OpenAI's 'Worrying' Q-Star Breakthrough, Google's Culture Problem, Crypto After CZ & SBF

Malcolm Ethridge is the executive vice president at CIC Wealth a CNBC Contributor, and the host of the Tech Money Podcast. He joins for our weekly discussion of the latest tech news. We cover: 1) OpenAI's 'worrying' Q* breakthrough 2) Whether Sam Altman is in danger of being fired again 3) Where's Google Gemini? 4) Google's culture struggles 5) Binance CEO CZ pleads guilty 6) Is Binance the next FTX? 7) Is Coinbase toast? 8) Bitcoin's future 9) Cruise CEO Kyle Vogt's resignation 10) Is Cruise toast? 11) Jack Dorsey ends PIPs at Block 12) State of the market and how to read it. -- You can subscribe to Big Technology Premium for 50% off in our Black Friday Deal: https://www.bigtechnology.com/Friday Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [email protected] Learn more about your ad choices. Visit megaphone.fm/adchoices

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

• 0:00Alex Kantrowitz?

  OpenAI had a new breakthrough ahead of Sam Altman's ouster. What's Google's next move after all this chaos? CZ please guilty and Bitcoin is rising. Cruise CEO Kyle Voat is out and Jack Dorsey does away with PIPs. We've got a jam packed show coming up right after this. This episode is brought to you by Genesis. What does it actually take to put Agentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial

• 0:41Alex Kantrowitz?

  to go inside a large scale Agentic CX transformation, including the business decisions, trade offs and lessons along the way. You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay? Akash is an open cloud that provides easy access, flexibility and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation. Welcome to Big Technology Podcast Friday Edition.

• 1:23Alex Kantrowitz?

  We break down the news in our traditional cool headed and nuanced format. Ron John Roy is off today. He'll be back soon, but joining us today is someone I've been meaning to get on the show for quite some time. Malcolm Ethridge is here. He's the executive vice president and a financial advisor at CIC Wealth. He's a CNBC contributor. He's the host of the Tech Money Podcast and he's someone that I've, you know, had a good time hanging out with on air on CNBC and sparring a bit. So it's great to have a long conversation with you today, Malcolm. Welcome to the show.

• 1:54Speaker 01

  Yeah, man, I appreciate the invite. Glad to be here.

• 1:57Alex Kantrowitz?

  Let's start with OpenAI, shall we? I mean, we've been talking about this in depth on the show over the past week, but I think it's important to just go talk about the next chapter here. And it really begins with the fact that there could be some lingering tension about safety within OpenAI. Because there's this new breakthrough that they found right before Altman was fired. It's called Q-Star. And let me just read the headline from Reuters. It says, "Ahead of OpenAI, Sam Altman's Four Days in Exile. Several staff researchers wrote a letter to the board of directors, warning of a powerful artificial intelligence discovery they said could threaten humanity." And this is from the story, "Given the vast computing resources, the new model was able to solve certain mathematical problems.

• 2:40Alex Kantrowitz?

  The only performing math on a level of grade school students, acing such tests made researchers very optimistic about its future success." And doing math in AI is supposed to be very big, because while generative AI is good at predicting the next word, if you can do math, it means you can reason, and that is considered by some a step change. Obviously, this freaks some people out within OpenAI. What's your perspective? Do you think this is as big as some of the people within OpenAI are making it out to be? And does this mean we're just gonna have more of this, like, should we dissolve and fire the CEO drama to continue?

• 3:16Speaker 01

  So I come down in two places on this. I think we tend to be over the top alarmist in some cases, anytime there's one teeny little breakthrough in technology. But I also think that mere mortals like myself better at least heed the concerns of the folks who are professionals with a 10, 20, 30-year history in a space like artificial intelligence. Like, the fact that the people inside the organizations looking at the guts of these products are concerned and fearful tells me we have to at least consider the fact that there's something there, right?

• 3:56Speaker 01

  If there's enough smoke, there's something there. And so I think we do have to marry our greedy ambitions as investors and everything else with the idea that maybe there really is something to be concerned about.

• 4:11Alex Kantrowitz?

  Right.

• 4:11Speaker 01

  The people who are raising concern have something to say.

• 4:15Alex Kantrowitz?

  Let me ask you more directly, do you think Sam Altman is at risk of being ousted again over safety concerns within OpenAI?

• 4:22Speaker 01

  Not anymore. I think the war chest that is Microsoft has put their bet down on that horse. And I think anybody who comes and tries to rock that boat going forward is going to be up against the heft that is Microsoft, that is its general counsel, that is everything else that Microsoft brings along with it. They've gone just shy of installing their own board member on the new OpenAI board right there, reconstructing this thing themselves, it sounds like in the background. And I understand the hesitancy of them to actually put a board member there. But I think that in this case, Sam Altman is a made man, for lack of a better way to say it, because he has the support of Microsoft behind him going forward.

• 5:07Alex Kantrowitz?

  And you would have to imagine that. I mean, they're going to expand this board to nine people. You would have to imagine that Microsoft gets at least one of those seats.

• 5:15Speaker 01

  Well, if they want it, right? Because the last time you and I were on CNBC together, you said something that didn't really hit me until after the fact, but it was actually very profound, which was that Satya Nadella doesn't want to have to be called in front of Congress two, three years from now to explain himself and justify why he decided to build XYZ product underneath Microsoft's umbrella, and instead would rather have at an arm's length, a company that can act as R and D and go do that for him. And he still reaps all of the rewards. His company still reaps all of the rewards, but he doesn't have to be responsible for whatever accidentally also comes out of OpenAI down the road. I think you can also make that same claim when it comes to having a board member who represents

• 6:00Speaker 01

  Microsoft, because now still, as Congress, I could make the case, well, you were still aware, you were still involved, you know, you had somebody who was reporting back home. But if I don't have a board member taking that seat, then I didn't know what they were doing, right? He's a mad scientist.

• 6:16Alex Kantrowitz?

  Yeah, and I was channeling Dan Primack, who was a guest on this show, kind of the day that we both were on air talking about what was going to happen next, who made effectively that case. One of the things that I look at when this stuff comes up is, what does Yan Le Cun, the chief AI scientist of Meta, who's been behind a lot of these big breakthroughs, what is his perspective? And there were, you know, the people who are saying that this new Q star breakthrough within OpenAI is going to lead to, you know, determination of humanity. I mean, Yan effectively subtweets at first, saying the dystopian fantasy of machines taking over humanity is so old that it's cliche. And then he says, he's quote tweeting Pedro Domingos, who's another researcher.

• 6:58Alex Kantrowitz?

  And Domingos says, we need a moratorium on talking about looming artificial general intelligence until we have at least a working house bot. And Yan goes, I quotes it, and he goes, even a working cat bot. So clearly, the people who are, you know, closest to a lot of this research, don't really think that we're, even at the precipice, we had Aaron Levy make the case on this on Friday. And I think that's the case even with this Q star. Pay attention to it, but don't start running for shelter about the AI apocalypse. And that's probably why Altman is back, because it was an overreaction to something of this nature.

• 7:32Speaker 01

  But as an AI engineer, if I may just take the other side of that for a second. As an AI engineer, I have to at least be concerned about the fact that AGI has shown its ability to replace me not as a human person, but as a engineer, right? And so if I just think about the fact that so many software engineer jobs have already been threatened by the fact that HubSpot, for example, I can throw into a, throw in there a prompt that says, build me a website that does X, Y, Z. I wanted to interact with other pieces this way. Here are the integrations that I want to tie in and maybe use something like Zapier in the background to tie it all together. And it takes me about a weekend by myself to sit and put that together.

• 8:15Speaker 01

  So that scares me as an engineer of what the future brings forward, where we used to have a team of maybe 50 people it took to do something like this in a sprint. Now, one person along with ChatGPT can work this out themselves. So if I just think about what's possible with artificial general intelligence. The computer can now start to tell other computers what those commands are and what to go build using that technology, which eliminates me altogether as a software engineer. And that part is scary enough for me to start ringing alarm bells. And I think maybe that's some of what we're getting.

• 8:50Alex Kantrowitz?

  Yeah, but the one thing about the jobs front, now I do see how you could see like the spiraling automation among AI and bots and be concerned about that. With the jobs thing, it does also also seem that like we would build many more websites, you know, in a more personalized web if we just had the capability. And what this seems to be doing is giving us the capability to do that. So as opposed to firing developers, what it could do is just expand their capabilities, make the company that use humans plus AI even better at what they're doing versus more efficient and leaner.

• 9:25Speaker 01

  I think that's the optimist's view. I have seen how greedy these companies can be when it comes to staff headcount, right? You have somebody like Block, for example, that wants to get to 12,000 employees no matter what. And so we're just going to start cutting people at will because we we're fixated on that 12,000 headcount number. That flies in the face of, you know, we're going to use these things to enhance your capabilities rather than we're going to use these things to replace you because that then increases our operating margin and Wall Street will love us even more.

• 9:59Alex Kantrowitz?

  Okay, Malcolm, I hear you on that point. It's definitely, it's gonna, it must happen in some places. But then let me put your attention to something that's also been bugging me about this, which is we have this AGI conversation, but then we're also wondering like, what is this technology doing within organizations today? And here's a tweet from Chamath Palihapitiya, who has his own history. We know that, but I think this is a valid point. He goes, "The AI industry is in a curious state right now. Billions are spent on capital expenditures, credits and tokens, yet few incremental customer revenues are being generated, at least that I see." And he gives two potential explanations. One is that AI is an efficiency play,

• 10:42Alex Kantrowitz?

  so companies will deploy agents and automation to reduce existing infrastructure costs. Okay, is basically what you're saying. Or two, VCs are feeding startups with billions that consume AI compute, looking for new use cases. The AI compute complex booms and books real revenue, but if the startups don't find product market fit soon, then these revenues will shrivel because the startups won't get more funding and will go bankrupt. So it's interesting. So are you seeing this mostly as like companies like basically Door1, where companies are just saying like, "We want to become more efficient, and that's the key use case of AI?" Or do you think that a lot of this AI spending is just VCs shoveling money into AI startups, really desperate for a use case, or maybe a little bit of both?

• 11:26Speaker 01

  Yeah, I think both are true at the same time. I think we're seeing, one, there hasn't been a lot of consumer use and uptake, you know, at these larger companies with their consumer-facing products, because they're just aren't really useful to consumers yet. The money really is being created, if you, to go back to Microsoft one more time with these co-pilots, right? If I'm charging $30 per seat per month, and as far as I know, it hasn't changed yet, there's a requirement for Microsoft that you've got to take up 30 seats, 300 seats at one time. And so now, I'm talking about really large enterprises and government agencies that are able to get their hands on these things first, because how many people out there actually have, you know, $9,000 a month to spend

• 12:11Speaker 01

  for a team to try these things out, just to find out if there's a use case or it does actually make them more efficient? So I think you go enterprise first, because that too has the cash flow to be able to afford to tinker and let you know if what they've uncovered is actually useful, versus individuals paying $20 a month to use ChatGPT to ask it ridiculous questions that, you know, you sign up, you test it out, two months later you cancel. That's not reliable enough. I need the enterprise client who's got some real, some real purchasing power to test it out. But then on the flip side, I think from the VC perspective, That's the the age old playbook for VCs, right? Throw enough cash at it to find out if if there's some there there. They'll either win faster or fail fast.

• 12:55Speaker 01

  And I'm gonna look like a hero if I stumbled across the next Facebook. And nobody's ever gonna know about it if it goes to zero in two years because who cares? Right? But I also think that all of the nonsense that has happened among OpenAI, the attempted fire cell to Anthropic, all those kinds of things in the background within the VC community has made people push away from the table already. Right? It's made them ask the same question that that you asked starting this off. Can these people be trusted going forward? Right? You have so many of these effective altruists who have somehow worked worked their way into the AI conversation. And so now it's a can we trust the robots?

• 13:37Speaker 01

  And also, how can we make enough money to sprinkle around the world to make the world a better place? And those two things are competing inside of these organizations that makes me as a VC say, why would I commit 10, 20, 50 million dollars to an organization that as soon as they find success and they're on the precipice of an 86 billion dollar valuation? We'll just shut everything down and say, you know, they're not playing fair.

• 14:01Alex Kantrowitz?

  So what does this mean for like the picks and shovels and the Nvidia's of the world? Like, are they just in the middle of a momentary boom that's gonna fall apart? Or can this be sustainable?

• 14:11Speaker 01

  Well, I think for a company like Nvidia, who already has relationships at the top of all of the organizations that are driving the conversation today, they're sitting in the perfect seat.

• 14:21Alex Kantrowitz?

  So you don't think that this VC thing is then gonna just kind of fall away? And they're not gonna have the continued revenue?

• 14:28Speaker 01

  Well, what I think is there aren't going to be as many new entrants as there would have been. It's very tough for anybody trying to. It's already tough for any startup trying to come into the game in any arena to compete with the incumbents, right? The incumbents already hoover up a lot of all the activity, the tech talent, everything else. And so now you've made it that much harder for any startup to really come in and compete. Who's gonna create a chip that competes against Nvidia and be able to sell it for less than $40,000? Right? That's really what you're you're working toward. But with Microsoft and AMD going and saying, we're gonna design our own chips and roll them out. Well, now I've kind of edged out anybody who would have been able to start anything and compete. Because why would you throw money at that as a VC when you can?

• 15:13Speaker 01

  Just buy more shares of, you know, AMD.

• 15:16Alex Kantrowitz?

  Right. Okay. So Malcolm, you had this like big moment on TV. I don't know if we were on air when it happened together, or you had just made this statement and we came on like a couple of days later, but you effectively were just like, Google missed the boat. I'm out of Google. I think that they are not going to be players in this AI race the way that I hoped they would. Can you kind of take us back to that moment and kind of talk about like whether your thinking has changed with Google and AI? Because while this all happened, everyone has been asking, where the heck is Google? Where's that Gemini model? Why are we not hearing more noise from them? What's your perspective?

• 15:51Speaker 01

  Yeah, I think Scott thought I had lost it when I, when I, when I said that. But essentially, my thinking is, and still is, not was, Google is a company, Alphabet is a company where 90 plus percent, 93% I think of its revenue comes from search. All of the products and services that it has out there, Gmail, the, the Galaxy, the, the Pixel phone, all of the YouTube, all of the things that it has out there in the ether are designed to get you and me back to that search bar as quickly as possible to execute another query that brings in ad revenue for the company, right? Everything they do is designed for that. And then the ad revenue is the 10 clicks, the 10 hyperlinks that have nothing to do with what you are actually looking for.

• 16:36Speaker 01

  That's really what their bread and butter is. So for them to compete in the artificial intelligence conversation the way it is today, right? Where it's returning you one singular search instead of 10 hyperlinks that you don't care about that are all ads, that cannibalizes their entire business. So in order for me to compete against Microsoft, or in order for me to compete against whoever else is creating singular search, large language model, style chatbots, I would have to get rid of all of the thing that brings the dollars in the door. So as much as I want to compete and be a part of the conversation, how do I justify that to my shareholders? That's the core of my issue with Google's structure, the way they've built the company around ad search being their primary product.

• 17:20Alex Kantrowitz?

  Right, but we've heard so much about this Gemini model that's apparently in development. It's supposed to be an even more powerful or somewhat on par with GPT-4. They haven't released it yet. Do you have any thoughts about what's happening there? Is this just because they're afraid of like what the business implications will be? I mean, they can't really hold everything back because OpenAI is, you know, already pushing it forward.

• 17:42Speaker 01

  Well, I think that's one of the big issues within Google, actually, is how many engineers have worked on this project for the last four years that have been pushing and pushing to get this out there. They see GPT happen. They see, you know, it's a competitive sport, so to speak. So they see the folks they know at OpenAI and at Microsoft who are realizing, one, some serious shareholder value, right? Because a lot of the compensation for folks at these companies is tied to the share price. So they're, one, seeing people just make a lot more paper money than they are. But then also they're looking and saying, I want my thing out there. I've been working on building this thing for years. I want it out there and the company is saying, we're not ready yet. It's not ready yet. We want to be responsible. We want to go slow.

• 18:26Speaker 01

  And I think to the question I think you're asking, the real challenge is how do we message this to Wall Street in a way that doesn't communicate that we are cannibalizing the one true business that we have here? And also keep our folks inside the house happy that feel like their life's work now, in some cases, is actually being put out there in front of people to interact with and use and love.

• 18:50Alex Kantrowitz?

  And your bet is basically just like they are not going to be future focused enough. And therefore you took all your investment out of the company.

• 18:58Speaker 01

  Yeah, I sold all of the shares I owned in Alphabet and just said, they can get there. I don't ever want to make it sound as if I'm saying, you know, Google is over, right?

• 19:10Alex Kantrowitz?

  Right.

• 19:10Speaker 01

  I do think they can get there. I think they can get there beyond my time horizon, right? I would rather use those dollars to invest in another company that's working on something that's going to pay off in the next year or two versus waiting the five, 10 years it's going to take for them to figure out how to walk and chew gum at the same time.

• 19:29Alex Kantrowitz?

  Okay. And so it's like a perfect lead into like what's happening at the culture there, which you mentioned. There's an extraordinary post that was just published by a longtime Google developer. I think he was there for 18 years, a guy named Ian Hickson, about the Google culture. He just talked about why he's left. Let me just read a couple of selections from this and get you to respond. So he says, "Google culture has eroded. Decisions went from being made for the benefit of users, to the benefit of Google, to the benefit of whoever was making the decision. Transparency evaporated. Where previously I would eagerly attend every company-wide meeting to learn what was happening, I found myself now able to predict the answers executives give, word for word. Today, I don't know anyone at Google who could explain what Google's vision is. Morale

• 20:13Alex Kantrowitz?

  is at an all-time low. If you talk to therapists in the Bay Area, they will tell you that their Google clients are unhappy at Google." I mean, what do you make of that? It's pretty extraordinary.

• 20:24Speaker 01

  I don't want to say more than I should say here, but I will say that I have also heard similar sentiments from folks who work for Google, that not necessarily his specific experience, but that morale is slipping. That folks just do not feel the same way coming to work there and feel the same badge of honor that they used to wear, their Google T-shirts around wherever they went, and like the pride that came along with that. And so now you've got folks internally who are not so concerned about the long-term of the company, and that was always their thing. It was everybody's long-term focused on the 20, 30, 50-year future of the company. And now you have fewer people who are thinking about

• 21:09Speaker 01

  it that way. There's less of a sense of ownership.

• 21:12Alex Kantrowitz?

  Exactly. Okay, I'm gonna read some more because it gets even better. Okay.

• 21:18Alex Kantrowitz?

  He says, "Much of these problems with Google today stem from a lack of visionary leadership from Sundar Pichai and his clear lack of interest in maintaining the cultural norms of early Google." He says, "It's definitely not too late to heal Google. It would require some shakeup at the top of the company, moving the center of power from the CFO's office back to someone with a clear, long-term vision for how to use Google's extensive resources to deliver value to users. I still believe there's lots of mileage to be had from Google's mission statement. Someone who wanted to lead Google into the next 20 years, maximizing the good to humanity and disregarding the short-term fluctuations in stock prices could channel the skills

• 22:00Alex Kantrowitz?

  and the passion of Google into truly great achievements. I do think the clock is ticking, though. The deterioration of Google's culture will eventually become irreversible because the kinds of people who you need to act as a moral compass are the same kinds of people who don't want to join an organization without one." Pretty dramatic stuff. Leaving the company, spent 18 years there, basically calling for a change at the very top.

• 22:25Speaker 01

  But that's an example of what I mean, though, where you have people who have been there for years and years and years, more than a decade, who remember what it used to be like. Who, so to put this in context, in my day job as a financial planner, a lot of the clients that we work with are inside of these big-cap tech companies, right? And so I can tell you from personal experience, three years ago, to get a Googler to sell their RSUs after they vest would be harder than, you know, convincing an atheist to come to church with me tomorrow. Right? Like, it just was that hard. Now, not so much, right? Now, folks are actually like, "Yeah, maybe I should go ahead and start selling some of this stock. Maybe I do actually need to diversify."

• 23:08Speaker 01

  The word "diversify" was like I had cursed your mom once upon a time to Googlers. And now it's like, "Yeah, maybe we should actually go ahead." And so just that alone tells me quite a bit. And this is longstanding people like you're talking about, who've been there longer than a decade. So they've got seven-figure net worth tied to the price of Google. And it's just not the same as what I keep hearing.

• 23:32Alex Kantrowitz?

  Yeah, and that's why I saw this post from Hickson. And to me, it's like, yes, you know, you can always have someone who's disgruntled. And there did seem to be clearly some indication of that.

• 23:41Speaker 01

  There's sour words there, yeah.

• 23:42Alex Kantrowitz?

  Basically, just like flaming like different managers by name and just like... That kind of stuff kind of discredits the argument, but why I thought it was worth talking about and why I thought it was important is because it did kind of channel a lot of what I'm hearing in the back channel about what's going on there. And it was like, wow, you just went out and said it.

• 24:02Speaker 01

  Well, I agree with you that naming folks by name was a little bit dangerous for one, right? From a liability perspective, but also just sour grapes is how it comes off once you start down the road. But at the same time, I will say that one of the ways you're able to get folks to work on some of these projects for years at a time without it coming to fruition or without being financially rewarded the way they know they could and should is the promise that my equity would be worth so much more down the road. And then you have a company go out and try and destroy itself and erode that value over a weekend. And I lost that incentive that I once had. Or you have a company like Cruise, like I know you wanted to chat about at some point.

• 24:46Alex Kantrowitz?

  We will.

• 24:47Speaker 01

  Where the Tinder offer gets pulled from under me as I'm able to finally monetize the value of the work that I've put into this place. And so when you start to play around with people's livelihood that way, and at the same time, the industry is going through pretty significant layoffs, right? We're seeing layoffs by the tens of thousands that started in 2021 and haven't stopped yet. They've just been less of a headline now because they're not the giant scary number of 10,000, 20,000 at a time like we were hearing once upon a time. But now we're still seeing units disappear by the hundreds. And so if I'm worried now that my job security is at risk, I'm less willing, one, to take the big swings that I would have been willing to take, you know, knowing that I've got

• 25:31Speaker 01

  some cloud cover here. But also, I'm less willing to be long-term focused and I'm only worried about the share price so that once I can cash out, it's at the highest price possible because who knows how long I'm going to be here. So I think all of that messes around with the culture. And for a culture that's been built for three decades at least on your ability to galvanize people around a future payoff, a future liquidity event, it's just tough to.

• 26:02Speaker 01

  Deteriorate that culture by slashing people for short term gains, not worried so much about the longer term focus.

• 26:10Alex Kantrowitz?

  Definitely. And that was an interesting part of Hickson's post. He really talked about how the layoffs have slammed morale in a way that I think that is sort of lost itself from the public dialogue.

• 26:19Speaker 01

  And that part is not just a Google problem.

• 26:22Alex Kantrowitz?

  Yep. Oh, wait, where else are you seeing that?

• 26:24Speaker 01

  I won't say, I won't say necessarily any company specifically along with them. I'm just saying Google was because we're talking about them. But I will say at a lot of the mega cap techs, that layoff by the 10,000 issue has created a morale problem for folks.

• 26:40Alex Kantrowitz?

  That's interesting because like the whole, the whole narrative around it was that it was going to spark a renewed effort and new cadence in shipping and make these companies seem like startups. Super hardcore, right? Elon style. You don't think that's happened?

• 26:53Speaker 01

  I don't, I don't get that impression. I'm not inside of these organizations. So I can't say firsthand that way, but I don't get that impression from the folks that we work with.

• 27:02Alex Kantrowitz?

  Malcolm Etheridge is here with us. He's the executive vice president at C I C Wealth. He's a contributor at CNBC and the host of the Tech Money Podcast. When we're back at the other side of this break, we're going to talk a little bit about CZ pleading guilty. We're going to talk about the resignation of Cruise CEO Kyle Vogt and a little bit about how Jack Dorsey is doing away with performance improvement plans at Block. Back right after this. This episode is brought to you by App Point. Everyone's racing to roll out AI right now. Co-pilots, chatbots, agents doing real work. But here's the part nobody loves talking about. All that AI runs on your data and most teams have no single way to see it, secure

• 27:42Alex Kantrowitz?

  it, and prove it's under control. That's exactly what App Point does. For 25 years, they've been the trusted layer beneath the world's most demanding data, now extended across your entire AI estate. Your data, your cloud, and the agents acting on your behalf. It's how more than 28,000 organizations deploy AI with confidence. So innovation scales without scaling risk. App Point, the unifying trust layer for AI. Head to avpoint.com to see how enterprises deploy AI with confidence. Learn more at avpt.co slash big technology podcast. That's avpt.co slash big technology podcast.

• 28:27Alex Kantrowitz?

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• 29:12Alex Kantrowitz?

  and how to lock it down before a threat reaches their front door. That's ironwell.com/bigtechnology. Learn how to stop online threats before they become real-world attacks. The link's in the show notes.

• 29:27Alex Kantrowitz?

  And we're back here on Big Technology Podcast. We have Malcolm Etheridge here with us. Always great to speak with you, Malcolm. Let's talk a little bit about the CZ guilty plea. So CZ, the CEO of Binance, which effectively was the biggest cryptocurrency exchange, he pleaded guilty, this is according to Reuters, to anti-money laundering and US sanctions violations. And he made the settlement with the US that allows Binance to continue operating, but will remove him as CEO. Binance is going to pay $4.3 billion as part of the settlement. CZ will pay $50 million. He might go to jail or prison for potentially 18 months.

• 30:09Alex Kantrowitz?

  And this is wild. Some of the things that they talked about in this guilty plea included the fact that Binance allowed transactions to go to Al Qaeda and ISIS and Hamas. And yet the...

• 30:25Alex Kantrowitz?

  The operation continues effectively as normal. What do you make of this, this moment? And what's going to happen in crypto next?

• 30:33Speaker 01

  Oh, my God, there's so much there like. So first of all, to your, your, your point, I don't know if you noticed I chuckled a little bit to myself. When you said he might go to jail for 18 months, at least because you as a journalist have to throw in those qualifiers. I, as a dude with an opinion, don't. There's no way you can be found guilty of helping to knowingly help to support some of America's biggest terrorist threats. And not do any jail time like I just don't see how that's possible. Right. But separately from that, the thing that's amazing to me is that Binance still has about $65 billion worth of assets on their balance sheet. And that's not including Bitcoin because we can't quite account for how much Bitcoin exists anywhere ever.

• 31:18Speaker 01

  How in the heck does that happen? Like, how does the CEO of the company get found for violating AML laws and, and supporting terrorism through the organization? And you still aren't motivated to move your money? That is insanity to me. And so I have to wonder how much of that $65 billion is a true $65 billion. And so I've heard, you know, they got the three year plan. We're going to right size the organization. We're going to dig in. And I think what we might find is there's some inflated assets there, specifically the Binance token itself. But I don't understand the crypto community at large for this one, like.

• 31:55Alex Kantrowitz?

  Wait, Malcolm, are you saying that we could have another FTX situation on our hands at Binance?

• 31:59Speaker 01

  I'm saying we absolutely could have another FTX situation happening. And I don't understand how people aren't pulling their assets away from this platform ahead of finding out that there's another FTX situation. I was confused a year ago when CZ was still going on all the networks for an interview to plead his case to explain why he wasn't like Sam Bankman Fried. And this one's different. And you guys, I would have been boarding a plane to someplace that doesn't have extradition and packing it all up and saying, thank God it was him and not me. But this dude was out there defending himself vehemently. Like you can come look at our books. Every token we have is backed up by the full faith and like.

• 32:42Speaker 01

  I don't understand this, but I don't understand the psychology of crypto investors either, because what the emergence of a spot Bitcoin ETF has actually brought with it is the elimination of the need for these types of exchanges anyway, for anybody who holds Bitcoin or Ethereum, right? These altcoins, I know you gotta have a place to go and do that business and that's fine, right? But if I can now hold my crypto inside of my Fidelity account, or I can now hold my crypto inside of like a Charles Schwab or whoever else account, and I can also in the next however many days buy the Bitcoin spot ETF, and then there's a application out there for an Ethereum

• 33:26Speaker 01

  spot ETF by BlackRock I've already seen, what good is Binance to me anyway, right?

• 33:32Alex Kantrowitz?

  Well, then explain to me how Coinbase is up 13% over the past five days.

• 33:36Speaker 01

  That is, defies logic to me as well. I see Coinbase as being on the precipice of disappearing and it has no real value anymore. Like Coinbase to me served the same purpose as AOL did once upon a time, right? It brought a ton of people into the party who otherwise would not have taken it up as a real thing. AOL was great about bringing regular people outside of Silicon Valley to the internet, literally bringing it to your homes by mailing you CD-ROMs. And then all of a sudden, when it became available to everyone and you didn't need a CD to get on the internet, I know some people listening to this are like, a CD-ROM? What the hell are you talking about?

• 34:17Speaker 01

  But once that was no longer the case, AOL's value just went by the wayside. And that's the same thing I see with Coinbase as well as all of these other exchanges. They were great for getting the party started, but now they're useless. And so I don't understand why Coinbase's share price has gone up just because Bitcoin's price has gone up. That logic, and that's why I say I don't understand crypto investors at all for these illogical seeming decisions.

• 34:44Alex Kantrowitz?

  What's the broader commentary on crypto here? I mean, FTX, let's talk about the two biggest exchanges. FTX, all but a Ponzi scheme, and Binance, you know, clearly pleading guilty to some of the nastiest money laundering charges you'll see in your lifetime. What does it say about the broader crypto movement?

• 35:06Speaker 01

  I think maybe it says their days are numbered and I know that the crypto bros will find me on Twitter and come for me.

• 35:12Alex Kantrowitz?

  Yeah, you're toast Malcolm.

• 35:13Speaker 01

  Yeah, I get, I get all kinds of things thrown at me anyway as it is. But the, the thing I don't really understand still, 14 years later, is what is it used for? Right? So we're talking about artificial intelligence, for example, and chat GPT. Chat GPT hit the streets, what, in March of this year, maybe on a, on a major level at least? And we've already figured out two or three uses for it. Microsoft has already figured out how to incorporate it into these co-pilots and make money off of it. Bitcoin has had a 13-year head start and we still can't figure out what the heck it's actually for. And so I just don't see how it can blossom the way that the, the true believers believe that it will.

• 35:58Speaker 01

  If you can't even culminate around what its one true purpose in our lives actually is. And so as you probably can tell, I don't own any crypto. I am, from what I would consider a blockchain enthusiast, but also a crypto skeptic. And so, you know, do with that what you will, but I, I just don't see how the industry goes any, any further from here.

• 36:21Alex Kantrowitz?

  Well, let me give the counterpoint to that. Maybe it is just to store value and the same criticisms have been levied upon Bitcoin for ages. And it went from 17,000 per coin just a little while ago to it's trading at 37,000 today. I mean, the resilience of Bitcoin is incredible, don't you think?

• 36:42Speaker 01

  Well, I think COVID was resilient, right? It's still hanging around out there in the ether. It doesn't do anything good for society, but it's still here. So what? Like it just refuses to die.

• 36:52Alex Kantrowitz?

  Bitcoin and the just global pandemic are in the same level of utility.

• 36:56Speaker 01

  Well, I think it existing in the zeitgeist is only because people were at home with nothing to do during COVID. So there's some overlap there. There's some crossover.

• 37:03Alex Kantrowitz?

  Okay. Interesting. So, okay.

• 37:07Alex Kantrowitz?

  Bitcoin 37,000. Maybe it goes to 100. Who knows?

• 37:12Speaker 01

  Maybe it goes to $37. Who knows?

• 37:16Alex Kantrowitz?

  That's true. Okay. Speaking of technologies that have big hopes and aspirations and may or may not amount to anything, I'm going to eat crow on this show for the second time here because

• 37:30Alex Kantrowitz?

  Cruise just fired at CEO Kyle Vogt, or he resigned. Vogt was on the show. I've been very vocal about my belief in the fact that these cars are going to be everywhere soon. And, you know, he was on the show and he said that he expects Cruise next year to 10x from where it was this year and 10x the year after that, 10x the year after that. And I like, thought that those were remarkable comments and basically said that if he's coming out and saying this, this better happen because he's putting basically his tenure as CEO on the line if it doesn't. Well, it turns out that that was true, but just not in the way that, that he hoped or I anticipated. They obviously worked too fast to roll out these cars. There were some serious safety issues and now he's out.

• 38:14Alex Kantrowitz?

  And, you know, the first thing that I wonder, you know, upon seeing his resignation, his co-founder also is out, by the way, so Dan Kahn also out. And the first thing I wonder is, is this the end of the line for Cruise? Like, can Cruise actually come back to, from this?

• 38:31Speaker 01

  I think they may come back under a different name, only because General Motors has so much invested in this, literally and figuratively. They probably have to change the brand name at some point, but I do think that Cruise can actually continue on and progress here. And it feels kind of weird for me to say this about a CEO of a giant corporation such as GM and especially an industry like automotive, but I actually feel bad for Mary Barra here. Like, I really want to see her succeed because what she's trying to accomplish is good for all of us, I believe. I feel similar to what I think you do in that I really do want to see electric vehicles take off.

• 39:12Speaker 01

  I want to see driverless taxis take off. I think the idea that Cruise had to create a, basically a shuttle van without a driver is genius, right? But they're up against a society that doesn't want to see change, right? We will tolerate somebody drinking four or five shots of

• 39:32Speaker 01

  Tequila at a bar and then jumping in their car and driving home and killing six people. But we won't tolerate a self-driving taxi that, you know, blows through a stop sign and knocks over a road cone. Like, I don't understand psychologically how we see these things so dramatically different. But at the same time, I think that a company like GM, who is betting its entire future, or the CEO of GM is betting the company's entire future on being able to bring EVs to fruition and also being willing to bring driverless cars to fruition. And I think 2030 was the timeline that she gave. In an industry that moves at a snail's pace and doesn't want to see change. And you've also got to fight the unions at every turn who want things to stay the same

• 40:15Speaker 01

  and want to keep internal combustion engines as the standard because it keeps so many of their people employed.

• 40:20Alex Kantrowitz?

  Yeah, I mean, Mary Barra, talking about this, gave this extremely strong endorsement to Cruise in a way that surprised me. She said, "We continue to believe strongly in Cruise's mission and the potential of its transformative technology as we look to make transportation safer, cleaner, and more accessible." And she says, "The board and I also want you to know that we are intensely focused on setting Cruise up for long-term success." So that's her statement on the outside. But then you look inside, and this is kind of when I wondered, like, how does this move forward? Vote resigns, there's really no direction that comes down to the employees. And this is from TechCrunch. "Morality at Cruise has been low since the October 2nd incidents, which is basically

• 41:02Alex Kantrowitz?

  this moment where the cruise car dragged somebody for about 20 feet, with employees pointing the finger at poor management that didn't prioritize safety at the company. Without commercial permits to operate in San Francisco and an internal decision to pause its driverless fleets in other states, the company laid off contract workers, further deepening the malaise." Now, they're coming back in one market, I believe, now, but it does seem like it's going to be a real struggle for them to make their way back.

• 41:32Speaker 01

  Well, also, part of the challenge was the CEO of Vote.

• 41:37Alex Kantrowitz?

  Calvote, yeah.

• 41:37Speaker 01

  He was trying to come at this with the same type of attitude as what got Uber to its bigness once upon a time, right? And those days are over, right? The the super pumped Travis Kalanick saga, the WeWork, Adam Newman saga, like, they had the perfect right timing for when the VC world was willing to spend whatever it costs to override

• 41:59Alex Kantrowitz?

  Right.

• 41:59Speaker 01

  rules of society.

• 42:01Alex Kantrowitz?

  But the thing is, he was working with regulators. He took the cars off the road. You know, he didn't force them off.

• 42:06Speaker 01

  Allegedly, he was working on projects that he said they weren't working on. Like, for example, the the shuttle van that I was talking about wasn't approved by California, but they still had them on the road testing them. So, you know, it's a great idea. It's a great concept, but you got to color within the lines because the world has moved on from that whole, you know, move fast and break things mentality to now there's so much scrutiny on tech companies wanting to do anything differently. You gotta be willing to play the game the way it's it's designed.

• 42:39Alex Kantrowitz?

  You know, Malcolm, we had both Vote and Waymo co-CEO Takeedra Mawakana on the show, like, within successive months of each other. And if people go back and listen to those interviews, it's really a fascinating case study of setting expectations and ambition. Because Vote talked about this 10x every year thing, and Mawakana talked about, I said, hey, why don't you make a similar proclamation? And she wouldn't. She wouldn't go anywhere close to that. And I just think that it really shows now that, you know, Waymo is, the Waymo ride is definitely smoother, and Waymo is is still on the road and hasn't had these type of issues. And Mawakana is still there while Cruise has had these issues and Vote is out.

• 43:20Speaker 01

  I also appreciate the way she talks like, we have the data to support what I'm telling you, but also this data is none of your business. So

• 43:29Alex Kantrowitz?

  That is what she told me.

• 43:30Speaker 01

  I can I can talk to you about it to the extent that I feel comfortable. But also, you just have to trust me that in the background, we've done the research.

• 43:39Alex Kantrowitz?

  But then you also get where I'm coming from, seeing what happened with Cruise, which is like, you gotta be as transparent as possible. But that being said, their record on safety is better.

• 43:48Speaker 01

  Yeah.

• 43:48Alex Kantrowitz?

  So, there you go.

• 43:50Speaker 01

  Again, the move fast and break things mentality that got us to this place is not going to sustain these companies going forward with so many eyeballs on them and no longer having the shield of VC money to back them. Like with the fascination with startups has fizzled and we no longer are going to be willing to tolerate it as a society and as a government.

• 44:13Alex Kantrowitz?

  Let's end with a fun story. Inside Block, Jack Dorsey, who I wouldn't exactly put on the the parthenon of or the the Mount Rushmore, shall we say, of good management leaders, has issued this very interesting memo within Block. Basically, well, I'll read it, read a bit of it. So first of all, he says, "We want everyone to achieve excellence here at Block. And if that's not possible for any one person, we want to acknowledge that and part ways without delay, which is a perfectly fine and honorable outcome." So basically saying that we're not gonna, we're not gonna like give you a lot of time. If you're not performing, we're just gonna fire you. And he says, "Our current performance management

• 44:55Alex Kantrowitz?

  practices do not help us achieve this. In fact, they are holding us back. Some have described them as a denial of service attack on managers." I love that. It's like the perfect explanation of what a lot of these performance reviews are. And he says, "This is the last annual performance cycle we'll have. It's way too heavy for everyone involved, and it doesn't actually help us get better. Performance should be continuously evaluated, and feedback should not be queued up for later." And he says, "We're gonna end performance improvement plans, which are called PIPs in the US. We haven't seen these plans actually work consistently, as they often feel too late. And don't push the manager to give feedback in a timely manner. It's a lazy and often surprising approach that we can

• 45:35Alex Kantrowitz?

  often avoid with direct and consistent feedback." I kind of like this, reading it from Dorsey.

• 45:41Speaker 01

  You do.

• 45:42Alex Kantrowitz?

  Seems extremely logical and makes some sense to me. What do you think, Malcolm?

• 45:46Speaker 01

  That's actually not the the take I thought you would have. I am, I'm thinking, talk about killing morale. Like, this is just another one of those things from a tone deaf CEO who is missing the fact that now your employees will be walking around paranoid.

• 46:03Speaker 01

  And wondering if today is the day. So instead of being willing, again, instead of being willing to take big swings and see if I can create the next Gmail inside of this company, I am going to stick to the norms and only do things that are two X better than what I did yesterday instead of going after 10 X because I don't want to be axed at it at a moment's notice. And so I think by even announcing it so largely and publicly in this way, you just give me the impression that you're coming for me, right? You have a number you want to get to, which is 12,000 headcount. He's been public about that. Now I'm concerned. I don't want to misstate it. I actually, but I'm now concerned that I'm going to be the

• 46:48Speaker 01

  one, right? Every day that I log on to my computer, I walk in here and that's the the issue that I have with such a loud proclamation.

• 46:58Alex Kantrowitz?

  That's a good point. The one thing about PIPs are they very rarely work out. Like it's typically like here's 90 day heads up to go find another job. And the person on the PIP is just like, not going to be happy within that company.

• 47:10Speaker 01

  So send a message to the management team and say, hey, guys, so you know, we're no longer going to waste your time with these performance improvement plans. If you feel that a person is underperforming, you now are empowered to just go tap them on the shoulder and say, you gotta go. But the law, the loud proclamation to the rest of the world that this is what we're doing makes me uneasy, even if I am a very high performer, because I might not think of myself as a high performer, even though I'm in fact killing it. And so now I'm paranoid and anxious and in the therapist's office that you're talking about before complaining that my job's at risk every time we meet for a session.

• 47:51Alex Kantrowitz?

  Yeah, that's a good point. The need to just sort of blast this out as a memo to everybody versus speak to managers. Yeah, that might hurt more than it helps.

• 48:00Speaker 01

  Precisely.

• 48:01Alex Kantrowitz?

  All right, Malcolm, last question for you. So you are, you know, you, you work with wealth management. You are thinking about the market all the time. This has been a very difficult market to read, you know, down and up, convulsing on every, you know, inflation report, on every GDP report. It's like you can't go five minutes in every labor report. You can't go five minutes without a completely different narrative emerging. When you think about the broader market and the economy, what's your perspective on where we're heading? And what do you use in terms of, you know, basically to make your assessments?

• 48:35Speaker 01

  So I'm going to oversimplify here because you asked me, what am I using? So I'll give you one metric or one thing to point to, which is the yield curve. Right? So this is a technology focused podcast. This is not a traditionally finance focused podcast, so I won't get too wonky on you. But I'll say that naturally the two year treasury is supposed to be worth less than the 10 year treasury is. Right? Just by nature of incentivizing you to take on additional risk. I have to give you more on your money to hold it for 10 years as the US treasury than I do to hold it for two years as the US treasury. In this case, the two year treasury is paying off a lot better than the 10 year treasury is. That's what we call an inverted yield curve.

• 49:20Speaker 01

  As long as I can remember, right? And historically, back to, I think, 1950, anytime that relationship gets out of balance, where the two year is worth more than the 10 year is, we have a recession looming. In this case, the two year has been inverted above the 10 year for more than a year now. That is the precursor to a recession that tells me 2024 is not going to be as fun as 2023 has turned out to be. But we were supposed to have a pretty drab 2024. So I'm going to qualify this by saying AI rescued the stock market in 2023. Right? If you think back to March 2023, everyone got excited about ChatGPT and what that meant.

• 50:01Speaker 01

  And these tech companies went crazy and seven companies rescued the stock market. So I say that qualifying my 2024 prediction with the fact that we could have some other thing that captivates our imagination in 2024 that saves us. But in reality, it's just mathematically impossible for the government to raise short term interest rates more than 5% in one year.

• 50:26Speaker 01

  The cost of borrowing goes up in an economy that's built completely on consumption and the way that we consume is by borrowing to do it. It's impossible that that gets thrown out of whack so substantially and nothing bad happens as a result of it. So I'm pretty confident in this, but I also say the stock market might have a different opinion just because who knows what unknown might show up in 2024.

• 50:48Alex Kantrowitz?

  Yeah, it's been so interesting. I mean, we've basically been expecting this recession the last two years. And in some ways, I'm just like, come on, like, get out of your system already. Cause like, you know, 2022 started well, then ended rough. 2023 has been a little bit better than expected, but still not easy. And this like, speak about morale and what you talk to your therapist about. I mean, this like impending like recession at all times that never comes. It's just like, you're right, it has to, I mean, even the specter of it has to have bad consequences for the economy.

• 51:22Speaker 01

  Right. So the anticipation is what causes what we call recessionary behavior, where people are stockpiling cash and cutting down on spending they normally would do simply because they're anticipating a recession coming and that brings unknowns, right? Something in the economy is going to break is the way we keep saying it, but we have no clue what it is. We had a little bit of hint of it back in what March, when Silicon Valley Bank fell and then a couple others. But other than that, nothing in the economy has really broken in a way that meaningfully changes anything for us economically. So people are anticipating that happening and so they're doing all the things we know we're supposed to do, like hoarding cash on the precipice of a recession. How long can people hoard cash before finally you have to just give in?

• 52:07Speaker 01

  And that's kind of what the feeling is, what's causing the feeling you're talking about where people are, let's just get on with it. Let's get it out of the way. Let's get it over with and then go back to our, our normal lives.

• 52:18Alex Kantrowitz?

  Yeah, now that Sam Altman is back at OpenAI, maybe we've averted the worst.

• 52:23Speaker 01

  Fair enough. I was genuinely concerned on Friday, last Friday, when it actually went down and then woke up the next Monday like confused as to how Microsoft's share price had gone up from that point. And now I sit here a week later and I'm like, thank God it's over.

• 52:43Alex Kantrowitz?

  We hope.

• 52:44Speaker 01

  Right. There was a question mark at the end of that.

• 52:46Alex Kantrowitz?

  Exactly. Yeah, great. Well, where can people find your work online and where can people get in touch with you?

• 52:53Speaker 01

  Yeah, man. So I'm at Malcolm on Money on socials. I'm also on LinkedIn Malcolm Ethridge and they can go to MalcolmEtheridge.com and I would ask you to please check out the Tech Money Podcast.

• 53:06Alex Kantrowitz?

  Awesome. Malcolm Ethridge, thanks so much for joining us.

• 53:08Speaker 01

  Thanks for having me.

• 53:10Alex Kantrowitz?

  All right, everybody. Thank you for listening. What a week it's been. So many podcasts. Great way to wrap it up. We'll be back with regularly scheduled program next week with the podcast on Wednesday, another podcast breaking down the news on Friday, unless something totally insane happens, in which case you know where we're going to be right in your feed with an emergency show. I don't know exactly who we're going to have on Wednesday, but I know that it's going to be AI related. So stay tuned for that. Until then, have a great time over the weekend. Have a nice holiday weekend if you're celebrating Thanksgiving weekend here in the United States. And if you're abroad, we're wishing you all the best. All right, everybody, that'll do it for us here. We'll see you next time on Big Technology Podcast.

• 53:53Speaker 02

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• 54:35Alex Kantrowitz?

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