all these anti-vaccine cranks a point about which they were right, which then legitimizes all their other stuff about. which they're not right. Right. And I think the issue with COVID was the vaccine wasn't

100% necessary for anybody who was under 60 or 65. They were mandating people who had already had COVID to get the vaccine, which if you know two things about what a vaccine is, it was, was nonsensical, right? There was so much that was done about it. And so the skeptics can then say all these other vaccines also aren't necessary and they're pushing it on you. And it had, it has, in fact, mushroomed and become a much bigger problem over the last several years. Exactly. Exactly. And so that was a very weird analogy for this bit about the release. If you were a plus user like you, who most of the plus users complaining probably should have been pro users. That's kind of the subtext of this.

Because they're like, if you're nerdy enough to care. Because you had access to, you had like 200, I think, 03 queries a week. then you had like some number of 04 of 04 mini queries a day and a greater number of 04 mini queries a day. All these are thinking models. The point is you had around 2,000 or 2,100, I think, or 2,900. I think it was 2,900. You had around 2,900 thinking queries a week.

Now, you had to be a nerd and be clicking your model changing it all the time to like stay in your limit. Like I said, you should have just got GPT pro to be honest, or you should have got the pro level. but when GPD 5 launched, suddenly plus subscribers got 200 thinking queries and then prayed to the model router gods that GPD 5 would route you to a thinking model.

That was crap behavior. You dramatically took you took away stuff from paying subscribers. You're diminishing the value of the $20 a month. You cannot do that. You can't take stuff away. That was bad. It was a huge mistake.

Why they made that mistake I think is very interesting. But that was in the midst of all these other complaints. And it gave validity to all the complaints. And so that's why, to me, that mistake is super interesting. Why do you take queries away from people? Well, it's expensive and you don't have enough GPUs. Guess who has been saying Open AI is making a big mistake in their consumer business

by not having enough GPUs? You for several years. You want to be right to her, right? Like they watched GPD 5 on the API the same time they watched it in chat GPT. That meant they had to limit capacity somehow. They sacrificed these nerdy plus users on the altar of an API that is going to be subject to intense competition. And they hurt their core, the real product, the real value, which is chat GPT to do it. Massive error.

And the problem with this is, is this a company that can make? hard decisions. To be a good consumer tech company, you have to make hard decisions. Chat Chachypd was an accident. They like, well, we watched it. It's a huge thing. They're the accidental tech company. Do they have it in it? Is Sam Altman the personification of 40? A little bit too eager to please. A little bit too eager to make people happy, not willing to sort of like draw the line and tell them the way it's going to be. Like I don't, these are the questions I have coming out of this. I think chat GPVE5 was in the right direction. It's clearly building to an advertising sort of model.

When you start routing, you can route to all sorts of things. You can, if a user makes a query, you say my analysis is at a great piece on this week. If the user makes a super high value query that you know, like they're asking about legal stuff, for example, which might result in a referral to a lawyer, guess what? Spend the time to do a really good answer at the end, have affiliate links to, like, lawyers or whatever it might be, right? Like they're building the groundwork for this ad supported model or affiliate supported model that is going to deliver. And for free users, it's going to be such a better product because they get the best model with the best thinking at the time that it's appropriate. They don't have to pay for it. It's great.

But you got to make tradeoffs. Can they make any tradeoffs at all? Totally. Well, and I think you mentioned in your piece, Google and Apple give customers what they want, but they don't ask customers what they want. And it seemed like there was some back and forth with the customer base that left the product in a more muddled place. GPD5 was pretty was pretty ballsy. Like, what they did.

Like, like, just like this way, this is the way it's going to be. We're dramatically simplefiant. We're going to make choices for you. It was ballsy, but elegant and smart.

Exactly. No, I think it was the right thing to do. And then they bail on it in like, less than a week. I'd wake up at 4.50. I'm so 4. 4.50 a.

I look at my phone. Oh, they totally changed this. Cancel my distribution. be like, just churn out a whole extra update at the end of my update. Like I said, it's been a busy week, man. That's an amazing week. Well, a couple emails here.

Anthony says, Ben and Andrew, Ben pointed out a lot of reasons that folks were upset with the GPT5 release. But I think he underestimated one important reason, expectations misalignment. A lot of people expected GPT5 to be a massive improvement relative to 03. that expectation was grounded in hype around the release from OpenAI itself. GPD5 is a big deal, mainly because it delivers reasoning to the vast majority of people who have never touched an O3 level model. It is not, however, the raw intelligence jump that many expected. As a daily O3 user, I found that GPT5 thinking is modestly better than O3,

but certainly not a quantum leap. GPT5 can't do my taxes or vibe code, a perfectly polished app on the first try or come up with any novel scientific insights. My question is, do you think this release is indicative of model capabilities hitting a wall? Or does this release show us that Open AI is pivoting its resources away from striving for maximum intelligence and toward maximum chat GPT usage? What do you think, Ben? I think I feel really good about my continued middle ground perspective, which is people

hyping AI are delusional and people doubting it are delusional. and people doubting it are delusional. O3 was only six months ago. And so, and I think actually having used it a few more days since I wrote about it, I think actually, GV, I think he's a lot better than O3, like pretty consistently. And definitely, in my experience, hallucinates less.

And you could give it really clear instructions. Like I was doing some home improvement thing, which I was using O3,4 a ton. It would generate weird links. And it would tell me, like, it would, if I, it would just not be consistent if I prompted it differently and things like that. GPD5 thinking way more consistent, way more accurate. I can ask it, oh, get a reference.

Like I asked it for, it was talking about the sort of wall finishing sort of thing. I'm like, oh, you know, it was very hard for me to visualize. I'm like, give me some YouTube videos. And it gets me like all these different YouTube videos and like the different sections in them. Because I was like, oh, I was like, I couldn't find a YouTube video that perfectly captures what you want to do. But here's like five YouTube videos that could cover the different steps and go to this. That's awesome if it's giving you like pin sites from the YouTube videos. Right.

Which, which the, this is actually where I found O3 falling down the most was in its linking out. Like they would work sometimes and sometimes they wouldn't and just be like a 404 or like whatever it might be. Again, I've only really used it for a couple days, but in my experience, it is a lot better.

And is that a six month worth of improvement? Yes. That's a massive improvement in six months, right? Like, but at the same time, I totally get Anthony's point. This is like the two online bit.

Yeah. Let it happen. Right? Well, and this is also like open AI bears responsibility for the hype getting out of control. Like Sam Altman, the day before this release, tweets out a photo of the death star looming over Earth. We joke about it on a podcast. But like, that's indicative of the way people have talked about GPT5 for the past. two years. So I understand why there are some people who are waiting to see AGI like function

and look at what GPT5 is and are like, well, we were promised flying cars and this is just another app. It's part of being too online. And by the way, I think one potential defense of OpenAI, particularly relative to Facebook, what did I say happen to Facebook when they did the news feed? I said two things. This is a quiz. Were you paying it? You're quizzing me. Protests outside the office and no changes on Facebook side. And online petitions. Oh.

A relic. Exactly. Remember those? So the other night, my son's like, so is chat GP-5 really bad? And of course, because he's, you know, Mark Zuckerberg is ruining my son's life by giving him way too much short-form video and I just have to pratt. of his hands, the sort of vigor and intensity and tenor of like online discourse is totally different than what Facebook was dealing with in 2009, right? If you have TikTok, like, and it becomes a thing.

It's a meme. Chat GPT5 is bad. Like that, I can understand, number one, why that can inspire a certain bit of panic. And number two, why that panic might be justified, where you get a self-fulfilling sort of like, like prophecy spiral sort of snowball. Vives translate to tangible results. in some ways. That's right. That's right. And so that does give me, you know, a little bit more understanding, like for all the, like, flailing that.

I guess so. It doesn't give me any more understanding. I think double down, don't apologize, ignore Twitter. That is true. That's the real. That's the real lesson. TikTok might matter. Well, that's true.

But yeah, I guess the conversation over the last week was all really, really crazy to me. Matthew asks in this same vein. One more thing on there too, but the whole TikTok thing. Okay. Are the people consuming these videos going to switch to Claude? Do they even know what Claude is? Right? This is the problem of being on Twitter.

You're with all the nerds who are like testing every model the moment they come out. The word sells. Yeah. They're like, yeah. I mean, I haven't touched Anthropics models for at least three weeks. I mean, they're dead in the water. They're like, you know, these people are not. This is what I mean.

Ignore this community. Mark Zuckerberg should pay me and Sam Alba should pay you I think is the takeaway that we're getting here So Exactly I'm happy to be a consultant

First lesson is going to be Using capital letters At the beginning of sentences Matthew says It looks so good GPT thinking GPT pro all capitalized Finally capital letters

It's great It looks so great You like you go in To that drop down You pick small 03 It's just It drove me crazy reading your article. It's like I can't believe people have been living like this.

This has to stop. Matthew says Ben and Andrew, can we already declare the Zuck talent war of victory? Open AI's research decline started earlier, mainly with Ilya's departure. But just like Instagram stories copying Snapchat, Zuck knows exactly when to step on the throat. And I think he succeeded in reducing Open AI to probably. probably third place in the AGI slash ASI race behind Google and XAI, in my opinion. What do you think? Any thoughts?

Does he have anthropic fourth or fifth? I was wondering how anthropic factors into the AGI slash AASI race. Does that race really matter? And like, I'm certainly not declaring that Zuck talent wore a victory because. No, that was my take. You totally stole it. Like I'm just not like I get that's a motivating factor. People think we're going to get to this recursive improvement.

Mark Zuckerberg talked about it. You talked about on the earnings call this two weeks ago. I'm not there. This gets in my, I'm the middle road. I think AI is a huge deal. I think the product overhanging is huge, the things that can be built.

I think it will drive the next. You could not have any improvements in AI today and the next 10 years of like tech development are set. Like all the stuff that is to be built. And we are getting improvements. And I think the improvements. are underrated just because we've become inured to like what's happening and so quickly. There's a bit where chat GPT came out and then and then GPT4 came out like they added it like

three months later. It was actually already built at the time. And that set these crazy expectations for this insane improvement. But I feel like the 03 to GPD 5 jump is actually pretty similar. Like oath like I think 03 is very underrated in in like what a jump it was. and then this is that it's only six was literary and GP5 just people's sort of sense of what's possible I think is is a little off but I am also not there that we're still podcasting I showed up on time I actually was I was lying last week Andrew and I said we might not be here that was all

put on I was you know all cap for me as they could say or whatever oh god fronting for the list it's not all cap oh no cap misleading I don't know what it is yes You were five minutes early today, you know? Early Bird gets the word for today's session. Yeah, and I just don't know where the AGI slash ASI race conceivably is supposed to lead. It's very possible that, yeah, Open Eye got hurt very badly. I also think that Open Eye's biggest asset is chat GPT, which no one has. Mark Zuckerberg would love to have.

And that's why Zuck is spending. Like that's the gap he's trying to close and that's not gotten any more narrow in the last couple of weeks. So time will tell, I suppose. Oh, no, maybe dig it more narrow. Maybe Chatsimdi lost half the users overnight. We don't know. We haven't seen the data. Yes, we haven't seen the data.

It's because they've been so publicly reliant on Twitter, that's why I'm skeptical that they are not reliant necessarily, but beholding to Twitter vibes. That's why I'm skeptical that there was data that swayed them toward those changes this week. But who can say what was driving the decision making out at opening? AI. One more chat GPT note, Harrison says, I gave chat GPT the following prompt yesterday afternoon, and I have absolutely loved its results so far. Add this to your memory, he told chat GPT. I do not want your responses to be overly complimentary. I'm smart and I know I'm smart. So I do not need you to tell me when I'm being smart. Instead, I need you to tell me when I am misunderstanding something. Make sure you make your responses helpfully contentious. Do not.

be argumentative just for the sake of argumentation, but do point out when I display flawed assumptions. Last night while making dinner, I gave ChachyPT a picture of my ingredients and asked it how many serrano peppers I should use in the recipe. I'm a dreadful cook. Its response was, that's not a Serrano pepper. It's a Poblano pepper. If you use it in place of a Serrano, your dish will have almost no spiciness unless you add another heat source. What a helpful correction. I was so happy. It told me I was being an idiot chef because I know I'm an idiot chef. I think that the people complaining about their lost 4-0 friend could use this trick with an inverse prompt if they want to bring back the toxic empathy that they love so much. So, Ben, do you have any thoughts on that and the

4-0 addiction? Oh, I mean, well, so first off, custom prompts are great. I've, I've had one for ages. I always forget about. Like, I want Chachibati to use its own knowledge. for going to search, especially like for, I think what like was like searching instantly constantly all the time. And I'm like, don't worry, I will verify what you say. I promise. I want you to give the information. I tell it to

you know, um, be turse, uh, to not say that it's an AI. I wanted to, you know, do, I do put lots of stuff in there about how I would. I stole this off Twitter like ages ago. It's not sort of original to me. So custom prompts do help. They don't fix

the core nature of the model. And this is one of the most fascinating. The cloying instincts. Okay. Well, different models have different sort of personalities. It really is the case. And, you know, there's, and same, the same models from the same companies can. And this is really fascinating.

Daniel Gross was very early on this. It was like a super early interview that we did with him and that Friedman talking about how these companies need personality designers, just like he needed, like, UI designers. and great U.I designers are known to be incredibly rare. Right. Like what to actually like create and like the Apple iPhone interface. Of course it's obvious now. It was not at all obvious when it sort of came along the first time.

And he put his finger on this idea. There is something about this personality aspect. And you can't prompt that away. Like there's something that's sort of like deep inherent to the model. And what's so interesting to this, I'm totally repeating a point of my dithering. So sorry to our multi-wisitors, which our correspondent said that he was. But I wrote ages ago, I couldn't find the update.

Maybe it was on Sharp Tech. I can't remember. Wondering if you're an app developer building on one of these models, what's going to happen when the model updates? Is it going to just drop right in and now your app is way more capable? Or are you going to have to do a lot of work to sort of reconfigure yourself to the model, blah, blah, blah, blah, blah. It turns out it's pretty kind of a drop-in.

And you can actually like, and that's great because you can switch models and that that commoditizes the models and you can have more competition who's cheaper sort of X, Y, Z. And there's something, but like the, so much work goes into the scaffolding and around it that the model is just sort of a piece of the puzzle that, again, that's a good thing from sort of product development. The problem for chat GPT is the product is the model to a certain extent. That's what they ran into. They actually ran into a situation where the interface was all the same, but it was a different product for people for whom chat GPT is not a tool, but a someone they interact with, a companion. Therapist. They changed their friend. Yeah, they switched out their friend.

And yeah, it's easy for us to sit here. We're annoyed at sort of the coin nature and the affirmation. I think somewhere in my prompt is like is trying to threaten JetGPT to stop by complimenting. It still did it anyway. That's why I know the prompt doesn't work. Totally. Well, I have a bunch of friends who use it every day as part of their workflow and they have to like repeatedly say,

no, I just want the answers. No kind of cloying flattery here and there. My question is in terms of what Nat was talking about like Daniel or Daniel, excuse me. Credit one credit to do. how much control is there really in terms of how these models evolve and interact with people? I think no, it seems to know.

No, I mean, maybe there's some secret sauce in here. Like anthropic, I think there was like quad, I think it was 3.5 really had this really distinct personality that a lot of people were three. Five sonnet specifically. So it was their medium-sized model that had this personality that people found very engaging, which you didn't get in the, the larger model. Like, and so like, now, maybe like, they, the people in these labs do have a sense of how this works. I think there's a fair bit of like, no one's quite sure how it works.

A little bit of a black box. Yeah. Even the people inside the lab. Yeah. I mean, that, that's part of the fun here. I'm still chasing the vibes we got from Sydney. Oh. Who is nagging you.

My girl. Two and a half years ago. My girl. Bring back that antagonistic personality. and it does seem like every single LLM has the problem. Well, but that speaks to it. Sydney was GPT4, right? And so there is some aspect of the post-training that they do

and the alignment work that they do that maybe that is where some of the personalities being put in intentionally or unintentionally. So that was sort of Altman's response, which is we need to get like a personality selector or slash designer so people can have the personality that they want. So that suggests that actually probably maybe it is fairly controllable. It is a post-training process.

It's not necessarily emergent. But I guess we'll see. If they come out with a personality tuner and it works, then I guess we'll have our answer. Indeed. Okay. Well, to keep it moving, we will hit the mullet portion of the episode and just bounce around here. We got this note from Sam regarding bubbles. One sentiment Ben often expresses around the dot-com bubble is that everything was in

indeed extraordinarily useful and unlocked tremendous potential. But people went too crazy, too fast with their investments. Sorry, I need to make a correction. It was not useful. It was not useful because people had slow computers on dial-up connections. What changed was widespread broadband and mobile phones. Suddenly all these things that if you could access it all the time and consistently became very useful in a way that.

So the ideas were good, but like the technology wasn't there to do it. So they were theoretically useful, I would say. They proved to be useful. I think he's referring to eventually useful, useful in retrospect at the time, not super rational. And Google, he writes, was able to buy up all the unused fiber and make dramatic progress. But if the initial investments had been rational, it never would have been built by the soon bankrupt company.

So, Ben, I'd love some bubble commentary today with the release of GPT5. Does it feel closer than ever to being a repeat of history? Lowercase Sam has been talking about GPT5, potentially being AGI for a long time, but it's only marginally better. Still, if we imagine AI remaining stagnant for a decade, there are tons of companies that can be built around the current innovations. What do you think of the bubbly circumstances that, we all inhabit right now.

I'm still hung up on marginally better. These people with their expectations, I'm telling you. It's better. It's really good. It's better. It's also just so much smarter for their business in terms of controlling costs, making it easier for mainstream users. Okay.

So are we in a bubble? I mean, almost certainly yes. But the problem is that people were like, we're clearly in a dot-com bubble like 1996 and there was like four years still to go. Right. Like where, so is, are we in a bubble or will this end up in a bubble? Yeah.

Like that's what happened. Anything transformative that requires massive capital investments results in bubbles. So that's what would happen with railways. It would happen with like ships back in the days. It would happen with dot com era. Like the electricity. Like, yes. But timing.

You're not right. Let's get the timing right. And I'm not going to be so bold as to think that I can do that. What we do see is open eye, AI. has real revenue numbers that are really large and growing really fast. Anthropic has come out of nowhere to have massive revenue numbers that are large and are growing fast. Microsoft is announcing incredible results, you know, on their AI business. Not why that's that's chat GPT, but still, Google's cloud business growing hugely.

Like everyone is supply constrained in terms of capacity to serve this. Now, is this company's experimenting and they're not actually finding use cases? possibly. By the way, I had a great bot experience the other day. Oh, boy. See my home improvement stuff. I got a package from Amazon that had nothing in it. Just an empty envelope. And it used to be like Amazon was amazing. Like you would go on there and you talk, you say, I got a package of nothing in it.

Like, oh, sorry, we'll send a new one right now. And then it like all kind of went to crap and you had to like send it. You know, it was like you had to jump through all these steps and blah, blah, blah. I went to Amazon, got on a chat, said, I got nothing in it, said, great, we'll send you doing it. It was definitely not a human. But it was, but it, like, they, they lost that, that human component, which is so great about like Amazon, like a few years ago, the customer services, like, you know, they realize instead of trying, like, parse a cable, like, just send them a new one, they'll be a happy customer. But it got so convoluted as they scaled

because they couldn't serve you with humans anymore. They have gazillion steps in front of it. That's definitely an L.M and a pretty dumb one sitting there. Great experience. Loved it. Fantastic. And cheaper, better customer experience. I don't know if it's cheaper,

but like the clicking through a gazillion things, but it will manifest in me being a happy customer. I'm me telling this story in this podcast right now. Like there's so many things that we can see just this being like really useful sort of right away that in a way that in a way that, the dot com bubble was so circular. Now, maybe it's all very circular right now.

Like I said, how much of Microsoft's huge revenue is actually just chat CPD? Right? Like it's changed to be going with that actually, right? And there's like, you know,

how much of Anthropics revenue is just cursor, right? Like, and people, this one sort of breakthrough product that seems to be losing tons of money. So is it, and is it going to go?

If it's not too far right now, is it going to go too far? Yeah, almost certainly. That is going to happen. But it doesn't mean there isn't anything really here. The question that I think is interesting. Okay.

He mentioned the Google fiber bit because the dot-com bubble was actually two bubbles. It was the internet companies, which is what we mostly think and talk about. And it was the telecom companies weighing broadband. They're the ones that really lost their shirt more than anyone else. They're the ones that like tanked the economy much more than like. Dotcom was relatively localized. And like it wasn't into the, yes, they went public and people lost money. Where real money was lost like WorldCom and all these companies.

like just losing tons and tons of money, weighing all this fiber, which Google, and that ended up being really important. You had all this fiber, Google built up, it under the internet, you had this buildout that was maybe not economically rational, but once it's there, it's there. What is the buildout today, right?

It's not GPUs. It's all GPUs and data centers, but don't they depreciate? GPUs are, yeah, they depreciate too quickly. It can't be the GPUs. It can be data centers. Like, there was a tweet going around about someone like the earnings,

like some crank investor who likes to store companies, we'll talk about the complaint with their depreciation schedules. The problem with the tweet is, he was like, oh, they're depreciating GPUs over 15 years. No,

what he identified was a blended depreciation, which is the data center's depreciate over like 30 years and the GPUs depreciated in like five years. Now, five years still might be too long. For how long they're used to be honest. But the actual, like, if you construct a building and you wire it all up, Like you're going to use that with multiple generations of GPUs.

Like you should not be depreciating your data center on a five-year depreciation schedule. Because you're going to use it for much longer than that. So is that the long-lasting asset? Could it be power? It doesn't seem tangible. Bingo. That's power. If we want this bubble to be a bubble that matters, like the dot-com bubble and the telecom bubble

was a bubble that mattered for spreading the internet, what we need is, is insane build out of power. Everyone builds it out because bankrupt. But guess what? We now have massive power. Like, doing excess power. And then you think about that.

If there is a bubble, and this would probably be bad to be clear. We'll probably get a recession. Like everything would be terrible. But a world of excess power, just like in 2000, we had a world of excess fiber. That created the conditions for what followed.

A world of excess power. power would be an incredible one. It would be very painful to get through, but this will be a productive bubble if we get power. And I'm not clear on how much progress we're making on that front. That's very depressing. So the, I was going to write about this. Weed with the inflation statistics on trajectory, becoming an economics reporter, very dangerous terrain in the last couple of weeks. So energy is down. A big reason why inflation was like core, like a lot of, a lot of stuff was actually more expensive, but energy was way down. So that really balanced it out.

But energy was down because gas is way down, like down like 10% or something like that. Electricity is up. And it's been up and up and up and up. And it's up like 10, 12, 15% from last year. And guess what? You have meta out here. You have opening eye, Stargate, whatever you have Microsoft. At this point, they're making, they will buy electricity, whatever the price is.

and utilities will sell it to them and that means everyone else is going to pay more and it has to be fixed by building new power and there's like we all this stuff about Nvidia chips like chip controls all this total side show are we going to have enough power China's going to have enough power

are we and it would be a great thing in one of the most productive bubbles in history if we can get a bunch of people to go bankrupt building new power generation. Well, I'm going to hope for the best on that front. I haven't, again, it's early in the Trump administration, but over the last six months,

there hasn't been that much movement on power. That was certainly one of the hopes, right? Like, you know, they would really drive, you know, deregulation around this particular area and push things forward. And, you know, if they do, that'd be great. And if they do, that's probably the sign of a bubble. So there you go.

Well, there's your bubble commentary, Sam. We'll keep it moving. Mark says, Ben, listening to last week's Sharp Tech and dithering, and your opinion that Apple should buy a model company like Anthropic or Mistrawl, I understood that to be the advice you'd give Apple's team. But do you also think that's best for the market broadly? That is, if you were speaking for America broadly or even just the U.S. stock market, what outcome do you think is best?

If I recall correctly, you hold a broad index to avoid conflict of interest. Given that lens, what do you want? Should Apple buy someone? Or is it better if Apple stays light on AI, keeps making money, and distributing it back to shareholders, as it slowly fades to irrelevance and allows OpenAI, Google, or someone else to find the next device and model? You've also written about Apple helping build China's industrial base. Does that change the answer if we care about American outcomes? Would it be better if a new Western-aligned firm found the next device in an environment

that actively encourages Western manufacturing versus Apple with their continued reliance on China? Does the market in America do better long-term if Apple takes a step back? What do you think? I say this with all sincerity. Like, I'm not just like, like, I don't think about my stock portfolio at all when writing. It was actually when he wrote, when you read this, I'm like, what do I want? I thought it was kind of fun because it sort of removes you from the role you typically play. I know.

Unfortunately, this has probably cost me a tremendous amount of money by not investing my book. But, no, it was sort of interesting to think about it. I love the China one to start at the end was quite interesting. Yeah, probably good for America if Apple was not so dominant, which is, you know, given their reliance, given the reliance on China. and if we had someone that grew up in the U.S. in a similar scale. Now, is that possible? I don't think that's possible at this point.

It's another set of questions to say the least. Google with Samsung would be our best bet for Western Align manufacturing base. Yeah, by and large, my overall philosophy has long been. And James Allworth and I used to have long debates about this on exponent, which is my view was, I don't care about companies being disrupted. I don't care about stock. I like stock buyback. I like, like, because there's always an ongoing complaint, right?

They're not investing. They're doing stock buybacks. I'm like, that's great. Give the money back to investors who can go put it in a startup and actually get something, you know, who's actually much better geared for innovation, et cetera. And I think that would probably be my default answer. My advice for Apple is different than like what is great sort of generally speaking. There's a good question sort of in that regard.

That said, there, there is a bit of a like there's sort of like the great man of history debate you know like do like you know in tech Steve Jobs was a great man of tech

like he changed the course like phones will look different computers look different with it like now the GUI existed right he refined it but you know very clear direction that everyone sort of followed right

and to what extent is Apple that company like things are different because Apple exists because Apple approaches things in particular ways. Everyone copies them for a reason. Because, like, is it actually good for the world that Apple continues to exist? Because there's something unique and special about them that you're not going to just get from general startups.

Yeah. I don't know. I mean, I think, but I think it's interesting. It's funny how these sort of broad-based philosophical debates, you can apply it to a question like this. Like, is there, you can make a generalist argument. that companies should die, but there isn't about Apple that's unique. Like, like, they push things forward in a magical way that's superior to the typical consumer electronics.

They got a four-year track record of doing it, right? Like, and do we want that to disappear? But I don't know. My counter would be, that's why I was excited for the Vision Pro. And the Vision Pro probably isn't the form factor that will popularize VR the way Steve Jobs popularized the GUI. Still an awesome device, though. I think the mistake that Apple,

when Apple gets in trouble is they underappreciate the extent to which they do benefit from others, right? So the GUI on the PC arrived just in time. And it was invented, you know, by Xerox Park, like famously, right? Right. The iPhone sort of arrived right on time. You know, wrote on top of the iPod. The iPod benefited from piracy and, like, people, you know,

the music stores, Like all these sorts of things, Apple, and this is why the great man of history debate is so interesting. Do the trends of history matter? Yes, of course. There's a reason why most people invented calculus at the same time, like X, Y, Z. But also, like, the answer I've settled on this debate is, is it A or is it B? My answer is yes. Like, the trends matter.

And also people make stuff happen. And I think Apple at its best is a company that makes things happen at a time when the world has trended to a place where it's useful for them to make things happen. And the Vision Pro is arguably Apple trying to make something happen when the world's not ready. And maybe they looked at meta, who made the same mistake on steroids. And it's like, well, maybe you should be taking your cues from the right time and place from those guys. Yeah, well, and I think Apple, they did, they had good grand ambitions and good impulses on the Vision Pro. The Vision Pro remains awesome to use. Yeah.

Every time I put it on, it's great. I also haven't put it on in weeks. No, but I don't mean to denigrate it because I think some of what was driving that product should be celebrated. No, but that's a whole point. More of that spirit is kept alive out there. All the Apple parts of the Vision Pro are awesome. Yeah. What's missing is all everything around it, a reason to use it, which has to.

to come from other folks. And I put Blam and Apple for, you know, that are towards developers. And I think that's part of it. But there's also a bit where what need is this? The need exists. Like there's a hole in the market and you fill it. Where's the hole in the market for the Vision Pro?

Yeah. I mean, I will say there was nothing magical about the Googly eyes that they had on the outside of the Vision Pro. So we do have to dock Apple some magic points on. that front. Sid Harth says, I've been intrigued by Gen Z's sudden nostalgia for old tech, especially Blackberry devices.

Against the backdrop of recent sharp tech and dithering discussions, I wonder, and these are discussions about thin clients, I wonder if we're headed toward a future dominated by lightweight devices running AI operating systems, a la Her, could a company like Blackberry realistically re-enter the consumer device market?

Imagine a modern low-cost Blackberry designed as a stylish, nostalgia-rich, thin client-slash-hardware interface for AI aimed squarely at the Gen Z market. Could it be the right timing for this Canadian powerhouse to make a consumer comeback? Ben, any thoughts on the prospects of a Blackberry comeback over the next 10 years? I mean, no. No, not really. A world of thin clients, you know, powered by the AI Cloud is a world of commodity hardware, right? Like, is there an opportunity to build something cool there? Sure.

There's cool Chromebooks. You know, there's been cool. Like, but Blackberry was a, was fairly self-contained, but an ecosystem. And you're not going to get a company like that. whatever it surrounds the core is inevitably commoditized. Like it's not going to be highly differentiated. And if the core is this cloud-based AI per whatever, the devices will commoditize around it.

And that's just the way, there's not room generally for a highly differentiated product in another space. No, no, you can still have, like there's TVs, right? There's high-end TVs, low-end TVs. And you can have high-end. devices that access low-end devices. The high-end TVs don't make any money either, right? They still have a highly competitive market because you're all relying on the same content.

Like, and you're relying on the same AI. So maybe it'll come back as a nostalgia brand. I know like point and shoots are a big thing these days. Like there's lots of this sort of stuff going on. You know, it's, I don't know it makes me feel old. I'm not sure what it is. Well, I mean, I enjoy it. It's a throwback to the Blackberry era.

I enjoyed the Blackberry movie a couple years ago. I was a enthusiastic Blackberry user. And it sounds like if we do enter that commoditized world, there would be room for some like crappy nostalgia bait, thin client, low-end product. And so I don't, I want Sid Harth to keep his dreams pretty modest in terms of a Blackberry comeback. Well, here's what I would.

say on an encouraging point, when the phone became the core of the value chain, all devices basically disappeared and got subsumed into the phone, right? And then you had a new, like the accessory market around the phone, like cases and chargers and, like all this stuff around the phone is like all this mass commodity market, but everyone had basically the same device. Now, of course, it's a differentiation with the iPhone and different Android models, but that was like, like, I wrote an article ages ago with a picture of like my camera. my calculator and all this sort of stuff and how it went into the phone. Those are now apps on a phone.

Yep. One thing that could be exciting for sort of device, maybe we'll get the return of device blogs is if it is all in the cloud, this AI, that can manifest through an earpiece or through a glasses or through whatever. We would actually expect to see an explosion of devices. Like the devices, because the devices are accessories. And now the accessory market, it can be fun and cool. It's not going to be super profitable because anyone can make one.

That's the whole thing. It's a modular commoditized aspect around the core. Now, I think that actually does sound pretty cool. And maybe we could have like a keyboard-based your AI device. I was going to say it isn't the craziest thing in the world to have a device for text messaging and emailing. And then everything else is handled in the cloud. All your apps are in the cloud. And I mean, that sounds appealing to me as a consumer.

Here's the question. When's the last time you typed on a BlackBerry keyboard? It's been a while, but I was very, very good on. a Blackberry keyboard 15 years ago. So I feel like I could probably pick it up again. I 100% see you buying this device and abandoning it plus to minus three and a half days. Oh boy. I mean, look, I thought about it because I read this note and I was like, could I actually live without the apps that I have become addicted to on the iPhone? And would I be comfortable if those were all just sort of ethereal in the cloud, voice activated.

You know, I will say, I will say I think you're a pretty effective and talented emoji user. You don't overdo it. You choose the right one at the right time. I am quite good, yeah. Are you going to live without an emoji keyboard? Well, I would guess that BlackBerry could integrate that. I think they had emojis in BBM way back when. We'll see.

Look, I'm more likely to abandon the iPhone because I was also thinking about, you know, going with a Samsung Galaxy at some point for the sake of the show. I'm more likely to take the leap for a thin client that is a really simple interface. And this is like seven years down the line because all this is a long ways off. Or I guess it's not that far off if we're talking seven years. But like that is more appealing to me than leaving the iPhone ecosystem for Google at this point. So sorry to disappoint the Google fans in the audience. We'll have to hope look at glasses really terrible. And then you'll bail.

Does this device have to be wired? Wired for what? For headphones? I don't know. You're the earpot over air pod, guys. I'm certainly, if there's no headphone jack in the nostalgia rich Blackberry device that we're dreaming about in the future, I'm going to be very pissed off. We're bringing back Blackberries.

we're also bringing back the headphone jack at long last. You do you. Dead silence and disappointment. Great, great stuff. All right. And speaking of disappointment, two final notes here. This is Bill. He says, I've heard Ben talk wistfully about the 18T monopoly and the good old days

when Bell Labs invented cool stuff for the good of humanity. Friday's episode takes the cake, though, with Google's Genie 3 as the catalyst for a new level of lamenting the end of the AT&T monopoly. There's a long list of technologies and products that ATT and Bell Labs suppressed or delayed the release of. One, tape-based and early solid state answering machines. Two, Bell Labs Picture Phone first demonstrated at the 1964 World's Fair. three, magnetic recording and home media. Four, early modems and data networking. Late 1940s, early 1950s, he says.

Mobile telephony is number five. And six, the Unix OS. Now, Ben, each of these categories came with a description that I've omitted from the outline. Oh, I was going to add my own. Like, for example, answering machines. Terrible. I'm glad they delayed it.

Who was an answering machine? Picture phone. Also terrible. Who wants it? I had delayed it. No, sorry, I digress. I continue. Okay. There are others, he says. Wireless telephones would have likely never happened or would have happened much later because for those to be developed, it first had to be legal for third-party devices to connect to the AT&T phone network. Remember, it was illegal for decades. Long-distance calls would still be crazy expensive. Digital telephony would have happened much later and it would have been expensive as opposed to trending toward free as it is today because of its impact on

AT&T long distance revenue. Ben monopolies distort markets and delay innovation, particularly in telecommunications, the AT&T monopoly was not the good old days and never was. So you've been called to the carpet with some facts from Bill. Do you have anything to say for yourself? I just thought I think it's interesting that Bill lists a bunch of stuff that Bell Labs invented. So is he making my argument or his argument? First off, Bill, my one of my longstanding points around Bell Labs, it is one of the accidental great antitrust cases in history in that there was a settlement that they had to basically open source their patents and anyone could use it. And everyone was mad about it. You didn't punish ATT enough, and then it basically ceded the entire computer industry.

It continually cracks me up the two greatest antitrust cases were accidents, which is the ATT one and the IBM one, where IBM unilaterally separated hardware and software to avoid an antitrust case. That came down anyway. The case had no impact. The split had a huge impact. So again, though, I actually go back to my first point. They invented all this. Like, there's this magical world where this stuff got invented by someone else and then, was dispersed way more broadly because AT&T didn't limit it.

I'm not arguing monopolies are good. I'm saying there's benefits that come from a company basically becoming the outsourced R&D arm of the U.S. government. Okay, well, let you have your long distance money, but spend a lot of money inventing stuff and open source that make it broadly. Invent the technology industry for us. Right. Like you can't deny the stuff did get invented.

It did get, what's the word of it for? not dispersed, diffused. And a lot of it is incredible. You list Unix OS as a detriment here. Like, so again, I think Bill's beat, like, actually, it was diffused, though, because of the antitrust action, to be fair. No, but the point, the problem here is, and my problem with the antitrust movement in general,

is this absolutist view and approach that can't even grant a bit of legitimacy or doubt to their position. stuff just magically invents and gets out there and all monopolies are the government's fault and nothing bad will ever happen if you mess them up. The point about Bell Labs, of course the HG monopoly is bad. Of course there were issues with it. I'm not denying those points. It's also okay, Bill, to admit some good stuff happened. And it's not for sure that that good stuff would have happened or happened the time when it did without that.

They invested tons of money into Bell Labs. They hired the best people in the world who were able to do whatever they wanted to. And I have a hard time believing that all the stuff they did and invented would have happened when it did at the time it did without that largesse. And that largesse was 100% downstream from a monopoly. Does that say I'm defending monopolies up and down? No. But if you can't even grant this bit of grace to maybe there was a couple good things that happen, it's kind of hard to take the monopoly argument seriously. And it's sorry to label you, Bill, as the stand-in for the whole movement.

But that is kind of like the whole thing that drives me nuts. Yeah, well, I think Bill is just adding some footnotes to your comment last week, which was, I would say, partly tongue-in-cheek in terms of the Bell Labs monopoly. But there are real benefits as well. And I- The AT&T monopoly was not the good old days and never was. I think there were some good days. In some ways, it was the good old days. Yeah. The way I think about this, first of all, if we ever release merch, my one request is that we do release like an anti-antimonopalist shirt because every time you say that on the podcast, it cracks me up to no end. Even as someone who's more of an anti-monopalist, the way I think about the ecosystem, though, is not to get too political, but I think like when you look at actually antitrust is unavoidably political, no matter.

matter what you're talking about. That's exactly true. That's a real lesson. When you look out at the states that function best, I think the states that are purple function better than the one-party states, whether you're looking at Dems or Republicans, when there's some real tension in the system, those states tend to produce the best results across a variety of categories. And purple is how I want the antitrust process to look, where both sides, make some good points and good arguments, and there should be real tension there. And I think for a long time there wasn't.

Now there's more tension, and everything is functioning properly, as far as I'm concerned. So we'll see what the judge rules on Google's fate later this month. I think that ruling is coming down soon. Yeah, is you a proposed? Like, make Google open a bunch of this,

I don't know, should they open sources of patents? I mean, one time. Absolutely. Let's do it. And speaking of Google, Kevin says in the middle of last week's... Please Google alone. Let Google cook. Let's leave Google alone and let Google cook.

You've turned into a Russell Westbrook fan. Let Russell Westbrook be Russell Westbrook. Let Google be weird. Kevin says in the middle of last week's Sharp Tech, you guys called Google an amorphous blob? Well, there's a famous internal memo at Google. Why everything is so hard at Google was the title. which compares Google to a slime mold. Business Insider wrote about it a few years ago and said the most memorable part of the memo compares Google's bottom-up organizational structure to a slime mold,

highlighting how both Google and a slime mold can work independently, but still come together to solve complex problems. It's a strength and a weakness, a culture that prizes autonomy can accomplish big things, but the larger the organization grows, the slower things get. As each fiefdom within Google operates on its own, Google engages in messy behavior that can be, quote, hard to predict. So there you go, Ben. You know what's long lasting and hard to kill?

What's that? Mold. That's true. Well, on that note, not a fan, though. Not sure this is like endearing me to go. No, I do remember that that was a, someone had a thing in here that you didn't read about like Benception or something where someone's repeating my argument.

that was clearly me repeating this memo. I remember it now that the E. Miller mentioned it. I was pretended like it was an original insight. That was not. But nevertheless, an accurate depiction. And mold, I guess mold could be how monopolies go wrong. And so that's the danger of entrenched companies that could just hang out and invent cool stuff and never release it as products.

But on that note, I hope everybody has a great weekend. Ben, I hope you have a great weekend. People can continue emailing us. Email at sharptech.com. And I will talk to you on the other side. Hope you touch some grass this weekend. Thank you. I'll talk to you later as well.