Tech Brew Ride Home - Thu. 11/02 – Silicon Mesa?

Episode Date: November 2, 2023

Looks like Disney is finally going to swallow Hulu. One more time we’re going to look at the AI regulation debate, this time noting that governments are regulating tech ahead of time for the first time in a while. You might want to tip your DoorDasher ahead of time. And can I coin a term? Arizona is becoming Silicon Mesa? Sponsors: Nutrisense.com/ride and code ride Links: Disney Says It Will Take Full Control of Hulu (NYTimes) Joe Biden Wants US Government Algorithms Tested for Potential Harm Against Citizens (Wired) Attenuating Innovation (AI) (Stratechery) DoorDash now warns you that your food might get cold if you don’t tip (The Verge) ‘Our secret weapon’: how a university bolstered Phoenix’s rise as US chip capital (Financial Times) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Thursday, November 2nd, 2023. I'm Brian McCullough today. Looks like Disney is finally going to swallow Hulu.

One more time, we're going to take a look at the AI regulation debate, this time, noting that governments are regulating tech ahead of time for the first time in a while. You also might want to tip your door dasher ahead of time. And can I coin a term, Arizona is becoming the Silicon Mesa. Here's what you missed today in the world of tech. A longstanding digital media. saga looks like it's coming to a conclusion. Disney apparently plans to acquire NBCU's 33% stake in Hulu, thereby gaining full ownership, and expects to pay around $8.61 billion to do so, which

represents NBCU's share of a $27.5 billion guaranteed floor price for the asset. If you're not familiar with this saga, what, 15 years ago, Hulu began as an experiment between a consortium of many different media companies, the idea was simple. Maybe we should try our hand at this streaming video thing. Now, at long last, Hulu will be wholly owned by one of the partners in the consortium, Disney. Quoting the New York Times. Comcast triggered the deal as part of a put-call agreement between the companies in 2019. The ultimate price will be determined by an appraisal process that will drag into next year. Comcast, which recently stopped supplying Hulu with shows like Saturday Night Live and The Voice, rerouting them instead to its Peacock streaming service said in September that it had sped up negotiations to sell Hulu to Disney.

Previously, Comcast and Disney agreed that Comcast could force Disney to buy its stake early next year, therefore the put. At the same time, Disney had the ability at that point to require Comcast to sell, which would represent a call. As part of its push to make its flagship Disney Plus streaming service profitable, Disney announced this year that content from Hulu would be made available on Disney Plus to subscribers of both services in the United States. Hulu does not operate overseas while Disney Plus does. Disney plans to roll out this one app experience by the end of the year. Hulu will also continue as a standalone product charging $18 for ad-free access and $8 for an ad-supported option. Founded in 2007, Hulu was for many years the streaming equivalent of a Frankenstein's monster, an emerging startup backed by 21st Century Fox, NBC Universal, Disney, and Time Warner.

They hoped that the shared ownership would make Hulu the streaming equivalent of Switzerland, a communal hedge against the rising power of the internet, but it proved to be an impediment. Disney gained control over Hulu after it bought 21st Century Fox's entertainment assets in 2019. Like other big media companies, Disney has been struggling to address investor worries about streaming profitability and the decline of traditional television. Disney shares have been trading at about $81 a share down from $197 a share two years ago. and quote. More rules for artificial intelligence. The Office of Management and Budget has released draft rules that require U.S. federal agencies to monitor AI in health care, law enforcement,

and housing for potential harms against citizens. Quoting Wired. The proposed OMB rules would add testing and independent evaluation of algorithms bought from private companies as a requirement of federal contracts, which the office can do in its role of coordinating departments with presidential priorities. They would ask government agencies to evaluate and monitor both algorithms in use and any acquired in the future for negative impacts on privacy, democracy, market concentration, and access to government services. The draft memo would require testing and evaluation of algorithms to be done by people with no direct involvement in a system's development and encourage external red teaming tests of generative AI models. It also instructs the leaders of federal

agencies to explore ways they can use generative AI, such as OpenAI's Chatchee, quote, without imposing undue risk. President Biden's AI executive order requires the OMB to provide its guidance to federal agencies in the next five months. The office is inviting public comment on the draft policy until December 5th, end quote. So I'm interested in all these draft rule regimes for many different reasons, but one that I haven't spoken about yet is the idea that this is government's rushing to regulate tech ahead of time. This is new. For basically 30 years, Western countries have essentially been hands-off in terms of regulation of new technology. The idea was you wouldn't want to stifle innovation in its cradle, lest you harm potentially economic expanding new ideas and

job creation. With this AI stuff, we can clearly see that that is no longer the default position for a lot of governments. Again, I present this without comment. I simply want to note the change in posture because it could affect the entire tech industry at large. But I do want to return for a third day in a row to the whole debate about regulatory capture with AI because Ben Thompson has weighed in at Strateree. And as you know, when Ben talks, I tend to listen. Quoting from his piece yesterday, he is referring to that open letter from AI luminaries that was released a few months ago where they, again, essentially asked for industry regulation. Quote, there are 30 signatories from open AI, including the aforementioned CEO Sam Altman. There are 15 signatories from Anthropics.

including CEO Dario Amo Dai. There are seven signatories from Microsoft, including CTO Kevin Scott. There are 81 signatories from Google, including Google DeepMind CEO, Demi Seibis. There are none from Apple or Amazon and two low-level employees from meta. What is striking about this tally is the extent to which the tools and prominence align to the relative company's current position in the market. OpenAI has the lead, at least in terms of consumer and developer mindshare, and the company is deriving real revenue from chat GPT.

Anthropic is second and has signed deals with both Google and Amazon. Google has great products and an internal paralysis around shipping them for business model reasons. Urging caution is very much in their interest. Microsoft is in the middle. It is making money from AI, but it doesn't control its own models. Apple and Amazon are both waiting for the market to come to them. In this ultra-cinical analysis, the biggest surprise is probably meta. The company has its own models, but no one of the market.

of prominence has signed. These models, though, have been gradually open-sourced. Meta is betting on distributed innovation to generate value that will best be captured via the consumer touchpoints that the company controls. The point is this. If you accept the premise that regulation locks in incumbents, then it sure is notable that the early AI winners seem to be the most invested in generating alarm in Washington, D.C. about AI. This despite the fact that their concern is apparently not sufficiently high to, you know, stop their work. No, they are the responsible ones, the ones who care enough to call for regulation. All the better if concerns about imagined harms, kneecap inevitable competitors, end quote. So the next time you order from DoorDash, if you don't put a tip in

ahead of time, you might hear about it from the DoorDash app itself. That's because they're testing a prompt warning customers that orders with no tip again ahead of time, may take longer to get delivered since drivers choose which orders to accept. Quoting the Verge. DoorDash has added a pop-up in its app this week, warning customers that orders with no tip might take longer to get delivered. Upon seeing the prompt in a since-deleted tweet on X, formerly Twitter, the Verge confirmed that if you enter $0 in the tip amount in the DoorDash app

while placing an order, an alert appears with the below warning prompting you to add a tip or continue without a tip. Orders with no tip might take longer to get delivered. are you sure you want to continue? Dashers can pick and choose which orders they want to do. Orders that take longer to be accepted by dashers tend to result in slower delivery. The move appears to be an effort by DoorDash to show customers that drivers are likely going to prioritize more profitable work. According to DoorDash spokesperson Jen Rosenberg, the prompt is, quote, something that we're currently testing to help create the best possible experience for all

members of our community. If they don't see a tip, deliverers may choose not to take the job. It appears the pilot is not live in every locale. One verge colleague in New Jersey got it, while another in South Carolina didn't. Neither proceeded to place an order without a tip, however. While tipping isn't something anyone who lives in America should be surprised about doing or should ever consider not doing without a really good reason, pre-tipping is a relatively new concept in our gig economy. It's entirely plausible. You might be planning to tip your door-dasher with cash or intend to bestow a giant tip on the driver when they arrive promptly, and with piping hot food or perfectly packed groceries, something you can still do in the Doordash app post-delivery.

The driver preference for pre-tipped orders may be linked to DoorDash's somewhat convoluted courier payment method, which was reworked following revelations that DoorDash was not giving drivers the full amount of customer tips. In 2019, DoorDash restructured its payments to drop the controversial tipped wage method and pay a base rate with 100% of tips going to drivers. The knock-on effect of this, however, makes orders without tips, less appealing to drivers. According to the New York Times, the way DoorDash's payment structure previously worked was that if a driver got a guaranteed base rate of $685 for an order, but the customer tipped $3, the driver would still get $685. Now it seems that an order without a tip will show at that base rate, which DoorDash says ranges from $2 to $10, quote, depending on the estimated time distance

and desirability of the order. The difference is that the driver gets to keep all of any tip given, but without knowing they are getting one, you can see why they'd pick a $6 order where the customer included a $4 tip over a $2 order and the hope that the customer plans to tip. A person claiming to be a former DoorDash driver posted on X that he often passed up offers where no tip was included, as those with tips had more of a guarantee for his time. Quote, if you want to wait an extra one to two hours to get your food, then don't add an extra dollar or two is his advice, end quote. Finally today, when all those announcements were being made this year about ground being broken on new domestic chip factories here in the U.S., a lot of those announcements were being made in Arizona, which puzzled me a bit, because why Arizona? Is there some advantage to nice weather? Apparently there is.

Though also, it's my understanding that chip fabs require tons of water, so the southwestern United States seems an odd locale because, you know, desert. Well, this piece from the Financial Times might have something of an answer because it posits that Arizona State University has become something of a secret weapon for the region because it has become a hive of research and development for the chip industry, thereby making the Phoenix area the beating heart of the U.S. chipmaking boom. Quote, at the turn of the millennium, Phoenix's economy was dominated by the tourism and real estate industries that are the natural byproduct of year-round sun. The region's largest university reflected that stance. Arizona State had earned a reputation as a, quote, party school where

students paid more attention to their tans and a highly ranked football team than academics. The sun-drenched campus in the Phoenix suburb of Tempe has not fully lost its image as a place for outdoor fun, but inside ASU's modernist buildings, a transformation has taken place. Today, it is a microelectronics petri dish, a hive of research and development for the semiconductor industry, while also establishing itself as America's leading conveyor belt of engineers. All of this has laid the groundwork for the Valley of the Sun as the beating heart of the country's chip-making boom. The university has become one of the most important engines for a city that some have described as the new U.S. semiconductor capital. The shift has come amid a scramble in

Washington to rebuild domestic capacity to manufacture semiconductors, offering billions of dollars of incentives for companies to build fabrication plants or fabs. ASU's Engineering School now boasts 24,000 on-campus students, more than any other standalone university in the country, and has plans to expand that number to 30,000 within the next three years. Another 8,000 students study via the internet, after it introduced America's first fully accredited online degrees in electrical software and mechanical engineering. Even though the dry climate and isolation from natural disasters helped Phoenix become part of the semiconductor business decades ago, starting with Motorola in the immediate post-war period, government leaders give the university credit for helping launch a chip renaissance in the region.

I would say our secret weapon in all of this has been Arizona State University, says Kate Gallego. Phoenix is mayor. They have helped us attract foreign investment because they can provide the very top-tier graduates to staff these companies, end quote. Capital has poured in. More than $70 billion of investments have been announced in Maricopa County, in which Phoenix sits since 2020, according to data from FIDI markets. Put another way, of the $242 billion that has been invested in American chipmaking in the past two decades, more than a quarter of that has flowed into Maricopa County in just the past four years. Two years ago, with the help of ASU, Phoenix bagged its biggest prize. TSM, the world's largest maker of high-end semiconductors. The Taiwanese company announced a $12 billion investment to build a fab to the city's north in 2020.

Last December, the company increased its commitments to $40 billion. ASU's role in the revitalization reflects a wider economic development trend nationwide. In the global battle for high-tech funding, research universities are now being deployed to the front lines, helping U.S. cities attract the biggest capital investments with the promise of a skilled workforce that has become central to the ability of tech groups to expand. In Pittsburgh, Carnegie Mellon University has helped transform a city once known for its rusting steel industry into a robotics and AI hub. Cleveland has been reinvigorated in part by Case Western Reserve University. In some ways, these municipalities are following the model established a half century ago

by Stanford University, where research and innovation were instrumental to the creation of Silicon Valley. But unlike California in the 1970s, the most important role now played by ASU and similar engineering schools has been creating a skilled workforce amidst one of the tightest job markets in generations. Phoenix had the advantage of its legacy semiconductor manufacturers to help build on. Intel has had a presence in the region for more than four decades and is now expanding significantly, pumping $20 billion into two new fabs in Chandler in Phoenix's southeast. But the region's Arrival as a chip-making superpower has been cemented by TSM. In the city's northwest, its burgeoning plants are rapidly growing out a plot of land larger than New York City's Central Park.

The pace of this change, turbocharged by the $52 billion of subsidy provided by the Chips and Science Act passed last year, and the demands it has placed on the city have brought with it their own challenges. TSM has blamed labor shortages for a decision to delay the opening of its first plant from next year to 2025. It is parachuting in more than 500 workers from Taiwan to plug the gap, much to the dismay of local unions. Cultural clashes have also raised concerns locally. ASU is collaborating with chipmakers by adapting curriculums, developing new research initiatives, and further expanding its engineering department. On campus, the effort to grab graduate talent is evident. The career fair is like a zoo, says Gabriel Adams, a 24-year-old electrical engineering student at ASU from nearby Gilbert.

Jobs in general are, I think, at the front of a lot of people's minds. it's not just engineers that Phoenix is producing en masse in the city's colleges. Courses are being offered to help lower skilled workers secure jobs as semiconductor technicians. I'm watching our society change and people need educated workers faster than they can get educated, says Tammy Robinson, president of Mesa Community College. Along with two other local colleges, Mesa has introduced a two-week crash course for workers to retrain as semiconductor technicians, end quote. Nothing for you today. Talk to you tomorrow.