E115: The AI Search Wars: Google vs. Microsoft, Nordstream report, State of the Union

You're talking about the military-industrial complex is going to benefit massively from this. The longer this drags out, the more the conflict in Taiwan heats up, the more we're going to invest in our military.

I think there are a lot of interests who benefit from war and I think the foreign policy establishment is funded by those interests and it's kind of wired for war

With every single one of them, it was all about like my orientation for getting bigger, going deeper, going harder, going stronger, making this thing bigger.

And so, of course, these generals have to push for war because as long as they're girding for war, they're guaranteed to have for them a very lucrative job once they leave the military.

A recent estimate on running the GPT-3 model for ChatGPT is that each result takes about 30 cents of compute. So it's about an order of magnitude higher cost to run that search result than it is to do it through a traditional search query.

So that 10 billion dollars should do enough to grind it down between software optimization, data optimization, chip optimization and cloud optimization.

The same output today will cost one one tenth as long as you ride the energy and compute curve for the next few years.

Google should go and they should cannibalize their own business before it is cannibalized for them.

It might move the needle a bit, but I don't think it really changes the equation for them.

So if you're going to spend 21 percent of your revenue on tack, you should be willing to spend 30 to 40 percent to maintain the 93 percent market share.

And I think the longer this goes on, the more dangerous it is.

I don't think that there's much of an incentive or a motivation to back down, because this conflict creates a significant amount of debt owed back to the US.

This is something that we've said before, which is that ChatGPT is an incredibly important innovation, but it's an element of a platform who will get quickly commoditized because everybody will compete over time.

The good news is that the Google monopoly has finally been cracked. The bad news is that it's Microsoft and even bigger monopoly. That's the one that's done it. But it just shows how vulnerable all these big tech companies are.

So it's certainly going to be a total game changer for a subset of search queries, but to make it economically work for these businesses, whether it's Bing or Google or others, there's a lot of work still to be done.

And so Microsoft effectively for 10 billion, bought almost 50% of a tool and now will make that tool as pervasive as possible so that consumer expectations are such that Google is forced to decay the quality of their business model in order to compete.

Now, I think when you search in AI, you're looking for a very different kind of answer. You're not looking for a list of 10 or 20 links. You're just looking for the answer.

This is your key insight. The fact is, if Google gives you an answer, you don't click on ads.

That you could see the number of content sites offering self-help advice and how to do this and how to do that, 95% of them go away because all of that work gets aggregated and synthesized and presented in a really simple, easy user interface that makes them completely oblivious.

The people who need to be compensated, J Cal, if they don't get what they want, they may just go away, but there'll be 10 times or a hundred times more people waiting at least to replace them.

And Microsoft CEO Satya Nadella, he is going ham. He looks great. He's fit. He's wearing a tight t-shirt. And he is saying he's going to make Google dance.

If you add it all up, what Satya said is true, which is even if all we do collectively as an industry is take 500 or 600 basis points of share away from Google, it doesn't create that much incremental cost for us, but it does create enormous headwinds and pressure for Google with respect to how they are valued and how they will have to get revalued.

And they no longer have that anymore. In fact, they may never have that again. So they're going to pay a very high price economically, maybe forever.

And we've discussed the benefits on this program of now we've shifted the European dependence on Russian gas to a dependence on American gas.

The ability to run this at scale is going to happen because we're getting better and better at creating silicon that specializes in doing things in a massively parallelized way and the cost of energy at the same time is getting cheaper and cheaper along with it.

this is the best thing that could happen for all of the monopolists in technology, because Microsoft taking five or six hundred basis points of share is the best way to ensure that the FTC has zero credibility in going after Google or anybody else in tech.

I'm saying, when you look at transformer architecture today, every LLM that you write on the same corpus of underlying data for training will get to the same answer.

Any middleman business right now that doesn't have its own competitive mode can be competed against because now you can take all of those input costs that go into human capital.

I also don't think that you're not going to need to hire engineers because Copilot is going to do it for you. I think what Copilot will do is make your typical engineer more productive. They had some graphs around how Copilot reduced coding time by 50%.

And I'm going to go and make sure that all of these publishers have a new kind of agreement that they signed up for, which is I'll do my best to help you monetize, you do your best by being exclusive to our AI agents, so you deprive other models of your content on your pages, because that will get litigated, and there is no way, just like, again, if you say, do not crawl, you're not allowed to crawl if you're Google or Microsoft researching. This is going to happen for these agents. It's unrealistic to expect that it won't.

New technology waves that are this powerful don't get stymied by either chip costs or legal rights issues.

I will bet any amount against your premonition here, J Cal.

They train their AI on Getty Images with the watermarks on them, and they've been busted, and they are dead to rights now, and they are going to pay a hundred million dollars or more to Getty Images for stealing their content and allowing it to be republished in a commercial setting.