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Keith Teare
Hi, this is Keith. It is Sunday, March the 24th, and we're a little bit late, but that was the week this week, which is excused by the fact that Andrew was traveling until today. And so, without further ado, here's the show.
Andrew Keen
Hello, everybody. It is Sunday, March the 24th, 2024. I just got off a plane from New Orleans, and that's why our start... The week or that was the week episode, our roundup, our weekly roundup of technology was delayed a couple of days. It's been quite a week in technology, a week which, at least according to Keith Teer, the author of That Was The Week newsletter, suggests a degree of shame. Was it a shameful week, Keith?
Keith Teare
Well, it's a shame if you believe in professionalism and... the rule of law, because the nation's top legal body, the DOJ, I guess you could argue that the Supreme Court is the top legal body, but certainly on the executive side of the House, has decided to file a complaint against Apple for abusing monopoly power. And the unanimous response, at least from what I read, is to hold the DOJ in ridicule for having brought the complaint. That's the that's the gist.
Andrew Keen
I'm not sure there's ever been a monopoly case that you'd be sympathetic with. Is that a reflection of what and who you read?
Keith Teare
Probably that is somewhat true because I haven't read anyone. I literally haven't read anything that is defending the DOJ. But I do believe in this case it's because their case is so flawed that it would be super hard to support them. So what is the case, the DOJ case against Apple? They make five points, actually. But the broad thrust of it is that Apple is a monopoly in a market that the DOJ has defined as top-end smartphones. So it's had to, if you like, it can't accuse Apple of being a monopoly in smartphones because it only has 20% of the market globally and about 50% in the US. So it's defined a smaller market. It has language to describe superior smartphones, basically. And it gets to Apple being 65% to 70% in that market, and then adds in Samsung and says between the two of them, they're 90%. So it's a kind of a sleight of hand to create a market that none of the rest of us recognize as a market. We think of it as a small part of a bigger market. So it's really jumping through hoops to try to define the scope of monopoly.
Andrew Keen
Given the DOJ's ongoing cases with Google, some with Amazon as well, Do you think Apple just had it coming that the DOJ felt, well, if we're going to go after Google and Amazon, we've got to go after Apple too?
Keith Teare
Well, I think based on the modus operandi of the DOJ, which I believe is inspired by Lina Khan's... Your friend, the graduate student, right? Yeah, her PhD paper. Given their modus operandi, where I think the crime is to be big, not to be a monopoly and abuse monopoly power, but simply to be big and powerful is a crime because it gives you pricing power and all kinds of other things. Now, the Sherman Act, which is the Anti-Trust Act, doesn't really cover those things. But the philosophy of the DOJ and the FTC is to go after those things. So they have to really file complaints against everyone if they believe their own philosophy.
Andrew Keen
So the Sherman Act suggests that If large companies are doing harm, am I correct, if they're doing harm to consumers?
Keith Teare
Not really large.
Andrew Keen
They have to be monopolies with a capital M. Right, they have to be monopolies and they have to also be doing harm to consumers.
Keith Teare
They have to be abusing monopoly power, yeah. And what about... And by the way, to answer your earlier question, there are some obvious abuses of monopoly power, like price fixing between all the players. So if Google and Apple were meeting in a dark room and setting the price of phones... that would be an appropriate focus.
Andrew Keen
But Google... But they haven't, because Google's not a phone maker.
Keith Teare
Well, it does make phones, but many, many more phones are made using Android than the ones Google makes. So it doesn't really work. So there really isn't a solid case that there's a monopoly here.
Andrew Keen
So what about the argument, and this issue's been dominating the legal community now for years, that Apple's operating... that the Apple Store or the App Store operates a kind of monopoly because they control everything?
Keith Teare
Well, if you want to discuss that as a serious proposition, not you and me, but if anyone does, you've got to take into account how many app stores there are in the world for how many different types of smartphone. And the answer is lots. And Apple's app store for its iPhone is just one. So given that Apple built the iPhone and wants to make sure that the apps that go on it are safe, it doesn't seem unreasonable that it should curate its app store and have some rules.
Andrew Keen
I'm guessing your dog is just as outraged by you about this.
Keith Teare
You know, I think our listeners are tolerant enough for me to go and stop it.
Andrew Keen
Let me stop the dog and imagine it's Lena Khan. Give it a good kicking key.
Andrew Keen
We can talk while Keith's away, shutting his dog up. Probably a pro. Is that a pro DOJ dog, Keith?
Keith Teare
It may be objecting to my narrative. That's entirely possible.
Andrew Keen
I think it's probably offended by your narrative. Shame on you. In all seriousness, do we need to use this word shame? I hate this word. It's such an annoying word. What's so shameful about it? It's a political initiative. Clearly, the Biden administration or the DOJ under the Biden administration doesn't much like big tech, so it's going after Apple. So what? It's not shameful.
Keith Teare
But don't you think, I mean, this is serious now, just between you and me.
Andrew Keen
I was being serious.
Keith Teare
Well, don't you think both TikTok and Apple are the two targets you wouldn't want to go after if you want young people to support you?
Andrew Keen
I don't know about Apple. I mean, I would use the word shameful in terms of TikTok. I think that is shameful to try and shut the thing down or force a sale. But with Apple, it's... Actually... It's, you know, it's swings and roundabouts. It's the nature of big tech and of a state that's seeking to somehow control it. You know this is... isn't going to work out. There's no way that the DOJ is going to be successful with this. Even when they've got good cases, they usually fail. And this is clearly a stupid case.
Keith Teare
Yeah, I agree. And a bit of a challenge here. If by the end of the show, we can come up with a better headline for this week's newsletter than DOJ shame on us, which is intended to say that if they get away with this, that's on us for letting them.
Andrew Keen
It isn't on us because none of us control the DOJ. And ultimately, this will be resolved in the courts by incredibly expensive lawyers, maybe even by the Supreme Court. So it's got nothing to do with us. It's only got nothing to do with me.
Keith Teare
Well, in a democracy, the people always have a voice.
Andrew Keen
Yeah, but no one's going to vote on this. No one cares enough. I mean, even if the DOJ got what they wanted, how would that impact Apple and the iPhone ecosystem?
Keith Teare
Well, it's hard to know until you know what the specifics would be. Steven Sinofsky, who's in this week's newsletter, went through this. He was very senior at Microsoft.
Andrew Keen
Yeah, you've got a good tweet from him. What does Sinofsky say?
Keith Teare
He really goes through in some detail why the case has no substance. He's not really still fighting the Microsoft battle. He looks at the Apple thing with clear eyes set in the present. but from a person having gone through exactly this set of circumstances at Microsoft.
Andrew Keen
There was a case against Microsoft. You yourself as a startup entrepreneur had one of your startups killed by Microsoft.
Keith Teare
Yeah, but I actually defended them. I put out a press release defending them at the time because I thought competition would deal with Microsoft more effectively than the government. And that ended up being true with Chrome now trouncing Microsoft's Edge, which is a tiny browser. And the browser was the crux of the whole case back in those days. Microsoft missed mobile. Microsoft arguably missed the cloud, although they're strong in the cloud now as a secondary player. And they somewhat missed AI, as we'll see this week.
Andrew Keen
Well, we'll talk about that. One interesting piece, one theme in the newsletter is you bring up Kurt Vonnegut's short story, Harrison Bergeron, about...
Andrew Keen
On the dangers of radical egalitarianism, what's the connection between the Apple case and Vonnegut's short story?
Keith Teare
I read the short story after I sent you the draft of the editorial, and I've added a paragraph to the editorial subsequently. which is exactly answering your question. And if you wanted to reduce the DOJ case down to a kind of a populist phrase, it would be Apple should be as bad as Android, and it's not fair that it's better. And the Bergeron story is a story of the state insisting that everybody is the same and handicapping anybody with natural abilities to make them as challenged.
Andrew Keen
Yeah. And in the story, there's something called the United States Handicapper General. Everyone has to be equal. And it's interesting. I don't know whether you were influenced by this in terms of your Vonnegut comparison, but Apple is defending itself by arguing that the DOJ is trying to turn the iPhone into Android. That at least is according to TechCrunch, one of the pieces you live with. How and why?
Keith Teare
Well, you know, let's take the iMessage complaint. And anyone who's got an iPhone will be familiar that if you text somebody that has an Android, the bubble is green, not blue. And that's because the Android receiving end can't do everything that the iPhone sending end can.
Keith Teare
One of the DOJ complaints is that that should be changed, which would mean reducing iPhone's messaging capability down to being equal to Android. That's just one example. And that, by the way, at a time when you can have WhatsApp on both phones and do pretty much anything you want with WhatsApp, that's equal. So it's not even as if there's a problem.
Keith Teare
They're basically saying to Apple, you can't have a better messaging platform. And on the face of it, that's ridiculous.
Andrew Keen
Is there acknowledgement within the tech community that Android is a lower end product, less? Yes. And Android phones obviously are cheaper and a different kind of customer is attracted to Android than the iPhone.
Keith Teare
Yeah, well, let's be balanced. Android is fantastic. It has about 80% market share worldwide. Not just smartphones, by the way. Your TV might be running Android. If you've got a set-top box, it's probably running Android. If you have a projector, it's probably running Android. So Android's everywhere and huge. And in terms of... delivering modern capability to people at low cost it's fabulous but feature-wise you know apple photos apple imessage apple mail even almost every feature that is unique to apple is better than the android equivalent because apple owns the hardware and software and can build things that benefit from having both so is the case
Andrew Keen
arguing that Apple is not allowed or shouldn't be allowed to bundle these products into their phones? Or is it a case that suggests that these products should be more universal?
Keith Teare
Well, both. On the one hand, the DOJ says iMessage should run everywhere. Now, Apple has done that with iTunes. iTunes runs on Windows. There is a way of making it run on Android and even on Linux. um because it has a web version um and you know the doj is saying uh you know if apple made imessage run everywhere that would fix the problem well the problem is imessage's core is security and encryption
Andrew Keen
And because Apple doesn't own Android, it can't guarantee that. So it'd be dragging down the quality. The one piece you linked to in the newsletter this week, which has a little bit of sympathy with... the DOJ is by Matt Birchler, who writes about his wife's reaction to the suit. His wife is not a tech person. What does Birchler say? And what is the argument from the point of view of the ordinary consumer?
Keith Teare
Yeah. Well, by the way, my wife also started the week very sympathetic to the DOJ. And she and I had some quite riveting conversations about it. So Matt's not the only one with a wife that whose instinct.
Andrew Keen
What does your name say? Why is she sympathetic?
Keith Teare
She has this natural instinct against big companies that, you know, remember, she's South African and was anti-apartheid. And you and I know history very well. But the whole history of anti-colonialism, which has basically know cold war stalinism at its core is that monopolies are bad things and anything big must be a monopoly so there's that going on so there's kind of a a leftist anti-monopoly uh diatribe which really doesn't care much about leaving aside that what about the ordinary consumer so people everybody has an iphone or an android device what is the argument whether it's from brickler or from
Andrew Keen
or whoever, that this would actually benefit ordinary consumers?
Keith Teare
I think there isn't a coherent answer to that question. I think it's just emotional instinct that big is bad.
Andrew Keen
What about pricing? I mean, iPhones are still more expensive than Android. Is it an attempt to maybe bring down the price, force Apple to bring down the price of their iPhone?
Keith Teare
You know, there's a great piece in Bloomberg today that debunks that. I mean, effectively, the iPhone is free if you have a wireless contract.
Andrew Keen
But all phones are free then, and then that's a moot argument.
Keith Teare
Well, people like me, I'll buy an iPhone at cost price.
Andrew Keen
You buy an iPhone every week. You're not typical. What about the ordinary person who buys an iPhone maybe once every three or five years?
Keith Teare
Ordinary people get their iPhone for the same price you can get an Android phone, basically free. It's built into the $20 or $30 a month.
Andrew Keen
But it does have a price, a formal price, whether it's $1,000 or $1,100.
Keith Teare
It does, because nobody pays that price.
Andrew Keen
Well, some people do.
Keith Teare
Some people do who can afford it, yes, and I do. It goes all the way from, you know, I'd have to go to Apple's website to remember the range now, but I think it starts in the, like, $399, $499 kind of at the low end.
Keith Teare
Let's just say iPhone. So you can start at the iPhone SE, where you get all the software and if you click buy, the price starts at, you've actually got to choose it. Oh, 429. Listen, listen, 429, but they'll pay between 30 and $630 for your old iPhone. That's if you have one. But leaving that aside,
Andrew Keen
What is the politics here? Is it just that the Biden administration probably only has six months left? Are they just throwing this stuff at the wall now?
Keith Teare
I'd be pretty shocked if Biden has his hands on this, because I think if he could... Obviously, there's a Chinese wall between the DOJ and the White House. They're not really meant to have their hands on things just like the Federal Reserve. There's a wall. So I suspect Biden doesn't have his hands on this.
Andrew Keen
Yeah, but the Khans of the world know that they may only have six months left because if Trump's reelected, they'll all get thrown out of office.
Keith Teare
So the politics really is Elizabeth Warren driven.
Andrew Keen
Oh, another of your favorite women, Keith. Is it the left? Is this what you're fearful of? The woke left?
Keith Teare
Well, it isn't really left, is it? It's a misunderstanding of the role of technology in progress. That there's no real understanding in the Democratic left that progress comes from technology.
Andrew Keen
That's a bigger argument. And certainly they do have a good argument when it comes to loneliness and atomization. Although I don't think that has anything to do with the case against Apple. This is not a case against technology. It's a case against Apple.
Keith Teare
Well, as you were saying earlier, Andrew, it really isn't. Apple's the fourth case. It's a case against Apple.
Andrew Keen
But it's not a case against people using technology. They're not saying... The premise of this argument is that technology is alienating, therefore we've got to stop people using phones. It's about stopping people using Apple phones.
Keith Teare
Yeah, but the accusation against Apple, really, they wouldn't use these words, but what it really comes down to is you're too far ahead. Therefore, there's no competition because no one's as good as you. Therefore, we want to make you as bad as everyone else.
Andrew Keen
Now, if you're... Yeah, but you sound like an Apple lawyer now. I mean, what about the news? You had another interesting piece of news, Keith, this week about Apple is in talks with Google Gemini to power the iPhone AI features. What does this say with these huge companies now partnering to make themselves, for better or worse, even more powerful, whether it's the Gemini AI or Apple?
Keith Teare
I actually think it's the opposite case. This deal represents the failure of Apple to compete with OpenAI. or Claude AI or any of Mistral AI or any of the others. And Google, it's their failure to distribute Gemini to a real audience. And so Apple and Google are both losers clinging onto each other to try to get to
Andrew Keen
Something that... Well, losers, I don't know.
Keith Teare
I think... In the AI race, they're currently behind by far.
Andrew Keen
Well, they're not losers. The race has barely begun. Some people argue that Google's Gemini and OpenAI's ChatGPT are relatively equal.
Keith Teare
They're not, they're not. But Claude AI is. I mean, it's even better. I've started using it more than OpenAI now. Uh, but that's the startup again and inflection AI that Microsoft, we're going to talk about inflection because that's, um, but the key is that none of them are Apple or Google and Apple and Google, you know, competition is embarrassing them in the AI space, which is how it should be. Yeah.
Andrew Keen
Another of the pieces, your video of the week from Jason Lemkin is about the odds of raising Series A funding for your startup. In the context of the broader startup economy, what are the odds, Keith? This is something you know a lot about. Do you have better odds in 2024 than you did in 2020 or 2015 or 2010? Or is it increasingly controlled by these huge companies like Apple and Microsoft and Google and Facebook?
Keith Teare
Well, the hard thing is in venture capital, it takes about four years to know what the odds were. A round happens and then you've got to wait and see. So what Jason is talking about really is backward looking data going back to about 2019. And the truth is that almost every investment made in 2020 and 2021 is stalled. That is to say, no subsequent round has happened. So the data will say things are really bad. But the truth is, you don't know, because people doing Series A rounds in 23 and 24 may go on to do a Series B and a Series C much faster than that prior cohort. Probably will. I would guess they will. So there's a bit of backward-looking data and then, you know, extrapolating from something that's out of date. And it's not his fault. It's just the way the venture capital... I understand that.
Andrew Keen
But you have a front seat on this. Is it harder or easier to raise money these days?
Keith Teare
Much harder. Although I do believe it's always hard to raise money. But it is much harder because there's less rounds. However, the... The amount of money being raised has gone up. I can actually show you the trends amazingly, because I happen to run a company that does this. Let me just pull up the web page.
Keith Teare
But I have to log in while I do it. And I think what you'll see is that the amount of money being raised per round
Andrew Keen
is on a very strong upward tick now in 2024 however there's a lot less rounds happening so from from the point of view of the d the the business of the daj and the business of the american government generally i think in terms of tech is trying to create uh a level playing field right
Andrew Keen
If you were the DOJ, what would you be focusing on? You're always bashing it. You hate Lina Khan. But are there areas where you think they could be working to benefit young entrepreneurs, Series A entrepreneurs with important, interesting ideas?
Keith Teare
Well, they already do do some of that. If you follow the former AOL CEO, Steve Case, has a venture fund called Revolution, The Rise of the Rest. And it's a lot of money and a lot of it's government money. And it's focused on, I think they're called enterprise zones.
Andrew Keen
Yeah, I mean, places outside the East Coast and Silicon Valley.
Keith Teare
Yeah, and they've given all kinds of tax breaks plus money to entrepreneurs.
Andrew Keen
But that's not a DOJ issue. It's not DOJ, but it is government. Where should the DOJ be looking? I mean, they've got to do something, Keith. Or are you suggesting they should shut it down in a Trumpian way, just get rid of it?
Keith Teare
No, I think the DOJ's job is to focus on crime. And it isn't. It's focused on politics right now. And there's a contradiction between the DOJ should only be a legal force, not a political force. And I would have said the same under Trump when he tried to get Biden arrested for the stuff his son did. The DOJ should not be an instrument of politics. It should be purely legal. But Lina Khan was appointed as a political appointee to the FTC.
Andrew Keen
Well, very usually. I mean, all these appointees are political. You just don't like Lina Khan. What about Trump? He's in the news. He's always in the news, but he's in that... The news in a tech way this week, truth socials going public might allow him to pay off some of his debt or some of the punishment from other legal inquiries. Is this right? Is truth social? And what I've read is that it's not really a company. So how is it raising so much money?
Keith Teare
Well, so Andrew, going back in our history, this is a SPAC. It's called the Digital World Acquisition Corporation. Yeah. The SPAC is funded by friends of Trump. And what happened late last week is that they agreed to merge with Truth Social, which is how SPACs work, which means the money sitting in the SPAC will now become money on the balance sheet Can they pull it off?
Andrew Keen
Is this just another political maneuver to allow Trump to pay his debt?
Keith Teare
I think they will be able to pull it off because inherently it's an inside decision. There's no external authorities really that can stop it. And that will mean that Truth Social shares will have a share price. Now, in the case of most SPACs recently, the share price is reduced by often more than 90%, very fast.
Keith Teare
The starting point for this will be that Trump's shares are worth about $3 billion. The question is, can he get money out before the share price crashes?
Andrew Keen
Danny, you're the expert on this. I mean, it will look dreadful if he...
Andrew Keen
Who loses the money then? The buyers of the shares. But why are the buyers of the shares in agreement? Everybody knows what's going to happen. Trump will try and take as much money out as he can, and then the price will crash.
Keith Teare
Very likely, which means you've got to go and look at the sponsors of the SPAC and ask the question, is that their expected outcome anyway? And if the answer to that is yes, then the losers will be retail investors who buy the shares on day one.
Andrew Keen
bad smell there keith and a bad smell i think also another announcement saudi arabia announced a 40 billion dollar ai fund saudi arabia of course being uh one of the most troubling authoritarian states in the world are you troubled by this or do you like saudi investment well i think you've i mean as an observer of saudi arabia
Keith Teare
you kind of it would be wrong to have a static view of the country it's clearly undergoing a lot of change right now including for women and one you know reads through the lines that the crown prince um is a modernizer And then there's the self-interest of oil revenues being assumed to shrink in the next several decades and Saudi Arabia needing a transition plan to a post-oil world. And they have a lot of money to put behind that, which is probably not a bad thing if you want Saudi Arabia.
Andrew Keen
I was writing an editorial this week. I would talk about the shame of this rather than Lina Khan. I mean, how does Lina Khan, who might be a bit of a clown, but how does she compare with MBS in Saudi? She doesn't behead people. She doesn't put people in jail.
Keith Teare
Well, I don't know. What's your view of Saudi Arabia? Don't you think there's an attempt to change it?
Andrew Keen
I think that perhaps, but I think the human right, we've had some shows on keen on on the human rights record, which, which remains abysmal, worse than the Russians, worse than the Chinese. So yeah, I'm certainly no apologist. But I think You get outraged, shame on us about Lina Khan. I agree that it's an absurd case, but you seem less concerned with the human rights abuses of the Saudis. I mean, Lina Khan's never put anyone in jail. She's never tortured anyone. She's never chopped people up into little bits and put them into suitcases.
Keith Teare
Yeah, but, you know, if you... I personally look at Saudi Arabia as a story of transition. Now, I'll agree that the facts, as you tell them, that's entirely true. But a bit like China, I don't think you get the change you want by pointing out the crimes of the past. I think you have to engage with people. and lead them to a better place.
Andrew Keen
The crime we're talking about, Turkish journalists, was only two or three years ago. Anyway, is there any good news? There's the Reddit IPO, Keith. Is that encouraging for startup entrepreneurs, investors? Is this a good thing? The IPO seems to have gone rather well. We've had A real shortage of tech IPOs. Does this suggest the beginning of a new market, new appetite for tech IPOs?
Keith Teare
Well, there's a fortuitous set of circumstances. It's very good timing. Reddit is not a great business. It still makes a loss after many, many years. However, it's recently started getting large sums of money from AI companies to allow those AI companies to train models on its data. It has a lot of data because it's a huge community centered site with detailed knowledge of all kinds of specific topics. So it looks as if it's going to become profitable this coming year. And it's part of the AI focus. Its share price went up 48% from that $34 number.
Andrew Keen
Are you saying that Reddit's value now is that they're using the content to train models, train models, the sort of the training, the guardrails? Does everyone who posts on Reddit, do they know that they're helping to build value to OpenAI or Inflection or Gemini?
Keith Teare
I would say yes. People are pretty aware. Reddit has a cryptocurrency that it rewards its users in for attention that their posts get. And so there's a kind of a self-built-in incentive for attention. So I don't think most Reddit posters want their data to be private. They mostly want it to be shared.
Andrew Keen
So you don't think this is a big deal? You think it's...
Keith Teare
I don't think it's a big deal. I think the market for data is only going to get bigger and bigger and bigger. I have 100% of the data as it pertains to venture capital. And then on top of that, I've built some scoring algorithms. I can't tell you how many times a week people call me trying to buy the data from me. And I don't sell it because that's not my business. But data is very valuable.
Andrew Keen
Well, Reddit, in spite of their IPO, didn't win the most coveted award in tech. It is startup of the week that went this week to Neuralink, which has developed a new product showing patient using brain implants to play chess.
Keith Teare
on a laptop is this the best news of the week keith the neuralink news well it it it's mind-blowing in that i i wouldn't have thought it was possible but um this this is a paraplegic uh i think whatever the worst is it's from the neck down no sensations whatsoever this was a young guy actually who had an accident swimming accident diving into a pool that was shallow um and you know he's from the neck upwards he's fine but from the neck downwards he isn't and they showed him playing chess on a screen using the neural link to do very precise movements like he could move the cursor and pull down menus and click on options in a very and fast no delay um and and uh move chess pieces and play chess and the excitement in his voice as he explained what a breakthrough it was for him to even be able to he couldn't contemplate doing something like that so um the fact that this is tech for the good there's not there's nothing
Andrew Keen
Dodgy, nothing ambiguous about this. Even if it's an Elon Musk-owned company, it still benefits humanity. This would be one of your arguments for embracing technology rather than being Lina Khan-like, suspicious of tech, of big tech. Yeah. Well, finally, one of the other interesting pieces of news, this was in TechCrunch, was that... Microsoft, quote unquote, seem to have acquired inflection AI. And this created an X from somebody called Jacob Austin. Always good to know you can be fired from DeepMind for being an asshole. Abandon your... startup your dollar startup and still get hired as a microsoft vp this was in reference to mustafa solomon who i think was the ceo of uh inflection who now is head of ai at microsoft why did you choose this x and what does it tell us about what's happening in the in the ai space
Keith Teare
Well, it blends a few things in a lovely way. I mean, the first is that this guy is a serious achiever, being one of the founders of DeepMind, which was started in London.
Andrew Keen
um is itself an achievement then he went he left uh this tweet claims he was fired uh i don't have any insight there but it could he was fired he was the the tweet i don't know why you chose this particular tweet um he was fired from deep mind when it was part of google for bullying behavior.
Keith Teare
Oh, that's right. Now I remember. Anyway, he then went on to form Inflection with money from Reid Hoffman and others.
Andrew Keen
Yeah, and Reid Hoffman had an operational role. Wasn't he co-CEO or chairman?
Keith Teare
Chairman, I think. um and and reed is leaning into ai heavily and then clearly what happened here is microsoft um seduced mustafa to want to go and join them um because of the doj microsoft couldn't just acquire inflection ai because it probably would have been blocked so instead they they've licensed the software for 650 million dollars and hired the founding team And the assets remain with the company, and they've now got money.
Andrew Keen
It sounds like what they did in some ways with OpenAI. One of the things that struck me about this is that Hoffman's on the Microsoft board. He's a multi-billionaire, partly because of his sale of LinkedIn to Microsoft. So isn't there something troublingly incestuous about this arrangement?
Keith Teare
Well, I think if you understand it through the prism of fear of the DOJ, you won't be far wrong. This is a very unusual... Are you blaming the DOJ for this, Keith? I'm saying the DOJ has made it impossible, and the FTC, impossible to do straightforward acquisitions. Therefore, people are resorting to weird structures to get what they want, which is the assets and the intelligence assets held by the target company and we might see more of this i mean google i'm sure can't always acquire the company but no google's a major investor in anthropic right and they probably can't acquire anthropic but they might be able to acquire anthropic's team and ip so what's mike what's microsoft's game here i mean another reading of this would be
Andrew Keen
that Inflection AI just couldn't compete with Anthropic or OpenAI or Gemini, so they folded and Mustafa got a job at Microsoft. Is that credible?
Keith Teare
Not really, because then Microsoft wouldn't have had to pay $650 million. So I think that isn't the story, really. The story is... probably more driven by microsoft's fear that open ai will end up not being controllable and this is microsoft trying to have another option yeah in addition to open iai it would be the the technology from inflection yes that's probably my gut instinct and it also reinforces that ai is a world in which startups are leading not the big tech players yeah but this comes back to what we've been talking about
Andrew Keen
This inflection isn't really a startup. It raised, what, two or three billion dollars. It was founded by Reid Hoffman, who's already one of the most influential figures in Silicon Valley. There's nothing, there's nothing. And Mustafa Suleiman, who was a DeepMind co-founder.
Andrew Keen
So when you think of something like inflection AI, it's the opposite of what Google once was or even Apple with jobs.
Keith Teare
Well, there is a rationale for that, which is that... I'm not blaming them. I'm not saying that... I'm going to explain to you why it is a startup, despite what you just said being true. That is the starting bar for participation in AI.
Andrew Keen
Right.
Keith Teare
is billions of dollars. So to be a startup in AI, somebody has to underwrite the price of entry, which is rising all the time. And, you know, you look at Nvidia this week, which we haven't talked about, but Nvidia launched a new chip called Broadcom, I think it was called, or Broad something. And that Nvidia chip is the starting price is $40,000 per chip.
Keith Teare
So the price of entry is super high. So startups that attract the right talent that can execute will need to attract large sums of money just to get going.
Andrew Keen
It's a very different kind of... I mean, at best, it's a very different kind of startup world than you and I knew back in the 90s, where anyone... I mean, I started a company on a credit card. You did the same thing. I did the same. So you've got to have billions of dollars. You've got to have... Powerful wealthy friends like Reid Hoffman who have connections to Microsoft or Google or Apple? It's a very I mean for better or worse isn't the criticism of tech and it's not a defense of Lena Khan But it's a very different world and it also reflects this new Saudi Forty billion dollar fund and the truth social news everything seems to be coming from above rather than from below well actually the Saudi fund is
Keith Teare
40 billion ends up being quite a small number in this context.
Andrew Keen
Right. No, I agree. I was actually surprised with that number. It's not a lot of money.
Keith Teare
And so I would say it isn't top down. It is still bottoms up. And developers ultimately are driving this because unless you can build something interesting, no one's going to give you money. But there are not many of those developers. And if you are one, you're going to attract you know, a lot of what is available to invest in the future. And, and that's, yeah.
Andrew Keen
And I wonder whether finally Keith has gone on and it's an interesting subject, whether as always with bureaucracies, like the DOJ, they're fighting the last war or the yesterday's war. They should be focusing on these issues and not worrying about the Apple iPhone.
Keith Teare
I agree with that. Did you come up with an alternative title to shame? Shame on Keith. It's still got shame in it.
Andrew Keen
Well, what's another word for shame?
Andrew Keen
I don't think it is shameful. I think that it may be incompetent, but there's nothing shameful about it.
Keith Teare
It's just words. But yeah, I think if you're incompetent, it is a shame. In South Africa, they use the word shame this way. If somebody falls off a bike, the person who sees it says shame.
Andrew Keen
So it reflects incompetence.
Keith Teare
Well, it's also got some empathy.
Andrew Keen
So is that the first sign of a thaw between you and Lina Khan?
Keith Teare
Shame. I feel sorry for her. Exactly.
Keith Teare
That was the week That was the week