← Sharp Tech with Ben Thompson
Sharp Tech with Ben Thompson
(Preview) A Spring Break Mailbag: RIP Sora, Ads and Surplus, F1 Going in Reverse, Elon Inc., Smartphone Parenting, and More
00:20:42
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- [00:00]
A
Hello, and welcome to a free preview of Sharp Tech. Hello, and welcome back to another episode of Sharp Tech. I'm Andrew Sharp, and on the other line, Ben Thompson. Ben, how you doing?
- [00:20]
B
I'm doing okay, Andrew. How are you?
- [00:22]
A
Deep sigh mid vacation. Deep sigh. I'm good. It's great to be back.
- [00:29]
B
Yeah, I mean, I've done. Done a couple, did an update, did an interview this week. Yeah, I mean, just a real stark contrast to you sitting on the beach a few weeks ago, completely taking the week off. Like. Like, who's the grinder here?
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A
Look, all I can say is I did it right. And you took the weirdest, most disjointed vacation I've ever seen. But I figured in honor of that, we would keep it light tonight and go all mail today.
- [00:54]
B
It's. I know everyone keeps asking all vacation is. I'm like, does this look really? Not really.
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A
This is just.
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B
Let's call it what it is, a very functional trip to Asia. And the days off are working around my travel, so. But I usually take. I do usually take a spring vacation every year, so I'm calling it a spring break. But yes, it's.
- [01:14]
A
That's right. And next year, I'll be right there on the first weekend of March Madness in your basement, preventing you from traveling anymore.
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B
We're going to do it next year. Yes, I was. I was annoyed that it was the same week this year, but. Well, I've already looked. My son's spring break does not line up with March Madness next year.
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A
Oh, perfect. There we go. Okay. Well, as for the show, this is
- [01:35]
B
what Grinders have to do, Andrew. We have to plan like a year in advance, not like three hours in advance or whatever.
- [01:40]
A
Exactly. A day before I tell you I'm going on vacation. I'm going to be out all week. Deal with it. But no, here we are, Ben and I gave you a couple of weeks heads up on my vacation. At least 50% nonsense questions is the promise on this episode. We are going with a spring break mailbag today. Before we hit mail, though, we do have to read this note at the top. A note from @Sora official app on Twitter. We're saying goodbye.
- [02:09]
B
I think. I think the problem is right there. I saw one of the most. Who's a Bob? Bob something or other. The guy who writes the email newsletters about the music industry. We. I've referenced him before. Taylor Swift's song Mean was about him because he wrote a thing about how she can't sing. Oh, boy. And one of the more Devastating takedowns of a publication that I ever heard was when Recode went out of business. Bob Leftwitz, I think is his name. Yeah. And he's like, it was rico.net if you didn't have a dot com, sorry, you weren't in business. Now I hesitate, I hesitate to say that to you because it is sharptext.net right. Which I think is fine. I'm fine with Shot fired from Bob Left. It's a top three. It's a top three sort of domain. But if you are at Sora official app as opposed to Sora, maybe you are not long for this world.
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A
Well, they weren't long for this world. We're saying goodbye to the Sora app was the announcement earlier this week to everyone who created with Sora, shared it and built community around it. Thank you. What you made with Sora mattered. And we know this news is disappointing. We'll share more soon, including timelines for the app and API and details on preserving your work. The Sora team, what you made Sora mattered. Fact check on that particular statement.
- [03:32]
B
Did anything made a Sora better? That's exactly where I was going.
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A
Well, look, at least you can pop champagne mid spring break over there because
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B
Vibes is still alive, you know, look, vibes one. Yes, look, just a lot of Ls all around. I was I think proven correct. Although this is probably one of those things where, oh, congratulations, you made the most obvious call ever. Zora wasn't necessarily it. Although it did look sketchy for a while at the top of the app Store, it was ultimately proved to be a novelty. Again, this is the guy who liked Vibes and then honestly has never looked at Vibes in like months. So I really do not tell much.
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A
Like 12 hours before the entire Internet was like, this is the most anti social product we've ever seen. But hey, Meta has so much money that they're keeping Vibes alive, at least for the time being.
- [04:24]
B
I. They will claim that actually the numbers are pretty good, which I, I don't believe then actually show some numbers here. But yeah, Sora, it was kind of a. It's interesting because we talked about, or I think me and John talked about at the time to watch this capability not in ChatGPT, but to sort of watch it as a standalone thing and with real sort of community social network type features. And it was pretty audacious sort of, you know, particularly you look back in retrospect, stuff like this usually doesn't work. Like Facebook has launched a bunch of additional social networks that really haven't worked. The ones that have worked are the ones they just ended up buying because they sort of came out of the ether. And so this is, you know, in retrospect, pretty audacious. And it's interesting to consider was it a good or bad thing, in retrospect, that they didn't just put sora functionality into ChatGPT. And I think the critique why that was a mistake is they just, maybe they didn't ever get sort of critical mass. The good thing is this is a very bloodless killing.
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A
Yeah.
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B
I mean, I think the primary casualty seems to be Disney of all entities.
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A
That's right.
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B
But if no one was using it
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A
rolled back this week as well.
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B
Right. If no one is using an app in the App Store and the app goes away, does it make a sound?
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A
Well, and this app scared the crap out of Hollywood. I mean, there was like a whole frenzy. I'm sure everybody listening to this show remembers it, but Hollywood was all freaked out about copyright and what this could mean. And then Disney was forward thinking for embracing it. And I do think in retrospect, it reflects good product instincts at OpenAI. Like the choices they made, the way they promoted it was all good. It's the product itself isn't really a business for them and they're now focusing on business.
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B
Well, here's the thing. You could make the case that the reason why Sora died is because they started cracking down on copyright, like in the first few days when it was going nuts, is because people were doing stuff with recognizable figures. And I think we talked about this at the time, but maybe that is one of the biggest takeaways is it's sort of a theory that I put forward consistently. It's a reason why I feel optimistic about our fortunes. Sort of in an AI world that things that people have in common are going to matter and matter more and more. I mean, at the far extreme, there's like live events, like live events, more and more important, tremendously profitable, going up almost everywhere in sort of all cases, except for like NBA games for tanking teams. But that's another discussion. But it's a similar thing with like these copyright bits when you could do Pikachu, doing crazy things. People found Sora very interesting using it
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A
on a semi regular basis. It wasn't going to be an everyday thing. Probably. But would we still resort to Sora to make videos featuring movie characters we all know? I think that's a good question.
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B
Well, the other thing that's interesting is you go back to Instagram Back in the day and Instagram started as a photo filter app. And in Instagram, when you would take a picture and you would apply the filter, then there were buttons right there to easily share to other social networks.
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A
Yeah.
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B
And it's sort of become a very well chronicled sort of strategy. I think Chris Dixon wrote the sort of the canonical argument about this, like come for the feature, stay for the network or something along those lines, where they were independently useful and then sort of got permission over time to layer on the social network aspects and then became, you know, also lifted the Twitter graph sort of wholesale back in the. You know, everyone wants to bemoan the end of open and open APIs and opensocial graphs. Well, there's a very good reason why stuff's not very open anymore, as Instagram basically bootstrapped itself off of Twitter social network. Yeah. But for Sora, you know, probably the most Sora videos people did see were on other social networks. And it's just really hard. Maybe even having the social stuff at the beginning was a mistake. I mean, there was the cameo bit, all those bits and pieces. I think probably the takeaway is they
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A
were trying the right things.
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B
It's hard.
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A
Yeah.
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B
Look, there's been so many attempts to build social networks and the reality is the vast majority of them fail. And if you want to be a good prognosticator, if you want to have a good track record, just come out and say every single one is going to fail and you're going to have a great nine out of 10 times.
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A
You're going to come out looking pretty smart.
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B
The thing that was striking to me though, is just like when you hear OpenAI talk about focusing, I was like, well, Soar app's got to go. It's not just that the Soar app needed to go. The amount of compute this appears to have been using, even now when no one's using it, feels astronomical. And that's. In the end, that's maybe the biggest critique of this.
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A
Yeah.
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B
Which is who it was that expensive.
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A
Apparently. I saw $15 million a day thrown out. I don't know what the actual number is, but yeah, I mean, it was. It was obviously compute intensive on day one, and people had questions about how much compute was being dedicated to this project.
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B
Yeah. I mean, this probably gets to the broader questions about where's OpenAI's sort of business in general, but I feel like I don't want to bag on it too hard. Like I'm not going to again. You could get a very high batting Average predicting everything's going to fail. And that's not a very fun world if no one tries because they assume everything's going to fail. So I would give Sora a parting salute.
- [09:54]
A
Well, and look, we're all living through the early innings of the AI era here and there are going to be misses and weird experiments and all sorts of things that are charming in retrospect. Sora is already one of those things. I'm always going to remember that first week when every. Everyone thought that Sora was taking over the world. And I do think if you were still allowed to use copyrighted movie characters and insert yourself into the Matrix.
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B
Right. Or like modify like actual scenes. Right, right. To like, it had the potential to be at the greatest meme maker of all time.
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A
Exactly.
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B
But that's.
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A
That was always plausible. That was more plausible me, just for the record, than it turning into its own social network that rival Instagram or TikTok or Twitter.
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B
Well, but if, to go back to the Instagram example, if you have heavy usage.
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A
Yeah.
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B
Then you have the sort of ingredients to do a social network. One thing that is important to note though, and this gets to the infrastructure cost angle. To go back to the Instagram example, it was applying filters on your phone, using your local camera, your local computer, and then you were posting stuff to other social networks. The actual costs for the initial version of Instagram on a marginal basis were basically zero.
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A
Yeah.
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B
Like, and so because everything was happening locally, you built the app is distributed through the App Store. So Apple's taking care of that aspect for you. It's running on people's local phones and over time then you could layer on the. No, the cost on Instagram today is astronomical. Right. Because it's basically a cloud. You know, it's a front end for a cloud service and everyone has their own customized feed and there's obviously lots of video and all these bits and pieces. But it was a very sort of natural progression from basically zero marginal cost to layering on. And as the value of the app itself and the network increased, the costs also increase. But it was a match.
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A
Yeah.
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B
And that is a fundamental problem with Sora and is going to be a fundamental problem for anyone that tries to do something similar if the. This just gets like. This is why Forrester Checkery, from the very beginning, I've always been on and on about zero marginal cost and why that makes all these new things possible. AI Generally speaking, you know, there's a whole discussion to be had about local versus in the cloud computation and the Question of marginal costs. But for video generation in particular, we're nowhere close to a world zero marginal costs. But this is almost makes the point that I make continuously about zero marginal costs in reverse. Like not having zero marginal costs is sort of debilitating and it ends up in an all or nothing scenario where either this takes off and is a huge deal or within a matter of months it's dead.
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A
Right. Well. And if it takes off and it's a huge deal, well, we haven't really figured out how to make money from this. So how are we benefiting more than we're hurting from all the costs?
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B
Yeah, maybe should have had an advertising business, right? Yeah. I mean it, it, it really speaks to that was probably like peak open AI in terms of they could do no wrong. They would make a deal with a company, that company stock would go to the moon and it, it's incredible. Like that was only a few months ago.
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A
So it's takeable company in history. It's all part of the ride here. Well, speaking.
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B
Yeah, go ahead.
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A
Adrian, who emailed last week saying that OpenAI pivoting to the enterprise was a mistake. He followed up on our discussion and said guys, how many great companies did well at consumer and enterprise in the first decade? Microsoft was able to dominate the consumer market not just because they were good in enterprises, but because they had an early enterprise monopoly and were a default. Will OpenAI be able to build a monopoly in the enterprise today against Microsoft, Google, Oracle, Anthropic and Amazon and leverage that to remain the default for consumers in the consumer market. They only have to compete with Google, but keeping up with Google will take laser focus. Any thoughts on the follow up from Adrian there?
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B
Well, this gets to what is honestly going to be a theme for a huge majority of this podcast. I'm going to warn you right now, maybe this is the quote, unquote. Don't call it a vacation laziness kicking in. Okay, but one thing, this is just a thing about AI in general. My answer is I don't know, like the degree of uncertainty is so high and OpenAI is a great example. I mean it does speak to this cost issue. Really sort of screwing with things. Yeah. In a, you know, in sort of a more traditional compute environment which a lot of my analysis with OpenAI maybe unwittingly has sort of incorporated. It's like, well you have a billion users or close to a billion users or whatever it might be. Consumer, consumer is like the great prize. Like you only get a big new consumer company like every 15 to 20 years. There's usually like one defining one per paradigm to launch really well even, I mean, I really go back to Facebook is sort of like the category that you sort of have in mind for, for an OpenAI and that is the biggest prize sort of in the world. And part of the whole thesis around why they need to be monetizing, they need to have an ad model. And all these, all these pieces is because then that gives you this revenue flywheel that no one can sort of compete with because it's so hard to. It's hard enough to get consumers. It's even harder to build a thriving advertising business. But they had seemed to have such a lead and they had so many consumers. It's like surely they can figure this out. And once they figure this out, then they're getting revenue from this model that they feed back into their R D and they can push further, further ahead.
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A
Yeah.
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B
And you're. It sort of like becomes an insurmountable lead. And I think I probably made this case most clearly around, I want to say like 20 months ago. I think it was at like the Mafia NISON conference or something on those lines talking about this flywheel and why that would give them this big advantage. And it's so frustrating to the point of being a takeable company. We, we don't know if that would have worked because they were so late to get started. And now we're in a situation where for sure the best way to make money in the short to medium term where you can just really turn the spigots on is in enterprise. We talked about it last week. Enterprise is willing to pay for productivity gains and, and what they have with Codex is very compelling. And yes and no, I should say it's not a monopoly. Like they're, it's tooth and nail with anthropic. Obviously they'll be fighting with Microsoft, they'll be fighting with all these folks. But at some point the computation costs are what they are. You have to pay for these servers.
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A
And when I think about Microsoft succeeding in the consumer space, a lot of that was because basically everyone, I mean, they did have an airtight monopoly on the enterprise space. And so, so everybody learned to use computers by using Microsoft at work. And that's a huge advantage as you're trying to get a foothold in the consumer space. OpenAI their story is going to be more complicated than that in terms of enterprise adoption because I'm sure there are going to be a lot of different tools that are used at enterprises over the next couple years here. And Anthropic does have like a real share of that market. How big of a share is anyone's guess because these are private companies.
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B
Yeah, it is guess. I got a lot of pushback when I shared like I told before that ramp data. As far as Anthropic, there's a story information this week too that Anthropic is basically when they're talking about their, their skyrocketing annual recurring revenue numbers, that's actually like the total that people are paying. Like it's kind of like with E commerce, like what do you calculate? Like there's, there's, oh, what's the word? Gross merchandise volume, I think gmv, which is like how much you pay for all your items. Do you calculate that as your revenue or do you calculate like the actual. Like do you subtract away the cost of the item itself? Right. In Amazon. Actually one thing that's challenging with Amazon's business is traditional. Amazon is a wholesale model. It's like a retailer, they actually buy the items and then they sell the items. And so for that business, Amazon's revenue is the whole item and they have a very large cost of goods sold because they actually had to buy the item from whoever sort of made it. Whereas the third party business, Amazon's revenue is much smaller because they're not including the cost of the item in their calculation because it's a third party merchant that's selling it.
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A
Right.
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B
All they're doing is sort of their skim on top as far as their percentage of fees and their, you know,
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A
how much they're not the risk in that scenario either.
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B
Right, right. But no, exactly. But as far as like an understanding the company, what you kind of want to know is gross merchandise volume, which is like the total value of everything they're selling. But that's a very different number than like what your actual meaningful revenue is that's actually coming into your company. And so anyhow this reporting, the information is that anthropic numbers are basically the GMV version. It's like everything. Whereas OpenAI's numbers is like the percentage on top of what's going to the clouds. Who knows? To your point, them not being public companies is frustrating, but.
- [19:26]
A
But they're different methodologies. Like they're stated different, different methodologies.
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B
But trajectories are real. I don't think anyone denies that the Anthropic trajectory is more vertical at this point than maybe the OpenAI one. Even if it's possible the OpenAI lead is larger than you might think.
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A
Yes, well, and both of them may not be private companies for much longer, so stay tuned. We'll see whether they go public in the next few quarters here.
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B
I mean, it is actually the public company concept working as it should. It just had to get as large as these companies are. They need money.
- [20:01]
A
Yeah, exactly. Richard said I have a take for your review. All right. And that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes or you can also go to SharpTech FM. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Sir Techery and the Certekeri plus bundle. Check it out and and if you've got feedback, please email us at. Email sharptech FM.