Wiz passes on Google, Meta pushes open-source AI ahead, Spotify’s earnings, and more! | E1984
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Jason and Alex kick off the show
- Jason and Alex, the hosts of the show "This Week in Startups," begin the episode by discussing the recent news of the Biden-Trump election. Alex, who had previously predicted a Biden victory, acknowledges that the outcome was still a "real moment" despite his prediction.
- Jason announces that he has moved to Austin, Texas, with his family and purchased a ranch. He clarifies that this move will not significantly impact his business life, as he will still be traveling to major cities where his startups are located.
- The hosts then transition to discussing the main topics of the episode, which include the end of the Whiz-Google deal, Meta's new open-source AI model, Spotify's earnings, and a hypothetical scenario of giving people money every month.
The end of the Wiz-Google deal
- Wiz, a rapidly growing AI company, rejected a $23 billion acquisition offer from Google. The decision was driven by the desire for independence and the potential for a higher valuation through an IPO.
- The decision highlights the challenges of achieving 2021-style IPO valuations in the current market. With high interest rates and a shift in investor sentiment, companies like Wiz may struggle to achieve the same multiples they could have in the past.
- The chapter discusses the potential for Wiz to raise capital through a secondary offering. This would allow existing investors and employees to cash out while the company remains independent. The speakers suggest that finding investors willing to pay a premium for a company like Wiz, despite the current market conditions, could be challenging but potentially rewarding.
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Spotify's successful quarter
- Spotify had a very successful quarter, exceeding 246 million paying subscribers and 626 million monthly active users. This success is attributed to continuous product innovation, making the platform more engaging and sticky.
- Spotify's stock is at an all-time high, and the company has achieved its highest free cash flow quarter ever. This demonstrates the positive impact of going public, as it forces a level of focus and discipline that can lead to strong financial performance.
- Spotify's expansion into audiobooks and podcasts has been a strategic move, reducing its dependence on the music industry and creating new revenue streams. The company's aggressive approach to podcasting, including acquiring popular shows and offering attractive deals to creators, has positioned them as a major player in the audio space.
Daniel Ek's strategy and Spotify's future risks
- Spotify's recent success and potential future risks: Spotify has seen significant growth in paid subscribers and revenue, leading to a surge in profitability. However, the speaker wonders if Spotify will continue to take risks and invest in new areas like video and audiobooks, or if they will focus on maintaining their current success.
- The "static team size" strategy: The speaker discusses the concept of "static team size," where companies maintain a consistent headcount while increasing employee efficiency through tools like AI and focusing on high performers. This strategy has become increasingly common, as companies seek to optimize their workforce and avoid the competitive "war for talent."
- The potential for increased employee compensation: The speaker argues that companies adopting the "static team size" strategy should consider rewarding their employees with higher salaries and bonuses, as they are taking on more responsibility and achieving greater productivity. This would help address concerns about increased workload and potential job hopping.
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Universal basic income (UBI)
- The speaker discusses the concept of pensions and how they are no longer common due to the uncertainty of life expectancy. He argues that pensions could be a powerful tool for employee retention, but the potential for long lifespans makes them risky for companies. He contrasts this with the Australian superannuation system, where employees are mandated to contribute a portion of their salary to a retirement fund, leading to a more stable and secure retirement for Australians.
- The speaker then transitions to the topic of Universal Basic Income (UBI), highlighting a recent study conducted by Sam Altman's Open Research. This study involved providing $11,000 per month to 1,000 lower-income individuals in Illinois and Texas for three years. The speaker expresses his interest in the study's findings, particularly in light of the potential impact of AI on the future of work.
- The speaker concludes by discussing the importance of understanding incentives in decision-making, using the example of a former government official who may have strategically delayed her resignation to maximize her pension benefits. He also shares a personal anecdote about handling a workplace harassment situation, emphasizing the importance of clear communication and severance agreements to avoid future complications.
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Findings and implications from a recent UBI study backed by Sam Altman
- A study backed by Sam Altman found that recipients of a Universal Basic Income (UBI) worked less, but this was largely due to those already working long hours. The study also found that UBI increased interest in entrepreneurship, particularly among women and minorities, but this effect took time to manifest.
- The study also revealed that UBI led to a decrease in problematic alcohol use and illicit drug abuse, but these effects faded after the first year. This suggests that UBI can have positive short-term impacts on mental health and well-being, but these benefits may not be sustained over time.
- The speaker suggests that future UBI studies should explore different modalities, such as tying UBI payments to educational programs or incorporating incentives for increased work effort. They also advocate for comparing UBI to existing entitlement programs to assess their relative effectiveness and cost-efficiency.
The efficiency and impact of welfare programs
- The speaker argues that welfare programs are not always efficient in delivering aid to those who need it most. They suggest that a block grant system, where individuals receive a cash payment instead of services, could empower recipients and allow them to make their own choices.
- The speaker proposes a specific model for distributing welfare funds. This model would allocate a portion of the funds to a retirement account and a portion to an investment account, encouraging recipients to build wealth and understand basic economic principles.
- The speaker emphasizes the importance of social capital in understanding economic disparities. They cite JD Vance's "Hillbilly Elegy" as an example of how limited exposure to certain opportunities can hinder individuals' ability to succeed. The speaker believes that providing financial education and opportunities for wealth building can help break the cycle of poverty.
Meta's AI developments
- Meta has released a new AI model called Llama 3.1, which boasts 405 billion parameters and was trained on 15 trillion tokens using 16,000 Nvidia H100 GPUs. This model is significant because it is the first openly available AI model that rivals the top AI models in terms of capabilities, including general knowledge, steerability, math tool use, and multilingual translation.
- Meta's decision to release an open-source AI model challenges the dominance of closed-source AI companies like Google and OpenAI. This move is similar to the shift towards open-source software in the past, where corporations began to trust open-source solutions over proprietary ones due to their flexibility, cost-effectiveness, and lack of vendor lock-in.
- Mark Zuckerberg's engagement with this project suggests a shift in Meta's priorities. After investing heavily in VR and AR, which have not yielded significant returns, Zuckerberg seems to be focusing on AI as a potential growth driver for the company. This is evident in his personal involvement and the significant investment in hardware, with Meta spending an estimated $30 billion on 16,000 H100 GPUs for the Llama 3.1 model.
Mark Zuckerberg's thoughts on Apple and open-source AI
- Mark Zuckerberg expressed frustration with Apple's closed approach to technology, arguing that it hinders innovation and limits user choice. He believes that Apple's actions are motivated by a desire to stifle competition.
- Zuckerberg is advocating for open-source AI, believing it will be safer and more beneficial for society. He argues that open-source models will be more transparent and accessible, leading to greater collaboration and progress.
- Zuckerberg's recent release of Llama 3.1 405b, a large language model, has been met with positive reception. This success has likely boosted his confidence and may be a response to criticism he has faced in the past, particularly regarding his metaverse ambitions.
Predictions for Meta's competitive moves
- Meta's Competitive Moves: The speaker predicts that Meta will release a competitive app to OpenAI's ChatGPT, potentially costing OpenAI 50% of its valuation. Meta will likely copy the app's design and add features, making it free to use.
- OpenAI's Valuation: The speaker believes that OpenAI's valuation will be significantly impacted by Meta's competitive app, potentially being cut in half.
- Twist 500 Party: The speaker discusses plans for a Twist 500 party, celebrating the top 1% of private technology companies. The event could be held in multiple cities and feature a trade show area, presentations, and networking opportunities.