Invest Like the Best with Patrick O'Shaughnessy
00:45:05 · Ben Thompson
[00:45:05] S2: The answer is always Amazon. The reason Amazon is so compelling is the extent to which they build for them. They are their first best customer. They provide the scale to get basically anything off the ground, which they then sell to other people. AWS is the most obvious example. AWS, contrary to sort of popular thought, was not spare Amazon capacity. Actually, it took a long time to get amazon.com onto AWS. What it drove was the understanding that we can't be having so many meetings. Like we need to have just compute that you can plug in purely API surface. You don't need to talk to anyone. It's just there. And oh, by the way, if we do that for our internal retail teams, we could do that for anyone. Turns out the retail is so big. We have to start with everyone else. AWS actually started serving external customers before it served internal ones, but now it serves them all. You got other products like say the logistics, where it was the opposite. Right now we're using external providers for logistics, UPS and FedEx and USPS. We need to build this up ourselves. And now they built out themselves. They're offering it to third parties. Other people can use their delivery services. You see this in market after market. They're talking about some of their AI products or their chip products. What's the beauty of the Graviton or the Trainium, particularly the early versions? The early versions were terrible. But if you're on Amazon and you're using some their managed services, like, say, the Redshift database service, they don't tell you what the processor is underneath that. You're just buying a managed service. So they can put all their crappy processors underneath the services they're selling, and that gives them the volume and the capacity to iterate them and get better. And they get to the point where they can actually sell them externally because they were the first best customer for Graviton. Graviton got better. Because they were the first best customer for Tranium. Trainium got better. And now Trainium is obviously running Anthropic and AI products. We'll see if any of them take off. They have call center software. Their call center or their customer experience is going through AI. By the way, it's pretty good.
00:47:02 · Patrick O'Shaughnessy, Ben Thompson
[00:47:02] S0: I haven't tried it. [00:47:03] S2: Moving back to America, I've been buying lots of stuff. Every summer I'd buy lots of stuff in a very brief amount of time. Sometime in like the last year or so, can go on and you're clearly talking to a chatbot, but the chatbot does a great job and it actually does take care of the problem. So you could see that actually starting to work in that regard. But they're building up these AI services for their own business that they're going to make broadly available. And some of them will work. Some of them won't. It's such an elegant approach given they have so many investments in the real world, their core business feels so impervious to AI for the model version of AI. It will benefit from AI, but their moat feels deeper than anyone as far as their core business and their ability to just sort of generate new business lines organically is very compelling. [00:47:50] S0: What about Apple? They've set this whole thing out, it seems.
00:47:53 · Ben Thompson
[00:47:53] S2: It feels like it might be a situation of better be lucky than good to a certain extent. Apple has their whole ecosystem. At the end of the day, they do own access to customers. So they can get suppliers. This is the classic aerator play. If you own access to customers, suppliers come to you, not the other way around it. So they can get suppliers for their AI as needed. And by the way, to the extent it's true that people don't want to be productive, they just want a sort of a chatbot. Not only can they serve them a chatbot and finally getting a Siri that works, but you can see a future where this absolutely can work on device. And they actually don't even need to pay for inference costs either because they're using the customer's electricity. I don't think we're quite there. There's a reason they're using Google Cloud and Nvidia chips, but you can certainly imagine a future where that's the case. And they're in physical goods. Actually making phones is hard. Having retail, having distribution for physical goods, they're more insulated. The smartphone is so perfect. It's small to fit in your pocket. It's big enough to watch basically anything on it. You can run your whole life on it. All your entertainment is there. When we talk about customers who wanna be entertained, the TV is now an accessory. It's all on your phone. I don't see anyone taking over the phone. The question is, is the phone always gonna be the center? Or is there a bit where, particularly in the home, is where open AI's efforts here are very interesting, you want sort of an ambient AI, where you just talk to the AI and it tells you what you need. Apple is the best position to provide that, but can they provide that without having leading edge models? Can they provide that if they're so phone centric? Or is it like a Microsoft situation? Microsoft didn't miss mobile. They were very early to mobile. The problem is their mobile was a small PC. They assumed the PC would always be the center and their phones were gonna be something that was off that Apple realized, no, we need to reset. The phone is not gonna be accessory to the Mac. The phone is gonna be the phone. The iPod helped them realize that and going with Windows and all that. But will they fall into a Microsoft like trap? Assuming the phone's so good, it's always gonna be the center and then let's figure out around it.
00:50:10 · Ben Thompson
Or is this finally the time when actually ambient, the cloud, just in general, AI being everywhere, It can manifest through your phone. It can manifest through a device, can manifest on your computer is actually better and is actually disruptive to them. I think it's possible. I also think it's totally valid for Apple to double down on what they do. The other thing about the AI stuff is on what basis should we expect Apple to be good at this? At the most crude level, AI is this probabilistic endeavor. Apple is the king of deterministic products. A physical product, you ship that iPhone, you ship it once, and it's gotta be good. If it's bad, it costs you billions and billions and billions of dollars. Apple's never had an iPhone recall. It's amazing. That care and decision making and diligence and fierceness in terms of your supply chain and making hard decisions is very, very different than everything that goes into like making great AI. I generally prefer companies to do what they're good at. So from my perspective, I'm fine with Apple not doing AI. I want them to keep making great devices.
00:51:15 · Patrick O'Shaughnessy
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00:52:35 · Ben Thompson
[00:52:35] S2: OpenAI and Anthropic obviously are the riskiest, but also have the biggest upside. Never discount, number one, the power of belief. They think they're creating God. The most impactful things in history have usually been fueled by religion. The two religious organizations in Silicon Valley are open as kinda like mainline. They go to church every Sunday. Uh-huh. This are like evangelicals. That's anthropic. They're all in. It is core to their belief. That goes a long way. The fact you need to make a business work for you to survive goes a very long way. Google just needs search to not die too quickly. Meta has the huge advertising business In a world where Meta was run by anyone other than Mark Zuckerberg, they would not be on the weeding edge. That is one of the purest manifestations of founder energy for better or for worse. Their business is so amazing. You see them just easily sort of doubling down on that. Google, there's a bit where they had Google Cloud, they have TPUs. They've been doing research in this. It makes sense why they're pursuing this. Meta being like, actually, we're gonna hire a completely new team or we're gonna start from scratch. This all again is pretty insane. Credit to Mark Zuckerberg in that regard. Again, you could decide whether that's a good idea or not. And then SpaceX AI data centers in space, the theory is there. Do they have to own their own model though to do that? They'd get better margins if they do. Then again, if we actually run out whether through political opposition or power or whatever it might be. If we run out of data centers on earth, they can run whatever model they want. As we're seeing with selling their capacity to Anthropic right now. They're all pretty interesting. Probably the case for Space X AI is probably the weakest because the data center and space play is so highly differentiated. If that plays out, I'm not sure to what extent they need to even have their own model. So why are you wasting billions and billions of dollars in the meantime? That's a fair question. From a tactical perspective, I love the cursor acquisition. That makes so much sense for both companies. And so I've been intrigued to see what they do. Meta is probably the most interesting.