E171: DOJ sues Apple, AI arms race, Reddit IPO, Realtor settlement & more

00:00:00.000 | Has anybody else seen due to an IMAX? No, don't say anything. Oh,

00:00:04.140 | don't say anything about dune. I want to say about dune. No,

00:00:07.600 | don't say it. It is fantastic. And I want to see it. Okay.

00:00:11.040 | That's all I'm saying is that it's worth seeing twice. I don't

00:00:15.120 | even want to know that you think it's good. It's over. It makes

00:00:18.520 | me stop. See, he didn't sex didn't see it. I saw dune dune

00:00:25.040 | to Yeah, I saw it. It's over. Okay, stop, stop. Okay, stop.

00:00:28.880 | Everybody. You both did. It's not over. There's like five

00:00:32.720 | great scenes. Sachs. The scene.

00:00:35.000 | All right, everybody, welcome to the all in podcast with me

00:00:58.400 | again, the chairman dictator come off Polly hoppity. David

00:01:02.240 | Sachs, the rain men. Yeah. And Sultan of science, David

00:01:06.920 | Freeberg. It's your boy j cow here and we have so much to go

00:01:13.840 | through. The DOJ dropped a Sherman x suit on Apple today

00:01:17.720 | right as we were about to tape the program seems like

00:01:21.120 | Thursday's is the big news drop day now. So this DOJ suit

00:01:25.000 | outlines five alleged abuses and they claim obviously that

00:01:28.320 | those abuses reduce competition, while limiting consumer choice

00:01:32.160 | and raising the prices that consumers pay for their iPhone.

00:01:34.760 | We talked about this actually just a couple of weeks ago, we

00:01:37.080 | talked about peak Apple. The five categories are very quickly

00:01:40.760 | super apps, cloud gaming apps, messaging apps, smartwatches,

00:01:45.560 | and digital wallets. If you don't know about super apps,

00:01:48.840 | that's the one that's maybe you haven't heard of if you're

00:01:51.240 | listening to this. In Asia, they mentioned how Ali pay we chat

00:01:55.960 | and pay TM are super apps. What does that mean? You get like

00:01:59.920 | five or six different functions in one app, social media images,

00:02:03.680 | purchasing, getting rides, you know, all that stuff. And when

00:02:07.160 | you have that you can move from one platform to another super

00:02:10.040 | easily. And when it comes to messaging apps, we've all

00:02:13.640 | experienced the green bubble friend. So the main argument of

00:02:17.880 | the lawsuit, pretty interesting. They explain and it's a really

00:02:22.000 | well written document, I read it this morning, that when Apple

00:02:25.600 | faces new competition, instead of lowering prices, for

00:02:29.000 | consumers, or offering a better deal to developers, they would

00:02:33.000 | quote meet competitive threats by imposing a series of

00:02:35.720 | shapeshifting rules and restrictions in its app store

00:02:38.440 | guidelines, and developer agreements. I've faced this

00:02:41.960 | every time I've invested in an app startup, they complain about

00:02:45.720 | the goalposts moving by Apple and Apple shares down about 3%

00:02:50.120 | on the news today. I'm sure everybody's got some interesting

00:02:53.280 | thoughts on it. Chamath, you were talking about peak Apple

00:02:55.880 | just last week or the week before, I think. What are your

00:02:59.440 | thoughts on the lawsuit dropped today?

00:03:02.200 | To be honest, I haven't read it. And I don't really know. Like

00:03:09.960 | the odds of these things, just because it seems like some of

00:03:12.480 | this stuff is so clearly political. And I think that

00:03:16.200 | these things have seasons to it in the sense that there are

00:03:20.480 | moments where these things are more likely to go in the favor

00:03:23.440 | of the company and more likely to go in favor of the

00:03:25.320 | government. The one thing I'll say is that these guys have been

00:03:28.800 | losing a fair number of these things. So they're kind of 5050

00:03:35.200 | in their fight with Epic. They've basically lost against

00:03:38.280 | their fight with Spotify. They definitely are in a moment where

00:03:45.360 | people are looking at the profitability of these devices

00:03:48.760 | as the source of their long term cash flow. And I think they

00:03:54.280 | realize that there's not a lot of growth because they haven't

00:03:56.400 | entered a bunch of new markets. So the real question is knowing

00:03:59.640 | all of that, did they do something beyond what they've

00:04:02.520 | already always done to try to lock people in? And can they

00:04:06.760 | prove it? I think that that's really where the government's

00:04:09.080 | case will come down to. Because then it's clear that Apple

00:04:12.520 | probably understood that their market was kind of solidifying.

00:04:16.680 | And they introduced these blocks essentially into processes that

00:04:22.120 | that force people to stay. That's probably bad news for

00:04:24.680 | them. But I don't really know because I haven't read the

00:04:26.480 | lawsuit. Yeah,

00:04:27.600 | Saks did you get a chance to read it? Or do you have any

00:04:29.520 | thoughts? Generally speaking?

00:04:30.440 | I haven't read the filings. But I read some of the press

00:04:33.440 | coverage about it. I would say based on the press coverage that

00:04:37.400 | I read that there's not really a smoking gun here. At least the

00:04:41.440 | press hasn't reported one. And what I mean by that is the link

00:04:45.080 | give you a couple of examples that were in the press. One is

00:04:47.760 | that apparently the filing made a point about when Tim Cook was

00:04:53.240 | confronted some time ago by a user saying when I try to send a

00:04:58.280 | video by text to someone with an Android phone, it just doesn't

00:05:01.440 | work very well. It never works. It was a guy trying to send a

00:05:04.160 | video to his mom. And Tim Cook responded, well, your mom should

00:05:07.560 | buy an iPhone. It's kind of like a throwaway comment by Tim Cook,

00:05:10.840 | probably not a great idea for him to say that. But that's an

00:05:12.800 | example of what the lawsuit brings up. Another example is

00:05:16.520 | that the Apple Watch doesn't work with Android phones. You

00:05:21.600 | know, it only works with iPhones, obviously. Again, is

00:05:25.880 | that really a smoking gun issue? I don't think so. I mean, it's,

00:05:30.400 | this is Apple's whole strategy is that all of its products work

00:05:33.760 | seamlessly together. And Apple hardware doesn't really work

00:05:37.680 | with other operating systems. It never has. So at least based on

00:05:42.160 | the press coverage, I have yet to see a single smoking gun

00:05:45.480 | example coming out of this lawsuit. Now, I think what those

00:05:48.480 | examples highlight is what this lawsuit is really about is your

00:05:52.360 | view of interoperability. What the government is saying is that

00:05:57.160 | Apple needs to make its apps and its devices more interoperable

00:06:02.000 | with other ecosystems. So the watch needs to be interoperable

00:06:06.160 | with Android. Apple messaging needs to be interoperable with

00:06:11.120 | Android messaging, and so on. What the government is saying is

00:06:14.360 | that Apple is refusing to play ball with other applications,

00:06:18.400 | other operating systems, and that creates a monopolistic

00:06:21.600 | network effect. What I think Apple would say is no, the fact

00:06:25.600 | is that Apple from the outset has always tried to do

00:06:28.400 | everything soup to nuts, we've always done the hardware and the

00:06:32.200 | software together. And that's what creates the magical

00:06:35.200 | experience. And so Apple's entire product strategy is based

00:06:39.720 | on creating a vertically integrated stack that goes from

00:06:44.360 | hardware to operating system, to key applications. And I think

00:06:49.040 | Apple has a point saying, if you try to make us unwind all of

00:06:52.200 | that, the products is not going to work as well. It's not gonna

00:06:54.960 | be the same product experience that everyone's used to. So

00:06:57.160 | again, I think that how you view interoperability is at the core

00:07:00.800 | of this lawsuit, I think that both the government and Apple

00:07:04.600 | make good points about that. And I'm a little bit skeptical right

00:07:08.560 | now that the government has a smoking gun, at least one hasn't

00:07:12.160 | been reported in the press. And so I'm a little bit doubtful

00:07:15.960 | right now that the government's gonna be able to win this case.

00:07:18.280 | Freeberg, any thoughts?

00:07:19.320 | Yeah, I mean, I think it's a function of consumer choice. If

00:07:23.920 | consumers want to have this closed system where they can I

00:07:28.000 | message with other I message app holders and not be able to have

00:07:32.720 | a seamless integrated messaging experience with Android users,

00:07:35.800 | they'll be happy if they're annoyed, they'll switch over to

00:07:39.040 | an Android. So you know, this has always been Apple's

00:07:42.520 | orientation. I think I mentioned this to you guys. I've been on a

00:07:47.040 | Mac since 1984. When the Mac original came out, I still have

00:07:50.400 | my first Mac original, by the way, I keep it in my office on

00:07:53.320 | my shelf. And Apple's, you know, always had like a really hard

00:07:58.280 | focus on the software that they make available to their users to

00:08:01.320 | create an incredible product experience. So I don't know if

00:08:05.440 | this is necessarily about market abuse as much as it is a

00:08:09.160 | consumer choice. If the consumers didn't like the

00:08:12.120 | product, they didn't like the fact that things were not

00:08:14.040 | available, that things were very expensive, they would go

00:08:16.680 | elsewhere. And you do see that in segments of the market. And

00:08:19.160 | as we talked about a few weeks ago, you do see that x us most

00:08:23.160 | of the smartphone market is actually Android driven. Yeah.

00:08:26.560 | So this is a premium product that people are willing to pay a

00:08:29.080 | premium price for even if that means limited access. I think

00:08:31.480 | developers are frustrated that they can't access this premium

00:08:33.920 | market. But I'm not sure that Apple necessarily should be

00:08:38.520 | coerced to service developers. When at the end of the day, the

00:08:43.320 | consumers are paying for the products.

00:08:44.840 | And to your point, like, is it is it really the case that a

00:08:47.920 | green bubble versus a blue bubble is really that limiting?

00:08:51.480 | You know, it's not annoying. It's annoying. But it's not the

00:08:54.240 | end of the world. Yeah, I would say Apple has completely abused

00:08:58.560 | their power every chance they get in order to capture this 30%

00:09:02.200 | from the App Store. They blocked the ability for you to use

00:09:05.520 | audible or, you know, other marketplaces to buy books and

00:09:09.760 | media. They blocked the ability to use other media players like

00:09:14.040 | VLC blocked the ability to use browsers. And if you leave Apple

00:09:19.440 | unchecked, they just keep abusing it. So I think this is

00:09:22.600 | kind of one of those lawsuits that's like, if we don't stop

00:09:25.680 | them, they'll just keep making it worse. And when people file

00:09:28.880 | complaints, then Apple will back down, which they did on media

00:09:32.440 | players. And they'll stand down. If you think about this from the

00:09:36.840 | PC era to now, then you can see how pernicious their behavior is

00:09:40.520 | when you buy a laptop, the idea that you would have to go through

00:09:43.920 | an App Store and pay a $30 tax to put a piece of software on

00:09:47.680 | your computer would seem insane. 30% 30% 30% tax on your which

00:09:52.640 | would seem insane. Like if you buy a laptop, you should be able

00:09:55.480 | to put whatever software you want on it. But they did this

00:09:57.960 | magic trick where they said, Oh, no, if you want to put software

00:10:00.560 | on your phone, it has to go through the App Store, it has to

00:10:03.800 | be 30%. And that's really the anti competitive thing here. I

00:10:07.400 | think this will be settled. And if you look at the different

00:10:10.520 | issues here, I think this is going to be actually a huge win

00:10:12.800 | for Apple. Because if I message were to exist on Android, they

00:10:17.440 | would get all of those users to download I message and they

00:10:20.600 | would have all those users if they made the watch compatible,

00:10:22.760 | they would open up many more people to buy the watch. And you

00:10:25.520 | would get more watches. I think that Apple's thinking way too

00:10:27.880 | short term about the lock in here. And they should allow more

00:10:32.200 | of these apps allow more watches and they should allow the gaming

00:10:35.280 | thing. I think that they're being petty.

00:10:37.360 | I don't think anything's going to happen here because it's

00:10:39.680 | taken them five years to file. There's a at least a 50% chance

00:10:46.000 | that the administration is going to turn over, which means that

00:10:48.520 | this lawsuit changes or goes away entirely. And then even if

00:10:52.520 | it does kind of proceed, it's going to take 10 years of very

00:10:55.560 | detailed arguments for something to happen. And frankly, probably

00:10:59.320 | in 10 years from now, we've already moved to a different

00:11:01.280 | compute platform, and this is not going to matter.

00:11:03.120 | I mean, there there is the coin toss of what the Trump

00:11:06.240 | administration would do here. For sure, that's valid. But I

00:11:09.560 | think these things will get settled. I think the settlement

00:11:11.640 | will be I message releases, they allow the thing about the Apple

00:11:15.880 | watch. It's not just sacks that they're allowing it on Android.

00:11:18.600 | It's would you allow Android watches to connect with the SDK

00:11:22.760 | directly into the iOS operating system, which they block you

00:11:26.840 | from doing. I think they should just have a little switch in

00:11:29.840 | your Friedberg settings that allows you to flip it and say I

00:11:34.560 | take responsibility for allowing third party stores. And I want

00:11:39.040 | to be able to load any software. It's your computer.

00:11:41.240 | I don't think the government should should regulate I don't

00:11:43.880 | think the government should be able to mandate. Yeah, I mean,

00:11:46.960 | I like the fact that everyone is looking to the government to do

00:11:50.320 | things that they want as a consumer, make your choice with

00:11:53.120 | your dollars. Make your vote with the product and service you

00:11:55.800 | want to buy. Instead of running to the government and asking the

00:11:58.680 | government to come and do stuff. I feel that way about price

00:12:00.720 | fixing. We mean price fixing in what context if like a group of

00:12:04.560 | people price fix the price cost of a phone or like let's say the

00:12:08.280 | 30% from the app store, which just happens to be the same

00:12:10.560 | between two app stores. Getting price fixing is something valid

00:12:14.400 | for the government to come in. It's not the same. Do you think

00:12:17.040 | price fixing is something the government should come in on is

00:12:19.360 | the question if there's limited access to products in a market

00:12:22.680 | and all the participants get together to set the price in the

00:12:26.480 | market. I do think that's anti competitive. And that's there's

00:12:29.200 | a good role for the government to play there. But Google and

00:12:31.840 | Apple don't price fix because Android is an open access

00:12:36.040 | system. You can put any application you want any way you

00:12:38.360 | want. There are several app stores to put Android apps on

00:12:42.520 | your Android device. Google operates an app store called

00:12:45.800 | Google Play. But there are other app stores you can go to as

00:12:48.560 | well. And they all have different prices and Google's

00:12:50.920 | app store costs, by the way, are not apples, and they're not 30%.

00:12:53.720 | And we talked about this last time, I'll pull it up for you.

00:12:56.080 | Again, it's like 15 to 12 going down to sliding scale. So there

00:12:59.800 | is competition in that market. Generally, I think the point

00:13:02.560 | about if there's limited access to a market for products for

00:13:06.760 | consumers, and everyone in that market gets together and sets a

00:13:09.080 | price that is anti competitive, and there's a good role for

00:13:11.840 | government to play there. But I don't think that having the

00:13:13.960 | government come in and say, I want this feature to have this

00:13:16.280 | button and this flip in my app is what I want my government

00:13:19.920 | doing. I want my government protecting me from crime. And,

00:13:24.200 | you know, defending the country. And I don't want all the other

00:13:27.000 | stuff that the government does to drive costs up, which is

00:13:29.360 | generally what the government does.

00:13:30.640 | So what do you think the role of the government is here in terms

00:13:33.520 | of anti competitiveness, especially in the case, I'm

00:13:36.680 | curious your thoughts on a duopoly. Like, if you look at

00:13:38.800 | Google search monopoly, pretty easy to understand, like, hey,

00:13:42.080 | they got 90%. But here you got two players who have, you know,

00:13:45.160 | roughly 50% of the market each or 6040, depending on where you

00:13:48.360 | are. So what is the the proper role of government here? And is

00:13:52.640 | this an over reach?

00:13:54.120 | No, I mean, I actually think just to give the government

00:13:57.760 | lawsuit some credit, I actually think it's good to hold apples

00:14:01.040 | feet to the fire and make sure they're not engaging in

00:14:03.280 | anti competitive tactics. One of the things I've said

00:14:06.240 | previously on the show, is that I think the government's been

00:14:09.480 | making the mistake of going after bigness for its own sake.

00:14:12.880 | And I don't think that bigness in and of itself is bad, it

00:14:16.720 | might be a reflection that the company's done an incredibly

00:14:19.240 | good job. And that's why it has a lot of customers a lot of

00:14:22.120 | market share. What I've said is, I think the government should

00:14:24.680 | prevent anti competitive tactics. So I think that this

00:14:27.840 | lawsuit is good in the sense that it's targeted at the right

00:14:31.680 | types of things. It's not just going after Apple, because its

00:14:34.320 | market cap is so big, it's going after specific things that it's

00:14:37.720 | doing to kind of lock in its network effect. Now, the problem

00:14:41.960 | that I see is just that the examples that we've been given

00:14:44.480 | so far from the lawsuit just don't seem that compelling.

00:14:47.360 | Again, I'm kind of waiting to find out where's the smoking

00:14:50.320 | gun here. But to freebirds point, I mean, look, I don't

00:14:53.680 | think you can just say that. If you don't like what Apple is

00:14:57.520 | doing, go to a different platform. Because the point is

00:14:59.960 | that there's only two choices. And they can both engage in

00:15:05.080 | anti competitive tactics, and they can both create lock in.

00:15:07.680 | But sex, there are not just two choices. Android is an open

00:15:11.280 | operating system, Google has a fork of Android, that they put

00:15:15.040 | on certain smartphones, there are other smartphone makers that

00:15:17.800 | use other forks of Android. So Android has enabled and the

00:15:22.040 | reason Google bought Android was to provide a counterbalance to

00:15:25.560 | exactly the dynamic of one handset manufacturer, having an

00:15:29.920 | operating system that could control access to the internet

00:15:32.840 | and to apps. And so Google open source Android, many handset

00:15:36.720 | manufacturers use their own versions of Android to put their

00:15:39.480 | own experience on the phone. And then Android users can put apps

00:15:43.560 | from anywhere they want. And other companies offer app stores.

00:15:47.280 | So there are many app stores to go to. And there are many

00:15:49.560 | different handset manufacturers. And a lot of

00:15:51.640 | people, I think incorrectly, look at the operating system

00:15:55.280 | landscape and mobile and say, Oh, there's Android and there's

00:15:57.600 | iOS. But Android is an open platform. And there are many

00:16:01.160 | different forks of it run by many different companies. So I

00:16:04.160 | think that is actually a very competitive market, like we

00:16:06.480 | talked about last week, I think close to 80% of global handsets

00:16:09.960 | are run on Android forks. So you know, it's not necessarily the

00:16:13.800 | case that there are only two choices. And Google does not

00:16:16.520 | control Android. There are many developers that contribute to

00:16:19.200 | open source their Google has their own fork that they do a

00:16:21.800 | lot of work on. But anyone can take their own fork and do I

00:16:24.600 | mean, you guys can, you know, when you when you when you boot

00:16:27.680 | up a Samsung or Sony TV, that's running Android. And that's

00:16:30.640 | running their own version of Android.

00:16:32.000 | Are you arguing that Apple doesn't have market power?

00:16:34.280 | In the US? They do X us there? You know?

00:16:37.440 | Yeah, I mean, I think sure, we're talking about the US

00:16:39.520 | market.

00:16:40.000 | I mean, are they about 5050? We pulled this chart up last week.

00:16:44.240 | In the US now it might be 5545 right now. Yeah, something like

00:16:48.080 | that. The issue is the cat and mouse that Apple is really good

00:16:51.480 | at playing, they will push their advantage. And so we see the

00:16:54.480 | five things that the Justice Department wants to go after

00:16:56.880 | here, but the App Store is obviously one of them. And

00:16:59.640 | before that, I mentioned some of the other categories where they

00:17:01.920 | do this abusive power, they basically keep it up as much as

00:17:05.160 | they can until they get checked. And I think interoperability is

00:17:09.360 | actually in the long term going to be in their best interest.

00:17:11.880 | They use interoperability when they need it. So Apple Music and

00:17:15.480 | iTunes, they allow you to use Windows and Android, it's only

00:17:19.000 | when they see an advantage. And that's really the hypocrisy of

00:17:21.520 | Apple. And I think it's a really important that the industry

00:17:26.080 | stand for more interoperability and the ability for you to load

00:17:29.240 | any software that you want on your device, this is a compute

00:17:32.120 | platform, the ability for them to block you from installing

00:17:35.240 | your own apps on it, I think is a really terrible.

00:17:38.080 | What you're saying is a very fair statement from a consumer

00:17:41.600 | point of view and from an industry point of view. And

00:17:44.160 | that's where that voice should come from to force in the

00:17:46.720 | marketplace changes from Apple. But having the government do

00:17:50.760 | this and having the government involved, I think sets all these

00:17:52.840 | bad representing the

00:17:54.120 | people he did it, they asked him cook to do it. And Tim Cook said

00:17:56.560 | pound salt, buy a phone for your mom.

00:17:58.200 | No, but aren't they representing the people? Like, how do you

00:18:00.920 | expect the people to organize like file a class action?

00:18:03.760 | No, I think if enough companies boycott the Apple platform and

00:18:06.800 | tell consumers to boycott, they'll, I mean, consumers can

00:18:09.640 | make decisions. That's developers can make decisions

00:18:12.080 | whether or not they want to develop for out. No, that's not

00:18:14.080 | realistic. You know, not really. That's nice. Come on. I don't

00:18:17.160 | think I want the government stepping in to tell private

00:18:19.760 | companies what to do, because customers don't like what

00:18:22.000 | they're doing.

00:18:22.400 | Wait, do you think that the government should have stepped

00:18:25.200 | in to prevent Microsoft from taking over the browser, the

00:18:27.800 | whole Netscape case?

00:18:28.800 | Bundling? I don't know the case well enough. I mean, I remember

00:18:34.160 | it, but I don't want to speak. I don't want to speak definitively

00:18:36.520 | I think there was a substantial chance that if the government

00:18:39.320 | didn't step in, then Microsoft would have extended their

00:18:42.160 | Windows operating system monopoly.

00:18:43.800 | They did have an absolute monopoly. They did have a

00:18:46.000 | monopoly on personal compute. Oh, it wasn't an absolute

00:18:49.400 | monopoly. I mean, you could use Macintosh using Macintosh.

00:18:53.160 | At the time, Macintosh was like 5% of the market was under 10%

00:18:57.800 | at the time. Yeah, it was about four or 5%. At that time, it was

00:19:00.480 | a do off. Microsoft was 95% of the personal computing market.

00:19:04.520 | So they did have an absolute monopoly choice. You had a

00:19:06.760 | consumer choice. It wasn't a very good consumer choice, but

00:19:09.560 | you still have a choice. You could go use Macintosh. And you

00:19:12.840 | did you could afford it. Yeah. Okay. But the point is that

00:19:17.600 | Microsoft had substantial market power. And what they were in the

00:19:20.360 | process of doing was the smart thing from a business

00:19:23.560 | standpoint, which is you take your operating system monopoly,

00:19:26.520 | you use that to extend into the browser, you kill Netscape, you

00:19:30.000 | take over with Explorer, you bake Explorer into your Windows

00:19:34.160 | operating system. So the two things are basically the same.

00:19:36.280 | Then there, hold on from there, you leverage your control of the

00:19:40.520 | browser in the home screen to control search. Okay. So you

00:19:44.560 | think about like all the dominoes that would have fallen

00:19:46.680 | if Microsoft had continued, maybe if like Bill Gates,

00:19:50.160 | continuing CEO, and there would have been no Google, there would

00:19:53.320 | have been no Yahoo, they would have controlled the internet,

00:19:55.560 | they would have controlled the internet. And they were actively

00:19:57.640 | you left out a big piece of it. sex, which you'll remember the

00:20:00.320 | second I say it, they were trying to break HTML and open

00:20:03.400 | standards by creating ActiveX and using funky code. That's

00:20:07.760 | right. So you have to understand these companies will if you give

00:20:11.560 | them an inch, they'll take the mile. And that's exactly what

00:20:15.400 | Apple does consistently, they consistently try to squeeze. I

00:20:19.240 | think it's great. sax is right. tactics is the way to go after

00:20:22.360 | these companies. These are five recent tactics. I think though

00:20:26.440 | the government's going to win changing three of these. And

00:20:28.680 | that's when that's a win for me.

00:20:30.040 | Yeah, the mobile operators try to do the same at that same

00:20:32.080 | time. If you guys remember, Verizon, yes, singular, they you

00:20:37.000 | could only put their apps if you bought it through their store on

00:20:41.080 | their operating system on the mobile phones that they

00:20:43.160 | contracted to have made. So they all had their own custom version

00:20:46.960 | of the handset manufacturers, OS, which I'll get and then they

00:20:50.880 | did RedShare back with the manufacturers. And that's why

00:20:53.080 | Android was acquired. It wasn't actually at the time to compete

00:20:56.120 | with Apple, Android was acquired to compete with all the mobile

00:20:59.600 | phone companies that were trying to block access to the internet

00:21:02.480 | maps.

00:21:02.960 | Well, Google wanted to maintain its search monopoly. Let's be

00:21:05.560 | honest. That's why they bought it. They knew for users would be

00:21:09.080 | there. And they wanted to have the default

00:21:11.360 | access to the internet block. Yeah, by this by the handset,

00:21:14.360 | man, they wanted to be the browser in the app, which is

00:21:17.640 | what you have to agree to, by the way. So if you don't want to

00:21:19.400 | talk about perniciousness and heavy handedness, we have an

00:21:21.800 | Android, you and you want to use the Android that's not correct.

00:21:24.800 | Google, that's not correct. No, no, you have to give the bundle

00:21:27.320 | of apps if you want the updates and support from Google, you

00:21:30.080 | can forget, then you don't get their support, which then breaks

00:21:33.480 | your phone if you want their version. That's right. Yes.

00:21:35.520 | Yeah. So they, you know, there's a little cleverness here, I

00:21:38.600 | think. So you have two basic ecosystems and mobile, it is a

00:21:42.080 | duopoly, and both of them advantage themselves in ways

00:21:44.720 | that grow over time. And I think that if Apple were completely

00:21:51.800 | left unchecked, it would figure out ways to boil the frog and

00:21:55.040 | keep extracting more and more value out of downstream

00:21:57.520 | applications.

00:21:58.240 | Totally. Repairing 1600 a phone now. Yeah, how are we paying

00:22:02.000 | 1600 a phone? So look, I think it's I think it's good for the

00:22:04.520 | government to hold their feet to the fire. But here's the thing

00:22:06.800 | that the government's lacking is, again, that example they can

00:22:10.840 | point to that's really compelling. I mean, with the

00:22:12.600 | Microsoft Netscape thing, it was really obvious what they were

00:22:15.640 | doing, right? The browser was the gateway to the whole new

00:22:18.480 | platform, which was the internet. And if Microsoft could

00:22:22.080 | make that a feature of the operating system, their dominance

00:22:25.600 | would extend into the new computing platform. But you

00:22:27.600 | remember how they did it sacks Apple Watch is just not the same

00:22:30.040 | thing. The Apple Watch is kind of an appendage of your phone

00:22:33.680 | that most people don't even want. So it's hard to point to

00:22:37.080 | something. Do you remember sex how they were getting the

00:22:40.600 | browser built in? They were going to the OEMs, the dells of

00:22:44.120 | the world, the HP isn't saying, if you want this price for

00:22:47.440 | Windows, you have to include the browser on the desktop, it has

00:22:51.080 | to load, it has to ask your credentials, all this stuff. Or

00:22:53.960 | you could pay $150 for Windows. And if you want it without the

00:22:58.800 | browser bundle, so they use this pricing to get the OEMs to bundle

00:23:04.320 | it. And that that was where isn't that what Google's doing

00:23:06.200 | with Android effectively? Exactly. Is like, it's exactly

00:23:09.480 | right. You can have your own version without Google search.

00:23:12.920 | If you're willing to put up with all these headaches, and these

00:23:17.120 | calls in an operating system, update the operating system.

00:23:19.880 | Yeah, that's exactly what they're doing. So anyway, I

00:23:22.400 | think three out of five of these get settled, and it'll be good

00:23:24.840 | for consumers. Ultimately, I would not financial advice, but

00:23:28.800 | I think that Apple is going to be able to manage this, I'd buy

00:23:31.080 | the stock, I may buy more of the stock, I think that this will be

00:23:34.120 | good for them long term. Alright, listen, going even

00:23:38.080 | deeper into Apple, and this Google relationship, big

00:23:41.280 | questions emerged this week, as Bloomberg reported that Apple was

00:23:44.960 | speaking to both Google and open AI about powering certain AI

00:23:49.160 | features on iOS specifically, according to the article, this

00:23:53.320 | deal between Apple and Google seems much more likely than the

00:23:56.280 | opening I want and could happen this year. As you know, we've

00:23:58.840 | talked about it on this show before Google has been the

00:24:01.640 | default search engine on iPhone for I think over a decade now.

00:24:04.880 | And Google pays Apple 20 billion a year, that's pure profit for

00:24:09.000 | Apple. It's unclear what features they would power with

00:24:13.460 | Google Gemini. Maybe it's like the search deal and Google

00:24:16.920 | Gemini is on there. Maybe it's built in. And Apple has been

00:24:20.600 | building its own LLM. It's called Ajax. They've been doing

00:24:23.640 | some other open source stuff called Maggie. What do you think

00:24:26.520 | Shama? If you were talking about this on Twitter, you get a

00:24:29.580 | pretty good tweet and a pretty strong position. If Apple is

00:24:33.640 | going to use Gemini, what does that say to you about Apple and

00:24:38.360 | their view of the future?

00:24:39.240 | I think it's them giving up this is the most consequential new

00:24:43.440 | development in technology and compute in probably 20 years, 30

00:24:48.840 | years. And so to be spending 10s of billions of dollars of R&D

00:24:54.120 | and to not have enough allocated to this, so that you have a

00:24:57.600 | legitimate path forward to do it yourself, I think is a little

00:25:00.720 | inexcusable, actually. It's akin to IBM in the 70s, going to

00:25:07.240 | Microsoft and and basically asking them to build the

00:25:10.680 | operating system for them. When you're such a dominant company

00:25:14.720 | in such a dominant position, but you abdicate your responsibility

00:25:18.880 | to innovate. I think that that's a really bad situation for a

00:25:24.320 | company to be in.

00:25:25.120 | It's like Yahoo adding Google search, right?

00:25:27.200 | And then by the way, on the heels of like, turning off cars

00:25:30.680 | and, and losing these antitrust issues in Europe, and then being

00:25:36.840 | sued by the DOJ here, to then be in a licensing discussion with a

00:25:41.680 | third party for such a critical technology, I think is just says

00:25:45.960 | not very good things about the state of the company.

00:25:48.440 | Freeberg, your thoughts on this potential deal? We don't know

00:25:52.560 | what feature is this with power? I don't know if it's Siri, or

00:25:55.000 | it's just image editing, or search, or an extension of

00:25:59.040 | search, maybe giving an answer.

00:26:00.440 | I have no idea. It seems to me like there's, if, if Apple's

00:26:04.200 | doing the right thing, which I'm sure they are, they're probably

00:26:06.080 | building their own alternative platform here, they realize it's

00:26:10.480 | going to take them some time in the interim, they want to have a

00:26:12.840 | stopgap. And my guess is, by going to Google, they're

00:26:15.400 | probably going to get paid, instead of having to pay someone

00:26:18.080 | else for the technology. Because Google will realize some benefit

00:26:23.080 | from getting users over to search results and seeing ads.

00:26:26.320 | So Google will probably benefit and pay them instead of them

00:26:31.800 | having to go pay someone for access to some technology that

00:26:34.440 | consumers might want access to.

00:26:35.760 | Sachs, any thoughts here?

00:26:37.400 | I'm sure Apple is going to make an investment in building their

00:26:39.440 | own models here.

00:26:41.360 | Yeah, I mean, who would look at the launch of Google Gemini and

00:26:45.560 | say, I want that. That launch was a total fiasco.

00:26:49.880 | Another woke company. I think it's the Apple philosophy.

00:26:53.320 | How woke would Tim Cook have to be to look at the launch of

00:26:57.120 | Gemini and say, Oh, yeah, I don't see anything wrong there.

00:26:59.120 | You got that exactly right.

00:27:00.200 | Absolutely. I want that. Yeah, Siri, show me the President of

00:27:05.120 | the United States.

00:27:06.000 | I mean, apparently, Tim Cook is the only person on earth who's

00:27:09.200 | impressed with the launch of Google Gemini. I mean, I can't

00:27:11.720 | believe the story is true. It's just it can't be true.

00:27:14.360 | I'm so excited today to launch Gemini on stage here. iOS 27. Oh

00:27:21.880 | my god, can you imagine him on stage doing searches live?

00:27:24.440 | The story can't be true, because it'd be so strategically dumb.

00:27:27.920 | Like Jamal said, even if Google Gemini were great, you'd still

00:27:31.600 | want to invest in having your own thing because it's such a

00:27:35.440 | strategic technology. Why would you ever outsource it to your

00:27:38.680 | main competitor? But in this case, you know that Gemini was

00:27:41.520 | terrible. It was a fiasco. And so the story makes no sense. I

00:27:45.880 | just can't believe it's true.

00:27:46.680 | It's probably people knocking on each other's doors. They spent

00:27:49.800 | $30 billion last year on R&D 30 billion. Apple to be clear, they

00:27:56.440 | spent $30 billion on R&D. What did they spend it on catering?

00:28:00.840 | I mean, you got to think Apple Vision is a big piece of that,

00:28:06.200 | right? Chips, I guarantee you like half of that is like 3m 4

00:28:10.480 | 30 billion, like, not a couple crumbs fall out of somebody's

00:28:14.200 | pocket. And so there's 50 million allocated to just like,

00:28:17.360 | you know, mucking around with llama or mucking around with

00:28:20.360 | Mistral. What if they took Project Titan, the car car deal

00:28:24.520 | that was 10 billion, supposedly they had spent on that. And if

00:28:28.080 | they put that towards AI, but again, again, it goes back to

00:28:32.000 | the to the people I don't think I don't think the the person in

00:28:34.720 | charge of the windshield wipers for Project Titan is going to be

00:28:37.800 | the person that figures out how to land a really killer LLM.

00:28:40.560 | Yeah, that's a different skill set.

00:28:42.280 | That is not even that expensive. I mean,

00:28:44.760 | mechanical engineer wants a computer scientist. So these are

00:28:47.640 | not the same people. They're not fungible that way.

00:28:49.600 | I mean, I guess the question here is Apple, capable of

00:28:52.840 | building on a culture basis, Friedberg, this type of

00:28:56.520 | software, their hardware company, it's not having their

00:28:59.240 | dear standing on the shoulders, the whole open source movement,

00:29:01.640 | all you have to do, like Jamal said, all you got to do is take

00:29:03.440 | the latest Mistral model or

00:29:06.160 | jump on hugging face and start working.

00:29:07.920 | I mean, you're not starting from zero, because open source,

00:29:11.480 | not only you're not starting from zero, not only do you have

00:29:14.560 | the foundational models that are excellent and available in open

00:29:17.120 | source, you have probably the most prolific set of training

00:29:19.800 | data that has ever been created in the entire world to make

00:29:22.840 | these models kick ass.

00:29:24.040 | Yeah, you have all the Apple photos, archive, I wonder if in

00:29:27.720 | their terms, that's the thing is their terms of service is so

00:29:29.840 | privacy based. I wonder if they could even use that information.

00:29:33.360 | And I just think, look, at the end of the day, the Apple brand

00:29:35.480 | is still exceptional. And so if you're given a $10 million a

00:29:39.040 | year job at Google, versus a $10 million a year job at meta,

00:29:43.280 | versus a 10 million, $10 million a year job at Apple, if you're

00:29:47.480 | like one of these killer AI people that get these kinds of

00:29:50.600 | offers, I gotta presume that Apple gets their fair share of

00:29:53.960 | these people.

00:29:54.520 | Yeah, you would think

00:29:56.200 | and even in the worst case, you see Microsoft doing like, pretty

00:30:00.360 | heavy handed deals with companies like open AI, and just

00:30:04.360 | this week with inflection. So it's not as as if these deals

00:30:07.960 | can't be done. Right. And so it just kind of like leaves. I

00:30:13.240 | don't know, it's just, it's quizzical, to spend that much

00:30:15.920 | money, to not necessarily be willing to compete on the human

00:30:19.160 | capital to not necessarily be in the market, acquiring these

00:30:23.720 | businesses. I don't know, it's just it's just a question mark,

00:30:26.800 | like what's going on?

00:30:27.480 | Tremont asked what's going on over there. We have some inside

00:30:29.920 | footage. Nick, you want to play tape?

00:30:31.440 | What's going on here?

00:30:37.920 | I hope we didn't keep you waiting.

00:30:56.400 | Mother Nature. Welcome to Apple. How was the weather getting in?

00:31:00.760 | Oh, she's controlling the weather.

00:31:07.000 | Yeah, they did this couple of but but this reflects their

00:31:11.480 | self image. I mean, they release this. They care about the plan.

00:31:14.560 | No, it's it reflects that they think somehow this is an accurate

00:31:18.400 | reflection of the way they do meetings.

00:31:19.880 | No, I think it was the No, I think it was that we're making

00:31:23.880 | is they were trying to do a skit about like how they're doing

00:31:26.720 | less packaging and including that that skit was to tell you

00:31:30.000 | that you're not getting a charger in your next iPhone

00:31:32.080 | because they they don't they want to say it was cringe.

00:31:34.520 | Yeah, it was a little cringe. But yeah, I think it was a little

00:31:40.040 | cringe. But I do appreciate that they are doing sustainable

00:31:43.440 | products and not putting as much stuff in landfills. So I think

00:31:46.640 | they should get a lot of credit for that. What I do think about

00:31:48.840 | this deal that's really interesting is it's sort of

00:31:51.320 | cementing the Google and the Apple alliance against

00:31:56.000 | Microsoft and Microsoft has big, you know, AI ambition. So this

00:32:00.240 | is kind of interesting. If you lock in the duopoly of Google

00:32:04.440 | and Apple, and then you lock in Google search monopoly, and you

00:32:07.720 | start fighting Microsoft, I think that's what we're, I think

00:32:10.760 | that's what's probably going on here is they're trying to figure

00:32:12.840 | out how do we keep Microsoft away from running away with

00:32:17.080 | this. All right, we covered that huge NAR lawsuit back in

00:32:19.560 | December. And there has been a settlement big news for the

00:32:23.240 | National Association of Realtors. They've agreed to pay

00:32:25.800 | $418 million in a settlement last week. And federal jury

00:32:30.680 | found that the NAR and several large real estate brokerages

00:32:34.040 | conspired to artificially inflate agent commissions. The

00:32:38.360 | settlement is pretty, pretty big deal. People are freaking out

00:32:41.360 | about it. As you know, the seller of a home pays the buyers

00:32:46.920 | agents commission. So you have a buyer and a seller 6% fee

00:32:51.480 | typically, sometimes it's five, but they split that 3% to the

00:32:54.560 | buyer and the seller, but the seller is paying that 3% to the

00:32:58.840 | buyer. Now that can't be listed in the MLS anymore. And that

00:33:02.480 | deal cannot be done ahead of time buyers are responsible for

00:33:07.120 | paying their agents commissions going forward. So if you bought

00:33:09.400 | a million dollar house, and you were the buyer, you would pay

00:33:12.280 | 30,000 to your buyers agent or you would choose to not have an

00:33:16.760 | agent or you would choose to negotiate it. And you have to

00:33:20.360 | have a signed contract. This is a crazy, just shocking shock to

00:33:26.480 | the system. According to most people who are in it, I've seen

00:33:29.000 | a lot of real estate, folks are saying this is going to be

00:33:31.600 | healthy, because you have this you have to have this

00:33:33.720 | conversation between the buyers agent and the buyer. But

00:33:38.000 | commissions in the United States are $100 billion a year. And one

00:33:43.440 | analyst projected the lawsuit lead to a 30% reduction in

00:33:46.480 | commission payments. And that would eliminate about half of

00:33:50.320 | the 1.6 million active NRA members from the industry. You

00:33:53.520 | had a lot of feelings on this Friedberg when we talked about

00:33:56.000 | it a couple of months ago. What are your thoughts on the

00:33:58.360 | settlement? Is anything going to change? Is this as

00:34:01.400 | groundbreaking and shocking as people seem to think it is?

00:34:04.680 | Well, I would take this settlement along with a lot of

00:34:11.320 | the developments and advances in AI as being the moment of

00:34:18.240 | catalyzing real change in the residential real estate agency

00:34:21.520 | industry. It's an industry that's been known to have fixed

00:34:25.720 | pricing and be very expensive to consumers a real tax on the

00:34:31.240 | system. And it's largely been wrapped around this idea of

00:34:36.120 | mitigating your liability, reducing risk, servicing the

00:34:40.880 | customer. Many of those aspects over the last couple of years

00:34:45.120 | have been largely standardized through forms, digitized,

00:34:48.920 | because so much of this information is no longer going

00:34:51.000 | to get paperwork from the courthouse. But a lot of the

00:34:53.200 | information sits digitally and can be accessed in a

00:34:55.520 | democratized way. And the fact that so much of the service and

00:34:59.240 | discovery, reading through documents, understanding what

00:35:02.200 | they mean, and what they say can be automated through AI and

00:35:04.520 | LLMs. Much of this is kind of coalescing around what I hope

00:35:08.080 | and expect will be a more seamless, automated, direct

00:35:12.640 | marketplace for consumers. The challenge is that most consumers

00:35:17.240 | put most of their personal net worth into their home. And so it

00:35:21.800 | is where most people's net worth is tied up. And so because it is

00:35:24.560 | such a sensitive investment, and it is their entire savings, they

00:35:29.800 | want to have a trusted advisor by them. So it's going to take

00:35:32.880 | some time before that trusted advisor becomes some piece of

00:35:36.160 | software. But I do think that software is going to play more

00:35:39.040 | and more of a role in providing advisory tools and services to

00:35:42.880 | consumers in this transaction marketplace. And that's only

00:35:45.800 | going to catalyze and accelerate the fee reduction. I do project

00:35:51.480 | and I do expect that much of what is charged on a commission

00:35:54.280 | basis on a percent of home value today will change to being a

00:35:57.400 | fixed fee.

00:35:57.920 | And it's 5k 10k for your buyers, a different services. So you can

00:36:02.240 | have someone do a la carte do the disclosure diligence for me

00:36:05.840 | for 5k, you know, negotiate the purchase for me for 10k. And you

00:36:10.360 | as a consumer will start to pick from a menu of the services that

00:36:14.240 | you want to have rendered for you and things that you're

00:36:15.880 | comfortable doing yourself. I don't need someone to negotiate

00:36:18.480 | price. I don't need someone to find me a home. I've got Redfin

00:36:21.440 | I can go do that. I can arrange open houses on my own the lock

00:36:24.280 | boxes there. I'll go walk around the property. I don't need

00:36:26.760 | someone to point out that the color is nice in a room. And so

00:36:29.440 | I think that there's elements of what this half of what will

00:36:31.880 | happen here, which is a fragmentation and then an

00:36:34.440 | automation of these services. And as a result, significant fee

00:36:37.440 | reduction. And I'm in the middle of doing this myself right now,

00:36:41.480 | with a piece of real estate where I'm not using an agent.

00:36:44.400 | And I've been using a direct listing service. I've used all

00:36:49.840 | of these standard forms, there's a lot of AI tools you can use to

00:36:53.120 | kind of read all the disclosures for you make sure everything's

00:36:55.080 | copacetic. And these escrow agents, they'll handle a lot of

00:36:58.760 | what a lawyer will handle. And they'll get paid a you know, a

00:37:01.680 | fee, which is much less than the agents fees. So I do think that

00:37:04.840 | there's a big disruption happening in this industry. I

00:37:07.320 | think it's it's really important for consumers, agents are going

00:37:10.360 | to be, you know, hands in the air telling you this is

00:37:12.000 | ridiculous, you need someone to help you need an advisor that

00:37:14.520 | will continue for a good chunk of the market for a very long

00:37:16.560 | period of time. But I do think that it's for the benefit of

00:37:19.640 | consumers over time to see these fees come out of the system, and

00:37:23.480 | see those savings go back into consumers pockets and for the

00:37:26.200 | value of their real estate to go to go in their pockets, not into

00:37:29.720 | an agent's pocket, is it going to change the

00:37:32.000 | profitability of a realtor? Pretty meaningfully, right?

00:37:38.520 | Both realtors won't be able to be in business, right? I think

00:37:41.040 | the sellers will do fine. And they might capture more of it

00:37:44.040 | because they'll, they'll, my understanding is the set, the,

00:37:47.200 | the seller will maybe do both sides of the transaction. No,

00:37:51.640 | that's not what's gonna happen. And there's also going to be

00:37:53.480 | limits on that. But But here's what I will say. If you look at

00:37:58.200 | the the number of people, there are 1.4 million members of any

00:38:02.840 | are today, the National Association of Realtors. If you

00:38:06.280 | look at the distribution of earnings, you guys know this, my

00:38:10.360 | guess is probably 10% of those realtors make 40% of the fee

00:38:14.720 | income or 50% of the fee income. So there's a long tail. So

00:38:18.600 | there's probably a third of those folks who are already kind

00:38:22.920 | of sub living standards in terms of income, maybe half of them

00:38:27.200 | won't be able to make enough money in this new, you know, fee

00:38:30.160 | regime, that it'll no longer be an attractive proposition to be

00:38:33.680 | a real estate agent for maybe half a million to a million

00:38:37.280 | people over time that are agents today.

00:38:40.040 | Yeah, you know, it's interesting this, the the sellers are going

00:38:45.400 | to be faced with buyers who just show up having seen something on

00:38:48.600 | Redfin and don't have a buyer's representation. And so they

00:38:51.360 | think, from the stuff I've been reading that the sellers agent

00:38:56.080 | might be pointing them to, hey, go to these services, and be

00:39:00.320 | acting as like one broker, essentially representing both

00:39:03.880 | sides. That's what people are saying is the potential downside.

00:39:06.280 | I don't think that's good. Yeah, that's not going to happen for a

00:39:09.200 | couple of reasons. But let me ask you guys a question. If you

00:39:11.960 | guys wanted to go buy a new house, currently, you just go,

00:39:15.880 | you know, sign up an agent or buyer's agent, they go walk with

00:39:18.600 | you, and eventually they'll get paid by the seller's agent. So

00:39:21.320 | now you have to negotiate a fee with them up front. Would you

00:39:24.840 | negotiate a fee and say to a buyer's agent, hey, I'll pay you

00:39:27.560 | 2% of whatever home I buy? Would you be comfortable doing that or

00:39:30.840 | 3% or 4%? How would you have that conversation? No, you say

00:39:35.920 | sex? I mean, forget I know you've got a different

00:39:37.560 | situation. Because you've got real estate people like working

00:39:40.320 | for you. But like, if you were to go out and if would you go

00:39:43.680 | out and get an agent and pay and negotiate a fee with them?

00:39:46.280 | It is not worth it to the buyer to pay two to 3% of the purchase

00:39:50.320 | price to make appointments. You can see all the houses on MLS

00:39:54.400 | through Zillow or Redfin or whatever.

00:39:56.400 | And what about handling closing and disclosures?

00:39:58.360 | No buyer would ever voluntarily agree to pay this massive

00:40:02.480 | commission. It's not worth it. So it's game over for the

00:40:06.000 | realtors. If buyers are forced to pay their own brokers

00:40:12.200 | commission. The only reason this system works is because the

00:40:15.800 | seller is forced to pay for it. Yeah. And when you sign the

00:40:19.080 | listing agreement with the seller's agent, you can

00:40:22.360 | negotiate a little bit at the margins. Sometimes you can get

00:40:24.920 | the 6% down to four to 5% for a big listing. But 50% of it will

00:40:30.360 | always go to the buy side. I mean, I've said to these guys,

00:40:33.000 | the buy side agent doesn't do anything. Why don't you make it

00:40:35.360 | 2% for yourself 1% for the buyer, they won't do that.

00:40:38.520 | They just won't take your business, the seller will not

00:40:41.040 | represent you.

00:40:41.680 | They have like all sorts of rules against it. So the whole

00:40:44.120 | thing is like, protect. It's like a racket that's protected.

00:40:47.040 | And now it's been cracked. Yeah. Well, I still am like a little

00:40:50.080 | bit skeptical that this is going to work out exactly the way

00:40:53.400 | we're saying because it is just such a death blow to the

00:40:57.480 | industry if buyers are forced to pay their own commissions, their

00:41:01.120 | own buy side brokers commission. And in the articles, they're

00:41:04.760 | saying there's still like some gray area about what's going to

00:41:06.920 | happen. But that is what should happen. Buyers should be

00:41:10.840 | responsible for paying their own brokers. And if you do that, I

00:41:14.040 | think you'll knock out half the fees this industry.

00:41:15.960 | Here's an idea. Want to charge an hourly fee as a buyer's agent

00:41:18.920 | like people doing that jk $200 an hour $300 an hour doesn't

00:41:22.720 | impact home prices as well. Like if you if the buyer had to pay

00:41:26.600 | all of a sudden their affordability effectively goes

00:41:29.560 | down because if they have to pay an extra $100,000 for a home,

00:41:33.520 | then that's $100,000 they can't pay less than they can pay for

00:41:37.680 | the house itself because they have to pay an agent. So but it

00:41:40.040 | all comes back into home prices. No,

00:41:41.720 | it nets out because the seller's agents no longer paying 6%,

00:41:44.800 | they're paying 3%. And so now the seller's agent has 3%

00:41:48.760 | more that that's your net, they'll take that's the same.

00:41:53.080 | Yeah, but net net,

00:41:54.160 | I think it's good for buyers and sellers because the transaction

00:41:56.760 | costs of trading go down.

00:41:58.000 | Exactly. The money goes back in consumers pockets, create a more

00:42:01.320 | fluid market. I think it's a great opportunity for startups.

00:42:04.440 | I'll say this right now, like I think there's going to be a lot

00:42:06.440 | of startups that are going to come out of this ruling that are

00:42:09.560 | going to launch a la carte services leveraging AI to make

00:42:13.000 | these services available direct to consumers without needing an

00:42:15.560 | agent. And they're going to be pretty compelling services and

00:42:18.120 | they're going to show up real fast.

00:42:19.320 | I mean, a lot of people will not list their home or sell it.

00:42:22.840 | Because that 6% might put them underwater. So if it's now now

00:42:28.000 | down to two or three, totally. Yeah, people might be like,

00:42:30.600 | it's been crazy to me that anyone would pay a percent of

00:42:33.560 | absolute value. It makes no sense. I bought a home for a

00:42:36.960 | million. I'm selling it for 1,000,001. So I've made $100,000

00:42:40.480 | profit, but I got to pay $60,000 of my total gross to an agent to

00:42:46.760 | sell it for me. 60% of the profit, I just gave up 60% of my

00:42:49.880 | profit on my home. Right? It makes no sense.

00:42:52.400 | And the crazy thing is that a bad sale of your home would be

00:42:57.800 | let's call it 900,000 or a million and a great sale would

00:43:01.080 | be 1.2. So exactly. It's a very small margin where they actually

00:43:05.680 | have an impact based on the quality of their effort, but

00:43:08.520 | they get compensated for the whole thing.

00:43:11.240 | Yeah, for the whole thing, no matter what compensated no

00:43:13.400 | matter the out should be that you get a flat rate $10,000 at a

00:43:18.200 | million, and then you get 10% over a million or something you

00:43:21.400 | could give just like you might be a salesperson.

00:43:23.520 | The incentive comp should be variable based on performance.

00:43:27.880 | Whereas the guaranteed part of the comp should be like you said

00:43:31.720 | a flat fee. It's kind of like the salesperson has no T variable.

00:43:36.400 | Yeah, I mean, you can say if you said 1% up to a million, so

00:43:40.240 | that's 10k and then 10% for the next 100k and then 20% for the

00:43:45.320 | next 100k. So you it's you know, that 1.2 million is really hard

00:43:48.920 | to get. Yeah, I'll give you 20% of that incremental 100 that

00:43:51.880 | would be a much better deal. You'll be getting paid for the

00:43:54.640 | actual performance. So really interesting.

00:43:57.400 | You know, Jake, I have an idea for the National Association of

00:43:59.920 | Realtors.

00:44:00.560 | Oh, here we go.

00:44:01.360 | If they want to stop being perceived as an evil

00:44:04.400 | monopolist, all they got to do is put out a cringe ad talking

00:44:06.760 | about the environment. Everyone's gonna love them

00:44:08.200 | again. Absolutely. They should do an ad where they have a

00:44:11.200 | little cast of people. And that diverse cast could talk about

00:44:15.960 | like putting sustainable forestry around it.

00:44:19.040 | All I got to do is say something something landfills. Everyone

00:44:21.480 | will love them again. They can charge

00:44:22.520 | absolutely, absolutely virtue signaling, right? They can

00:44:24.600 | change something landfills. Yes, absolutely. All right, let's

00:44:28.800 | keep the train moving here. The AI landscape shifting yet again,

00:44:32.560 | Microsoft is just did another one of these shadow aqua hires

00:44:37.320 | this time of inflection AI bizarre deal. Microsoft has

00:44:41.120 | hired most of the team at inflection AI including the CEO

00:44:44.640 | Mustafa, who everybody knows, I just actually had him on this

00:44:47.720 | weekend startups. He was the co founder of DeepMind. He worked

00:44:51.080 | at Google for years, and now he's going to be the CEO of a

00:44:55.520 | new company called Microsoft AI. It's essentially the consumer AI

00:45:00.240 | division of Microsoft, but they did give him the CEO title for

00:45:03.920 | background inflection have raised 1.5 billion over the last

00:45:07.000 | two years. It was one of these giant fundings that occurred to

00:45:10.880 | build a foundational model. Like open AI is doing like in

00:45:14.880 | traffic is doing. They had a chatbot called pi very similar

00:45:18.480 | to chat GPT was supposed to remember your history and build

00:45:21.480 | a relationship with you. That's all getting shut down. Reid

00:45:25.080 | Hoffman, who is a major investor in this company, and who's on

00:45:28.880 | the board of Microsoft, and who's so linked into Microsoft,

00:45:31.600 | and played an important role in this deal, according to reports

00:45:35.480 | and the inflection investors included Bill Gates, Eric

00:45:38.480 | Schmitt, and a bunch of other interesting folks. But this was

00:45:42.040 | a acquire, which is the weird thing, Chamath, they hired all

00:45:45.240 | the employees, they leave the shell of a company, the company

00:45:48.080 | is going to go do some enterprise stuff. And investors

00:45:52.480 | get to keep their equity inflection. But I guess that

00:45:55.040 | might be worthless. There's something going on here that we

00:45:58.200 | don't know about this deal structure. When you saw this

00:46:00.880 | deal, and you see Satya taking the entire team, like he

00:46:05.360 | threatened to do with opening AI, if you remember, same exact

00:46:07.640 | kind of thing, I'll acquire everybody, if you don't take the

00:46:09.600 | deal, what is your take of what's going on here? Why did

00:46:13.560 | this occur like this, instead of just buying the company?

00:46:16.400 | I mean, it occurred like this, because read and bill are

00:46:21.440 | inexorably tied to Microsoft. So they were able to get a deal for

00:46:24.520 | investors that would have never happened otherwise. And so good

00:46:27.520 | on them. I think they did a very good job protecting the

00:46:30.880 | fiduciary interests of the investors of the startup sacks.

00:46:36.440 | No conflict, no interest. Yeah. I mean, we say that a lot. This

00:46:39.560 | is so weird, though. Why not buy the company sacks? Is it because

00:46:43.560 | of antitrust?

00:46:44.400 | Actually, that's a good theory. It's just it's hard for

00:46:47.480 | Microsoft to get anything through at this point. So

00:46:49.880 | probably they're just like, why even deal with antitrust, they

00:46:52.920 | don't really need the assets. So I think they license the core

00:46:56.760 | tech from the inflection C Corp, and then they hire away all the

00:47:00.400 | talent. And then the investors get made whole. So I think it's

00:47:04.080 | like an aqua hire with a little bit of tech along with it that

00:47:08.800 | they get through the licensing deal. Maybe that's to protect

00:47:11.760 | them from an IP standpoint. My take on this is that this was a

00:47:15.160 | bailout. This was a bailout of the investors. I don't think

00:47:18.400 | investors got ripped off here. I think the investors were like

00:47:21.200 | thrilled to get their money back for whatever reason. This

00:47:23.520 | company wasn't going anywhere. It raised hundreds of millions

00:47:25.920 | of dollars. Reed and bill obviously are wired in there on

00:47:29.560 | the Microsoft board. And this company did have some talent

00:47:32.960 | that Microsoft wanted. So they basically did a giant aqua hire

00:47:36.880 | and it bailed out the investors.

00:47:38.280 | freeberg. Is that your take? This is a bailout? Or do you

00:47:41.520 | think this is a new interesting and run around antitrust where,

00:47:45.120 | hey, if Adobe wants to buy the next Figma, just buy the team,

00:47:50.440 | do a license of Figma, some fakaka lunacy? Or do you think

00:47:55.360 | this is a ballot? What's your theory here? freeberg? What does

00:47:58.520 | it say about Microsoft's approach to the AI space?

00:48:01.440 | I don't think this is some run around antitrust. I think

00:48:05.800 | obviously, like a lot of companies, there's been a

00:48:09.640 | realization on how quickly foundational model development

00:48:13.000 | is commoditizing and how quickly costs are escalating. And how

00:48:17.600 | many folks are chasing it. So having some unique advantage in

00:48:21.720 | the particular plane of the market, where they were

00:48:25.160 | participating as a startup, maybe became difficult and

00:48:30.240 | untenable and negotiations and conversations between all these

00:48:33.800 | parties who all know each other very, very well, and are all

00:48:35.920 | very friendly. You know, this ended up being kind of the best

00:48:39.400 | way to move forward.

00:48:40.600 | All right, there you have it, folks. In other related news,

00:48:44.480 | the Saudis are planning a $40 billion AI fund, according to

00:48:48.040 | the New York Times reps from the public investment fund in Saudi

00:48:52.240 | have spoken to a number of firms about partnering on it. This

00:48:56.840 | would be the second largest venture fund of all time behind

00:48:59.440 | softbanks $100 billion Vision Fund one, which you remember was

00:49:02.800 | also backed by the Saudis and some other folks in Middle East

00:49:06.320 | region, this new fund would reportedly invest in AI

00:49:09.400 | startups, chip companies and data centers. So we thought we

00:49:13.120 | do a little quiz here. If you were given the 40 billion David

00:49:16.720 | Sachs, how would you allocate the 40 billion in AI in today's

00:49:22.240 | market 2024 going on if they put you in charge of this $40

00:49:25.600 | billion a fund AI fund? Where would you deploy it? Same

00:49:29.800 | question will come around the horn to you freeberg. And then

00:49:32.480 | you come up?

00:49:32.960 | Well, the first thing is, I wouldn't be in a rush to deploy

00:49:36.840 | all 40 billion at once, because that's a recipe for spraying a

00:49:39.680 | lot of money into unproductive or overhyped things. So I would

00:49:42.720 | take my time, first of all. But second, in terms of kind of

00:49:46.640 | the framework, I would think about the different levels of

00:49:49.640 | the stack of AI and try to figure out where the value

00:49:52.200 | capture is going to be. And I think there's maybe four

00:49:54.920 | different layers of the stack. First, you've got this look on

00:49:57.240 | you've got the chips were Nvidia is dominant. Then you've got the

00:50:00.640 | foundation models where it's open AI, and then there's some

00:50:03.560 | open source models. And then you've got kind of infrastructure

00:50:06.720 | dev tools, vector databases, things like that. And then

00:50:09.280 | finally, you have the applications sitting on top of

00:50:11.280 | that, which are just getting started. I think it's really

00:50:14.000 | hard to know from what we're seeing today exactly who's going

00:50:16.880 | to capture the most value in the stack. I mean, you could make an

00:50:20.160 | argument for against pretty much any layer of the stack, I guess

00:50:23.800 | if I had 40 billion to deploy, what I would do is try to

00:50:27.240 | identify who are the leading companies at each level of the

00:50:30.680 | stack, and then who are the most promising challengers, and I

00:50:33.800 | would make a bet at every layer. So I'm covered. That's not what

00:50:37.680 | I personally do. Because I'm not, you know, I'm just not a

00:50:41.120 | hardware investor. I'm not really an infrastructure

00:50:43.680 | investor, I'm more of an application investor. So I'm

00:50:45.600 | going to focus on that fourth layer of the stack and just

00:50:48.440 | trust that there's gonna be enough value there. But again,

00:50:50.960 | if I was managing a $40 billion sovereign wealth fund, then I

00:50:55.600 | would play at every single level. And I would hire the best

00:50:58.000 | people who know each layer of that stack.

00:51:00.280 | sacks me to do a good job of sort of showing the the four

00:51:04.160 | layers of the stack. I think open source, the application

00:51:07.560 | layer, and specifically robotics are huge opportunities that are

00:51:10.800 | under invested in right now. So I would take the top open source

00:51:13.760 | projects, I'd find those top contributors, take the top 20 or

00:51:17.040 | so open source projects, and back them to the tune of, you

00:51:20.600 | know, significant money, 50 million, 100 million, whatever

00:51:23.160 | it takes, and try to own the top 20, or have insights into those

00:51:26.720 | top 20 open source models, and own those teams, look for the

00:51:30.720 | top contributors really easy to do on GitHub and hugging face

00:51:34.320 | and replete and other places where they're active and empower

00:51:37.760 | those. Then obviously, there's verticals, we're working on

00:51:41.800 | people who are doing screenplays and tax just like you are sacks,

00:51:45.120 | and that's a fantastic place to deploy money. But then I think

00:51:48.120 | robotics is going to be super, super compelling here. And that

00:51:52.880 | takes a lot of money. And so you do have the capital as a weapon.

00:51:56.200 | And you know, the 20 year view of this and making a general

00:52:00.560 | person purpose robot like Elon's doing with optimists, or figure

00:52:04.600 | AI is doing with their robot. I think robotics is a major place

00:52:09.440 | you can probably buy, I don't know who owns Boston Dynamics.

00:52:11.920 | Now I know Google sold it. So you can probably buy some

00:52:14.640 | robotic companies and then put the AI on them and really take a

00:52:18.120 | 20 year view of robotics. Freeberg, your thoughts, how

00:52:22.680 | would you deploy the 40 million

00:52:23.800 | the autumn three stacks are very difficult right now to find a

00:52:31.040 | footing, obviously, you know, I think sacks the, you know, it's

00:52:34.400 | the I think the generally accepted framework for how to

00:52:37.040 | think about how the market is broken apart. But on the

00:52:41.200 | application side, I think is where you could think about

00:52:44.040 | finding more traditional business model advantages. So,

00:52:50.600 | you know, I think your point about robotics is a really

00:52:52.800 | interesting one, you know, is there a enterprise like sale of

00:52:56.440 | robotics tools that have positive ROI for enterprises?

00:53:00.280 | And is there a business that's working there and that is

00:53:02.240 | scalable vertical solutions in labor and automation and

00:53:06.760 | productivity gains are probably the best sharp ratio, good alpha

00:53:11.600 | lower beta, and a good place to kind of deploy competing and

00:53:15.400 | chips competing in infrastructure competing and

00:53:18.600 | models. It's such a, you know, as we just talked about with

00:53:21.840 | respect to what happened with inflection and Microsoft this

00:53:24.760 | week, it's such a rapidly changing environment. It's hard

00:53:28.080 | to have high confidence in where things are headed there. So I do

00:53:31.520 | think that we do know that there are enterprise markets, we know

00:53:34.040 | that there are segments of things like food, medicine, you

00:53:38.600 | know, manufacturing, these are markets that aren't going

00:53:40.800 | anywhere. And they could all certainly benefit from unlocks

00:53:45.160 | in software or in robotics and automation and hardware. So

00:53:48.800 | that's probably where I would think about concentrating

00:53:51.640 | capital. But you know, 40 billion is a lot of money. So

00:53:55.000 | you'd probably think about deploying it over what period of

00:53:57.200 | time is a 10 billion a year over four years. And then is it

00:54:00.800 | broken apart? And what way over those sectors and over what

00:54:03.440 | geographies and you know, then find good managers to help you

00:54:06.920 | get it deployed.

00:54:07.760 | Jamal, you're batting clean up here, you got to hear

00:54:11.160 | everybody's answers. Before giving your own, what are your

00:54:14.240 | thoughts on your other besties answers and what's your plan to

00:54:17.760 | deploy 40 billion for the kingdom of Saudi Arabia is

00:54:21.960 | public investment fund.

00:54:23.000 | The most important thing that fund managers get wrong is not

00:54:26.680 | having appropriate reserves for your winners. And if I look

00:54:30.480 | back, the real profit dollars that I leaked was not not

00:54:35.840 | investing enough upfront, but when I didn't have enough

00:54:38.440 | reserve to do the full pro rata, or even super pro rata and the

00:54:41.920 | ones that worked. So the first thing you have to do when I do

00:54:44.800 | the regression on all of my funds, you really need to

00:54:47.720 | reserve between 40 and 50% of a total fund size for reserve. So

00:54:51.720 | take 20 billion off the table. And now you have a smaller

00:54:55.160 | problem, which is how do you deploy 20 billion because the

00:54:57.400 | other 20 billion is purely meant for the winners, where you cram

00:55:01.000 | the money into the few that are winning so that you can make the

00:55:03.520 | most money of that 20 billion, I would probably take two thirds

00:55:08.680 | of it. And I would go to all the hyperscalers, and anybody that's

00:55:13.520 | providing cloud compute, and essentially buy out all of the

00:55:17.680 | compute credits on GPUs. So that I could tell any startup in the

00:55:22.400 | world, you will do a safe with me, the kingdom of Saudi Arabia,

00:55:27.800 | I will give you free compute on pick your cloud provider, pick

00:55:32.400 | your model, I don't care. So if you want to run llama on grok,

00:55:36.360 | great. If you want to run Mistral on GCP, great. If you

00:55:40.320 | want to run open AI on open AI, fantastic. But we will pay for

00:55:45.240 | all the compute in return, we get 7% upfront. And you have to

00:55:49.160 | tell us some benchmark of how this model is improving. And

00:55:53.800 | then you are hiring a team of people whose job it is, and you

00:55:57.640 | can probably train a model to do this as well, to ingest the

00:56:01.640 | reporting in a systematic way to understand if it is, as you guys

00:56:06.160 | said, a robotics company, there are measures of the quality of

00:56:10.080 | a robot, a robot's dexterity, or vision or manipulation or tax

00:56:14.680 | completion rate. If it's a search engine, it's a different

00:56:17.280 | thing. If it's a consumer facing app, it could be users, if it's

00:56:20.160 | a drug discovery app, it's the number of legitimate protein

00:56:24.040 | synthesis, passes that that pass, whatever it is. So now

00:56:30.120 | you've scoped the problem to 20 billion is in reserves, 15

00:56:33.480 | billion of it is tied up in credits. And then the 5 billion,

00:56:36.160 | I do think it's what David said, what SAC said, which is a

00:56:39.880 | billion and a half to the hardware, a billion and a half to

00:56:42.160 | infrastructure, a billion and a half to some of these discrete

00:56:44.680 | ideas. You probably need a 30 or 40 person team total no more.

00:56:49.920 | But that business can could make a trillion dollars if it was set

00:56:54.280 | up that way. But the key is to get the credits out to people.

00:56:57.000 | So that the reality is what the commonality across every single

00:57:02.320 | AI startup is that they will have to run on a model. And that

00:57:06.360 | model will be hosted somewhere in a cloud. And all of that

00:57:09.160 | compute will need to be paid for. So Saudi Arabia should pay

00:57:12.760 | for that compute, get six or 7% upfront, and re title the safe,

00:57:18.440 | not as the what is a safe call Jason

00:57:21.320 | simple agreement for future equity, there should be the

00:57:25.640 | Saudi Saudi agreement for future equity. I love it. That's what

00:57:30.080 | they said. Well, there you have it. And yes, the all in KSA $40

00:57:34.600 | billion fund, give us a call. We'll fire it up. And we'll

00:57:38.080 | deploy the 40 billion for you.

00:57:40.520 | I can't, maybe. Actually, I'm curious, you guys, since

00:57:43.800 | everyone kind of seems to agree with the framework of the four

00:57:46.600 | levels of the stack, where do you guys think the value cap is

00:57:49.960 | going to be? Do you think it's going to be by the chip

00:57:52.120 | companies, the foundation model companies, the infrastructure

00:57:56.440 | companies or the or the applications?

00:57:58.600 | I'll actually change my answer in a little bit. I don't think

00:58:01.040 | it's necessarily new technology companies per se, that are going

00:58:04.760 | to benefit most. But I think that it's businesses in

00:58:07.120 | traditional industries that are going to be able to leverage

00:58:09.960 | these tools, whether they're using open source tools, or

00:58:13.280 | third party technology capabilities that they're buying

00:58:16.040 | as a service or as a piece of software. There's an incredible

00:58:19.360 | set of advances are going to be realized in things like chemical

00:58:22.080 | manufacturing, drugs, general manufacturing that have existing

00:58:26.840 | scale and infrastructure that are the fastest to move to adopt

00:58:30.680 | these technologies are going to benefit the most. And I think

00:58:33.840 | that's probably where most of the value will accrue is not

00:58:36.520 | necessarily a chip company, but in other businesses and

00:58:39.200 | traditional industries that can transform themselves using AI.

00:58:44.000 | So your answer is that the application and then within

00:58:47.640 | application level, you could divide it up between existing

00:58:49.840 | companies and startups. Yeah. And existing companies that are

00:58:52.800 | able to leverage AI innovations that are lower in the stack.

00:58:56.760 | Another way to answer your question, saxes, which is the

00:59:00.680 | most crap, which spaces are the most crowded already. And so

00:59:03.280 | obviously, chips are super crowded, lots of incumbents,

00:59:05.600 | lots of people going after it. And the foundation models are

00:59:08.280 | very crowded as well. And the application level is yet to sort

00:59:13.200 | of be built out, right, because we're in year zero or year one

00:59:15.760 | of that. So I do think application levels where there's

00:59:18.160 | a lot of value, but I also think the hosting and the development

00:59:22.800 | of these various niche models is going to be a huge opportunity.

00:59:26.240 | So just once again, those open source models, being put into

00:59:30.080 | cloud computing environments and optimized, that could be a whole

00:59:33.720 | new level of AWS is in Google Cloud, and Azure's. So there's

00:59:39.240 | an opportunity for somebody to compete with those incumbents by

00:59:42.840 | just being better at those models that are open source and

00:59:46.720 | having the team that's doing those updates, and then

00:59:48.960 | optimizing that cloud. So I would go with the cloud level

00:59:51.480 | for those open source models and providing that as a service like

00:59:54.440 | VMware does or other folks do. WordPress will be a tiny example

00:59:58.960 | of an open source project like that. And then I just something

01:00:02.800 | tells me this robotic space, which has been a false start

01:00:05.640 | over and over and over again. I think this is the time where

01:00:08.920 | actually it's going to work. And so I'm, I love that hardware

01:00:13.040 | robotics space.

01:00:13.960 | I think you're right, sex. I think it's kind of bookended in

01:00:17.000 | my mind. I think the the folks that are building fundamental

01:00:19.800 | hardware will make a lot of money over the next five to 10

01:00:23.320 | years. And then the folks that are building the fundamental

01:00:27.080 | application level experiences will make a lot of money as

01:00:29.480 | well. And then, who knows? The thing that we're not talking

01:00:33.760 | about enough, and I don't understand it well enough is the

01:00:37.240 | entire way in which apps are built needs to fundamentally be

01:00:41.160 | rethought from first principles, because you essentially

01:00:43.680 | basically have these client server apps, where you have all

01:00:48.160 | of this business logic that's sitting back in some server

01:00:52.040 | somewhere. And I don't think that that's how apps get built

01:00:55.520 | today, in a world of AI. And so it doesn't need to work that

01:00:59.080 | way. So I don't exactly know what that means. But it, it

01:01:02.400 | just seems like most of the architecture of how the

01:01:04.360 | internet works today doesn't make much sense. So that would

01:01:07.520 | then support freebrook's point that all of the kind of the

01:01:10.040 | legacy things that we all know and trust also get rebuilt. And

01:01:13.440 | so that could create an entire wave where networking value gets

01:01:16.800 | recreated and everything. So my gosh, I mean, it could be very,

01:01:21.080 | very transformational.

01:01:22.000 | I mean, the idea that you would just talk to a computer or in a

01:01:26.480 | chat interface, and you wouldn't use an app interface, you would

01:01:29.240 | just ask it questions that would give you answers, ask you

01:01:31.120 | questions, it gives you answers, give it a task, it gives you a

01:01:33.240 | result. This is very compelling. This is why like Saudi needs to

01:01:36.720 | basically make a bet that there's just developers that are

01:01:39.720 | swarming around ideas, let them show you what's happening,

01:01:43.680 | because paying 800 million a year of fees is not the best

01:01:47.840 | way to generate a return on $40 billion. If this is where you

01:01:51.040 | want to be investing, I don't think yeah, 800 million could

01:01:53.400 | pay for a lot of credits, which probably gets you one step

01:01:55.920 | closer to the to the answer.

01:01:57.800 | Or read it when public today, they have 800 million in

01:02:00.600 | revenue. Company is worth over $8 billion in trading, it's a 50%.

01:02:07.640 | What do you think? Chamath is this the opening of the IPO

01:02:10.520 | window again? So so one off gets tribe coming? And what do you

01:02:14.440 | take from it popping 50% on the first day?

01:02:17.440 | I don't know. I really haven't looked at the company. I haven't

01:02:22.320 | looked at the financials. But like this last three or four

01:02:27.640 | weeks, I think people have been so excited and rearing to go.

01:02:31.000 | We're in the middle of another meme coin craze.

01:02:35.000 | We are all getting pulled into that nonsense.

01:02:39.000 | I think the point is that I think there is a speculative

01:02:43.840 | party going on right now. And I'm not saying that Reddit is

01:02:47.560 | part of it. But whenever these things are so mispriced, just

01:02:52.160 | means that people are ready to gamble a little bit.

01:02:54.280 | There's definitely a lot of gambling in the system, as we've

01:02:57.560 | seen. And we're recording this on Thursday. So who knows what

01:03:00.480 | the stock price will be tomorrow? Generally, I mean,

01:03:03.320 | the other thing is, like, Powell did say, finally, it looks

01:03:08.200 | pretty likely we're going to get these three cuts. So we're going

01:03:11.320 | to be down to four and a half to 475 unfed funds by the end of

01:03:16.600 | the year. It probably means that we'll get another 50 to 75 basis

01:03:21.120 | points to 2025. So people will look out to the end of 2025 and

01:03:25.360 | look at a fed funds rate that's sort of like 375 to 4%. So

01:03:29.000 | they're getting pretty excited and frothed up. So this is the

01:03:33.880 | beginning of the beginning in terms of that kind of

01:03:35.920 | speculation.

01:03:36.720 | Yeah, we saw crypto go bonkers the last couple of weeks. Yeah.

01:03:41.160 | What's your take on all this sacks? Is does it feel like

01:03:43.960 | people are in gamble mode again? And does that concern you? I

01:03:49.640 | guess after what we just experienced?

01:03:51.520 | Well, I think they're pricing in these rate cuts as if they're

01:03:55.720 | definitely going to happen. Like Jamal said, I think the markets

01:03:59.160 | expectation is with let's call it 70% certainty that you're

01:04:04.000 | gonna get three rate cuts this year. And it still seems to me

01:04:07.520 | that that's a little bit up in the air. Because inflation has

01:04:11.840 | not come down to the Fed's target of 2%. It's still right

01:04:14.960 | around 3%, 3.1%. So it's been sticky around 3%. It was coming

01:04:20.760 | down pretty fast last year, but it's still there. So people I

01:04:24.520 | think are maybe gambling in the sense that they're counting on

01:04:27.400 | rate cuts that haven't happened yet. But they liked pals dovish

01:04:32.160 | rhetoric yesterday. And they seem to think that that means

01:04:36.880 | that the rate cuts are definitely coming. I don't know

01:04:39.760 | how pal can promise that without inflation coming down unless

01:04:42.920 | he's trying to create a Biden put. There it is, folks, which

01:04:47.520 | was my theory going into this year. Is that yeah. Biden put

01:04:52.200 | from the Fed.

01:04:52.840 | Absolutely. And it's looking like Biden has a clear path to

01:04:56.200 | victory based on the lowest unemployment of our lifetimes

01:04:59.880 | and this warring stock market records. Yeah, it's a easy Biden

01:05:04.320 | victory. Friedberg, what do you think? About the risk on? I

01:05:11.240 | don't know.

01:05:12.280 | Biden is incredibly unpopular. If you look at his actual

01:05:15.100 | polling, he should not win the election. But that's in spite

01:05:18.720 | of your right, the economy is seems to be doing pretty well.

01:05:21.400 | And the stock market certainly doing pretty well. A president

01:05:24.760 | with these fundamentals would normally get reelected. But

01:05:28.640 | Biden currently is not his polling is not the polling of a

01:05:31.840 | president who's gonna get reelected. It is. But if pal

01:05:35.960 | comes through with the rate cuts that will help him.

01:05:37.960 | It's pretty amazing how horrible a job he's doing that he's made

01:05:41.800 | Trump look like a better candidate to some people. That is

01:05:44.640 | an extraordinary achievement by Biden. I will have to agree.

01:05:47.560 | There.

01:05:49.080 | Look, I think the the bigger economic issue to be talking

01:05:52.280 | about was that buried article in the Wall Street Journal about

01:05:56.920 | commercial real estate. Do you see that article? That was

01:06:00.040 | crazy. So this Wall Street Journal article reported that of

01:06:03.120 | the 36 billion of office loans that came due in the commercial

01:06:07.840 | mortgage backed securities market last year, only one

01:06:11.480 | quarter were paid off in full. That's according to data from

01:06:15.080 | real estate analytics firm cred 10.

01:06:17.080 | Is that extended pretend strategy that you see there?

01:06:19.880 | Oh, yeah. I mean, only one quarter of the loans got paid

01:06:23.680 | off. So 75% didn't get paid off in full. So there's tons of

01:06:28.080 | buildings that are underwater right now. But nobody wants to

01:06:32.080 | foreclose and then sell them at a fire sale price. So yeah,

01:06:36.160 | everyone is it's pretend and extend.

01:06:38.320 | Yeah, kicking the can down the road. Nobody wants to take the

01:06:40.720 | medicine. So yeah,

01:06:41.560 | well, they're hoping they're hoping that rates will come down

01:06:43.680 | fast enough and occupancy rates will go up fast enough that no

01:06:47.520 | one has to foreclose. But if rates don't come down, then you

01:06:52.320 | have a real problem. And again, everyone is just assuming that

01:06:55.720 | inflation will continue its path from 3% to 2%. And then we'll

01:06:59.840 | get these rate cuts. And they're hoping they can cling on

01:07:02.880 | landlords are clinging on. And I think the banks that loan them

01:07:05.760 | all this money are clinging on for dear life. But if rates stay

01:07:10.880 | higher longer, then you're gonna see some real distress. Yeah,

01:07:15.480 | including the regional banking system.

01:07:17.240 | Freeberg, you had a science corner here, a couple of

01:07:19.560 | different things came up the Hubble telescope, 3d printed

01:07:23.280 | organs, where do you want to go with this?

01:07:26.480 | I mean, do you guys want to talk about how the universe is

01:07:29.680 | expanding at an accelerating rate and expanding

01:07:32.560 | differentially everywhere we look and we don't understand how

01:07:35.120 | or why 100% and sacks needs to use the loo. So yeah, definitely.

01:07:38.840 | Love science quarter. Let's do it. Freeberg, it's your time to

01:07:47.280 | sign to shine. Oh, science. Tell us what's going on with the

01:07:51.160 | universe. My favorite topic. astrophysics. My favorite, my

01:07:55.960 | favorite. So back to Texas back. Are we headed for Uranus?

01:07:59.320 | Dead set on it. We're dead. It's a collision course. He

01:08:04.120 | disappeared. He's just gonna drop in and do a Uranus jokes. I

01:08:07.880 | hear him giggling with his he's with his writers. He's he just

01:08:11.640 | went to the writers room to get an update on the Uranus jokes.

01:08:14.520 | It's long been known that our universe is expanding. We've all

01:08:20.280 | heard about the the Big Bang Theory. And a couple decades

01:08:26.440 | ago, scientists began to observe the brightness of supernovae or

01:08:33.960 | exploding stars. And then by looking at their brightness, we

01:08:37.880 | could tell how far away they were. And then looking at the

01:08:40.640 | shift of the light, whether it's getting red or blue, you can

01:08:43.240 | tell whether the light the supernova is moving away from us

01:08:47.960 | or towards us and how quickly. And so what scientists have used

01:08:53.520 | those observations to deduce several decades ago, and for

01:08:57.200 | which a group won the Nobel Prize, is that our universe is

01:09:02.360 | expanding, meaning that everything is moving away from

01:09:06.040 | itself. It's almost as if we're all in a cake. The best analogy

01:09:09.280 | I've heard is that there's raisins in the cake. And as the

01:09:12.000 | cake expands in the oven, all of those raisins look around, and

01:09:15.840 | they're all moving apart from each other. So the distance

01:09:18.360 | between everything is getting wider, space is expanding. And

01:09:23.880 | so we can actually roll moment of the Big Bang. That's the

01:09:27.120 | theory is right. This all started in the Big Bang. And

01:09:29.360 | it's not like, you know, we're all in the middle of the

01:09:31.440 | universe, and the universe is moving away from us. It's that

01:09:33.840 | the entire entirety of space is expanding itself. And so

01:09:37.680 | everything is moving away from everything else. The challenge

01:09:40.560 | in the data was that recently, we saw that different types of

01:09:43.520 | stars that were observed with the Hubble Space Telescope had

01:09:49.120 | actually a different rate of expansion of the universe than

01:09:54.160 | was previously thought from the supernova that we saw. And

01:09:57.120 | everyone thought there was something wrong with the Hubble

01:09:58.760 | Space Telescope data. So, you know, in a final print published

01:10:03.000 | last month, the James Webb Space Telescope, which showed much

01:10:08.560 | higher resolution of imaging, and as a result, much better

01:10:11.920 | data. Here's an image of it, you can just see the difference

01:10:15.000 | between what came out of James Webb, and what was used in

01:10:18.320 | Hubble. So that shows one star that was used to calculate the

01:10:22.440 | rate of expansion of the universe. And what the star

01:10:25.600 | showed is that the rate of expansion of the universe as

01:10:29.240 | measured across 1000 of these stars called Cepheid stars in

01:10:32.440 | five different galaxies, had a value that didn't match the

01:10:35.920 | value that we see when we look at exploding stars very far

01:10:39.440 | away. And so it once again, confirms what the original

01:10:43.600 | Hubble data showed, which is that the universe is expanding

01:10:46.560 | at different rates in different parts of the universe, which

01:10:50.520 | totally doesn't make sense. And there's no really clear answer

01:10:53.480 | as to the physics of why, if there was a Big Bang, and the

01:10:56.760 | universe started to expand, it should be expanding the same

01:10:59.320 | everywhere. There's no reason that different parts of the

01:11:01.600 | universe should be expanding at a different rate than other

01:11:04.200 | parts of the universe that there's differential expansion

01:11:06.520 | happening across the universe. And it really tells us that

01:11:09.680 | there's very little we know or understand about this large

01:11:12.840 | scale structure of the universe and why these things are

01:11:15.280 | happening. There was one group that put out a theory where they

01:11:18.760 | said that the local universe where we see these Cepheid stars

01:11:23.160 | that this data is based on, there's almost like a little

01:11:25.560 | bubble. And on the outside of the bubble, there's galaxies,

01:11:28.160 | and they're pulling stuff out faster than what's happening

01:11:30.680 | where there's not as much density. So there's a lot of

01:11:32.880 | different reasons and explanations for why this might

01:11:35.760 | be happening. But it's kind of a big story, because it basically

01:11:39.240 | confirms that we see a lot of differential expansion happening

01:11:42.760 | across the universe. And we don't know why. Just another big

01:11:45.680 | mystery of the universe. So super kind of interesting

01:11:48.200 | confirmatory data from James Webb this week. Do you want to

01:11:51.600 | talk about the, the pig kidney?

01:11:54.640 | I mean, I think it's, it's really incredible. They took a

01:11:58.280 | kidney from a pig, and then they use CRISPR cas nine to edit out

01:12:03.880 | the certain subset of the pig genes and edit in a certain

01:12:08.080 | useful subset of human genes. And then they transplanted that

01:12:11.040 | kidney into a 64 year old man. I said, and he apparently seems to

01:12:16.440 | be doing well. It's really incredible. And this is a guy

01:12:18.880 | that was at end stage kidney disease. And my father went

01:12:24.160 | through this. But when you're at that end stage renal disease,

01:12:27.400 | you're getting dialyzed every three days, for up to four or

01:12:32.320 | five, six hours, trying to basically have a machine that

01:12:36.200 | does the job the kidneys for you to keep your blood clean. But

01:12:39.520 | it's just it's kind of a death sentence. And it's like a slow

01:12:42.160 | moving death sentence at that. So the idea that you could now

01:12:47.400 | use this effectively infinite source of organs seems really

01:12:55.200 | compelling. Pretty amazing. I don't know what do you think?

01:12:59.400 | Definitely where we're headed. I don't even see. Yeah. Speaking

01:13:06.360 | of medical breakthroughs. Did you guys see the guy who got the

01:13:10.880 | neural link chip with his brain? He's using the force. Yeah. That

01:13:16.120 | was also the force. Yeah, he described it as he was playing

01:13:19.400 | chess. And he said, like, I love playing chess. And I've learned

01:13:22.400 | to use my mind to move pieces around. And he said, like, it's

01:13:25.960 | like having the force. I mean, wow, amazing. I watched the live

01:13:29.920 | stream. And he said that he was a quadriplegic from the

01:13:32.440 | shoulders down. But he loves chess. He wasn't able to play

01:13:35.960 | chess. Now he's able to play chess. He was able to play

01:13:37.800 | civilization, the game, which I guess was really hard. In the

01:13:42.320 | absence of having this, this chip, and now he can do that.

01:13:45.000 | It's incredible. I mean, it's really cool that they kind of

01:13:48.600 | went public with it. Or I mean, obviously, he agreed to go

01:13:51.560 | public with it. I think Trevor was his name. It's pretty

01:13:54.680 | amazing. And there's more amazing stuff coming. They're

01:13:58.200 | making significant progress over there. I was talking to somebody

01:14:00.800 | who works there. And, you know, it's, it's, it's going to be.

01:14:05.160 | Yeah, it's going to be a process, but they're making

01:14:10.240 | significant progress, and they're going to have, I think,

01:14:13.280 | even bigger announcements in the coming year. They're getting it

01:14:16.800 | done.

01:14:17.120 | My kids were really blown away by it. You know, it's, it's

01:14:21.960 | interesting to me what like penetrates their cynicism bubble

01:14:25.360 | and like what they get actually impressed or excited by and they

01:14:29.000 | thought this was really cool.

01:14:30.120 | You know, it's so funny. It's like people are breathlessly

01:14:33.000 | like, looking at the Elon Don Lemon video, and they're trying

01:14:37.520 | to opine whether he had a good interview or a bad interview.

01:14:40.680 | And it's like, he actually had one of the best weeks of his

01:14:43.840 | life. Yeah, Starship three made it up. Yeah, Starship had an

01:14:48.720 | incredible performance last week. And then this thing this

01:14:52.360 | week. I mean, what an incredible seven day run. It's more than

01:14:54.960 | most of us will have in our lifetime. It's also not so

01:14:58.680 | crazy. That Don Lemon interview, like there was actually some

01:15:01.520 | really interesting topics discussed. But I felt like this

01:15:04.240 | was like, this was the perfect like, baton passing between old

01:15:08.280 | media and new media where he was constantly trying to do a gotcha

01:15:12.240 | journalism thing. And you know, I was trying to engage in good

01:15:15.600 | faith and like an interesting discussion. And then every time

01:15:18.320 | the discussion got interesting. He kept trying to go back to

01:15:21.160 | like, sensational gotcha journalism, and it was a totally

01:15:24.560 | wasted opportunity if he had just gone lemon, I just stayed

01:15:27.000 | in the moment. And like engaged in good faith, instead of trying

01:15:30.600 | to get this like, clip, it was a really bad performance by Don

01:15:34.040 | Lemon, I thought it was really getting interesting at moments

01:15:37.680 | in time. He's obviously trying to get a job back at some

01:15:40.280 | mainstream media company. Maybe this is his. This is his resume.

01:15:45.120 | If he can basically get some clip of Elon saying something

01:15:48.680 | that he can twist into something that it doesn't mean. And you

01:15:51.760 | can say I got Elon Musk, then he can get his job back at CNN or

01:15:55.520 | one of those paid out in full, like 20 30 million bucks. And by

01:15:59.480 | the way, those jobs are not they don't exist anymore. Like Tucker

01:16:02.840 | and him were like the last of that generation to get those

01:16:06.480 | huge paydays. Don Lemon got paid $30 million by whom? I think

01:16:11.680 | CNN, the report was CNN paid out his full contract. The same

01:16:16.240 | thing happened, I think with Tucker, they both got paid their

01:16:18.320 | full contracts, whoever negotiates those contracts with

01:16:20.880 | the networks over the last couple of decades is awesome,

01:16:23.840 | because it's pay, it's pay for play, like, whether you are on

01:16:28.600 | air or not, you get paid. And the and then they don't let you

01:16:31.520 | go to a competitor. That's why both of them are doing internet

01:16:34.560 | stuff. x or whatever carved out stuff. Just wanted to give a

01:16:37.960 | shout out here at the end of the pod for the guys that all in

01:16:41.560 | talk, Chris and Spencer did an amazing job the team over there

01:16:44.760 | from good future media of creating just that amazing fan

01:16:48.280 | account. Now that we're growing up here over at all in and we'll

01:16:51.360 | have a CEO announcement at some point. We have taken over the

01:16:55.320 | accounts and we're starting to make our own clips. So thanks to

01:16:58.320 | them for supporting us and helping grow it. If you want to

01:17:02.640 | see the four of us, go to YouTube and type in all in

01:17:05.720 | podcast and then subscribe. We're almost at 500,000

01:17:09.280 | subscribers. And we decided that if we hit 1 million subscribers

01:17:12.800 | by the end of the year, we're going to throw a party. And y'all

01:17:16.560 | will be invited. We'll have as many people at the party as

01:17:19.440 | possible. So go ahead and find us on tik tok, LinkedIn and

01:17:23.720 | Instagram, just do a search for all in and you can search for

01:17:26.680 | all of us to mouth. David Friedberg, David Sachs, and

01:17:30.200 | Jason, Alec Hannes, thanks again to the super fans for helping us

01:17:33.720 | build an amazing audience. Couldn't have done it without

01:17:37.000 | you. And yeah, we're just posting clips, I think every

01:17:40.640 | other day on the YouTube channel. And so if you go in

01:17:43.680 | there, you can subscribe. And then right next to it, there's a

01:17:46.000 | little alarm bell, you hit the bell, you'll get an alert and

01:17:48.560 | you get to see our faces and know what we look like. We also

01:17:51.360 | put a lot of graphics. So if you hear us referring to charts,

01:17:53.680 | that's all on the YouTube channel. For David Sachs,

01:17:57.560 | Maupai Hapotea, David Friedberg, I am Jason, Alec Hannes, and we

01:18:02.040 | will see you in the next episode.

01:18:02.760 | Love you boys, world's greatest moderator. You forgot your

01:18:04.880 | timeline.

01:18:05.400 | And the host of This Week in Startups. So search for my

01:18:08.240 | podcast, This Week in Startups, where I interview startup

01:18:10.640 | founders. Gotta get a plug in for that. No, some people don't

01:18:12.680 | know I have another podcast. So please search for This Week in

01:18:15.320 | Startups and subscribe to that as well. We'll see you all next

01:18:18.000 | time. Bye bye.

01:18:18.880 | Love you boys.

01:18:20.560 | We'll let your winners ride.

01:18:22.320 | Rain Man, David Sachs.

01:18:25.160 | We open sourced it to the fans and they've just gone crazy with

01:18:31.800 | it.

01:18:32.000 | Love you, Wesley.

01:18:33.040 | Queen of Kinwa.

01:18:34.480 | Besties are gone.

01:18:42.240 | That is my dog taking a notice in your driveway, Sachs.

01:18:47.000 | Oh, man.

01:18:49.600 | We should all just get a room and just have one big huge orgy

01:18:54.240 | because they're all just useless. It's like this like

01:18:56.080 | sexual tension that they just need to release somehow.

01:18:58.320 | Wet your BB. Wet your BB.

01:19:03.160 | We need to get merch.

01:19:06.000 | Besties are gone.

01:19:06.520 | I'm doing all in.

01:19:08.120 | I'm doing all in.

01:19:16.120 | (upbeat music)

E171: DOJ sues Apple, AI arms race, Reddit IPO, Realtor settlement & more

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