Tricky Bits with Rob and PJ and Dave
Rob Wyatt and PJ McNerney and Dave Lewanda discuss the latest and greatest news in the tech world and to figure out where things have been, where they are, and hopefully where they are going.
Tricky Bits with Rob and PJ and Dave
1.16.2024 - Tech Layoffs 2024 Opening Round
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Barely in 2024, the week of January 8th saw layoffs across multiple tech companies: Google, Twitch, Discord, and Unity. To be sure...this is foreboding sign for 2024.
How did we get here? What happened from high flying, highly profitable tech companies that once touted that "they would be different" to becoming just like any other business?
In this episode, Rob and PJ discuss how any why why got here, what effects we think it is going to have on the tech industry, and, unfortunately, some of the areas where we think the layoffs are still yet to come.
Buckle up, folks...it is going to be a ride...
Opening
Ierengaym. com ierengaym. com
Track 1All right, so for this episode of Tricky Bits with Rob and pj, we're gonna talk about at least the first round of layoffs in 2024. How did we get here and where we think this is going? Spoiler alert, we don't think the layoff train has ended by any stretch. We're barely outta the first couple of weeks of January. These are just the first hits. But before we get into that. Let us talk a little bit about the recent set of layoffs. So on the week of January 8th, we had layoffs announced from at least four major tech companies. We had Unity, we had Twitch, we had Google, and we had Discord. All announced layoffs from, in the case of Google, a maybe about a thousand, a few thousand people, which for them is maybe less than half of percent of the company to Twitch, which lost 35% of its people. And this rings very close to home because in the latter case, I was one of those 35% that was let go. Truth be told. I'm not surprised that any of this stuff is happening, and I think it's gonna be very important for us to explore why these layoffs actually happened from a business perspective. Rob, do you have a hot take you want to add in here at this point before I go off on probably a very long rant.
rob_2_01-16-2024_094300I'm interested to hear you around. Uh, but I do think these layoffs will continue and I do think it. It's gonna massively affect the tech industry as a whole, but I think it will only affect big tech. I think there's still lots of startups and doing good work. There's lots of positions at startups and I wonder how it will affect the people who just bounce around big tech. They're tech people, but they go from company to F company. And are those people capable of working in a small startup in a completely different en environment? So I think the layoffs will have huge effects on big tech and I think they are gonna continue 'cause a lot of these businesses are not sustainable and hopefully that opens the door for some good competition and some startups can get their foot in the door and start to do better work. That's how we got here to start with. Why do we have to assume the tech companies we have now are the ones we always have.
Track 1I, I think it's a really good point. We have seen a multitude of tech companies, which were, once the hot items on the scene either become completely eliminated or become transformed to
Consumer Companies - Case Study: Google and Facebook
Track 1be shadows of their former selves. Let's talk about the consumer crop of companies, and I think it's important historically to understand how we got here. I'm gonna pick on Google. I Google it's search engine page rank fundamentally comes out of academia. This was in many ways the PhD thesis that Larry and Sergei never did. They instead made Accomp out of it. And as a search engine, Google was amazing. And you think about the late nineties, the, we had Alta Vista, we had AskJeeves, we had Yahoo. All these were pretty terrible. Google comes on the scene and is really a reinvigoration that makes the ability to operate on the internet actually useful. I mean, they, they do what they say. The one problem though, and this is thematically gonna be very important, I believe, to understand the last close to 30 years of tech on the internet was they didn't have any kind of profitability story. In fact, I think they offered to sell themselves to. One of the big engines, I can't remember if it was Yahoo, whomever, Alta Vista for some poultry sum. When you look at it, it was like, you know, like a billion dollars maybe. It was, it was really something minimal, and they said no. So instead, and, and I gave a lot of credit to Eric Schmidt for this. They were like, okay, we have to figure out some way of actually producing income. Well, what if we tried connecting search to ads? And that turned out to be wildly successful. You've got the Double Click Act acquisition that happens later for the marketplace. We have a, you know, lots of stuff that can be said about kind of the, the things that happened along the way. But the fact of the matter is there was this very serendipitous moment where they created what I call the infinite money pipe where search combined with ads ended up creating this monster of a moneymaking machine. They were printing money growing 20% year over year for something like two decades.
rob_2_01-16-2024_094300Is this where the don't be evil fell apart Because once you can print money, it's easy to be evil.
Track 1no, believe it or not, this is actually is where I actually believe that they, because they were making so much money, they believed that they could like say, don't be evil. I actually, I actually, I, I will, I will give them the benefit of the doubt to say that the, the don't be evil ethos was born out of this mixture of, Hey, we created this great academic idea. We were able to connect it to the marketplace and bring a lot of goodness to oth to people. We can do this for anything. And. The change to don't be evil happens actually much later. I feel like it's in like the 20 13, 14, 15 time period. It's actually when I was at Google where that mission statement gets changed.
rob_2_01-16-2024_094300Okay, so before we dive into that, I just looked up when, uh, Yahoo had the chance to buy Google. It was 1998, Yahoo had the chance to acquire the then startup for $1 million.
Track 1Oh 1 million. I was off by a, by, uh, several orders of
rob_2_01-16-2024_094300Yeah. And then Yahoo decided against it because, uh, they just basically dismissed the quality and potential of the Google search engine. In 2002, Google offered itself to Yahoo for 5 billion, and again, it was turned down. So that's how we ended up with Google. If any of those two acquisitions that have happened. I don't think we'd have a Google as we have today, and I don't think Yahoo would've done anything with it. Yahoo would've basically been the same. So this story wouldn't happen if any of those two things that've happened, we'd have a totally different tech scene.
Track 1I'll pause on Google for a second and say that there's a similar story that happens with Facebook, where Facebook creates, you know, a social network worth a damn that starts to connect people and the way they make money and the, the way they become a money printing machine is also with ads. And the reason why I wanted to highlight these two upfront is I believe it sets the tone for so much of the tech industry, you know, outside of hardware. and outside of things like logistics, so hardware, we can talk about Apple Logistics, we could talk about Amazon, but I think the, the pattern that got created,, I've got this great idea. I'm gonna get funded by a VC and let me go do this, but it's not profitable. There's two sides to this equation that I think are important. One side of the equation is yes, the startups did not create a story around profitability. The second side of the equation is the VCs didn't really care. What they were instructing folks to do was grow as fast as possible. Go figure out how to acquire as many customers as possible, will figure out profitability later. And. I think a lot of these patterns got ossified in terms of seeing how successful Google was, how successful Facebook was. And in many ways the exit strategies for these things really came down to, you know, three main paths. One, the startup failed, in which case it was a mark of honor and you just went on to do your next startup. The second was you would get acquired by some larger company, which was great for the VCs 'cause they basically had to cash out their chips. And that acquisition might be because you wanted the talent or you wanted the customers. And so the idea was just grow, just grow as much as possible. The third, which was, you know, the, the, the special snowflake that happened only once in a blue moon that hey, you'll become the next Google, the next Facebook. Obviously. That is, is the lottery ticket that is few and far between for so many of these companies,
rob_2_01-16-2024_094300I agree So the ones that did make it, the Googles and the Facebooks, they now have these money printing machines internally. This is where a lot of the side projects came from of like, okay, we can now do this. We can now investigate all these different things. And Facebook had more recently the whole Metaverse fiasco and Google's had many of these things. It's had its fingers in pretty much every tech pie that exists to the point where there's a whole Google graveyard and people laugh about it. But I think it also hurts Google that the fact that today enterprises and individuals even aren't willing to put the chips in Google's game. There's no guarantee that Google's not gonna turn around and go, this product's not making money. It's not search. We're gonna get rid of it. And I think that leads Google in a tricky place. And I also think that feeds into the layoffs.
Track 1Oh, it's a hundred percent. We're, we're, uh, yes, yes. You've, you're on completely the right track here, which is, and, uh, once again, I'm gonna make a claim that I think this was done for altruistic reasons. I, I have cynical takes that I, maybe for another time, but I think Larry and Sergei thought, oh, we've got all of this money. Let's start crafting useful products for people. And, you know, we can, we, we've got so much money, we can do it for free. Like, if you look at Google Photos, when it was just the photos backup, you know, it was some minuscule amount in their mind of how much it would cost versus the benefit would bring. But this is really where things start to. Take a turn in my mind and it, it goes back as at least as far as 10 years, probably longer, uh, actually, yeah, definitely longer, where you start creating all these cost centers. And these cost centers obviously are not actually providing you any like positive revenue flow. They, they truly are just like you have ads, they're providing so much money, and any one of these is less than a percentage point of your sort of gross revenue per year. But the problem is like these things start to really pile up. And there is this, again, this combination of kind of this maybe misguided altruism combined with a belief that, oh, well if we, if we do this kind of like academic approach the same way we did it for search ads, we'll be able to craft like next incredibly like successful business. and I think there was very little appreciation for how fortuitous their initial success was. And, and again, I'm picking on Google a lot here, I think it can be applied to a lot of other companies. And over time, like all of those side projects create a cost center that then starts becoming in aggregate, very significant to the company. So you're paying a lot for engineers, you're in an arms race at this point in time because it's not just Google. It's Google and Facebook. It's Adobe, it's Microsoft, it's all these players that are looking for what is a scarce set of resources, which is really the engineering talent. This was true for many decades.
rob_2_01-16-2024_094300and I think that's what grows those cost centers. I mean, you had Google Maps to start with, for example, and then other people it could scroll and it was way better than MapQuest at the time. And so people went there, but they had to, to maintain that. So they started doing things like street view, which we acquired somebody to drive on every street in the United States and then around the world and gather all that data, an incredible amount of data from those multi-view cameras that are on the cars. And then process it, filter it, deal with the legal requests, everything else that has to happen, lots of AI involved in this, lots of r and d. So that becomes a huge cost center for something you're going to give away in order just to make Google slightly better than. Whoever they're competing with, with maps, at that time there wasn't anybody. They may have literally done this for fun.
Track 1Yeah, so, so now we're hitting a, a really, really important problem, which is this. I'm gonna use Google Reader. Everyone likes to beat up on, on Google killing Google Reader. I'm not. I'm going to beat up on Google for creating Google Reader in the first place. Here's why. There could have been an actual marketplace for an RSS reader or set of readers. That could have been competition, that could have actually been companies that would've created value by actually selling a subscription or crafting some sort of business model around this. But because Google was giving it away for free, no one can compete with that one. Two, because it was free. It creates a devaluation of the capability so no one wants to pay for it anymore. And three, when it craters and goes away, it's a whole other story. then you effectively have just ruined a marketplace. So to your point about maps, the same thing could be said there, which is that because they weren't actually crafting a business model or a business story around this, not only were they, creating a cost center for themselves that was really a, just a cost center. They were also cratering the ability for any useful competition or valuable businesses to evolve in the marketplace. And so this is a big deal because you start seeing this with the flotilla of Google products, where it's like Google Drive was the same way, um, in Google Docs, Google Photos. And what you started to see over the last, I'd say five years, is this Attempt to really bend the curve to get back to some degree of profitability in areas where it's even possible, but where they're really clawing back like some of these promises that were unfulfillable in the first place. I'll give an example. How do you deal with storage abuse if you sell a subscription on Google Drive that says it's unlimited? As one colleague of mine used to say, unlimited is not a business strategy. You can't do anything with that, and yet you have to then start to figure out, well, is this abuse? Is that abuse? But the fact of the matter is, this is just growing sets of costs across the board. Okay. I've been beating up on Google a lot, but the point of the matter is all these cost centers have been growing for decades and because they never created business models that could sustain them. They were always living off of the La Tet of search ads. And now, now that we've come to a place where, oh, we actually want to be profitable, we get layoffs. We saw a whole bunch of layoffs last year from Google's and we actually saw, I mean, Twitch and Amazon had them as well, with the notion that this was kind of the overflow from over hiring during the pandemic.
Layoffs and Warnings
Track 1I think this year's is now a lot more serious,
rob_2_01-16-2024_094300so all of these layoffs happened in this first two weeks of January. There was very little. Warning or notice even internally that this was gonna happen. There was a few posts on the Twitch side, very little's been published on what's going on inside Google. And same thing, there's been the odd post here and there, the odd news article on, uh, discord. And Unity was mentioned a while back, and these could be part of that. They could be a continuation on top of what they previously announced. But even so, it seems to be like the norm. News articles aren't covered anymore. It's like, yeah, Google highs and fires all the time. End of story.
Track 1So I think the, the, um, the story that is not being told is, and, and it's the reason why I went sort of so far back in time was all these tech companies wanted to have this platonic ideal of an academic campus where people had a free flowing set of ideas and they would Produce great things to the world and you wouldn't have to worry about the money because we'll figure that out. And it really created a distorted perception of the world, which is not that, oh, we, we wanna actually create stuff that's valuable and we'll measure that value by whether or not we can sell it. But instead, we're gonna craft these companies around a meritocracy. We're gonna craft it around, you know, how, how well do you deal with ambiguity or technical complexity or leadership? How do you execute even in a divorce from what it means to the actual business to do this in this very high-minded PhD academic fashion. And these companies prided themselves on this meritocracy. And I think what's really shocking for a lot of the people that are getting laid off, especially now. And again, I pick on Google, but I think a lot of tech companies are the same way. I think the big wake up call is that, no, this isn't your family. This isn't some ideal academic place where you're just going to get to float around and do whatever the heck you want. It's a business and you are part of the cost of that business, and if the value you are bringing to the table is not greater than the cost of keeping you, you're gonna be let go. And I think that's a hard thing for a lot of people to come to grasps
rob_2_01-16-2024_094300I think it's a hard thing for a lot of people who've just left college because it's the all they've ever known.
Track 1Yeah. Yeah.
rob_2_01-16-2024_094300if a manager, I've only worked a handful of big tech companies and I. Two of the best, the two biggest basically, uh, Microsoft and Apple are the, and I would officially tell my manager, you ever call this a family again to my face? You're gonna have a problem with me. This is not a family. It's like, it's like you won't hesitate to fire me if I do something wrong. Where a family pretty much never kicks you out, even if you do something atrocious. Yeah, sure it happens. But it's like this, like I said, this is not a family. And I think it's a big fu ball of any company to start calling its employees, family members and treat them like family. Because that's a very distorted view. It's like, yeah, we'll take, we'll use all the buzzwords of the benefits of family, but don't forget, I'm still your boss.
Track 1Yeah, I'm still your boss and I. Uh, and again, the, the way it should have been and wasn't was we need you to produce more value than what you cost. And that's just not the way it rolled. I think, uh, you know, go Google in many ways like that we've been talking about is a, a best case scenario, if you will, because it's still a profitable company. Um, let's talk about the Flotilla though, and twitches in this bucket of companies that stayed growth obsessed and then were acquired and effectively their patron company was the same as basically a VC just kind of dumping money their way in the hope that they transform into something profitable,
rob_2_01-16-2024_094300Until they stopped dumping money and then. We have to look at the hard numbers of what's going on here. And this comes back to my point of a lot of these companies were never viable in the first place. And and this also applies to Google and Facebook of like, what would these companies of look like if you've paid for them from day one? If they'd had a business model that was profitable, even minuscule profitable, or even even put it there,
Track 1Sure
rob_2_01-16-2024_094300but there was some financial contribution that the users had to put in there, how would a lot of these businesses would never have existed. Maybe they should never have existed. Uh, but that goes back to Google and Facebook of like, what would the tech world look like if you had to pay for Google or paid for Facebook from day one? I mean, you're talking about paying for it now to get rid of the ads, but if you'd paid for it from day one, maybe the data mining, the invasion of privacy and everything that both companies do would never have needed to happen. Maybe we'd be in a much better place if we'd had it originally paid for these things. That's a discussion for another day,
Case Study
rob_2_01-16-2024_094300but it I think for Google and Facebook, it's a very valid discussion to have. I think for companies like Twitch and Discord and these companies that give you free service with massive backend cost of how was it ever viable that this is what we're gonna do,
Track 1My claim really is that a, any of these companies, there's really only three exit points. You either make it wildly big, like Google, Facebook, uh, I, I don't know, I don't know if I can put anyone else, maybe Netflix, but I wanna get back to Netflix in a second. That's an important one. Or you go outta business and that's the most likely one. Or you get acquired, right? And you get acquired for a few reasons. You get acquired 'cause you have the talent, you get acquired because someone wants your technology. And because it may be at that moment in time, it's innovative and it's not commoditized yet. And the third reason basically is you wanna acquire them because of the customers. Uh, in the case of Twitch, I think Twitch got acquired by Amazon for all three of those reasons, but probably, most probably I would say Miss mostly the customers like, Hey, we've got ready audience of people that we can, you know, showcase ads to, or, you know, target.
rob_2_01-16-2024_094300What was Twitch's end game? What do they want to be? It's like, is there a sustainable market in watching people play video games? And I get from the start. There are some good ideas there. Remember years ago you'd used to get the gaming books and it would tell you how to complete the game and do the puzzles and all that.
Track 1sure.
rob_2_01-16-2024_094300Having somebody play through the game while you watch and like, oh, that's how you fix that problem. It's like, oh, now I'll go back and finish that game because I got stuck there, couldn't figure it out, blah, blah. blah. So Twitch definitely replaced all of these, uh, game completion books that used to exist and,
Track 1Yeah,
rob_2_01-16-2024_094300and websites and a lot of other things. Um, and the camaraderie of streaming together and all things like that, and has that little bit of social aspect, which games frankly still lack. But that isn't, and that may be where it started, but that isn't where it is today after you've started having people just streaming gambling games and people in bikinis. Streaming just with a camera on there because they're streaming and it's allowed it's, it's like how much has Twitch been abused from its original roots, and how much is that abuse kind of encouraged because that is the market.
Track 1So I I did a lot of deep thinking on this and because I mean, I was part of the analytics side of things of trying to provide better analytics to creators. And so I, I tried to do a lot of deep thinking as to the core business of Twitch. And a lot of times I would pause at the question to people, what is Twitch's core value? Is it as a technology platform or as a brand? And a lot of times people try to say, oh, it's both. And that's bss because the, the reason I say it's BSS is that if, if there is value you have as a technology platform, then the way you wanna make money is to sell that platform. And you start seeing this with like Amazon started piecing off the video services from Twitch into its own thing that it could resell, which I think is a smart idea. The other side of it is, if you're a brand, then you're really trying to get that brand in as many places as possible. And what I mean by that is that then it's like, okay, Twitch as a brand shouldn't be limited to its own platform. It should have presence, a heavy presence on YouTube and TikTok and all these other places. Because what you're really trying to do is say, the brand of Twitch is its community and how we connect people and the streaming in many ways is, is just a commodity. And the reason I say it is it just a commodity is because everyone's doing it. Yes, you'd have people at Twitch say, oh, we do it better than anyone else. I, my claim was it didn't matter. Facebook does live streaming. You've got, LinkedIn does live streaming. TikTok does it. Instagram does it. All of these, YouTube does it. All of these different places do it. So then there you have to really kind of come down back to the question what is the most important like bit here? Because it really isn't the technology any longer. It's really about how people are actually connecting through the platform. And to your point about the completion guides, I would argue that YouTube is actually a better place for that
rob_2_01-16-2024_094300I agree today, back when it all started. I could see going to a vc, and this is part of our story of we are gonna basically make this a more modern form. Everything's changed since then. So today, YouTube is absolutely the place where I would go if I was stuck in a video game. How do you get past this? Google it. It will show up on YouTube. You watch it, you do it. And I think that's because, again, it's the platform mindset that you had. It's like I know that there's a video out there somewhere and I'm pretty damn sure it'll be on YouTube, so I'll just search for it on YouTube. But that's where I'll start. I might have to dig deeper, but I'm certainly not gonna sign up for anything or create a new account or go to a new place. It'll either be on YouTube, potentially
Technological Commoditization and Content Policies
rob_2_01-16-2024_094300ask friends on Instagram, something like that. Or someone will send you a link or, well, you know what? I didn't know five minutes ago. I don't know. Now that's it. Go on with my day.
Track 1So I took you through this, this journey because I, I was really trying to think through like, how do we grow Twitch and the, I, you know what, a lot of the conclusions I came to was. unless they lean into the unique aspects, which really are derived from the community of people that are there. Unless they derive the unique aspects from their brand, I don't think as a technology platform, they survive because streaming is a commodity at this point
rob_2_01-16-2024_094300It is. And I think that's a big flaw of the whole VC world of they don't have the foresight to see that this will become a commodity. Like Amazon will today sell you a package, which is effectively twitch's tech, and
Track 1Yep.
rob_2_01-16-2024_094300you could go do with the same, again, with their package and their servers. And in no time you're up and running with your streaming service. And you could use that for video. You could use it for like way using, uh. Squad cast right now. It could be used for a service like that. It could be Twitch, it could be a YouTube thing. It doesn't matter. Video in and out of the internet is now a commodity and you could get pre-existing packages. No tech involved. Doesn't matter whether this tech's bit of a NA tech or that becomes then is back to these cost centers of like, you know what? It costs more to stream with this tech, but it's less to store. And depending on your business model, maybe that's the way you go. Maybe it isn't, but there's a multitude of options with a multitude of parameters, which make the tech side of streaming is a solved problem. All the video encoding is done by other people. It'll get better. It'll just get dropped in at some point. H 2 64 will become H 2 65, which will become whatever the new standards for the open source. Standards that they're working on today will be, and that's just the progression. That's not really to save bandwidth or storage though. That's to give us 4K, eight K, and that's what that new streaming tech will be used for. No one's gonna take a step back. And you know what? We could make Twitch for half the price if we stay at seven 20 P. That's not even a business decision today because no one's going to use it. So again, the technology, I completely agree, is a hundred percent irrelevant in the product. Initially, it made a lot of sense. Now we can do this better. We have better tech, better streaming, better storage. No one cares.
Track 1So the only differentiation I see nowadays, and this is gonna lead into in, in a hot second to my predictions of the future. The only differentiation I see is content policies. Like when I was really trying to like say, okay, well if the technology is commoditized, how do you differentiate
rob_2_01-16-2024_094300Content
Track 1and content? And it's, well, specifically content moderation policies. Uh, effectively, like you have on one hand Disney Plus, and forget about the Fox acquisition for a second. Think of just, oh, it's when I think Disney, I think Disney movies, Cinderella, snow White. I can stream those. Great. The other side of the spectrum is OnlyFans, and in both cases, the same technology can be used for each of these things. The difference really is who is picking the content moderation. So this leads really directly into my predictions about where, uh, we're gonna see a number of layoffs. In 2024, all of the major media companies created their own streaming services. So in the, in the old days, you had just Netflix and Hulu, you know, Netflix for movies, Hulu for television. That's the way I looked at it. And over time. you had more and more studios decide, you know what? We're gonna build our own tech arm, we're gonna create our own streaming service. We're gonna do this ourselves. And so you've got Disney plus, paramount Plus you've got Max, you've got, you still have Hulu and and Netflix. What's the difference? The only difference is content. It just happens to be that Disney's got the Disney Fox and Marvel, star Wars, blah blah, blah stuff. Paramount got its stuff. HBO has its stuff, but fundamentally, like there doesn't need to be this multitude of different streaming services bespoke to every studio. So I think what is coming down the pike is I think studios which are not seeing the Netflix like growth that they hoped for. I think they're gonna start to look for a white label solution, call it a day, and get rid of their, their engineering arms
rob_2_01-16-2024_094300I could definitely see that happening too. And I think the content motivation is a good point too of it's, I think we've got all the current streaming services, not for content motivation because of licensing of like everyone used to license the Netflix 'cause it was the only place. And then over time these licenses expire, they don't get renewed and Netflix loses all the movies that it used to have. And Netflix is now a shell of itself compared. Uh, it's all homemade TV shows and documentaries and movies. Very few licensed new content on Netflix and there's still a lot of old movies and they're disappearing over time too. So I think that's obviously licensing and Disney refuse to license because we gotta make our own systems so we'll keep it to ourselves. I think it's narrow-minded in some ways, and certainly shortsighted as like you expect people, why would I stop paying for Netflix? It has other content that I want and pay you. Yes, I'm not paying as much as I'm paying cable, but if I get them all to get all the things I want, I'm back to where I was Now, is that just me being like, I don't want to pay, I want it for free and being part of the problem? I don't think so. 'cause I do think a hundred dollars a month for content is too much and it always has been. And cable's always been overpriced. Doesn't mean that I'm gonna pay a hundred dollars in this. New world. But I do believe, like you say, content motivation does come into play. Especially I think for someone like Twitch of, like for example, this is just clearly hypothetical. OnlyFans could steal half of Twitch's market straight away by allowing people to play game is naked. And
Track 1Well, they
rob_2_01-16-2024_094300they do, they there is an entire gaming section on OnlyFans and all they'd have to do is kind of clean up one corner of the website to make it more friendly and know you're not going to get nudity. And that's the rest of, that's the rest of Twitch. So it's like, it's anything you want to be. So I do think that people with the lowest, moderation policy potentially have the best chance because they're going up in the world. Yeah. OnlyFans doing Twitch is a step in the. What society would say the right direction and Twitch going the other way would be a huge ding on Amazon. So I think, and I think this plays out across the board for everybody. You see it between British and American television where violence is fine in American TV and in nudity aren't. Where on British tv it's the exact opposite. People aren't so keen on the relentless violence, but you could be naked on tv, you can swear at eight o'clock, it's fine. No one cares. It's, it is real world. It's more real world than the high violence you get on American television. So I think societal norms play a lot into this too, of like, what will society accept? And these are global companies, so how they walk the line is going to be difficult. And this is cropping up with things like. The, uh, European privacy laws and hosting requirements and all of these start to become huge problem. And then you throw VPNs in there where I can pretend I'm somewhere else and it's Can you make a a streaming platform for everybody?
Track 1Technologically speaking, yes. All of these can serve any purpose. Like you can take you, you could have YouTube become a white label service and do live streaming or content, and then effectively You have a customizable content moderation engine that you get to set the rules on. And then it's kind of a question to your point of like, if you're OnlyFans and you can say, you know what, we'll tighten over here and you know, this section over here is loosened. Um, and you're also a hundred percent right. Twitch can't go in the other direction. Like they actually, they attempted to believe it or not. So if you look back just before the new year, they attempted to do a content moderation, policy change where nudity that was drawn or like 3D modeled as art was okay, but not to have it as like actual live video. And this created a big stink because a lot of people who are in the art section of Twitch, you know, doing drawing and whatnot, said. There's no way I will be able to compete with what is effectively pornography like. I will not be able to maintain my stream here. So then they did kind of a half step back and it was, it was, it's, you know, kind of awkward. They did it within like 24 hours. But I, it goes directly as an example to your point of like trying to loosen these things up then starts to change what the brand means. And all of a sudden, like if, you know, my kids who don't use Twitch, they, they actually use YouTube. If my kids basically are just gonna be searching on Twitch for, you know, how to play Fortnite or Roblox better or whatever, and all of a sudden they hit the art section. It's just like, you know, even simulated nudity at that point in time that, you know, is not necessarily what I want my kids to like be, you know, looking at. But it really is that question of like the content moderation policy, the brand effectively changing to attempt to capture a larger market share. And in this case, I think it would blow back on both Twitch and Amazon.
rob_2_01-16-2024_094300Oh, absolutely. So going back, streaming companies are in a warhood, and do you think. They are gonna have more layoffs. All of them. I don't really know how they're implemented. Are they using white label services? Do they do it all in-house? I think Disney do do it in-house. I can see someone like Max being a white label of Paramount and all the other ones. I just crop up randomly.
Track 1So, so this is a, a fun bit of history. One of the biggest white label services that used to exist was MLBs BAM Tech. And this was, before Vimeo before video, uh, before YouTube, they were doing video streaming and they did it for baseball. And then they started to become a white label service for other folks like. Uh, NHLI think Max was using them. I think there was a few others, and they got a large investment from Disney with the option to buy more. Long story short, what happened? Disney bought out all of Bam Tech. It was a huge windfall for, uh, MLB, but they, they basically brought what was a white label service in-house to form the backbone of Disney Plus. So I don't precisely know if they're still serving out for Max and a few other places. My claim right now is that if they're not, that it would be a smart idea to spin that out again as its own company to do so. 'cause I, I do think this is a close to a winner take all situation, The service that is going to serve video streaming for all these content providers, can reduce the cost of these guys significantly. I, think that They have to go white label or they just shut 'em down and then they say that, Hey, we're gonna toss this all over into,, know, Hulu or Netflix
rob_2_01-16-2024_094300Yeah, I mean that's basically back to where we started of like, this is too expensive for us to run. It's more of a, it's a cost center right now. It could be a profit center if we just licensed it. 'cause that's literally signing a piece of paper and you deal with it. And that gives value back to the consumer. That gives value back to whatever platform's chosen, Hulu, Netflix, both. Let's just accept that that's where the content is, that's where we'll pay you guys. Figure out your business deals on the backend to get the most value you can, but you're not streaming it. So any money at this point's profit versus a cost as to what it's doing now. And this talk about Netflix brings us back to a very interesting point. I think Netflix is gonna have some interesting layoffs because I don't think they have the stomach to follow through with some of the things they've started, especially their game site of like, if Netflix is gonna make games, they need to basically be a publisher. We are going and we publish games on PlayStation, Xbox, pc, steam, typical platforms, and we're just gonna fund developers to make games. I think they're at a really weird spot, like, oh, we're gonna do interactive movies, and we tried this with laser discs. People hated it and it's no better today than it was 40 years ago. So unless they're gonna do into game streaming where, because I've pictured Netflix as a streaming company and games tend not to do well streamed and Xbox and PlayStation have got that market and Nvidia two have that market sewed up pretty well then, uh, what are they doing? They have some big name people paying ridiculous salaries, but they don't have the bit you need to make a game. They have had people at Port Deve who were just doing pure r and d and they had a lot of game producers who've done Content in the past, but these people don't make games in a vacuum. They need the whole team behind them. So just because this game did well, if you take the producer from that game and hire them, doesn't mean your game's gonna do well. It doesn't have the same structure, same resources, same programmers, same artists. None of that exists. And I think big companies do this all the time. Amazon's either foray into games a few times and they're still doing it today, but today they're doing it as a traditional publisher. They're not trying to be a different spin on games. Google, obviously with Stadia, all these companies try to get into games because they see the dollars, but they can't stomach the upfront costs. And I think Netflix is in that same thing. They're trying to do these weird technical twists on what games could be. Nobody wants it. Just give me a PlayStation game and let me play with my friends is what people want because that's what the market's saying people want. It's because you have a good idea. It doesn't mean you should make a business out of it. You
Layoffs From Big Tech in the Outside World
rob_2_01-16-2024_094300should probably go make a PlayStation game with your idea and see what the market thinks. So I think Netflix are the next to have some big name layoffs and potentially close the entire arms down of like, you know, we, we are done with games. With all these layoffs is now an oversaturation of incredibly well-paid engineers. How employable are these people is what, what my question is in the current world, a lot of these people can only operate in a fan style environment. Uh, a lot of 'em thrive in that environment 'cause they, they like the middle management and they like the, the structure and the systems and things like that. And that goes for a lot of engineers too. Engineers would certainly want to be managers. Is, is this gonna make it more difficult to get hired in these tech companies for products that they do need to hire for? Uh, why did these people get moved horizontally And is it just clearing out the old to make way for the new.
Track 1I mean, yes to all the above. W What I'll say is that I think the, the employability thing is, is gonna be a real thing. So many of these companies crafted their own technologies internally, you know, let's say blaze or Basil as it's called on the outside world for Google, you had bespoke source control engines that may or may not be recognizable on the outside world. Maybe they have a get like front end, maybe they have a perforce like front end. But there's also this host of technologies that have been effectively closed by these companies, some of which may be open source, a lot of them not, but even if they're open source, they may not be used by a multitude of companies. So I do think that there is a, a massive retraining that's gonna have to take place for a lot of people that we're working in these, in these different big tech companies I think there's a deeper aspect that's gonna be more of a shock. And that's, you know, the companies are gonna have to enter into, aren't going to be the fang companies where it's like, ah, I just build something. And, you know, don't worry about the profit side or the cost side, just make it big. And so like, use whatever language you want and, and make it academically perfect and oh, and furthermore take as much time as you want. So I do think that it's so much of the ethos, so much of the retraining isn't Isn't the technical. I think the technical side is actually the easier side. I think it's going to be the, no, we have to get this shit done now and it's not gonna be perfect. And that's okay.
rob_2_01-16-2024_094300See, I think the technical side's a big issue too. Why would you train this potentially overplayed generic engineer when you could take a college student and train them fresh? Much easier to train fresh than it is to retrain, unless that high value engineer is giving you something that you actually need that makes the retraining worthwhile. I think it's, it's a legal form of ageism and it's just naturally occurring. It isn't that we're doing this intentionally. There's no malice here. It's just, I think the way, it's just the way it's working out. It's, you have this esoteric system that nobody else has and you go somewhere else and it's like, yeah, my ideas are valid, but my ability to implement that idea is hindered because I don't know the system and it's gonna take me a while to learn it. It's hard to relearn. I had this exact same experience on a much smaller scale at Apple. I went to Apple and yeah, they use Git, they use, uh, standard tools. Obviously they use Xcode and clang and everything like that. So there's no big issue there except I'm a c and c plus plus a similar programmer, and now I've gotta do objective C. And it's not a big step. It's a tiny, tiny step.
Track 1Yeah.
rob_2_01-16-2024_094300but when you're trying to do high performance code and the language is getting in the way, I could do it in objective C, but these are the issues. And then it's a political issue of like, can we write this in C or c plus plus? It becomes a building integration issue when the build systems can't handle c plus plus in certain parts of the pipeline. So then you have to do it in c. So it's like now it has to be C. Now we have to write all of these other dictionary type components and things like that in a way that works. And C, should we look across the company whether someone else has done it, blah, blah, blah. So it becomes this, what started off as a, a simple engineering problem is now an institutional problem. So how much of that are engineers willing to tolerate is another question. And I think there's two types of engineers. There's me who is a pure engineer, don't care for the bullshit at all. Just always do what's right for the end product, for the performance, for the result you're going for. And then there's the engineers who want to be managers who will happily play into the bullshit world of. Oh yeah, well we'll do it like this 'cause it'll impress my boss and then I can get a high ranking on my review and I won't get fired and start this cycle all over again. For engineers like me, I think suffer the worst because they tend to get put on more and they tend to not get rewarded as much. I have never been one to care, like if firing me is the only weapon you have, take it off the table right now because I literally don't give a shit. And once your manager knows that, you start to get respect from the manager's point of view, but it'll just move the bullshit to somebody else. It's, I do think people are gonna be employed in different capacities and I think AI plays into this different capacity I think the money train and the high salaries also, I. It became problematic here.
Track 1Yes to all the above. The high salaries was, born of this, I think, initial altruism that then turned into a frenzy, which also turned into a moat to try and actually lock in talent into certain places. So much of what you're describing in terms of this difference between, oh, what's gonna look good politically and what's good for the user really speaks to me so much about this divorce that happened in the tech industry between delivering real value to the user versus how do we create this sort of ethos of individual achievement that's individual within this sort of platonic ideal of tech, rather than, no, I have to sell a product and I have to actually deliver value you know, you saying we have to do this in assembly shouldn't become a political conversation. It should just be okay. That's how we have to get it done. Insomniac games would not have survived if it was a political conversation for whether or not you wrote the render in assembly. Like it just would not be there,
rob_2_01-16-2024_094300It is true and, but it's also the correct tool at the correct time. Like we did the PSS one, engineer assembler, the PS two engineer assembler, knowing that they were not compatible. We couldn't never reuse this code, And I agree with you, it shouldn't be a political argument. If someone's saying this really needs to be written in assembly, then it could be for many reasons. Could be performance, could be for sizes. The common one today, you can write a sampler by hand, much smaller than you can, the compiler can, and you can get very creative in doing that too. And it obviously fits in cash better. It's sometimes going in a raw, it needs to fit in a raw or there's limited space for it. It's. Maybe it's initial boot code and it's only option, maybe it's assembly needed because it's instructions the compiler can't generate, has no intrinsics for, there are always reasons to use it. It should never be a political argument. If a seasoned engineer is saying, we really need to do this in an assembly, but then it becomes like it's institutional 'cause we can't build it, we can't do this, this person can't merge it. If it needs to have a merge request and there's not an option in a big company of saying, well, if he can't merge it, just send it to me and I'll merge it. It's in insomnia, that'd be off all the time. Which I think it's where my hatred of the word individual contributor comes from because it puts you in a pigeonhole of like, I can't now merge this file where I'm the only one who can merge it. But because there's an entire other organization in the company that has to do the merge, they're not gonna hire me to do it and they can't ask me to do it because we're in different orgs and it's, it basically makes an individual contributor be like, you just produce, you don't support, you're not part of the e. End product, that's somebody else's job to take the fame for the end product. It's you are now an individual contributor who contributes to this pipe only and to make your own life sane, you contribute in a way that's supported by everything that's further down the pipe. And why engineers like me have to work in a startup where
Repeating Corporate Cycles and the Carl Icahn Premise
rob_2_01-16-2024_094300we can do what we need to do to get the job done. I don't care who my manager is, I don't care if I have a manager, give me a list of shit that needs to happen this week and I'll make it happen. If that different to last week, so be it. The goal is to get this out where in the big companies with, in unlimited money, you lose sight of that. And before long you're on these esoteric paths of like, well, I'll just make my own programming language for this 'cause it'll be better. And you become a cost center and this cycle just repeats and repeats.,
Track 1Once you introduce the word unlimited, which which might be time, it may be resources, you start getting off onto these. Esoteric tangents that don't really matter and don't really deliver any value to the end user. And ultimately, as you expand your cost centers, you can't sustain it or you choose not to sustain it. Or Wall Street doesn't want you to sustain it. And if you look at what's been happening to the stock prices of all these companies that have been doing layoffs, their stock's been going up. this shouldn't be un unfamiliar. I think I, I think the story here is how familiar this whole thing actually is. And I think there's lots of different ways that most people would wanna take this, that this is, oh, we're getting new technologies, or we're restructuring, or blah blah. This is all just very like typical company bss. This has happened before. It will happen again. And it happens because we neglect to say. How are we delivering value to the user? That value is measured by how much I can sell something to someone, and is the cost of delivering that value less than the value I'm gonna get from it? Because if the cost is greater, whether you're giving it away for free or for just a minimal amount, you don't have a sustainable business. And then ultimately you get the heartbreak of people getting laid off, people getting, you know, shuttered to the side. And we're in that world right now, and I think it's gonna continue throughout all of 2024.
rob_2_01-16-2024_094300I agree. You mentioned Wall Street, and how much of this is. Shareholder pressure. And I have a follow up question here for you. How much of this is shareholder pressure and how much do these layoffs really save these particular cost centers? The only way I think, and this flows into what my next question's gonna be, is to shut that cost center down, get rid of it entirely. Which my question is, if someone like, Carl Icah or one of the other
Track 1As my poster
rob_2_01-16-2024_094300investors
Track 1he is my poster
rob_2_01-16-2024_094300took over Google without any regard for like, I don't give a shit how long you've been here, who your boss is, how friendly you are with the CEO, I don't care. I'm gonna slice and dice like this. What would be left of Google or Twitch after
Track 1I,
rob_2_01-16-2024_094300that? I.
Track 1I so would say exactly this when I was at Google for pretty much the last 10 years, I would say, what would Carl Icahn do? And two things would happen immediately. One would be someone would say, who's Carl Icahn? And then I'd have to go explain stuff like the RJR Nabisco, acquisition. And then the second thing is, after I've explained all that, I would say, look. Carl Icahn would come in, he would keep searching ads together because they make the money. He'd keep YouTube because it also makes money. He might keep Cloud as a bet, but after that, you could sell Google photos to Dropbox or Apple. Maybe you could sell the, the office suite to Dropbox or to Microsoft or whomever. Um, you could maybe even sell Android off onto like Samsung or something like that. You could basically like start to decouple this company and really pair it. You could probably fire 90% of the people and you'd get down to something that still has, I don't know, 15, 20,000 people working for it. That is wildly profitable, like wildly, wildly profitable. And the fact of the matter is that Google has not wanted to admit that as a reality. They've tried to. Continue some version of the ethos about the shining city on the hill as a tech company that does know evil. That's always good and is always just good for the consumer and not really admit that it's a business. To your question of is it shareholder pressure? I, I don't know. I, I, really don't. But I can definitely see that, you know, as the layoffs are happening, wall Street is paying attention that, hey, these guys are getting more serious about their costs.
rob_2_01-16-2024_094300Well, in my mind, they're not getting serious. The cost, it's just basically rearranging the chairs of the Titanic. It's, they're not doing the call. I can think of shutting down the cost center, getting rid of the cost center. There's still massive infrastructure in these teams that doesn't need to be there. The team probably doesn't need to exist. It's, they're not really doing, making the hard choices. They're not doing the hard work. It's unless they literally do like the slice and dies. I'm just calling typical bullshit tech company, rubbish.
Track 1so I, I am not convinced Sundar has the guts to do that. I think it's the next CEOI think the next CEO that comes in, I predict, will be outside of Google and we'll do some pretty intense things. The, the one exception is maybe like Thomas Curian, if he ascends to the ceo OI think because he came from Oracle, uh, he's kind of a, effectively an outsider. I think he would have the, the guts basically to do exactly what you're saying
rob_2_01-16-2024_094300So within if for Google, what would you do for Twitch? What would Cari can do to Twitch over the burn
Track 1shut it down.
rob_2_01-16-2024_094300Burn the whole thing.
Track 1be shut down. I, you know,
rob_2_01-16-2024_094300I mean, what IP do they have that you could use over the tech, which we've already said to commoditize this. All the people doing it,
Track 1it's got a good brand to it. Maybe there's a play that you could sell it to a game company or a game publisher. Maybe that's a stretch though, man. I mean, like, at this point in time, it's really a question of, you know, that community, you know, you could consider it, maybe it's a social network. Maybe you can, you sell it to Facebook. I don't think there's very many options for where to go because the streaming side of it is so commoditized. So at that point in time it's like, okay, like who really wants to take this on? I think Discord is in a similar situation. I think Unity is in a similar situation where I don't know how these guys
Wrapping it Up
Track 1are actually gonna turn around and make money. and I think best case scenario in maybe in all three cases, they get sold to either a game company or you know, some other company that wants to try their hand at games.
rob_2_01-16-2024_094300I think all those companies, and there's many more, if you just look at the gamut of potentially useless tech companies, there is so many of them and we focus on ones that have a name. There's hundreds more that don't have a name that are
Track 1well
rob_2_01-16-2024_094300even more useless.
Track 1We even focused on a very specific subsection, which is that obviously we, we hit some big ones with Google, Facebook, Amazon, Twitch, uh, but we, I mean, we also focused on a really specific sector, which was media, entertainment, games. I think there's a larger story that is playing out here. Obviously, I, I'm picking on these ones because it's the ones I'm really familiar with, the ones I really track. But I think the general problem remains is that there has been this essence throughout all of tech over the last, call it two decades, ever since the.com bust, where companies have been hyper-focused on growth at all costs without any regard to profitability. And now everything's coming home to roost. And we're gonna see a lot of pain throughout 2024
rob_2_01-16-2024_094300I Agree. I think someone has to pay the piper at this point