81. What we learnt from the Meta whistleblower

0:00Sarah Wynn-Williams:Welcome to The Difference Engine, the show for tech founders, investors and innovators.

0:09Okay, so what's coming up on today's episode?

0:13Sarah Wynn-Williams:Well, we're going to be delivering more than a token presence as we analyse the rising budget-busting cost of AI and what it means in practice. But first, we turn our attention to a headline-grabbing book that you might be reading on a Sunlinder soon, proving you do not need to be a referee to blow a whistle.

0:33Okay, it's that time. It's that time to figure out what the book that everyone is talking about. I refer, of course, to Careless People by Sarah Wynne Williams. If I pronounced that correctly. This is the book that everybody in tech is talking about for various reasons. And I guess part of the conundrum of the book is, is this book from a meta whistleblower hubris or sour grapes?

0:59Sarah Wynn-Williams:oh and wasn't there a connection to a late and probably unlamented deputy prime minister you don't know this but uh on thursday of this week uh i was in a private members club that you and i know and love or tolerate and and there was a said prime minister mr nick clegg uh advising some other political part uh party literally a different political party to his on uh what was going on the uk politics but no photographs are allowed so i can never prove that there you go um no but so So Sarah's job, which was brilliantly the way she tells it, was something that she created herself. So she basically talked Facebook as it was, Meta as we know it, into creating what became quite a big corporate affairs department and critically important to their success or failure.

1:45And still more so than ever, I would say, because big tech at the moment, although it's created a stranglehold on social media, lots of governments are just beginning to warm up, limber up for a big fight. and you see Australia with the children's ban, something alleged here happening in the UK and Canada to follow.

2:03Sarah Wynn-Williams:And it's also not escaped her attention that the CEOs of big tech now appear to be visibly wielding more power than politicians. She was part of that, actually, and I don't know how she feels about it. We'd have to get her on. But the Hay Festival, Jono, have you ever been to the Hay Festival? No, no, no, and that's way too posh for me. This is a rural countryside get-together. It's where West London decamps, doesn't it? It's where literary West London decamps. Yeah, West London on Sea. This is where genteel literary types exchange book reviews, where writers head out on the train to shill their books and read them out to the appreciative audiences.

2:39Now this year, a lady by the name of Sarah Wynne Williams sat silently on stage, watched by eagle-eyed lawyers, and unable to participate in the launch of her very own bookie-wookie.

2:51Sarah Wynn-Williams:Maybe people thought it was some sort of weird art installation that was happening at the time. That's very Hay Festival. Very Hay Festival. But it was a lot more serious than that. And subsequently, her lawyer, who was on a radio program, was unable to refer to any of the substance of the book, or the nature of her allegations, or the existence or substance of any restraining orders, in one of the most free speech light radio interviews I've ever listened to. Could they confirm or deny that the book actually existed? We're going to have to use allegedly a lot here. And in fact, the reason that we're covering this now is there's a new twist.

3:27There's a court case that we've noticed has popped up in the States. And in this court case, allegedly, allegedly, Meta alleges that her very silence on that stage resulted in more sales of the book. And I don't think she's allowed to promote it. Despite all of that, it has hit the bestsellers list after her mime promo. So maybe this public affairs maven is actually a dab hand at PR. So who on earth wants to keep their business that quiet? And why? Let's talk about the substance of the book. So here are some of the things that are covered in the book. And I would encourage you to read it. Oh, and the other thing to say is she happens to be married to somebody at the Financial Times.

4:14So how she kept this quiet, I mean, hat tip. One of the things that people often wonder about Meta is how aggressive its acquisition strategy was. Now, she alleges, or it's alleged in the book, that competitors like WhatsApp and Insta were specifically acquihired or taken out of the market, specifically to freeze them out of the category space that, you know, brilliantly Meta saw. And that's something that a lot of people have thought about. And it may explain why so many people were pink-slipped recently, because essentially it didn't sound like they needed them for what they were doing, allegedly indeed.

4:50We all know, and he pioneered it probably, the share structure of Meta is something that gives Mr. Zuckerberg absolute control. and from what we've read he really does or did at least live the break things and move fast motto and that clearly uh works up to a point quite a high valued point in this case you know trillion dollar point um what maybe escapes that or the consequence of this and possibly why the pushback from government is happening is like when that ethos affects democracy and influences free will And there are all sorts of stories here about Myanmar and the Hong Kong riots, etc. They do say power corrupts.

5:38Sarah Wynn-Williams:Maybe slowly at first, I reckon, but then it can all come home to roost. Yes, there's only so many private jet flights you can take before you start thinking you're God's gift. But what's fascinating about Sarah's journey is she's alleging that Zouk had to have it all explained to him, that Facebook's involvement in politics was significant. I think we've got a little bit from the book. So from the book, this is what was explained to Zuckerberg, allegedly, on a 10-hour private jet flight. Facebook embedded staff in Trump's campaign team in San Antonio for months, alongside Trump campaign programmers, ad copywriters, media buyers, network engineers and data scientists.

6:29Boz, who led the ads team, described it as the single best digital ad campaign I've ever seen from an advertiser, period. I'm sure Boz is gainfully employed doing more of this single best digital ad campaigns ever, but it does completely prove, unlike what the testimony in Congress was, that Facebook and others very much do leave the agenda. I think this was something that was denied for years, and here it is in the book, out in the open.

6:58Sarah Wynn-Williams:Well, it doesn't necessarily prove it, does it, Paul? It's just one person's opinion who wrote the book. The danger of a fractured vision is also really one of the major points of the book. And I think here there are some lessons for all of us, really, especially in the category building world. If you don't continually share what the company is about, you know, and potentially and allegedly, maybe this is an example of it, your team will desert you or wait for the opportunity to potentially stab you in the back. now there is to be fair there's clearly a conflict of interest uh in the book because clearly you know the writer was quote quote taking the devil's shilling uh and earning a pretty penny um as one of the most successful executives in one of the most successful software companies the world's ever seen doing great work and depending on your view of that sarah was paid enough to keep stum for years or and that's obviously the narrative of the book she finally did the right thing after struggling with her conscious and made this agonizing decision to go public isn't there a phrase there's none so righteous as the converted i mean having read the book and given some of the personal traumas that she and her family went through i think on balance given what this lady has has been through we'll go with uh doing the right thing after an agonizing decision and coming to that conclusion.

8:25One of the things that's very clear from the book is that would back up the claim that this was a really agonizing decision made on moral grounds is that the writer makes it clear that she was not working and by choice on collaboration on the China side of the business, which was clearly of great importance to the leadership. So there was some internal pushback on foreign collaboration. And that meant that the China project, if you will, I think they called it Project Aldrin, was pushed off to one side.

9:03Sarah Wynn-Williams:There's a lot of buzz around it. Yes, certainly it rocketed. No need to apologize about that. Oh, dear. Wow. The internal decision specifically highlighted here was that you know, the people that worked on the China operations of Facebook, which was significant, as we say, were allegedly collaborating very closely with the CCP, the Chinese Communist Party, something that the writer slash whistleblower, she tried her best, as she tells it, to avoid it professionally until forced, reluctantly, as she claims, to accept China as part of her role. Sorry, this is somebody who had actively created Frankenstein's monster, and she's suddenly saying, oh, I don't like the way this is going.

9:49To be fair to her, I think she said it from the start. Eventually, she was forced to take that as part of her role, as she tells it. And from the book, here's how that is conveyed. The ugly fact is that many of the things Facebook has said are simply impossible when Congress and its own government have asked on content, data sharing, privacy, censorship and encryption. And yet its leadership are handing them even all to China on a silver platter. Now, that's clearly a strong allegation that is from the book. And who knows? Maybe the truth will come out in subsequent legal proceedings. But we do know that there is now a legal case.

10:33And the allegation there is that Facebook owes a large amount of expenses. So it sort of all comes down to that horrible lucre thing at the end, as it always does. So I guess we've got to ask ourselves, what do we learn from reading this book? Ultimately, in all of these cases, how heavily should we weigh these claims?

11:00Sarah Wynn-Williams:I don't personally think it matters that she's connected to the FT's news editor. I am really, frankly, surprised that anybody's surprised about this. Yeah, I think that's fair. I guess it's always different when you read it in black and white, and it's told in quite a compelling way, this version of the story. Yeah, I'm also not really that convinced that buying competitors like Instagram and WhatsApp to freeze them out, it looks to me like they had a bit of a vault fast there. And WhatsApp, Instagram seem to be doing quite well. Yeah, no, absolutely. Well, of course, but I think the point was they were independent organizations before they were taken to be, you know, as meta built its category.

11:53Sarah Wynn-Williams:Oh, so this is about ensuring that they were on the inside of the tent pissing outside rather than being on the outside of the tent pissing inside. It was about control. Control of the category, absolutely. And I guess the other thing is it's impossible to know, you can't prove a negative, that Instagram would have gone on and done anything of significance. Absolutely. It could have been the perfect time for their shareholders to bail out. And I'm also not entirely convinced here about why that is, oh, my God. I mean, acquisition to kill your competitors or acquisition to control your competitors is what companies do.

12:34Sarah Wynn-Williams:It's a strategy that will be taught on any MBA you could go on anywhere in the world. Absolutely. So what? The counterpoint would be when Meta tried to go at loan and innovate its category into what we tend to forget is the reason for its name, the Metaverse, that didn't work. So actually maybe acquisitions are a genius move. It's called buy or build. And they realized that part of their strategy wasn't going. So they adjusted the strategy and they had built their company to a state where they could make that level of acquisition at the level of price that was being demanded for those relatively immature companies at the time.

13:16Sarah Wynn-Williams:So I think you should look back at that strategy and go, pretty good strategy. That actually worked. Yeah, you're sort of winning me over to your opinion here, because I think then Zuckerberg's absolute power, the dual class shares, which allows those strategies to be implemented, are aligned. Well, it's autocracy, right? So we know the benefits of autocracy is you can make things happen very, very quickly, but things can also go badly wrong. That's sort of why democracy started to appear in the first place. Well, before we go there, I think this is a decent holiday read. If you've got any concerns about your data privacy while you're busy posting holiday snaps and messages on Insta, on WhatsApp, or the good old OG Facebook, you might want to read Careless People, Power, Greed, Madness by Sarah Wynne-Williams whilst she's on her summer holds.

14:17Sarah Wynn-Williams:hey paul have you noticed that everybody is complaining it seems everywhere in the world about how the cost of living has gone up and all the politicians are trying to get on it um yeah of course that's true it's particularly true if you're using a whole load of ai tokens absolutely um well you know think of the great advantages of building up category momentum one of the things you can do because right now you're focused on momentum is to just offer your services for free um i think pre-freemium yeah freemium we've talked a bunch of times on this pod about that um we like it but all good things come to an end could we now be at the era of looking down the barrel of some shocking bills to come from our previously free AI products.

15:02Sarah Wynn-Williams:Right. So anybody who has not been vaguely sentient for the last decade, at least, should, should, should have figured out by now that when the product is free, as some wag put it some time ago, you are the product, right? You get Facebook for free because Facebook is harvesting all your data and the value of that data is way more than what it cost them to provide you with the inverted commas service this idea of the product being you used to allude very much to social media um i guess other things like you have free video games if they're of any any interest oh they're of interest you see people on the tube in the morning yeah they're of interest yeah yeah yeah and of course yeah back in our day commercial tv and radio right so you got some nice tunes paid for you but had to list some pretty dreadful ads in the middle right so but now it seems very very quickly unsurprisingly in a world that constantly speeds up to apply to ai and tokens yeah they're becoming a critical issue for enterprise tech um reading in the financial times uh love this headline we created a monster quote companies rein in ai usage as costs strain budgets when these are the same companies who are making a big deal about the cost savings of getting getting rid of people and replacing them with ai in some cases they still might because the folks that are doing the whinging here are amazon yeah walmart yeah uber coming coming uh so these are the early adopters that have uh now uh internally introduced caps to their ai usage or discouraged wasteful activity and it goes on to say companies that race to put ai tools in the hands of their workers are starting to rein in their use as the cost of deploying the technology at scale begins to test corporate budgets amazon walmart cisco uber meta among the early adopters that have introduced caps discouraged wasteful use or pushed employees to cheaper models i'm thinking chinese in a bid to keep ai spending isn't there a a fable of many many years ago that never ever seems to lose its potency um would the phrase pandora's box apply here yeah i think it very well i think it very well very well might but i don't think um many folks really predicted this or it happening as quickly and clearly it's happening because you know there's a lot of money going into data centers and nvidia chips and um did you see the news about um memory maker sd micron as i call it or Micron as it's called now.

17:44Sarah Wynn-Williams:Oh God, the valuation. Overtaken, Meta, I think SpaceX. It just, you know, for a humble memory maker, it's pretty amazing stuff. Who'd have thought, who'd have thought that if given apparently free access to the power of AI in a world where as a worker, you are being told constantly that unless you get up to date with AI, you're unlikely to have a job, surely that's going to incentivize you to use the hell out of any AI that you're offered because isn't that what you're supposed to be doing? You're supposed to be adding value by becoming this new hybrid human AI individual. Yeah, and obviously the doomsters are out there saying that you don't use AI, you ain't got a job.

18:26But I can tell you from personal experience with our graphics team here that you're the amazing video generation capabilities that were once available with Nano Banana, et cetera, on Google. I'm having the conversation, well, I've run out of tokens. Like this isn't even a conversation that would have happened a month ago or maybe two months ago. And now everyone's like, oh, shit, there's a concept of a budget. I've got a thing called a token. I'm out of them.

18:52Sarah Wynn-Williams:It's going to be very interesting how that's going to appear on companies' balance sheets and reports to HMRC. I'm really glad you mentioned that. That's a brilliant take. Yeah. So the issue here is, if it's too expensive to use expensive tokens from OpenAI, Anthropic, and all the other guys desperately trying to IPO, where am I going to go? Literally, where will I go if there's a mass exodus? I guess I'm going to go overseas. Now, what country could possibly have a reason to supply the world with very cheap AI? Who would possibly make the case for cheaper, free, open-weight models? Oh, yeah, maybe China, possibly.

19:36And then what you've got is you've got a viable alternative to Western democracy, which is messy at the moment, expensive non-conformity and free speech. You've got an alternative to horribly expensive Western AI.

19:53Sarah Wynn-Williams:yeah but you've also got possibly got an opportunity for europe to get its act together right and that's i think the big opportunity for european category creators is we have got a role it would seem this is the moment to strike because you know big tech has never been less popular and they got a they got a problem that they're coming with the bills you know we've gorged on the meal and now they're coming with a sir can you just settle your tab and it's never a comfortable moment, right? This is, as you rightly point out, a chance for Europe. I didn't see it before, because I thought we've had Christine Kaffera on this pod before making the case that we just think we can regulate our way to market success.

20:34But with the pricing, we're not really talking about regulation. We're talking about commercial reasons. And so I'm beginning to wonder if European regulators, certainly European founders and policymakers, can in fact fundamentally alter the trajectory of this category and maybe change the aspirations for big tech?

20:57Sarah Wynn-Williams:I mean, too much too soon from big tech, perhaps. Or can Europe actually react quickly enough to start to get up into that LLM space rather than shaping its future by applying AI in very particular vertical markets and other applications? Yeah. And so the cracks are definitely appearing. The recent update to Apple's Siri model, which has to be said has been appalling thus far. Rubbish. But unfortunately for we Europeans, we cannot get the latest version. We will not be released in Europe as reported in Politico. And I quote, Apple blames EU rules as it withholds new Siri AI from European devices.

21:41And another bit of human psyche is FOMO. do you know do europeans um the users i'm i'm talking about here not necessarily the policymakers do they like the fact they can't get the latest greatest apple product the same way as the rest

21:55Sarah Wynn-Williams:of the world can i think not well increasingly they might not care they've seen what comes with that at this juncture in time then with ai costs becoming an issue with you know cso's and cios rattling back their development teams from just using tokens willy-nilly where are we in this in this fast evolving AI space and the categories around it. Well, it might be time for companies to be a little bit more honest about how much AI is going to replace the people that they already employ and have invested in. They might also start being a little bit more honest about which people are going as a result of the implementation of certain sorts of AI and which people are going because they massively overhired in the first place.

22:41Yes, and if it's a choice between go and build something that I will possibly get some value out of down the line to replace the people who are already giving me value, if the costs go up on the bill side, might I be better off retraining the folks that I've got and not putting all of my eggs in the basket of a company who controls the bill?

23:04Sarah Wynn-Williams:It's sort of interesting. I mean, again, the lessons of history may tell us that, of course, this is not going to be the horrible apocalypse for big tech that we thought. I mean, you know, when tractors got introduced and they started to become a bit more expensive because demand outstripped supply, people didn't suddenly go, oh, God, sorry, horses, you can come back. We'll go back to doing that because the genie was out of the bottle. so the commercial issue here is you know which of the large llm suppliers are going to go are going to adjust the pricings of their tokens so that people can use more you know we're back to what we discussed in recent episodes here which is like the jevons paradox well there is i think there's an alternative now which is looming very very bright which is um you know if you overprice on the tokens, there is an alternative, which is free, which is open weights, which is, you know, probably Chinese.

24:06And that presents new opportunities for the types of categories that we've talked about here before Europe might be well placed for. So built on something open source, not paying the tax to the man, if you want to think about it like that. And my question is, is will these categories emerge and will they have a lot to do with this cost change and i think they will if you look at the one of the things we look at in category uh formation and design is novel language and we see a lot of that around this we already seen token maxing which is the idea that you use as much as many tokens as you can obviously that's probably not great if the price is going up and even uh and i like this one tokenomics so does the price i'm paying for tokens stack up from a business value point of view more of that in a future episode no doubt but these pricing constraints are something that category builders especially those in europe need to take seriously because often constraints make for better products right yeah and and this is also you know that that

25:09Sarah Wynn-Williams:that issue that you have to deal with if if your business is fundamentally reliant on somebody else's business and you know that that that makes it very difficult to to establish long-term categories because so often your business is just a bit better than the business you're sitting on top of so you need to have a bit of a bit of a break there i think and if i just my opinion uh for my offer an opinion on that i don't think it fully played out with the cloud uh previous cloud innovation because there were plenty of businesses built off the back of Microsoft, Google, Amazon, et cetera's cloud models that the big guys allowed to prosper as they should.

25:52Smart, building an ecosystem is a smart thing to do with a category. But I'm just not sure in this instance, if we can read across because I fear a mass exodus to cheaper or free AI models and potentially a misstep by our friends in the US agomony on tech.

26:10Sarah Wynn-Williams:So you're saying that potentially US suppliers should have a good look at what they did right in allowing ecosystems to build around the likes of AWS and think about that in terms of their LIMs rather than immediately going to price gouging to maximize profit because they are so ludicrously overvalued. Well, they may have no option, Jonathan, financially because of what they've pledged in terms of investment. But I do think… Because they are so ludicrously overvalued. Right. And I think that the opportunity here is for smart Europeans to play off the two options that they've got and build categories that really just add business value and don't focus on token maxing and all of the current nonsense that's going on with the price hikes.