The ‘AI-First Company,’ Big Tech Mega Earnings, NVIDIA vs. Anthropic
01:05:30 Share

CEOs everywhere are calling their companies AI first. But what does that mean? Plus, we cover a major week of big tech earnings and NVIDIA and Anthropic exchanging harsh words. That's coming up on a Big Technology Podcast Friday edition right after this.

From LinkedIn News, I'm Leah Smart, host of Every Day Better, an award-winning podcast dedicated to personal development. Join me every week for captivating stories and research to find more fulfillment in your work and personal life. Listen to Every Day Better on the LinkedIn Podcast Network, Apple Podcasts, or wherever you get your podcasts. Did you know that small and medium businesses make up 98% of the global economy, but most B2B marketers still treat them as a one-size-fits-all?

LinkedIn's Meet the SMB report reveals why that's a missed opportunity and how you can reach these fast-moving decision makers effectively. Learn more at linkedin.com backslash meet-the-smb.

Welcome to Big Technology Podcast Friday edition, where we break down the week's news in our traditional cool-headed and nuanced format. Major week of news to speak with you about this week, as every CEO seemingly has this new memo out calling their company AI first. So we're going to talk about what an AI first company means and why the companies that we're going to discuss, including Duolingo Box and Shopify, have decided that it's important and whether that can expand beyond tech.

we're also going to cover a major week of big tech earnings we have apple amazon microsoft and meta all reporting we're not going to go so deep into the numbers themselves although we'll cite plenty of numbers but really what we're going to look at is the trends what it means for big tech and the economy in general and then towards the end we'll talk about nvidia and anthropic getting into it a great letter that we got from one of our listeners about ai consciousness

And then we will close out with a new gadget that Ron John has and loves, and he can't wait to tell you about it. Joining us as always on Fridays, I already gave it away, is Ron John Roy of Margins. Ron John, great to see you. Welcome back to the show. This is an AI First podcast, Alex.

Alex, how have you used AI as a fundamental expectation of podcasting, as Toby from Shopify said? It is interesting that we're going to talk about how all these companies are AI first, because in order to insert their memos into our show notes or our show document, I had to use AI. Every CEO seems like they want to post their memo as a screenshot. I

I mean, there are longer tweets now. You can just give us the text so we can read it as opposed to having to zoom in on your screenshot. Best possible way to make that happen?

Save those screenshots, drop them into Claude and have Claude spell it out. That is exactly what I did. So I did my part as an AI first podcast, Alex. This is a big trend. Three is a trend. And we have three now where there've been three CEOs who have written memos to their companies talking about how they are now AI first. That includes Shopify, which was the first, Duolingo and Box, which just showed up this week. So Ranjan,

I'm going to we're going to go through a little bit of these memos because I think this is important. I think we're going to see many more companies going to that will go this route. But why don't you start us off by giving your thought on what it means to be an AI first company because it does sound like jargon. So look at what the three are saying and tell us what you think it means.

So reading these three memos, again, from Duolingo, from Box, and from Shopify, each one had a slightly different tone or intensity to how they said their employees need to be AI first. But overall, the idea is you always need to start with an AI tool. Can the task you're trying to do be done in a better way with some kind of AI tool? And I think it's right. I think getting just everyday people in your company

really fluent in whatever new tool is happening and figuring out how they can actually change the way they do work is actually far more important than any large scale effort that any company is going to try to implement. So I actually, I like

that this message is going out. And we can get into the tone and the nuances of how they're actually trying to communicate this, but I like that they're saying this because I do think these are the companies that will do better. I mean, it's just the same way. And even Duolingo, they talked about the shift to mobile.

If they had missed that as a company, they would have been dead. I mean, Facebook slash meta was one of the most famous transitions to the mobile era from desktop. So when these big transitions happen, you need everyone at the company not just exploring the tech, but actually integrating the kind of AI or whatever that big transition is into their daily work.

So there are definitely a few themes that I saw in these memos. First is a desire to share information within companies. I would say the second is probably a desire to cut costs or at least minimize headcount increase. And then the third is to scale up what you do in ways that you couldn't before AI.

Aaron Levy, in his memo to Box, he told his employees that we're focused on building an AI-first company. Just as we ask ourselves what our product would look like if we started Box in 2025, we need to ask ourselves what would work look like if we started in 2025. So it's basically just his way of saying,

We need to collaborate better. Now, is it a coincidence that he's driving this, writing this memo and releasing it in public? And he has a company that is explicitly built on document storage and collaboration and a tool that can make you more efficient at work? Probably not a coincidence. He's probably going to talk a little bit about what Box can do and then release this to the world and, you know, try to get others to follow. But some of these things that he brings up are quite interesting. So,

To me, he starts really in the knowledge sharing area. He says, we want to use AI to ensure more time on average is spent on the things that really matter. So we'll use AI to help onboard boxers faster, get everyone access to experts on any topic like box AI in hubs, which I think is like an internal help desk, to make decisions more quickly, iterate on new ideas more quickly, augment our code writing safely, and better serve our customers and more.

So, Roger, let me ask you this, because this has been one of the big questions about AI right away, is can AI help companies be more efficient, sort through internal documentation better, get access to better expertise, and basically spend time on things that matter more as opposed to going through these long, arduous onboarding processes and trying to cut through red tape to find out information? Do you think AI is at the point today where this can actually help with this task?

Yeah, 1000%. And to Aaron's credit, I think Box is certainly one of the players in that space. And which also I will say, the fact that Duolingo came out with it, I thought was pretty interesting because they have no real vested interest in kind of pushing that narrative. And in fact, they got a lot of backlash because...

thanks to Duo and their social media marketing, they become a bit of a cult favorite, but also with the anti-AI persona. So putting it out there definitely meant something different. But I think the most important thing there, and like what you were saying, or what Aaron said, starting a company in 2025, if we did it today, what would it look like? That is the most important question that every company has to ask themselves. And I've thought about it a lot, 'cause the last few years,

It's been a more, at most organizations, trying some experiments, testing some stuff out, seeing what works. There's a lot of internal inertia towards most AI efforts as well. But

Up-and-coming startups that are built completely from the ground up on these kind of technologies are going to just do stuff way faster, much more efficiently, probably better for the end consumer as well. So any kind of incumbent has to rethink the way they do it. And in reality, the technology to actually access large amounts of information, especially unstructured,

and get an answer that is correct, they're avoiding hallucinations, whether that's through RAG-type technologies, whether that's other. It's gotten some really long context windows in Gemini and OpenAI. It's gotten so much better that this will become completely table stakes for every organization. So the ones who do it faster will do better. By the way, I think this is the reason why it's important for us to read these memos and why we're leading here because...

We know that this is going to be the way that everybody in the economy ends up operating, if not everyone, a large majority. And it starts to answer some of the big questions that you might ask in terms of what the impact is going to be, both on business and society. And I think there was a theme throughout, but I'm just going to start with box here that the idea is, and I know I cited efficiency as one of the things, uh,

that they're aiming for, and they definitely are. But like, what do you do with efficiency? And you have to remember that every company that's beginning in 2025 is going to start with many of these tools natively in their approach. Like if you need a internal knowledge hub, which I hate to use the term internal knowledge hub because- It's a thing. It's a thing. Yeah, it is. But if you need one of those, just-

I don't know. It just feels like very like put me in my cubicle and make me read the internal knowledge hub. But when you have and everybody has internal knowledge, shared internal knowledge in a company, the newest companies will build with that centralized in AI queryable by largely by natural language. And so the question is,

modern companies, what are they going to do? Do they, do they become efficient and kill everything or do they become efficient and do more? And I think this is kind of the most underrated part of the, uh,

Aaron Levy memo, and then we'll move to Duolingo. He says,

This to me is the thing. Companies using AI are not going to say we are happy doing what we did before and this will just enable us to do it more efficiently. Therefore, we will cut our spending and we'll cut people. I think the smart companies, companies like Box, run by a person that really gets this, will understand that this is a mechanism to push even harder and grow and take that money and reinvest. And it doesn't mean job loss and it doesn't mean cost cutting. What do you think? Well,

Well, yeah, I think there's always two ways to look at the potential benefits of AI. There's cost savings, but then there's also doing things that you could never do before. And in the Duolingo memo, Luisman on, he talks about doing implausible tasks. And like, again, you imagine this online shopping. We talked about this a lot last week.

there's a world where you can truly personalize every bit of messaging that is now going out to any kind of customer. And when you say internal knowledge hub, it makes us think again, you have to like check with HR what the vacation policy is. I think about it more like internal knowledge is,

even all the actually like aggregated product knowledge, product data, customer data, all of that kind of knowledge and being able to quickly leverage it and generate new types of content in new ways. And that you can serve customers and just make more interesting things than you could ever before. And again, to me, it's interesting because we, you know, AI,

A lot of the industry is trying to push the narrative that it's potentially, you know, the most transformative technology since fire or whatever else.

I still kind of am in the camp that it's like cloud or it's like mobile. And you just have to think like if you were at a company that, or even computers call it 30 years ago, if you're at a company that's an incumbent that is not investing and not becoming fluent and native in that new technology, you're going to lose. So to me, it's not, you know, this earth shattering once in a millennium thing, but it's a pretty important thing that everyone's going to have to get their hands around.

Right. And just to the subject of building more, I know we're going to get to meta earnings and what Mark Zuckerberg said about AI. He made Mark Zuckerberg made the podcast rounds this week. And we'll we'll talk about that. I mean, we should talk about it now. I thought he had a fairly miserable showing on Theo Vaughn's podcast, which was very, very difficult to watch and just not the right host for.

for the guest. I mean, Mark wants to talk about technology and Theo wants to talk about basically everything that makes Mark Zuckerberg squirm. In fact, there was a great moment where Theo Vaughn looks at him and he goes,

Do you think, and he goes, is social media bad? Mark is just like, I don't think so, which was hilarious. But otherwise, that interview really wasn't worth listening to. The one that I thought had some good moments was Zuckerberg and Dvarkis Patel. Dvarkis, of course, has been on the show. And they start talking about AI, what AI will enable meta to do. And Zuckerberg says, look, we're too big to have a customer service organization. But could we have...

enabled customer service that has, you know, voice potentially, and then, you know, enables us to build something that can serve 3 billion people and, uh,

have limited need for like human oversight, in which case we're going to hire more customer service people because they'll be able to maximize what they do with AI. And I think that was what you saw with Duolingo. So just as Louis Fanon, the CEO of Duolingo releases this memo about going AI first, Duolingo doubled its courses. It said it's launching 148 new language courses, uh,

and 28 supported user interface languages. And this is what Luis said, or no, the senior director of learning design, Jesse Becker said this, "By using generative AI to create and validate content, we're able to focus our expertise where it's most impactful, ensuring every course meets Duolingo's rigorous core standards."

So it's pretty amazing that AI can enable a company like that to provide what it's doing just at a much greater scale, which creates a much larger moat over any language company that's not AI first. And to me, I think that's really the promise.

Well, yeah. And that's, again, a good example of increased efficiency. It took 12 years to create 100 courses. And now they just created another 150 that they're confident are at the same quality and scale as the original ones. But then, I mean, language, and I'm proudly on day 334 of my Duolingo streak in French. I don't know if my French has actually gotten that much better, but I'm obsessed with the Duolingo widget and making sure I don't lose my streak. But

How much more weirdly and almost amazingly personalized, like now they actually have these video calls you do with an animated character and talk to them.

And, you know, like there's a lot of talk after OpenAI released voice mode that Duolingo is dead. It's even more reason that a specialized language learning company like Duolingo, if they leverage this technology well, they're going to create some amazing stuff that we can interact with and learn languages with in ways that, you know, when I was sitting in a

sixth grade French and with a textbook trying to conjugate verbs could only dream of large starting to learn a language today. So that's the stuff I think that's like, again, efficiency over here, but then creating new amazing experiences is that's the next phase. Now I'm not opposed to those video calls, but I just think that they're awful.

You like that? No, it's good. You can actually, you can't, I try to mess with them sometimes. And it actually like, they reel you back in to ask you questions about the vocabulary you've been learning. And again, it's like, I don't know, weirdly, because it's French, I think. It's like animated, really like a blasé girl with blackface.

purple hair. I don't know. It's weird, but that's, I think that's the character for all of them. They're not impressed with your, with your language skills, the Duolingo characters. See, but wait, wait, but in a way, when we're talking about is open AI going to kill everybody or is it the product and not the model? Such a good example. They have a whole brand. They have a whole animation style with which they deliver the courses. They have like an entire vibe to them. And, and,

And that's it's a reminder. Everyone, everyone can still win right now. I hate while I'm that I'm grudgingly coming towards your opinion, but that is great support for your the product matters. But then again, better models enable this type of experience. So you and I will let that debate run another day. You know, I was so optimistic leading into this segment talking about how companies are just going to double down and grow. But then I look at some of the things that.

did cause the backlash for Duolingo. And that, of course, is the human cost here. So Van Aan in his memo said, we'll gradually stop using contractors to do the work that AI can handle. AI will be part of what we look for in hiring. AI will be

AI use will be part of what we evaluate in performance reviews. And this is really important. And this was also mirrored in the Shopify memo. Headcount will only be given if a team cannot automate more of their work. So when you look at the sort of culling of contractors and then the fact that you're going to have to justify a headcount, it'll be much more difficult to get headcount because the AI should do this stuff automatically.

And then I wonder, like, OK, so if this does get applied across the entire economy, are we going to see any growth in jobs? Like, could this really lead to a lot of job loss? I just saw a tweet that come across my feed this week talking about how new graduates are really struggling to find work right now. Now, maybe it's because of the uncertainty in the economy, but I don't think it's

out of school or even a remarkable insight to say that a lot of companies now are not hiring their most junior level because they're turning some of this over to AI. What do you think Rajan?

I mean, it's tough, but to me, it's an inevitability. Like, if you are able to build and run a company a certain way and you don't, someone else will. I mean, I think it's just that simple that the way work is done is changing and there are certain tasks. And I mean, Duolingo is the perfect example.

They had contractors simply checking the output. Now with generative AI, you can safely, if you build the right system, which I'm sure they did, check output.

hundreds of thousands of answers very, very quickly and efficiently. You're not just because you, now that you can do that, you're not going to do the opposite. And if you don't do that, someone else will. So I think to me, and this is going to be an ongoing discussion. Don't get me wrong. This is, this is going to cause dislocation the same way, like in the nineties globalization and more low cost manufacturing, we're feeling the effects 30%,

30 plus years later. So like, it's not like this stuff is not going to cause some kind of dislocation. The only thing is like, this is where if in a perfect world, there's some thoughtfulness put into what it is doing. And there's, I don't know, I even hate saying, but some kind of more mass upskilling of people

And as I say this, I literally am like, this will never happen in the current moment. But you have to prepare for this. And any economy that does will be better off the same way any company that does will be better off.

What do you think? No, I agree with you completely. I just think that it's sometimes going to hurt. And if you're looking for a job, it's going to hurt. It's going to be much more difficult to find a job and to keep your job. You're going to have to really show that you're using AI. I mean, I'm just looking at the again, looking at Toby Lutke's memo in Shopify. He says we're going to add AI usage questions to our performance and peer review questionnaire. Learning to use AI well is an unobvious skill.

My sense is that a lot of people give up after writing a prompt and not getting the ideal thing back immediately. Learning to prompt and load context is important and getting peers to provide feedback on how this is going will be valuable. You're also going to every time you're going to create a prototype, you have to do

do it with AI exploration. He says you can learn to produce something that other teammates can look at, use and reason about in a fraction of time it used to take. Actually, I think this is smart. Like, I think that if you're going to try to get this to take off within your organization, you need to create these incentives and people will respond.

Yeah, I mean, when he writes that, in a way, it makes me happy because I know he gets it. It's kind of like when the Klarna CEO was on. I was a bit skeptical about some of the stuff that was coming out in the press at first, but then the way he talked about

your first prompt, you won't get the right output. And then your job is to keep working until you get it and learn how to do it. And I think him pushing that, it's exactly correct. And I actually think the new grads article that came out, I'm still going to, I don't know, attribute it maybe at least more to the current state of the economy. Because I'm

Honestly, I would rather be a new graduate coming out right now than, I don't know, having been in the workforce seven, eight years and become completely habitual in a certain way of working. And I do think the idea of like these skills are necessary. I remember...

Probably like even three or four years ago, sometimes you would get people putting Google Docs on their resume as a skill. And I'm sorry, I'm sorry. Like, no, no, come on. That's like Microsoft Office back in the day. Like those things might have a certain window where it is considered an actual listable skill. But I don't know, man.

Do you have that on your resume, Alex? I definitely had Word and Excel on my first resume. There's no doubt about it. Yeah, the first one. I was still learning PowerPoint. The first one. When was that? Early ones. It was a long time ago. A long time ago. But computer. Shopify in particular wants to be able to do this because it seems like they're going to just integrate more and more.

with AI. In fact, last week we talked about how you might want to shop in ChatGPT and then this week, it looks like we were onto something. OpenAI rolls out new shopping features with ChatGPT search update from Reuters.

So it's going to open. I said it updated chat. She's web search capabilities to improve online shopping for users with personalized product recommendations, with images, reviews and direct purchase links. So if you're Shopify, you definitely have to do this because you're

This is where it's going. It might end up being that your front page is not going to be the vendor pages that you've created, but the actual user interface of ChatGPT. I tried to get Jamil Ghani, the head of Prime, to bite on this question in our interview on Wednesday, but it was unsuccessful. Although I imagine that they're going to be thinking about this quite hard. Well, that's actually a perfect example that if you don't have AI native employees, you

you're not going to realize the urgency of how shopping can change. And they might not have pushed and worked and actually delivered, probably being, I think, like the first major e-commerce platform to actually deliver a native integration into ChatGPT.

Because I believe perplexity for their shopping, I don't think it's with Shopify. I think it might be in-house or like this is a big deal, but this is only going to happen because internally people understood what is the shift taking place in terms of how people are shopping. And when everyone marries ChatGPT and needs to buy its stuff, which is listeners can go back to last week's episode if that sounds a little odd. We're bullish on the relationship. Yeah.

Yeah, buying them, buying some GPUs. But you got to know what it looks like. You have to really understand the overall picture and flow of these things. Otherwise, you're not going to do the right things. Now, how many companies are going to go out and say that they're AI first to distract from the fact that they're struggling? I mean, when I first saw these headlines come out about Shopify, I had a couple of people that reached out and were like,

This is just them trying to paper over a disastrous business. In March 2023, for instance, they laid off 20% of their workforce and gave up on logistics. And then they also did another big layoff recently. And the suggestion that some made to me was,

Look, this is just them trying to sort of distract us from what's actually going on and have us look at the new shiny object. I don't think Shopify is a disastrous business, but we can look at the headlines and see that they've definitely had, to use another term, as bad as internal knowledge hub. They've had some speed bumps. They've had some headwinds. I think...

If any of this messaging came from a CEO or management that typically did not make public statements or was not in the public conversation, I would be more skeptical. If like someone, it was just kind of like a silent CEO who suddenly is coming out and is like AI, AI, I'll be a little more skeptical. But again, Toby, you're

He doesn't show up. I've been like, actually he goes on podcasts too, right? But I mean, he certainly tweets. I've been asking him, Shopify, if you're out there listening to this show, get Toby on the show. We'll ask him good questions. I think he should do it. There's nothing to be afraid of. But I mean, he certainly tweets and is in the conversation. Duolingo is like, though, I mean...

Their brand persona is one of the strongest out there, but they're public and Aaron Levy, I mean, it's like I would say probably like the single most quality voice, but also prolific voice on agentic AI as well. Yeah. All right. Let me ask you two big questions and then we're going to go on to big tech earnings. The first is...

Can this be top down? Can this really be something that a CEO commands a company to do and they end up doing it? So normally I would have said no, but I actually think the Shopify memo has an interesting take on it. Again, the idea that if you want budget, you have to demonstrate it could not be done in a different way. That is a good top down, like actually behavioral way to push the change.

If it's just everyone spend two hours a week using whatever internal AI tool or system we're building, that's not going to work. But this is actually the way you get it done. So I think it could be done. I think it's going to cause some internal tension and speed bumps, as you said. But I think it can be done. What about you? Definitely. Yeah, I was skeptical at first. But then I think that when you integrate something into performance reviews...

That's when it gets done. Right. I think that like performance management is what drives a lot of the tech industry comp. I mean, as you might imagine, money matters. And if your pay is contingent upon you spending a couple hours or, you know, building chat GPT into everything you do, you're going to do it. You want to you want to get paid.

I mean, it's no different than any other major tool set that came before. Again, using docs collaboratively was like transformational, I guess, but we all just kind of did it. Okay, here's my second question for you. Obviously, this is happening within three very techie tech companies, right?

Can we see this in non-tech companies? And if so, how long do you think that's going to take? That is a good question because I do agree that, I mean, yeah, if you are a digitally native, pure tech company, that's like lots of engineers, it's going to be easier. But yeah, actually, I don't know. I don't know. That's a tough one. I mean, it could be.

I would like to see something kind of dramatic soon. And let's say in the next few months, but I don't know if we will. I think it will take years. I mean, that's one of the things that when we think about the transformative power of this technology, it's,

The transformation takes quite some time always. So even if this does become a thing everywhere in the tech industry for normal companies to implement it, it's just going to take much longer. It's my perspective. Years, years, not months. I don't know. Maybe as the tools get actually better and more functional and intuitive, I think there's a shot. There's a shot. I'm more optimistic, I think. You know what helps those companies or those tools become better and more intuitive? Yeah.

And usable. Better products. No, model improvement. Good try, though. Better UI.

All right. No, I mean, there's a case to be made for both. Let's talk a little bit about big tech earnings. Actually, it's been a very interesting earnings season. So we're talking here Thursday night. We're doing Friday edition a little early because I'm about to go to France. Let's talk about it. We had Apple, Amazon, Meta and Microsoft all report over the past couple of days.

And the reason why I pay attention to these companies, I mean, among many reasons, but one of the most interesting things about them is they can sort of be a read through to the rest of the economy. If things are going well with Amazon, then things are probably going well with the consumer. And if things are going well with Microsoft, then enterprises are probably faring well.

Companies by and large beat their earnings expectations. The big tech companies by and large beat their earnings expectations in the quarter that they just reported. Remember, this is Q1. So it's January, February and March before Liberation Day. But Apple reported this is from The Wall Street Journal. The highest first quarter or March quarter revenue it's seen in more than two years as people move quickly to buy smartphones and other devices before the tariffs were announced in April.

The company said sales rose 5%, 95 billion, which was ahead of analyst expectations. However, the China revenue came in just a little bit lower than expected. So they're going to clearly see some issues in the China market, especially after the US and China go head to head and China's putting out propaganda like China won't kneel, which is interesting.

If you watch that and you're in China and then you go to the store to buy a smartphone, it doesn't seem like you're going to run the American version, given the signals your government is sending. And also iPhones are banned within Chinese government offices. And then you look at the another interesting thing that we heard was demand like production. So this is from CNBC. Half the iPhones sold in the US were made in India.

And Gene Munster, an analyst at Loop Ventures, said he expected the figure to be close to 25%. So it's already the Apple seems to be driving much of its manufacturing capability to India, especially for the US market. One last stat and then I'll turn over you.

Mark Gurman talked about the tariff impact. Apple said there was no tariff impact in the March quarter. It cannot precisely estimate for June quarter, which is the current one, but estimates $900 million in cost increases in the period. This is with an exception for iPhone.

What's your big picture take on what's happening with Apple? It seems like it's weathered the worst of it. I think anything that happened pre-liberation day, January through March, obviously tariffs people expected were coming. But I mean, I guess attributing, I don't know, like, did you personally in the months of January to March, were you like, I got to stock up on stuff before? Were you panic buying or? No, I just bought, I mean, I bought in April after liberation day.

I bought a couple pairs of sneakers from Amazon. That was it. No, see, that's the thing. I think any kind of like even the conversation around panic buying really started after Liberation Day. So, I mean, to their credit, it looks like and the release of the iPhone 16E was also cited as one of those factors and kind of like the lower cost, but still Apple intelligence enabled phone. So I don't know. I think...

I still believe, and we're certainly going to get into Apple, the X tariff conversation. But I don't know. Apple still is the most vulnerable. But the most promising part of that was the 50% in India. That blew me away. I mean, it blew Gene Munster away. But I mean, 50% already. I guess supply chain Tim has been pretty good on this stuff already.

It's almost as if, yeah, if you're going to take one CEO who's ready for this, it is the guy with the supply chain. It's supply chain Tim. But I don't think this is going to be the end of the story. I mean, OK, so Cook also said that the tariff hit will be about 1% in the June quarter, which is less than most had been expecting, according to Gene Musser. Again, Apple had this exemption from tariffs, right?

But that is the export side of things. So I think the real thing is the China market. 17% of Apple's revenue last year came from China. It was 15% in Q1. I don't know the percentage yet for this year, but I think it was kind of in line on that front. A shrinking of Apple revenue in China is going to be bad.

Yeah, no, I'll agree there. And actually that's, I mean, not just bad, but potentially catastrophic. Cause like I have to imagine out of all things, like an expensive cell phone purchase, like, and again, we will get into Apple, the product side of it, but the it's,

more of a status symbol than anything. In the same way, like, I mean, Tesla, we've seen the brand impact on the product sales. Like when the iPhones, one of its primary values is that of a status symbol. And suddenly that status in China could have a very negative connotation rather than this means you are cool and wealthy. That could be a huge problem. Independent

of any actual like regulatory or legal restrictions just from pure brand standpoint and then the other side of this is let's say okay we didn't see any price hikes right but let's say the price has to go up because of this

or we lose China downloads because of this. The thing that Apple is selling and has growth potential is services, which is a $100 billion business and has been growing at an insane clip and has major margins. So you want to be able to sell as many phones as possible so you can sell more services. And if tariffs cause an issue there, then that could be a problem for Apple. But I have to say,

Candidly, my reaction to what we've seen and heard from Apple and McCall so far and from earnings is actually it's not as bad as feared. To use a line from Dan Ives.

Yeah, I think that's the market at least responded accordingly. I mean, I think we ended up today as a recording on Thursday, only up a little bit. We were up more earlier. Well, the stock did trade down in after hours, but not tremendously. It's down 2% in after hours. Oh, yeah, I guess Apple. Overall, from the earnings, just this narrative that

It's not as bad as we were thinking, even though the time period that all these companies are reporting for is before Liberation Day. Still, the idea that there's some like good feeling that actually the economy is humming along at some capacity still that and basically, I guess, if we.

go back to zero tariffs or something like that, everything will be okay again, seems to be the feeling right now. But something beyond tariffs can hurt Apple, and that is aimed directly at its services revenue. Because for a long time, Apple had told app developers that they could not tell other people that they could buy subscriptions to their products through

mechanisms that were not the Apple App Store. So for instance, if you were on Netflix, Netflix couldn't say, just go sign up on netflix.com and you will avoid the Apple App Store tax. Then the federal government had something else to say. Why don't you cue us into the story, Ranjan? Okay. I think this is one of the biggest tech stories in a long time.

And I think this really poses a huge threat to Apple. And I will inject my own personal feelings about, as a longtime Apple fanboy, but what I've been seeing happening to the company. So there's been this trial with Epic Games that's gone on almost five years that actually, and again, it's amazing that like,

through different administrations, through different political climates, actually ended with the judge ruling that Apple not only is two years ago that there was an injunction against the idea that they take a 30 percent commission and block any other way or are very overly restrictive about

how app developers, as you said, that you can't include any language, go to netflix.com to pay. And I'm sure many listeners have dealt with this. Like if you try to buy something, I think if you try to like on Amazon, sometimes you're a book, you're redirected to the Amazon app on the mobile web. Like it really creates bad overall UX flows. So then what happened is after that initial injunction,

Apple basically did a bunch of workarounds and still were forcing app developers to pay 27%. And the judge came out and said, that is completely not okay. And now you have to give, allow the options to actually let people go and pay elsewhere outside of your actual like embedded app payment ecosystem. There's two big things that came out of this. First,

So in 2023, after the initial decision, Phil Schiller had actually said that maybe we move to a model where Apple takes no commission. But apparently Apple's finance chief had come up with the idea around 27%.

Tim Cook sided with the finance chief, Luca Maestri. So you have a situation where it's very clearly documented and now in the public record that even after this initial injunction, that they basically worked around it for circumventing this. The second thing that this is actually the craziest part to me, because as a user, I felt this.

If listeners have tried to go and pay, even like click out directly to a payment site on an external website,

There is a Slack conversation that leaked through this, or were in the court filings, where they talk about, they're like, "Okay, external websites sound scary, so the execs are gonna love it." Basically saying you're going to an external website. And I've been in that position. You're like, "Oh wait, maybe something's insecure right here."

And then it even says, wait, to make your version even worse, you can add the developer name rather than the app name, just to make it look overall a little shadier that if you're going to go do this. To which the other developer responded, oh, keep going. Like they were sitting there like, how do we make this work?

seem like this kind of like shady spammy transaction when in reality it was not. And it just made me start to question like Apple's entire brand and what has gotten them to where they are today is the idea they're the ones for privacy and security and the user interest when all these other tech companies are sucking up your data and leading you through dark patterns. And suddenly you're seeing this was November 2021. This was being discussed.

like the dark pattern thing they're in there and that to me that can completely change the perception of the entire company well I used to think that but Apple has been able to weather so many storms like this and nothing seems to stick and I think it's just because people love iPhones so much that like this is not going to resonate with the individual uh user so

I think that that is not going to be a big deal. Also, I just love that the term external website is

Sounds scary. Like, excuse me, what is an external website? Like, what the hell am I on right now? It's still a website. It's just a website. Yeah, but to the average user, I get it. It sounds like a virus. Yeah, anything that makes it seem like you are no longer in the safe walled garden of Apple's payment ecosystem and your credit card could get stolen out there. Who knows? But to me, there's another big thing and that's

the pragmatic engineer, Gurgly Oros. Is that how you say his name? Gergay. Gergay. Gergay. So he had a great, he had a great thread and he talks about how the actual payment ecosystem is,

is like a perfect representation of monopoly because it has not improved. The whole idea is this 30% fee is supposed to allow you access to this robust, safe, secure ecosystem. It's good for consumers. It's good for app developers. But he pointed out all these things that I hadn't really thought about, but are table stakes for any kind of subscription e-commerce.

giving a full or partial refund directly, like providing customer service messaging around any kind of transaction or especially refund, providing certain types of discounts rather than just a three or seven day or 30 day trial. Like all of these things are just so normalized and part of like

running a good subscription type service and apple doesn't allow them and then you start to think like and as he points out it's because they haven't had to improve it at all so again the promise that it actually was the best place to be and that's why you should pay 30 in reality this was like the most cleanly a clean example of monopolies monopolizing behavior where

It just was pure market weight and dominance. And in fact, that experience got worse and worse. And I'll say this, like, have you canceled a subscription on iTunes slash App Store, whatever, whichever one it's on now? I think so.

like it's 10 steps you have to log into your icloud account which who goes into icloud ever you have to go file a dispute you have to like like it's the most heavy ugly annoying process ever and i'm so convinced that like

They make a lot of money off of people just not knowing how to do that or not even realizing or not caring. And again, think about how many apps are like seven day trial and then $69.99 for one year. Like they've pushed the whole ecosystem towards the more scammy side of the way this stuff can work versus the rest of the internet. I'm with you. I think this is the most egregious thing that Apple does with its power.

or the most egregious thing I can think of right now. And I do love that the federal government is trying to get them for it. And frankly, the reason why I think it is such a righteous crusade here is because the one that ends up getting hurt is the customer always like, why am I paying 30% more for Netflix? It's the same service. I mean, I know Netflix doesn't even take payments on, on Apple's ad platform. So that's,

An extremely righteous reason to pursue action here. And just to bring it back to our discussion of where Apple's business goes, App Store fees are a major part of its services revenue. Like Apple's big revenue growth moment, again, is services. Wait, what services does Apple provide? Now, of course, there's Apple Music and Apple TV+, but a big part of the service, quote unquote, that Apple provides is extortion.

30 billion. 30 billion. That's the estimated revenue directly from the payment side of it. I mean, that's a lot of money. And what is anyone getting for that? That's the question. Yeah. Now, of course, I don't mean extortion like in the legal sense, but sometimes it feels like you'd be terrible if something happened to the nice business you had over there with that company.

All right, let's talk a little bit more about what's going on with big tech because this does again have a read through to the economy. Very interesting stuff with Microsoft which crushed earnings expectations. Microsoft Chief Financial Officer Amy Hood said demand signals across the company's business have remained consistent so far this month. So everything's still going quite well in April and Azure grew 35% year over year. I think that's OpenAI. What's your read, Ranjan?

I mean, I think the general theme from this week was AI is still powering the economy. Yes. Exactly. Maybe that's why you got to be an AI first company. But I definitely think-- and again, in the whole how much of that money is Microsoft's own investment money coming back to Microsoft? I mean, this stuff gets a little difficult to fully understand. But overall, I mean--

I mean, when Azure is growing at 35% year on year, that's pretty spectacular. And again, I think it's a sign that every company is moving towards that paradigm. And so you better get on.

That's right. And Amazon, AWS grew 17 percent, missing expectations. I don't know. I think that next quarter is really going to be the interesting quarter to watch for Amazon. Did you know that 60 percent of the company's e-commerce sales came from third party merchants? OK, come from third party merchants that get many of their products from China and then sell on Amazon's website. I mean, I try to get this speak to Jamil Ghani about this, but he wouldn't give a

A number also the head of Prime, but this is coming out in places like the Journal. The company is way over indexed on China. Whatever way you look at it. Yeah, I think Amazon potentially more than Apple or at least equally is in trouble. And actually, this is a good sign. Like, do you want supply chain Tim?

he might not make great product with apple intelligence but he can shift supply chains uh faster than anybody else um but i mean amazon made this strategic shift a number of years ago to push for more chinese suppliers and allowing chinese suppliers directly onto the platform rather than chinese suppliers selling to american businesses that then resell on the platform so

I mean, it's been a long time coming and obviously they kind of had to do it in many ways to compete against Xi and Intimu, but they're, they're gonna, this is going to be a big issue and we're going to see this stuff play out a lot more directly in the months to come. But hey, maybe you don't need $30, Alex. Maybe two are good enough. Isn't that what Trump said? Yeah, that's what Trump said. What was the New York Post headline?

Oh, yeah. The New York Post headline. Trump admits tariffs will raise some prices, cause shortages. Maybe children will have $2 instead of $30. And there's a picture of Barbie and Trump. And the headline is skimp on the Barbie. Oh, God. Classic. Do you think AI is going to replace the New York Post headline? Front page headline. Unfortunately, probably. You know what? That's classic. It's very human. Yeah, that's a good one, though. Now, you know what?

AI can't come up with that one. That's too good. That's original. Yep. Skimp on the Barbie. Textual. It's never been done before. New York Post is probably the single most defensive, front page headline writer is the most defensible job against AI. Don't tell that to Mark Andreessen who said this week that it was VC. Early stage venture. Early stage venture.

Confirmation bias, maybe. All right. Very quickly, Facebook, $42 billion in sales in the first quarter. I think that is kind of insane. Zuckerberg says they're well positioned to weather macroeconomic uncertainty. CapEx, spending that they're going to go from AI, is going to go. The original range was $60 to $65 billion. Now it's going to be $64 to $72 billion, largely on artificial intelligence investments. Meta?

I've been through many cycles with Meta and it's hard to keep them down for long. They find a way. Yeah, I think Meta, the digital advertising impact is almost going to be like a second order effect versus the manufacturing one, which is going to be a lot more immediate in this quarter. We'll start to see that downstream. And we haven't, I mean, I know Snap issued some like headwinds guidance, but I think Meta is overall relatively stable.

pretty well positioned right now. And I also say that now that it's been getting warm in New York, I'll admit I am loving my Meta Ray Bands even more. Wearing Meta Ray Bands, walking around New York City, listening to music on it, asking it questions while you're just wandering around, it

It's a good product. It's a really good product. Now, would you wear them in a podcast interview like Zuckerberg has been this week? Absolutely not. Absolutely not. I got them in December and I haven't used them that much. But they were cool like on vacation and when I was skiing and stuff. But now wearing them outside when it's sunny out isn't weird. So then you can just go around and actually use them. I still will not wear them. I don't have the transition lenses though, so...

They're just the dark ones. I'm definitely not wearing it inside, but I don't know if I'd wear it. Maybe if we're an AI first podcast, Alex, both of us. Gotta wear those Ray-Bans. Gotta wear the Ray-Bans. All right. Next time we're in person, let's do it. All right. Okay. Let's take a quick break and come back and talk about NVIDIA and Anthropic going at it. And then this great letter that we got from a professor from a philosophy from Wilford Lawyer University. We'll do that right after this.

Small and medium businesses don't have time to waste, and neither do marketers trying to reach them. On LinkedIn, more SMB decision makers are actively looking for new solutions to help them grow, whether it's software or financial services. Our Meet the SMB report breaks down how these businesses buy,

and what really influences their choices. Learn more at linkedin.com backslash meet-the-smb. That's linkedin.com backslash meet-the-smb.

And we're back here on Big Technology Podcast Friday edition, coming into the home stretch. Very quickly, Ranjan, I know we have this in our headline of the episode, but let's just talk about it. It's kind of interesting. NVIDIA and Anthropic are going head to head. I don't know if you caught this, but Anthropic really doesn't like the fact that chips are getting into the hands of developers in China.

And they said that the chips are being smuggled in to China in baby bumps or alongside live lobsters. And, um,

They would like an increase of funding for export enforcement. Export controls are only effective with proper enforcement, Anthropic says. Enhanced resources for the Bureau of Industry and Security would significantly improve control effectiveness. Now, NVIDIA, which sells a lot of chips into Singapore, and I think we can say with a good deal of certainty, many of those end up in China, is not happy about this.

Very interesting fight. I mean, it is interesting that we're going to start to see American firms become more and more concerned about what's going on in China and NVIDIA, which I think depends to some degree on selling them.

is going to fight back. And we're seeing that play out. And among two companies who really don't want to be publicly fighting with each other. What do you think? I think I'm convinced Trump is going to address this one. I'm making the call right here in the next three to four days because it's just too perfect. If you hear smuggled and prosthetic baby bumps or alongside live lobsters, I mean, that's just too enticing to make a comment on. But

I don't know. I mean, we're going to start to see more of these very nuanced divisions that you wouldn't quite expect. And I agree, at that scale, and I'm sure Anthropic is a highly dependent customer on Nvidia as well,

It's pretty surprising that they're doing this, but I don't know. And NVIDIA has to play both sides, basically. So I think we're going to see more of this coming out, especially as whatever happens on the trade side happens. We'll definitely see more. Not to be a guy that plays both sides of the fence here, but I definitely am on Team Anthropic that like,

we know whatever export controls are in place aren't working. So if you're serious about the export controls, you may want to try to enforce them. And then I'm also on Nvidia side here that if you, uh,

wanted to smuggle a GPU cross borders, it's going to be very difficult to make it look like it's just a normal pregnancy. And a GPU certainly does not look like a lobster. That's just my opinion. I would, I could pick out a GPU server next to a lobster. I don't know for, for my chip mule behavior, uh,

I like to go with the lobsters over the baby bumps. It's just lobsters. Actually, do we export lobster to China? I think I remember reading a while ago that is a big export to China. So might as well, right? Okay. Makes more sense.

This is why Red Lobster went out of business is because they started serving GPUs instead of the actual thing. Actually, the next one is, you know, like another major export to China from America is the like leftover pig and cow parts because things that are chicken feet as well, things that are not eaten in the US. So yeah, keep an eye on those chicken feet to the customs officials. I have a feeling that's where they're going next. Yeah.

I'm just imagining a man sitting down for dinner at a Red Lobster and tucking his little napkin into his shirt collar and being so excited, drinking a little beer maybe. And they bring the plate out and they say, sir.

Here's your lobster. And it's an H100. It's an H100. God damn it. Send it back. That is not what I ordered. Send it back. This is not well done. I like that we went down that road rather than the prosthetic baby bump because that raises a whole host of ethical issues. Yeah.

I don't even know how you would do that. Okay. Let's talk about this great letter that we got from Professor Brian Williston from the Department of Philosophy at Wilfrid Laurier University. So we spoke about AI consciousness at the beginning of last show, and we always love hearing from listeners, especially when there's thoughtful feedback that will help us advance the discussion and think a little bit more. So

What Professor Williston said was that we talked about how there's consciousness, which is what you feel, and intelligence, which is knowledge.

He said,

to what I presume is going on inside of them. This is exactly the same boat we are in with respect to LLMs. Intelligence in all cases, humans or machines, is all we have to go on.

Well, that really threw me for a loop, I would say. It definitely helped expand my mind here on this question because, wait a second, if the only thing that we can determine whether something is conscious or not is its intelligence, whether we basically look at them and say, is there something going on inside this being that is like actually being versus just existing like a rock, then who are we to say that machines exist?

aren't conscious or can't be conscious because i think my implication was if you can't feel you can't be conscious but how do we know now i'm still on the side of this ai isn't conscious but i do kind of think that it's a very interesting prod at the ideas we shared last week and want to turn it over to you to get your response my first reaction on this was this is why i love our listeners honestly like

actually genuinely intelligent, thoughtful, and like long responses to what we say. I mean, that's, it's kind of like reflects the type of conversation in the Discord channel as well. Like this conversation

I love getting this kind of email from listeners. But then the other thing too is I agree it made me at least be like, who are we to say that machines are not conscious? Like it's one thing to be like, I don't think they are, but to definitively say they are not given kind of how he, the framework that he set up and even how we were talking about last week. Now I think maybe I am in the camp of,

I will not take a position and I will recuse myself from... Because again, our displays of intelligence are talking about lobsters and GPUs. So I don't know what that says about our own consciousness. Right. I don't know. I guess like the other side, the other definition is self-awareness. And you could say that these AIs today are already self-aware. Yeah. Maybe that's a stretch. No, no. But there's been a lot of behavior that...

Sure. Actually, no, but we don't even talk about sycophantic chat GPT. It did not solve itself. They had to go into the system prompt. So I don't think we're at self-aware yet. Okay. But I think that we can certainly see a path to it getting there. Maybe. I think we'll... Self-awareness, I think, is a lower qualification than consciousness. Is it before or after AGI? Maybe it's right at AGI. Okay.

Again, if a Waymo can drive the streets of New York City, I'll give you self-aware AGI. Not conscious, but close. Well, maybe we can end with the greatest sign of technological progress we've seen in millennia, if not the length of time that's longer than millennia. Maybe eternity? I don't know. What's longer than millennia? Double millennias? Double? I don't know if there's a unit for 10,000 years, but...

We'll check with AI because we're an AI first podcast in a moment. And it is a beautiful new gadget that you're going to tell us all about called the Mag2. I am now, as we've been doing more video, with respect to the YouTube commenters who are like, why is Ron John looking down at the camera like that? And what is this angle? And I'm someone who enjoys...

Some good framing in any kind of video. This company, Plexicam, has this new, it's a magnetic...

thing that attaches to a webcam. So you can put your webcam in the middle of your screen right over the other person you're talking to or right next to it. So you can look when you're looking at them, your eye contact for the video is actually looking into the camera. A lot of people, I'm guessing if you've done video, you know, you kind of try to force yourself to look up to the middle of your laptop. I'm a big fan. This is my first time using it. We'll see how the video comes out. But

I'm a big fan of this and I'm going to put this under the camp of AI first podcasting. All right. I don't know why. It's actually magnetic. It's one of the oldest technologies in the world. Magnetism. The original artificial intelligence. Magnetism? There was a big transformation where you had to go magnet first. That's right. It's going in the performance review. You are magnet deficient. Get out of here.

Speaking of which, let's do that ourselves. Ranjan, great to see you as always. Thanks for coming on the show. All right. See you next week. All right, everybody. Thank you so much for listening and watching. It's always great to have you here. Join us on Wednesday for a discussion about whether scaling is over with Gary Marcus, an AI skeptic. And then Ranjan and I will be back on Friday to break down the week's news. Until then, we'll see you next time on Big Technology Podcast.