Apple's XR Misadventure, An Emerging AI Bubble, Elon vs. Bezos

0:28The truth is AI security is identity security. identity security fabric can help you secure the next generation of identities, including your AI agents. Visit Okta.com. That's O-K-T-A dot com. Capital One's tech team isn't just talking about multi-agentic AI. They already deployed one. It's called Chat Concierge, and it's simplifying car shopping. Using self-reflection and layered reasoning with live API checks. It doesn't just help buyers find a car they love. It helps schedule a test drive, get pre-approved for financing, and estimate trade in value. Advanced, intuitive, and deployed. That's how they stack.

1:09That's technology at Capital One.

1:19Welcome to Big Technology Podcast Friday edition. We break down the news in our traditional cool-headed and nuanced format. We have a great show for you today. There's an unbelievable preview of Apple's mixed reality device out that we're going to discuss first. Then we're going to be talking about whether there's an AI bubble with stocks like NVIDIA going through the roof. then OpenAI ends up in Washington with Sam Altman testifying before Congress. What can we really learn from that? And after the break, we're going to cover the TikTok ban in Montana. How long is that going to last? And Shein or Shine.

1:55Ranjan, is it Shine? It is Shein. And this is going to be the most important story of the week. So stick around and you'll all learn how to pronounce the most important company to watch in American tech. Let's start this week talking about how Apple's mixed reality device might not go according to plans. So there is a terrific, terrific story. I'm amazed that it's not getting more play this week by Mark Gurman in Bloomberg talking about the shortcomings of this device. Let me just kind of run through them pretty quickly. It is something that Apple expects to sell a lot fewer devices than it did previously.

2:32three million expected but now it really expects 900 ,000 units. It has many non-Apple features, big bulky pieces of hardware that just is not very traditional with Apple. There's a former Apple marketing executive saying that it could be one of the great tech flops of all time. And it is very different from what the company originally envisioned, making it seem like they're just going to try to ship something versus uh you know build until it's perfect do like cut measure twice cut once which is the way that apple typically builds so very very interesting article now i really can't wait for apple to release this thing ronjan what's your perspective here do you think that i mean for german to come out and say that this thing you know is not going to be what was expected it's a pretty big deal yeah but okay the most interesting part of the article for me was he writes apple's ambition is that customers will eventually wear the device continuously all day replacing daily tasks done on an iphone or a mac such as playing games browsing the web emailing doing facetime video calls and on and on it's the idea that this is supposed to become the new iPhone.

3:49This is supposed to be your primary computing device. That worries me a little bit. That feels a little overly ambitious. And I think one of the biggest problems I've had with the way Facebook slash meta approached the metaverse was it was an incredible gaming technology, VR headsets, and trying to force feed it into your everyday life because that's a better total addressable market rather than really evolving it as a gaming device and then seeing where it goes, I think it was a huge mistake. So I think Apple, if the goal really is to try to match the iPhone rather than make it the watch or AirPods and an accessory, I think that's going to be a huge problem.

4:34And a huge problem is where it's gone. So there's some conflicting reports because Palmer Lucky, a friend of the podcast, has tried these glasses and said this week that thinks they're amazing. And maybe they are in terms of the current category, right? But you have to think about what Apple was trying to do and where they landed. And this is a passage from the story. So Kerbin says, after initially setting its sights on a lightweight pair of augmented reality glasses, Apple gradually drifted towards something that felt more like existing devices because of technological constraints and the desire to get the product on the market.

5:11Oh, here's what that points to to me. First of all, what makes Apple Apple is that it's able to imagine the future and build that future, right? Even when the technology says it's impossible. Remember when they introduced the iPhone, Steve Jobs said what? This is years ahead of the nearest competitors. And it was because while other competitors were dealing with inferior devices, Apple pushed forward and built something that changed the game. And this seems like an also rand and then you talk about the internal disagreements right what's going on culturally inside this company and the last thing is and this is probably the most indict you know the most concerning of the entire statement is that the desire to get the product on the market it led it led the company to basically put out something that is not what it hoped initially that's just not what apple does it doesn't rush things out to market and it's doing that this This had me thinking a lot, and I am someone who waited in line for four hours for the first iPhone.

6:13I've been a long time Apple fanboy. But the last few years, it's definitely felt innovation is incremental rather than transformative. Every additional iPhone has gotten less and less exciting. Your new watches are a little bit better. So it'll be a huge challenge to see, you know, can this really be that transformative? But but I do think like, you know, now when we look back, that first iPhone was a game changer. But at the time I was made fun of because it didn't have copy and paste in the text by people at work. Like a lot of people said it was ridiculous to wait in line and spend that much money on a device for a phone, because the idea of like a smartphone as a computing device didn't even really make sense to most people at the time.

7:03So I think casting it out that easily, it still is Apple. And especially if it fits into their ecosystem, because again, I switched from Amazon Echoes to the HomePods and it just works. And it's not even perfect. It's far from perfect. But now my smart home, I can talk to from my watch and my phone. And the whole ecosystem still is where Apple wins. So how well they integrate this device and bring in a new form of computing into that ecosystem, I still think they're better positioned than anyone else. I'm not buying it. All right. I mean, when Steve Jobs came on stage and introduced that iPhone, you know, internet machine, a phone and browser, a phone and an iPod together.

7:48Yeah, okay, and that look watching that I remember I remember it's one It's the only technology announcement that I remember where I was and I'm not a gadget guy Okay, so I'll say that in the beginning. I remember where I was and it was clear that this was gonna change the game They had so many cool features and those people that were saying well, it doesn't copy and paste they were haters Okay and And frankly, you know, there's going to be people that will find the problem with everything. And that's where they were. But and I don't know, I think that it was clear on that day that this was something that was pretty transformative.

8:26This device does not look revolutionary. It looks evolutionary. And I'm willing to admit if I'm proven wrong, I'll be proven wrong. but I had never seen a story like this about Apple in the Tim Cook era or in the jobs era where the company is working towards this major major major device that it thinks could be the next era of computing and there are all these concerns about it now if they pull it off credit to them right they've been and they've been doing some things right their their internal chips the ones they've designed the m1 and m2 are amazing I mean I'm recording this on a laptop with one of those chips and man it's better than anything i've ever used the laptops work well the phones work well but it's an inability to make that next transformative product is going to look disastrous if this flops and it is a legacy thing for tim cook yeah yeah but but this think about the watch not the iphone when the apple watch came out it was supposed to be this luxury product Remember, they had the gold-plated one, Johnny Ibe.

9:29It was a watch. It was not a health monitoring device or a fitness tracker. And that's an example where Apple showed they can create a killer product by, one, actually evolving it to meet the ways consumers are using it and what consumers were demanding, and two, just making it vital to their ecosystem. And again, I have a watch. I have the iPhone. For a couple of years, I left. I got a pixel. I got a surface. I tried to leave and then I came back. You just can't handle being a green bubble, right? It's just easier. It's just easier. Actually, I remember at the time, I was married at the time and one of my friends who was single, I was telling him how good the pixel was and he's like, I'm sorry, man.

10:13I just can't text someone with a green bubble when I'm trying to date. That's the kiss of death. That's the kiss of death. So it is. But yeah, it's the ecosystem. And and again, and we talked about this the other week with Brian from Tech Meem. Like for me, the magic leap was still one of the coolest technology experiences I've ever had. So and it's almost been disappointing for me. And like, why has that technology not taken off? And I actually think of because I ascribe everything to Zerp, I think like overfunding and just overhype around the magic leap is what led to their demise. is HoloLens, from Microsoft, from people I know who used it, they talked about how amazing it was.

10:56And that kind of got sucked into Microsoft corporate politics when that company was going through a lot of change. That technology is waiting to be released into the world and made into everyday use. So I'm pro-headset. We can take the opposite sides of the matter of this one. I, again, have to disagree with you. I think the problem with Magic Leap wasn't that it was overhyped and overfunded. The problem was that they never released a consumer device. And I mean, they did. They eventually released something, but it was expensive. It didn't work very well. And they pivoted to enterprise. And the reason why they pivoted to enterprise is because it just was not convenient to wear those glasses in the pack around as a consumer.

11:41That's where the opportunity is for Apple. it's to build something for consumers to push the envelope forward on technology and create that pair of glasses that you could wear that has this these capabilities inside that no longer forces you through the constraints that you used to be with and with other technology and i think the company's inability to do that right and they're the fact that they're going to ship something that doesn't meet that bar that they set originally because they need to ship something who who i'll agree if what one part of the report said like you might have to have a battery pack that's like attached to you which is kind of how the magic leaf was you had a pack that you would kind of clip to your belt if that's the case this is not this is not going to work maybe though and and then maybe snap spectacles come out of nowhere and uh and and take over and assume their rightful place is the augmented reality kings maybe maybe but yeah i think if there's like a battery pack if it's not really a cool product.

12:45Imagine your single friend who couldn't bear to be a green text showing up to a date with Apple glasses and a battery pack. See ya. The Google Glass 2023. Here we are. Gone. So anyway, we'll see what happens. Look, I know that there's a lot of people who are big fans of Apple that listen to the show. Obviously, it's a very impressive company, and it would be unfair to judge the company on one product release. And we haven't even seen it yet, so this is clearly speculation and maybe they're going to do a good job with it. But if they don't, it's going to be a problem for them. I'm bullish. It won't necessarily diminish what Apple is, but it could lead to a narrative shift and that would be interesting.

13:30So anyway, Apple, good company, potentially shaky launch coming up. And look, Ranjan, here's the thing. If they go ahead and launch this and it's great, then I will come here on the show and I will admit that I was wrong. I just don't think I'm going to be. All right. Let's wait for that. Speaking of overfunding, the AI stocks this year are ripping. Anything that's touching AI is just basically going through the moon right now. And we like to talk about bubbles here. and there's some talk now maybe on the stock market that we are going through a bubble and front and center is nvidia which is up 116.93 year to date 116 i mean is nvidia this is sort of the questions we were asking in the zero interest world is nvidia today double the company that it was when we started the year double the company i kind of doubt it what do you think Yeah, I think stock market valuations, who's going to win, the hype around it is very problematic because we have no idea what the business models are going to be.

14:43And we've talked about that a lot on this show that, you know, right now, every chat GPT query is a money suck. OpenAI loses tons and tons of money. They've had to kind of like use financial whiz bangery with Microsoft around a quote unquote billion dollar and then$10 billion investment. When in reality, it's just using cloud credits and who knows what revenue is being recognized where. but like no one knows what the business model around any of this will be around the hardware side of it around the software side of it around the services side of it and i think like you know last week we had talked about uh the or maybe it was a couple weeks ago open source versus big tech could open source even come out of this as a winner which would completely eviscerate a lot of the investment theses around this so so i think everyone because all you have to do is say AI and investors come rushing in and probably AI algorithms are driving those investment decisions anyway from quantitative hedge funds.

15:47But I think it's way too early to make these kind of giant bets if people are really trying to figure out who's going to win and who's not. Yeah. So here's the argument for why we're not in a bubble. I was watching CNBC this week. Scott Wapner had the whole crew on. Josh Brown was making the argument that we were in a bubble. by the way, yeah, I think it's definitely a little bit of a bubble going on looking at that Nvidia number. But Scott put up a chart and I was like, well, okay, let's really be thoughtful about this. So these were the forward PE ratios in the early 2000s. So Qualcomm was at 192 times on the multiple.

16:29Yahoo had a multiple of 739. Cisco had a multiple of 134. Okay, here's the multiples today. Alphabet's at 22, Microsoft's at 31, NVIDIA for all we've talked about 63.7, Meta's at 19, and Amazon's at 76. So even if there is a slight bubble going on, maybe the market is just being restrained enough that it's not getting too carried away. I just had to Google and I did not know this off the top of my head yahoo's peak market cap in 1999 was 90 billion dollars come on amazon is what one still a trillion metas 800 billion alphabets 1.4 trillion micah you know like these are gigantic companies so obviously a ford p ratio is still kind of extrapolating out future growth so their growth will never be comparable to you know uh those at least the potential back in 1999 for a Yahoo or a Cisco, which were still thoroughly overvalued, but not that, you know, on a relative basis, not that overvalued.

17:39But I think it's fair in the sense that right now it appears big technology companies are positioned to just kind of squeeze everyone else out and dominate. The computing costs are so high, the resources needed are so high, they have the existing ecosystems to deploy any kind of new apps and services. So I think signs are pointing to these are the places to be. And again, like whatever that says about the economy as a whole is not necessarily great, but that they're positioned well. But I still think like, I don't know, it's still so early in this that I think, and maybe lo and behold, there's a new player that comes out that we weren't expecting in this, which would be kind of exciting.

18:20Well, the one that you could say is already that that new player is open AI, right, which has, I wouldn't say come out of nowhere, but certainly increased its profile to the point where Sam Altman showed up in Washington this week to testify about safe regulation of artificial intelligence. Congress is obviously taking and Washington and regulators around the world know we have international audience so we're not going to make this completely U.S. centric right this is something that governments around the world are worried about that AI is going to come in and do some things that are quite damaging and we're already seeing some big bodies out here trying to figure out what exactly to do so Altman goes in to Washington I found a few things notable first of all this is the person they're asking is the person who's leading industry it's interesting I mean, it does seem like if Sam is the one that's leading the regulation conversation, then aren't we just setting ourselves up for regulatory capture where the rules are set in a way that favors the incumbents and ices out those other new entrants that we might expect.

19:22And the second thing here is, man, I feel like deja vu really in some ways where we spent five years or something like that talking about the potential to regulate Meta and Amazon and Apple and Microsoft. All of Congress agreed on it. There were actual common sense rules that you could put into place and they did nothing. So why is something going to happen here? Yeah, I am definitely, in terms from a legislative standpoint, I'm not thoroughly optimistic, but I think it's good that these conversations are starting right now. But I also agree that the fact that it's Sam Altman up there, I don't think is necessarily the best thing.

20:04Now, I am genuinely confused as to what exactly OpenAI and Sam Altman are trying to do. Like, is this just some, you know, long term regulatory capture strategy? Because what kind of regulation they're actually looking for? I never understand this argument that comes from so much of, you know, the biggest, most influential people within AI is the idea that AI could kill us all, that there's these great societal harms, yet we're going to continue working on it and pushing, you know, wholeheartedly into it. and it's going to be the greatest business opportunity. And we want to be regulated around this existential threat, but we don't know anything past that.

20:49And we don't want to stifle innovation. So I'm genuinely confused as to what is happening, what they're trying to do here and what's happening here. Well, here's one theory, which might be that Sam Altman just enjoys being the center of attention. And one of the interesting things that came out of the hearing was that he said he has no equity in the company and just kind of makes enough money to buy his own health insurance and loves what he's doing. And is it crazy to think that Sam might just be like that unicorn type person who's just like not, man, I can't even believe I'm saying this, but not doing like evil genius ways to like 4D chest the Congress into not regulating his company, but might actually just kind of enjoy working on this transformative technology and enjoy being the center of attention and that explains everything?

21:37I, Alex can see on the video stream, the smile across my face right now. I, there are moments. So, so one, him saying he has no equity in the company blew me away. to this idea that basically there's no salary. He's already rich, so he has enough money that he does not need anything out of this is a really interesting twist as if it is completely confirmed, which I'm not sure, everything is still based on what has been publicly stated, not any kind of actual documentation. But yeah, I think, but if that were really the case, wouldn't he go up and comfortably say, you know we trained and stole the work off of like tens of millions of people and i know that could be problematic so maybe you'll have to sue the hell out of us for copyright infringement or that's a real issue you know like we know that disinformation will be created no no i mean he wants to keep working on things you know that's he has no equity he has no equity in this well that's what i'm saying that maybe it's just the pursuit of the work and that would inhibit the To create the genuinely equitable utopian future that maybe he's looking for, then that's where we should start.

22:55Because it's like, rather than talking about robots killing us all, there's very real problems that are already happening today that could be addressed and are going to have to be addressed at some point. I think copyright to me is one of the most tangible, concrete things that is going to, there's going to be a test case. There's going to be some kind of ruling around this. there's some kind of precedent. I think section 230 has to be part of this conversation because again, what is new content? What is original content? By definition, every one of these large language models creates new content.

23:30Of course, they're synthesizing existing stuff out there on the internet, but it's new content. So who's liable? This stuff is going to have to be addressed. And I think trying to take a proactive stance and say, maybe if you want to to regulate us, let's actually talk regulation, not just theoretical. Okay. So I'm actually going to point you to a piece of concrete stuff they did actually talk about. And it wasn't all, we're going to be turned into paperclips, but there was this discussion of something that seems a little bit like an FDA for AI. So here's from the New York Times, echoing an idea suggested by Dr.

24:08Marcus, which is of course, friend of the podcast, Gary Marcus, he, which is Sam Altman, proposed the creation of an agency that issues licenses for the development of large-scale AI models, safety regulations, and tests that the AI models must pass before being released to the public. Okay, so that's actually, people have said this is an interesting approach where people get licensed effectively to build AI. That's the part where I, you know, I heard that and it was just like okay wait a second maybe this optimistic take i had about like what open ai might be doing might be completely wrong because that fda for ai however common sense it seems um a i don't think it addresses a current problem where like the ai is going to turn us all into paperclips like that's not happening right now and b like who does that benefit you know it benefits the incumbents and it benefits OpenAI.

25:04Yeah, the idea of, you know, who has the resources to do a full audit on existing models, even though they have the biggest models, it would still be companies like OpenAI, Google, whoever else. So yeah, I agree that definitely would push towards benefiting the incumbents. But I think like to me at a larger level, I still can't believe we're back here where again, rather, Gary Marcus I thought was a very good inclusion into this conversation because he's someone who's been deep in the space, like a visionary in it, a successful entrepreneur in it, selling a company to Uber that was a machine learning company.

25:42And so at least having that as a counterpoint, him as a counterpoint was really good. But there's still this, even in that New York Times piece, I still can't get over how we talk about the author had written, the appearance of Mr. Altman, a 38-year-old Stanford University dropout, was his christening as the leading figure in ai the boyish looking and also traded in his usual pullover sweater and jeans for a blue suit and tie for the three-hour hearing like like like sammy someone writing a book there see yeah i know it's like tell me what happened and get to the fest yeah but there's still this he and maybe he has his pr has been genius he has established this like cult-like figure of thoughtful wanting to help.

26:31Whereas in reality, again, open AI has just been, has been just as aggressive as anyone else, if not more so in the space. So yeah, I still feel there's a lot of other members of civic society that need to be brought into this conversation rather than the people who stand to poise, to, to profit the most, even though he, I guess he does not stand to profit the most. And it's also, so I have no idea what's going on. Yeah. And the company, I mean, it started out as like a real nonprofit, but now it's cat profit. So, Oh man, I don't know. It's a very interesting question. Maybe here's my, here's my pro wrestling.

27:09Uh, hope for this is out of nowhere. Elon pulls out some like amazing early days of open AI drama in the next few weeks and we find out more about this story and things that don't quite make sense around equity and pay that's my that's coming yeah that would be great and uh look sam if you're listening come on the show i want to love to talk to you about this stuff um i've been trying to get someone from open ai i don't know maybe they think the show is too skeptical of them but anyway i'm not going to change what what we do here uh to land interviews so i'm just gonna i'm not there But I am not skeptical of OpenAI, the technology at all.

27:53I think they're like, they are best positioned to win in this space. I think like what they've done is incredible. It's just this on the regulatory side. I don't think they're the ones who should be leading the conversation. No, no doubt. I think just talking about a PR standpoint, I mean, you mentioned that the PR has been genius. I think sometimes when companies don't want certain questions asked, they'll steer their executives to certain places where those those questions won't be asked okay let's take a break we're here with the ron john roy of margins you can get it at read margins.com great newsletter on substack we break down the news here every week on friday and then we have our flagship interview on wednesday um if you're listening on the feed we do these live on linkedin so you can join us fridays typically we record at 2 p.m eastern 11 a.m pacific you can check my linkedin page, Alex Kantrowitz, for weekly updates on when those conversations will be.

28:48Sometimes we bring in guests today, one-on-one. All right, if you're a longtime listener of the show and you can rate us, five stars would go a long way on Spotify or Apple Podcasts. And if this is your first time here and you want to subscribe, that would be awesome. Again, two shows on the feed every week. When we come back, we're going to talk about the TikTok potential ban in Montana. We'll see if it ever goes effect. And then we'll hand the floor over to Ron John to talk about Shein. These days, it feels like every dollar should be working a little harder, but figuring out where to put your cash can be confusing.

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30:32It helps schedule a test drive, get pre-approved for financing, and estimate trade in value. Advanced, intuitive, and deployed. That's how they stack. That's technology at Capital One. And we're back here on Big Technology Podcast Friday edition. Ronjan Roy is here with us. Let's talk TikTok. It was banned in Montana this week, but it's a very interesting ban. So effectively, Montana is kind of counting on TikTok to not make itself available to people in the state. What do you think about this? I like that this conversation is accelerating in terms of like, it's not a ban, but it's a ban. They banned app stores from offering new downloads of TikTok to users, and you can still use a VPN.

31:23So it's still a very like, you know, Swiss cheese type of ban here. But I think it's important that these conversations are moving faster and faster. and i think i don't know we've talked about this a lot i think tick tock gets banned this year i think there's a number of reasons why it will and why it should um but even more important i think like this is a reminder that it's not going to be in just one all-out blanket ban if it happens there's going to be legal challenges different things that happen over time and then i don't know again my prediction on this is there's going to be a few just gigantic scandals that come out and then which there have already been endless things coming out and dripping and dripping and that's what pushes it over the edge.