(Preview) Meta Continues Its AI Spending Spree, More Fun with OpenAI and Microsoft, ‘Apple in China’ and Related Matters

Ben and Andrew react to reports that in addition to adding Scale AI CEO Alexandr Wang, Meta’s now in advanced talks to hire prominent AI investors and frequent Stratechery guests, Nat Friedman and Daniel Gross, for an offer that could exceed $1 billion. Then: Follow-ups on Perplexity and Apple, the calculus for both sides amid reports of between OpenAI and Microsoft, a question about ‘Apple in China’ and culpability for the last 20 years of decision-making, and thoughts on the competition between the US and China, in general.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  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?

• 0:19Ben Thompson?

  Doing well, Andrew. For the record, employed by Stratechery LLC, not Meta.

• 0:26Andrew Sharp?

  For now?

• 0:27Ben Thompson?

  Some people were asking questions.

• 0:29Andrew Sharp?

  Yeah, it's pretty wonderful, man. I mean, tumbleweed season has been interrupted by a spending spree that just keeps on going for Meta. And that's where we're going to kick things off. From the information, Meta Platforms is in advanced talks to hire the prominent artificial intelligence investors Nat Friedman and Daniel Gross to help lead its AI efforts, according to a person familiar with the discussions. As part of those talks, Meta is in discussions about partially buying out Friedman and Gross's venture capital fund, NFDG, which holds stakes in top AI startups and is worth billions of dollars on paper, the person said.

• 1:11Andrew Sharp?

  If the talks are successful, Gross would leave Safe Superintelligence, which he co-founded with former OpenAI chief scientist Ilya Sutskever last year. At Meta, Gross is expected to work mostly on AI products, while Friedman's remit is expected to be broader. Both Gross and Friedman are expected to work closely with Meta CEO Mark Zuckerberg and Scale AI CEO Alexander Wong. So Ben, when we discussed this last week in the wake of the Wong news, you alluded to Meta's interest in other big names. What do you think about Nat and Daniel potentially being thrown into the mix at Meta here?

• 1:49Ben Thompson?

  Well,

• 1:51Ben Thompson?

  Just, you know, this is definitely a disclosure podcast. Nat and Daniel have appeared on Chit Techery multiple times to discuss AI. We initially started the series actually before ChatGPT, where our perspective was, okay, GPT-3 is unbelievable. Like, why is no one building products around this? So even we're going back to 2022, we're saying there is a product overhang. Like, there is a new capability, a new technology that exists. And why aren't people building products around this? And it was interesting because I was hesitant to do it. That's the other disclosure. I am personal friends with both Nat and Daniel. There are some of my closest friends in tech. And so

• 2:33Andrew Sharp?

  And it comes through in the interviews. The AI interview series is one of the best AI resources I've had over the last two years or so. They're great.

• 2:42Ben Thompson?

  Right, so I, so just that's on the table. I'm obviously going to proceed with, you know, just it is what it is. So just, but and normally I don't talk about executive moves per se, except that, well, I mean, you know, it's not just my friends. These are big deals, but they're, and it's interesting because they're headline deals that are not about AI researchers. What didn't happen is Meta didn't buy like SSI as a whole. Ilya Sutskever is arguably the greatest AI researcher in the field, or he's in the top five. Like, and so it suggests, I think, one of the challenges for Meta, which is you go to Meta because you see an incredible terrain to build products.

• 3:27Ben Thompson?

  You don't go there because you're like inspired, you're like an AI true believer sort of thing. You kind of know what you're getting into when it comes to Meta. And so, and Ilya obviously had that conflict, whatever it was, with Sam Altman and with OpenAI, ended up going to do his own thing. It's very highly valued. It has no product. They say they're not going to release a product until they have AGI, whatever that is. So

• 3:53Andrew Sharp?

  Great.

• 3:53Ben Thompson?

  I just think the fact that Daniel's involved and not Ilya is interesting. And by the way, I've not talked to them about that specifically. So this is just, just sort of my surmising. But Nat is, Nat was the leader of GitHub when GitHub created GitHub Copilot, which was Arguably the first major AI product. Again, it's not AI, it's the product. It's something you actually use. That was a huge deal. And he left Microsoft and GitHub Copilot's kind of fallen well behind, things like Cursor and things along those lines. And so it's interesting that what, what sort of meta is hiring to date is really more about management

• 4:36Ben Thompson?

  than it is about sort of researchers. And maybe that's because they can't get researchers. I don't know, TBD. Again, there's, there's a couple of big names that are rumored to be headed in that direction. But I do think it's a pretty smart and like humble sort of acknowledge. This is some classic Mark Zuckerberg stuff where he's taken a heavy interest in AI. And to me, this says, my interest in AI speaks to the fact, I'm not capable of managing AI. I need someone to come in who really gets the space, who is not just a researcher, but is a manager who can actually direct and set direction and

• 5:19Ben Thompson?

  align incentives and do all those sorts of things. And again, totally biased here, if you're looking for the best manager of AI, it's hard to get, imagine someone better than that. He has the management experience. He understands the space. He knows what's going on through their sort of investment fund. And that's the other sort of exception with them. I typically don't have VCs on. When they started, they were just doing like a startup, a fun sort of thing. They were seed investors. I'm like, I'll just kind of squeeze it a little here. And then they got more and more like big in the space. I'm like, well, this is so much for my, my no VC interview principle. We had a good thing going. So we've kept it up. I think the last one was in January.

• 5:58Andrew Sharp?

  I was gonna say, it's sort of like a biannual tradition with those guys. And it started six weeks before ChatGPT launched. So it's been fun to trace the evolution of the space through those interviews.

• 6:09Ben Thompson?

  Yeah, we'll put a link to the interviews. I assume they still hold up pretty well. It'd be interesting to sort of go back, go back and read through them. But to me, that that's just the big takeaway is this is a And you know, I've met Alexander Wong a couple of times. Um, it's interesting what the fit's gonna be with him and Nat. But Nat is, you know, he's my age, he's experienced, he's managed large organizations, he's operated in large organizations. He was inside Inadella's inner circle at Microsoft. Like, he understands what it takes for an entity like Meta to operate in a space like this, probably better than almost anyone that you that you could imagine.

• 6:50Andrew Sharp?

  There you go, yeah.

• 6:52Ben Thompson?

  Obviously, I think it's a great move by Meta because I like Nat and Daniel. And Daniel, if you go back, Daniel's brilliant. You like, you read through those interviews and he's been on the product point from day one, talking about how the product, like, people, number one, there are no products. And then number two, the people doing products don't understand and aren't thinking about how AI transforms product capabilities along the way. So Daniel going into products, Nat doing business. Now, they still need the talent. Like, at the end of the day, it's the engineers and the researchers that actually do this stuff. So this story isn't complete, but yeah, this is a big deal. Like, it was, it's pretty surprising. Um, I think it's probably safe to say they're buying out their venture fund.

• 7:34Ben Thompson?

  Like, if we thought that $15 billion for Scale AI was was a lot, um, you know, I mean, I, whatever, clearly, there's no holds barred. This is pretty nuts. I can't imagine what, what, what, I don't know what the budget is. It's gotta be very large.

• 7:51Andrew Sharp?

  The numbers are getting pretty astounding, man. And, you know, I too am interested in the interplay between Nat and Alexander Wong, and we got Jan LaCoon still in the mix. Like, if this were sports.

• 8:03Ben Thompson?

  I gotta think Jan's being sidelined to a certain extent. I mean, I think I expressed my, my, my Jan take earlier. Again, salute to him, giant of the field. Um, the wrong person for Meta, even if all he is skepticism about LMS is correct, that has nothing to do with the possibilities in front of Meta. And, and again, this speaks to why maybe someone like Ilya doesn't want to go to Meta because he's not interested in making a more compelling Facebook experience. Like he wants to like discover God, right?

• 8:31Andrew Sharp?

  Making everything on your Instagram photo clickable and an advertisement. That's not necessarily what Ilya is trying to do for the next five years.

• 8:39Ben Thompson?

  Right. And so, so we'll see what all this stuff sort of ends up looking like. But again, like, like that goes back to our initial interview with what I did with Nat and Daniel. Their point from the beginning was about productization of AI. That's the possibilities that they were focused on. And so they're the sorts of people that make sense in a meta contest. The possibilities of product ties within Meta's, you know, surface areas is massive. But again, you know, they, they, they're, they're not the ones actually doing the programming or the research. Like, like, you know, I say this as an analyst who's not doing the program research and they will freely say as VCs. Now, they can do it like Nat had Nat dev, like one of the earliest playgrounds for AI.

• 9:21Ben Thompson?

  That he actually funded for ages, uh, very large bills where he could go and just play with the stuff and sort of figure it out. And he did that all himself. He did a super early, uh, like a, a web scraper, like where the AI would surf the web for you. And he did this like years, like he's capable, but he's not like the, the, he's not Ilya. He's not Ilya Sutskevich. Like, are they going to get those sorts of people?

• 9:46Andrew Sharp?

  Well, look, maybe Meta's off season isn't over just yet.

• 9:50Ben Thompson?

  Well, yeah, it clearly wasn't when we talked about it last week. So.

• 9:53Andrew Sharp?

  Yeah. Over the next couple of weeks here, Austin sent us this tweet. Breaking Meta to trade Yan and four first round picks for Schulman and Schulte Bricken in a three way trade. Schulman contract expiring at the end of the year and expects to sign a three year, $200 million deal with Meta. Karpathy says, quote, "He is happy where he's at, but CEOs around the bay expect a signing to come soon." Should we get on the trade machine and start putting together the next moves for Zuck? Is it time for you to enter your Bill Simmons era?

• 10:25Ben Thompson?

  I was wondering. I saw the rundown of the Bill Simmons era. I wasn't sure what you meant, but yeah. I mean, there's a reason I don't generally talk about executive movement at the top. It's just like it, you know, even here, I'm talking about like, like, look, Daniel's going to be a great product guy and that's going to be a great manager. That. And it's interesting because in tech in general, there's, there's a real bias and appropriately so towards engineering and the people that actually build it. And obviously me, I do appreciate management and the sort of fuzzy, you know, aspects that go into creating the circumstances and the incentives and the environment for great engineering to take place. But it's

• 11:06Ben Thompson?

  really hard to sort of like know and talk about if you're not there, if you're not sort of in, in the building. And I do think that Meta is the only company that could have pulled Nat and Daniel in precisely because Mark's clearly in control. The ability to sort of start afresh, cut through red tape is going to be higher there than it would be most other places. Um, I, you know, I'm sure that they were not the only company that's tried, tried to hire these guys. But, um, but yeah.

• 11:35Andrew Sharp?

  So in terms of Meta and what's attractive about Meta, it's essentially Mark has unilateral.

• 11:41Ben Thompson?

  Number one is Mark is in control and you, if you have a direct line to him, uh, and we just see evidence of Meta being willing to take the risks.

• 11:50Andrew Sharp?

  The products get pushed to three billion people. So it's a massive opportunity if you care about making great products that the whole world is going to use.

• 11:59Ben Thompson?

  And Meta has a lot of great talent, right? Like, like even if the question about the very high end AI researchers is out there and they lost some of the, you know, the people that they did have, they lost a lot to Mistral in particular. Um, like when it comes to actual productization and engineering, like they, they got a lot of talent and.

• 12:17Andrew Sharp?

  Well, and they're going to keep spending. It sounds like they're going to keep spending because the FT had a report, OpenAI chief executive Sam Altman has accused Mark Zuckerberg's Meta of trying to poach his developers with the promise of a hundred million dollar signing bonuses and even higher pay as the social media platform races to catch up in the artificial intelligence battle. Altman said Meta, which has a market capitalization of 1.8 trillion dollars, had begun to make the quote, giant offers to employees on his team after falling behind on their current AI push. And he said that on a new podcast that Jack Altman has started. A lot of new podcasts out there in the world these days.

• 12:55Ben Thompson?

  Yeah. Why is everyone coming for me? Go, go for, go for someone else. I mean, come on.

• 12:59Andrew Sharp?

  Exactly. Um, well, my question.

• 13:03Andrew Sharp?

  Are we entering an era where we're going to start to see the barbell effect hit comp for tech talent going forward? Because the engineering, it seems like there may be a downward push on engineering salaries over the next five to 10 years as AI proliferates. And then the type of talent that can really make a difference for a company like Meta, I mean, given the stakes, it isn't crazy to spend $100 million or $150 million or OpenAI throwing $6 billion of stock at Johnny Ive to get a hardware business off the ground. Like, is this going to be a new normal in tech going forward?

• 13:46Andrew Sharp?

  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 Strategery and the Strategery Plus bundle. Check it out, and if you've got feedback, please email us at [email protected].