Sharp Tech with Ben Thompson - Intel and the US Semi Future, Will Any Big Tech Incumbents Lose in an AI World?, Questions on Tea, Grok, and The Ringer

Episode Date: July 30, 2025

Intel's future in leading edge manufacturing looks more uncertain, while prospects for the US semiconductor supply chain are beginning to look more promising. Then: Google's earnings inspire a question about Big Tech in AI, who will win the entertainment space in AI, thoughts on doomerism and marketing, Apple's App store promises and a very bad week for the Tea development team, a question about The Ringer and Grantland, and a note on life coaching and Apple's 2TB storage plan.

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? I'm doing okay, Andrew. I'm doing okay. How are you? I'm doing well, you know. We're rounding the corner, rounding third on the end of July,

headed into August later in the week and I'm excited to be back. We're going to kick things off. That was just a really great articulation of where we're at in the calendar. Thank you for that. Sleep walking through the intro here. That was the most summer end of July intro ever. So I guess you captured this spirit. I'm doing fine.

How are any of us doing? But no, I'm in a good mood. It's good to see you. And we are going to begin with a chip check-in, long overdue for a chip check-in. So last week on Intel's earnings call, Intel CEO Lip Bhutan said the following. Up to and through Intel 18A, we could generate a reasonable return on our investments with only Intel products. The increase in capital cost at Intel 14A make it clear that we need both Intel products and a meaningful external customer to drive acceptable returns on our deployed

capital, and I will only invest when I'm confident those returns exist. So, Ben, as we take a look at the state of Intel, can you use? translate that message into English for people who care about the future of U.S. semiconductor manufacturing? Well, let's step back from the specifics of particular node size and whatnot. What Ton is referring to in broad strokes is basically what I was warning about 12 years ago when I started trajectory and first wrote about Intel, which is the problem with missing mobile is you're missing out on volume.

And if you don't have sufficient volume, you're going to eventually not be able to invest in the leading edge as costs continue to go up. As costs do you go up, you need to spread those costs over an increasing number of chips. And if the only chips you're making are Intel chips, you're not going to have enough chips to absorb all the costs. And that's, yeah.

Right. And so this articulation is basically just what I said 12 years ago, and I think the challenge with chips and writing about chips as we've discussed is you can see stuff like this coming 12 years ahead of time. But it takes a long time for it to play out. There's lots of money to be made or lost sort of in the meantime. And, you know, this is where you get a real, I think, separation between sort of the stock price and what's actually happening. Like the Tyler Cowen, like one of his favorite critiques is always, well, are you shorting it? And this is one of those cases where I would use as a counter example to Tyler's favorite critique, which is, yeah, if I had shorted Intel, I would have been both right and bankrupt.

Right. So, you know, there is, yeah, there is, there is, there is a challenge there. I mean, so some things are, are just not very investable in the long run. Ultimately, probably the way to have approached Intel in 2013. And I think a lot of smart investors did do this. Mm-hmm. Would have been to plow your money to. TSM, like the company that did sort of win mobile.

So just broad strokes, whether this is actually true or not, whether this is a negotiating tactic, whether Liputon just sort of always wanted to get out of manufacturing in general. Which, by the way, I mean, it's interesting because I think on one hand, I and others probably gave Pat Galsinger too much benefit of the doubt in his statements. I will say my natural inclination is to look at Liputon with a bit of a side-off. in that, at least from a manufacturing perspective, because the sort of, when you go back to the stock market perspective, the most cogent thing for Intel to do has been to just get out of manufacturing. Like try to preserve, like sort of the slow decline, become fabulous like AMD did previously, outsourced to TSM like everyone else,

and maintain and double down on the product advantage that you have that do keep people in Intel. because it's not just that manufacturing, it's become a millstoneer on their product group. Their products have been bad, not as good as AMDs, but also they were on slower processes as well. So it's sort of like exacerbated the problems that their product group had. And now AMD's over like 50% server market share,

which is, you know, that was the segment that kept Intel so profitable and attractive as a stock throughout the 2010s. And so, and him being sort of a software guy was always, you know, as someone who cared about the manufacturing side, not just from an Intel perspective, but from a national security perspective, always a bit sort of, I've had a bit of a side eye for him. I would say from the beginning.

In terms of the direction this might go. Well, and I mean, stepping back, you mentioned the national security side. The rational business choice for Intel may be to step out of manufacturing. But for the last several years, there's been talk about how urgent it is to save Intel because it's important. to have an American semiconductor manufacturer, and now it looks like they're one foot in, one foot out on the leading edge with the 14A. This is why nine months ago I wrote the article saying, look, I had Intel right pre-Galsinger, which is like this company needs to split.

And like if you want to make this work, it's kind of implicit in this statement, which is Intel products do give Intel Foundry the volume or at least a huge portion of the volume they need to function. If Intel went completely at a TSM, this sort of foundry effort wouldn't just need one external customer. It would need a bunch of external customers. But my sort of contention then was,

yeah, that would be very hard to split them for lots of good reasons. But it seems clear to me, and this was my take pre-Galsinger, then I sort of gave Galsinger a run. And then last fall, I'm like, nope, my initial take was right. Intel's culture is fundamentally incapable

of becoming a foundry. They cannot not prioritize themselves. And no one is going to want to partner with them and go with them, given that reality. It has to be split up. And which is why I'm like, look, the U.S. government, if it actually is a national security concern, you're going to have to just suck it up and fund it, not expect Intel to do it themselves. And I think that's maybe, so maybe my side eye with Luton is actually a side eye of,

yeah, we're on the same page here. It made me for slightly different, like, from a shareholder perspective, it would probably be best for Intel to dump the manufacturing. Right. From a, or that's debatable, but there's certainly a case to be made in that perspective. I would argue if you want this foundry to function, it has like, I just, Intel's just not a customer service organization. That's what a foundry needs to be at the end of the day. It's not whether, it's not just whether or not they have an advanced process. It's whether they're actually partners you can work with and deal with.

And there was a lot in this call about Ton with very legitimate critiques of Intel that were hilariously directly in line with the critiques of Intel for the last 30 years. Okay. All they care about is performance. They're not, well, I think the big one was like they were insufficiently focused on yield and only cared about performance, which that's the way Intel's always been. And they never really had to be as concerned about yield. So yield is like, of the chips you make, how many are useful. And with logic, it's very challenging because in a logic chip, almost all parts of the chip are distinct. This is different than memory.

We'll get to memory in a little bit. I think we're talking about Samsung. In memory, in memory, you're making the same sort of memory cell again and again and again. So you make a huge sheet of memory. And if a bunch are defective, it doesn't really matter. I mean, it matters, but not that much because you just disable the ones that are effective. And then you still have a useful memory chip. Right.

In logic, if part of it's defective, the whole chip's defective because every part is much more unique. So making memory, even though they're both fabbing, there's a reason why you generally have different memory companies, SK-Hinex, Samsung, Micron, then you do logic companies, Intel, TSM, sort of, et cetera, because they're very different skill sets. And there's a very different sort of appetite for risk. And the boom-bust cycle and memory's insane. It's much more of a commodity. It's really sort of a money game in many respects. And in logic, it's really a, what's the word I'm looking for?

It's like, it's a precision, discipline game because you have to sort of get it right. And if you're a TSM, you really have to get it right because your viability is a function of keeping those lines as full and as fast moving as possible. Yes. But Intel's been unique because Intel is fully integrated. So sorry, I'm kind of rambling here, but I think this is sort of a broader point that's useful to understand because Intel is fully integrated. They're their only customer for their manufacturing. And so they've always had a little bit more leeway because they had larger margins in part because they were getting all the differentiated pricing. Like Intel was the Nvidia back in the day because they made their own manufacturing.

So Nvidia has to pay TSMC a bunch. Invidia Intel had it all internal. That gives them a bunch of leeway. So they could sort of tolerate worse yields. and they could also like tolerate just being slower. Like very, one of the areas where TSM and ASML leapt ahead was in the shift from 200 millimeter wafers to 300 millimeter wafers. And when you get a larger wafer, like kind of the physics of it are different, like the way

it wrote like it's moving through machines and around like you kind of have to re-engineer from the beginning to get the full benefit of 300 millimeter wafers, which is the more area you have, the more chips you get per wafer, which means every wafer going through, you're making that much more money because there's that many more chips on the wafer. Nikon and Canon at the time dominated, I believe it was dominated lithography. And they just sort of like wanted to adjust their machines. Okay, now I could put a bigger wafer in. But that meant it was slower because to like control like the forces, the structural forces

of rotating the wafer around and things like that. And Intel was fine with that. Intel wasn't, their focus was not on speed and efficiency. Right. What they wanted, what they liked is they had full control over Canon and Nikon. They were sort of like, like, you know, hand in glove and sort of working together. And what ASML did, ASML and TSM worked together to completely re-engineer

lithography around 300 millimeter wafer. And that's really when ASML became a force in lithography. this was before EUV, it was because they worked hand in hand with TSM to re-engineer the entire process around the physics of a larger wafer so that you would get the same throughput

as a 200-millimeter wafer, but with a larger wafer, which meant you got much more efficiency in your line. And so this is like just, this is just a mindset of TSMC. It was a mindset of ASML. It left them ahead of Intel and Canada. But what it speaks to,

and while it's pertinent to this discussion, is Intel by virtue of its, integrated model has never had to be concerned about efficiency. Move with the urgency of somebody who's trying to serve customers as quickly as possible. That's right. And same thing with yield. They could be less concerned about yield because they had such huge margins to sort of like, you know, they just need to be, and they had a super aggressive binning strategy, right? That's why every Intel processor, there'd be like eight versions, like, which is really just compensating for their yield issues. And so, but that's fine because

they were serving, you know, if you got your mini PC or what was the, what was the, what was the app netbooks, the netbooks. If you got a netbook with an Intel processor, what that processor was was just riddled with errors and they're turning off huge chunks of it. But that's fine. They're still making money off and selling it for 50 bucks or whatever it might be. But it speaks to the cultural point. And you raised that, you drew a distinction between Intel and Samsung's culture with the news that Tesla is signing a $16.5 billion deal with Samsung. And Samsung's going to fab AI chips for its autonomous driving dreams. And obviously TSM has taken over the world in some ways by serving customers better than anyone else.

And essentially it looks like Intel just doesn't have those muscle groups in order to thrive in this world. Right. No, that's my that's my big takeaway is setting aside everything else, Intel just they don't have it in them to serve customers. And so like you go back to Lipbutan's comment and you talk about they didn't really care sufficiently about yield. They cared about performance. That goes back to the, like, I brought up the Tony Fidel discussion that I had ages ago, where his big bugaboo is, the reason why I got that interview in the first place is I wrote about Paul Adelini's comments about turning down the iPhone order. And he emails me.

He's like, no, I'm so sick of this. They had no chance. That's great. That's great backstory. They're fundamentally uncompetitive because all Intel cared about was performance. They did not care about efficiency. And even though they had an armed division at the time called X scale, their armed chips were focused on performance, not on efficiency.

This has been the Intel mindset. And this goes back to, again, this is one of those things where the things we view as rotten cultures today were great culture in the past. You go back to the 80s and 90s and a couple things. Number one, you go back, which I brought up before, how Pat Galsinger was the one who fought for CISC over risk, a less efficient architecture because his point was we have a software moat. And by the time we rebuilt everything for risk, number one, we're opening ourselves up to competition. And number two, our manufacturing, if we had just stayed the course, would have pulled us ahead so that our cis-based chips would be faster anyway. So it just, it's core to Intel's culture that we'll make it up in manufacturing by just being faster.

Performance. Number two is the entire ethos of computing in the 80s and 90s. And we talk about this in the context of AI, where you shouldn't be optimizing your AI. apps for the models of today because you assume the next model is going to be way better and is going to solve a lot of your problems. That was computing in the 80s and 90s, which is any time you spend optimizing your application to run fast on current chips is a waste of time because by the time you finish optimizing, new chips will come out that will solve your problems for you.

Faster, better chips, yes. Right. Now, this is how we got bloat in software, but it was a very rational way to build software in a world where chips just got massively faster. year after year after year and Intel was the foundation of this. They were making their chips faster and faster. And this was in an era when all the computers were plugged into the wall. So Intel was fine.

But this is just, so Intel is historically self-serving, totally optimized for performance over everything else, not sufficiently focused on yield. Like they're used to being fat. They're used to having big margins. And they're used to like just making whatever chip they want and people have to come and get it. This whole backside power thing is another example. And this is where I almost like, I lament the loss of Intel to a certain extent. I'm sorry,

by monologuing too much, Andrew. No, it's good. A bit of a rent. I feel like I, no, this is what I think I should have written a big article this week to like summarize all this together. So you're sort of getting it right now. There's never a time we discuss Intel without you launching into some 15 minute digression on Intel history, Intel's complicated future. I mean, I'm looking at Intel and it's like,

this is not a specialty of theirs and they suck at customer service. It's not surprising to be in the slightest that they're struggling to find an external customer for the 14A node. And I mean, I'll let you finish, but I do feel like some finality in terms of Intel's manufacturing shops and Intel's manufacturing prospects on the, the leading edge might actually be healthy at this point in the process so that everybody could just move forward with clarity. This is a, this is a mistake on my part. I mean, if I'm writing an update over two days and then doing a 20-minute digression on a podcast, I clearly have it in my system. I need to get it out. It's late July. Everyone might get an article next week where they

wanted or not. The, the backside power angle is, I think, very interesting. Uh-huh. So generally speaking, the way chips are laid out is there is the logic layer at the bottom, then there's a communications layer that sort of links all the logic stuff together, and then there's power at the top. And the power part is like electricity, and it has to be piped down to the logic layer. And it's laid out this way for lots of historical reasons, but a very good reason, some of which is the logic layer is very complicated. That's where you can screw up. And so if you screw up, it's easier to screw up earlier in the process than later, you toss the chip.

You remember a lot, this goes back to the efficiency time. The cost in chip making is not the wafer itself. A wafer is like a few hundred dollars. Right. The cost is the time. And so the sooner you can discard a wafer because it's screwed up, that is actually yield accreative. Even though you're losing a wafer,

you're getting a newer wafer in that much sooner. And so yield is a function of the number of good wafer out of total wafer. If you have a bad wafer, you want to increase your total wafer sooner rather than later, that's how you get your yield back up. And so that was one reason where you do sort of logic, the hard part, in the complicated part where it's different, you would do that first and they'd do the other layers on top.

The problem is that as these chips get smaller and smaller and need more and more power, electricity, like, you start having like, you're losing electrons and you're having RF interference and like all this sorts of issues of electricity being, especially going through this communications layer. So the solution from like a physics perspective is to separate the communications and the power. And this is what is called backside power. You put power on one side of the logic. Then you have the logic.

Then communications on the other side and they're totally separated. This makes it easier to design the chip because you don't have to worry about trying to fit all this stuff in a small space. It reduces interference issues. There's lots of benefits to doing it. But the cost is yield. And it's because you're, so Intel's solution. is the most technologically forward solution, which is they're laying down the power,

then they're putting on the logic, then they're putting on the communications, and it's all a fully sort of integrated chip. The risk is if you screw up the logic layer, you're throwing away a lot more work. So it's going to be worse for yield. It's going to be more expensive overall. What TSM is doing is they're doing logic and communications,

and then for N2, which Apple is using, they're putting the power on top like it used to be. And for A16, which Nvidia is going to use, they're making a separate chip with power and bonding it to the bottom.

And so it's literally making two chips for one. That approach is ineligent. It's kind of clunky. It's more expensive than either than the other approaches because you're making two distinct chips. But if you step back and you zoom out,

the end result is that Apple, who's baking chips for a phone where the total power is gated, you don't want to go above like seven or eight watts

because like you're running on battery. Right. You don't want to drain the battery. Right. From their perspective, they get no benefit from backside power because they're not

amping up the power enough to encounter all the issues that backside power is meant to address. So they don't need backside power. And so they don't want to pay the yield penalty or the extra chip penalty of getting it.

So just from an apples to apples basis, TSM's approach is better for Apple than Intel's approach. Okay? Then you, so, but what about the sort of invidious of the world? Well, they're selling chips for $30,000 or $60,000 or whatever the price might be. So if TSM jacks up the price is in, VEA's not happy about it, but they have plenty of margin to pay for it. And so TSMC chose a clunkier, but ultimately more.

more flexible approach to N2, where NVIDIA chips, they're pulling like seven, 800 watts per chip, like just massive amounts of power. They really have a power issue and they want efficiency, but that efficiency is gated by cooling and giving you're gated by space in a data center and your total electricity generation. It's really interesting because they both, both Apple and Vita care about efficiency, but in totally different ways. And so TSM is delivering two totally different approaches using the same logic layer for N2 that serves both.

Intel's stuck in the middle. It's a bit of a tragedy because Intel remains and always has been more technologically interesting and created than TSM. And this is a great solution. Intel's 18A and 14A, they're all backside power. It's a completely new way of building chips. It's very technologically innovative. It's classic Intel. The problem is it's not meeting anyone's needs.

It doesn't meet Apple's needs. It theoretically meets Nvidia's needs, but this is the problem of not being in the market and not having proven themselves to date. Well, that's what I'm saying. It's like there's no proven track record here. There's also now with these comments from Lip Bhutan, like it's not clear how committed Intel actually is to staying in this world. And then you layer on the lack of customer service jobs and the lack of track record

where they are working with companies and moving. with urgency to meet their needs, meet anyone other than Intel's needs. And it's like not surprising in the slightest that there aren't people beating down the doors to work with Intel. And so that then creates a situation where the leading edge manufacturing in the U.S. looks like it's now a two-player game with Samsung and TSM. Would that be a reasonable assessment going forward? So the Samsung angle is pretty interesting.

I haven't covered them enough. they really ran into some problems, first with EUV and then with gate all around. So part of the three nanometer transition for all these companies is a new kind of transistor. That becomes even more 3D than sort of like FinFet was previously. And it's always like these transitions are always super difficult and hard. It's usually at these transitions that companies sort of fall off because it just they can't, they can't do it. The money's too great. Someone else sort of does it and goes forward.

And so Samsung was making Tesla's chips before on 7 nanometer, and then they really fell apart on 3 nanometer. They just couldn't get it working. So Tesla goes with TSM for the AI5 chip. The news here is the AI6 chip, which would be on 2 nanometer, is coming back to Samsung. They're like the first best customer for this new Texas fab that was delayed and now is clearly going to be built.

And it seems like I think they're not. there's sort of the dark horse that came in and they're going to be the second supplier. Like you just sort of zoom out. Number one, Samsung has some of the concerns about Intel, particularly around IP theft and things on those lines. It's part of what Apple left them. You know, Qualcomm's expressed concerns about this. They actually separated out their Silicon Division from the rest of the company because of there was real questions and customers about them, particularly about a decade ago. Yeah.

Yeah. But Intel has all the same concerns, sort of to be clear. always been one of the TSA's Trump cards, which is we're never going to compete with you. We're never going to sell a product. We're not making phones. That's right. Or no, we're not designing your own chips. We're only making the chips.

You're doing the design. So that's always been a bit of a concern. But you also had, you know, they have, and they're also a memory maker. And part of that is, I think there's always a cultural challenge for memory makers, as I mentioned before, making logic because it's sort of a different skill set. Then again, memory also throws off a ton of cash in the boom cycles, which can help sort of fund these transitions. Memory is also very lithography intensive, you know,

which is, again, Sam's UV struggles set them back in memory also, but it also means they did get over the hump. And now they sort of figured it out when it comes to logic. And now they have a core customer who's making a lot of chips. And you think about Intel needs a core customer who's left. Right.

Apple and AMD are not going anywhere. They're locked in with TSMC. Apple, TSM. They're locked in on the leading edge. AMD, because TSM really sort of saved their bacon, they're really loyal to them. They're not going to go anywhere else, even though they're a node behind. I just think that that's a very tight relationship that I think is not going to change. Nvidia has always been willing to dual source, but invidia hates Intel, like with a passion.

Like, and this is just long-rooted 20, 30 years. If there's any company in the valley that never, ever wants to get in bed with Intel, Nvidia is arguably top of the list. They believe Intel tried to kill them. Well, they believe it's true again and again through both shady and legitimate and illegitimate reasons. Okay. It's just purely, this is just a historical thing.

It's hard to see Nvidia ever going with Intel. But they would want a second source, right? They do want a second source. That's leveraged with TSM. Yeah. But if they want a second source, Samsung, they've done, they've gone with Samsung previously. I think they'd be willing to do it again.

And so then there's Qualcomm. Qualcomm's a little iffy to go with Samsung because they compete in modems. But then again, like Qualcomm has kicked the tires the most with Intel. And they said no. Like you're just like they don't they don't trust Intel can meet their needs. So Qualcomm's probably the biggest wild card out there as a potential Sam or Intel partner. You know, I still think the sort of like, I think Doug Loflin put this out and I sort of co-signed Broadcom. acquiring Intel and even though they probably don't want the manufacturing part, but Brockham has a lot of volume.

Brockham did Brockham tried to acquire a Qualcomm? That was that was blocked. But there's, there's, there's somewhere, somewhere in there is maybe a path forward. But if Samsung becomes a viable second source, is there room for three. I think is a very fair question to ask. Are there enough customers for three at that point? And Samsung does have, they've have done the customer service thing. Like like again, I went back to that Fidel interview. They worked hand in hand with Apple before sort of things fell out because of product. Yeah, product arguments. But if Samsung's going to be a viable alternative, it just makes, I think, the outlook for Intel even more dire outside of just straight up government intervention and like pseudo nationalization.

Well, I mean, that was going to be my final question here because it occurs to me that I think, maybe three years ago, we were recording in the wake of the passage of the Chipsack. And we hadn't gone live yet with the Sharp Tech podcast, but we were recording one of the early episodes that we put in the bank that we launched with. And we were talking through the Chipsack. And we're talking through Intel as a national champion. And every Intel conversation we've had since, I've been looking at our national champion here and being like, God, it's not looking great for the prospects at Intel and there are like layers and layers of problems there. And so as an American, there's layers and layers of problems.

It's like the layers and layers of a chip. And the problem is the base layer of Intel is like their culture. That's rotten. There's the waiver just have to be thrown out. That's the thing. And so as an American looking ahead at the future of the U.S. semi-supply chain, like should I feel good? about where things stand right now

because TSM is fabbing in the U.S. And Samsung looks like there's some promising progress on that front as well. And so if Intel is dying on the vine and we're giving up on the dreams of a national champion emerging here in the next five to 10 years, is that okay? I think things are better than they were.

I am somewhat encouraged. I think that I was a little skeptical of the TSM, Arizona, promises and maybe I was right to start. I don't know. It's hard to say where they're at now, I think is pretty promising. Just in general of Arizona being, and this really speaks to in some respects. I think Arizona is a validation of some of the stuff we talked about with trade and things on those lines where just getting a foundation and anchor starts to pay off over time.

There's an aspect from TSM. Maybe the first fab was just to mollify Trump. And you remember this started under Trump sort of like, you know, seven, eight years ago. And yeah, we're going to make stuff in the U.S. I'm like, well, they're just, all this is going to be totally dependent on Taiwan. They're just, it's going to be a few generations behind, blah, blah, blah, blah, blah. Even Morris Chang was giving interviews being like, we make less money in the U.S. Yeah, he's like, we're doing it because we're being forced to.

Yeah. Right. But you know what? Once you've put in the effort and like well chronicled. challenges and difficulties in getting this fab built in the U.S. Oh, yeah, all kinds of cultural challenges with TSM for sure. Well, yeah, but in cost challenges and just there's so much to get it started. But once it's there, how do you maximize all the time and effort that you put in?

Make more. You build more. It's like, no, it's the exact same as a fab, right? Once you've built the fab, you need to maximize the number of chips that is being sold by that fab, so you get a return on your investment. And in this case, whatever the motivation and whatever the intention of that original fab in Arizona has seven to eight years later resulted in an extremely aggressive, large scale. They're talking about, I think it was 30 to 40 percent of their advanced chips are going to be made in the U.S. in a number of years. That's a large number.

That's much larger than I think was thought about at the beginning. It's going to have its own R&D center so it can be somewhat self-sufficient if Taiwan gets taken off the map. And this, you know, they referred to it as a gigafab. What is a gigafab? A gigafab, a new term that's entering the lexicon, but I think is actually really, really interesting. So the way TSM used to function, like 10, 15 years ago, they would build a fab once and then just run that fab forever.

That's how they made their money. Because they were way behind Intel. So they couldn't charge a premium for their chips, but they would depreciate that fab over five years or 10 years or whatever it is. They'd use that fab for 30 years. And so it's just generating like, free cash over time because you've already paid for the equipment once and you're just, you know, selling, even if the chips cost a dollar each, it's a dollar of basically pure

profit. So you're just, you know, you're making money again again for ages. They faced a real challenge when they became the leaders. I critique them heavily for N3. And I don't know, I think it's why their former chairman of the board and former CEO lost his job. From what I've heard, he didn't necessarily leave, especially the chairman of the board post willingly. They underpriced and three. They were the leaders in the market and they priced it too low, given their sort of dominant position. And the reason is they had to have a cultural mind shift from we're going to make money over 30 years to we need to make money immediately because this stuff's so expensive and also we have pricing power. And the other reason is like from basically underneath like 28

nanometers, there was the shift to FinFET, which is around 17 or 18 nanometers, and then five to seven nanometers was a shift to EUV. The cost became so large that for a lot of applications, it didn't make sense to go lower than 20 nanometers. It's like this is a perfectly functional chip. We don't have any power constraints, any performance constraints that's going in a refrigerator. Like, it's totally fine, right? Like we don't need to. And so the problem is they have these massively expensive fabs that the apples of the world would come in and use.

And then when they had the new massive fab, Apple and AMD, everyone moves forward and suddenly, wait, who's going to use this fab? Right. Right. So they have this sort of like gap in the middle between like the trailing edge and the leading edge. And so they've had to rejigger their their business model to make much more money up front, but also rejigger their fab model into this gigafab idea, which is our three, five and seven nanometer fabs is actually all together. And we are designing them to be repurposed. So we can start with seven and we only need to change out some equipment and it can do five. Then we'll need to change out some equipment, it can do three. and building in this flexibility from the beginning,

knowing that we're not going to have as much backfill as we're used to, what we need to do is reuse our equipment to the greatest extent possible on the leading edge. The thing about this is that was the Intel model, right? TSM is becoming Intel, and they're becoming Intel much faster than Intel is able to become TSMC. That's really at a fundamental level, what has sort of happened over the last five to ten years. If you were to sum it up, man, that's a good line. I'm going to write this article for sure now. go. And so I thought it was meaningful in that context that they're now referring to Arizona

as a gigafab. Yeah. A gigafab is not one fab. It's a bunch of fabs that are, that are worked together, that is a flexible sort of organism that is meant to be continually be on the leading edge. This is not a, we're going to throw some sort of satellite out there that's copying one of our fads from before, just going to sit there and run. Like they have a fab in Washington. They tried the U.S. thing like in 1999 or something. Is it Oregon or Washington? Yeah. Somewhere out there.

Yeah. Same equipment. Like that is not like that's just stuck there frozen in time. Right. It operates because they spent money on the equipment. But it's still 1999 technology, right? And that's not going to be the case in Arizona. So so number one as far as the U.S. position is TSM's presence in the U.S.

is substantially different, more meaningful, more sustainable, more independent of Taiwan than it was previously. And they're in kudos to the U.S. for making that happen. So that's that's number one. Yeah. Number two. Samsung like this whole this whole fab is in Austin.

Now Samsung is still, I think, similar. Their core functions are in South Korea. Their R&D is there. There are fabs that sort of pioneer all this stuff is in South Korea. I think it behooves the U.S. to now push Samsung to, make similar investments around this Texas fab that TSM has done in Arizona. But the likelihood that that happens, given this Tesla deal, is much higher because

these investments have their own gravity. Well, they have their own gravity. If you're going to spend all this money to build a leading edge 2-9 meter fab in Texas, it just starts to make more sense to keep building around that, to sort of like make it sort of a center. and so that that's that would be a big focus for me if I were in the in the short of chip stuff is continuing to push TSM to be more and more independent in Arizona which sounds like has happened yeah and do it getting Samsung to do the same and you know that's and Intel like I mean it's it's a bummer but but it's always sort of it's always been a fight against gravity to a certain extent and I think that culture is hard to overcome and just the biggest. I was just so struck by Elon Musk saying, I'm going to walk the line of the Samsung fab.

Yeah. It's like, on one hand, okay, Elon, you're a good expert now. Number two, it's like, well, everyone's like, okay, Elon, you're a rocket expert now, like 15 years ago and now look. So, hey, maybe he's going to actually have some input. Do you sort of think about it? Like, what if we put Elon Musk in charge of Intel? That actually might solve the problem. Right.

Yeah. I think that would get cut through some red tape. Yeah. Eventually. It's exactly what Intel needs. Like there's, there's no country in the world that could probably benefit more from Elon Musk being in charge of them that Intel. Just going in and just like break it.

Intel needs to be broken. They need to be broken and reconstituted. Well, I mean, the reason I highlight TSM and Intel, or I mean, TSMC and Samsung is because I came away from your coverage earlier in the week, feeling optimistic about the future.

for leading edge manufacturing in the U.S., despite all of the dysfunction, sort of compounding at Intel and then potentially getting out of the leading edge manufacturing game. Like, given that story, the future actually looks fairly bright for the U.S. generally speaking.

I mean, yeah, I mean, does it matter that it's not a, quote unquote, US company? I mean, in the modern stock market, does it really make it different? Doesn't matter to me? I think it, yeah, I mean, it's really interesting because I think there's lots of industries were actually, this is a very pertinent question,

like shipbuilding, right? Big push for U.S. to make ships. Guess what the U.S. cannot do is make ships. Guess who can make ships? The Koreans and the Japanese. Yeah. And like there's a should our shipbuilding endeavor, which seems very reasonable,

should that manifest as American companies have to make ships in America, or should it be some sort of partnership with Japan, with South Korea? Of course we should make some in America. because the risk of war in Asia, but we should be leaning on these companies and their expertise and their capabilities

to a much greater extent. This is like the Nippon steel thing. I was just going to bring that up. Yeah, it was so infuriating to hear people pushing back against that deal. It's like if Nippon wants to do it, then let's let them do it. If they want to invest money in America

to upgrade steel meals, like why are we saying no, right? Yeah. It's like this, and at some point, are we going to trust the Japanese, or are we not, right? Like, and I think it's a similar thing

is sort of with South Koreans and like, look, you could push back on that. Look at a map. South Korea, not ideal location. We fought China over South Korea in the past. Like, it's something that has actually happened. So like, but at the end of the day, like, what is this going to be a pursuit of the perfect

in sort of abandoning the good along the way? And how long would it take for Intel's manufacturing to get to perfect is its own question in the middle? of this. And also there's, you know, Intel, by the way, not exactly scared of outsourcing. They're the ones that started it. Right. They went to Hong Kong and Very Child Semiconductor in the 1960s.

They were the first ones to do it. All in all, I think you're right to feel encouraged. I think the TSM situation, and again, I think this is a real credit going back to the first Trump administration of really pushing, putting pressure on this specific point. And this has been a bipartisan effort. And I think we're in a much better spot than we were, even if Intel is arguably in a worse spot. Yes. Okay.

Well, shifting gears here. I look forward to your Intel article next week. Although I never promised articles. Who can say? Who can say? No, I think I kind of wrote everything I wanted to write, but it wasn't like packaged. I don't know. We'll see.

Yes. Well, time will tell. For now, last week we recorded before you'd had a chance to parse Google's earnings. you wrote about them for Thursday, and then Bob C. sent the following question. He writes, your update on Google's earnings has me thinking, are any of the big tech incumbents going to lose in an AI world?

I am now long on everyone. What do you think, Ben? Well, one of my, I think, better articles, by better, I both mean it was both prescient and also everyone hated it at the time, and I think it turned out to be right, was the end of the beginning, which I wrote in, I think, January 2020.

And I analogized tech to the car industry, where the car industry started out with a gazillion car companies between the 1890s and 1910s. Like, there's hundreds of car companies that were started. And then it rapidly sort of congealed into four or five, and then over time down to three,

such that Tesla was the first new car company in like 60 years. I was going to say, like 80 years. Yeah. Yeah. And actually, there was one. that started the 40s, 50s, they got absorbed right away. So realistically, is really the first new car company like 100 years.

And people wonder why does Elon Musk get a lot of credit for people? Like that sort of says it right there, right? It's seemingly sort of impossible task. And what happened was you had this explosion in innovation and new industry. They just sort of settled into economies of scale and production and all the innovation happened on top of that. Now, obviously there was, you know, foreign, you know, the Japanese and the Europeans and all those sorts of things. It's not just a U.S. sort of story. But the overall take is that people might be

biased by the fact that they were around for tech's early years where you had a gazillion new companies. Anything was possible for these spaces and XYZ. And actually it might be settling down into a very rational structure of the big tech companies. And each of them sort of does their thing. And there's some competition like in the cloud layer, for example, but by and large, each dominates their space. and every time someone tries to challenge them, they just get overwhelmed with scale and distribution. Like, that's just sort of what happens.

And I noted this was combined with the sort of end state of computing, which is a phone in your hand and cloud computing on the other side, and you have continuous computing everywhere you go. And yes, we'll have devices beyond the phone, but it's really hard to beat the phone for it's sort of like being the sweet spot for everything you want. Portability, battery life, connectivity, the screen big enough to do stuff, also compete in your pocket. and then cloud computing, you get access to computing everywhere.

It's continuous. Like, thanks to 5G in the air, 5G, 5G, 5G, 5G, and the internet and sort of whatever it might be. And given that, it makes sense that this is the point where things are set. Does it mean innovation's over? It means all innovation going forward is going to happen on top of this foundation. And I think Bob's question here is, Ben, were you totally right in January 2020? And I think Bob looks like I might have been. Like Google AI comes along.

Now Google was the one that was always sort of the most interesting and not because they couldn't technologically do it. Everyone knew they were ahead, right? Open AI famously was started because everyone's like, oh, Google's got to run away with this. It was the business model question. Can they actually what happens when the 10 blue links question goes away? And the whole thing about Google and this update, that's still a question. Like it's still there. But the thing about the cloud and GCP and the,

reason why I've always been very bullish on GCP. I'm one of the world's biggest Thomas Curian fans. Like, I think what he's done with that organization in general is very impressive. Thomas Curian is running GCP for anybody who's off a year. And he's a former Oracle executive. When they hired him, it was like, why they're bringing an Oracle guy into Google? The hell's that going to work? Turns out that's exactly what Google needed.

They needed like some Oracle discipline to actually like be a reliable organization. Let's get Elon into Google, you know, mix it up. No, no, that's the wrong mix. No, we need Elon to go in and break things. Google's like so loosey-goosey and flexible. They don't need someone to break things. They need someone to stiffen them up. They need the exact opposite.

That's right. So Thomas Carion gets GCP into a functional enterprise organization just in time for AI to show up. And it was so perfect because all these investments that Google makes, like I think we mentioned on a podcast previously. People's like, well, you know, Google's responded to open AI. The point was they needed an open AI to respond. They didn't have it in them to build an AI product.

They invented the transformer, didn't build crap with it in the real world until open AI forced them to. That is a picture perfect example of why an incumbent holdback innovation for business model purposes, even if it's sort of subconsciously. But GCP takes advantage of all of Google's strengths. It takes advantage of the technology. It takes advantage of their, they have the best cloud. They have all their own networking. This goes back to like the dark fiber days of the dot com era where Google bought up all this dark fiber. And so they still have advantages that are reap from that.

They have everything that's great. And also with GCP, other people are building the product. So Google's product sclerosis and inability to sort of like build anything effectively doesn't matter because other people are doing for it. And that's why I've been posting this graph or this chart of GCP revenue. and margins and growth rates. Earnings after earnings after earnings because this is the key. It fits in perfectly with Google. It's kind of a business they can get for free as long as they can execute and as long as

their AI offerings are compelling enough for third parties to actually switch to them. And all evidence is that that is happening. GCP is crushing it. Their margins are going up. Their shares going up. Everything's going up. And now I don't know if this is why Google has a new CFO. all I can say is ever since they got a new CFO, it is pedal to the metal.

And the pedal to the metal is, is CAPX investment that is going explicitly for GCP. So who are the GCP customers, just for example? I mean, enterprises all over the world. Like everyone, so everyone, it could be like, well, they brag about a lot of AI companies are on GCP. Open AI now on GCP, apparently with some workloads. But say you're just like your bank of,

I don't know if Bank of America's worth it, But say like Bank of America, they need cloud computing, right? So all these companies, the first wave was on AWS, particularly a lot of startups. Yep. A lot of companies went to Azure with Microsoft. But then there's a lot of companies that either they're going to the cloud now. And so they go to GCP or they might be on other clouds, but Google's AI offerings are so compelling. And it's so much cheaper.

Like the AI stuff on Google's cloud is much cheaper than it is everywhere else, in part because Google's implicit infrastructure advantages. And so they're like, actually, we will keep Azure, but we'll also go to GCP. But the great thing from a GCP perspective is once you have some workloads, they have gravity. They'll start pulling more workloads in. And the bulk case for GCP was always that Google's AI offerings would be differentiated. And that would be the anchor to start pulling another business. And it looks like that's happening. And the beautiful thing for Google is this is completely independent of the search questions.

The search questions are still out there. But the GCB was always compatible with the search model. The question was if they could execute on that, it appears that they are and they're investing for it. And they weren't invest. That's the crazy thing. They did $55 billion in CapEx in 2024. It was clearly not enough. Yeah.

And now they went up to 75, which blew everyone's mind. I came out in January. Like even though I've been the Google skeptic in January, I was like, every, no, investors are totally missing the point here. This is amazing. You should want them investing more. Wrote the same thing last week. They went from 75 to 85. If GCP is such an opportunity that if they don't have sufficient supply, that meant they screwed up previously.

And again, they do have a new CFO. I don't know if that's why. All I know is that they definitely invested too little. Now they have a new CFO. They're being super aggressive and they absolutely should be. Yeah. Well, I mean, and zooming out as far as big tech generally, we go back to your article. the end of the beginning.

I don't think we were working together at that point. In fact, I know I was a lawyer at that point, but we were friends. And I thought that was a really poignant article at that like in, what was it, 2021? No, 2020. January 2020, as COVID was discused.

Oh, COVID dawning out from China. Before the entire world changed. Well, and the framework makes sense and the analogy to the auto industry makes a lot of sense. and you look at some of these companies now, they have so many built-in advantages and various forms of lock-in. It's easy to see how AI will be more sustaining than disruptive. Google has always been the kind of unique case within that conversation,

only because Google is so dominant. They have the entire market share of the greatest business in the history of businesses. And so if the volume of traditional searches drops 20, 20% or Google's market share of searches drops 20%. Google is still ridiculously profitable in that context, but less dominant than they've been for the past 20 years. So who's going to lose in an AI world? Losing may be relative,

particularly if the cloud business emerges and becomes dominant in its own right over the next however many years. It sounds like it's dominant now. It's interesting because the cloud business is a much lower margin business. And so there is a risk like Google is committing to lowering its overall margin profile. If GCP is massively successful, that means Google has worse margins as a company.

Exactly. And that's always a challenge for companies to sort of accept and deal with. And kudos to Google for leaning into it. They are investing heavily to get worse margins, which is exactly what they need to be doing. The other companies, yeah, that's why you go back to A in the Big Five. I'm like, Google definitely disrupt some questions. Everyone else looking pretty great.

and distribution and all that sort of things matters. And I think the real question, if it's true that AI is sustaining and not disruptive, is should we be a little more worried slash skeptical about XAI, OpenAI, and Anthropic? Like if they're in a fight with incumbents who are funding their efforts with profits and you're funding them with VC money and debt

and whatever else you get your hands on, every single year. That's a tough fight to be in. It really is, right? Yeah, I mean, it depends on the chart that you look at. But with Open AI, it has market share. It has mine share. It's growing every single month.

Like the rate has been unbelievable in terms of the accelerating growth. But then you look at the projected losses. It's like relative to the way tech to work 20 years ago or 25 years ago, you're supposed to lose less money as you take over the world than people are using your product constantly. But I don't know. I think their unit costs are probably still, I'm almost sure are still positive. Like people, people's subscription for chat GPT, like if they stopped all their R&D investment and whatnot, they'd be fine.

But does that count if you can't stop? Right. Because you will fall behind. And this is why the Mark Zuckerberg's war for talent is really debilitating. Because even if Open AI keeps people. their costs are just rising through the stratosphere. It's like, so Mark Zuckerberg wins either way. Either he gets the talent or he really hurts Open AI's profit margins.

And like, you know, an open AI in meta, that's the fight. It's Open AI versus meta for consumer mindshare. So there's a very real factor here where meta is, it's a no-hold barred assault on Open AI. And this talent war is like a boxer doing body blows. You don't see it. It doesn't look as good on TV, but you're just sapping the energy and sort of the vitality of your opponent. Making life harder and harder. Yeah.

With each passing round, each $100 million deal that comes raining down from the sky from the super intelligence team. Well, so I will say. And Mark Zuckerberg is paying for that with free cash flow. Yeah. He doesn't have to go to a soft. bank and get money. Absolutely. He decided to pay them more.

Totally. I mean, it's again, built in advantages. You have a money printing machine. If you're Google with a search business, you're not underwater as you invest in the cloud business. You also have YouTube, which is just this empire sitting right there somehow never comes up in the Google conversations, but it's like just as dominant as any entertainment platform in the world.

A mistake I've made for years. Yeah. No, they're just taking over TV. like that's what that's one of the under like this is the real Netflix threat the Netflix threat was not other streaming services I think we were all over that like they're going to be fine HBO trying to become Netflix before Netflix becomes HBO yeah it's YouTube just devouring everything with a fundamentally advantageous construct structure because they get their content for free so can I just say alongside this conversation what I enjoy about the landscape for the next five to 10 years is that there's still. a decent amount of unknown baked into all of this. And you can go company by company. And the individual bull case is more compelling than the bare case for each of the big tech companies, whether it's Microsoft, whether it's Google, whether it's meta. But if I were to step back and ask myself, are we going to get 10 years down the line and still be talking about the same five companies as the

most powerful consumer tech companies in the world. That seems like a bad bet, despite everything we just said about Google, despite everything we're saying about meta, like meta has not had a hit product in a really long time. I mean, they bought Instagram and are monetizing that. They're great at monetizing, but in terms of like a new thing that people care about, it's been a while. And so the jury is still out in terms of whether they can make AI work. Apple legitimately lost right now. And like liquid glass. I heard you and Gruber talking about liquid glass. It sounds like the stupidest thing in tech history.

Like I don't understand what they're trying to make happen there. And so like I'm closer than ever. If Open AI released some hardware in two or three years and it was really cool, like I'm open to trying it at this point. And whether Microsoft like how does chat GPT change workloads. This is why open eye so interesting. This is why open eye is like when. the most interesting companies.

Like, they're basically taking on everyone. Exactly. Right? Like they're trying to walk like the narrowest path. But the rent is open AI. It's wild. Well,

you can make the case that open AI should never have hired Johnny I. They should have really budded up with Apple and like cemented that relationship. And they didn't. And this is like classic Altman. He wants it all. He's going for it all. And it's and so yeah, it's trying to be Google and Apple at once.

It is funny though. There is a bit where I mean, just tying into strategically. Like we, or we talked about it in 10 years. I mean, there was a point, you know, in the mid-2010s where I'm one person. I can only be stretched so thin. People are like, why don't you cover X?

Why don't you cover Y? I'm like, because, I mean, the answer to doing that is having multiple authors. Yeah. That's right. Well, it's not actually even that. It's like, I want to write authoritatively about what I write about. And I could like lampoon as an expert on company XYZ, but I'm kind of making it up as I go along. And that ultimately is not good for you and it's not good for me.

And so I'm like just sort of like look, trajectory is really about the big tech companies. That ultimately, and I will talk about other companies to the extent they intersect with that. And occasionally I'll dive into other companies as sort of a sign order as I think I have a really interesting angle. And it was interesting because that was just sort of a functional decision that I had to make at some point in strategic areas of evolution.

But it also ended up being, I think like a strategically very good one. Like the end of the beginning is good for chatechery. I'm going to be car and driver in like 1930 or whatever might be, right? It's so it's funny that it just sort of has that impact and something that I have to think about. And it's like, am I talking my book by saying it's the end of the beginning? It's only the big tech companies, which happen to be the companies that I cover specifically. Right. But no, maybe it ended up working out.

Yeah. Well, and also I would say it really was fortuitous timing because AI arrived and everybody immediately treated it as this disruptive threat to several of the companies that we're talking about here. And the reality is there are so many advantages and so many different ways for these companies to integrate AI into how they make money that there is. I think the search question is still out there, by the way. Again, that's what like that, I don't think that's been resolved. I think Google's responded as well as they can the way they're aggressively. Like I said, all the product shops that still exist in the company appear to exist in search. And I think they're, responding as well as they can. And again, the GCP thing is great, but that was never in conflict with search.

It's still an open question if it's going to have an impact. Well, I mean, that's what I mean. It's fun that there's still a little bit of unknown here and all these companies can feel confident, but the earth could shift underneath them over the next couple of years and spice things up a little bit. And as far as Google's concerned and Google search, my wife was complaining about her sister last night.

We were sitting together. And her sister was texting together. her all these different questions. And she was like, why is she asking me these questions? She can just go to chat GPT, get answers from chat GPT. And I think that's how a lot of people are living at this point. I'm not that unfriendly to various people who reach out with questions. But I don't think that bodes well for Google, obviously try to protect like 98% market share of that sort of use case. So I guess we'll continue to check in,

but a good note from Bob because it does dovetail with a lot of the conclusions that you've drawn on Stratory over the last year or two here as people try to size up the place. Did you remember and were you ever a user of LMG, TFY? Yes.

But I always thought it was dickish when people would hit me. I did you. I never used it. I think there is like a let me Google that for you website or something and you could send someone a link. And then it like replays you typing the question in Google and bring it out.

And look, here's the reality, Ben. Let me chat GPT that for you. And I, I hit you with questions, like several times per week that I could ask of chat GPT, but I don't because I want to talk to my friend Ben, you know? And so communion is all part of the human experience. We don't need to all just. Man, you just bought yourself like a hundred new queries with that one. That's right.

there you go. Keeping it moving and keeping it LLM themed here. Daniel says, GROC has been discussed by you both as being a potential big winner in the AI space. Presumably... Just a second. Win. I don't know.

The first thing I was going to say to Daniel is I don't recall ever talking about GROC as a potential big winner in the AI space. They've been a peculiar entry. in the AI space for the last year and a half or so. But do you want me to read the rest of his question? Or do you want to just reject it out of hand? No, because the whole question is predicated on what our angle is. Like the, I think it, you know, the theory of the case is at the end of the day, some of the LMs are pretty annoying in what they will or will not answer.

Is there actually a space? Like, it's not just like what they won't answer. It's like the cloying nature of them. It's right. Like, I'm very good at dismissing that and ignoring that. But if you do actually go back and like, read the text. It's like, stop. Most annoying friends.

This is why I ask Ben. Exactly. And so is there room for quote unquote, it's so much truth telling as it is just like saying it like it is or whatever it might be. I think in theory, there's something for that. In reality, chat GPT has won the consumer space. It's hard to see anything sort of getting in the way there. To the extent I've talked about GROC and XAI, it is. is that they're super useful for everyone else as a stocking horse.

Like if you, if it doesn't work out with you, I'll just go with XAI, right? If you're like a cursor and Anthropic wants to, you know, it's wrong, well, we can just plug in XA. Like,

it's great to have more players. The problem is being sort of like the designated second bride or whatever it is, usually isn't a very good business model. The bridesmaid, I think is what we're looking for there. Bridesmaid, thank you, second bride,

You know, so is XAI, is it actually going to pay off with Elon's own companies? Maybe that might actually be the better way to think about it. Yeah. But, but yeah, this is, I mean, the whole question, uh, well, do better, Daniel. So hold on, hold on, hold on, hold on. Hold on in Daniel's defense. This came up on a dithering episode last week. And it wasn't you.

I think you were quoting someone else in a group chat. You were recapping group chat back and forth stuff. Um, great midsummer. content. Love it. Oh yeah. That's what it was with the three dragons and Grogh being silly. And being a potential winner in entertainment. And look, the reason I raised that is because I do think that's a really good question two and a half years into this new era. Like who are the entertainment winners actually going to be? I don't know whether Grock is nonsensical enough to fill that role. But I do think it actually, it reminds me of the Nat Friedman discussion, maybe a year into the

AI era where it's like where are all the products and where are the people who are going to capitalize on these new capabilities. I don't know that there's been a good entertainment solution that's working on the strength of LLMs at this point. But maybe I'm missing it. The whole like sort of like anime girl talking to you, it just everyone gets upset about it. And then you remember that some of the most valuable companies are like stupid toys. Totally.

Everyone dismisses because like it turns out most people just want to be entertained. They don't actually want to get. stuff done. Right. Like, and to the extent they want to get stuff done, it's so they can get back to their entertainment more quickly. And so, and so yeah, that was, that was the angle. Um, but the, um, and like, would Grock be the company that does that? I don't know, but like, what am I doing on my iPhone all day? Right. Mostly screwing around in group chats and reading Twitter. It's not me being productive all day. To be honest with you. And granted, I'm talking to my boss here on this podcast, but it's like an 80-20 situation in terms of iPhone usage, 80 being entertainment.

So who is going to serve that 80% market? Maybe it's going to be chat GPT and chat GPD is just going to win everything at the end of the day. Yeah, maybe or maybe it would be meta. You know, maybe this was, yeah, maybe Grock just by not caring. Just being stupid and spewing out nonsense and occasionally like pretty dark, nationalism, I don't know. But in any event, good question. Well, I'm a complicated question from Daniel there, but we appreciate all the people who write into us. To keep it moving, this is not an email, but it peaked my interest last week. This is Matt Levine at Bloomberg. He's riffing on Sam Altman's

discussion of chat GPT agent. He could be describing any number of product launches in AI. And he writes, I have described Altman's marketing approach as business negging. If you say, quote, our product is good and will make the world a lot better, that is sort of ho-hum. Everyone says that, so your audience will discount it. But if you say, our product will probably make the world a lot better, but could destroy humanity, t-he, aren't I a little rascal? That's exciting. People are drawn to danger.

And if you go around warning people that your product might destroy humanity, then that And that strongly suggests you think it's powerful. Similarly, when you launch a product whose pitch is, this product could do your whole job for you. Boring. Everyone says that about everything. But if you launch a product whose pitch is, this product could do your whole job for you.

But there's like a 10% chance it will email porn to your boss. More people will be excited to use it. The do everything for you and maybe ruin your life, AI assistant, is just obviously. more psychologically appealing than an omnacompetent AI assistant that definitely won't ruin your life. Aren't you a little curious? And Ben, I just wanted to read that into the record because this is the psychology that he's describing there does ring true and it will stick with me as I digest future product launches in AI. Does it spark any thoughts on your end? I mean, I think just in general, all the AI rhetoric.

Like, I've always been pretty critical of the whole, like, it's going to destroy the world sort of thing. Like, I still think Washington, D.C. is really screwed up in their evaluation and understanding of AI and chips and Vidia and China and all these sorts of angle. In part because you had folks like Anthropic going there and convincing everyone, this is like this doomsday device that is a one-time chance to control the world, which I think was wrong and false. And is actually causing us considerable problems and an ongoing sort of issue. that is just out of touch with reality. It still drives the, yeah, it drives the conversation to these bizarre places, like with the H20 being listed.

You had the Biden administration just destroying U.S. industry as far as like a lot of the chip stuff sort of goes and destroying the Nvidia moat because they were like, they were convinced this was a one-time opportunity. Right. Well, and there's this notion that there's going to be one super weapon that nobody else is going to be able to replicate and if we don't ban everything,

then we could be losing everything in that scenario and seeding the future to X, Y, and Z. And it's just not really... It's not seeing the future. It's not like we're going to magically control the whole world forever. Yeah. I mean... And it's not been borne out over the last like three years of AI progress

and development at various places. And so it all just strikes me as kind of crazy. But you're right. it is absolutely taken hold and informed how a lot of people think about these issues. This is a very frustrating mode of argument, which is the base case for AI is in where I've generally been is it, you know, it's probably the impact over a small number of years is going to be smaller than impact where large of years to be large. Like technology sort of as a whole. And it is going to be hugely impactful. It's in vastly impressive productivity. It's going to like eliminate a bunch of jobs. going to have all these sorts of effects, but in a way that we've seen technology play out before.

Like people who are like, I'm not saving any more money because the world is going to end in two years. It's like, do you have any concept of how technology actually disseminates over time? And again, but the problem is the people hearing this who believe that, they're like, yeah, but it's different this time. Mm-hmm. And the problem is that they were saying it's different this time in 2020 and 2021. At what point do we get it aside actually no, it's playing out like we thought. We're going to get to 2035 or 237. They're saying, look, the world's totally different.

Told you. I'm like, no, I also thought the world would be different in 20, 25, 237. I just think it's going to be this really steady change that we're going to acclimate ourselves to in a surprising way, just like we had this discussion on the podcast a while ago. The world's drastically different in so many ways and we barely notice. That's sort of what happens. And again, this isn't to dismiss whatever.

happens. It's just to say the method in which it happens and the way in which we experience it is different than popular conception. But people come out with these scarce scenarios. And it's like, shouldn't we just in case? It's like the whole COVID thing. It's like people came up with these spectacular means of transmission and harms that what if it's the case? And then they convinced everyone to protect against this worst case scenario that was basically a function of imagination. And no one's doing an actual expected value calculation, which is like what's the, it's not just the potential harm of an outcome, but what's the chance that harm is actually correct and real if it's a 0.1% chance that harm has to be multiplied by 0.1%.

And now if people say, look, if the world's ending, then that that's more than one. They have to think through like, wait, what capabilities do actually have to stop this, right? Like, like, is it actually even solvable or tolerable or do you have to just sort of accept the fact it might happen and manage all the other potential outcomes along the way? And what I feel has happened with AI, particularly in Washington, D.C., is very much similar to what happened with COVID. It's people with the largest imaginations got the most influence and control. And no one was actually considering what's the best policy for the most likely outcome. Yeah. I mean, I can't argue with you.

It does remind me that the AI executive order under the Biden administration was drafted after Joe Biden watched Mission Impossible dead reckoning at Camp David. As far as imagination is concerned, wonderful stuff, a note that will delight me to no end until the end of time. So thank you to the Biden administration who put that out. favorably to show that Biden was taking the issue seriously. And as far as the rhetoric from Sam Alton, it just cracks me up because it seems like every time there's a new model. Well,

it's bad and Anthropics worse. It's like there's a tweet that precedes the new model by a week or two where Albin's like, I don't know if we should even release this. It's really worried, but here goes. Super annoying. It is very effective marketing though, you know. Peaks my interest. I can't wait to see chat GPT5. Let's check it out. And it's really annoying because all these people who are doomers, it's like to disprove them, you're disproving a negative.

Yeah. Right? Like, like, could we get some metrics about or the actual. A date where we can all measure if the world has. Well, it was, it was 2025, I think. Now it's 2027. Yeah. Everything 2027, what's it seems auspicious. That's like the date everyone's putting on for China and Taiwan too. Ah, yeah. Well, I think that's the cheap. A real big opportunity for the number. Nothing happens crowd to make some anti-20207 bets. Oh, boy.

Well, I'm going to enjoy the rest of my summer and we'll cross the 2027 bridge when we get there. For now, we'll keep it moving with Joe T who says, it's surprising to me that Apple isn't taking any heat for the T app. The ethos for their app store monopoly power is partially based on promises of protections and app standards. SaaS apps use a SOC2, SOC2 or SOC2? Soc 2. Soc 2. Sock 2. Sock to it. SAS apps use SOC 2 and more to standardize trust. Apple should implement something similar in the era of professional-looking vibe code slop. What do you think, Ben and Andrew?

So for context, for anybody who is enjoying his or her summer is blissfully unaware of what the T-Ap is, It was an app that allowed women to upload a selfie and sign up and share their experiences with men they've dated, men to stay away from, etc. The whole affair looked pretty dystopian. I didn't investigate any further than seeing some tweets. But then in the past week, there were reports that the company inadvertently exposed the names and selfies and identity documents and locations of thousands of women. And then on Tuesday, there was a second report that the apps direct messages had also been compromised. So it's turned into quite a mess. Do you think Apple has a role, a responsibility to police something like this? How does it happen?

What, to police apps that are predicated on randomly slandering other people who can't defend themselves? I will say there was a similar website that emerged when I was in college that was quickly banned like 15 years. ago. I didn't know we were doing this again 15 years later. It's like you can choose any angle you want on this and it's incredibly dystopian and like fairly horrible. And again, I'm not defending bad actors to be clear. But it's like the entire premise of this is not great. Really, really crappy and depressing. No question about it. So, so yeah. I mean, so it should, you know, I think the reality is, is I'm not going to get all worked up like Joe is because I never believe. I've believed Apple's BS about the App Store in this regard anyway.

Uh-huh. I've been calling it out for years and years. So I'm not going to like, I'm already on my high horse. I don't have a higher horse to get on. Well, I don't know if that's true. I don't know. Every time we talk about the app store, you say, well, they are very secure. That part is true.

They do work hard to ensure the security of your devices. I, and no, no, no. What I say is the, the fundamental architecture of iOS is secure. in that apps are in their own sandbox. They can't interfere with other apps, which makes it fundamentally different than a Mac or than a PC or the way computers used to be architected. My point is it,

the security comes from the architecture, not from the app store. I'm disputing Apple's characterization of the app store. Yeah, I think it's all BS. So is it something that we should worry about, though, is AI lowers the barrier to entry for app development? We should have been worried about Apple's BS around the app store for years. That's been my position since as long as I've been publishing

online. Okay. I see this is... Do we multiply those affirmations? Now I sound like a dumer here. Exactly. Something going to be really easy to make a professional looking app that is completely unsecure. Right. But the insecurity here is on the cloud side. It's not it's not the... And so like, do you want Apple going in and verifying someone's cloud implementation? Like, we could. We could go that direction, but that is what Joe's referring to. And to be fair, that's what Apple seems to suggest with what their claims about the app store. I'm just saying, I've called those claims BS all along. The security comes from the way that it's architected on the system layer. And this is like in this case, no one's hacking into someone's app on an iPhone and getting

this information. They got a publicly available URL to an S3 bucket in the cloud. Well, fair enough. You talked about zero trust security in the past. I have zero trust in any security. Anything I'm putting into my phone, putting into an app is something that I'm comfortable with people hacking. Because at this point, I just don't really feel that secure in any of it. So similar to you, nothing is going to change for me in the future. Well, it also speaks to like, the other thing is you can critique is the whole know-your-customer

customer set of laws and regulations generally that condition people to continually uploading their identity and verifying themselves and all these sorts of things, you know, nominally to stop smugglers or counterfeiters or people, you know, or money launderers, whatever it might be. And the reality is, like so many things,

what you're actually doing is, is compromise and security of everyone else who are law-abiding citizens that are forced to compromise just to live their life on a day-to-day basis. Yeah. Like, KYC is in many respects, Again, I'm not, there's, of course, legitimate reasons to know your customers, but it's like any tradeoff by focusing on one thing, you're trading off a bunch of other things along the way. Yep. Well, we will see.

Good luck to the good folks behind the T app. I'm sure it's been a very stressful week for the last couple of days here. I mean, this whole thing feels like it's not thing. Nothing but the worst of luck. Oh, God. James says, Ben and Andrew, you all. have had several thoughtful conversations about digital media recently, and that leads to a question. How has the ringer lasted twice as long as the greatest sports website of all time?

Its predecessor, Grantland, great question from James. I worked at Grantland, so near and dear to my heart, did not work at the ringer, still have a bunch of friends over there. Do you have any thoughts, Ben, any guesses for James? Yeah, Grantland, ESPN decided to stop funding Grantland, and then Spotify keeps funding the ringer. I mean, like it's simple as that. Yeah, I mean, well, the ring are much more than Grantland is, is very explicitly a podcast first organization. The website supports.

Yeah, I think the website is probably there because Bill wants it to be there. And Bill still has enough poll at Spotify to make it happen. Spotify's there for the podcast, which are successful. And this was, I think, a shift Bill made after Grantland where Grantland really was a website first and foremost and one of the greatest websites of all time. Yeah. Despite the fact you were there, you know, over. became that sort of challenge. Cripling handicaff.

Well, it's funny. So the end of Grantland, I was not all that familiar with your work at that point, but you were writing about Grantland's business and Bill's podcasting. And the end of Grantland was very frustrated because I was on the inside as things were beginning to fall apart and people were speculating about how much money it was losing, this, that, and the other thing. And it was the first time that the media was writing about something I knew a lot about and watching people just repeatedly get the story wrong. Like Deadspin, a habitual offender in that regard.

But you noted that Bill should be monetizing the podcast first and foremost then. And that's what ESPN just did not do very well during the Greatland era. And I think the economics have become a lot more favorable at the. ringer where like five or six podcasts can pay for a lot of ambitious work elsewhere because they're actually doing a good job monetizing in that space, which monetizes much better than digital media, digital print media, uh, in the modern era. So I think that's part of the answer in terms of the ringer's longevity versus Grantland's kind of cursed fate at ESPN. Yeah. I mean, there is a bit like Grantland is like the Kurt Cobain of websites.

where it will always be thought of as great and can never be diminished by virtue of sort of going out early. It never had the chance to sort of fade, as it were. It's a shining light forever and ever. But it wasn't really awesome for those over there. It existed at a time when everybody online was in a much better mood than they have been over the last 10 years. So that helps its legacy as well.

Absolutely. So it was, yeah, but it was one of my favorite articles I wrote. And it goes into some of my thinking around. Secretary and Structory Plus, this idea that text is, you need to think about a media company in a multimodal sort of way. And what is text good for? Text is good for customer acquisition because it's easy to share, easy to spread. It's really bad for monetization.

Podcasts are good for monetization. You have a capture listener really hard to grow and spread. So you need to think about them together. So you have people that get popular through text and you then they can be on podcast. You need people that can fit that mold and can do that. And I wrote that about how ESPN was not thinking about Grantline the right way. You had to have this multimodal approach. And that's actually, that's how I met Bill.

And for sure, this was a core piece. I think it's fair to say this thinking went into the ringer and like how the ringer is going to be formed. And much more of a very explicit link between website and podcast and how they sort of work together. Ultimately, probably doesn't really matter to Spotify that much. I think the ringer the website is more a function of like Bill wants it to exist. Yeah. So it still exists. But I think overall it, the fact it lasts longer is because business models matter even more than product sometimes or having a sort of a model that works is important to longevity, not just having a great product.

It was an incredible product that costs that lost a lot of money. Yeah. Well, and I would also say that Bill cares about the written word and cares about preserving the website. site and he has a tremendous amount of leverage because Spotify has figured out how to make money on his tremendously profitable podcast and suite of podcasts at The Ringer. And so he's allowed to sort of swing that weight around and keep riding alive for a couple more years here. Who knows whether anybody's going to be reading writing in 2035. But I've enjoyed The Ringer and I'm glad it still exists. Not quite on the level of Grantland to be honest. Not necessarily a destiny. I'm

I'm glad it exists. It's not close to Grantland. Yeah. All right. Closing out here, Andrew says, I know Ben is reluctant to go all in on the endorsement game. But given how consistently helpful his recommendations have been, I'd love to see some sort of middle ground. The above and beyond group therapy playlist has carried me through many late nights building presentations. The Kizek's big win with my father-in-law. That's a big one-law recommendations. That's really my angle.

I've worked in tech so I'm not a total normie, but I still find myself asking the same questions I imagine many listeners do. Should I get the M4 MacBook Air now or wait for the M5? What's the best desktop setup? Travel setup? And yes, some of us are very much interested in watch talk, even if it is dangerous territory for host and listener alike. You've built trust by being rigorous and practical. But I think everyone would love to learn more about your product, recommendations, your heuristics for buying, what's worth future proofing on a regular basis,

as well as having a place to find those recommendations. Thank you for the note, Andrew. As Ben's friend and co-host, I don't know what the next 20 years of your career looked like. I don't know what the next 10, 15. Who knows? You can do any number of things. I do hope that your final job in life is life coaching and product recommendations because I think that's what you're most passionate about in this world. So I don't know if you have any response to Andrew, but I feel like you've been training for this for quite some time. I mean, there was, oh, there was something I was talking to someone about. Oh, yeah, it was key chains. Oh, God. So of course you've got keychain takes. I do.

So a key chain is you want a car a carbinder, what is like the clip you use for like rock climbing? There are keychain carbinder clips. Those suck. Don't use those. You want a real one that's actually strong. Carabiner. Carabiner, is that what it is?

Yeah. And then every individual key gives its own key chain that goes in the carabiner. So you can not only carry them all together, hook it on your belt. I'm a big key on belt guy. Really great. Real father-in-law. I was going to say a real dad move there.

You could take one key off super easily for something else. You need to give it to someone to use XYZ and it goes back on. So I, of course, you know, was in the U.S. I needed to do so I got a new Caribbean, I had an extra one. So I was giving someone my other one saying, oh, this is how I do my keys. And they come back through like, this is such a better key system. What a hat. Like I can't believe in our thoughts before.

And I'm like, look, there's literally every single aspect of my life. I have probably thought too much about and have my own system. So all that is to say, yes, I think your recommendation is correct. I'm happy to write your keychain article at some point. But I'll have to stick with the big tech companies for now. But if you want to drop the occasional question, look, there's my key recommendation, how to carry your keys. That's what the podcast is for. There will be room on Sharp Tech for Ben, life coaching for years to come.

I assure you, Andrew and anybody else who's interested. I'm interested depending on the day. No, you're a big problem with this thing. So the issue is like you're, what makes you a good podcast hosts. Is sometimes even you might agree or be inclined to agree, but you'll push back. I'll tease out the devil's advocate perspective.

Yeah, not just because it makes for good podcasting, but because you. you're instinctually inclined to disagree. You are a contrarian. Like speaking of like Silicon Valley cliches, you are the biggest contrarian I know. And that can serve you well. It's good for podcasting.

It has. It leads to some horrific life choices, particularly the longer you know me. Because you're like, I can't listen to Ben for everything. So I have to disagree in particular areas to like maintain my sense of self and independence. Yeah.

I just like, it's like, do I need to like watch the movie Inception? and just like trick you, like, do I have to start saying stuff? I don't believe. So you start doing the right thing. You know what?

I actually do that. It is some real friction in our relationship. I do that to my two and a half year old son sometimes. When I want him to do something, I'll tell him to do the opposite of that thing. And then he'll naturally gravitate to doing what I actually want him to do. So I'm glad to know that I'm the two and a half year old son in this analogy. Context for this conversation is that signal,

at Signal on Twitter said every millennial is now paying Apple $9.99 per month for two terabytes of data just to not delete their life. And I responded to this midday Friday in a group chat and said, I actually got so upset when Apple tried to charge me $9.99 that I went out and bought a external hard drive and moved all my stuff onto an external hard drive just because I'm not going to pay Apple. $10 a month for the rest of my waking life. I draw the line at a $10 tax for living and taking photos. Then, like, six hours later, you log on. I was in Taiwan. So it's Friday night. I'm sitting with my wife.

And I've got Ben waking up in Taipei just coming off the top rope about how stupid this decision is, how you come. could lose the external hard drive any day. An external hard drive is not a backup. All you're doing is transferring your data into a less safe device. It's still only existed in one place. And now that one place can be bumped or knocked or thrown away or burned. It can be stolen.

The 99 is not a tax. It is a service. You are, you are, it is insurance. Like there is nothing in your life that is more irreplaceable than, like photos of your kids. And you can, by definition, never take them again. And for the low price of $9.99, you can have that taken care of immediately and backed up. It's worth it.

It's a great. It's not a tax. It is a service. And yes, I've never woken up so quickly because I was so filled with disgust and rage. First at you for doing this. And number two at myself by knowing that by coming from the top rope at you, I was just solidifying your obstinence and making it more like you are not going to do it. So I was just filled with self-loathing all the same time.

Here's the thing. I may be contrary and I am open to changing my mind. On greatest of all talk, I'm known as the greased pig because as the facts change, I'm willing to change my mind. This one, however, you were so annoying on Friday night as I was sitting there. I will never be paying $9.99 a month for. the two terabytes of torsish from Apple. No, I'm not.

No, I'm not. So this is the thing. As a millennial, there are so many freaking photos of my kids. We print photos of my kids every like three or four months. I'm not, one thing I can promise you is that 20 years from now, no matter what happens to my photos, the external hard drive, whatever, I shouldn't have even bought the external hard drive. I'm not going to be suffering from any lack of photos of the,

early years of my children. The problem is fine. You make that choice for yourself. At least let your wife have the backup plan. Well, you want to deal with her despondency when stuff gets lost? Yeah. Look,

my wife is nothing if not a big check and a hearing. Yeah, I'm paying the 99 of months. I'm texting her right over this call. No, I checked with her. Don't worry. She's got the extra two terabytes. So,

get a family plan. I know. Maybe I, Maybe I owe it to her to get a family plan, except you were so annoying over the weekend. I can't possibly cross that bridge. Like I said, like I said, what made me most upset was knowing how annoying I was and all this was going to be counterproductive. But I can contain myself. I'm dug in now.

Sorry signal. I'm one millennial who does not pay $9.99 a month. But Ben, great to see you as always. And we are coming back next week. People can continue emailing email at sharp tech. FM. Again, we're going to be in the heat of August. So hit us with anything you've got because God only knows how slow it's going to get over the next several weeks. But we'll be having fun on the podcast regardless. For now, go enjoy. I'll give one recommendation of podcast. You have

to come up with a product wrecks, life coaching. It's a little risky because who knows what we're going to get. But that's why the key thing was so funny. Because I'm like, yeah, actually I do. I have a take on on literally everything. Of course you do. It's unbelievable. And there's nothing. It honestly is really charming. You enjoy helping other people improve their lives and optimize various aspects of their lives. It's like what gives you the most charge of anything at this point in your life? It's so true. So it's really rough because you, you resent it. And that's right. It's a very dysfunctional relationship. You know what, though? Disfunctional relationships make for a good podcast. Good podcast. Great content. It's all about content at the end of the day.

I mean, this was why I wanted to hire you in the first place. You and Ben, very dysfunctional relationship. Great podcasting. I love it. That's right. Absolutely. Well, more great content next week. Until then, have a good couple of days, and I will talk to you soon.

Talk to you later.