(Preview) Deep Research and OpenAI's Business Model, A Counterpoint on White Collar Concerns, The Future of Cognition and Companionship

After Ben's interview with OpenAI CEO Sam Altman, Andrew and Ben hold an impromptu symposium on AI and its implications, featuring questions from listeners. Topics include: The long-term UX for Deep Research, OpenAI's allergy to an ads-based business model, a confession from Ben after an Exponent take years ago, how AI might--or might not--change the White Collar economy, an era of startups capitalizing on AI-enabled cost structures, AI for companionship and adult content, and whether generative AI will slowly erode human cognition. At the end: A few follow-ups on Vision Pro, including proof of concept at a bluegrass concert.

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?

  Yeah, it seems like a natural follow-up question when you use deep research and then think about how valuable private information is going to be going forward. It's like, how did deals get made to integrate some of this stuff or make it easy for users to integrate some of this stuff? And I'll be curious to see how they tackle it going forward.

• 0:29Ben Thompson?

  Right. And there's also this real tension between the, you know, just the cost of doing this and serving it. You're feeding it all these PDFs. You're doing all these sorts of things. Does this actually make sense on a subscription basis? And some people drastically overuse it relative to your cost basis. Does that, is that made up for by people like me that are maybe underusing it, but are still paying $200 a month? Or is this, or you buy on a one-off basis and it's worth it because you bought it? I thought one of the interesting things talking to Sam about this was his, I thought pretty, I wouldn't say strident, but you know, of course I'm open to anything, blah, blah, blah, but strong dismissal, I think of an advertising-based model.

• 1:12Andrew Sharp?

  I would say strident. I was pretty shocked by, I mean, he didn't outright dismiss the possibility, but he came back to it a couple of times. He just does not really believe in ads and they're trying to prioritize other business models right now.

• 1:26Ben Thompson?

  Yeah. And I think that's a mistake. I mean, I think it's, it's missing their opportunity. And as I think I said to him, the way you get, or maybe this is afterwards, we sort of talked a little bit after, I'm like, any ad product you launch is going to suck. The question is, does it suck in 2025 or does it suck in 2028? Because the way to get good ones is to just get out there and do it and to iterate. Now again, this is, I wrote an article ages ago about Apple and culture and one of the challenges they had is the nature of web services is it's the exact opposite of a phone. You, you built, like the whole challenge with building a phone is you make the phone once.

• 2:10Ben Thompson?

  And you can't change it, right? Now, that's not totally right. They do make adjustments, like they get that initial feedback of people bringing their phones back. What's wrong with them, X, Y, Z? They will make small adjustments in the production line, but that will affect phones weeks or months down the road, right? Like they have to deal with the ones that are there. And that forces a certain sort of mindset and culture, which is you, you, you'll measure twice, cut once, because you only get to cut once. Right. And I think this is one of the reasons why Apple traditionally sucked at web services. You go back to the mobile me thing. They, it was this beautiful interface and it did all this sort of stuff.

• 2:50Ben Thompson?

  And then it fell apart once real people started using it because the nature of the web is you can't do that. You, there's so many variables. There's so many things you have to be able to fail gracefully. And you fail like, like at multiple steps and you can recover and, and then it's super iterative. You can be upstaging and push it right away. Right. But, but, but it's also just that the nature of it is you, with software in general, there's always bugs in software. Every time you ship, there's bugs. It's a decision. Are, are the bugs that, that we know are there acceptable? And are all, and knowing there's also a lot of bugs we don't know are there that are going to show up when they get there. And this is a hard thing to get right.

• 3:31Ben Thompson?

  Like we had a pretty rough passport update in January where basically we got, we got this balance wrong. And, you know, and we're doing things internally to revisit this and, you know, stay tuned. There's going to be like a beta program and things on those lines that we're, we're going to try to make sure we don't have a similar episode again. But it's, it's hard. It's a hard problem and it's very different than shipping a phone. And the nature of being a web service and something like advertising is like that. You're only going to get good at it by doing it. You, you can't be precious about it. And there was, I feel, a degree of preciousness that was coming across from Sam and about their product, which didn't surprise me.

• 4:14Ben Thompson?

  It's my expectations and assumptions about OpenAI kind of generally, but I

• 4:20Ben Thompson?

  Do think it's a big internal obstacle to them achieving what I think they can achieve, which is the hardest thing to do, which is a consumer aggregator destination site. Like I told him, they're the first one since Facebook. That's how rare this is. It's like an every 15 year sort of event and you're only going to get good by by doing it. And even if it sucks to start.

• 4:44Andrew Sharp?

  Yeah. And what and the other thing that resonated as I was reading the interview was you talking about your time writing Strategory. There has not been a company to emerge since you've been writing Strategory, like all the dominant consumer tech companies were in place at that point. When you started and now OpenAI has emerged here with ChatGPT as this unicorn. The alternate timeline here and like the question that I wonder about with deep research was also something you raised to Sam is like, this is a product that has a ton of value to high agency people, but how big is that market really? How many high agency people are out there that are willing to

• 5:29Andrew Sharp?

  understand this tool, pay $200 a month and take advantage of it. And, you know, I think that is a pretty small market at the end of the day relative to what's possible with a billion people otherwise.

• 5:42Ben Thompson?

  Yeah. Well, I mean, I think this this just applies to subscription products in general. I know with Strategory, my market is limited, like even though I keep the price relatively low because I want to have a larger market than I might otherwise. But the fact of the matter is your own, like you're, I'm just never going to be the size and scale of anything that's free. And that's even before you get to the whole aggregator concept and capturing the whole world and all those sorts of of pieces. And I think, yeah, limiting themselves to a subscription based business model is.

• 6:16Ben Thompson?

  That's a nice thing for an anthropic to do. I think it's a, a dereliction of potential for OpenAI to do. They should be thinking bigger. And the reality is when it comes to consumer tech companies, bigger means advertising. That's just, that's just the way it is. And the thing about advertising is it's not, people have such a bias against it. And I, you know, I've defended advertising for ages and ages. And there again, there is an irony where I don't do advertising, but that's because I'm not big. Like for, for someone of my scale, subscriptions are great. When you're big, the magic of advertising is you, the whole world is your addressable market because it's free.

• 6:56Ben Thompson?

  And you get to raise prices on customers because it's the advertisers that are paying more, not the customers. And, and that's why it's inevitable that a large consumer tech company, or at least a web services company is going to be ad-supported. That's the way you grow revenue in the long run. And e- even if you have a middle ground, like say a Netflix, like, like the ad, you know, Netflix's growth has been so large because they added the ad product in part. Like they were saturated and people willing to pay $15 a month or $18 a month, or whatever what it's up to now. And so that lets them charge more. It, it opens up that funnel at the top to move them down.

• 7:34Ben Thompson?

  And yeah, I, I think, I, I think it's a mistake and I think the longer they wait, the, it'll be worse for the business. And the more likely it is, they just missed the opportunity as, as a whole and someone comes along. And the other thing is people that are high agency that use these tools and will pay money. I'm, believe me, every anthropic release, I'm checking it out, I'm testing it. I, I already talked about, I use Grok much more than OpenAI now. Like, yeah, you're, you're fighting for the hardest customers to keep.

• 8:03Andrew Sharp?

  Well, you talk about a bias against advertising. One note is I am insulated from.

• 8:10Andrew Sharp?

  The state of advertising on the open internet these days because I'm mostly just reading Substack and reading Strategery and subscriptions and you know, Financial Times, Bloomberg, whatnot. But every year around the NCAA tournament, I'll seek out information from the open web.

• 8:29Ben Thompson?

  Make your pool picks?

• 8:30Andrew Sharp?

  Exactly. And like, man, oh, man.

• 8:33Ben Thompson?

  Who do you have winning, Andrew?

• 8:34Andrew Sharp?

  I have Auburn winning.

• 8:36Ben Thompson?

  Oh, I see. I do it. There's, there's, there is one clear choice this year based on like the, uh, the, the numbers and the metrics. Like one team is top five in defensive efficiency, offensive efficiency. It is Duke basketball.

• 8:49Andrew Sharp?

  There's no way. I, I chose Auburn because Bruce Pearl has always struck me as like a scumbag extraordinaire college basketball coach. And college basketball rewards the scumbags. So I'm pulling for the Auburn Tigers. But the point is, you go to CBS Sports, you go to Sports Illustrated, and the experience has just become unbelievably degraded and depressing. So I understand why advertising may make people's skin crawl in the modern era.

• 9:21Ben Thompson?

  Yeah, but you know which ads don't suck?

• 9:22Andrew Sharp?

  Facebook?

• 9:23Ben Thompson?

  That's right. Facebook ads don't suck.

• 9:25Andrew Sharp?

  Instagram, I haven't been to Facebook in years. But Instagram, they do it elegantly.

• 9:29Ben Thompson?

  They, yes, they do. Now, that, it's not clear how you get those quality of ads in an AI experience, right? Like, you know, to start out, you're just having like display hats, right? And you have great targeting because people are typing in their entire like world into your, your little box. But yeah, it's gonna suck. And that's painful. But the way you get to not sucking is by doing. And, uh, so, yeah, we'll see.

• 9:56Andrew Sharp?

  So we'll see whether they do it.

• 9:57Ben Thompson?

  I do have to make an admission. I've been meaning to, to mention this, I think, for a long time.

• 10:03Andrew Sharp?

  Okay.

• 10:04Ben Thompson?

  Early on in Strategery, I was very critical of like people that like ad blockers and all that sort of thing. Where, and I think I might've used, I think it was an exponent, I call these people entitled, um, which really set a lot of people off.

• 10:16Andrew Sharp?

  I bet.

• 10:19Ben Thompson?

  And it goes like, hey, if you want the access, like, that's how you pay for it is is the ads, right? Just don't read it if you don't like the ads.

• 10:26Andrew Sharp?

  Oh, my God. Holier than thou, Ben. I missed that era.

• 10:30Ben Thompson?

  Yeah. So, um, at some point, the web got so bad, it would, and I, I use the web a lot. I had to do, I think with Chrome, like the one usually like Ublock, Origin, or, or something on those lines, which now is like deprecated because Google updated Chrome, I'm sure for very valid reasons, just happened to kill the best ad blocker. And so, like, for a day, I didn't have an ad blocker, and it was horrific.

• 10:55Andrew Sharp?

  People have been living like this.

• 10:57Ben Thompson?

  Yeah. And, uh, and I just needed to tell my audience who's been here a long time, I'm now entitled. I'm sorry I called you that. Yeah, it was, I really, I just need to come clean. It's, it's, uh,

• 11:09Andrew Sharp?

  Comes down from the mountaintop, hat in hand, signing up for an ad blocker.

• 11:14Ben Thompson?

  Uh, it, it's, it's necessary, and I'm a bad person, but you know what?

• 11:18Andrew Sharp?

  I hate to see it.

• 11:18Ben Thompson?

  We do what you gotta do. I know.

• 11:20Andrew Sharp?

  Well, it's bad out there, you know?

• 11:22Ben Thompson?

  It is rough.

• 11:22Andrew Sharp?

  You need an ad blocker.

• 11:23Ben Thompson?

  It's so rough.

• 11:24Andrew Sharp?

  All right. Well, to keep it moving, one more question on deep research. Mason says, on Sharp Tech a few weeks ago, Andrew gave an example from when he was a young lawyer, and a partner asked him to put together a memo of legal research. It took Andrew about six hours to do the research and write the memo. Now, with deep research from OpenAI, Andrew said it would take about 20 minutes. The concern highlighted by Andrew was the potential displacement of junior lawyers, consultants, and other white collar type positions. I myself work in equity research for a large bank. I would characterize my job as similarly at risk with new AI tools like deep research. On the other hand, I was recently part of a discussion with a much older,

• 12:07Andrew Sharp?

  seasoned equity research analysis, who said in jest, what do associates even do these days? Back in the eighties and nineties, when I was coming up in the business, I would work 15-hour days compiling spreadsheets and charts by hand. Well, 30 to 40 years later, the equity research profession still exists and likely employs even

• 12:29Andrew Sharp?

  More people than it did back then. So what gives? I'm not spending 15 hours a day making charts and compiling data because that takes me minutes using Microsoft Excel and other tools. It's not that our jobs were rendered irrelevant because of better technology. Rather, the nature of the work changed. Research, analysis and associates took the time freed up from not having to hand calculate spreadsheets and instead do other more value-added research. What do you guys think? My thesis is that this time isn't necessarily different. Game-changing technological breakthroughs happen in every generation and I don't think AI will lead to mass unemployment, but rather a redistribution of knowledge workers' time

• 13:12Andrew Sharp?

  and attention to more value-added tasks and jobs. So I wanted to include this because we got a few variations of this response to the Deep Research Podcast earlier this year. And it's a refrain that emerges pretty consistently in conversations around AI and its impact on the economy. So what do you think of that line of reasoning, Ben? 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 sharp tech.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.

• 13:57Andrew Sharp?

  And if you've got feedback, please email us at email at sharp tech.fm.