00:14:16 · Alex Hawkinson, Jordi Hays, John Coogan
[00:14:16] S2: The thing that Ben [00:14:17] S0: said that stood out That stood out to most, the most to me, and I'll probably butcher it a little bit. But he effectively was saying like, it's really hard for companies to change who they are. Yeah. When you look at Google's mission statement to organize information and make it universally accessible and useful, that is so deeply aligned with AI. Yep. It's like what does ChatGPT do? Like organizes information and makes it useful. Right? Agents like ChatGPT agent is making that information useful. [00:14:46] S1: Yep. [00:14:48] S0: And so it just feels like, again, like generative AI is, like, deeply aligned with the core mission. And so it's easy to see, you know, them continuing to win here. [00:14:56] S1: Yeah. I I I think the the problem is is, like, the like, disruption comes when you create a product that is not as good, but the financials are structurally different. So the idea of, like, if AI disrupts, like, a law firm, you look at this product or even, like, I don't know. What what what's the classic example of of of disruption that people go through? I don't know. But, like, this idea of [00:15:27] S0: like Yeah. The big thing was Innovator's Dilemma.
00:15:29 · John Coogan
[00:15:29] S1: Yeah. In Innovator's Dilemma, the example is like a new product comes to market that does something 90% as well. And and so it's like unacceptable to the people that are buying the current product. But then over time, it gets better and better and better until it replaces the current product. And so there is a world where if they had just changed the the Google search bar to just be like, this is just an LLM now, people would have been really, really disappointed with that shift, and they would have been like, I want to go back. And ripping that Band Aid off to the tune of, what, $300,000,000,000 a year in in search revenue would be really painful. So they had to take a more a more iterative, like, stepwise improvements, but it seems like they're doing well. And Ben Thompson is kind of echoing this. He says, Once again and however, I have to come to Google's defense. All available metrics suggest that the company is doing quite well. Indeed, I would go further. You can make the case that the company's biggest mistake is not going harder. And so, they flip infrastructure spending is through the roof, as we mentioned. So in in after the q four twenty twenty four earnings and their announcement that they were spending 75,000,000,000 on CapEx, then Google Google Cloud's revenue numbers disappointed, but this was because they didn't have enough GPUs and they were actually constrained. So they they missed on top line. Like, didn't bring in enough revenue, but their margins actually improved. And so what that means is that there was so much demand that they had pricing power. And they could say, no, we're not giving you any discounts because everyone wants these GPUs right now or the TPUs. They want our infrastructure. So we don't need to we don't need to sell them at a discount. And so their margins were really good and what that revealed was that they were they were capacity constrained and that justifies the bigger CapEx spend that they're going into right now.
00:17:22 · Jordi Hays, John Coogan
[00:17:22] S0: And Google is still the poly market which company has the best AI model end of twenty twenty five. So December 31, there's been one and a half million of volume and Google is still sitting comfortably at 46% chance of being at the top of LM Arena at the end of the year. [00:17:42] S1: Yeah. This is this is such a crazy supply constraints metric. So the Google CFO Anat Ashkenazi said on the earnings call, in cloud as I mentioned, the demand for our products is high as evidenced by the continued revenue growth and the cloud backlog, guess how big their cloud backlog is? Just the demand for for Google Cloud products that they can't fulfill because they haven't built the data centers. Like, but if they had more capacity, they think that they could deliver this. A $106,000,000,000. That's so much money. [00:18:13] S0: Great. Honestly It's so much businesses should try to put themselves in the position [00:18:18] S1: Yes. When they [00:18:18] S0: have the It's a little billion of demand that they can't. [00:18:22] S1: 106 106,000,000,000. [00:18:24] S0: We try to not give business advice because it's so Yeah. It's fraud. Well, it's just it's just like every business is different. Every every founder's different. Yeah. But in general Yeah. If you can develop a a a demand [00:18:36] S1: It's a good call for like a YC company. Like, you go on stage at demo day and you say like, yeah. We have LOIs and we have some demand backlog.
00:18:36 · John Coogan, Jordi Hays
[00:18:36] S1: It's a good call for like a YC company. Like, you go on stage at demo day and you say like, yeah. We have LOIs and we have some demand backlog. [00:18:42] S0: We have a $106 billion. Of demand that we're unable. There was actually a YC company yesterday Yeah. Or or two days ago that that was getting a little bit roasted because they were like, they launched a product and they were like, wow, today was insane. Our servers our servers went down immediately. Yeah. And you could see the user chart and they had like 250 users. And so people are like, wait, like your entire your product went down on 250 users. [00:19:10] S1: That's ridiculous. [00:19:11] S0: Anyways, but happy happy for their success. [00:19:14] S1: Yeah. Well, let me tell you about Figma. Think bigger build faster. Figma helps design and development teams build great products together. You can get started for free at figma.com. And so this so he keeps going into the CapEx. [00:19:25] S0: Wait. Before we do that, Figma make is generally avail Go to Today. Yeah. [00:19:30] S1: You can [00:19:31] S0: go to figma.com/make and just start building various products. Tyler has been using Figma Make to make a product that we'll be releasing very soon.
00:19:31 · Jordi Hays, John Coogan
[00:19:31] S0: go to figma.com/make and just start building various products. Tyler has been using Figma Make to make a product that we'll be releasing very soon. [00:19:41] S1: Very excited for that. We will we will announce that soon. So from the earnings call, given the strong demand for our cloud products and services, we now expect to invest 85,000,000,000 in CapEx from '25 2025, up from a previous estimate of 75,000,000,000, just a 10,000,000,000 incremental investment. Absolutely massive. Our updated outlook reflects additional investment in servers, the timing of delivery of servers, and an acceleration of the pace of data center construction primarily to meet cloud customer demand. The challenge Pichai cautioned in an answer to an analyst question is that it takes a while for these investments to come on board. So of course, the risk is like you overbuild, but there's certainly no evidence of that given the massive backlog. So the other interesting thing that Ben dips his toe into. So Ben Thompson, Mr. Stratechery, famously does not get caught up in trade deals and non CEO employee shifts. [00:20:42] S0: They're below his line. [00:20:43] S1: They are below his line. They're below his line. But he had to chime in on the CFO change that happened at Google. So he says, I'm always hesitant to delve too much. I like that he's throwing in a delve. You know it's not written by a It's bait. But he's baiting. Yeah. [00:20:58] S0: He's baiting for sure. He's like how dare you accuse. Yeah. He's like you can go back and look at how many times I've used
00:20:58 · Jordi Hays, John Coogan
[00:20:58] S0: He's baiting for sure. He's like how dare you accuse. Yeah. He's like you can go back and look at how many times I've used [00:21:04] S1: Dell for millions of I created Dell. I coined that word. [00:21:08] S0: There's a YC company called Dell [00:21:12] S1: Oh, yeah. [00:21:13] S0: Yeah. As well So that's doing [00:21:16] S1: he says, but it's interesting that the goo that the earnings call was Ruth Porat's last one as CFO. Porat earned a lot of plaudits for getting Google spending under control in the late twenty tens, but what seems clear in retrospect that is that 52,500,000,000.0 that Google spent on CapEx in 2024 was too little. And so he's kind of like, you know, noodling on this idea that maybe the CFO was too cautious going into an AI boom. [00:21:48] S0: You could lose your job [00:21:49] S1: over that. Called a maybe Ruth Porat was calling top signals like us. It looks terrible. Fortunately, we don't lose our job and we There's [00:21:57] S0: nothing wrong with calling top signals. [00:22:00] S1: There there there's something wrong [00:22:01] S0: with underinvesting. Water if you're calling specifically calling the top. Yes. Trying to identify top signals [00:22:07] S1: Yes. [00:22:08] S0: Is more of a meta game.