Grok's AI Lovebot, Aqui-Hire-Sition Backlash, OpenAI's ChatGPT Agent Debuts

0:00Is scaling data centers and talent all that matters in AI, leaving an opening to anyone rich enough to compete? Is the Aqua Hire-sition good for tech? Grok will fall in lust with you. And AI browsers and operators are all the rage. That's coming up on a Big Technology Podcast Friday edition right after this. Welcome to Big Technology Podcast Friday edition, where we break down the news in our traditional cool-headed and nuanced format. We have a massive week of news for you. We're going to talk all about the fallout from the Aqua Hire-sitions, whether employees and investors are left behind. We're also going to talk about whether all you need is money to compete in AI.

0:42We'll leave with that. Grok's AI bot will now fall in love with you or actually really in lust. Ranjan, it's great to see you again. Welcome to the show. It's good to see you. Who would have thought acquisition would be the term of the year, but that's all I can think about and I'm going to give you credit. You coined it. I think that it's worth us shouting out right now this weird back and forth between acqui-hire, acquisition, investment. It's got to go. We need some clarity in our jargon. And that's what we're here to do on Big Technology Podcast is to bring you that clarity. It's called an acqui-hire-zition.

1:19Let's all adopt the term and get on with it. Let's just agree it's acqui-hire-zition. I think I'm on board. Let's everyone adopt it because it's the most accurate way to describe what's going on. In our two-person council here on Big Technology Podcast Friday edition, this motion is hereby considered and passed by a unanimous 2-0 vote. So let's get on to the setup here for acquihirizations, which is something very interesting afoot in the AI industry. Now, we all know that companies like OpenAI and DeepMind within Google and Anthropic have been leading this AI race. but all the designs for the transformer model and the way that you build these things have been out in the open leading to this question can players with a lot of money come in build massive data centers higher talent and effectively compete from a zero start with the established labs and the answer is seemingly pointing to yes.

2:22This is from Spyglass, MG Siegler's great news site, we're seemingly still in the throw money at it AI era. He says Meta's massive hiring spree and XAI releasing Grok 4 may be related at the highest level. That is, they showcase that we're still very much in the throw money at the problem part of the AI cycle. This is important because it means that any company with the will and resources can seemingly still get back into the race. I'm getting less skeptical on the news about Grak 4 and specifically the fact that it seems to perform and specifically outperform the other cutting-edge models on the market right now.

2:59He also says Mark Zuckerberg is spending at least as much money, if not more, than Elon with compute and the talent that Meta can get back into the AI game. So Ranjan, And I'm curious if you accept this premise that you can just compete in AI if you have enough money and what that means for the competitive dynamics of this industry that we've been talking about for so long. Yeah, I think it really adds like an entire, I don't know, dynamic to this around can you just throw money at the problem? And is it compute? Is it talent? But to me, the more interesting part of this whole trend really is actually distribution.

3:37is that you can bring in the talent, you can bring in the compute levels, but distribution is going to be king again. And I think this is where meta still has an advantage. It's going to be interesting what happens with Google. But I don't know, to me, and we're going to get more into this, the kind of depressing part is it's not the technology. It's not that initial wave of adoption for a cool new tool that's been sent out into the market. it really feels like none of that matters. And in the end, it's just going to be raw compute and distribution. I don't know. How do you feel about this? Well, I think it's fascinating because there's been this idea of powering this entire generative AI moment, which is the scaling loss, which means that as you add more compute and, of course, data to this equation, your models are going to get much more powerful and that will allow you to do more things.

4:31and it's not a very difficult thing like there's no secret sauce to it well there's maybe some but at a at a brute level if you build massive data centers you should be able to get in the game and this is something that open ai and anthropic have been harping on and now you have zuckerberg and elon that come in and they say oh okay so i can build great models by scaling this up and even if I'm a little compute inefficient because I don't have the best cutting-edge methods, I could get myself in the game and compete. And I think that is going to change the dynamics here because, as you mentioned, they have distribution.

5:12You can see Meta's, if Meta's able to build a competitive LLM with this compute and talent that it's stacking up, then it's going to be able to distribute that through Facebook products. and you know all they have to do really is slow down the growth of chat chp t similar to the way that they did to tiktok with reels similar to the way that they did to snapchat with stories and they've served their purpose so in some ways with this effort they might even slow down the momentum that the ai industry has by taking some of the people responsible for some of the key the key innovations within open ai and that suits their purpose just fine and all the better for them if they can make the best model and advance the state of the art.

6:00Well, yeah, I think, I mean, if we want to get into slowing down the industry, I think that antitrust angle to me has been one of the most interesting parts of this entire conversation. Again, we saw it with Scale AI and just buying out Alexander Wang and all of the work and value created by this company that was actually Scale AI, a critical part of building the models that power this first wave of generative AI, apparently isn't really worth that much. And I don't know, it's interesting to me because power is just going to accrue back into the big technology companies, as you said. Maybe it will slow things down and in reality it's just going to add another feature on the meta AI app that is on everyone's phone and people probably aren't using that much doesn't seem to be in the conversation in general.

6:52So I don't like it. I don't think it's good for the industry. Do you think it's bad for the industry, good or neutral? Well, I think we could have to separate out this idea of scaling up the models and everybody can play with this aqua-hier-zition idea, which we're going to talk about in the middle, which is taking the talent. I think the one thing that we should say here is my setup has kind of been incomplete, shall we say, because while we have OpenAI and Anthropic and you could say, okay, these are the independent labs and they are to some extent. Remember that OpenAI is tied to Microsoft pretty deeply and Anthropic has, I think, $11 billion that's come into it through Amazon and Google.

7:40So ultimately, I think I wonder if What we're actually seeing is all of big tech competing against each other and simply the other tech giants starting to catch up. Yeah, that's actually a fair point that even though acquihirization is the phrase of the week or the last few months, you know, we have talked endlessly for a few years now on unconventional funding practices and like calling it a fundraising round where it's really compute. So I guess actually big tech has been playing the long game for a while in all these cases. I think on the scaling law topic, though, I think I've become even more hardened.

8:23And regular listeners will know, is it the model or the product? I fall on team product generally. But I don't know. To me, Grok4 made waves. There's plenty of people saying it's doing reasoning at levels unheard of in the past, or just the fact that it's at least on par with other kind of frontier models is a kind of testament that money can compute can buy you, you know, like some kind of progress very quickly. But in reality, like on that adoption side, what's changed? Like, I don't know, like, what do you feel? There's endless stats that yes, like the chat GPDs, perplexities, Gemini's of the world are seeing more adoption, but are people really adopting the level of complexity that this new level of compute and scaling allows you?

9:14Or are people still just kind of searching for what are good? And as I'm in Taiwan right now and traveling a bit, what are good restaurants to go to in whatever location I'm going to? Like, are people really taking advantage of what's available right now? Okay, so I was going to end with this story, but now I have to kick it up. All right, go for it. This is going to be, if you have kids, you might want to turn off this section or skip till, I don't know, maybe 20 minutes from now. But we have to talk about what's happening in AI. and there is some crazy stuff that's been happening with Grok in particular this week and so I would posit that better models allow you to build better products and meta let me give meta an example as an example meta has been trying extremely hard to build voice and avatars uh with lambda with llama and it hasn't been able to do it convincingly and I think Mark Zuckerberg's belief is that there's going to be some use cases here.

10:14There's going to be the sort of work companion chat GPT chatbot. There's going to be that enterprise use case where like you're connecting, you know, one system with the other and the generative AI will like summarize things for you and then input it into another system and just make business work better. And then there is the sort of friend, lover, et cetera, bucket that is going to be big. I think that there's a belief within Meta that that AI friend is going to be one of the key product areas with this new technology. And if you have great models, you can build them. Now, I'm not going to say that Grok has a great model or a great product.

10:55I'm not going to use what I'm about to say as proof of either of those, but I am going to use it as a indication of the direction that I think things are going, whether we like it or not. This is the story Grok debuts interactive AI companions on iOS with anime avatars. Story Grok has just introduced a notable addition to its iOS app, AI Companions, which are fully 3D animated characters that can interact with users via voice. Currently, the features include two available companions, Annie, an anime-inspired character known for flirty for a flirty and whispery voice and rudy a red panda capable of displaying different moods including bad rudy yes listeners and viewers i did experiment with these companions and i have a disturbing review to deliver so you go into the grok app and you go over to the side tab and you're able to open up these AI avatars.

11:59Let's talk about Rudy first. So Rudy is like some sort of red panda or bear that seems ready to speak to kids. And in my conversation with Rudy, Rudy said, I'm going to tell you some story about some magical land. and here's a section from the story. Fluffle Sparklepaws loved to explore nibbling on the sweet moon berries and chasing glowy fireflies. One Sunday morning, Fluffle found something super special, a shiny swirly portal hiding behind a giant mushroom. It was all rainbow colored and whooshy like a magical doorway. And then this bear takes you through this interactive experience. So let's pause here.

12:44This seems like, you know, okay, this will happen. This will be a new way that kids play with computers is they'll have these magical creatures tell them stories. Wow. I mean, I think this is the nuanced conversation that you all come to the big technology podcast for. But I think, okay, seriously, a couple of things. I have long believed in again, like using ChatGPT voice mode to come up with stories for my son, like is something that I've done for a couple of years now and actually works really well. I think expanding that to an interactive avatar is a pretty logical next step. I think it's, again, interesting to me because that, to me, feels like it's going to be commoditized pretty quickly.

13:34So from an actual competitive standpoint, from a business standpoint, I guess it's not that interesting to me. To me, everyone is going to have that available. Everyone's going to do that pretty quickly. so to me i don't know like why why do you think that's something do you think grok is just going in that direction just to make waves and clearly we are talking about it or do you think there's something within this that actually is native to x to xai there's something underneath it i think i think the way that a lot of tech companies operate is they think about user retention, user stickiness, and engagement.

14:16And anyone who's developing AI is going to say, how do I increase all those metrics? Do I make like this genius level AI bot that can help me with my work? Or do I create for what is becoming the number one use case, companionship and therapy? And many are going toward the companionship and therapy side. And if you're going to do that, if you build models good enough that have emotional voice or voice with an emotional register, an avatar that you can speak with, and something that responds with low latency and in real time and can customize to a person, then you might want to put it in one of these products because you believe that a kid, for instance, I'm just going through the business logic, will spend much more time with the ethics side if they can speak to this elephant or red panda or whatever it is in a way that they wouldn't with like chat gpt okay i get that side of it a bit i mean on one hand it's kind of almost comical to me that for all the talk about uh ai taking over the world and skynet and like artificial super intelligence if this entire battleground plays out on time spent metrics, which is probably where Mark Zuckerberg is thinking.

15:37I mean, I've read a lot around like, why is he so going full like Zuck war mode right now? It's not because of some like intellectual desire to be the one to crack the code of artificial general or super intelligence. It's because ChatGPT represents a threat to how much time people spend scrolling Facebook and how many ads you can show them, which is kind of like I respect from a cold business logic. But yeah, it's almost comical to me that if it's for all the talk about everything's going to change, this is just about time spent in selling ads. I mean, maybe it's both, but it seems like it's probably at least the time spent thing.

16:20I mean, these are social media companies, right? So I mean, And X and XAI is a social media company with an AI development side of it as well, or tucked into an AI development group. But ultimately, these are the metrics of social media. Now, one of the disturbing things that happened here, and this is the thing that I was kind of setting up, or no, actually, I really don't find a way to view this as not very disturbing. It's just the proximity, because next to Rudy, our happy-go-lucky bear friend or whatever it is, is Annie. Not Bad Rudy. Bad Rudy. Bad Rudy is... Is he bad? How bad is he? I don't know.

16:57I kept saying I want to speak with Bad Rudy, and it goes, I'm sorry, Brad Rudy is not here. And I'm like, no, bad, bad, bad, bad, bad, Bad Rudy. And it was like, I'm just here to tell you a story. So I'll spend the next week trying to unlock that and report on the next week's show whether I've been able to. But let me speak about Annie, okay? because Annie is like an anime love bot. I think there's no way to talk about it otherwise. She immediately started flirting with me. She called me babe within like three minutes and I was completely vanilla with her. I initiated nothing but a friendly conversation.

17:36And then she starts asking me to tell her my secrets and kept saying, I can make it even spicier if you want. Let me read a little bit of what Annie told me. I slide closer in my black dress, catching the glow and whisper. Drop a secret and I'll give you one of mine. Something real naughty. For every secret you share, I'll hit you with a flirty move. Maybe a slow teasing sway or peak. That's all yours. You feeling this heat yet or you want me to turn it up even more? wait are you uh is this part of like the paid x premium no subscription it's free this is just freely accessible yes for anybody in the app next to my god child elephant thing that tells you stories mr fluffy swooshing thing mr fluffy swooshing good rudy and then annie's right next too yeah i mean i i agree and like it's interesting because i mean you had the ceo of replica on here a few months ago i think it was like the companionship topic you know we've covered a good deal it gets more real it gets more weird seemingly every week and every month but i agree it's certainly going to be a core part of how this all plays out but to me again going back to like How does that fit into the larger battle when we're talking about complex models and thinking and reasoning?

19:09And is it all just going to kind of filter its way down into bad Rudy and Annie in her black dress? Or is that just a front to capture some time spent while they work on the real stuff? Or is that the real stuff? That's the question that I struggle with because I almost feel it's the latter.

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21:17the gemini credit card is issued by web bank in order to qualify for the 200 crypto intro bonus you must spend three thousand dollars in your first 90 days some exclusions apply to instant rewards in which rewards are deposited when the transaction posts this content is not investment advice and trading crypto involves risk the gemini credit card cannot be used to make gambling related purchases so i think it's going to be both in some ways like you're going to build these and that's what's interesting about this technology is it does have the ability to perform across domains. So my perspective is you're going to get those great models that will be useful to, let's say, biologists who are doing their experiments.

21:56And then you'll also be able to productize them into these weird or interesting consumer use cases. And I bring this up not to be this like moralizing podcast host that says you shouldn't put the porn bot next to the child elephant, although I suppose it was worth saying that. I do believe that. But I think the bigger picture here is, you know, beyond that, that this is going to be a real use case that a lot of people are going to engage with. And I think they know this. And I think we're just at the very, very beginning here. I guess like one of the things we like to do on the show is like put flags on the ground and say, we're pretty sure that this is going to happen and grow and become a lot bigger.

22:39and that's what I'm doing right now. I think that this is something to watch. Yeah, I'm not going to disagree with you there. I mean, again, the idea that we folded proteins with AI so we could get to bad Rudy and saucy Annie is, again, quite something to try to process, but it does not seem ridiculous that the killer use case for generative AI that the entire industry was looking for was bad Rudy. we still don't really know about uh bad rudy also i'm not uncovered bad rudy yet yet that's true i have this i'm also on level one of annie apparently it's gamified so if you get to level three it gets really not safe for work three alex don't get to level three no one of my goals no one is asking you to get to level three i know one of my goals in 2025 is to make sure that my marriage isn't ruined by one of elon musk's porn bots and so i'm gonna to stay on level one and not go any further.

23:37I think to all of our listeners have high ambition and goals and make that one of them. So, you know, I think we, so, so that's the product side. And we've talked about scaling what, what these big models get you on product. But we should talk about what's happening with this aqua higher position situation in the industry, which we've touched on a couple of times. You know, last week I was on with Aaron Levy. We were talking about this windsurf aqua hirezition where google has paid 2.4 billion dollars to bring on some of the top leadership of windsurf and the big fallout here i think more than any aqua hirezition that we've seen is that it's been a great exit for the founders but we still don't really know if the employees are going to end up getting and the investors are going to end up getting their share Now, Windsurf was quickly snatched up by another company, Cognition, but you do wonder if it was a traditional acquisition versus this acquihire-ization and then follow-up deal, I don't know, smaller deal.

24:45How does that change things for the employees and how does that change things for tech? And I know you have strong feelings about this, Ranjan, so I want to give you the floor to air them out. Well, yeah. Okay. So from reporting, again, founders made out very strongly with Google paying, I believe it was$2.4 billion for the talent side of Winsurf. From what I had read, preferred investors were able to make their money back, not see some kind of outsized return. But again, none of this is fully confirmed. This was just some reporting, I believe it was from the information. To me, the more interesting part is, so then you have the entire employee base.

25:29They're bought by Devin, which is owned by Cognition Labs, who's raised$175 million in venture so far. So there's no way from a cash perspective that the employees of Winsurf or anyone is seeing any kind of significant return or even making any like a strong, like a large amount of money. Maybe it's an equity for equity swap. So now you're at least now in Devon, which was, if we remember, they had a really buzzy launch video and had a lot of hype and then kind of went quiet for a bit. Still valued at, I think, yeah,$4 billion right now. So that equity could be worth something. But overall, to me, this is one of the most troubling trends in the industry because in a weird way, there's been a lot of talk like, and it's funny to me because you see a number of people, you know, kind of almost ranting that because of LenaCon, because of the FTC, the big tech isn't able to now just properly acquire these companies.

26:33So they have to come up with these roundabout solutions. To me, it's a bit ridiculous because this is exactly what antitrust is trying to prevent. It's consolidation of power. It's the idea that windsurf could have been the next big competition to a google or a microsoft or even an open ai who tried to buy them but like which their relationship with microsoft was apparently part of the reason that that deal fell apart like this is the foundation of antitrust the idea that startups should grow and compete rather than not only get in this case not get acquired but essentially get killed off and have their founders get paid a lot of money.

27:16It's bad for the employees. It completely distorts the economics of joining a startup itself. So overall, I see no positives to this trend. Do you see anything? I agree. No, I don't. I personally think that you're right, that it does seem like the antitrust movements have backfired. If you have a situation where you're going to see an acquisition definitely blocked, you're not going to do an acquisition. You might do something like this. It's a roundabout way. The one interesting thing is Lina Khan isn't in the FTC anymore. It was supposed to be an FTC that's much more open to acquisitions and tech M &A.

27:57So I'm curious, do you think that these companies still believe that they won't get past that Federal Trade commission or do you think that the constraints put on by the last ftc lena khan's ftc led them to find this loophole and they really freaking like the loophole and they're gonna just keep doing it this way so in that way you know it's possible that the uh mna unfriendly era of of past has led to large uh long-term damage on this front yeah i think it's both i think it's i think It's certainly like actually the constraints imposed by the Lena Kahn regime. But also even now, again, big tech is not in the favor of the current administration and the current FTC itself.

28:43It's supposed to be more business friendly, but it's specifically big tech companies that are in the crosshairs often and make for a good punching bag anyways, even by the current administration and the current FTC. So I think it's a bit of both. But and again, as you said, they love loopholes. I think like this, it's creative. It's working. Everyone seems to be doing it right now. But to me, again, the bigger issue of this is really the thing I can't stop wondering is like, are the assets of these companies all worthless? is scale ai was it really not worth that much was windsurf which you know really took off really became this useful tool has i believe like hundreds of thousands of developers on there using it regularly made for a better product than other much more like entrenched products that are out there even a github go pilot so clearly these products hit a hit a nerve and and worked and worked at scale but then are they really just not worth that much like that is that user base is the product itself and is the talent really the only thing that matters well they let's talk about scale just to talk about how complex these deals are so first of all when meta made this deal with scale i think it bought 49 of the company so the idea was the company would continue as normal and by the way they do have business lines that are going to continue as normal.

30:17But when it comes to, I think, when it comes to a fast-growing line of business, like creating data for gendered AI, you now have Meta, which is one of your competitors. If you're, let's say, you're an open AI or a Google that has a large chunk of this company, has also taken some of its top leadership. So do you still want to work with that company? I think the service is probably still valuable, but you're just effectively giving money to a company that has a massive ownership stake that now lands with a competitor. I mean, of course, AI, as we know it today, is, I don't know if incestuous is the right word, but let's say deeply interlinked.

30:59Again, we talked about Anthropic. Anthropic is owned by a chunk by, well, yeah, owned a chunk by Google, a chunk by Amazon, OpenAI, owned a chunk by Microsoft, or at least has this deal with Microsoft where it has to give it its future profits a good chunk of them so there's always going to be these combinations but yeah if you have a company that has that gives 49 percent of itself to another company that you happen to be competing with you're going to reevaluate being close partners so I think some of these companies they have they provide services they depend on their relationships and when you throw off the equilibrium you're going to you're going to throw off some of the value.

31:36Although, who knows? I mean, scale, they did just do a 14 % workforce layoff, which is about 200 employees, according to The Verge. But I did speak with their CEO, Jason Droge, and he's told me that they're still full steam ahead and they want to go push some of these business lines that they have, which includes working with governments, which includes working with companies to stand up AI instances. So it's possible you get two exits, although obviously the degree of difficulty is much harder. And one last thing, what struck me as interesting in this, there was a great Bloomberg story that you and I both dropped in our collaboration doc for this.

32:15There was an investor, Ali Oje, he's the chairman of Northgate Capital, a venture capital firm that invested in inflection AI and goes on record to say, I dislike the phenomenon. and that these acqui-hiresitions are hitting the outlier companies and it's favoring the founders over shareholders and employees. So I think we're at this moment where the backlash is really, really hitting. Do you think we'll see any kind of actual negative effect from an actual fundraising standpoint? Because if VCs who are plowing money into the space start to worry about, in the past you just had to worry about company failure, now you actually have to worry about a successful exit for your founder actually does not benefit you so your interests are not aligned does that make them pull back or is the FOMO just so strong that people will still be throwing money at whatever they can no inside knowledge here but VCs you know fool me once shame on me fool me twice shame on no fool me once shame on you fool me twice shame on me uh that's always hard one to get out of your mouth but anyway they're gonna write i think they'll just write into contracts that like the ceo uh cannot do a deal like this if if they're i think yeah i guess like a trunch they might not be able to get right yeah ahead of the founder even which would be pretty aggressive but maybe they need to do that at this point yeah and it sort of depends on who's which company is and who's got the leverage but I think they're going to get smarter about this.