Alex Kantrowitz on Apple's subdued WWDC, on-device AI as a developer unlock, and Google's Sergey Brin comeback

a quick introduction on kind of how you frame yourself in the in the giant pool of big technologists and big technology folks? Definitely. I think it's fairly straightforward. I'm an independent journalist. So I used to be working within newsrooms in 2020. I quit BuzzFeed News, started my own thing.

I've been writing the newsletter for 5 years and doing big technology podcast for just underneath that. Amazing. Uh, and I mean we this is just we can go into a bunch of other stuff, but I want to talk like the the meta level, the inside baseball for a little bit.

Uh, do you see uh do you see kind of a a meaningful difference between being an analyst and being a a reporter, an investigative journalist, someone who gets scoops versus someone who provides op eds?

Do you uh do you think that's a meaningful distinction in kind of the modern independent journalism era or the going direct era or anything like that? We see ourselves not as breaking news here. We see ourselves more as like a reaction and opinion show and and talk show or anything like that.

But I'm interested to see how you think it's evolving and then how you see yourself in the ecosystem. Well, it's so interesting because the definitions, they sort of blur. And I think if you do this for long enough, you're going to realize that you're a little bit of each, right?

You're going to want to uh get interested in a subject and then just make a bunch of calls and, you know, maybe you'll find something out and now next thing you know, you're an investigative journalist or you write a piece of analysis, now you're an analyst.

Or I had a situation where I interviewed Blake Lemony because I was interested in this guy who said that Google's AI was sentient. And Blake Blake is late to the podcast interview. And I'm like, what's going on? And it turns out that while I was waiting for him, Google was firing. Fired. Yeah, I knew. Correct.

So I said mid- interview, "Hey Blake, this is news. Uh, can I like get a comment from Google and publish it? " And he goes, "Yeah, sure. Go for it. " So then I write to Google mid-in. We publish the story on big technology because I have a Substack.

Um, I wake up the next morning and it's a story in the Journal and Bloomberg and the New York Times and a bunch of other places. most of them said as first reported in big technology. So then I'm a reporter with scoops. So I think that you know I think the key to this stuff is are you president? Are you curious?

Are you going to try to serve your audience? I know you guys are doing this so you're probably you know in all these buckets as well. And I think it's one of the cool things about doing you know reporting or news or information on the internet is you get to play um you know in all these different buckets.

That's fascinating. Uh yeah I had I had not thought about it that way at all. Uh that's fascinating. Uh anyway, let's move on to the big news. I'd love kind of your reaction and breakdown from uh WWDC.

Uh we talked to a lot of folks about it and um I I mean obviously a lot of mixed reactions, but uh I came away kind of optimistic that we could be going into this era of like a new explosion in AI apps with leveraging ondevice inference.

And I was extremely optimistic about it, but uh there's a lot of other narratives going on. What was your takeaway? Yeah, it was really interesting. So, I was there. I was on the broadcast riser because I was doing some stuff with CNBC. Cool. And I have never seen a more different uh event one year to the next.

Last year, super enthusiastic, a little bit more open, big vision setting with Apple Intelligence. this year. I think they spent, this is a conversation I from a conversation I had with MG Seagler uh last week. They spent more time talking about the phone app than they did AI.

So, it was clear that the expectations have changed for Apple and they ran into a lot of difficulty building AI in the same way a lot of companies have run into difficulty building AI because u I think anyone who builds with this technology knows.

I'd be curious to hear from your listeners and viewers if this is the right uh perspective, but it's probabilistic. It doesn't act the way that you want to all the time. Uh if you're a company like Apple with a very high quality bar, it's not very easy to wrangle uh this technology.

This is why I think that they should buy Perplexity because they can just integrate an AI search engine into their products and have that control that Apple wants.

Um, so we definitely saw a a very big change last year uh to this year and the focus was really on this new design uh liquid glass that they've brought into iOS which is starting to roll out in like the developer release and with a bunch of fixes we'll all get access to it at some point soon.

Um but it was definitely you know a very subdued event for this company and you're it's interesting that that I'd actually be curious to hear why you think that this ondevice development uh is the thing that is going to lead to an explosion in AI apps.

The conventional wisdom from the people that I speak with about this is that you can already build fairly fast applications using the stuff that's available today and you can build much smarter applications with um these larger parameter models than this very small model that Apple is making available on device.

So I didn't really find that to be a needle mover but uh I'm curious to hear why you think it is and what your audience is telling you about it.

Yeah, I mean I think there's still like I think there there's this hangover from war stories where developers like created a cool experience, released it, and then incurred massive cost from it going viral because a lot of these generative AI features are naturally so exciting and novel that people just have this excitement to use them.

And that was leading to some meaningful costs that independent developers historically you could just spin up a simple mobile app or SAS tool and not be thinking about what your cloud bill was going to look like. Maybe you were even just had credits and it and it you weren't going to incur it at all.

It's the it's the kid without a credit card that is this super long tale of developers. They're not super mature.

They don't they're not venturebacked, but you get a ton of those random solo developers that don't even want to think about incurring costs and they want to build, you know, the the the next flashlight app, the the beer app or Flappy Bird.

These types of all these different apps that kind of start as little demos and then maybe they grow into something with proper infrastructure and and a backend.

But the more that they can leverage the free out of the box tools um the faster they can get going and yes eventually they'll raise money eventually they might switch to you know cloud models that are better and more expensive and they need to think about the business model there but being able to use AI in an app that lives in the app store uses app store viral distribution truly zero cost seems like it unlocks a different tier of entrepreneurship or or app development.

that that could be a really really interesting canvas to explore. It's kind of like when the when the when the original AI video came out, there was that one viral video Harry Potter Balenciaga and it's like that's something that that could have been done with a traditional CGI pipeline.

Like you could have gotten ILM or Pixar team to go and make that like it was doable with the previous technology. But when you lowered the cost from a million dollars to do a you know a 3D face scan of Dumbledore and and put him in Balenciaga or hire the actors and shoot it with cinema cameras.

When you lower that to just a couple creative prompts, like that human creativity part comes out and you get a viral video, Harry Potter, Balenciaga, right?

And and the same thing I think could potentially be on the verge of happening with viral apps as the as the the the the overhead and the cost to develop software drops with products like Cursor and GitHub Copilot and Windinsurf and Codeex and Devon and as that drops and then also as the ability to call AI inference on the device.

Uh we're already seeing it. There was a cool app that went um went out on X earlier today or yesterday. Uh somebody made the Tom Riddle uh the Tom Riddle iPad app. So you can you can write hello and it kind of dissolves into the UI and then and then a script writes back to you. Uh and that's all generative text.

And so it's just a simple fine-tuned prompt. It doesn't need to be, you know, oh imo gold medalist like amazing math like PhD level, you know, it's not leading benchmarks. It doesn't need to lead benchmarks. It just needs to be conversational and with an interesting UI.

And it's something that this developer was able to build pretty quickly.

And for like a young Harry Potter fan, that's going to be a magical experience for, you know, maybe a couple minutes, maybe an hour, maybe may maybe it doesn't turn into the next big thing, but you get a million of those in the app store and then one of them, you know, develops and develops and becomes something really really cool.

So that's why I've I've been very optimistic.

Let let me give the counterpoint which is that with the biggest models that we have and the such powerful models that we have we haven't yet seen a you know critical mass of hit apps uh that you would say oh if we could just bring the cost down we would get an explosion but you have opened my mind I I'm willing to to say that this is definitely something that I hadn't considered where you could have the sort of low lift fun apps that don't you know make the developer go broke that maybe were cost prohibitive to build beforehand that we might see.

So let's let's talk about this in a couple months and then we'll see we'll see what happened. Yeah. So I mean I I I do agree with you. Uh and uh the the example that I think would be worth digging into is do you remember that app Lensza? It was this magic avatar app.

You download the app and you take and you take and you take like 10 photos of yourself and then it can generate uh a like an AI image of you. It was kind of a precursor to the Studio Gibli moment. Yeah. and they were extremely good at monetization because they would be like, "Yeah, we're we're making the image.

Do you want it? Buy this $20 one inapp purchase. " They did very well. Uh it was a little bit of a flash in the pan. I think it went it went really big. And then they haven't shipped an update since December 20, 2021.

Yeah, it it didn't really go anywhere, but that felt like an important shelling point for uh for for generative AI imagery. And then we saw it again with Studio Gibli really taking over the internet. I feel like we haven't had that in text yet.

There hasn't been that like where's the Harry Potter Balenciaga for something that was just purely text generated. Um but uh but but I think that it might be a cost issue. It might be something that people just haven't had a chance to to to play with at low enough cost.

And I think that anytime you you reduce the cost like you know GPS, you drop the cost of that really really low and you get Uber. And I I I'm just still optimistic that that there's a there's a there is a binary difference in in 0001 cent and zero cents. Like zero is actually Yeah.

I'm smiling because I'm remembering this Lensa moment and there's been this like it was the start of people being like don't upload your face to AI because then they'll have your, you know, your biometric data.

And I remember in the middle of the Studio Ghibli thing, there was a tweet that came out like that where someone was like, you know, be careful about uploading your face to chat GPT and then someone took their Twitter avatar and jiblied it underneath course.

And I was like, all right, well, no good deed goes unpunished, I guess. It's so brutal cuz the company that did Lensa pivoted to something called Prisma, which was a photo editor with like cool artist. This is a It's a Russian company, I think.

It's cool artistic filters and they basically built the Gibli type experience and then I think they were actually Prisma before cuz I I think I've used that.

That's the name Prisma Labs is is the name of the company and uh and it was never quite there and then OpenAI just kind of leaprogged and I think that will be a dynamic that happens a ton.

I think that there will be uh kind of solo developers, kids that build a magical experience like the flashlight app and then yes, Apple will steamroll them, but that solo developer, that kid will probably make a ton of money with like a $2 inapp purchase just for upgrades or throw some ads in it or something, make some initial money.

But even more important, the experience of having like a hit app sets you up for, okay, the next goround, I'm ready to raise money. I'm ready to think about the the the the seven powers or the moes that I should build around my business.

Maybe I wind up going into B2B software or or infrastructure or something else, but but they've caught the itch of of entrepreneurship because they've had that taste of like I built I built a product that had an impact and that's something that uh I I love when those things get unlocked at earlier earlier stages.

It's a it's a very cool idea. I mean, I've had this idea to build this generative AI app where it's like a choose your own history where you can either play uh through these scenarios cuz you can do this.

You can like prompt Claude today and you can do it today uh where you could like be a historical character like let's say you wanted to be like Alexander Hamilton during the American Revolution and sort of like experience uh that as he did quote unquote right but doing it through a genai experience you can do that.

I think the problem has been that the models haven't been powerful enough for the thing that I want to build. But I I think that you guys are on to something like if this is a moment where Apple, you know, Apple might start with the smaller model. Let's see what happens.

Maybe you get the equivalent of that beer drinking app. Uh if that works out, then there's a lot of incentive for them to put much bigger models uh within the operating system. And then you could really unlock some very cool things.

And and it it does make sense that if you end up uh not going broke by building a Genai app that becomes popular, you might want to build another one. Yeah, I actually had this exact experience.

The historical character on uh character AI, the uh the the the the app where you can chat to a fine-tuned LLM on a particular person. Uh I picked uh Stalin. And what does that say about you? No, I'm kidding. Well, I I'll tell you.

So, I was like, I want to go and argue with Stalin about communism, and I want him to play the steelman, the literal steelman in his case. Uh, and and and I and I want to and I want to have a real hardcore debate about what Stalin did, my perception of him.

I I feel like I have a lot of good ammunition to to fight back against his ideology. Uh, but let's go have this debate.

And so I started debating with this character AI, the Stalin, but it had been so RLHFD and so fine-tuned on like American values that Stalin would come to me with something like, yes, like uh you know, I did a lot of bad things and I'm like, sorry about it. I was like, I don't think Stalin would talk like that to me.

I think Stalin would be very proud of what he did and and not admit fault. And I was like, "Okay, uh, character, you clearly didn't fine-tune this enough because it's still it's still rejecting, uh, you know, the the the real the the real communism.

Real communism in in characterized with it and realized that, yeah, you know, maybe I did get a few things wrong. That's not the stalin I wanted to debate.

" The genesis of my idea was just dumping Wikipedia pages into uh I think it was Claude and basically playing these scenarios as like uh maybe somebody who's not like in the power position in history. So I always find it interesting.

So my wife is European so we've like visited a lot of like um historical sites in Europe and I've always thought like well what happens if you're not like the lord or the lady that they feature or the king that they feature in these museums?

like what if you're just like somebody on the line and what would your life be like? So for me, cuz I'm a fun guy, I dump Wikipedia pages into these bots and say, "Well, what would that be like? " And then you can role play through it.

And I think that um if you want to if you find a way to like prompt these bots to give you like the um the non-sanitized version, it can be really interesting and and I don't know, fun. I don't know if fun is the right way uh to put it, but uh worth worth going through these scenarios and playing the games. Yeah. Yeah.

I mean, totally. it's a great idea. Somebody will probably build it. Uh but even right now, it's like even even if they would get you to pay, that's an extra hurdle that causes conversion rates and there's a million different things that that that kind of downstream from that.

Even if it's just writing extra code to make sure that you're processing a payment in order to pay for your cloud bill and your cloud bill. Uh so I'm excited to see what happens. I I don't know. We we could see how it plays out. Uh we some other Yeah. Can you give us an update on the app store?

There's just been a lot of back and forth between uh it's Tim Sweeney, right, over at Epic and Apple uh chirping at each other. Uh what what is the state of the app store? Are alternative, you know, payment rails getting, you know, real adoption yet? Can you give us kind of a broad overview?

Well, we're super early and there might be some court cases to still work through uh in terms of this alternative payment on the app store.

But basically what Tim Sweeney and Epic Games are trying to push through is Apple if you want to buy stuff within apps you have to use Apple's inapp payments and when you use Apple's inapp payments Apple gets a cut a sizable cut uh of the money that you spend and that is very important for their services business.

And just to take a step back, so basically Epic is trying to say uh that that should be illegal uh whatever it is, monopolistic or anti-competitive, and we want to be able to uh process the payments on our own or via the web and not pay Apple the 30% or whatever it is from every dollar that goes through our services.

Um it is so I was going to take a step back because it's just happening in this very interesting moment. So, if you think about Apple's financial position right now, um almost everything is either flat or shrinking. Uh the iPhone revenue 2024 versus 2023 flat.

Maybe it grew a tiny percent, but like you look in there, uh 10K or whatever it is, and you see the the uh you know, the growth or the loss is just the dash flat iPhone revenue. And by the way, that's happening as iPhone sales decline.

And the only reason revenue is flat is because they're getting a higher average selling price per iPhone. So Apple is in sales decline with the iPhone right now.

And that's happening as people spend more time with their phones and as people uh in China are less interested in buying iPhones because Huawei has become this object of national pride and it's almost as good. So they're starting to buy Huawei.

And by the way, they're not locked into the Apple ecosystem because they use WeChat. Mhm. So the company is is seeing flat sales revenue on the iPhone. They're seeing uh declines in things like wearable and the iPad. I think MacBook grew about 2% last year.

That's the uh only like traditional Apple business category that grew. Uh but there is the services category uh that grew 13% last year. And what does that include? It includes a number of things under threat.

Uh that includes those inapp payments that you just brought up and it also includes this 20 plus billion dollar payment a year that Apple gets from Google which is also under threat because there's this federal case going on in DC that Google has already lost. Whoa, whoa, let me stop you. It also includes Apple TV.

Let's talk about F1. Let's talk about some of the movies they're making. Let's talk about all the stuff that they highlight in the I'm not here to be super negative. Not here to be super negative, but let me be realistic.

If that Google payment in 2024 went away and like let's say that was 20 billion it was probably more but let's say it went away in 2020 24 any any thoughts about what happened? All right Apple as a as a company shrinks uh services the one the one uh division growing double digits growing 13% actually contracts.

Now it's a one-time hit. So you would go down and then you would grow from there. But the reason why Apple is in the $3 trillion range is because it has this services uh division which investors will value as uh more of like a software company.

So there you could get into like the the 30 or the 35x multiples versus a hardware company which is the other the other thing you didn't mention is margin iMessage has also opened up pretty dramatically too where you have red red receipts you know between you guys have seen the Android uh folks typing and been like what's that or seen the red receipts like why is the green bubble doing the typing thing starting to happen so you're right I I think gold bubbles are coming the open AI phone is coming that he's going to pick a different Trump phone.

Yeah, that Trump phones will have go bubbles for sure. No doubt about that. The go bubbles are coming. Uh talk to us about uh about Google. Uh you interviewed Sergey Brin recently.

Um uh what what what was your read on his involvement because I feel like there's a press cycle every few months about like he's coming back. He's he's he's he's back in founder mode. He's deeper than ever. he's not fully stepping into the CEO seat, but they're clearly uh stepping up to the AI moment.

At the same time, they're dropping a ton of product updates. Uh Google IO was a massive event with like a ton of different features and then they're also at the paro frontier of so many AI models on ter in terms of performance and cost and yet a lot of stuff's not breaking through. What's your read on Google right now?

I think they are they knew they were behind on AI.

I mean basically they had they developed this is going to be old history for a lot of people but for those who don't know they developed this transformer model within Google uh they were very safety concerned we we talked about Blake Leo a little bit ago um he was using a version of their LLM chatbot called Lambda that he believed was a person.

So they had this advanced technology working within the company but OpenAI of course was first to market with something that exploded with chat GPT.

So once I think Sundar Pachai realized what was going on, he said, "Okay, we're going to turn all of our focus toward uh you know this AI moment building large language models and he was lucky or fortunate or he planned uh whatever you want to say.

I mean the company has Demisabis the head of DeepMind in there and he consolidated these two divisions, DeepMind and Google Brain, which had traditionally kind of struggled over resources and realized they needed to coordinate.

So, Demis takes over both of those divisions and now you see that Google is shipping like crazy uh with AI and they have some great I mean they obviously previewed some very cool things at Google IO some great features working already. I mean notebook LM is really interesting.

I think Gemini could work a little better in places like Gmail, but we'll probably see it like being able to search your email is a pretty big deal.

uh and and do like things like I sometimes will say like pull out the emails um from all of Big Technologies paid subscribers recently to um so I can invite them you know to our to our private discord and Gemini gets that right about 50% of the time. So I think it's clear that they're expect Yeah.

What do you expect to see out of the Google Open AAI relationship? Right now we're seeing tension between Microsoft and OpenAI, their partners. They they maybe both are unhappy with with how the deal is worked out.

I think all this stuff is evolving, but in my view over the next 5 to 10 years, I just see this massive war and battle for the consumer between OpenAI and Google. Is that how you're looking at it as well? And do you expect to see more attention there? It probably will happen.

So just to I'm going to answer that question. I'll just finish up what I was saying that Google's in this moment of reinvention. So they're going to move from search to AI. And also I think Sergey is really involved on the technical side of things to answer that part.

Uh so the partnership that Google and and OpenAI did is is for basically um server space. Uh I think OpenAI is really running out of GPUs. Uh, and of course this they have this hosting deal with Microsoft uh, that's kind of like up in the air. We're not quite sure where we're going to go on that front.

And you see Sam Alman every couple days saying, "All right, we're out of GPUs. Stop burning our servers. " He's joking, but it's a real issue for the company. So, of course, you look to Google, which has the TPUs uh, to sort of offload some of that um, some of that sort of compute need.

Now, we don't see OpenAI being made, unless I'm wrong here, we don't see Open AI as models being made available within Google Cloud. That's the other side of the equation. I spoke with Google Cloud CEO Thomas Curry in a couple of months ago and he said we'd welcome OpenAI on the platform.

So, that's another step I think that we should uh anticipate. And then on the consumer side, I mean again like and you guys know this better than anyone else, like Silicon Valley is filled with frenemies.

Um, and we have another situation here where you're probably going to have Google, you'll have OpenAI, we already have it, OpenAI relying on Google infrastructure, but competing with them on, let's say, the assistant front or the chatbot front.

And I think that's one of the cool things about watching tech and for those who are in tech being in tech is there is almost uh you know a reliance on one another's innovations and products but also a recognition that everyone is working to build the best products and may the best product wins win and you know one product may be the king one day and then it could get leaprogged the next and build on top of each other.

So I do see this being a heated battle um and we're going to see a lot more drama. I anticipate from all these companies coming up uh pretty soon. Uh but it is notable that now OpenAI and Google have opened up the line of communications line of communication and maybe more is coming. Last question.

No, I'm excited to I'm excited to see all this play out. My last question when when can we place OpenAI in the category of big tech? Are they there yet? Does 300 mill $300 billion valuation does that do it? What what's your framework?

Uh it's so interesting because yesterday I was seeing um people on X talk about like whatever happened to Fang, right? It was Facebook, Amazon, Netflix, uh Apple, and Google, and people are calling it Mango now. You guys saw that like Meta Amazon jokes. I just like Mag 7. Mag 7 works.

But we're hoping uh we're hoping that, you know, YC can make enough startups so we get the Mag 70. We see you like to expand it. Yeah. So I I would say look I'm not I'm not a mango head like the Ow and Mango is open AI. I'm not a Mango head yet but it certainly seems like they're on the trajectory.

So I'm I'm uh I'll put my order in and and we'll wait on it for a little bit. Now how much have you dug into the innovators dilemma with regard to Google? Uh there's this whole story about like Sundar Pachai hasn't read the book and does it matter and Ben Thompson says well it doesn't matter because it's structural.

But the thing that I keep replaying is like is like what if Google had actually just released that Blake Lemony chatbot? Like what if they were the first mover in chat bots before chat GPT?

It feels it feels like that chat GPT moment would have been theirs and then they could have compounded off off of that and it would have been fine, but maybe they'd be disrupting themselves. Do you have any thoughts on on that?

I mean it gives more credit to Chris Pike's thesis around top down versus bottoms up innovation but anyways Alex. Yeah. So I mean I wrote this book that came out in April 2020. Don't recommend releasing books at the first wave of a pandemic. Um but it is sort of what launched big technology for me.

Uh and it's called always day one. And the idea is comes from Bezos.

uh that the reason why the big tech companies have been able to stay competitive and dominant for longer than the average right the average company on the S&P 500 last 15 years uh today as opposed to 67 years last century and the reason why these companies have been able to uh sustain their dominance is because they reinvent and they don't really uh care too much about their legacy business they're able to say what is going to take me into the next generation uh and sometimes they're late I I mean Microsoft is a perfect example.

They held on to Windows forever. They had the lost decade and then Satya who ran the server and tools business which was all about onrem servers said you know what let's do this cloud thing and now they're where they are today.

Um Google had maybe a lost couple years but I think they've definitely gotten with the program. Like I mentioned, they're in reinvention territory right now. And uh I think you could really tell the difference between what they were doing and what Apple was doing at uh WWDC, although some might disagree.

Um but they're all in on on AI right now. And I think that um you don't have to be first, you have to be all in and you have to nail it. And uh the book the the book isn't yet written on where Google ends up after this because it does threaten search.

Uh but I think they have as good a chance of as any given the like we talked about the compute, the talent and the data uh to be one of the leaders if not the leader in generative AI. Well, hopefully you're the one to write the book. Um that would be cool. Thank you so much for stopping by. Yeah. Uh we'd love you guys.

This is fantastic conversation. Definitely great. Fan of your show. Thank you for having me on. Have a great rest of your day. Looking forward to the next talk soon. Cheers. Bye. Take care, guys. Uh next up we have Saquon Barkley from technology investor. uh coming in from the the Philadelphia Eagles.

Uh let's bring him in the studio and we will talk to him about everything going on in his world. Welcome to the show. Ramp day. It is ramp day. Wouldn't be ramp day without Squan. Hold on. We are going to do one ad first. Uh if you're looking for a luxury watch, go to getbzzle. com.

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