(Preview) AI and the Winner’s Curse, Google’s Genie 3 Breakthrough, Questions on Intel, Fertility Rates, and Banning Advertising

Andrew and Ben discuss Ben’s article on Apple and AWS in the AI era, including a call for Apple to make an acquisition, a bit of AWS history, AWS as the new Azure, and the challenge of making changes amidst continued success. Then: Thoughts on Google’s Genie 3 breakthrough and OpenAI’s open weights models, and questions on Intel, scrutiny of Lip-Bu Tan, whether AI will compound the fertility crisis, and an emailer who wants to eliminate advertising from the human condition.

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

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, back in the United States, Ben Thompson. Ben, how you doing?

• 0:20Ben Thompson?

  Struggling, Andrew. The worst thing about getting old and just having more and more difficult time with jet lag is the fact that I realize I just complain about it on every podcast. It's a real bad combination of old, jet lag and regular podcasting. I'm sure everyone's sick of hearing about it, so I will not dwell on it. But I'm-

• 0:41Andrew Sharp?

  No, it's a great summer theme here, you know what I mean? I had a feeling we're recording later in the week and you've been back for a couple of days, so I had a feeling that the jet lag would hit you like a ton of bricks after about 72, 96 hours. Now here we are. Who knows whether we'll make it through the next hour and a half? But I'm excited for the journey with you, you know what I mean?

• 1:05Ben Thompson?

  I'm glad you're excited. Someone needs to be. Let's do it.

• 1:08Andrew Sharp?

  Well, and also, good news. This might be the last day of work that either of us need to do. Because as we're recording, OpenAI is set to release GPT-5. Sam Altman posted a photo of the Death Star looming over Earth last night. And I don't know, the whole world could be about to change and our future may just be you and I sitting around, smoking cigars and hanging out while GPT-5 does the work for everyone.

• 1:41Ben Thompson?

  That's a great point. We are obviously not going to be covering ChatGPT-5 on this episode. But who knows? Maybe ChatGPT-5 will produce this episode and replace everything we said. It's a great observation. Who knows what might happen?

• 1:55Andrew Sharp?

  Yes, one long cigar night for the next several decades, at least as long as we can afford cigars. In any event, we will, we'll hit GPT-5 next week. For now, we are going bigger picture on this episode. Last week when we recorded, we had a question about big tech companies in the AI era. Bob asked us whether any big tech incumbents would lose in an AI world. And on Tuesday this week, you wrote an article that was headlined "Paradigm Shifts and the Winner's Curse", which I thought was an interesting coda to the conversation we had a week ago

• 2:34Andrew Sharp?

  about all the different advantages that the big tech incumbents are enjoying as the AI era takes shape here. Your article focuses on Apple and Amazon, and particularly AWS within Amazon, after last week's earnings calls. So my question at the outset, why are we focusing on those two businesses? Apple just reported monster earnings, its fastest quarterly revenue growth in more than three years. AWS, still the most dominant cloud business, albeit with slower growth than competitors like Azure and Google Cloud. So what drew you to the AWS story and the Apple story?

• 3:16Ben Thompson?

  It's not just a, I mean, the email contributed, so thumbs up to Bob. And it's not just an Apple and Amazon story, it's also a Google story. I think when I sort of think and reflect about where we are and where we're going. I would say first and foremost, I brought up the, you know, the end of the beginning article in my response to Bob. And I do think that generally holds. Like, I'm not at all predicting the doom of Apple and Amazon. And, you know, what they do still matters, will continue to matter. I think, you know, like, to take Apple as an example, we're going to need devices, to take AWS.

• 3:58Andrew Sharp?

  Yeah.

• 3:59Ben Thompson?

  All the companies in AWS, they're not going anywhere. Like, it's, it's just, you know, they've established a really important and solid position. But I just had to like be honest about the fact that the other article I went back to is AI in the big five. Where all along in this whole AI paradigm, the company we've been wringing our hands over, and I've been a bit of a ringleader in doing this, has been Google. And as we discussed a few episodes ago, I didn't bring this up in the article, but maybe I should have. The real condemnation of Google is that they invented the transformer. They invented this technology.

• 4:40Ben Thompson?

  And they were totally caught flat footed by OpenAI and ChatGPT. And ChatGPT is the product that theoretically, Google should have created, at least from a technical perspective. The fact they didn't is like disruption happened. Like whatever happens going forward, ChatGPT is going to be a thing. If OpenAI went bankrupt tomorrow, the bidding war to acquire ChatGPT will be astronomical. Like this is a product that is like the whole, the whole structure, the equity structure, all that thing of OpenAI. Not just because it's a nonprofit, but also all the cost issues we've talked about.

• 5:17Ben Thompson?

  All that is a separate question as to whether ChatGPT is going to be a super important and meaningful product going forward, which it is.

• 5:26Andrew Sharp?

  Right.

• 5:27Ben Thompson?

  And arguably was.

• 5:28Andrew Sharp?

  And it's dominant in the consumer space because they were the leaders in the consumer space. And now they have an advantage that just compounds over time with word of mouth and user preferences and things like that.

• 5:40Ben Thompson?

  Right. And there's an.

• 5:40Andrew Sharp?

  All advantages that could have gone to Google had they moved first in like 2021 or something like that. On the strength of the transformer technology.

• 5:49Ben Thompson?

  Yeah, exactly. And you know, Apple loves to say, we're never first to a category. We just do it right. Blah, blah, blah, blah, blah. And I don't know, like, that was definitely the case with the iPod. That's probably the preeminent example. There were digital music players in the space. Apple came, came in with a completely different approach. Thousand songs in your pocket. Based on this, you know, 1.8, 1.8 inch drive they found in Japan, Toshiba, and turned around this product in six, seven months. One of the most incredible product development stories of all time. And, and but, but you, when you go to the iPhone. Yes, smartphones existed before the iPhone, but smartphones as they existed before the iPhone

• 6:33Ben Thompson?

  were more capable dumb phones. Like, like, like, Apple really did create and define the category. And a lot of my early writing about Apple, back at a time when people were assuming that Apple was going to be overtaken by Android, and not just overtaken in like a unit share perspective, but like, Apple was gonna be doomed like the Mac.

• 6:59Andrew Sharp?

  Right.

• 6:59Ben Thompson?

  Was, no, Apple, actually, Apple was first, and they have established this used ecosystem, and they're in a very strong position and not going anywhere. And in contrast, the Mac was not first. DOS was first, built on IBM. The Mac came later. It was first to have a GUI, but the fact that the Mac basically languished and kind of carved out a little bit in sort of the, the, the, uh, the, the design space, you know, desktop publishing, like, they had a nice little business in the, you know, late 80s, early 90s, but by and large, kind of a failed product, cost Steve Jobs, it's his job, like, in his position at the company.

• 7:42Ben Thompson?

  And so, like, that's actually a counter example to the, where, like, like, the two biggest products, the Mac and the iPhone, actually show that being first is, in fact, really valuable. Again, it all comes down to definitions, you, you could say the iPhone was not the first smartphone, blah, blah, blah, blah. It was clearly the first smartphone as we understand smartphones today. And had Android-

• 8:07Andrew Sharp?

  And established Apple's advantage in the app ecosystem. And then Apple came through with iPhone adjacent businesses, like the Apple Watch, for instance, or AirPods, and a number of examples that Tim Cook could point to, to say, we weren't first in these categories, and then we came to dominate and define these categories. But it's all downstream of the iPhone, which was first, and then established this ecosystem that turned into a massive moat that has turned the iPhone into the most successful product of all time.

• 8:40Ben Thompson?

  Right. I think there's an alternate reality where, now again, I don't think Android would be what it is today without the iPhone, like, Google- Was trying to copy the BlackBerry and then they just totally pivoted. But imagine Google comes out with Android as it is today, like all touch based icons, you know, like the whole app store, the whole kit kaboodle. Would Apple be doing as well as they were had they been three to four years behind Android? Like Android was three to four years behind the iPhone. I'm a little skeptical like, and I think, and the extension of this observation is that what Tim

• 9:22Ben Thompson?

  Cook likes to think about Apple, we're not always first, but we come in and we dominate blah, blah, blah. That is actually kind of Google, right? Like, like, so they, they, they have searched, they have this money generating sort of thing. And then they have these other businesses, like they come in with Chrome and they just sort of take over the whole market. They come in with Android and Apple, the iPhone's a really strong product. So it maintains us, you know, its market share and a huge portion of the profit share. But Google sort of cleans up everything else. And I think if you look at AI, it kind of feels like that's what's happening. Like ChatGPT is there, Anthropic is there and you're doing, you're really focused on B to B encoding, things on those lines.

• 10:07Ben Thompson?

  But you have this sort of like, like Google is like the, the, some combination of like Loch Ness monster and like this zombie that is just irrepressible. And it's like here, that guess we're going into AI products now. And yeah, this, it is just like, and you have this, this, this entity that they feels like they can't do anything right. It feels like they're so unfocused, they can't make good products, they're canceling things left and right. And I've, you know, recounted again and again, how I have a hard time understanding this company. And I was talking to someone who used to work at Google and he's like, I totally sympathize with your difficulty. You always talk about, I have a hard time understanding Google.

• 10:50Ben Thompson?

  He's like, this is, this was someone that worked at Google and was a high level executive for, for many, many years. He's like, I don't understand Google. He's like, no one at Google understands Google. And, and I think, and I do sometimes wonder, is a lot of my.

• 11:09Ben Thompson?

  Do I have a bias against Google precisely because they are so frustrating for me as an analyst? And like, I want there to be a top-down strategy and something that I can parse and I can explain. I can see what's going on. And the problem is, the critique of Google is the right hand doesn't know what the left hand is doing.

• 11:31Andrew Sharp?

  Yeah.

• 11:31Ben Thompson?

  Or in the case of Google, it's like an octopus or whatever it is. And none of the tentacles know what the other ones are doing. But maybe there's a little bit of a method to the madness. And maybe it's not even a purposeful method. It's like, Google is like this organism that is just sort of an amoeba that is just sort of envelops everything that floats around. And actually, it's really impressive what they did in mobile.

• 11:59Andrew Sharp?

  Yeah.

• 11:59Ben Thompson?

  And if you squint, it kind of feels like in the world is happening with AI. Again, in this view, you have ChatGPT as like an iPhone-like product that comes in, defines the market, dominates the consumer space. But then you have the infrastructure king and you have like, you know, and Google has a competitive model. They have the infrastructure that allows them to offer it very cheaply. I'm very bullish about their cloud prospects sort of by and large. And so, yes, this was an article about AWS and Amazon. But almost at the end, it was like, not an apology tour per se for me towards Google. But it's like a self-critique. Like, this was, this article was very sort of introspective in a way.

• 12:40Andrew Sharp?

  Yeah, well, what I enjoyed about it was your description of Google as, again, this sort of amorphous blob. And I don't know what the right animal analogy might be. Like, maybe a giant jellyfish as opposed to the giant Loch Ness monster. Yeah, I guess all, the Loch Ness monster is giant by its nature. But a giant zombie jellyfish, unkillable, because Google, they are dedicated to making cool products and shape-shifting over time. We've already seen them shape-shift to dominate the mobile era, the way they dominated the desktop era.

• 13:19Andrew Sharp?

  And that amorphous nature should favor them as the AI paradigm arrives and takes shape here. And then, on the other hand, you were juxtaposing them with Apple and Amazon, who have like very clear strategically sound strategies as this new technology arrives. And what was remarkable about your article is you're tracing the comments from Tim Cook and Andy Jassy on the earnings calls. And like beat for beat, they're making the exact same points about why Apple is well positioned in AI, why AWS is well positioned in AI. And

• 14:01Andrew Sharp?

  I mean, they talk about it's early, we will serve actual use cases, our chips are best, we have the data. And both CEOs made comments to that effect. And those were the sort of umbrella categories that you use to describe the points that they continued to emphasize on these earnings calls. And so all of that is true. And it goes back to the beginning, like two and a half years ago, when we looked at Apple and said, they have this advantage, they have this advantage. And then Apple Intelligence arrives and is announced. And it's like, well, this makes sense in theory for a way that they can capitalize on all the first party data that they have, all the advantages they have. What are the risks

• 14:44Andrew Sharp?

  that you see of doubling down on those strengths as AI arrives here?

• 14:49Ben Thompson?

  I mean, I think that it just goes back to the paradigm question, which is, you know, the Apple one, I think is sort of easier and more straightforward to understand. But, you know, we talk about a world where the phone is not the most important thing, or to the extent the phone is the most important thing, it is as a conduit for AI. And if the plane of competition is not the user experience in terms of like actually like touching icons and moving them around, or whatever it might be. And it's not necessarily the App Store, or and the players in your platform, but it's how good is the AI that is accompanying you? Is that a competition that Apple should feel comfortable about? Mm hmm.

• 15:33Ben Thompson?

  I mean, this was, this is where the Nokia tie in came in. And it's a little risky to use Nokia because they're like not in the phone business anymore. And I'm not saying that Apple is going to be in that position. But Right. My whole thing with Nokia is if they had just adopted Android,

• 15:51Ben Thompson?

  they'd probably be still around and be fine. Would they be as necessarily as profitable as dominant? Probably not, but then again, they were operating in a world where they were making phones. They were, you know, the under carrier specifications or they're not what they wanted. They, they weren't differentiated. Yes, Symbian, like I had a Symbian phone. It had some niceties, but at the end of the day, you bought it for the hardware. And Nokia hardware was amazing, by the way, uh, still some of my favorite phones. But if they adopt Android from the get go and they get all this stuff that they were bad at for free,

• 16:26Ben Thompson?

  would they still be under the thumb of Google to a certain extent because the operating system matters more? Yes, that's also a better existence than the one they ended up with. All right. And like the real cherry on the sundae is when they finally realize that Symbian's not going to make it. Instead of going to Android, then they go to Windows Phone. And it's like they just, they had such a need to be different. It's like some status obsessed individual that just can't eat at the right restaurant or can't get the right car. They have to be different and they just keep getting themselves into worlds of hurt. Because all that matters is, is that they have to be distinct. Like that was sort of Nokia by the end.

• 17:09Ben Thompson?

  And in the end, they're not around anymore. And the analogy to Apple is maybe they should just partner with someone and let them do Siri. Right? Like Anthropic or, or, or OpenAI or whoever it might be. And do they have to actually control it? And you could say, yes, they have to control it because that's the future. But what if you suck at it? Right. Right? Like, I mean, you have to make it to the, you have to make it to the future to worry about control. And, and again, Sitting here today, it's like the iPhone's not going anywhere. Come on, Ben.

• 17:47Andrew Sharp?

  But yeah.

• 17:47Ben Thompson?

  Then again, like, how good is this AI going to get? Like, how important is it going to be? And if you're stuck with Siri and your ragtag group of AI engineers who weren't good enough to get an offer from Meta, like, how competitive are you going to be?

• 18:06Andrew Sharp?

  It's a fair question, and I'll read this note we got from Jason because I think he sums up the other side of the argument, which is, he writes, "I'm noticing a lot of similarities between the AI spending races and the streaming wars six to seven years ago. Back then, content makers saw the growth of Netflix and convinced themselves they needed to compete with their own streaming services. The only studio who sat out that spending spree was Sony. Cut to today, where Sony benefits from having a large number of distribution platforms bidding on their content while saving money from not running and marketing its own streaming platform.

• 18:45Andrew Sharp?

  Similarly, while the incumbent tech giants and pure AI labs spend hundreds of billions of dollars combined annually on AI capex, the latest earnings call showed that Apple is sitting this trend out, spending a meager $4 billion in the next year. While many will be disappointed, I think this was a bold and courageous decision to go against its investors' expectations. While the animal spirits are saying, "Spend now or miss the next generation," parentheses, bubble alert, "Apple is realizing that their superior hardware and distribution leverage mean they can give their customers the option to run the best models on their devices without having to spend money of their own, on their own, in Apple's case."

• 19:32Andrew Sharp?

  So I understand that argument. I would feel better about embracing that take and celebrating Apple's contrarian impulses. I mean, Apple is zagging while everyone else zig's here, but we're also watching Apple's core competencies erode in the midst of all this, in addition to falling behind in AI. So I'm wary of trusting Apple to figure it out. But did you have any thoughts on Jason's take there?

• 20:01Ben Thompson?

  No, I mean, I've made the same take and it's very sort of compelling from a business perspective. But I think implicit in Jason's take, I would assume, is they're partnering with someone else to help provide this.

• 20:13Andrew Sharp?

  All right. And that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharptech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out. And if you've got feedback, please email us at [email protected].