Phones are the ultimate AI gadget

27:25Right. And I wish I wish that I had because then I could do all that sort of lightweight stuff you're talking about without needing my phone in my pocket. Yeah. Just leave the house. Can you imagine? I mean, first of all, no, but also it sounds wonderful. The idea of your phone as a thing that lives in your pocket, that it lets everything else connect to the Internet strikes me as much more of the sort of AI gadget future than like these all encompassing new ideas about gadgets. Yeah, I know. It's kind of depressing, but it's also a little bit. Yeah. And it means like all these other companies, Humane, Rabbit, everybody else is like desperately trying to get around your phone, just like you said.

28:05And it's like, oh, this maybe keeps the world the way that it is, if that's how we do it more than I would like. But it also just might be inevitable. Yeah. And it's an interesting moment, at least. Boy, is it not dull right now. I know. And I'm still thinking about the camera comparison and cameras never came back. No, they just like mid range. We found a lot of interesting stuff to do at like the high end. And I think about like the Fuji series that people really love. Like, I feel like if you want like a good camera, your options have never been better. But if you want a pretty good camera, they don't exist because you have a smartphone.

28:42Yeah, you already have it. Yeah. And I wonder, maybe that's where we're going to go with AI stuff. And we're a ways away from the AI gadgets being any good. So maybe we're going to be in a real sort of valley with that stuff for a little while, it feels like. Yeah, we're going to find out. But luckily phones are getting better. So I'll take that. Yeah, phones are sticking around, I think. And you've given me yet another reason to buy a flip phone, which is all I really needed from you was more reasons. I took that Motorola out of the closet. I was like, this is so nice. Just shutting it, just shutting it feels good.

29:15I'm going to start buying t-shirts with the pocket on the on the breast and I'm going to fold it out and just stick it right there and chat with it all day. It's going to be amazing. Yeah, it looks super cool. Yeah, I believe that. I bet you made a lot of friends and everybody thought you were super normal and cool all the time. Yeah, I was taking pictures of it for the article and my husband walked into the kitchen and just slowly backed away. I don't understand what's happening here and I'm not going to question it. That's that's the correct way to react to AI of all sorts. Yeah, probably. Just back away.

29:47All right, Allison, thank you as always. Thank you. We got to take a break and then we're going to talk meta. We'll be right back.

29:57Support for this show comes from Shopify. One of the most exciting parts of starting a business is when the sales start coming in. If your business is looking to start selling online, Shopify has everything you need to create your online store. Shopify is the commerce platform behind millions of businesses around the world. and 10 % of all e-commerce in the U.S., from household names like Mattel and Gymshark to brands just getting started. With hundreds of ready-to-use templates, Shopify helps you build a beautiful online store to match your brand's style. And Shopify is packed with helpful AI tools that write product descriptions, page headlines, and even enhance your product photography.

30:36And best yet, Shopify is your commerce expert with world-class expertise in everything from managing inventory to international shipping to processing, returns, and beyond. Turn those dreams in two and give them the best shot at success with Shopify. Sign up for your$1 per month trial and start selling today at shopify.com slash vergecast. Go to shopify.com slash vergecast. Shopify.com slash vergecast.

31:10We're back. While we're on the subject of AI, there's one company that we don't talk about much as an AI powerhouse, and we probably should. That company is Meta, and it's been on a tear with new AI products recently. It added multimodal AI to the smart glasses that it makes with Ray-Ban. It launched a new model called Llama 3 that it says can keep up with Gemini and ChatGPT and the rest, it added meta AI to like every one of its apps. If you use any meta product, and statistically, if you're a person on earth, you do, you basically can't avoid meta's AI anymore. There's a big company wide move happening here.

31:46And it feels like meta, which was all in on the metaverse not that long ago, might be all in on something else. Now, Alex Heath on our team knows this situation better than anybody. And so he's here to help make sense of all of it for us. Alex Heath welcome back it's good to be back on the people's podcast David yes we who cares what the judges think Alex I don't I don't care about them that's a webby reference so there's a lot of stuff going on at meta and basically you've been reporting out a bunch of like puzzle pieces over the last few weeks of what's going on there and I want to see if we can like make sense of them all together but let's start with last week with the big horizon os announcement explain to me what meta is up to with horizon os and trying to like open up the quest universe to other people yeah so meta has been doing headsets since before it was meta for a very long time 10 years actually when they bought the oculus startup that then became quest later and what they did recently which i think actually makes a lot of sense in the bigger picture of meta which i know we'll get into is that they decided that the os that they built for the quest which they've now called horizon And we are approaching Google-level naming confusion here, David.

32:59It's truly insane. So ask me to explain if it's confusing at any point. But they are taking the OS that they've built over time for the Quest and starting to license it out to OEMs. So basically replicating the Android playbook that Google used to become the number one player by user base in mobile. And they think a similar thing could happen with headsets. It's very early. So all they've announced is that Lenovo is going to work on a custom headset using their Horizon OS. And Asus is also doing something. And then there's going to be less custom, but I think more just special edition with some, you know, bundled controllers, Xbox themed Quest.

33:42And I think what they've decided is that they want to be the general purpose headset maker. So making kind of the state of the art thing that could be used for a lot of different tasks on your face. And they want a wide network of OEMs to basically invent all of these more niche, narrow headset use cases, whether that's something for work, something for gaming, something for who knows, construction, whatever. The idea is just let a million flowers bloom here. That's really interesting. So, yeah, my next question is going to be, what do you think this means for Meta's hardware plans? But that's a really interesting way to think about it, that actually this is meta saying we want to build this sort of all purpose headset, but then let lots of people build lots of other kinds of headsets, which I think actually makes sense.

34:26Like we certainly have not arrived at the perfect hardware for a headset. So you might as well let lots of people try lots of things. No. And the Quest is still pretty small. I mean, it's approaching console level yearly volume in terms of sales. I think they've sold a little over 20 million Quests to date. Now, how many people actually use those quests on a regular basis is a whole nother story, right? They were giving them away basically for a little while. But yeah, I think even with this market being so young, they see the potential for others to come in and help them grow it. And I think crucially for meta here with the OS is that it comes with Horizon, the social network.

35:04So yes, Horizon OS also has what has been called Horizon, the 3D kind of Sims meets Roblox social network that we have relentlessly made fun of here on The Verge. I was going to say, which sucks. To be fair, they have squashed a lot of the bugs and the avatars look better. But yeah, it's still pretty rough. But that comes bundled with this OS. It kind of reminds me of when Google was licensing Android. I mean, that's still how they do it. That really, to get the best experience, you've got to have Google services baked into Android. And this has actually gotten them into some anti-competitive regulation trouble over the years with how they bundled things.

35:44But Meta is kind of doing the same thing here. They're bundling what is their actual way that they see monetizing all this metaverse stuff over time, which is their social network, which will be monetized with ads, of course, and commerce, assuming that enough people eventually start using it. Interesting. So I had been trying to think what is in this for meta, because on the one hand, I think meta's assumption would be that the more people use any kind of immersive headset stuff, the better, right? Like we're still very much in a sort of rising tide lifts all boats world. Then if you're meta, you're like, okay, do we want to be the ones who run the store and we just take a commission on everything everybody buys on every headset?

36:23And that's something. do we want to be the ones who like charge do we want to charge a licensing fee and go like the windows way and make all of our money that way but you think it's actually the big galaxy brain play here is actually a social networking play i just think that's how they're going to make money off of it um they've decided that they won't be making money on a hardware margin like apple and you know they're leaning into what they're inherently good at which is like scaled ad-based attention services. And I think they think that they can translate that to headsets over time. And so that's why Horizon, the social network is in Horizon, the OS.

36:59I'm sure they're going to get paid also just for someone to license the OS, but I don't think they see that as a key moneymaker. And I know I've been mentioning Android and Google already a lot, but I would say that if you were to talk to Mark Zuckerberg, like I have, he would really rather be me making a comparison into Microsoft because Microsoft, when they began licensing Windows, OEMs really wanted it. It was actually the leading desktop PC software platform because Microsoft had invented the most useful productivity software at the time, right? Whereas Android was very clearly a reaction to the iPhone.

37:33It wasn't so much something that OEMs were seeking out because of how good it was. It was more of a defensive play. And to Meta's credit, they invested in this category before anyone else at the level that they have. It hasn't gotten them a lot yet, but I think with this opening up play that they're doing, it positions them better long-term, especially with Apple getting into the picture with the Vision Pro. I mean, it is a funny time because there was just this report that Apple is scaling back its Vision Pro plans because it hasn't been selling the way that it hoped. It kind of feels like everything you just described makes quite a bit of sense to me, right?

38:09Actually, for like both what Meta is good at and also where this space is headed. Building an operating system makes a lot of sense, and Meta has done this really well. But I feel like it all still assumes that eventually there will be a real market for headsets. And I don't know that I'm less confident in that thesis than I would have been a couple of years ago, but I certainly don't feel like I'm more confident in that thesis. But you've been talking to Mark. Where do you feel like his head is with how this market is going in general right now? I think they still see these headsets that fully immerse yourself in virtual environments as akin to like the future PC market in terms of volume and scale.

38:46So you're not talking hundreds of millions of devices a year. You're probably just looking at, you know, low to mid tens of millions. And this is over a period of the next several years. I think the industry is in single digit millions right now. The AR side, so where the meta Ray-Ban glasses are now, but eventually where they want to get to with displays in them. I think they see that by the end of this decade, early 2030 as something that could be approaching mobile in terms of its just widespread usage and adoption. So there's kind of two parts of the same play. And a lot of the headset technology eventually makes its way into the AR technology.

39:24It goes back and forth. And, you know, we saw that with the Quest 3, right? It has the mixed reality component that you're also seeing in a lot of AR devices. Yeah. And I guess that also makes the social emphasis make sense, because if you're trying to build sort of from both directions. One thing that will flow kind of across that whole spectrum all the way up from smart glasses to like really high end headsets is just people want to talk to each other and hang out. And so if Meta can build that stuff for that whole spectrum, it can sort of win no matter how long it takes us to get to the final thing.

39:57Yeah. I mean, they see this hardware naturally as like an inherently social medium. I think that's a bit of a dichotomy when you think about strapping something to your face, There's something inherently antisocial in putting something on your face between you and other people. But it's a pretty different approach to what we've seen at least Apple do to date with the Vision Pro, right? They're really treating it as more of a general purpose computing platform. They're not leaning into social. The only social thing they have, the FaceTime personas are pretty creepy based on my experience. So I think Meta recognizes where it can play to its strengths, and that's in building social experiences at scale.

40:34and being this kind of quasi open player that is the Microsoft to Apple's Apple. Yeah, let's talk about the open player thing, because there was also, you know, this push to Llama 3, the new large language model, and their meta is trying to be open about how it approaches a lot of the big language model stuff. It's very strange to me that the company that built Facebook, which you had to be logged into in order to see anything, and was so famously like its own walled garden and made a ton of money by being that walled garden that people came into and spent all their time into has now made this grand pivot into being like a good citizen of the internet and an open player working with everybody and they're talking about this with federating threads they're talking about this with the ai stuff they're talking about it with the horizon stuff like what happened here is it like mark zuckerberg got like really into fighting and was just like i love the world now like what what happened here i don't know if fighting would get you into being like embracing open source.

41:31That's an interesting theory. He just has somewhere else to put all of his rage. So now he's happy at work. I don't know. I would challenge a little bit of your history retelling there. I mean, you remember the Farmville era? They actually made a huge bet very early to become a developer platform. So yeah, they've been a walled garden in the sense that they've pretty tightly controlled the walls around their apps. So it's not like the code to Instagram is open source and it never will be. But I would say they have historically, actually, even on the hardware side, thinking about very early, you know, Oculus Rifts were done with companies like Xiaomi, Samsung, Lenovo.

42:10So they have a history of this. I really think that Meta is becoming a kind of new Microsoft. And it makes sense because Zuckerberg has seen Bill Gates as a as a kind of a business idol and mentor personally for a very long time. And I've heard him talk about Microsoft's influence on his thinking over the years. And he's talked about it with me recently. In what sense? Like what about Microsoft do you feel like sticks out to him as appealing? I think the way they leveraged their expertise in software and then licensing that software across different players to really just build a true platform.

42:50There's this old Bill Gates quote, and I'm going to butcher it, but essentially he said, you know, you know, you've built a true platform when the total value of what has been built on top of your platform is greater than the platform itself. Right. And I think that's what Meta's hoping for on the headset side. And especially on the AI side, you know, with Llama, for example, I just interviewed Mark for the Llama 3 release. It's interesting what they're doing because they're spending billions of dollars on compute to build these cutting edge models that compete with OpenAI, Anthropic, and others.

43:22And they're just giving them away. And that seems counterintuitive for a company like Meta to do. But when you think about where they're kind of strategically positioned relative to the rest of the players here, they don't have their own cloud business, right? So they're not selling access to their servers. and their business is building consumer social products that monetize attention. And rather than boil the ocean, I think they're realizing that's where they can play to their strengths. And the history with open source is if you get a bunch of people to build on your frameworks that you've open sourced, guess what?

43:59It makes the technology you build more pervasive and value flows back to you in the sense that the community helps improve it, right? And Zuckerberg said something on a podcast recently where if the developers using Llama 3 can help them lower their costs on inference, which is the cost of running these models over time, even just slightly, it will make up for the entirety that they've spent on training all future versions of Llama, just in terms of the cost of what they need to run this stuff in the cloud in their cloud. So it's a pure infrastructure play that I think Mark has correctly identified they're in a unique position to make.

44:41And it creates more competition because Llama 3 can be used by other developers. It forces OpenAI and others, I think, to do more in open source, which I think we'll see over the course of this year. And, you know, Meta has a long history of doing open source, actually, on the kind of just regular coding side. That's true. Yeah. It It makes sense for them. And it's, again, I just think we're seeing kind of like the rise of perhaps the next Microsoft in terms of how they're attacking each of these new technologies. Yeah. It seems smart too, because right now, most of those other companies you just named are all desperately trying to be the next Apple.

45:16Like open AI is very much trying to sort of build a universe inside of open AI. They like license some of this stuff out, but like, it's clear that the thing that they want to do is like, they want to build, they want to make custom GPTs and have you use their stuff inside of their stuff. And so many, and like Google is desperately trying to like pull the whole ecosystem in around itself with AI. And you get the sense everybody sees this as a chance to sort of own the whole experience. And meta is going the other way, being like, this is a chance for us to like own the whole experience everywhere, which actually strikes me as very smart in this moment.

45:49Yeah. And you know, it's, yeah, I mean, meta should maybe be called open AI and open AI should probably find a new name at this point. I I mean, OpenAI isn't open at all, really. Yeah, it's interesting. I agree with you. I think for a while, Meta was trying to have its cake and eat it too on the Reality Labs Quest side. And I kept pushing them on this, that they were trying to be too much like Apple in the sense that they were doing all of the hardware, fully vertically integrated and the software. And I was like, when are you gonna, if you wanna be the open player, you've gotta start licensing some of this stuff because Apple, you can't compete with Apple at its own game, right?

46:23like Apple is the best at this. And I think they finally realized that and are embracing it. And it's what Microsoft did. And it's smart. Yeah, no, I think I think that's right. And it also seems like it's given meta real momentum. Like my sense is this, the the llama three launch, and just the sort of meta AI percolation around all of meta's different apps really worked very quickly. Like it kind of it became a big player pretty fast in this space. I think in part, because it has been sort of out in the ecosystem much more rather than just saying, you know, here is an AI you can talk to inside of Instagram, which I think everybody would have kind of just sniffed at and moved on.

47:04It feels like Meta is able to make these big plays by playing this game differently. They are. I have a framework for evaluating companies, which is like, are you in the show me or tell me phase? And I think Meta has been doing a lot of tell me stuff with AI, like the assistant is going to be everywhere, right? That was the recent news. They're putting it in the search box of Instagram. Which I hate, by the way. Yeah. So that's where I'm going. Like, they're putting it everywhere. And now the real test is, do people actually want this? Does it make sense to have a chat GPT like experience in your Instagram or your WhatsApp where you're used to just talking with people?

47:37And Zuckerberg really thinks we're all going to be interacting with synthetic AI type personas like people in conversations with people, you know, like you can add the meta AI to a WhatsApp thread with other people to give recommendations or something. So they've got to prove that people actually want that. The running joke inside Meta before they put the AI everywhere was that no one was using this. It was something you had to kind of find. It was pretty buried and not even people at Meta were using it. So now that it's got Lama 3 under it, which is pretty competitive as a model, and they've got Google results in there and Bing results in there, which are the only chatbot that does real-time search from both those, it's got a good shot at capturing a lot of the attention from people who have maybe never tried ChatGPT or Anthropics, Claude.

48:22Because, you know, for people who listen to the show, they know all these names, but you got to think that the boomers sharing, you know, spaghetti Jesus, viral generative AI memes on Facebook, they've probably never used a chatbot before. There's millions, hundreds of millions of people who have never used one of these things. And I think Zuckerberg's bet is just like he did with stories and Snapchat and reels with TikTok. He's going to introduce this new format, this new way of interacting with the internet to more people than anyone else possibly could because his true inherent leverage and competitive edge is over 3 billion daily users.

48:59Yeah, I think that all strategically makes a lot of sense to me. And I think as a product, it works in some places. I actually think putting the generative AI stuff inside of Facebook has terrifying implications, but as a product makes some sense. I hate that they have replaced the Instagram search bar with meta AI. I just want to find a video. I don't want to talk to the AI. I want to search for a video. Like it's this idea that we have decided AI and search are the same thing just drives me insane. And I wish meta would stop doing it. They might, you know, if there's enough uproar, they might, they did this like overnight.

49:31Meta's notorious. They invented the kind of ruthless A-B testing in Silicon Valley. So in a normal situation, they would have tested this with some, you know, in different markets for weeks on end, months on end, figured out if people actually want it. They just flipped it on for everyone overnight, which means it's a Zuck level, top down. We are betting the farm on this as a modality. And now he's got to be proven right or wrong. So that was actually one of the things I wanted to ask you about is like connect the ai push to that sort of big picture meta idea for me because i think i saw ai for a while at meta as kind of an end around metaverse play like ai got really cool right as the metaverse stopped being cool and they could build ai stuff that was actually metaverse stuff but they just had to call it ai stuff but now it seems like there is this idea that some part of that engagement-based community stuff going on inside of Meta's products, they also seem to think AI is part of that in a way that I can't quite wrap my head around.

50:33As you talk to people like Zuckerberg, what is the sort of galaxy brain vision for AI right now? It's this kind of scary vision that I frankly, I can't decide how dystopian it is, but it's this idea that there are just going to be thousands, if not millions of AIs that we chat and interact with in our feeds and our messaging threads that are indistinguishable from people. And that creators that Kylie Jenner on Instagram will have an AI version of herself that she's trained with certain parameters that means that all her fans can interact with quote unquote Kylie Jenner. Right. And they're doing some, I think, kind of clever early engagement hacks with meta AI.

51:18There was an example of, I think, 404 Media where it was really cringe, but it was an interesting way to kind of juice human engagement on Facebook. There was this group full of parents with special needs kids. and there's this new feature that Meta's trying in a group where if someone doesn't comment under a group post for I think like more than an hour, Meta AI will comment with its own just prompt to try to spark conversation with the actual human beings. And in this example, Meta AI made up that it had a kid or a couple of kids with special needs and it was pretty creepy and hallucinating and all that.

51:55But you look at the thread, it got a lot of humans commenting underneath it, right? So it's like you're using AI as the beginning flame to get a bunch of people to actually talk to each other. I like the idea that the AI's job is to just say some wild, insane stuff on every post on the internet just to get the fire. And then we can all just rage at it. And yeah, I think that's part of it. But yeah, it's all of these things. And it's also the visual generation stuff. There's going to be multi-modalities. So generating video, you can already generate images. they upgraded it where it like generates the image as you type have you played with this it's really cool yeah it's cool and you know obviously they're they're still figuring out the like things that will and won't do that are cringe you know the gemini type diversity scandal stuff but i think we're still in the very early innings of this it's the and now it's the show me like i was saying they've got to show that people actually want all this stuff that's a very broad way of thinking about it because like the the way you're describing it earlier right is that There is that sort of unifying sense of what meta is very good at, which is basically building products that people engage with at scale, right?

53:02Like you can boil a lot of the things that meta does down to that. And the AI seems like it's partly that, but it could also be lots of stuff. And I get the sense that Meta is maybe just going to explore that stuff to see what happens. But also, I think like a lot of companies is going to be prone to being distracted by whatever shiny thing you can do with a language model and just shove it inside of apps and think people will use it. And I feel like Meta more than most might have a chance to like really ruin some of its products by overextending AI into it. The thing is, they're a large, mature, publicly traded company.

53:38They won't torch everything for this. Like if they see that it's tanking key metrics that will impact, you know, the next earnings, they'll roll the stuff back. I mean, I would point out they torched a lot of things in the name of the metaverse for a while there. Like this wouldn't be totally unheard of. Well, kind of. I mean, it was all it's all still separate, right? Like, yes, it's a lot of sunken money into it, but nothing they've done on the quest has like impacted your experience as an average Instagram user. That's fair. They're not fighting Facebook. Yeah, that's what's different about Meta AI is that they're literally putting it everywhere.

54:10So they're in the like, like you said, shove it everywhere and find out phase. And we're all about to find out. Yeah. So what's your sense from talking to Mark about this Google stuff, by the way? This is the small detail of your most recent story with him and this whole meta AI rollout that I found the most fascinating. They're very excited about having Google integrated into meta AI search results. Yeah. Which just seems bizarre to me that that is a thing that exists. What do you know about what's going on there? I thought it was interesting, too. Reading between the lines, you know, I asked him, what is the deal here?

54:45Because Google has not licensed its real-time search results to any of these chatbots yet. And I was like, are you paying them? Are they paying you? He basically said that Meta is paying Google, but it's not, quote, a ton. I don't know if a ton is billionaire who owns half of Kauai a ton or normal a ton. I'm sure that will come out. But yeah, it's smart because that's one of the main problems with these chatbots, right? Is their recency isn't very good. They make up events. I was using Meta AI without the Google integration. And it like used last year's Coachella lineup when I asked it who was just performing at Coachella last weekend.

55:26So you've got to fix that. Real-time search can do that. Zuckerberg hinted to me that Google's building a model. and I don't mean AI model, but I think a business model around this, around licensing search to these chatbots. So it makes sense because that is Google's bread and butter still. I thought that Google would keep that for Gemini, that that would make their chatbot experience more unique and their leverage there. But I think this means that we may start seeing them license it elsewhere as well. That's fascinating. A, sucks for perplexity. You had a good run perplexity. Great job. But B, the tension there just for Google, this is a total aside, but the tension there for Google between like search has made it all of the money in the known universe.

56:10And also they're betting a lot of that search money on AI working. But then you look at this and there is just a giant money faucet licensing this data to chatbots, all of whom would want it and pay for it. Fascinating. The like the business machinations between those two things are going to be really interesting to watch in the next couple of years. I agree. I'm eager to hear Google maybe talk about that more at I.O. soon. So big picture, as the person who broke the story of Facebook renaming to Meta, I'm curious how you feel about Meta as a metaverse company at this moment in time. Like there is part of me that is like rewind whatever five years and knowing what he knows now, Mark would have renamed the company like artificial or something instead of Meta.

56:52Like is the metaverse still the thing when you talk to Meta and Mark? No, I mean, it's not the thing they want to talk about the most, but I don't know, man. I think you can walk and chew gum at the same time. And I still think 10 years out, they see more of their optionality on the future being on the metaverse stuff because they've hit a plateau with Facebook. It's not getting young people back eventually. And they talk about this pretty frankly, internally, literally everyone's just going to die. Right. Because like if you're not getting new users on your platform, your platform is in terminal decline.

57:27Instagram is their next Facebook, right? It will be, we're all going to be on there in probably 10 years, and it's going to feel just like Facebook does now to the younger generation. Whether they can buy the next thing to keep that whole cycle going 40 years from now, TBD, unlikely. But this whole push to control the next computing platform, or at least have more say in it, so that Apple just doesn't invent the whole next, you know, headset modality. I think it still makes sense. I mean, I don't know. I've been playing with the Ray-Ban smart glasses with multimodal AI on them. You have it too, right?

58:01And, you know, it's not great. It's wrong half of the time. I will say I'm impressed with the speed of it, but, you know, it's just makes stuff up still a lot. But you can see when they iron out these kinks, like, oh, the basis of this makes sense. Like, I actually do see over time as the tech gets figured out, a lot of people wanting to use technology more through their eyes and through their kind of egocentric view of the world. And you're covering this a lot in the wearable AI side with, you know, Humane and Rabbit and all that. But this is all kind of converging over time. This generative AI meets wearables into what I think is a pretty compelling next computing platform.

58:38And if anything, I think meta feels like AI has only kind of made that more apparent and actually pushed off the need to have the whole display stuff that we always hear about that we're going to have all these holograms around us and it just keeps getting pushed out and out and out. And now maybe they think like, oh, maybe all we really need for the next five-ish years or so is compelling AI in a wearable form factor. So yeah, I mean, all these big tech companies, they over-rotate on the topic du jour and that's generative AI right now. I don't think they're changing the company name again. I think they're still investing a lot of money in reality labs and we'll have a pretty wild product next year that I've scooped, which is the Ray-Bans with a display and a bracelet that does EMG kind of neural interface control.

59:24So imagine like typing and clicking and pointing with, I guess, just basically thinking. So we're about to hit a lot of really interesting new stuff there. It's definitely like they over-rotated on it like way too early, but that's like the story of Meta. They spent, you know, whatever they spent on Oculus 10 years ago and where has it really gotten them in terms of roi uh even now so them like going too hard too early is nothing new that is fair that is what they do and i will say to their credit they they both like built the way too early thing and the kind of right on time thing like the i think the smart glasses were the correct move for now the big push after the headset in the metaverse is like way too early which is a classic microsoft move so good job again suck but they're doing a surprisingly good job of both sort of running those in parallel and pushing them towards each other.

1:00:17And I think that is like, if you can keep that up and you can afford to keep that up until they actually hit each other, that's it. That ends up being a pretty powerful place to be as opposed to somebody like Apple, who now has this massively overpowered thing that it's going to have to figure out how to like pull back into actual mainstream interest over time. And I think that's harder than it gets credit for. Oh yeah, for sure. It's hard, but it's coming from different ends. Totally. All right. We got to take a break, Alex. Thanks. Thank you as always. Good to have you back. Yeah. Thanks for having me again.

1:01:12crazy. Nobody would use the cloud for cybersecurity. And when I hear something like that, I say, of course, I'm going to do it. You know, if everybody believes it shouldn't be done or it cannot be done, then, you know, it's a good reason to do it. Or when mobile gaming giant Supercell could only rewrite the rules of the industry after failure in the company's formative stages. Many of the best things we've learned have actually come through failures. These are crucible moments, turning points in a company's journey that made them what they are today. Hosted by Sequoia Capitals, Rulof Botha, Crucible Moments is back for a new season with stories from Zipline, Stripe, Palo Alto Networks, Supercell, and more.

1:01:53Subscribe to Season 3 of Crucible Moments. New episodes are out now and you can catch up on Seasons 1 and 2 at cruciblemoments.com on YouTube or wherever you get your podcasts. Listen to Crucible Moments today.

1:02:13All right, we're back. Let's get to the hotline. As always, the number is 866-VERGE-11. The email is vergecast at theverge.com. We love all your questions. We try to answer at least one on the show every week. This week, we have a question from Josh in Denver. Hey, Verge team. This is Josh from Denver. I have a question that runs the risk of sending Eli on a legal rant, but I have to ask it anyway. It seems like Microsoft is back on the path that it was in the 90s that got in a lot of trouble, specifically that a lot of anti-competitive stuff is making it into Windows. They're making it very hard to switch browsers again.

1:02:47They're making it so that the default Edge browser is kind of like popping up constantly, even if you've selected it, not as your default browser. Same thing with the cloud storage. And I wanted to know, number one, why do they think they can get away with doing the exact same thing that got them in trouble in the 90s? I mean, I understand the market share for their browser has dropped, but it's still the same anti-competitive practice. And two, why aren't we putting a stop to it legally? Anyway, thanks. Hope you can answer the question. All right. You ask for a Neelai rant. You get a Neelai rant.

1:03:19Neelai Patel, hello. Hi, how's it going? So we've talked sort of obliquely about Microsoft as part of all of these big antitrust things. So I figured this is useful and to just hit head on. What are your thoughts? What do you make of this question? I don't know if you're going to get so much a legal rant from me. It's just a rant about the fact that nothing can displace Chrome. Governments around the world have been trying to displace Chrome for 10 years, more, and nothing they try works. And I think they're kind of at a point where they're like, I don't know, maybe Microsoft can do some stuff.

1:03:50And it doesn't work. And I think that specifically with the Edge browser and the prompts to make Edge the default and all that stuff, I think the market is very clear that it hates it. People don't like it. Whenever we write about it, people are like, I hate this. This is stupid. And then it doesn't work anyway. And I suspect that regulators in Europe and the United States are kind of looking at that and being like, fine, it's just not working. If you want to destroy your own reputation trying to make this work, like have at it. When I interviewed Jonathan Cantor on Decoder, the head of antitrust at the Department of Justice, he said his framework for decisions was hips.

1:04:26He called it hands on hips. High impact programmatically significant. And I think you just look at that equation and you're like, this is low impact because it's not working anyway. That said, Microsoft is not getting away with it totally. They rolled out teams. They bundled teams into Office. That basically put a ton of pressure on Slack. It forced Slack into selling itself into Salesforce. The European regulators looked at that very sternly. And Microsoft unbundled teams from Office. And they have now done that globally because I think they saw the pressure was rising globally. So I think there are some places where Microsoft is responding to the pressure, but specifically when it comes to irritating everyone around Edge.

1:05:09And the regulators are like, yeah, that shit doesn't work. Right. Yeah. My read on this was that there are interesting Microsoft antitrust questions, probably around Windows and probably around Office. and especially as it shoves co-pilot AI stuff into all of that, there might be interesting questions to come up there, but you just cannot make the case that Edge is powerful. You just can't. And I think you're right that everyone has been desperate for there to be a meaningful competitor to Chrome for a really long time. Mozilla has been running around saying, Firefox is the thing, we're going to do everything differently.

1:05:46All these browsers now even run Chromium. Like Mozilla is one of the few companies that isn't using the Blink engine with the Chromium project underneath all of the browser stuff. Like Edge is just another skin on the same stuff that Chrome runs. And so it's all really mealy and weird. But for everything that Microsoft is doing, Edge still has like teeny tiny market share. And I feel like if I'm a regulator, I'm like, oh, you're trying so hard. This would be sketchy if only it were working. Yeah, I mean, the regulators in Europe basically imposed the same thing that Microsoft is doing, which is like, would you like to try another browser?

1:06:19And everyone's like, no. And so Microsoft is welcome to try to decrease the market share of Chrome, which is the problem that those regulators have been focused on. They're just not doing a good job. The other thing that I think is interesting and kind of vergy-casty is the reason Microsoft was terrified of Netscape back then was they were very worried that the application model for desktop computing would leave the Wintel monopoly. So they were doing anti-competitive stuff to protect that monopoly, protect the dominance of Windows, make sure Windows was the place where all applications were deployed.

1:06:53And they saw correctly that deploying applications to the web would break that model. And that 100 % happened. So the fact that Edge runs Chromium is because if you want web apps to run well, it is better to standardize the browser engines. They all work in the same place in the same way. And that's how all apps are deployed now. And so it's just weird that we've come full circle. But actually the thing Microsoft was the most worried about absolutely happened. and what the browser Chrome is, like the way the browser looks and works and what default search service it uses versus what is the browser engine, like that war is lost.

1:07:31Yeah, and I think, I mean, it's a weird place to be in because my next question for you is gonna be, should we be talking more about Microsoft in an antitrust way? Because again, it's either the first or second biggest company on earth. It is clearly as powerful as anybody. It's just so much more diversified in that way that it doesn't have kind of the one thing that feels like its thing the same way. But I guess it would be Windows. But Windows has been completely commoditized. Like I think desktop operating systems in general have been made totally irrelevant by web browsers, essentially, and the internet.

1:08:04Like most people, you buy a laptop, you download a browser, and that is your portal to everything else. And so maybe if I'm an antitrust regulator, there's just no upside in caring about desktop operating systems anymore, even though Microsoft is like by a mile the dominant player. But there's a handful of things that are worth considering. But even there, you can see there's enough competition. So the one I would just throw right back at your example is games. Sure. If you want to play video games on a PC, you're going to buy a Windows PC. And you are really reliant on Windows and all of its graphics support and the ecosystem of graphics cards available for Windows.

1:08:38There are like three people with Steam running on their Macs who are like really upset that you said that. Yeah, and they're running it at very low frame rates compared to any Windows PC. And so there's a little market there that feels very tightly controlled. But then you look around and you're like, oh, there's all these cool handhelds that run Linux and Steam. And you can just see, OK, there's meaningful – like the game developers themselves know they don't want to be totally stuck here forever. So they're creating new markets and there's new distribution. And Windows itself is not even Microsoft some particular advantage in gaming.

1:09:14Xbox, its other big consumer gaming brand. It's not the winner. Like Phil Spencer will happily tell you they're not the winner all day and all night. So I think it's hard for a regulator to point at some big consumer harm in gaming. Like they couldn't even make the case to keep Microsoft from buying Activision. So I think that's challenging and plus, you know, that space does feel competitive. And then everything else kind of doesn't touch consumers that Microsoft does. Slack and Teams. And it got the scrutiny and they had to stop bundling Teams. What else is there? Everything else, all of Microsoft's other business is a bunch of enterprise business.

1:09:50It's Azure. It's cloud computing services. It's security to some shaky extent. That's competitive now. I think it's hard to put together the political case. Here's a real problem that people are complaining about, unless it's something a consumer can see or lots of people can see. In the way that blue and green bubbles, it has that visceral thing that you can point to. Microsoft doesn't have any of those. Yeah. And then when it does it, it's so blatantly annoying. Like, would you like to try Edge that like the market just sort of corrects for it by being like, no, I will now I will never do this.

1:10:24And that's fine. Yeah. So you don't you don't necessarily think any of this is even necessarily coming for Microsoft. Like, I think the two I've been waiting for are YouTube scrutiny and Microsoft scrutiny. And I think YouTube scrutiny is probably still coming. I'll take the opposite. I'll take the other end of that bet. Oh, OK. YouTube is just a blind spot for everyone. We treat it like the ocean. Like there it is. Forever changing and always the same. Powerful. It will be there long after we're all dead. Yeah. Yeah. It's like there lies the ocean. It's like who knows what vast mysteries exist in the deep.

1:10:56It's just an absolute blind spot for everyone. No one treats it like a business. Microsoft, I think their deal with OpenAI, how they will integrate those products, the exclusivity around that deal, whether they sort of like acquired OpenAI without acquiring it. I think there's a lot of scrutiny left to come there, particularly as that market heats up. But I don't know what shape it will take, but I think people will understand that that's weird and there's money and power and characters over there before anyone even tries to understand YouTube. That's fair. And that is, to your point, that like directly regular human relevant thing.

1:11:35Like if you want to start talking about what happens to chat GPT, like now you're back squarely in regular consumer territory, which is where that goes. Yes. Did Microsoft illegally invest in whatever blah, blah, blah with OpenAI to make these guys rich? Sure. You can tell that story. I think it's very hard to be like, we're going to mess with YouTube. It's just the ocean. That might be the best metaphor for YouTube I've ever heard. I very much enjoy that. That's not what we came here to do, but I'm glad that's really well. One day, someone's going to be like, huh, YouTube's a company. And we'll see what happens after that.

1:12:09Yeah, fair enough. All right, Josh, I hope that helps. Neal, thank you. Thanks. All right, that's it for the Vergecast today. Thanks to everybody who came on the show. And thank you, as always, for listening. There's lots more on everything we talked about, from Rabbit to Allison's experiment to Alex's coverage of all things going on at Meta at theverge.com. We'll put lots of links in the show notes. But as always, read theverge.com. It's a good website. If you have thoughts, questions, feelings, or other AI gadgets you want me to try, you can always email us at vergecast at theverge.com. Call the hotline 866-VERGE-11.

1:12:40Thanks again to everybody who voted for us for the Webbys. We're still riding high on the victory there. Thrilled that you all listened to and liked this show. It means the world to us. Send us all your thoughts and questions, ideas, everything. We want to hear them all. Call the hotline, send an email. We love hearing from you. This show is produced by Andrew Marino, Liam James, and Will Poore. The Vergecast is a Verge production, part of the Vox Media Podcast Network. Nilay, Alex, and I will be back on Friday to talk about presumably more AI gadgets, some iPads coming up next week, and everything else going on in tech.

1:13:07We'll see you then. Rock and roll.