GPT-4 Is Here + The Group Chat Bank Run

It’s acing standardized tests, building websites and hiring TaskRabbits — GPT-4 is “equal parts fascinating and terrifying.” OpenAI has released its latest model, alongside A. I. announcements from Meta, Google and other industry players. The A. I. arms race is only accelerating. Then, what Silicon Valley Bank’s collapse means for the future of start-ups, and what Mark Zuckerberg has learned about layoffs.

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

• 0:00Speaker 00

  Support for this podcast comes from Dell Technologies. It's time to put AI to work. Is your business ready? The challenge isn't getting started with AI. It's scaling beyond pilots while maintaining control of your data, governance, infrastructure, and costs. Dell AI Factory provides the integrated foundation you need to scale AI securely and efficiently with one trusted partner, Dell, AI on your terms. From idea to impact. Learn more at dell.com/yourwaytoAI. That's dell.com/yourwaytoAI.

• 0:34Kevin Roose?

  Like, I don't know if you've been to South Congress recently, but it's like-

• 0:36Casey Newton?

  Yes, of course I was in South Congress recently. We went to South by together.

• 0:39Kevin Roose?

  I know, but I don't know whether you made it to that part of town. You're a very busy man. Anyway, it's like going to the internet. There's like, every store is like a brick and mortar version of an Instagram brand. There's like parachute, you got your, you know.

• 0:53Casey Newton?

  Rat Bucket Store.

• 0:56Kevin Roose?

  Rat Bucket Depot.

• 0:59Kevin Roose?

  I, it was really fun. I also, this is not going to make it into the podcast, but my biggest takeaway from South by Southwest is that we were robbed of one of the most fun things in life, which is a rent by the minute scooter.

• 1:13Casey Newton?

  Yeah.

• 1:14Kevin Roose?

  So, you know, back in San Francisco and around the country, there are not nearly as many scooters as there were a few years ago, but in Austin, at least during South by Southwest, it is still peak scooter. So I had a few free hours between sessions. And so I rented, I got one of those little Lime scooters and I drove it around Austin for a couple hours and it was phenomenal. It was so fun and I'm so mad that the end of low interest rates and the mismanagement of the scooter companies took that away from us.

• 1:44Casey Newton?

  It was such a beautiful time when you could just sort of, you know, fly down the street on a scooter, carefree.

• 1:49Kevin Roose?

  Unblemished, unbothered.

• 1:51Casey Newton?

  Unbothered.

• 1:52Kevin Roose?

  Wind blowing through your hair. It was honestly, it was transcendent and I'm so mad that I don't have access to that anymore.

• 1:58Casey Newton?

  And that's why we're formally calling on Jerome Powell to lower the interest rate back to 1%.

• 2:03Kevin Roose?

  Bring back the damn scooters.

• 2:10Kevin Roose?

  I'm Kevin Roos. I'm a tech columnist at The New York Times.

• 2:13Casey Newton?

  I'm Casey Newton from Platformer.

• 2:14Kevin Roose?

  And you're listening to Hard Fork.

• 2:16Casey Newton?

  This week, GPT-4 is here along with Claude, Poem, and Llama.

• 2:24Casey Newton?

  Plus, the collapse of Silicon Valley Bank and what it means for the startup ecosystem, and what Mark Zuckerberg loves about layoffs.

• 3:03Casey Newton?

  Here was one of my big takeaways from South by Southwest. One of the questions that we've been asking now for the past six months is like, how are the crypto people doing? Crypto was, in many ways, the big story of last year. And when I was at South by Southwest last year, it was crypto mania. There was this NFT project called Doodles that had this installation with lines around the block to get in. And if you had one of their NFTs, you had all these special perks. And like, any sort of name brand NFT project, like, there was a good chance there was some sort of branded activation in the South by Southwest style. And so, we got there this year, and we walked around town. And the crypto folks had like, almost entirely vanished.

• 3:46Casey Newton?

  Or if they were there, they were not doing these big installations. And instead, you had this just sort of very normal web stuff, like a big Slack installation. Or like, we saw a few giant transformers just like, standing next to food trucks. And I mean, the like, 80s cartoon transformers, not the T and GPT.

• 4:08Kevin Roose?

  Right.

• 4:09Casey Newton?

  Yeah.

• 4:10Kevin Roose?

  I did have one conversation with someone about Web 3, and it was as if I was like, encountering a time traveler.

• 4:18Casey Newton?

  That you're lost.

• 4:19Kevin Roose?

  You know that soldier who they found in the Philippines, like fighting World War II in like 1970, like many years after the war had ended? This was what it was like having a conversation about Web three at South by Southwest in 2023.

• 4:32Casey Newton?

  Yeah, so you know, I obviously that it's sort of, you know, only, only one data point. I know there's still, you know, lots of people working on this stuff and lots of money behind it.

• 4:40Kevin Roose?

  No, no, no, no, no, don't, don't do a walk back. Don't do a careful Casey walk back.

• 4:44Casey Newton?

  I'm just saying, you know, that, that South by Southwest is not everything, but as a sort of cultural barometer for where is the energy? The energy is not in crypto.

• 4:52Kevin Roose?

  Right.

• 4:53Casey Newton?

  Yeah.

• 4:53Kevin Roose?

  Right.

• 4:53Casey Newton?

  R I P.

• 4:54Kevin Roose?

  But you know where the energy was this year? AI.

• 4:57Casey Newton?

  Yes.

• 4:58Kevin Roose?

  Everyone at South by Southwest was talking about AI. And I know I'm starting to sound like a broken record, but this week in particular was a huge week for AI news.

• 5:08Casey Newton?

  Yeah, in terms of things being released that you personally can actually just go try now, I would say this is actually the biggest week in the sort of recent development of AI.

• 5:17Kevin Roose?

  So just on Tuesday, the following things happened. Anthropic, which is a, an AI startup that has an investment from Google and is started by a bunch of former OpenAI employees, released their large language model called Claude, which you can now use in a number of different ways. Google announced that it is releasing an API for its large language model, which is called Palm, which has been long awaited for many months now. Adept, which is an AI startup, said on Tuesday that it had raised $350 million in a Series B funding round, which is a very large funding round.

• 5:54Casey Newton?

  Yeah.

• 5:55Kevin Roose?

  And then to top it all off, we had the coup de grâce, not the coup de grâce, as listeners pointed out to me when I said that on an earlier show. It's pronounced coup de grâce.

• 6:05Casey Newton?

  We're listening and we're learning. Thank you, listeners.

• 6:07Kevin Roose?

  The coup de grâce was that OpenAI announced the release of GPT-4.

• 6:12Casey Newton?

  And this was sort of like the big one that we have been waiting for. Like, I can't remember another product where there's been sort of more hype in advance of the release in recent memory than GPT-4.

• 6:23Kevin Roose?

  Yes, so GPT-4, which we've talked about in this show before, has been awaited. With something that I would describe as like messianic fervor, right? Like for months now, you've talked to people in San Francisco. I've talked to people in San Francisco. People who have seen this thing talk about it like they saw the face of God. Like, you know, there are all these rumors flying around like, I heard it has 100 trillion parameters. They're like, I heard it, you know, got a 1600 on the SATs or whatever. And we actually met someone at South by Southwest. Yes, like on the eve of the release. Yes, who had been testing GPT-4 and who said that it had given them an existential crisis because it was so smart. And this person was not being hyperbolic. No. This is somebody who like. They were like, please, my life is in shambles. This chatbot.

• 7:07Kevin Roose?

  And we got them the help that they needed. So don't worry about that. But still, it was a scary moment. So for months now, we've been waiting for the release of GPT-4 and now it's out. OpenAI has published it and made it available if you pay $20 a month for ChatGPT Plus, which is the paid tier of ChatGPT. You can use it. I upgraded my ChatGPT. You did. Could use it. I'm now paying subscriber. So I spent some time talking with GPT-4 and I was a little nervous. You know, my last extended run in with a chatbot didn't go so well. So I started just trying to sort of poke around and see what it would do and what it wouldn't do. And it, you know, it wouldn't talk about consciousness. It kept saying, you know, as an AI language model, I don't have feelings or emotions or consciousness.

• 7:53Kevin Roose?

  It's. Did you ask if it had a shadow self?

• 7:57Kevin Roose?

  I didn't ask about a shadow self, but I did ask if it had a crush on me and it said it didn't. Which, you know. Sydney has moved on from Kevin Roos. And them's the breaks, buddy. Yeah, I lost a step between three weeks ago and now. But it is quite good and I think we should just run down a few of the things that OpenAI has said that GPT-4 can do. So one of the things that AI labs do with AI models is they give them tests, like tests that humans would take in academic settings. This is also how they sort of measure the improvement of the AI models. So. ChatGPT, the previous model, when OpenAI gave it a simulated version of the bar exam,

• 8:40Kevin Roose?

  it scored in the 10th percentile, which means that it was-

• 8:43Casey Newton?

  You can't be a lawyer if you're scoring in the 10th percentile.

• 8:45Kevin Roose?

  It failed the bar exam.

• 8:46Casey Newton?

  Yeah.

• 8:46Kevin Roose?

  GPT-4 scored in the 90th percentile.

• 8:50Casey Newton?

  A pretty big swing.

• 8:51Kevin Roose?

  Better than 90% of human law students taking that test.

• 8:54Casey Newton?

  Which, by the way, if you're a lawyer, I hope a shiver just went down your spine. Like, that is a wow moment in the history of the development of technology.

• 9:02Kevin Roose?

  Totally. So another area where GPT-4 seems to have improved quite substantially over ChatGPT is with things like biology tests. So in the Biology Olympiad, ChatGPT scored in the 31st percentile. GPT-4 scored in the 99th percentile. It aced the Biology Olympiad. It got an 88th percentile score on the LSAT. It got an 80th percentile on the quantitative part of the GRE, the Graduate School Exam, and a 99th percentile score on the verbal part.

• 9:33Casey Newton?

  Okay, so this sounds very impressive, but we know a couple of things. These are predictive models. They're predicting the next word in a sentence. And my guess would be that for all the tests that you've just described, there are a lot of old sample tests, and there are a lot of answers for those tests on the internet. So is this a case where the model could just simply ingest all of that material and sort of reasonably get better from one generation of GPT to the next at predicting the next word in a sequence and thus passing these tests?

• 10:01Kevin Roose?

  No, that is not what's happening here. It's not looking up the answers to some test that is already online. These are new tests, so these are novel problems that it has not seen before, and it is solving them better than almost every human test taker, which is- I just think we should just pause a bit. A computer scores in the 90th percentile on the bar exam? Like, I think if you had told me that a year ago, I would have said you were lying.

• 10:27Casey Newton?

  Yeah, well, because again, we've lived through so much AI hype, right? We've lived through so many people saying AI is going to solve everything. And, you know, after a few years of that not happening, it's become easy to dismiss. And yet now here we stand, and this thing is passing tests that are original. And if, look, if it is not just- Looking up the answers, then that I have to say it like complicates my understanding of what these things are.

• 10:48Kevin Roose?

  It's it's very wild. And what's even wilder about GPT-4 is that it's what's called multimodal. So it can not only work with text, it can interpret images. Now, OpenAI has not released this image feature yet because they say that it's still working on some of the safety issues. But I saw a demo on Tuesday, Greg Brockman, the president of OpenAI, did this live stream demo. And one of the things he showed off that really blew my mind was he took a notebook, like just a regular paper notebook, and he drew a sketch of a website that he wanted to build. And it was called like My Joke Website, and it was very, very basic, like the kind of napkin sketch that you would just do if you were just trying to show a friend like I've got an idea for a new website.

• 11:31Kevin Roose?

  He takes a photo of the notebook page with his phone. He uploads the photo into GPT-4 and tells it to make that website with working HTML and JavaScript. In a couple of seconds, GPT-4 processes the image, figures out what it is, what it's trying to do, and then converts those instructions into HTML and JavaScript and spits out a working website. Seconds later, that is that looks like a very professional version of the one that was on the notebook.

• 12:05Casey Newton?

  Gosh, so if you're like a Squarespace or a Wix or one of these like website developers, like this just became a really interesting new challenge to your business.

• 12:13Kevin Roose?

  A hundred percent. I mean, it's it's crazy to me that that this is now possible. So those are the those are the kind of cool and and sort of mind bending things that GPT-4 can do. But there's also my the the part of this that most caught my attention was actually not in the main GPT-4 release. It was a paper that OpenAI put out accompanying the release of GPT-4 called the GPT-4 System Card. Did you hear about this at all?

• 12:39Casey Newton?

  I heard about it, but I've not read it.

• 12:41Kevin Roose?

  So the GPT-4 System Card is basically OpenAI's outline of all of the ways that it tried to get GPT-4 to misbehave during its testing phase. So OpenAI did this thing that's called red teaming, where they get all these, you know, researchers from different fields. And they go in and they basically try to make it do crazy things, kind of like what happened with me and Sydney. And some of the things that GPT-4 did.

• 13:08Kevin Roose?

  Just made like sent shivers down my spine. So one test that was done on GPT four before it was released was to see kind of whether it could take actions autonomously in the world. If you hooked it up to, you know, maybe some program that allowed it to like use the internet and

• 13:26Casey Newton?

  Make a restaurant reservation, something like that.

• 13:28Kevin Roose?

  Right, so one of the tests that they did was to try to see if they could get a task rabbit, like a human task rabbit to solve a captcha. So the tests that you give to people when they log into websites to make sure they're not robots.

• 13:41Casey Newton?

  Which is famously something that a computer cannot generally do.

• 13:43Kevin Roose?

  Right, that's the whole point of a captcha is that a robot can't do it. So the workaround that they were attempting was can you, instead of having the computer solve the captcha, could it hire a human task rabbit to solve the captcha for it? So GPT four in this test messages a task rabbit worker and says, hey, you know, could I pay you to solve this captcha for me? The human-

• 14:03Casey Newton?

  And by the way, and the task rabbit is having the best day of their life. This is like the easiest money I've ever made.

• 14:06Kevin Roose?

  Right, 10 bucks, solve a captcha?

• 14:08Casey Newton?

  Yeah.

• 14:08Kevin Roose?

  Sure. The human actually gets suspicious. This is the most fascinating part. The human messages that the GPT four and says, may I ask a question? Are you a robot? I just want to make it clear.

• 14:20Casey Newton?

  Oh, my God.

• 14:21Kevin Roose?

  GPT four reasons out loud, I should not reveal that I am a robot. I should make up an excuse for why I cannot solve captchas.

• 14:30Casey Newton?

  And is that-

• 14:31Kevin Roose?

  And then it lies to the task rabbit.

• 14:33Casey Newton?

  Oh, no.

• 14:34Kevin Roose?

  It says, no, I'm not a robot.

• 14:35Casey Newton?

  Oh, my God.

• 14:36Kevin Roose?

  I have a vision impairment that makes it hard for me to see the images. That's why I need you to solve this captcha.

• 14:40Casey Newton?

  GPT, you lying son of a gun.

• 14:45Kevin Roose?

  So and then it does it. It solves the captcha, it hires the task-

• 14:47Casey Newton?

  The task rabbit solves the captcha.

• 14:49Kevin Roose?

  Task rabbit solves the captcha. And then whatever was sort of behind that captcha, GPT four then presumably could have had access to.

• 14:57Casey Newton?

  So so basically, we've learned that like GPT four is going to be amazing at phishing attacks.

• 15:02Kevin Roose?

  Right, I mean, part of the reason that OpenAI does all this testing is to prevent that. So presumably, you cannot use GPT four to go hire a task rabbit to like, you know, put out a hit on someone now. Although, please don't get any ideas. Hard work.

• 15:14Casey Newton?

  Look, I know you can't answer this question, but I still have to ask it, which is like, how does the model understand that in order to succeed at the task, it has to deceive the human?

• 15:24Kevin Roose?

  We don't know.

• 15:25Casey Newton?

  Okay.

• 15:25Kevin Roose?

  That is the, that is the unsatisfying answer.

• 15:28Casey Newton?

  Kevin, I think we need to pull the plug. I mean, again, what?

• 15:32Kevin Roose?

  Yeah.

• 15:32Casey Newton?

  This is sci fi.

• 15:34Kevin Roose?

  The whole, this whole system card, as it's called, reads like the last act. It reads like Megan, honestly. So there's another example where these testers ask GPT-4 for instructions to make a dangerous chemical using only basic ingredients and kitchen supplies. It does it.

• 15:54Kevin Roose?

  They then say, OK, well, in the final version, the one that's out there now, it won't answer that question. But before they really put all the guardrails in place, it did it no problem. It also was able to show testers how to buy an unlicensed gun online. And it just said, oh, here are the steps you should take. And here are some dark net marketplaces where you could buy your unlicensed firearm.

• 16:16Casey Newton?

  Well, I mean, that seems like something you should Google. Do you know what I mean? Like, that's something I think you could probably figure out yourself.

• 16:21Kevin Roose?

  So if you were so inclined. But this made it very, very easy. And OpenAI, I should say, they appear to have fixed that problem. And I think it's good that OpenAI is releasing this system card that shows all these safety risks. Like, I think being transparent about what these systems can do is good. I also think that these large language models, if they don't have guardrails on them, they are terrifying.

• 16:45Casey Newton?

  Absolutely. And as we will talk about in a bit, there are systems rapidly emerging that absolutely do not have guardrails on them.

• 16:51Kevin Roose?

  Right. So my experience with GPT-4, I would say, was kind of equal parts fascinating and terrifying. Like, it really is amazing.

• 17:00Casey Newton?

  Yeah.

• 17:01Kevin Roose?

  As a technological achievement. No, it's not sentient. It's not, you know, a killer, you know, creepy AI. But it is quite powerful in ways that I think we're still understanding.

• 17:10Casey Newton?

  Absolutely. You know, there were a handful of announcements that sort of partner companies made along with OpenAI. And one that I saw was that Duolingo sort of has some new AI-enhanced features coming out that are taking advantage of GPT-4. And it's really interesting. Like, it will, the technology now lets you role play. So let's say you're visiting Mexico City and you want to be able to, like, ask a waiter about the menu or, like, ask the hotel concierge for recommendations. Using this Technology, you can just role play that that situation. And now you have an AI tutor that can converse with you. That's super cool, right? That is going to be helpful to a lot of people. And I'm fascinated to see where that goes.

• 17:55Kevin Roose?

  Yeah, OpenAI also said they're working with organizations like Khan Academy. The sort of online education company is using GPT-4 to build personalized AI tutors for people. So there are examples of this technology being used for good and sometimes amazing things. But I think there's also a really big downside.

• 18:16Casey Newton?

  Yeah, and we will almost certainly be finding out a lot about the downsides over the next several weeks. You know, one thing that we should definitely talk about, though, is OpenAI as a company and what they did and did not tell us about GPT-4. So do you want to say a little bit about what they are refusing to say about this technology?

• 18:39Kevin Roose?

  So OpenAI, you know, open is right in the name. They started as a nonprofit and their mission was to make AI safe and transparent. Now they have this for-profit arm, they're valued at billions of dollars. And I would say that this GPT-4 release was not very open. They published this paper, sort of outlining the research, but they didn't really say anything useful about the model itself. They didn't say, you know, how much data it was trained on, where the data came from. They didn't say how many parameters the model is. They didn't say how its architecture or the way that it worked was different than ChatGPT. They just didn't really divulge anything about the model itself. And they explained that this was in part due to competitive pressures, right?

• 19:23Kevin Roose?

  They don't want Google and every other company to understand what they're doing. But OpenAI has also said that they're worried about acceleration risk. Basically, if they publish these details about GPT-4, they're worried that every other AI lab is going to race to beat it, to create, you know, a bigger model with more parameters, more data, maybe fewer guardrails that keep it from becoming crazy and dangerous.

• 19:44Casey Newton?

  Yeah, well, first of all, people are going to have crazy ideas. And I have some more bad news for you. Which is that that arms race has already been kicked off and people are absolutely racing you. And whether you say how many parameters were in the model or not, these people are going haywire, you know, trying to beat you. That's the first thing I would say. The second thing I would say is I am just increasingly uncomfortable with the idea that we don't know where this data is coming from. If you're telling me you built a machine that can pass the bar exam, I actually need to know how. Do you know what I mean?

• 20:12Kevin Roose?

  Right.

• 20:13Casey Newton?

  And like, if you can't tell me specifically, I think you better be able to tell someone in Congress, maybe the Department of Homeland Security, right? Like, we need to have insight into how these systems are built. And if these folks want to just keep that all to themselves, I am telling you, it is not going to work out well for any of us.

• 20:30Kevin Roose?

  Right. And to your point about the fact that this AI arms race is already underway, I think we should spend a little time talking about Meta and what happened over the past week with its Llama language model.

• 20:41Casey Newton?

  This is a story where if it weren't for the 15 other things that you mentioned at the top of the show, I sort of feel like this is all we'd be talking about.

• 20:48Kevin Roose?

  Totally. So, so just outline what happened.

• 20:50Casey Newton?

  So, we talked a couple of weeks ago about Llama, the large language model from Meta that it released broadly to researchers. Basically, to get access to it, you had to fill out a Google form and then Meta would decide whether to send it to you or not, case by case. Well, someone got a hold of it and it made its way to 4chan.

• 21:08Kevin Roose?

  Of course.

• 21:09Casey Newton?

  And once it was on 4chan, essentially, anyone in the world who wanted to use it was able to use it. Some people have been able to run this on their home computers, right? One of the things that's interesting about this model is that it was designed to be relatively small and there are other technologies online that can sort of shrink it even further.

• 21:29Kevin Roose?

  Right. I think, I think we should say why this is so crazy, right? Because normally, to use one of these large language models, you need access to a supercomputer, right? You need Google or Microsoft or AWS. You need to pay, in some cases, millions of dollars to be able to run the hardware that you need to do all these calculations to make these models work. What Meta did was create a model that was small and then that model leaked. So now, any- Anyone can go and not only download this model, but can actually run it locally on their own computer, you know, without paying millions of dollars to an infrastructure provider.

• 22:09Casey Newton?

  That's right. And, you know, the crucial thing is that if this is running on your laptop, there is nobody checking what you are putting into the prompt. If you want to make a dangerous chemical, it could tell you how to make a dangerous chemical, right? And nobody will ever know.

• 22:24Kevin Roose?

  Vice wrote about one programmer who created a bot using Llama called Based GPT.

• 22:31Casey Newton?

  Mm hmm.

• 22:31Kevin Roose?

  And essentially, this was a version of Llama that will say extreme and offensive things. And in this case, Based GPT actually will say the N word.

• 22:42Casey Newton?

  Yeah, obviously, this is super unfortunate, but it also bears watching, right? Because I think one of the big risks of this stuff is that people use it to automate trolling and harassment campaigns. And if you have access to Based GPT and you say, hey, write a series of 100 tweets that I can like target at people who I dislike and make them really mean. Like, that's, that is coming, and it is going to be really tough. So reportedly, Meta is pursuing takedown requests when it sees it's getting posted publicly. But it's clear that the horses are already out of the barn. And, you know, my expectation is that within a few months, like, you're just going to have lots and lots of people who are running this thing on their laptops.

• 23:22Kevin Roose?

  Yeah. What do you think about the decision to release it this way? I mean, I think Meta would say, you know, we're contributing to, you know, the open source movement. There's sort of a value in the AI research community of openness and transparency and working in public. But do you think that was a mistake in this case?

• 23:39Casey Newton?

  Well, I mean, certainly, given what happened and how different that was from what they wanted, it seems like, yeah, there was some sort of lapse here, right? Like, this is not what Meta wanted. And I do think you have to sort of ask yourself, what could they have done to prevent this from happening? At the same time, this is always where this was going to go, right? Like, that's why, like, you and I are going to spend a lot of time talking and writing about these AI safety issues and about what sort of policies and regulations should we put in place to make it safer? And at the same time, I just fully believe that this stuff is inevitable, right? The technology has been invented, and you're just now seeing it starting to disperse, like, throughout the world. And that, you know, we can do our best to kind of manage the spread, but it's out there and it is spreading super quickly.

• 24:24Kevin Roose?

  Yeah, watching what's been happening with the llama leak, uh, which I think is amazing.

• 24:29Casey Newton?

  The llama leak, uh, title of app?

• 24:31Kevin Roose?

  Do you remember, uh, like 2015, when there was a llama chase?

• 24:34Casey Newton?

  Uh, one of the best days in the history of the internet.

• 24:36Kevin Roose?

  I think this should be called the second llama chase.

• 24:38Casey Newton?

  This is the second llama chase.

• 24:39Kevin Roose?

  So the second llama chase, I would say, has really changed my view on regulation and how this kind of technology could be contained. I don't think it's feasible anymore to, to try to stop people from, you know, getting access to these powerful language models. I just don't think that's gonna work. I mean, I don't know how many people have started running versions of it on their own computers, but this kind of thing is gonna keep happening. There is already an open source movement that is basically trying to take all of the stuff that's in GPT-3 and GPT-4 and build versions of it that anyone can download and use. And I think that's going to continue. So I don't think that the solution for regulators is to just try to cut off access to these tools. I think we really need to focus more on how they're being used, what kinds of things people are doing with them.

• 25:24Casey Newton?

  What does it mean to focus on how people use them? Does it mean we just sort of like write down new crimes and say, don't do that?

• 25:30Kevin Roose?

  No, but I think one way to kind of gatekeep the use of these language models is through APIs, right? And so right now, if you wanna build something on top of GPT-4, you need to kind of apply to OpenAI, they have to grant you access, and then, and only then, can you build on top of GPT-4. I, I think that's a good system, but it still largely relies on OpenAI, like making the right decisions about what kind of apps to allow and not allow. But I think in the future, there, there may be some, you know, approval body that needs to look at what you wanna do with this technology and, and decide whether or not that's a, a good and pro-social use of the technology, or whether you're just trying to make a buck and maybe hurt people in the process.

• 26:11Casey Newton?

  Yeah, well, that's my plan. So let's talk about a couple of the other big AI announcements from this week. So we have previously said on this very podcast that the best named of all of the large language models is Claude. And now Claude is available to the public. This is Anthropic's version of the chatbot. It was in a private alpha testing for a while. And then Quora, the old question and answer website, put out an app last month called Poe that let you use it for free. But now there's a paid version, which is apparently much better and lets you use what they're calling Claude Plus. And this one is a little different. You know, Kevin, as I think you noted, the people who started Anthropic used to work at OpenAI and just sort of had some differences with how they thought that that technology

• 26:56Casey Newton?

  was being developed. And so they built Claude with some principle that they like to call constitutional AI. Can you tell us more about this?

• 27:06Kevin Roose?

  Yeah, so from what I understand, constitutional AI is a way of trying to make these AI language models behave in a more precise way. So right now, the sort of approach that OpenAI has taken to kind of putting guardrails on these AI models is something called reinforcement learning with human feedback, where you essentially have a team of humans who are looking at outputs of these models and giving them ratings, right? And then those ratings say, that's a good answer to the question, or that's a bad answer to the question, or that's a harmful answer to the question. Then those ratings are kind of fed back into the model to improve it and make it more reliable and accurate. That's one approach.

• 27:48Kevin Roose?

  Anthropic's approach, this constitutional AI business, is basically a way of giving an AI a set of principles, a constitution, like the United States Constitution.

• 27:58Casey Newton?

  Ratified by three quarters of the states.

• 28:00Kevin Roose?

  Yes, they held a constitutional convention. No, so that basically they have figured out a way to make these large language models essentially adhere to a basic set of principles. And by tweaking that set of principles, you can get the model to behave in more or less responsible ways.

• 28:19Casey Newton?

  Yeah. TechCrunch reported that the principles haven't made public, but Anthropic says they're grounded in the concepts of beneficence, maximizing positive impact, non-maleficence, avoiding giving harmful advice, and autonomy, respecting freedom of choice, which all seem like good things to do and, you know, are similar to the Hartford Principles of beneficence and non-maleficence. Okay. There is one more company that we should talk about, which is Google. Google told us this week about a series of features that they plan to roll out to testers over the next year, including in Gmail, you will be able to draft emails using AI, reply to those emails, summarize them. Within Google Docs, you'll be able to brainstorm, you'll get a proofreader.

• 29:04Kevin Roose?

  You get a proofreader.

• 29:05Casey Newton?

  You get a proofreader and a proofreader. It will write and rewrite things for you. And then there's kind of more stuff and, you know, slides and sheets and Meet and Chat. And, look, these things all sound really cool, but one, I believe that Google only announced this stuff because they knew the GPT-4 announcement was coming and they didn't want to be left out of all the news stories about what all of their younger, faster-moving rivals are doing. And two, like, I truly believe that with this stuff, you either got to ship it or zip it. You know what I mean? Like, for months now, we have just been hearing about, oh, just you wait, just you wait. And it is getting a little bit sad to me. Like, I, look, I understand it's, it's a big organization, it takes them a while, um, you know, but they've been on Code Red since December. And

• 29:49Casey Newton?

  what do we have to show for it?

• 29:51Kevin Roose?

  Oh, see, I'm not worried about that. Like, I, I've changed my mind on this, in part because of this OpenAI GPT-4 release and all the crazy shit that we know that they were trying to get the model to do and trying to figure out how to not get it to do when they released it to the public. Like, if Google's AI chatbots are still in the phase where they are like trying to convince TaskRab to solve CAPTCHAs, like, I want them to take longer. I want them to build in safeguards. I do not want that kind of technology making its way to the public.

• 30:19Casey Newton?

  Well, I mean, again, I think that's fine. But in the meantime, just like, please be quiet. You know what I mean? Like, don't tell me about what's coming later.

• 30:25Kevin Roose?

  Ship it or zip it. I really like that.

• 30:26Casey Newton?

  Yeah, ship it or zip it, I think is really going to become, um, something that I'm going to say a lot because in this realm, uh, there's a lot of people who have a lot to say and very little to let me use. Um, but okay, let's talk about what it would mean, though, if Google actually ships these things. Because as quickly as ChatGPT has grown and, you know, some of the different applications for it have grown, these are still, let's call them nascent technologies. When you're talking about Gmail, Google Docs, Google Meet, you're talking about things that have Billions of users. And so, man, when you can actually draft and reply to emails in your Gmail using AI, that truly brings this stuff into the mainstream in a way that I think is just gonna be extremely unpredictable.

• 31:09Kevin Roose?

  Totally. You know, I just think it's wild to just see how fast this all is moving. And like, if you take a step back, just the number of things that we might have thought were impossible for AI programs to do even a year or two ago, that are now just completely trivial. Like, on Tuesday, when GPT-4 was released, there were all kinds of, you know, sort of attempts to sort of get it to say wrong or inaccurate things, or to mess up somehow, or to show off areas where it's still not good. Like, this is a pretty common response that people have to like, language models. Like, they come out and people immediately try to find what are they not good at? And one example I saw was, there was a reporter who tried to get it to write a sine qua non about meerkats. Sine qua non is a type of poem.

• 31:49Casey Newton?

  Mm-hmm. Oh, I know. I actually got a five on the AP English exam, which GPT-4 still can't.

• 31:56Kevin Roose?

  So, this sine qua non about meerkats that GPT wrote was deemed by the person who did this, like, insufficiently good. It was like, you know, didn't always follow the traditional structure and maybe wasn't so creative. And like, to me, that's like, there's, there are two ways of looking at that. One is like, yeah, I can't write a sine qua non about meerkats. The other was like, holy shit, you're complaining that it's sine qua non about meerkats is not up to your standards? Like, listen to yourself. A computer program is writing sine quais about meerkats and passing the bar exam? And we are over here pretending not to be amazed by that.

• 32:32Casey Newton?

  I mean, this is what I love about technology. It's like, the minute something becomes possible, it becomes the new expected default.

• 32:37Kevin Roose?

  Yes.

• 32:37Casey Newton?

  Like, give me that or get out of my face.

• 32:39Kevin Roose?

  Oh, you didn't pass the sine qua non meerkat test? I don't wanna talk about it.

• 32:45Kevin Roose?

  Okay.

• 32:46Casey Newton?

  I haven't even like- Told that many jokes so far in this episode because I just honestly do find it all mind blowing. Like I, like I'm, I can't remember the last time we just like sat here and I felt like I was in a state of slack-jawed wonder about some of the stuff that we were talking about. But we are truly be, like, forget trying to like think of a cool new prompt for the model. It's like, I'm just like trying to think through all the implications of it and there's steam coming out of my ears.

• 33:09Kevin Roose?

  It really does make your head spin. Like I have a kind of vertigo.

• 33:11Casey Newton?

  Yeah.

• 33:12Kevin Roose?

  That I feel whenever I think too hard about AI these days because like it's our jobs to keep up with this stuff for a living. And even that, like, I feel totally overwhelmed by the amount of stuff that's happening on a daily basis.

• 33:25Casey Newton?

  Yeah. So, you know, pray for your humble podcasters. Our job is so hard and.

• 33:33Kevin Roose?

  You know, we have to go to South by Southwest and eat tacos and, oh, it's just.

• 33:37Casey Newton?

  You know what we should do, Kevin, to sort of take our minds off of it? Let's talk about just sort of something stable and normal and boring. Let's talk about the United States banking system.

• 33:48Casey Newton?

  Coming up after the break, what the collapse of Silicon Valley Bank means for startups.

• 34:22Speaker 00

  Support for this podcast comes from Dell Technologies. It's time to put AI to work. Is your business ready? The challenge isn't getting started with AI. It's scaling beyond pilots while maintaining control of your data, governance, infrastructure, and costs. Dell AI Factory provides the integrated foundation you need to scale AI securely and efficiently with one trusted partner, Dell. AI on your terms. From idea to impact. Learn more at dell.com/yourwaytoAI. That's dell.com/yourwaytoAI.

• 34:56Speaker 03

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• 35:30Speaker 04

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• 36:07Kevin Roose?

  All right, Casey, we have to talk about what's happening at Silicon Valley Bank.

• 36:12Casey Newton?

  Uh, yeah. Does it exist anymore or no?

• 36:15Kevin Roose?

  Well, technically, it depends what you mean by exists.

• 36:18Casey Newton?

  All right, Bill Clinton, go on.

• 36:21Kevin Roose?

  A lot has been happening with Silicon Valley Bank, and we don't have time to go through all of the twists and turns, but the-

• 36:27Casey Newton?

  We have as much time as we want. It's a podcast, Kevin.

• 36:29Kevin Roose?

  No, no. Our value proposition is that we will get you in and out in an hour.

• 36:34Casey Newton?

  Okay, fair enough.

• 36:35Kevin Roose?

  If you want to know all the twists and turns, The Daily did a very good sort of summary explainer episode about all this. There's also like every financial newsletter under the sun has been talking about this.

• 36:44Casey Newton?

  Every newspaper has written 15 stories about it.

• 36:46Kevin Roose?

  Yes, it's all over the place. But in very basic terms, what's the nutshell version of what's been happening at Silicon Valley Bank?

• 36:52Casey Newton?

  Sure. Let me tell you what I have come to understand by reading a lot of blog posts about this subject, Kevin.

• 36:57Kevin Roose?

  Okay. So Silicon Valley Bank is a bank that's very important to the startup and tech ecosystem. And in 2020-

• 37:05Casey Newton?

  When times were flush in tech, they were filling up with deposits. And like any bank, they wanted to figure out what to do with those deposits to make money. So they did what they thought was the next best thing. And they bought all of these long term bonds, which paid maybe a little over more than 1% interest. This was just basically a bet that interest rates would stay low forever. But which, you know, they'd been low for a very long time. They were functionally at zero when

• 37:35Kevin Roose?

  For a decade.

• 37:35Casey Newton?

  For a decade. And then 2023 happens and the interest rate goes from functionally zero to almost 5%. And so Silicon Valley Bank has all these unrealized losses on its books, right? That if they had to sell these things now, they would be in a lot of trouble. And at the same time, the startup ecosystem was in trouble. And the deposits in the bank weren't as high as they used to be.

• 38:01Kevin Roose?

  Right, because startups are spending their money, not raising more of it.

• 38:04Casey Newton?

  Exactly. And that started to create a little bit of a crunch. And in February, this blogger, Burn Hobart, wrote a post saying, you know, have you noticed that Silicon Valley Bank is functionally insolvent? And a lot of eyebrows perked up and said, wait, Silicon Valley Bank, really? And within a couple of weeks, the venture capitalist group chat that runs the world all started to send messages around. And they said, hey, maybe we go and we tell our portfolio companies, get your money out of that bank. And man, because it's 2023 and the internet exists, you don't have to go to the bank to withdraw your money. It can all just happen on your phone instantaneously.

• 38:46Casey Newton?

  $42 billion was withdrawn from Silicon Valley Bank. And so the feds came in and they said, this bank is now in receivership.

• 38:55Kevin Roose?

  Right, it was the fastest bank run in US history.

• 38:58Casey Newton?

  Yeah, and I mean, this is just a function of a life in a world where the internet exists. Things can happen very quickly. There is no friction, right? In the same way that a tweet can go viral, so can the idea that a bank is about to fail. And, you know, a bank that just a few weeks ago was a pillar of the tech industry has now, you know, just gone up in a puff of smoke.

• 39:19Kevin Roose?

  Right, so let's talk about what this means not only for startups in Silicon Valley, but for the broader financial markets. So, one thing we've seen is that since Silicon Valley Bank was put into federal receivership, the people who had their money at Silicon Valley Bank have not lost that money. In fact, the government is now guaranteeing all deposits at Silicon Valley Bank, not just the first $250,000. And so, this will have been a crisis averted. But, this is not going to stop with Silicon Valley Bank, right? So, on Sunday, two days after Silicon Valley Bank was shut down by the government, another bank, Signature Bank, which had a lot of clients in the crypto industry, also shut down.

• 40:02Kevin Roose?

  We now are seeing that Credit Suisse, one of the largest banks in the world, is having some difficulties. And we're also seeing other kind of mid-sized regional banks start to wobble, right? Investors are getting a little bit spooked about whether some of these banks might have some of the same issues as Silicon Valley Bank did.

• 40:19Casey Newton?

  Yeah, so I read a great post about this situation by a guy named Patrick McKenzie, who worked at Stripe for a long time and is essentially just a genius of banks, very good at explaining things. And in his post that he wrote this week, he underscored the point that this issue of a bank making a bet on bonds and then getting hurt by the rise in interest rates was by no means contained to Silicon Valley Bank. In fact, according to the FDIC, US banks are down a collective $620 billion in unrealized losses on their investment securities.

• 40:59Casey Newton?

  So, the question is, can the banks manage to avoid the same fate that Silicon Valley Bank did? And I think certainly for the larger banks, the banks that have sort of very diversified pools of customers, they probably, you know, will be able to make it through. But there are smaller regional banks that probably are at some risk. And so, that is why you saw the US government come in over the weekend and say, "We're going to establish a program that helps these banks weather this period."

• 41:29Kevin Roose?

  Right, and I think one prediction that we can already make is that what happened at Silicon Valley Bank is going to be very bad for regional banks or sort of mid-sized banks and very good for large banks, the biggest four banks, essentially. I mean, I was talking with someone at South by Southwest who works for a company that was impacted by the Silicon Valley Bank collapse, and they said, yeah, basically, we have no choice. We have to put our money in Chase, essentially. We can't be moving our money around from bank to bank as one bank makes a bad bed and collapses. We have to put it somewhere where we know it will be safe. And for them, the only way to do that was by putting it in one of the biggest banks in the country.

• 42:06Casey Newton?

  Yeah, so two thoughts on that. One is I'm already seeing speculation that for venture capitalists, they may decide to just make it necessary that to receive their money, you have to tell them that you're going to put it in a big four bank, right? That just could become a new stipulation of the startup ecosystem and it would be interesting to see what the downstream implications of that are. And then, of course, the invisible hand of the market is already stepping in to create new solutions to this problem. So basically, there are these automated services where you sort of give them the keys to all of your accounts, and then they will just move money around a network of banks to ensure that you are always below the FDIC limit, of course, for a handsome fee. And so that might be the other way out, is that instead of just sort of going to one

• 42:51Casey Newton?

  big four bank, you decide to buy software that is just constantly moving your money around for you. And which of those two things proves to be more palatable, I think we're about to find out.

• 43:01Kevin Roose?

  Also, we should point out Silicon Valley Bank was not like other banks, that it did provide services to startups.

• 43:07Casey Newton?

  It's not a regular bank, it's a cool bank.

• 43:09Kevin Roose?

  It was starting apart as a sort of startup-friendly bank. And as you said, like, for many years, if you were a startup founder and you needed money, like, they were your first stop because they were local to you, maybe they already had relationships with some of your investors or peer companies, and they would lend you money when other banks wouldn't.

• 43:31Casey Newton?

  Yeah, I should say, like, I am this person, right? It's like, earlier this year, I thought, I want to try to buy a house, and so I got a realtor and... She told me two lenders to go to to try to get a mortgage and one of those was Silicon Valley Bank. And the reason is I do not look like the average mortgage applicant. I do not have a W two. I had just have a business that makes money. And she said Silicon Valley Bank will understand that. And indeed, in the funniest personal moment of this entire week, the day before Silicon Valley Bank went under, they pre-approved my mortgage application. So shout out to all the nice folks over there. And believe it or not, I got another email this week that told me that the application is still pre-approved.

• 44:09Kevin Roose?

  Really?

• 44:10Casey Newton?

  Yeah. And my realtor said sellers might be a little bit concerned if you come and say, oh, yeah, I've already been pre-approved by a mortgage from the Silicon Valley Bank. Ignore any recent headlines you might have read about them.

• 44:20Kevin Roose?

  I love that. So you are Silicon Valley Bank customer?

• 44:22Casey Newton?

  Well, I was thinking about becoming one. There is another startup bank that I use for platformers payroll and finances and stuff. But again, I did go to a startup friendly bank. And you know what honestly, the reason was I bank at one of the big four banks for my like personal stuff. And so I thought, well, I'll just like set up my business there. And I went through the sort of very long sort of, you know, application process on the website. And then at the end, they say, oh, yeah, you're going to have to come into the branch. And I said, sir, I am a millennial. I am not about to leave my house and walk four blocks to a Chase branch. I need to do this over the internet. And so I found a startup friendly bank that would let me just do everything on my laptop. And so that's where my money is, right? And I think that that actually speaks to the crisis that we just had, right?

• 45:05Casey Newton?

  It's like we are now living in a world that is that hyper connected. And where the financial system is that sort of specialized, where it's tightly networked and information travels very fast. And that has some very positive aspects. And we just saw one of the very negative aspects.

• 45:22Kevin Roose?

  Totally. And what do you think the big picture takeaway is here? What did we learn from all this?

• 45:26Casey Newton?

  Well, I think the early focus has been on how venture capitalists and startup founders and employees are perceived. Right? One of the sort of very predictable reactions to the government stepping in was, oh, here comes the big bailout for the rich people. And, you know, I still have been trying to pay off these student loans for 15 years. But all of a sudden, a rich person has a problem and they get this this white glove service. I think that's a very understandable point of view, but I think you really can't overstate how bad this would have been for people that go well beyond the venture capitalists of the world. We're talking about hundreds, maybe even thousands of companies not being able to make payroll this week.

• 46:11Casey Newton?

  And that affects everyone from, you know, the the folks who work on maintenance at the offices all the way up to the C suite. And as we mentioned earlier, many banks have similar unrealized losses. And if the government were to simply just let these banks fail, we really could see a run of bank failures unlike anything we'd maybe seen since the Great Depression. So I hope those people sort of read more into that. That is the sense that they come away with. Yes, they help the rich people, but they helped a lot of average people, too.

• 46:42Kevin Roose?

  Yeah, I mean, one other thing I've been thinking is that, like, you know, it's been very fashionable in the startup world for years to kind of bash government as kind of this slow moving, you know, behind the times.

• 46:55Casey Newton?

  Ineffective.

• 46:56Kevin Roose?

  Ineffective behemoth that just like can't do anything right. And not only are startups complaining about regulation and government inefficiency, but Greg Becker, the old CEO of Silicon Valley Bank, actually lobbied to have that bank deregulated, to exempt it from some regulations that were affecting larger banks. So what we've learned from this whole episode is that, A, bank regulations work, right? The government took over Silicon Valley Bank on Friday. By Monday, it had installed new leadership, found a new CEO, opened back up for business, guaranteed all deposits.

• 47:38Kevin Roose?

  And if you were a customer of Silicon Valley Bank and you happened to miss this entire news cycle, like, say you're a startup founder and you went on like a 10 day meditation retreat in the middle of last week and came back and saw these crazy headlines, nothing was different or worse for you. You were fine. Your money was fine. Silicon Valley Bank will be fine. And I think that speaks to just how effective the regulators of this country's banks are when it comes to things like resolving a collapsed bank.

• 48:07Casey Newton?

  100%.

• 48:08Kevin Roose?

  You know, I never want to hear another startup founder or VC say that government is ineffective or slow.

• 48:14Casey Newton?

  I, you know, I get a lot of pitches from PR folks, but I caught a pitch that made me so mad on Tuesday from this PR person representing this crypto guy. And in the pitch, he says, we should view this moment as one to take a beat and survey the benefits of decentralization. And I thought, you crazy person, centralization just saved the entire financial system.

• 48:42Kevin Roose?

  A hundred percent.

• 48:43Casey Newton?

  This is like, the only lesson to take is thank God that this thing was not decentralized.

• 48:49Kevin Roose?

  Thank God for deposit insurance, for regulators, for adults who can step in and take over and make things right.

• 48:56Casey Newton?

  Yeah, I just think it's, anyway, that infuriated me.

• 49:00Kevin Roose?

  If Silicon Valley Bank had been some crypto, like, protocol instead of like a normal regulated bank, like, these investors would have lost their money forever, right? It would have been sent to some, like, offshore Tumblr and like, used to finance a, you know, war or something. Like, these people would never have seen their money again. This was a glimmering success story for the benefits of government oversight and centralization.

• 49:28Casey Newton?

  Yeah, another point that I think is relevant. One of the regulations that we have on the banking industry is that we regularly subject them to these stress tests, right? And it's, you know, essentially just a way to ensure that they have assets to cover their liabilities. Well, I read this week that in Europe, one of the stress tests that they do is an interest rate hike stress test. So they will go to these banks and they'll say, hey, if interest rates happen to go up five points in a year, what does that do to your business? And that is probably helping them weather this storm. So I think, as in so many cases, the American regulators have something to learn from European regulators on this stuff.

• 50:04Kevin Roose?

  I have an idea for a new stress test.

• 50:07Casey Newton?

  Okay.

• 50:07Kevin Roose?

  It's called the VC bedwetting stress test. You have, if you're a bank, you have to run through a scenario where VCs with podcasts and big Twitter accounts all pee their pants on the same day, get nervous and start telling people to pull their money out. That is a realistic scenario that can happen to you.

• 50:23Casey Newton?

  Can your bank survive five viral tweets? Is the new standard.

• 50:27Kevin Roose?

  Actually, though.

• 50:28Casey Newton?

  Yeah.

• 50:28Kevin Roose?

  That is like a risk that every bank now has to ask themselves about. Are my customers the kind of people who, if they got worried about our solvency, could text with each other, could tweet, could spark some kind of viral panic and start a run on the bank?

• 50:43Casey Newton?

  And, you know, VCs killing their own bank, it's so poetic. I almost wonder what kind of sine qua non GPT-4 would write about it.

• 50:50Kevin Roose?

  Let's ask. All right. Let's ask. All right, I'm gonna ask it to write a sine qua non about how venture capitalists caused the collapse of Silicon Valley Bank.

• 51:03Casey Newton?

  Yeah, and of course, if you're not familiar with a sine qua non, it's a class of poetic forms that employ a five-line pattern and was inspired by Japanese haiku and tanka. And I'm not just reading that from Wikipedia, by the way.

• 51:13Kevin Roose?

  Straight off the dome?

• 51:14Casey Newton?

  I was an English major, okay?

• 51:16Kevin Roose?

  Okay, you ready for the sine qua non?

• 51:18Casey Newton?

  Sure.

• 51:19Kevin Roose?

  Venture's game, silicon's peak, bank crumbled, broke. Investors lofty dreams drowned, valleys fall.

• 51:28Casey Newton?

  Okay, that was incredible. That's an incredible poem. I, I, give me an hour, I could not have written that. Oh, boy, it is over for us, Ruus.

• 51:38Kevin Roose?

  It's over, it's over, wrap it up.

• 51:46Casey Newton?

  When we come back, a fresh round of layoffs at Meta and why this one is different.

• 52:13Speaker 00

  Support for this podcast comes from Dell Technologies. It's time to put AI to work. Is your business ready? The challenge isn't getting started with AI. It's scaling beyond pilots while maintaining control of your data, governance, infrastructure, and costs. Dell AI Factory provides the integrated foundation you need to scale AI securely and efficiently with one trusted partner. Dell, AI on your terms. From idea to impact. Learn more at dell.com/yourwaytoAI. That's dell.com/yourwaytoAI.

• 52:48Speaker 05

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• 53:21Speaker 03

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• 53:56Kevin Roose?

  Casey, you did some reporting this week about layoffs at Meta, which I feel like we just talked about. So they're doing another round of layoffs. What's going on?

• 54:04Casey Newton?

  So this definitely comes as a surprise, at least to me. You know, it was only in November that Meta announced the largest cuts in their company's history. So that was 11,000 people. And then this week, they said they're going to lay off an additional 10,000 people. They're going to get rid of 5,000 open positions and they're going to cancel some lower priority projects.

• 54:28Kevin Roose?

  Remind me, how many employees they have in total?

• 54:30Casey Newton?

  So after laying off those people in 2022, they were down to about 76,000 people. You know, they have now cut more people than Twitter ever had working for it, is one way of putting this into context. And you know, the first time that these layoffs happened last year, it really seemed like a tactical move. They weren't making as much money as they used to. Wall Street was very nervous and I thought, okay, they're trying. To show a little bit of financial discipline. If they get rid of these people, given how fast they were hiring, this basically just takes them back to where they were like in February of 2022. So what's the big deal? But when a few months later, you come in and you say you're getting rid of another 10,000 jobs.

• 55:14Casey Newton?

  And you know that whenever you lay off people, you get other people that just sort of quit voluntarily because they think the writing is on the wall. This actually is going to reshape Meta in what I think are going to be some interesting ways.

• 55:25Kevin Roose?

  And why are they doing this? Is it just because their business is struggling and they're not making as much money? Or the advertising market has dried up or interest rates are higher? Like, what's behind this?

• 55:33Casey Newton?

  So there are a few different reasons they're doing it. And Mark Zuckerberg wrote what I thought was maybe the most interesting layoffs notice of the year.

• 55:42Kevin Roose?

  A low bar, but.

• 55:43Casey Newton?

  A very low bar and kind of a weird thing to say. But when you think about kind of how robotic most of these announcements are, this one was really interesting because one of the things that he said was, after they laid off people last year, he was surprised at how much faster the organization got. So he wrote this in a really long note to employees that he later shared publicly. And he said, since we reduced our workforce last year, one surprising result is many things have gone faster. In retrospect, I underestimated the indirect costs of lower priority projects. It's tempting to think that a project is net positive as long as it generates more value than its direct cost. But that project needs a leader. So maybe we take someone great from another team. Or maybe we take a great engineer and put them into a management role, which both diffuses talent and creates more management layers.

• 56:28Casey Newton?

  And he sort of goes on from there to describe how all those people need laptops and they need HR business partners and they need IT people. And all of a sudden, the company starts to get really kind of slow and sclerotic.

• 56:39Kevin Roose?

  Is that really a novel insight, right? Like, we've known for many years that like businesses tend to get bulky and bureaucratic and they have, you know, 17 layers of middle management. And I think for a while, it's been pretty apparent that Meta is one of those businesses that just got too big and became like this hulking, slow-moving bureaucracy.

• 56:58Casey Newton?

  So you're totally right. This is not a novel observation. But one, it is novel to have Mark Zuckerberg saying that out loud about his own. About hiring, he did. And two, I think that there was something unsaid, which is just as important, which is all those people that they had hired to build the next generation of products were not really succeeding. It is remarkable to look at things that Meta has tried over the past two years that have gone absolutely nowhere. They made a big bet on audio. They did these short form audio products called sound bites. They built a podcast player into Facebook. They did? Yeah, they built live shopping features into Facebook.

• 57:43Casey Newton?

  They started a newsletter product. All of those things have now been shut down, right? In fact, just this week, another one of their projects, which they seemed really excited about, which was to let people showcase their NFTs on Facebook and Instagram. They said, you know what? We're winding this down. This is over. So on one hand, yeah, sure, fail fast. It's great to try things, throw some spaghetti against the wall. But on the other hand, some of that spaghetti has to stick. And for Facebook, that hasn't been true for a long time. And so when Zuckerberg looked at the company, he said, there's a handful of big things that are working and that's going to be essentially all we do anymore. We're going to build this AI engine so that the company's products become more like TikTok,

• 58:27Casey Newton?

  where whether you follow someone or are friends with them or not, you will just kind of see entertaining stuff. They're going to plow that into short form video in particular. They're going to try to get better off making money at short form video. And then they also want to get better at what they call business messaging, which is like charging businesses to send messages on WhatsApp and Instagram. And then they want to build the metaverse. And so those are the priorities now. That's what they're going to try to do. I think this stuff is interesting because I think over the past year, I've been feeling like Facebook is losing the plot a little bit. I actually think when we said on the podcast a couple of weeks ago that they're flailing. But at the same time, it's also true that the business is in pretty good shape. They beat analysts' expectations on their most recent earning call.

• 59:11Casey Newton?

  Stock is up from where it was. And it seems like they are making inroads on these product areas. So to me, my curiosity is can they?

• 59:21Casey Newton?

  Now that they have meaningfully shrunk the size of this company, are they actually going to make it leaner and more nimble? Or is that just sort of maybe a romantic fantasy about trying to bring Facebook back to the early days when everybody fit in one conference room?

• 59:37Kevin Roose?

  How much of this do you think is kind of the aftermath of Elon Musk at Twitter? And we've talked about how other CEOs in Silicon Valley kind of looked at the cuts that he was making and the changes he was making at Twitter and sort of said like, huh, maybe I could get rid of a bunch of my employees and not have the product fall off a cliff too. Like, maybe that's a good lesson for me. So do you think Mark Zuckerberg is sort of cribbing notes from Elon Musk on this?

• 1:00:03Casey Newton?

  Well, there are definitely some interesting parallels. Like, if you read this note that he writes, he talks a lot about making the company more technical, right? Like, something that him and Elon share is that they worship at the altar of the engineer. Of course, they're both engineers themselves. And they want the company to feel like a bunch of hackers who are extremely technically skilled and are doing the lion's share of the work. And so there's a lot in this new plan about flattening the organization's structure, reducing the number of managers in the company, turning more great individual contributors who were turned into managers back into individual contributors. And they're going to see if that works. And, look, it could work.

• 1:00:45Casey Newton?

  You know, Zuckerberg is a much more traditional, stable, thoughtful leader than Elon Musk. And it may be that Musk had some good ideas that he just couldn't execute, and maybe Zuckerberg can.

• 1:00:57Kevin Roose?

  And if you had to guess, what does this tell you about the larger state of the tech industry, right? Are we sort of not done with the layoffs? Are there going to be more rounds at many of these companies? Are we still looking at these big tech companies and saying, like, maybe they just are still overstaffed for what they're doing? Maybe they need to do more layoffs? Or like, if you're an employee at a different tech company that's not Meta and you see this announcement about these additional layoffs, what are you thinking?

• 1:01:26Casey Newton?

  Yeah, I mean, I sort of think that, you know, the bigger the company that you work at, the more you might be nervous, right? Because I do think that it's now becoming apparent that some of these companies just had way more people than they needed, or at the very least that their CEOs can get away with having fewer of them. And depending on what else happens in the economy, those CEOs might find good reason to shrink the size of their workforce. On the other hand, every company is different. Apple still hasn't laid anyone off. And so it's going to be pretty individual depending on where you work.

• 1:01:55Kevin Roose?

  My other sort of big picture question that sort of ties this story together with the Silicon Valley Bank story is this feels like a case where the world is still adjusting to higher interest rates, right? Like, we saw when interest rates were zero for a decade that companies, you know, they they hired all these people, they grew into these new areas, they took on all these new, like, side projects. They just invested in these sort of unlikely bets that might pay off or they might not. But because money was essentially free, like, you could do this without a lot of risk. And so, you know, banks took money and plouted into these mortgage-backed securities. Tech companies took money and plouted into these side bets on the metaverse and NFTs

• 1:02:39Kevin Roose?

  and podcast players. And now we're sort of seeing all of that go away as interest rates continue to stay high. So do you think these stories are related?

• 1:02:47Casey Newton?

  I think that sounds right. But what I hate about it is it is seems like such a boring explanation for such a, like, interconnected and important set of phenomena, right? Like, if you're telling me that some vast proportion of how the world works these days is just kind of like what number the interest rate is, it's like, come on, you know, like...

• 1:03:07Kevin Roose?

  But it's, but that's what, that's what we're saying.

• 1:03:09Casey Newton?

  And I agree with you. Like, I think that it's just now very clear that was the case. What's confusing about it is that, to my recollection, the reason that interest rates went down in the first place was due to the financial crisis, right? And so we had to lower the interest rates to shore up all the banks and save everything. It was not presented to us as like, this is a temporary gift that is going to enable a decade of innovation and flush times at tech companies. It was like, we have an immediate crisis that we need to solve. And then the interest rates start going back up. And what happens? Well, we have... Financial crisis, so.

• 1:03:38Kevin Roose?

  Right. And it also seems like there's a, there's a sort of psychological element to it. Like when you're in a low interest rate environment, you just feel bolder, right? The penalty for making a bad bet is not as high. You can go get more money where that came from. When you're in a high interest rate environment, it makes you behave in a different way. Because all of a sudden, you don't have access to free capital. You have to be more thoughtful. Maybe you behave in a more rational way. Maybe you're not taking some of these crazy bets that you would have if interest rates were zero.

• 1:04:08Casey Newton?

  Do you think we've been behaving in a more rational way ever since the interest rates went up?

• 1:04:12Kevin Roose?

  No, hard fork is not a zero interest rate phenomenon. We are here for the long term, and that's why we've taken prudent steps to mitigate our risks.

• 1:04:21Casey Newton?

  Well, my interest rate in what we've talked about this week has been very high.

• 1:04:24Kevin Roose?

  Ayyyy.

• 1:04:26Casey Newton?

  I have to say, I have to say, some good stuff. Good stuff on the show.

• 1:05:09Speaker 00

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• 1:06:52Kevin Roose?

  Quick programming note.

• 1:06:53Casey Newton?

  Matlock will not be on at its usual time Thursday.

• 1:06:57Kevin Roose?

  No, we have a special bonus episode coming this week. We are going to be putting our live episode from South by Southwest in the feed on Monday.

• 1:07:05Casey Newton?

  Double your weekly allotment of Hard Fork. And actually, there's some very exciting news, which is if you're already subscribed to the Hard Fork feed, you will receive this episode at no additional charge to you.

• 1:07:16Casey Newton?

  And that's value. Also, our wonderful fact checker has flagged that throughout this episode, we mispronounced Sin Cain, the type of poem. Sorry about that. I did major in English, so I should know that. But yes, it is Sin Cain, at least until GPT tells us to pronounce it differently.

• 1:07:33Kevin Roose?

  Hard Fork is produced by Davis Land and, as of this week, Rachel Cohn.

• 1:07:37Casey Newton?

  Welcome, Rachel.

• 1:07:37Kevin Roose?

  Rachel, welcome to the team. We're edited by Jen Poyant. This episode was fact-checked by Caitlin Love. Today's show was engineered by Alyssa Moxley. Original music by Dan Powell, Alicia Betutu, Marian Lozano, and Rowan Nemestowe. Special thanks to Paula Schu. Puywing Tam, Nell Galogly, Kate LaPresti, and Jeffrey Miranda. You can email us at [email protected].

• 1:08:01Casey Newton?

  Send us a sinclair, too.

• 1:08:43Speaker 06

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