OpenAI's 'Worrying' Q-Star Breakthrough, Google's Culture Problem, Crypto After CZ & SBF

0:00OpenAI had a new breakthrough ahead of Sam Altman's ouster. What's Google's next move after all this chaos? CZ Please Guilty and Bitcoin is rising. Crew CEO Kyle Vogt is out and Jack Dorsey does away with pips. We've got a jam-packed show coming up right after this. Welcome to Big Technology Podcast Friday edition, where we break down the news in our traditional cool-headed and nuanced format. Ron John Roy is off today. He'll be back soon. But joining us today is someone I've been meaning to get on the show for quite some time. Malcolm Etheridge is here. He's the executive vice president and a financial advisor at CIC Wealth.

0:37He's a CNBC contributor. He's the host of the Tech Money podcast. And he's someone that I've, you know, had a good time hanging out with on air on CNBC and sparring a bit. So it's great to have a long conversation with you today, Malcolm. Welcome to the show. Yeah, man, I appreciate the invite. Glad to be here. Let's start with OpenAI, shall we? I mean, we've been talking about this in depth on the show over the past week, but I think it's important to just go talk about the next chapter here. And it really begins with the fact that there could be some lingering tension about safety within OpenAI, because there's this new breakthrough that they found right before Altman was fired.

1:14It's called QSTAR. And let me just read the headline from Reuters. It says, ahead of OpenAI, Sam Altman's four days in exile, several staff researchers wrote a letter to the board of directors warning of a powerful artificial intelligence discovery they said could threaten humanity. And this is from the story. Given the vast computing resources, the new model was able to solve certain mathematical problems. The only performing math on a level of grade school students, acing such tests made researchers very optimistic about its future success. And doing math in AI is supposed to be very big because while generative AI is good at predicting the next word, if you can do math, It means you can reason.

1:56And that is considered by some a step change. Obviously, this freaks some people out within OpenAI. What's your perspective? Do you think this is as big as some of the people within OpenAI are making it out to be? And does this mean we're just going to have more of this, like, should we like dissolve and fire the CEO drama to continue? So I come down in two places on this. I think we tend to be over the top alarmist in some cases, anytime there's one teeny little breakthrough in technology. But I also think that mere mortals like myself better at least heed the concerns of the folks who are professionals with a 10, 20, 30 year history in a space like artificial intelligence.

2:41Like the fact that the people inside the organizations looking at the guts of these products are concerned and fearful tells me we have to at least consider the fact that there's something there. If there's enough smoke, there's something there. And so I think we do have to marry our greedy ambitions as investors and everything else with the idea that maybe there really is something to be concerned about. The people who are raising concern have something to say. Let me ask you more directly. Do you think Sam Altman is at risk of being ousted again over safety concerns within OpenAI? Not anymore.

3:19I think the war chest that is Microsoft has put their bet down on that horse. And I think anybody who comes and tries to rock that boat going forward is going to be up against the heft that is Microsoft, that is its general counsel, that is everything else that Microsoft brings along with it. They've gone just shy of installing their own board member on the new OpenAI board right there, reconstructing this thing themselves, it sounds like, in the background. And I understand the hesitancy of them to actually put a board member there. But I think that in this case, Sam Altman is a made man, for lack of a better way to say it, because he has the support of Microsoft behind him going forward.

4:03And you would have to imagine that. I mean, they're going to expand this board to nine people. you would have to imagine that Microsoft gets at least one of those seats. Well, if they want it, right? Because the last time you and I were on CNBC together, you said something that didn't really hit me until after the fact, but it was actually very profound, which was that Satya Nadella doesn't want to have to be called in front of Congress two, three years from now to explain himself and justify why he decided to build XYZ product underneath Microsoft's umbrella and instead would rather have at an arm's length a company that can act as R &D and go do that for him.

4:41And he still reaps all of the rewards. His company still reaps all of the rewards, but he doesn't have to be responsible for whatever accidentally also comes out of open AI down the road. I think you can also make that same claim when it comes to having a board member who represents Microsoft, because now still as Congress, I could make the case. well you were still aware you were still involved you know you had somebody who was reporting back home but if i don't have a board member taking that seat then i i didn't know what they were doing right he's a mad scientist yeah and i was channeling dan permac who was uh a guest on this show kind of the day that we both were on air talking about what was going to happen next who made effectively that case one of the things that i look at when this stuff comes up is what What is Jan LeCun, the chief AI scientist of Meta, who's been behind a lot of these big breakthroughs?

5:30What is his perspective? And there were, you know, the people who are saying that this new Q star breakthrough within open AI is going to lead to, you know, determination of humanity. I mean, Jan effectively subtweets it first, saying the dystopian fantasy of machines taking over humanity is so old that it's cliche. And then he says, he's quote tweeting Pedro Domingos, who's another researcher. And Domingos says, we need a moratorium on talking about looming artificial general intelligence until we have at least a working house bot. And Jan quotes it and he goes, even a working cat bot. So clearly the people who are closest to a lot of this research don't really think that we're even at the precipice.

6:14We had Aaron Levy make the case on this on Friday. And I think that's the case even with this Q star. Pay attention to it, but don't start running for shelter about the AI apocalypse. And that's probably why Altman is back, because it was an overreaction to something of this nature. But as an AI engineer, if I may just take the other side of that for a second. Please do. As an AI engineer, I have to at least be concerned about the fact that AGI has shown its ability to replace me, not as a human person, but as a engineer. Right. Right. And so if I just think about the fact that so many software engineer jobs have already been threatened by the fact that HubSpot, for example, I can throw into a throw in there a prompt that says, build me a website that does X, Y, Z.

7:00I wanted to interact with other pieces this way. Here are the integrations that I want to tie in and maybe use something like Zapier in the background to tie it all together. And it takes me about a weekend by myself to sit and put that together. So that scares me as an engineer of what the future brings forward, where we used to have a team of maybe 50 people it took to do something like this in a sprint. Now, one person along with ChatGPT can work this out themselves. So if I just think about what's possible with artificial general intelligence, the computer can now start to tell other computers what those commands are and what to go build using that technology, which eliminates me altogether as a software engineer.

7:41And that part is scary enough for me to start ringing alarm bells. And I think maybe that's some of what we're getting. Yeah. But the one thing about the jobs front, now I do see how you could see like the spiraling automation among AI and bots and be concerned about that. With the jobs thing, it does also seem that like we would build many more websites, you know, in a more personalized web if we just had the capability. And what this seems to be doing is giving us the capability to do that. So as opposed to firing developers, what it could do is just expand their capabilities, make the company that use humans plus AI even better at what they're doing versus more efficient and leaner.

8:21I think that's the optimist's view. I have seen how greedy these companies can be when it comes to staff headcount, right? You have somebody like Block, for example, that wants to get to 12 ,000 employees no matter what. And so we're just going to start cutting people at will because we we're fixated on that 12 ,000 headcount number that flies in the face of you know we're going to use these things to enhance your capabilities rather than we're going to use these things to replace you because that then increases our operating margin and wall street will love us even more okay malcolm i hear you on that point it's definitely it's gonna it must happen in some places but then let me put your attention to something that's also been bugging me about this, which is we have this AGI conversation, but then we're also wondering, like, what is this technology doing within organizations today?

9:15And here's a tweet from Chamath Paliapatiya, who has his own history. We know that, but I think this is a valid point. He goes, the AI industry is in a curious state right now. Billions are spent on capital expenditures, credits, and tokens, yet few incremental customer revenues are being generated, at least that I see. and gives two potential explanations. One is that AI is an efficiency play, so companies will deploy agents and automation to reduce existing infrastructure costs. Okay, it's basically what you're saying. Or two, VCs are feeding startups with billions that consume AI compute looking for new use cases.

9:52The AI compute complex booms and books real revenue, but if the startups don't find product market fit soon, then these revenues will shrivel because the startups won't get more funding and will go bankrupt. So it's interesting. So are you seeing this mostly as like companies like basically door one, where companies are just saying like, we want to become more efficient. And that's the key use case of AI. Or do you think that a lot of this AI spending is just VC shoveling money into AI startups, really desperate for a use case, or maybe a little bit of both? Yeah, I think both are true at the same time.

10:25I think we're seeing one. There hasn't been a lot of consumer use and uptake at these larger companies with their consumer facing products because they're just aren't really useful to consumers yet. the money really is being created. If you to go back to Microsoft one more time with these co-pilots, right, if I'm charging thirty dollars per seat per month. And as far as I know, it hasn't changed yet. There's a requirement for Microsoft that you've got to take up 30 seats at 300 seats at one time. And so now I'm talking about really large enterprises and government agencies that are able to get their hands on these things first, because how many people out there actually have, you know,$9 ,000 a month to spend for a team to try these things out just to find out if there's a use case or it does actually make them more efficient.

11:14So I think you go enterprise first, because that too has the cash flow to be able to afford to tinker and let you know if what they've uncovered is actually useful versus individuals paying$20 a month to use chat GPT to ask it ridiculous questions that, you know, you sign up, you test it out two months later, you cancel. that's not reliable enough. I need the enterprise client who's got some real, some real purchasing power to test it out. But then on the flip side, I think from the VC perspective, that's the age old playbook for VCs, right? Throw enough cash at it to find out if there's some there there, they'll either win faster or fail fast.

11:52And I'm going to look like a hero if I stumbled across the next Facebook and nobody's ever going to know about it if it goes to zero in two years because who cares? Right. But I also think that all of the nonsense that has happened among open AI, the attempted fire cell to anthropic, all those kinds of things in the background within the VC community has made people push away from the table already. Right. It's made them ask the same question that that you asked starting this off. Can these people be trusted going forward? Right. You have so many of these effective altruists who have somehow work their way into the AI conversation.

12:31And so now it's a, can we trust the robots? And also, how can we make enough money to sprinkle around the world to make the world a better place? And those two things are competing inside of these organizations that makes me as a VC say, why would I commit 10, 20,$50 million to an organization that as soon as they find success and they're on the precipice of an$86 billion valuation, we'll just shut everything down and say you know they're not playing fair so then what does this mean for like the picks and shovels and the invidias of the world like are they just in the middle of a momentary boom that's going to fall apart or can this be sustainable well i think for a company like nvidia who already has relationships at the top of all of the organizations that are driving the conversation today they're sitting in the perfect seat so you don't think that this vc thing is then going to just kind of fall away and they're not going to have the continued revenue well what i think is they're aren't going to be as many new entrants as there would have been.

13:30It's very tough for anybody trying to, it's already tough for any startup trying to come into the game in any arena to compete with the incumbents, right? The incumbents already hoover up a lot of all the activity, the tech talent, everything else. And so now you've made it that much harder for any startup to really come in and compete. Who's going to create a chip that competes against NVIDIA and be able to sell it for less than$40 ,000, right? That's really what you're working toward. But with Microsoft and AMD going and saying, we're going to design our own chips and roll them out. Well, now I've kind of edged out anybody who would have been able to start anything and compete, because why would you throw money at that as a VC when you can just buy more shares of AMD?

14:13Right. Okay. So Malcolm, you had this big moment on TV. I don't know if we were on air when it happened together or you had just made this statement and we came on like a couple days later, but you effectively were just like, Google missed the boat. I'm out of Google. I think that they are not going to be players in this AI race the way that I hope they would. Can you kind of take us back to that moment and kind of talk about like whether your thinking has changed with Google and AI? Because while this all happened, everyone has been asking, where the heck is Google? Where's that Gemini model?

14:45Why are we not hearing more noise from them. What's your perspective? Yeah, I think Scott thought I lost it when I when I said that. But essentially, my thinking is and still is not was. Google is a company. Alphabet is a company where 90 plus percent, 93 percent, I think, of its revenue comes from search. All of the products and services that it has out there, Gmail, the Galaxy, the Pixel phone, all of the YouTube, All of the things that it has out there in the ether are designed to get you and me back to that search bar as quickly as possible to execute another query that brings in ad revenue for the company.

15:24Right. Everything they do is designed for that. And then the ad revenue is the 10 clicks, the 10 hyperlinks that have nothing to do with what you are actually looking for. That's really what their bread and butter is. So for them to compete in the artificial intelligence conversation the way it is today, right, where it's returning you one singular search instead of 10 hyperlinks that you don't care about that are all ads that cannibalizes their entire business. So in order for me to compete against Microsoft or in order for me to compete against whoever else is creating singular search, large language model style chatbots, I would have to get rid of all of the thing that brings the dollars in the door.

16:03So as much as I want to compete and be a part of the conversation, how do I justify that to my shareholders? That's the core of my issue with Google structure, the way they've built the company around ad search being their primary product. Right. But we've heard so much about this Gemini model that's apparently in development. It's supposed to be an even more powerful or somewhat on par with GPT-4. They haven't released it yet. Do you have any thoughts about what's happening there? Is this just because they're afraid of like what the business implications will be? I mean, they can't really hold everything back because OpenAI is, you know, already pushing it forward.

16:38Well, I think that's one of the big issues within Google, actually, is how many engineers have worked on this project for the last four years that have been pushing and pushing to get this out there. They see GPT happen. They see, you know, it's a competitive sport, so to speak. So they see the folks they know at OpenAI and at Microsoft who are realizing, one, some serious shareholder value, right? Because a lot of the compensation for folks at these companies is tied to the share price. So they're, one, seeing people just make a lot more paper money than they are. But then also they're looking and saying, I want my thing out there.

17:14I've been working on building this thing for years. I want it out there. And the company is saying, we're not ready yet. It's not ready yet. We want to be responsible. We want to go slow. And I think to the question I think you're asking, the real challenge is how do we message this to Wall Street in a way that doesn't communicate that we are cannibalizing the one true business that we have here and also keep our folks inside the house happy that feel like their life's work now in some cases is actually being put out there in front of people to interact with and use and love. And your bet is basically just like they are not going to be future focused enough.

17:52And therefore, you took all your investment out of the company. Yeah, I sold all of the shares I owned in Alphabet and just said they can get there. I don't ever want to make it sound as if I'm saying, you know, Google is over. Right. Right. I do think they can get there. I think they can get there beyond my time horizon. Right. I would rather use those dollars to invest in another company that's working on something that's going to pay off in the next year or two versus waiting the five, 10 years it's going to take for them to figure out how to walk and chew gum at the same time. Okay. And so it's like a perfect lead into like what's happening at the culture there, which you mentioned.

18:30There's an extraordinary post that was just published by a longtime Google developer. I think he was there for 18 years, a guy named Ian Hickson about the Google culture. He just talked about why he's left. Let me just read a couple of selections from this and get you to respond. So he says, Google culture has eroded. Decisions went from being made for the benefit of users to the benefit of Google to the benefit of whoever was making the decision. Transparency evaporated. Where previously I would eagerly attend every company-wide meeting to learn what was happening. I found myself now able to predict the answers executive give word for word.

19:05Today, I don't know anyone at Google who could explain what Google's vision is. morale is at an all-time low if you talk to therapists in the bay area they will tell you that their google clients are unhappy at google i mean what do you make of that it's pretty extraordinary i don't want to say more than i should say here but i will say that i have also heard similar sentiments from folks who work for google that not necessarily his specific experience but that morale is slipping um that folks just do not feel the same way coming to work there and feel the same badge of honor that they used to wear their Google t-shirts around wherever they went and like the pride that came along with that.

19:47And so now you've got folks internally who are not so concerned about the long-term of the company. And that was always their thing. It was everybody's long-term focused on the 20, 30, 50 year future of the company. And now you have fewer people who are thinking about it that way. There's less of a sense of ownership. Exactly. Okay, I'm going to read some more because it gets even better. Okay. He says, much of these problems with Google today stem from a lack of visionary leadership from Sundar Pichai and his clear lack of interest in maintaining the cultural norms of early Google. He says, it's definitely not too late to heal Google.

20:28It would require some shakeup at the top of the company, moving the center of power from the CFO's office back to someone with a clear long-term vision for how to use Google's extensive resources to deliver value to users. I still believe there's lots of mileage to be had from Google's mission statement. Someone who wanted to lead Google into the next 20 years, maximizing the good to humanity and disregarding the short-term fluctuations in stock prices, could channel the skills and the passion of Google into truly great achievements. I do think the clock is ticking, though. the deterioration of google's culture will eventually become irreversible because the kinds of people who you need to act as a moral compass are the same kinds of people who don't want to join an organization without one pretty dramatic stuff leaving the company spent 18 years they're basically calling for a change at the very top but that's an example of what i mean though where you have people who have been there for years and years and years more than a decade who remember what it used to be like who so but to put this in context in my day job as a financial planner a lot of the clients that we work with are uh inside of these big cap tech companies right and so i can tell you from personal experience three years ago to get a googler to sell their rsus after they invest would be harder than you know convincing an atheist to come to church with me tomorrow.

21:55Right. Like it just was that hard now. Not so much. Right now, folks are actually like, yeah, maybe I should go ahead and start selling some of this stock. Maybe I do actually need to diversify. The word diversify was like I had cursed your mom once upon a time to Googlers. And now it's like, yeah, maybe we should actually go ahead. And so just that alone tells me quite a bit. And this is longstanding people like you're talking about who've been there longer than a decade. So they've got seven figure net worth tied to the price of Google. And it's just not the same as what I keep hearing. Yeah.

22:29And that's why I saw this post from Hickson. And to me, it's like, yes, you know, you can always have someone who's disgruntled. And there did seem to be clearly some indication of that. I mean, basically just like flaming, like different managers by name and just like, that kind of stuff kind of discredits the argument. But why I thought it was worth talking about and why I thought it was important is because it did kind of channel a lot of what I'm hearing in the back channel about what's going on there. And it was like, wow, you just went out and said it. Well, I agree with you that naming folks by name was a little bit dangerous for one, right?

23:05From a liability perspective, but also just sour grapes is how it comes off once you start down the road. But at the same time, I will say that one of the ways you're able to get folks to work on some of these projects for years at a time without it coming to fruition or without being financially rewarded the way they know they could and should is the promise that my equity would be worth so much more down the road. And then you have a company go out and try and destroy itself and erode that value over a weekend. And I lost that incentive that I once had. Or you have a company like Cruz, like I know you wanted to chat about at some point, where the Tinder offer gets pulled from under me as I'm able to finally monetize the value of the work that I've put into this place.

23:51And so when you start to play around with people's livelihood that way, and at the same time, the industry is going through pretty significant layoffs, right? We're seeing layoffs by the tens of thousands that started in 2021 and haven't stopped yet. They've just been less of a headline now because they're out the giant scary number of 10 ,000, 20 ,000 at a time like we were hearing once upon a time. But now we're still seeing units disappear by the hundreds. And so if I'm worried now that my job security is at risk, I'm less willing one to take the big swings that I would have been willing to take, you know, knowing that I've got some cloud cover here.

24:29But also I'm less willing to be long term focused and I'm only worried about the share price so that once I can cash out, it's at the highest price possible because who knows how long I'm going to be here. So I think all of that messes around with the culture and for a culture that's been built for three decades, at least on your ability to galvanize people around a future payoff, a future liquidity event, it's just tough to deteriorate that culture by slashing people for short-term gains not worried so much about the longer-term focus definitely and that was an interesting part of hickson's post he really talked about how the layoffs have slammed morale in a way that i think that is sort of lost itself from the public dialogue and that part is not just a google problem yep oh wait where else are you seeing that i won't say i won't say necessarily any company specifically along with them i'm just saying Google because we're talking about them but I will say at a lot of the mega cap techs that lay off by the 10 ,000 issue has created a morale problem for folks that's interesting because like the whole I the whole narrative around it was that it was going to spark a renewed effort and new cadence and shipping and make these companies seem like startups super hardcore right Elon style you don't think that's happened I don't get that impression I'm not inside of these organizations, so I can't say firsthand that way, but I don't get that impression from the folks that we work with.

25:59Malcolm Etheridge is here with us. He's the executive vice president at CIC Wealth. He's a contributor at CNBC and the host of the Tech Money podcast. When we're back at the other side of this break, we're going to talk a little bit about CZ pleading guilty. We're going to talk about the resignation of crew CEO Kyle Vogt and a little bit about how Jack Dorsey is doing away with performance improvement plans at Block. Back right after this.

26:51to kickstart your rewards. Visit Gemini.com slash card today. Check out the link in the description for more information on rates. Again, if you're looking to invest in Bitcoin but don't know where to start, the Gemini credit card makes it easy. The Gemini credit card is issued by WebBank. In order to qualify for the$200 crypto intro bonus, you must spend$3 ,000 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.

27:27What the hell is going on right now? And why is it happening like this? At Wired, we're obsessed with getting to the bottom of those questions on a daily basis. And maybe you are too. I'm Katie Drummond, the Global Editorial Director of Wired, and I'm hosting our new podcast series, The Big Interview. Each week, I'll sit down with some of the most interesting, provocative, and influential people who are shaping our right now. Big interview conversations are fun. I want a shark that... That eats the internet. That turns it all off. Unfiltered and unafraid. So in a lot of ways, I try to be an antidote to the unimaginable faucet of reactionary content that you see online, to the best of my ability.

28:09Every week, we're going to offer you the ultimate luxury of our times, meaning and context. True or false, you, Brian Johnson, the man sitting across from me, one day at some point as of yet undefined in the future you will die false tell me more listen to the big interview right now in the same place you find wired's uncanny valley podcast subscribe or follow wherever you get your podcasts and we're back here on big technology podcast we have malcolm etheridge here with us always great to speak with you malcolm let's talk a little bit about the CZ guilty plea. So CZ, the CEO of Binance, which effectively was the biggest cryptocurrency exchange, he pleaded guilty, this is according to Reuters, to anti-money laundering and U.S.