(Preview) Apple Searches for an AI Partner, A Second Fair Use Ruling and Reckoning with Reality, The F1 Movie and Related Matters

The considerations for Apple and its potential partners as the company considers external help with its project to supercharge Siri, a word about risks for Google and Microsoft in the AI era, and thoughts on a second ruling regarding the scope of the fair use doctrine and LLM training. At the end: Politics and LLMs, bad news for TSMC engineers, and variety of thoughts on F1: The Movie and the future for F1 the sport.

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?

  All right, elsewhere this week, on Stratechery, you wrote about a follow-up opinion, a separate, parallel opinion regarding AI, training, and the fair use doctrine. I'll read from Bloomberg Law. "Meta escaped a first-of-its-kind copyright lawsuit from a group of authors who alleged the tech giant hoovered up millions of copyrighted books without permission to train its generative AI model called Llama. San Francisco federal judge Vince Chabria ruled Wednesday that Meta's decision to use the books for training is protected under copyrights fair use defense, but he cautioned that his opinion is more of a reflection on the author's failure to

• 0:51Andrew Sharp?

  litigate the case effectively. This ruling does not stand for the proposition that Meta's use of copyrighted materials to train its language models is lawful," Chabria said. "It stands for only the proposition that these plaintiffs made the wrong arguments and failed to develop a record in support of the right one." So Ben.

• 1:12Ben Thompson?

  No, this rundown says you're gonna ask me with I have some takes. I've already written about this. I podcasted about it on Dithering. You go first. What's your take?

• 1:23Andrew Sharp?

  Well, I didn't love the podcast we did on this issue right before summer break.

• 1:30Ben Thompson?

  Wow, a week and a half of regret.

• 1:33Andrew Sharp?

  Well, no, not, I wasn't just agonizing the entire break, but maybe for an hour or two afterwards. It just didn't sit right. I didn't have that much time to prep and I hadn't fully formulated exactly what I think about this issue and exactly why I ultimately leaned toward treating training as fair use. But on the heels-

• 1:56Ben Thompson?

  A week and a half of baking. What's coming out of the oven here?

• 1:59Andrew Sharp?

  Oh, boy. Well, I will say I loved Judge Chabria's opinion. I just thought his explanation of all of it was a much more intellectually honest approach to dealing with the realities in play here and the stakes for the future of creators. So do you want me to read from Judge Chabria, or do you want me to run through my whole thought process on this?

• 2:22Ben Thompson?

  You're in charge.

• 2:23Andrew Sharp?

  Because I actually wrote it down.

• 2:24Ben Thompson?

  I'm letting you cook. I'm going to restrain myself and you tell me why Judge Chabria got it right.

• 2:32Andrew Sharp?

  Am I in the catbird seat here?

• 2:34Ben Thompson?

  You're in the catbird seat, exactly.

• 2:36Andrew Sharp?

  All right, so let me run through the way I think about this issue. I'll wear my anti-monopolist hat here and say that I'm instinctively uncomfortable with treating LLM training as fair use, because it does seem that, it seems clear that LLMs will harm the long-term market for books, journalism, other creative work, probably including human-generated music, human-generated movies, TV shows, and it's worth mentioning movies and TV shows.

• 3:12Ben Thompson?

  Human-generated podcasts?

• 3:13Andrew Sharp?

  Well, maybe not podcasts. I don't know. How big is the market, really? I feel pretty honest.

• 3:17Ben Thompson?

  Look, it's not big enough to get you a private jet from Nantucket. So it's big enough to get to Nantucket, but you might get stuck there.

• 3:26Andrew Sharp?

  Call me zuck. If we know that that's the direction this is going, but that it's only possible for it to go that direction, if these models are allowed to train on the work of millions of creators who own their IP without compensation, then we're ultimately talking about a transfer of wealth and long-term profit incentives from one industry that thrives on the work of millions of creators to an industry that's dominated by like $5 trillion companies. So I'm instinctively uncomfortable on that basis. That transfer of market power from creators to model makers

• 4:09Andrew Sharp?

  Without any real compensation seems antithetical to the concept of fair use, even if it's not necessarily antithetical to the technical letter of the law with fair use. And so that is why, as I was agreeing with you on the last podcast, I was like, eh, I don't know. I feel like I'm kind of betraying my roots here. And then thinking it through further, in a copyright context, I think courts are really stretching the boundaries of what copyright law is supposed to protect and enforce. If they are talking about LLM output that is not itself infringing, and then trying to prevent speculative market harms in the future,

• 4:54Andrew Sharp?

  and not actual market harms in the present, like I just, I don't know that the law can really go that direction on a consistent basis. And that's ultimately where Judge Chabria netted out here, while also reckoning with the reality that like, this isn't like a bunch of schoolchildren reading books and then ultimately learning to write books and competing in the same market years down the line. The scale of this does render it a completely separate problem than anything that the law has tried to reckon with before. And so I appreciated him for stating that honestly, and then also coming to the conclusion,

• 5:35Andrew Sharp?

  well, there's no real record of harm for these authors in terms of their market opportunities. And I can't rule, and I can't rule against Meta in this case. Does that make sense?

• 5:47Ben Thompson?

  I completely agree.

• 5:49Andrew Sharp?

  There you go. Standing ovation for Judge Chabria.

• 5:52Ben Thompson?

  No, well, a little bit of a standing. So I appreciate his intellectual honesty by the end. Because the first three quarters of that opinion was a little bit of living in a fantasy land. And this bit about they just need to make a better case. Is a fantasy. There's no case to be made. That's the issue.

• 6:11Andrew Sharp?

  That's the issue. Yeah.

• 6:12Ben Thompson?

  Right. And so I'm glad you mentioned the anti-monopolist roots. Cause this is, it's actually a replay of our debates about aggregators and monopoly.

• 6:23Andrew Sharp?

  Yeah.

• 6:23Ben Thompson?

  My whole point all along is I actually agree with you. I agree with all the concerns. But antitrust law cannot fix the issues you're worried about. And it sounds like we, we fast forwarded to the end here, which is copyright law can't fix the issues that you're worried about. If you want to address these issues, it's going to require a new law and a new approach. And then we have a separate debate about the trade offs with some sort of law that explicitly addresses this. But just like the monopoly thing, that's been my thing all along. I'm like, I get the point of view, but you're, you have to pass a new law. You can't retrofit. Antitrust to this because it doesn't fit and, and it's what you just said about copyright.

• 7:05Ben Thompson?

  It's like, yeah, there's the, the, all these concerns are real and valid. But Judge Chabria, to his credit, by the end. He's like, yeah, but it doesn't really apply here. And my critique of him is the suggestion that you could ever find evidence to apply. Cause what he's, what he needs evidence for is purchase decisions not made by individuals. How, how are you going to get that data?

• 7:31Andrew Sharp?

  It's right. Not made by individuals, not only today.

• 7:34Ben Thompson?

  At scale.

• 7:35Andrew Sharp?

  I think he's more broadly concerned with the long-term implications of this sort of behavior.

• 7:40Ben Thompson?

  Right. Which are very real. Those are totally real. Right. But, but if, if the standard of the law is you have to find explicit market harm. It's all, it's all in the noise, right? It's all like, the harms are real. Yeah, exactly.

• 7:55Andrew Sharp?

  Right. And I like that he said meta makes the mistake the Supreme Court instructs parties and courts to avoid. Robotically applying concepts from previous cases without stepping back to consider context. Fair use is meant to be a flexible doctrine that takes account of significant changes in technology. And that's how I would like law to work and be elastic in some respects.

• 8:19Ben Thompson?

  Living constitutional guy.

• 8:21Andrew Sharp?

  Yeah. Well, I mean, it should sort of be able to.

• 8:25Ben Thompson?

  Constitutional law debates in college, but yes.

• 8:27Andrew Sharp?

  I, look, we're not going to turn this into a law school seminar, um, but I think that his vision of the law.

• 8:33Ben Thompson?

  Favorite classes. I loved them.

• 8:35Andrew Sharp?

  His version of understanding the law and what it can do and what it can adapt to, I think makes more sense and resonates with me as opposed to robotically applying past precedents to try to grapple with some of these technology challenges. But you mentioned that if it were to go to Congress, you would still probably come down on the side of the AI companies here. So explain your logic.

• 9:01Ben Thompson?

  Well, this whole scale question runs in multiple directions. I think if you were to pass a law, which I think the UK either passed or is proposing, where basically by default, everything you have to get affirmative position. I might be wrong on this, but you can imagine a law. You have to get affirmative permission to include copyrighted works.

• 9:23Andrew Sharp?

  Good luck.

• 9:24Ben Thompson?

  How is that gonna happen? And meanwhile, all those works that are available can be pirated, or it can be online, or whatever it might be. Unscrupulous actors will have access to them. It gets in a situation where you're punishing the people trying to follow the law. And that's, and so I don't like this, but it's one of those just sort of you have to look at reality and sort of have a realism, you know, like foreign policy terms, sort of view of the world.

• 9:54Andrew Sharp?

  Real politics, let's do it.

• 9:56Ben Thompson?

  If you pass this sort of law, the only companies that are going to suffer are the ones that are trying to follow the law. And you're actually helping and empowering the companies that don't care. And that doesn't seem ideal to me.

• 10:13Andrew Sharp?

  Yeah, yeah, well, that makes sense. And I mean, for me, as I was thinking about it, I do think that there's room to step back and say, well, what sort of incentive structure do we want to create and protect for writers, or musicians, or film studios? But the reason I'm less passionate about pushing for statutory protection for that sort of class versus say pushing for laws that limit the take rate for Google or Meta or Amazon as they deal with businesses all over the world. In the latter case, we're talking about transfers of wealth from like hundreds of different industries that are all beholden

• 10:55Andrew Sharp?

  to tech platforms that essentially operate as utility companies. And in that case, I think the entire economy could be healthier and more dynamic if we're not limiting the upside in a bunch of different industries, hundreds of different industries that have to pay their pound of flesh to Google or Facebook. But in AI, I think that we're talking about erecting barriers to protect an industry of creators that is already facing so many structural threats.

• 11:25Ben Thompson?

  Right. They're already doomed. So who cares?

• 11:27Andrew Sharp?

  Just because of the mere existence of technology.

• 11:29Ben Thompson?

  That's right. No, the internet is already decimated.

• 11:31Andrew Sharp?

  Real politic is concerned. Yeah. And so like, what are you actually trying to protect?

• 11:37Ben Thompson?

  The horse, the horse is like halfway across the country at this point.

• 11:40Andrew Sharp?

  Yeah. And so I think you just have to sort of be real with it. And I,

• 11:46Ben Thompson?

  I think the other angle too, in sort of appealing to your anti-monopolist side, copyright is government granted monopoly, right? That's the tension with people act like it's this God given gift. It's like, no, this is, this is a, an anti-competition thing that we do because we value the incentives of doing creative things. But all intellectual property law is government granted copyright. It's by definition, market distorting. And again,

• 12:16Andrew Sharp?

  I mean, you could get really abstract and say that that's also true of property law generally, but we don't have to go full socialist here.

• 12:23Ben Thompson?

  Well, I mean, we have a second amendment discussion here. I step on my lawn, Andrew.

• 12:28Andrew Sharp?

  That's right. The law of the land out of Wisconsin.

• 12:34Ben Thompson?

  So yeah, so I I'm that is but that is a factor for me. I think that a lot of copyright and intellectual property laws act like it's this like law of nature and like, no, it's not. There's very real challenges and issues that come from government granted monopolies like patents, like copyrights, like that lead to abuses that lead to high prices that actually do can be sort of counterproductive. And given that I'm hesitant to layer on all these potential extra problems in service of a government granted monopoly for folks to your point to the ones that are that have made it this far are probably going to be fine.

• 13:17Ben Thompson?

  Like this is the other thing is all the AI is individual. It's all custom to you there. I continue to believe, and again, I'm totally talking my personal book here, so take it for what it's worth. There's tens of thousands of people listening to this podcast. They can talk to other people. It's a common experience. It's something that has value by virtue of being one thing broadcasted to many people, right? And having the human component and I think I mispronounced the name of someone earlier. Like we're doing our part to stay unique. So like, and so, yeah, to that point, like what the horse is gone.

• 14:02Andrew Sharp?

  Right. And imposing huge burdens on AI startups around the world isn't going to change the structural forces that are ravaging publishing.

• 14:12Ben Thompson?

  Totally right. All you're doing is favoring the incumbents even more because they can jump through all the hoops and figure out, it's like YouTube figured out a way to let you have copyrighted music in your videos. They just pay everyone out. They have this whole convoluted system and it's, it's great. I'm glad they got it to work. It sucked when people had had like birthday videos taken down because there was like copyrighted music in the background. There will also never be another competitor to YouTube ever again.

• 14:36Andrew 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].