XBOX Layoffs, Tesla's New Model Y, $12.8M Lottery Dispute | Diet TBPN

0:02John Coogan:Happy July 4th, everyone. I hope everyone had a fantastic weekend. How was your fourth? Jordi? Incredible. It was incredible. Cinema. Tyler, how was your fourth? It was electric. Can you tell us about that white party that you went to? You can't talk about that? What about the wedding you went to? Was that a fun one? That was in New York, right? New York, yeah. Manhattan? Yeah, Madison Square Garden. But you can't break it down for us? Yeah, they told us not to. Okay, okay, got it. NDA? I'm glad you had fun. I'm glad you had fun. I'm glad everyone had fun. My 4th of July was great. It was a little, was it humid?

0:32John Coogan:Did you even get sunburned? No. You don't even look sunburned. Not sunburned. Can't say that for the rest of the team. He's LARPing. Half the team over here. He's LARPing around saying, oh, I had the best 4th of July, not even sunburned. No. Make it make sense. Yeah. Shade. Shade. You stay in the shade at the right times. UV index. You're not sunburned. Why are you? Oh, I'm brutally sunburned. Oh, on the back. On my back. Okay, okay. That makes sense. UV index. Was it humid in Malibu? a little bit it was a little humid in pasadena and it made it feel very east coast like it felt like an east coast fourth of july to me i did i did i did east coast fourth of july a couple years ago and it was sort of refreshing i don't know it was nice uh but uh drone shows we're in this year yes fireworks are out given the palisades fire the altadena fire so a lot of townships are playing it safe with drone shows instead of fireworks, which is, I don't know.

1:28John Coogan:I feel like it's cool. I like a drone show. I've only seen one when we were in France. It was cool. I don't have a problem with it, but I'm anticipating a backlash. I'm anticipating that people will be like, we got to go back to the organic, authentic fireworks, right? Yeah. But yeah, they're like, I like when the air quality is terrible. Okay. It's an air quality risk for you. You notice that? I didn't notice it this year. Did you see fireworks and drones? I honestly didn't see a single firework. I didn't see a single firework. I was up at 6 a.m., so I went to bed at like 9. I did not see a single firework on the 4th of July, which is crazy.

2:05I heard some around. But I remember when I lived in L.A., the air quality would genuinely be terrible for at least a few days because it just sits in there and there's no wind.

2:17John Coogan:When I lived in Echo Park, it was like fireworks everywhere. It's the craziest neighborhood because people in the neighborhood buy the production level fireworks. You know how normally you get like a sparkler or you get something that like shoots off a little? No, they buy the same thing that you see at like Dodger Stadium, like the cannon that goes off and goes boom. But they don't coordinate them. So it's not like there's music that's playing and then it's synced up and there's a finale. It's just whenever someone feels like lighting one off, it goes full fireworks scale. There's some really cool like helicopter video shots of Los Angeles during, I think, 4th of July where they go really, really crazy.

2:56I feel like that's a kind of thing Dalian would do is like, I'm going to go fly my plane at 9 p.m. on the 4th of July. Yeah. And just get into.

3:04John Coogan:I have some crazy video of the fireworks show at Dodger Stadium before there were regulations around drones. I had one of the first drones and I flew it like through the fireworks. And in spectacular footage, I'll have to play it on the show one day. Wildly illegal by modern drone standards. But at the time, no one knew how to regulate those things. So you could just fly them anywhere, which was really, really crazy. But a lot of fun. Anyway, big changes at Microsoft, big changes at Xbox. Xbox is cutting 3 ,200 jobs by the end of next year. And here's where it gets interesting. It's not because of artificial intelligence.

3:40John Coogan:AI, the new CEO of Xbox, has been very clear that they're not stuffing AI everywhere. They're going back to their roots. but they are focused on efficiency. And so the newly appointed Xbox CEO Asha Sharma has announced this morning that Xbox will lay off 3 ,200 staffers by the end of 2027, with 1 ,600 layoffs taking place today. She posted her full email to Xbox employees on X, and it's very candid about the operational failures and trajectory of the company. Very notable that the first major layoff from a major company just admits that the business is not healthy, he doesn't blame it on AI. Yes, that is interesting.

4:20We have not seen a layoff of this scale that wasn't at least partially credited to the productivity increases that we're seeing from AI. Yes. And this feels like the most honest layoff, and they're sort of forced into doing it because the gaming community is so anti-AI, right?

4:40John Coogan:Yeah, I think there's a few things that are going on. So, yeah, we need to break this debate into strategic. Should they be doing layoffs? What does this mean for the Xbox business? And then the communications around it as well, because the communications, we can dig into what she actually said. In her email, she says the business is not healthy and lists a bunch of surprisingly bad trends and aspects of the operation. One, Xbox is operating at margins three to ten times lower than its competitors. It released its latest console to a smaller install base while the cost structure of the console itself was higher.

5:14John Coogan:Of course, memory prices are going up now. And so the cost of these consoles is going to be even higher in the future. And in some parts of the company, work has to pass through as many as 14 layers of management. Wow, that's a lot. In the typical year, Xbox lost 64 cents for every dollar it invested. In addition to the layoffs, Asha said that Xbox will spin out game studios that it acquired over the years. Compulsion Games, Double Fine Productions, Ninja Theory, Undead Labs, and Arcane are all getting yeeted in one way or another. Satya has been running Xbox into the ground for the love of the game.

5:49John Coogan:You mean running it unprofitably for the love of the game? No, no, no. Because I do agree that they faced really fierce competition. It looks PS5 has a ton of amazing exclusives. And then Nintendo has – Nintendo – the N64 used to compete directly with the PlayStation. It was like, do you get an N64 or a PlayStation? And then once Xbox came in, PlayStation and Xbox, they fought for every exclusive. And by and large, you could play Call of Duty on either. You could play most of the games. Madden was on both of them. And so you would sort of decide, oh, I got some friends on Xbox. I'm on the Xbox crew or I'm in the PlayStation world.

6:24John Coogan:But then Nintendo went off and just did something completely different with the Switch. PC gaming continued to grow and became more and more accessible on more and more devices. So even a laptop that you might get for school can still play most of the library on Steam. And so you have more competition. And then you also have mobile. Like the hyper-casual games are taking Mindshare. People are scrolling TikTok. There are tons of free entertainment resources that they compete with. This is something all the movie studios love to say. People are making podcasts. Podcasts. We didn't have this. No, you can be gaming while you watch this.

7:01We approve. No, I'm saying because you're making this, you're not gaming.

7:04John Coogan:Oh, yeah. You were spending, at least back in the day, a pretty penny on games. That's true. That's true. So, yeah, they're tightening up operations at Xbox. The question, I think, on everyone's mind is, will Xbox be spun out as a standalone entity at some point? Is it too far afield from the core Microsoft mission? There was a move. Xbox was seen as a foothold into consumer for Microsoft. Of course, with the way Azure has grown and their cloud platform and their cloud business, really it feels like Microsoft is having the biggest win in enterprise and teams and cloud and all of the workforce and productivity tools that they launch.

7:53John Coogan:Obviously, they're very big in AI. And so the idea that the Xbox would be, at one point it came with the best 4K Blu-ray player, an Xbox One S, I believe. You can get one of these for$100 right now. It's actually a great steal if you want to go physical media, which is very popular with parents these days, instead of, oh, yeah, scroll the endless feed of Netflix and Disney Plus. Instead of that, it's like, you like Toy Story? We got you Toy Story on 4K Blu-ray. You can put it in the box, and it's$100, which is six months of a streaming service. So a lot of people are starting to physical media max a little bit more.

8:33John Coogan:But the idea was that you would get this Xbox, and you would get it because you were a gamer, you wanted to play games, but you also had an HD DVD player, a Blu-ray player, and they would also serve as your home media console, and they would grow from there, get the foothold into the consumer market. But that never really materialized. Most people, if they have an Xbox, they use it to play one specific set of games. They might have a PS5 as well and a Nintendo Switch as well. And then if they're in the Apple ecosystem and they play Xbox games on the weekend, they're not lamenting the lack of integration there.

9:04John Coogan:They're like, yeah, it's fine. I play the games over there. I talk to people on the iPhone. It's fine. So let's read through a little bit of Asha's post to see, because there's this key decision to announce 3 ,200 layoffs throughout fiscal year 2027, but announce only 1 ,600 today. The question is, strategically, what does that do for morale? Because you sort of have this guillotine hanging over everyone. Is this a good incentive for everyone to lock in and make the cut because you know another cut is coming? Is it going to stop complacency in the organization? Or is it going to make everyone start looking for other jobs and think, oh, like I could get fired at any moment.

9:51John Coogan:They've already teed up 1 ,600 layoffs. If I'm likely to be in that, maybe I should be looking for another job right now. Now, that could be good because maybe those aren't the missionaries who you want on the team. But what do you think about the idea of announcing to your company that there are layoffs today and there's also a whole bunch more coming down the pipe? Xbox slash Microsoft Gaming has around 16 ,000 employees. So this cut is quite significant. Yes. I think that at least in startups. It's 10 % today, 10 % within the next year. Yeah, at least in startups, the best advice that I've ever gotten and would typically talk with founders in my portfolio about is like, if you need to do cuts, cut deep, right?

10:38And this is like maybe this is like a talking point for at least like five significant founders and investors. Right. Like a lot of people just repeat this. Right. And I think I think it generally holds true. It's better to I think the question is like, why did they feel like they needed to cut 1600 today and then also keep a 1600 cut in the in the tank? Yeah. Like, do they need like, is there some.

11:03John Coogan:And do they know who those 1 ,600 people are? And they're like, we just need 12 months to let them finish what they're doing? Or is it that we haven't even identified them? We just suspect. And either way, it doesn't necessarily seem that great, right? Because if you've identified who you're going to cut, you should probably just do it now. It's much better to just do a big cut and then say, look, everyone who's still on the ship, we're going on the offensive. We're going to be hiring in these areas. This is where we're winning. so everyone get on because we're going on a big run right now. We had to shrink a little bit, but now we're on the offensive with this particular strategy.

11:43John Coogan:But who knows? They certainly understand the implications of doing this. Microsoft as a whole is laying off 4 ,800 employees, which is 2.1 % of its workforce. This is a massive company. And you have to wonder, because they're obviously hiring as well, Like, will the company shrink this year on the back of these layoffs or will they just do 2 % layoffs and then wind up growing the company 3 %? And so they wind up a larger organization at the end of the year. There's some interesting history here because Microsoft has had a long history of rank and yank stack ranking they invented. It was always a hardcore culture.

12:21John Coogan:People sort of forget this about Microsoft because it's such a dominant tech company that, of course, they got lumped in with the nap rooms and free lunches. But, in fact, back in the late 70s and 80s, Microsoft was famously intense, very tiny teams, huge deadlines, technical arguments. Gates, Bill Gates, was personally reviewing work, and they had a culture that rewarded extreme competence. It was sort of an Elon Musk-type endeavor at that time. It was not nice, still founder-led and product-obsessed. Vanity Fair had a profile in the company in 2012, describes young Microsoft as thrilling but also unnerving, with Gates demanding intense commitment from hires and Ballmer joining in 1980 as the hard-charging business operator.

13:05So maybe Asha wants the new culture at Xbox to be thrilling and a little unnerving.

13:10John Coogan:Maybe, maybe. So in the 90s, they started to develop a monopoly. In Windows 95, Office, there was a lot of lock-in to Excel, Word. Business was just printing cash. And Microsoft became enormous, rich, internally competitive. The company still had the old smart people, brutal review, ship or die energy. But it was becoming more layered, as we saw. 14 layers of management at Xbox in some cases. Stack ranking became part of the culture. But no one really knows exactly when, exactly what date it went into effect. effect, but a former Microsoft employee writing in GeekWire said StackRanking had been an integral part of Microsoft culture for decades, and that when he joined in 1999, it was often viewed positively as a part of Microsoft's meritocracy.

13:57John Coogan:And so StackRanking was you rank all the employees, you put them on this bell curve, you're sort of grading on a curve, you have a couple A players, but then there's certain people that are falling behind, and everyone knows where they sit in the organization. Could you illustrate this for me? Yeah. Just with the team? Yeah, yeah, of course. That would be helpful. Yeah, yeah. I'd give myself S tier, U, F tier, and I think we can start and end there. No. But Balmer came in, and people started pointing to stack ranking as a little bit more of dysfunction. Of course, there were other strategic missteps during the Balmer era, and the stock was flat, and this is what birthed stratechery as soon as Ben Thompson left Microsoft.

14:40John Coogan:He had tons to write about because he was there during the pre-Sata era when they were trying to get into mobile and did so unsuccessfully. Then Satya comes in, the pivot to cloud, the business does very well, and everything's off to the races again. But during the infamous Balmer era, there was a forced curve performance review. Managers had to distribute employees into buckets. So even a strong team had to produce winners and losers. So even if you love everyone on your team, the bottom 10 % is going to be labeled the bottom 10%. And that creates a lot of stress. But it can also create a lot of incentive and a lot of excitement.

15:14John Coogan:It can be tough but fair sometimes. But ABC. It can be thrilling and unnerving. Thrilling and unnerving. How would you describe your corporate environment? Thrilling and unnerving. Better than just unnerving. I'd rather have some thrill in there. I don't know. You sort of opt into it. You know, ideally, ideally, this is all out in the open. It comes out in the hiring process. You don't go in blind. You know what you're getting. But, of course, cultures change over time. If you've been with a company for a decade, you might say, I signed up for a chill monopoly. Why are we wartime? I'm a peacetime employee, you know, or vice versa.

15:49John Coogan:And then it might be time to find another opportunity. So ABC summarized it as managers grading on the bell curve. Vanity Fair's critique was harsher. They said former and current employees described stack ranking as the most destructive process inside Microsoft because it made employees compete with teammates instead of competitors. That's a good point. So the question is, like, is this new? Is this a new trend or is this just a continuation of the stack ranking process? It actually is new. Stack ranking would push out low-rated people. Sometimes it would block promotions, reduce bonuses, force transfers.

16:25John Coogan:But they weren't necessarily doing mass layoffs around it. That's sort of a misconception. So even if they look at all the stack ranking at the end of the year and they say, okay, these people are clearly in the bottom 10%. They saw it more as an opportunity to reallocate talent from different pieces, different teams. And it wasn't always, okay, at the end of every year, we're just firing the bottom 10%. Yeah, bottom 10 % on one team might be top 10 % on another. Exactly. Which again, thrilling, but unnerving. Overall, is there cause for optimism with Xbox? It's the hardest gaming platform to be excited about.

16:58John Coogan:When you think about Valve, it's just a money printing machine on top of PC. The PC gaming industry broadly is doing well, and PlayStation's done such a good job. Sony's done such a good job with PlayStation with creating true intellectual property. You think about Last of Us, which is now an HBO series. There's fewer and fewer exclusives. And when Microsoft bought Activision, there was talk of, will Call of Duty go exclusive to Xbox? Because that would be sort of a killer feature that would get a lot of gamers, even if they're in the PS5 ecosystem, they say, well, I want to play Call of Duty.

17:35John Coogan:I'll get an Xbox as well. They chose not to do that for potentially antitrust reasons. You can't necessarily cut it. Yeah, I don't follow the video game industry. Loser alert. I don't like video games. But the thing that's easy to get excited about with Xbox is Modern Warfare 2 Rust and 1v1-ing your best friends. Yes, but you buy it in the secondary market. That's not putting any pennies and losses. They're not printing on me. Income statement. It's rough over there. The 12-cylindri is the first car with a gated manual shifter to come out of Marinello since 2012. Ferrari is building a new car with a manual transmission.

18:17John Coogan:This is the 12-cylindri Manuale. As you can see, it's a manual gearbox in a Ferrari. And what it really is, is a mode of the eight-speed DCT, but Ferrari has added a clutch pedal and a shifter. It's a six-speed shifter. The Manuale goes on sale at the beginning of next year, at the beginning of 2027. The price will be right around half a million dollars for starters. I'm sure most of them will be optioned out with lots of goodies and cost a lot more. Do you think this checks the box? Does this count as a manual Ferrari? Are they giving their manual fans what they want? Or is this a poor simulacrum of what it means to have three pedals?

18:56I think it's an obvious step in the right direction.

19:00John Coogan:I think a lot of people will be satisfied with this. I don't know. I think this checks enough of the boxes. The purists are in shambles. TJ Parker does not like it. He says, this is far more embarrassing than the luce face plant. And people are saying, wow, that's bad as long as it's fun. Who cares? TJ Parker says he cares. It's corny, but Koenigsegg approved by the new Bugatti CEO seems missed. Look, when I see this, I think that they're going to sell at least 1 ,499 Luches. The details are hilarious and kind of brilliant. Listen to this. You can skip gears, heel-toe downshift, and even stall the car if you mess up the clutch.

19:37John Coogan:But the system will also stop you from doing something truly stupid like over-revving the engine or money-shifting the car into the wrong gear. If you're not familiar with the money shift, that's where you skip a gear too much and it grinds the gears and you have to pay to fix your engine. The Model YL from Tesla is coming to the United States. It's now available in the United States and Puerto Rico. Deliveries are still a couple months out, but it's a three-row, six-seat configuration for the Model Y. It's longer than the standard Model Y. It brings exceptional interior space with ample headroom and legroom for all passengers, 0 to 60 in 4.4 seconds, 325 miles of range, front row, heated, ventilated seats.

20:21John Coogan:They all have power recline, improved airflow, more trunk space, active damping, staggered tires for an enhanced grip, longer tailgate for better rear visibility, upgraded 50-watt wireless charging pads. I haven't seen the wireless charging pads in the wild yet. That seems like a cool innovation for your home charger. It can be a little bit slower because it's overnight, but every night. So you don't even need to deal with the plug. Well, there's other Tesla announcements. The Tesla Model Y dual zone fridge,$600. Fits in the sub trunk and has two separate compartments that can be fit, set to different temperatures from 0 to 68 degrees Fahrenheit.

21:03John Coogan:You plug it into the outlet. I love this. I think it's so cool that there's like this gadget that fits into the other thing that they have. Like they have the front trunk. No one's really doing anything with it. Why not throw a couple? Yeah, not a lot of manufacturers are really willing to promote having 30 to 40 beers. Hit the road and having 30 to 40 beers. I don't think these are beers in this image. What is this? Tesla went there. Is this Olipop? I don't know. I think it's blood orange. I don't know which one this is. There was a team that figured out how to order pizza with iMessage using artificial intelligence.

21:39John Coogan:And people are not as impressed as they should be because the image is, AI, please press the order me pizza button. And it is wired up to press the order pizza button. Yes, DoorDash sort of already created an artificial intelligence for having food delivered to you. There is a button. And you can sort of reimagine the UI in a different way. VibeCode, a button that orders you the most recent thing or interfaces with a text message. Somewhat cool. The bull case for what Arlen is working on is that iMessage is a more universal interface. Text is the universal interface in a future world where everything is done via voice or via an agent or via text stream.

22:29John Coogan:having a centralized place and not having to use a bunch of different apps and have the best app at the right time and this one's on discount that one's not and this one's your payments information safe having all of that happen below the fold is just another layer to the user experience in the modern era that it feels like it's on the way can we play this video yeah from joe rogan joe rogan Joe Rogan is talking to the CEO of Perplexity, Arvind Srinivas. Two paths to curiosity, one that can kill it and one that can supercharge it. In my opinion, the one that kills curiosity is algorithmic feeds.