Using GPUs as leverage, MSFT beats the case, FTC fails under Khan | E1775

0:00I love innovation and venture. i love when people innovate on the five partners with the 300 400 million dollar fund making two investments a year sitting on 12 boards god bless benchmark little girl is my guy fred wilson's my guy you know they're great at what they do they're the goats but then you know sometimes the game changes and you get like a step curry coming in and it's like you know what i'm gonna stand four feet behind the three-pointer and i'm gonna shoot you know 20 or 30 three-pointers a game and I'm going to hit 10 of them, 12 of them. So stop me. And Clay Thompson might hit 10 in a quarter.

0:33All of a sudden, the game's changed. It's like, well, wait a second. This is a different style of basketball. This Week in Startups is brought to you by Lemon.io. Need to speed up your product development without draining your budget? Hire vetted engineers from Europe at Lemon.io. Go to Lemon.io slash twist to get 15 % off for the first four weeks. OpenPhone brings your team's business calls, texts, and contacts into one delightful app that works anywhere. Get 20 % off your first six months at openphone.com slash twist. And Veed makes it super easy for anyone, yes you, to create great video. Filled with amazing features like templates, auto subtitles, text formatting, auto resizing, a full suite of AI tools, and much more, vid gives you the tools to engage your audience on any platform head to vid.io to start creating incredible video content in minutes all right everybody welcome back to this week in startups everybody loved producer nick reading the news last week he wasn't on camera but we had a bunch of breaking news and didn't have time to get a news reader in here so i said hey producer nick read the news and you know what after a couple years of doing this week in startups feel like you got a handle on the news and writing show notes for three years, four years?

1:54Show notes, yes. Presenting the show notes, no. I have no idea what I'm doing, so everybody strap in and come along for the ride. This is my parents' basement. I have moved out of Hoboken. My house is not built yet, so I am actually coming to you live from my parents' basement. This is true. Literally a millennial trope. I'm working from my mom's basement. All right. So here we go. We have a couple of stories on tap today. I know the Microsoft Activision case, we had that breaking news this morning that Lina Khan has lost again. Yes. And what else is on the docket? Just give people a little preview.

2:30Yeah. So I think first up, I just want to get your thoughts on a story that I think is a really big deal and it seems like nobody is talking about, which is using GPU access as leverage to invest in companies. which is happening a lot right now it seems like or in two cases two very big cases it's happening and then after that we're going to talk about uh yeah like you said microsoft so there's two things with microsoft great news they basically beat the fdc case they beat the case um for the activision deal and then bad news they're facing an eu antitrust probe over how it bundles um teams bundling yeah we'll get into that okay so let's start with this first one i think this is a fascinating insight that you found writing the notes for the all-in weekly docket and for the weekly AI roundtable that we do with Sonny and Vinny.

3:26So cue this up here. I'm interested in your observation. Yeah. So for anyone listening to this that didn't listen to yesterday's episode, Jason and Sonny covered Inflection AI, who raised$1.3 billion at a$4 billion valuation, and a 22 ,000 GPU supercomputer or cluster that they're putting together. But I think that there's like a little bit more meat on the bone of the story. So obviously in tech right now across startups, there's a massive GPU shortage. There's a ton of startups looking to integrate AI applications and do it themselves, but they don't have access to these GPUs either in the cloud or on-prem, right?

4:01Because you can't buy these NVIDIA GPUs. You can rent them out for really, really expensive, but that's basically what's going on, right? Would you say that was accurate? it yeah i mean if you are going to try to do your own language model you want to do stuff at scale you need to have yeah thousands of these apparently and that means a hundred million to a 250 million dollar ticket to get started uh if you want to do your own language model which that seems like a lot of startups want to do so as you talked about yesterday with sony this round was led by microsoft nvidia reed hoffman who's also a co-founder bill gates and eric schmidt the former CEO of Google.

4:40And you guys talked about the round tripping potential on yesterday's show. And I'm wondering if this kind of falls into that basket or it's something a little bit different. So NVIDIA seemingly as part of this investment, but this hasn't been confirmed anywhere, at least that I've read, is going to help Inflection install more than 18 ,000 NVIDIA H100 GPUs. The H100 is basically the top of the line GPU right now. It's the most expensive one. It's the one everybody wants. Inflection already has 3 ,500 of them currently in use. So this would give them 22 ,000, as we said. The company said this is going to be the largest AI-specific GPU cluster in the world, which is pretty crazy.

5:17Some other large clusters, Meta has a 16 ,000 cluster. Microsoft said they're adding tens of thousands of them soon. um but it seems like nvidia might be using the gpu shortage and its position in the market as leverage to take ownership positions in startups okay so is there an example of this yeah inflection oh okay so in fact i thought there was a second example uh so i have a couple after but yeah okay good yeah so i mean it's there is a phrase in silicon valley no conflict no interest and so if there is a chance to press your advantage as an investor you know or as a business you're going to take it right so apple as one example has a lot of iphones and those iphones have a search box and you know they need to uh give people search results when you're using safari they sold that to google uh and they make something like 20 billion dollars a year just off that franchise and so that's but one example of you know two people who might be considered uh conflicted right android um competes with ios and you know tons of different products uh compete between those two but they found some common ground here google wants to maintain their monopolist position in search apple wants to make a ton of money so apple didn't launch a search engine or do a deal with duck duck go or bang and then of course you have here microsoft saying hey uh we would like to back inflection even though they're put 10 billion dollars into open ai so that's conflicted so there's always conflicts and if you can find leverage and gpus could be leverage or access to them now we don't know here if inflection is waiting in line with everybody else or if they got to jump the line but all's fair in love and war all's fair in startups and investing no conflict no interest so people have all kinds of conflicts the partners at yc we've talked about this on the show many times partners at yc get first look and the insiders get first look at the startups there because they come and they mentor them early and they've got their own network the the top 10 of startups at yc are swept off the table if you go to demo day you're going to see like the 80 % or 90 % that weren't taken by the insiders for funding.

7:39So you just have to always keep that in mind. People are angle shooting, as we say in poker, and this is an angle shot. Yeah, sure. We'll get you to the front of the list. We don't know that that's happening, but you can assume that they're going to have preferred treatment because NVIDIA has got a stake in this company. Yeah. Big stake too, right? So$1.3 billion investment. They're part of the lead, probably a couple hundred million dollars, you would imagine. And then the round tripping, all of this is massively conflicted. You have many conflicts going on here at once. And that makes for very interesting business.

8:12Do you think it's enough for an anti-competitive case against them? You know, the government gets involved in antitrust. And so dovetail with the Lena Kahn story coming up. Typically in a very narrow set of circumstances. circumstances uh consumer harm being the number one vector that people look at the number one lens or framing they look at so is there some consumer harm here no now are shareholders getting harmed um or is there some allegiance between open ai and inflection that microsoft should have you know be loyal to open ai and not inflection uh you know okay maybe um that would be something sam and greg could bring up with satya and nadelle and say hey why are you doing this these guys are competing with us that's not cool um but you know masayoshi-san was investing in uber competitors around the world and uh i think he famous did i think he's pretty famously invested in doordash and was like that's not competitive with uber so you know no conflict no interest and so it's just massively conflicted but it's not a legal issue it's an issue between partners and then for nvidia they're an arms dealer uh so when you're an arms dealer like the united states is we give our patriot missiles to any number of people those people could get in conflicts with each other and we could be replenishing their missiles and be on both sides of a conflict potentially um when you're an arms dealer you're an arms dealer you just want to sell weapons right so this is video is an arms dealer okay listen you got an idea for a tech startup.

9:50Great. You think you want to change the world. You think you got this. This is the one. Well, you've got that same problem that we all do. You don't have an engineer or you don't have enough engineers to make this happen. And you need product velocity. You need to go fast. And how are you going to go fast? And how are you going to control your burn rate if you got no engineers? Well, what if you had a partner who could provide you with more than a thousand on-demand developers? And those developers were all vetted, experienced, result-oriented, and passionate about startups and building great products?

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10:47So I want you to learn more at lemon.io slash twist. And when you go there, you're going to find your perfect developer or an entire tech team. And you're going to do that in 48 hours or less. And twist listeners get 15 % off the first four weeks. I want you to stop burning money. I want you to hire developers smarter and faster. Visit lemon.io slash twist and give it a shot. Yeah. NVIDIA has made a couple of investments in recent AI startups. Actually, they invested in runway, which we had the founder on the podcast. suite of generative AI editing tools. Cohere, whose founder is going to come on the podcast, they're basically building like a B2B LLM and a couple more AI startups.

11:24One of them is called CoreWeave. Have you heard of this company? No. Okay. So - Educate me and the audience. CoreWeave is interesting. They are the company that's actually helping Inflection deploy these 18 ,000 GPUs. They started as an Ethereum mining company back in 2017. So this is like a genius pivot. They put together this big cluster of GPUs to mine Ethereum when crypto was going like this. And then at some point over the past few years, when it started to go like this, they pivoted from crypto mining to basically being a GPU cloud provider. So if you go on their website, you can look at, they have all the NVIDIA GPUs ranked like this and the top ones are the most expensive and you can rent them on an hourly basis.

12:05It's like such a great business. Yeah. If you think about what crypto did really well, it was build infrastructure and build these federated or networks of computers, peer-to-peer architecture, just like Napster did previously or Scour, Travis's first company before Red Swoosh, etc. so cdns and peer-to-peer kazaa skype was peer-to-peer all that stuff is kind of in the same wheelhouse which is how do you take a job and put it out across a large network and and that's what gpus do or tesla's uh supercomputer that they've built is doing so this is uh a really great pivot obviously and we're seeing that across the board i think if you're a crypto person and you don't consider pivoting right now to AI, and you've got like a really great tech team, kind of crazy because consumers and businesses were open to hearing about crypto solutions, right?

13:04Everybody was like, Okay, yeah, tell me more. Tell me more about NFTs. Tell me more about blockchain. Tell me more about permissionless, you know, currencies, tokens, and people heard it and were like, too complicated, not enough value for the end user, whether it's a business or a consumer now you juxtapose that with ai i don't know if you saw the link i shared with the sales team using chat gpt for and uh bruce or brian was you know giving them some advice on how to look up potential sponsors i won't say what the thread was but producer brian on the media side of our business was telling the sales team hey look here i made you a thread of how to get all the sponsors of other events so when you sell sponsorships for the all-in summit here are some people who sponsored other events and it put it in a table for them really nice and clean so i think that is why you know people are falling in love with these language models and tools so quickly is that they just make you faster at your job and it takes out the i find it takes out the most arduous repetitive boring parts of your job sifting through google links sifting through google links yes formatting stuff into a table tagging a blog post whatever it is you know doing some basic research and and it's getting better and better so if it gets 30 better a year which i think is a pretty low benchmark man as i've said hiring freeze across the board we're 19 people in our company and i feel like we're doing the work of we're doing more work than when we were 23 or 24 people yes and this is going to be what rebounds the entire economy not to go on a total tangent but if people are concerned about earnings as i said on the all in podcast many times and i got a little bit of pushback on this i kept saying like well you know if your earnings go if your revenue goes down if you cut your spend you can actually keep your earnings the same or better that's math baby it's just basic math and you know i think shabath was like yeah that's not easy to do and i was like it's not easy to do but you can do it and then all of a sudden facebook twitter microsoft Google layoffs happen and you're like wow they took the medicine fast and I think that was all CFOs and founders just saying you know what I don't want my stock price to crash I want to have good earnings and so who cares if we cut 10 or 20 ,000 people if we have 80 or 100 ,000 doesn't make any difference and also in in Google and Meta's case those 10 20 whatever thousand people they cut were probably recently hired yes because they just they doubled their head count in or maybe not recently hired but you know they were last two years yeah yeah over covet basically and so they probably hadn't even onboarded them and gotten them you know hitting their stride yet so right it was like if you have never been into an office did you even work for the company that is a that is a pretty uh interesting angle so it's a joke don't yell at me don't work don't I mean, if you want to get people riled up, you could say remote work is BS.

16:03Yeah, you're really into that right now. You go all over that space. I just have come to the conclusion that 20 % of people are more productive at home, 50 % of people are less productive, and then 30 % are probably as productive, maybe 25 % are as productive. I think, generally speaking, does that track with your experience? Yes. If you had to put people into buckets, maybe it'd be a third, a third, and a third, but I can't ever imagine how a company of hundreds or more people runs fully remote. Yeah. I'm sure that there are some that do it and do it well, but I can never. I think for smaller teams, it can work, especially if you have seasoned people that know what they're doing, that know what they have to do.

16:47But for training and onboarding and things like that, it is really hard. and i'm just i'm worried about the psychological impact this is having on people especially young people who don't get to build relationships and then yeah if you are home all day and then you don't go out at night and you stay home at night which is pretty easy to do with you know ordering a doordash and you know watching whatever's on netflix or hbo max you know like people get weird um and so i think it might i think the big issue is it was too onerous the american system of two weeks vacation a year and 10 holidays and whatever a couple sick days i think europe has something figured out where like a longer break over the summer four weeks six weeks and that would make it a little more tenable to be in the office you know four days a week five days a week if you could look forward to having august off right or you know taking two weeks off twice a year instead of two weeks off once a year yeah i find myself missing the unproductive parts about being in an office.

17:46I miss the BS, the nonsense. When we went fully remote, it was like, oh, there's no more water cooler talk. This is great. And it is for productivity. But I also kind of miss it. I used to sit right next to Matt, our sales guy. I love Matt. Yes, Matt's like a dog. Yeah, he's a complete dog. And I miss just making fun of him and seeing him every day and laughing with him, you know what I mean? And watching him come on his bike. Those are the things that I miss, but it's all the unproductive stuff. That's why I did the stand-ups every day and told everybody to be on camera and to take a shower and be dressed and have a background.

18:20I said, listen, we're going to have a sales stand-up, a programs team stand-up, and the media side stand-up. Just wake up and get on a call and at least say hi to everybody and have some rhythm to your day. Turning it off is the hardest thing. I personally am having a hard time with that. That's why I'm going back to an office. I chose that for myself. Because I can't turn it off. You know, like I got my kids all day with me. And then at night, I'm still working. But then I'm partially with the kids. I liked it much better when I got in a car, I drove to the office, I had 20 minutes of listening to a pod or doing a phone call.

18:56Boom, I'm at the office. I just grind for eight hours, nine hours. And then I come home. And that 20-minute decompressed time on the way home, then I don't feel bad about sitting with the kids, turning the phone off. And yeah, maybe at 10 o 'clock a night after I spend three or four hours with them, I can do more. but I liked that rhythm better now. I'm kind of over it. Now with the exception of ski season, which I do not want to give up. Yeah. And every Goldman Sachs banker is like, yeah, we got to be in the office until it's time for Montauk. Yeah. Then we don't. Are you still using your personal phone number at work at your startup in 2023?

19:34Stop. Such a common mistake founders make, but open phone has totally rethought every detail of what a business phone should look like in 2023. Open phone makes it so easy to do this and so affordable that you have no excuse and you really don't want your team using their personal phones for business. Why? Well, it could get creepy. People start texting people on your team. It could be that they leave your company and the salesperson has all of these text threads going with all your clients and they bring them to your competitor. Do you want to deal with this nonsense? You don't. I can tell you open phone is amazing because we use it.

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20:46And if you've got an existing number, Open Phone will port it over at no extra cost. Head to openphone.com slash twist to start your free trial and get 20 % off. Anyway, so sorry, let me reel this back in. So I brought up CoreWeave because they also kind of fall into this category. so nvidia invested in core weaves 220 million dollar series b at a 2.1 billion dollar valuation a couple of months ago yeah but what's really interesting is that in that round nvidia's co-investors were daniel gross and nat friedman ah yes pioneer labs pioneer labs daniel gross he's been on the pod and i i love daniel's model for pioneer labs yeah he's amazing and nat Matt Friedman, formerly the GitHub CEO.

21:29Yeah. So Daniel and Nat invest together, but I don't think they have a formal fund, but they co-invest very often. Okay. And these two were actually in the news. Well, they actually weren't really in the news. You saw this, but nobody really talked about it. They are now offering a 2 ,500 GPU cluster to their portfolio startups. I thought this was a joke at first. It's not. It's called Andromeda cluster. Yeah. Yeah. So, you know, at market prices. So baller. It's crazy. but like so baller do you think that this had anything to do with their core weave deal like do you think that they got some kind of discount on core weave gpus and then they used it as leverage you know you know you see like the the link i'm trying to make here core weave is somehow associated with pioneer labs and no nat and daniel invested in their 220 million dollar series b alongside nvidia again back to no conflict no interest here's how what i learned uh how things worked in the valley everybody's kind of competing and collaborating and like if a deal comes up and i can get you into the uber deal or you can get me into the you know doordash round or doordash is competing with uber but you know cloud kitchen you know everything becomes like very murky and overlaps and y combinator perfect example sequoia and their reach perfect example you know uh sequoia and lp and r funds you know ruloff and i are great friends for over a decade now sacks and ruloff work together at paypal right so you see these like little you know gangs form right yes and then now with all in you have like the all-in gang and then okay this there's like three or four other podcasts that have come up with little clusters of you know investors and entrepreneurs uh i i think um uh my friend dave morin uh from path.com who i've always thought very highly of he started like an all-in competitor not competitor but let's call it inspired by all-in and it's pretty good you know it's it's not great it's not bad it's just like okay they have their opinion now over here and then pirate wire guys did theirs and moment of zen did theirs and three cartoon avatars did theirs these are all like little balkanized tribal things and like indrecent horowitz doesn't like all in right like he doesn't like me he doesn't like chamath we're critical well i mean whatever we've said we said critical things right but but i mean he's good friends with sax and friedberg right so you have this like very weird tension that can occur okay is he blocking chamath and myself at this moment in time or not right and so what i've learned is like enemies accumulate over time and you don't want to miss opportunities so you know to this extent you can squash beef and you know new york's got new york jersey's got jersey you know maybe somebody's got upstate new york south jersey philly south jersey philly you know rhode island providence a little different than boston you know but maybe they overlap these families can kind of like do business together but they could also get into spats right and that's what happens in tech and then sometimes you got somebody who hits like a home run like this like having their own cluster i just have to say if what a baller move oh my if nat and daniel spun this core weave deal and they had a little carve out for a couple extra gpus on the side and now they're using that as a way to get startups to basically pitch them for investment i mean bravo like that is i mean it's like ball walk empire like they're getting like some ships coming in from like with bourbon on them but maybe they make it to new york maybe they don't my theory so i don't know that's the truth but oh my god yeah like that's awesome again no conflict no interest you know five families different you know factions all trying to you know just get in the next deal you just want to get in the next deal and it's just leverage right it's leverage right yeah so if you were if you have those 2500 gpus they have sitting there and daniel gross is competing with y combinator right um and he's trying to preempt y combinator by getting to startups before they do i don't know why accommodator got 2500 gpus laying around so if you're an ai entrepreneur why would you go to yc when you could go to you know if you need access now everybody doesn't need access to them it's probably one in 25 startups need access to gpus directly like that the other 24 can just use you know uh hit an api and use chat gb4's api or use google's api or whatever so it'll be abstracted that way as well but i thought it was um uh one of the more baller and innovate i love innovation adventure i love when people innovate on the five partners with the 300 400 million dollar fund making two investments a year sitting on 12 boards god bless benchmark little girl is my guy fred wilson's my guy you know they're great at what they do they're the goats but then you know sometimes the game changes and you get like a step curry coming in and it's like you know what I'm going to stand four feet behind the three pointer and I'm going to shoot, you know, 20 or 30 three pointers a game and I'm going to hit 10 of them, 12 of them.

26:32So stop me. And I might, and you know, clay times that might hit 10 in a, in a quarter, all of a sudden the game's changed. It's like, well, wait a second. This is a different style of basketball. Shaquille O 'Neal, Patrick, you and Hakeem Olajuwon, you know, they changed the game for a long time. You had to have somebody to stop those three players specifically, or else you were just not getting to the finals. And Jordan had to figure out how do I beat? how do I get through Patrick Ewing? How do I get through Alonzo Mourning? How do I get through Duncan Robinson? You know, like these were, or Tim Duncan, no, Duncan Robinson.

27:00Definitely not Duncan Robinson. Well, whatever. I mean, there were, you know, there were concerns of how do you, how do you get through some dominant. No, Duncan Robinson is a, you know, he's the white guy on the heat now, not Tim Duncan. But, or David, you combine Tim Duncan and David Robinson into Duncan Robinson, I think. yeah, Sorry, I'm getting older. Like this thing's old because like one super team. Listen, I'm doing five podcasts a week. And I can tell you dealing with video, it's 100 times harder than just doing audio. Why? When you do video, you got to put cuts in it to make it visually entertaining.

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28:44Head over to V.io and start creating professional quality videos in minutes that's veed.io to sign up today um you want to move on to microsoft yeah i think this is really fascinating i think i'm going to reverse order um cue up the the bundling issue because we've talked about this on all in many times and i saw this and i'm sure it will come up on this week's all in with the return of the world's greatest moderator uh let's talk about that okay so we'll do the bad news first then okay um so microsoft is facing an eu antitrust probe over how it bundles its Teams product for free into the greater Microsoft Office suite.

29:21The problem stems from a complaint that Slack issued in 2020 to the EU over Microsoft bundling its Teams product, as I just said. Teams was initially added as a free product to Office 365 back in 2017. And Brian, if you could pull up this chart, just look at what happened when... I mean, this just shows you the scale of Microsoft's enterprise customers, right? So the purple line on the bottom is Slack's users, which if you zoomed in, you'd be like, oh, it's pretty good growth over time. And then you zoom out and you see what happens when Microsoft starts bundling teams for free to, you know, not saying that these are Microsoft users, but let's say Citibank, the NBA, like Volkswagen, giant enterprise customers and growth just completely skyrockets.

30:06It's 20x, whatever Slack has or whatever. And Chamath has mentioned in the past, obviously being an early Slack investor, I think they led the Series A with Mamoon over there, right? Yeah, Mamoon, I think led that deal. Famously. Once Teams did that, everybody on the board, he said, kind of saw this coming. And I think Slack actually made out great selling to Salesforce for almost$28 billion when it did because Teams just came in and basically killed their growth, it looks like. I mean, we didn't get any numbers after 2020 because that's when Salesforce stopped reporting or Slack stopped reporting and sold to Salesforce.

30:40But what do you think about this? So I think this is what Lena Kahn should be working on is tactics. Because she was put into the FTC because she was anti-big tech. She was anti, you know, the power of these. And, you know, that was a great way to get the job, I think, because it spoke to the Biden administration. they felt tech was like lording over them too powerful social networks trump getting into office all this stuff was like very present in their minds um and you know politicians don't want to have to answer to zuckerberg or previously to jack at twitter or youtube you know all of these things were very concerning to them and the problem is lena khan's premise which sounds really interesting is i want to preserve competition in the future so we have to get to these uh monopolies before they become monopolies we got to stop them now have you ever seen the movie minority report it's a little before your time all right that's your homework assignment minority report um i need you to watch it uh because when you do the news read next week i want you to i want to discuss it with you there's a concept of a precog and what precogs do is they can see into the future the near future and they know when somebody's going to commit a crime and then they send the police out to arrest you before you do the crime and this seems like wow society is safer and better but it's also kind of like well wait a second this is profoundly unfair where's free will i'm not going to kill this person i'm not going to rob this house and it goes against all of our ideas about justice right and so she can't predict the future but she wants to believe she can and this resonated with people who were anti-big tech which i would say you know there's republicans who are anti-big tech and they're you know but the the problem is the fdc executes laws they don't create them they're they're the umpire not the league you know the league has to create the rules if you want to have hand checking or you know whatever rules uh you know zone defense whatever you got to have that in committee you set the rules all the teams get to adjust and they play the game on the field she's got to call fouls and balls and strikes not decide you know how many runs are scored or how many bases there are the cases that she's picked she's just going after people because they're big tech this going after facebook over this tiny little you know vr app when vr is not an unlimited yep vr is not a thing and it was a very silly the argument was that um within unlimited made a a workout game that was sort of like beat saber right you're if you can't see me but i'm if you're listening but i'm swiping you know beat saber yeah you're a jedi congratulations yeah exactly um and that you know basically saying meta having this app and beat saber would give them an unfair advantage in the vr space in the future and like there is no vr space yeah nobody we know played beat saber this week zero i mean if you played beat saber this week you're a loser period unless you're under the age of 12 right you're just a complete utter loser so all you 14 year old beat saber players you should be playing baseball go go outside on your bicycle you know play some basketball do you know i don't know go to a dance do something they lost that one by the way and they lost of course they're going to just keep losing these because they're being vindictive and it's a stupid strategy there's a much easier strategy now if you go through american antitrust law price fixing is obvious if you're microsoft if you're google and you're apple you can't say hey let's set the price of our phones at 900 this year 950 next year and 1050 the year after we all agree on price fixing so you can't do that and people have done that you also can't do market allocation like you know on the sopranos where like okay we get gambling in this town you get gambling in this town here's the street you can go on the other side of the street you can't do market you know allocation kind of situations and divvy up a market that's collusion right it's anti-competitive you can't be a monopoly and you can't do bid rigging you can't do these kind of tactics um bundling and predatory pricing are very interesting ones predatory pricing and bundling is what microsoft's doing here what does teams cost what does teams cost zero zero it costs the the cost of the office suite it's it's it's an ad bundled yeah it's bundled and so there's a very simple solution for her here is to look at instances like that, where people are doing this kind of market allocation, you could argue what Apple does with their app store is like they've allocated that only they can sell in this geolocation, i.e.

35:40iOS. And just say, listen, you can't do that. You have a monopoly on these phones, you're in a duopoly. So in the case of a duopoly, where there's two players who own 90 % of the market. We want you to have more interoperability and we want more open platforms. So there should be other app stores on iOS. Now you can just saber rattle and say, listen, I'm Lena Khan. I'm the FTC. We're preparing a case against you, Apple. You have six months to allow Amazon to have a digital store, Microsoft to have a digital store and the Google Play Store to exist on Apple and they have to do the same. And you can't make iMessage closed.

36:17there should be interoperability and they'll say like well we can fight that you can fight it but this is what we're asking since you have a monopolistic position we're asking you to be more interoperable remember in the early days of ios they wouldn't let you have like a vlc a video player they wouldn't let you have the dolphin browser or chrome browser this in the early days they wouldn't let you use a third-party browser they wouldn't let you use a third-party media player they jobs really wanted to own those and so they would block are you installing that and then microsoft of course got in trouble for bundling where they put and that was the massive microsoft case uh that massive case in the 90s where they put um the internet explorer the edge browser uh to try to kill netscape and so if you make it free you used to buy netscape shout out mark and recent um come on the pod anytime uh they used to used to buy um netscape for 50 bucks a year you would go buy it and then they would like netscape navigator 4.0 would come out 5.0 would come out you give them 50 bucks 99 bucks you would go to comp usa and you would buy package offer bring it home put a cd in and install the new browser and they're like yeah it's in the it's in the uh operating system now so that's a much simpler uh execution i think and it's actually better for consumers consumers do not there's no consumer harm if microsoft buys act uh you know activision um or you know uh microsoft releases teams there but there is harm when they do it for free or if they said activision is only going to have their games on xbox for the first two years and then it goes to playstation or pc and they already conceded that they wouldn't do that correct so i think we can pivot to the next story they did yeah um actually this story has a complete master stroke that i just found out this morning by satya nadella another master stroke by satya nadella he's a killer i mean wait till i tee this up for you you're gonna lose your mind all right so all right so tuesday morning um a federal judge denied the ftc's attempt to delay microsoft's acquisition of activision blizzard um which is which can happen as soon as this month now so just a quick timeline on the acquisition it was announced first in january 2022 announced they were microsoft announced they were going to acquire Activision Blizzard for$70 billion.

38:34This would have been Microsoft's largest acquisition ever, and it would also be the largest gaming acquisition ever. December 2022, almost a year later, the FTC issues a formal complaint announcing its intent to try and block the deal. And one of the main reasons for the complaint, one of their main arguments was that the probability of Microsoft making Activision properties like Call of Duty or World of Warcraft Xbox exclusives would hurt competition and would hurt consumers. So the UK and the EU both followed the FTC in reviewing this deal. In April 2023, the UK actually formally blocked the deal, which is wild.

39:10In May 2023, the EU approved the deal, so they went the opposite direction. And then last month, the FTC sued Microsoft asking a federal court to postpone the deal closing by issuing a restraining order. So fast forward to July 11th, which is today, Tuesday. Microsoft wins – the FTC loses. Microsoft can now close the deal as soon as this month. And basically the judge ruled that the FTC failed to show that this was going to result in harm. And to top it off. Yeah. Just an hour before we went live today, Reuters reported that the UK is now open to looking at the deal again and changing its decision.

39:46Yeah. Perfect. I mean, it is an obvious decision. And this is where you just put conditions. and if that's what should be happening here is conversations with the major players and saying hey we we could take action here we can slow this down um we can give you a speeding ticket we might win we might have a 20 chance of winning we might have a 50 chance of winning why don't we just both agree on what's in the best interest consumers here if call of duty is available to i think activision's biggest title is call of duty if everybody gets call of duty at the same time we're good we're good and if the if the games are the same across all platforms we're good And if it's interoperable, so PlayStation and Xbox, you know, and PC gamers can all play each other, great.

40:30Or you have to hit four of the five major platforms in the first year. You can come up with some very basic, you know, things that preserve consumer choice and you're fine. This is why, Lena Khan, sorry to say it, Lena. I know that you're not pleased with my assessment of your tenure. I think you've done a bad job of really picking your fights. The job of the FTC is to pick your battles. And just being anti-tech is not picking your battles. Look at that. That was kind of her strategy too, right? She wanted to go spray and pray. She was like, we shouldn't just pick battles that we think we're going to win.

41:08We should go for a bunch of different things. Yeah, yeah, yeah. I mean, people who are bringing cases, I've heard Preet Bharara say this a bunch of times. like if you're going to bring a case you want to be sure that you have a really good chance of winning but you know it doesn't have to be a hundred percent you like to be 90 or a hundred percent but you know sometimes you go with something that's 70 or 80 i just think she came out and it's just like saying no to everything yeah doesn't make sense and i think undermine the credibility of the ftc you think i think it feels very partisan uh and it feels vindictive and it doesn't feel like it has anything to do with consumers so if it i think she wants to have a bigger role than what the FTC is supposed to do.