Transcript: The AI Race: Who's Ahead, Anthropic or OpenAI?
0:00 Scott You need the marketplace to really drive the winners.
0:03 Scott Based on what I read,
0:04 Scott I think Anthropics is going to be a winner.
0:22 Scott Hello, everybody,
0:23 Scott and welcome back.
0:25 Scott To another episode of How Many CTOs Does It Take?
0:28 Scott My name is Scott Porad,
0:29 Scott and I am here with my friendly co-host.
0:31 Brad Brad Hefta-Gaub.
0:33 Scott And Brad,
0:34 Scott today we have a little AI business check-in.
0:40 Brad Yeah.
0:41 Scott I saw an article in the Wall Street Journal this week.
0:45 Scott called Anthropik is on track to turn a profit much faster than open AI.
0:55 Scott Financial documents from both companies show the different approaches they are taking to the AI boom.
1:02 Scott And if I just look in here, I just read a few key facts.
1:08 Scott Anthropic has really focused on business users because of the capabilities of their Claude chatbot encoding and actually expects to break even in 2028.
1:21 Scott OpenAI,
1:22 Scott goodness,
1:25 Scott and this is just mind-blowing, they expect their losses to swell to $74 billion.
1:32 Scott in 2028 and doesn't expect to be profitable until 2030 and expects to burn through 14 times as much cash.
1:46 Scott Crazy sauce.
1:49 Scott They're just taking different approaches.
1:51 Scott AI expects thinner margins.
1:54 Scott It is investing more in things like chips and technology.
1:59 Scott It just has a more aggressive approach,
2:01 Scott a more risky approach.
2:05 Scott Let's see here, just scrolling through,
2:07 Scott what does it say about Anthropic strategy?
2:10 Scott Anthropic is taking a more cautious approach with costs growing more at a pace with revenue.
2:15 Scott They're focused on increasing sales among corporate customers and avoiding,
2:19 Scott this is key,
2:21 Scott avoiding getting into image and video generation, which is much more expensive in terms of a cost.
2:26 Brad Interesting.
2:27 Scott So very interesting.
2:30 Brad Yeah.
2:30 Scott Any thoughts on that?
2:32 Brad Well,
2:33 Brad yeah,
2:34 Brad I have a couple thoughts on that.
2:36 Brad First of all, my first thought is that this is just a, I mean, the battle, the battle that's going on here for AI is really,
2:49 Brad really interesting. And anthropic and open AI are the two small fish, right?
2:54 Brad And,
2:54 Scott Mm-hmm.
2:55 Brad you know, you got the big players of Meta, Microsoft and Google that are really aggressively out there.
3:02 Brad And it feels to me a little bit like anthropic is,
3:11 Brad I think it's fair to say they appear to be taking the more conservative approach.
3:16 Scott Mm-hmm.
3:17 Brad And I think you're right that kind of open AI is kind of just trying to swing for the fences, get big fast,
3:24 Brad you know, scare people by, you know, kind of trying to act like they're the biggest possible player in the space and try to cover as much flood the zone kind of thing.
3:37 Brad And,
3:37 Brad you know, the the stakes are high enough that.
3:42 Brad And Sam Altman is a good enough salesperson that, you know, they're, you know, he's making the way of it. But from a sort of like the business, do the numbers pencil out like things have got to get gigantic. Right.
3:57 Brad So a good example of this is and.
4:02 Brad You know, we record this when we record it and it gets released a little bit later.
4:06 Brad So any of the numbers that we're throwing out now are going to be, you know, could be old news by the time that this episode comes out. But at the same time, it's on trend, so it kind of doesn't matter. But, you know, the recent,
4:18 Brad you know, Sam Altman's been, you know, tweeting that,
4:21 Brad you know, they expect to hit a $20 billion forward annual run rate by the end of this year.
4:27 Brad here but at the same time they've got 1.4 trillion dollars of you know capital commits right so it's just like you can't make 1.4 trillion dollars of capital commits pencil out on a you can't even make that pencil out on a hundred billion dollar a year business you gotta you gotta get well well north of that and so they're just it's huge numbers we're talking about and it's huge amounts of
4:52 Brad you know, I'd say risk because the reward is so great.
4:57 Brad So that's my first thought is that I100% agree that OpenAI appears to be taking a much more swings for the fences, everything,
5:06 Brad everything AI approach versus Anthropic, which really seems to be focused on business users,
5:12 Brad especially coding.
5:14 Brad So that
5:14 Scott Mm-hmm.
5:14 Brad I think is accurate statement.
5:16 Brad And I didn't know about the video and image generation,
5:18 Brad but it's totally it totally syncs with what I happen to know as a user of the two.
5:23 Brad But I hadn't even thought about,
5:24 Brad oh, that's right there.
5:26 Brad Anthropics not really doing image and video generation.
5:30 Brad Here's another really interesting piece of news recently that is very related to what you just said.
5:39 Brad Cursor, another independent company,
5:41 Brad which embeds all the models,
5:44 Brad right?
5:45 Brad So you can hit Quad,
5:47 Brad you can hit OpenAI,
5:50 Brad Gemini.
5:52 Brad They just released in the last week or so their own model,
5:57 Brad right?
5:59 Brad So they released a model.
6:00 Brad But you know what?
6:01 Brad It's not a foundation model that they built.
6:05 Brad It's a repackaging of a Chinese open source model and they packaged it as their default model and they believe that it's outperforms Claude and Claude was a far, far,
6:18 Brad it was far outperforming on coding tasks.
6:22 Brad This, I think, is another interesting play where it's like,
6:24 Brad OK,
6:25 Brad so cursor is very much a targeted application for software developers.
6:30 Brad That's what their focus is.
6:31 Brad They're not a foundation model.
6:32 Brad They're not trying to build models.
6:33 Brad They're just trying to build this this world class application for developers to use.
6:38 Brad And even they are picking and choosing which of these foundation models to use and going with an open source model.
6:48 Brad uh was a bold and interesting move on their part um so there's just a lot of churn happening in these uh in this space and i i think that i think that that move by cursor is very telling about anthropic right like if
7:09 Brad Cursors not like if cursor can can use this open source model and outperform Claude that puts that puts anthropics business significantly at risk.
7:20 Scott Mm hmm. They're commoditizing those things and it's going to be a race to the bottom unless some model,
7:28 Scott foundation model can have a demonstrable.
7:33 Scott improvement quality,
7:35 Scott right?
7:35 Scott I mean, if you're a cursor and you can use a model that's 20% less effective,
7:43 Scott but it saves you 50% of your cost,
7:47 Scott you're going to do it.
7:48 Brad Of course.
7:52 Scott There's something else I saw in this article about open AI and anthropic that was the first thing that stuck out to me, honestly.
8:02 Scott So I've been in a number of startups and I've been at startups that have been disciplined and I've been at startups that have gotten out over their skis.
8:09 Scott And what I mean out over their skis is they're spending far ahead of the revenue.
8:13 Brad Yep.
8:15 Scott And typically, it is the case people spend ahead of the revenue because they think, well,
8:20 Scott we're going to grow into the cost, right?
8:23 Scott We're investing and we're going to grow.
8:25 Scott And I've been part of a few situations where that has not happened.
8:30 Scott You get the then you sort of head into the proverbial downward spiral of layoffs and then can't deliver and then more layoffs and then you're just put,
8:41 Scott right?
8:43 Scott And I've also been part of companies that have been disciplined and not gotten out over their skis or when they've gotten out over them, they haven't got too far as they've pulled it back a little bit.
8:53 Scott I don't know. When I saw that, I just saw Anthropic being disciplined.
8:59 Brad Yeah
9:00 Scott And I believe that a key for success,
9:05 Scott at least as a startup, but probably overall in the business world, is discipline.
9:10 Brad Yep.
9:11 Scott There are always going to be pressures pulling you and pushing you in different directions. There's going to be shiny new objects.
9:18 Scott And the companies that I've been a part of that were able to stay focused and stick to their knitting and say,
9:25 Scott this is what we do and we do it well, tended to be more effective and more successful.
9:31 Scott And so when I see a story like this and I think to myself.
9:35 Scott Well,
9:35 Scott I would prefer to invest in Anthropik than invest in OpenAI because I bet what's going to happen with OpenAI is at some point in the next few years they're going to flame out or if not flame out have a big dumpster fire.
9:46 Brad Well,
9:47 Brad OK,
9:47 Brad so another thing that happened again, this will be, you know, a little bit of history when people hear this, but, you know, there was some kerfuffle on the Internet this week where.
9:57 Brad open ai which is a private company not a public company
10:00 Scott Mm
10:01 Brad so it's
10:01 Scott -hmm.
10:01 Brad not like we could get to see their financials but what they've shared and what their cfo shared um on twitter was something the effect of yeah we've got this 1.4 trillion dollars of of capital spend and you know it'd be really good if and they use the term it'd be great if you know the you know trump administration with you know the commitment to make sure that u.s wins the ai race you know if they would backstop
10:22 Brad Stop R.
10:24 Brad uh spend and the word backstop specifically was used and of course people turned that into wait a second are you asking for a bailout here and um you know david sacks the ai czar on trump's administration had to kind of come out and like no this is not we're not doing backups we're not doing backstops for this company oh that wasn't the word we meant to use right but you know i i heard it um on the on the um all in podcast i heard um david sacks talk about this like
10:50 Brad look man this is one of the most vibrant marketplaces we've seen in a long time like this is cutting edge stuff but there are so many players in this space right you got the mag 7 all playing in the space we got these two other like really made a big big small startups small relative to the mag 7 but they're huge and and they're all fighting it out and we got that doesn't even include xai so we got xai we got open ai we got anthropic we got all the mag 7 and so
11:16 Brad This is a very, very active and, you know, competitive marketplace.
11:23 Brad And so, yeah,
11:26 Brad so what if OpenAI gets over their skis and blows up?
11:30 Brad That's not going to that that that'll be one out of half a dozen companies in a space that doesn't make it. And, you know, they're private companies. So the investors in them are, you know, hopefully they're all big boys and they knew what they were getting into when they invested in a risky company.
11:52 Scott I agree with you 100%. I don't have any problem with OpenAI blowing up.
11:57 Scott In fact, I think when you see a market like this, you need what they call it creative destruction.
12:03 Scott You need the marketplace to really drive the winners,
12:07 Scott to drive, you know, to flush out the losers and drive the winners. And I don't know, based on this article,
12:14 Scott if I thought based on what I read, I think.
12:16 Scott Anthropics is going to be a winner.
12:19 Brad Well, or at least not the first loser.
12:22 Scott He's not the first loser because they're actually trying to build,
12:27 Scott and I could be wrong about this,
12:29 Scott but it feels to me they're more trying to build a business than trying to just do a, you know, we saw this during the first dot-com boom, the eyeballs land grab.
12:39 Brad Yeah,
12:40 Brad so a couple of other things that also I think are interesting that have come out this week that I think are kind of worth noting.
12:48 Brad A couple weeks ago,
12:49 Brad you and I were talking about this maybe on an episode of the pod that hasn't been released yet,
12:52 Brad but you were asking like,
12:53 Brad hey, how come Siri sucks so bad?
12:55 Brad Why isn't Siri at least as good as any of the other LLM models out there?
13:02 Brad And what happened last week?
13:04 Brad Apple announced a deal with Google Gemini to power Siri.
13:09 Brad So Apple's going to be using Gemini to power Siri now.
13:12 Brad And so to me, that's another similar example of your those that keep, you know,
13:19 Brad to their own knitting.
13:20 Brad Apple has been very like,
13:22 Brad you know.
13:23 Brad cautious slash deliberate about what they're spending in AI.
13:28 Brad And I think it's really interesting that they, you know, partnered with Google instead of just throwing all of their own resources at this. They're the one of the Mag7 that aren't burning their free cash flow on infrastructure deployment.
13:45 Scott Right.
13:47 Scott That's very interesting. And that's the same play that Apple did, for instance,
13:50 Scott with search, right? They did deals with Yahoo and Bing and Google,
13:53 Brad I
13:54 Scott etc.
13:54 Scott That's kind of their playbook.
13:56 Scott Who do you think pays in that deal?
13:57 Scott Do you think Google is paying Apple or do you think Apple is paying Google?
14:03 Brad think it tends to be like a kind of a little bit of both,
14:07 Brad you know, I think in that Siri deal,
14:10 Brad I have to imagine that Apple's paying Google,
14:13 Brad but.
14:14 Brad Um,
14:14 Brad there must be like some,
14:16 Brad you know, law back clawbacks where they don't have to pay if, you know, for certain types of things,
14:24 Brad you know, exactly.
14:25 Scott You know, I don't know, in the search world,
14:27 Scott right,
14:27 Scott Google monetizes those searches, so they pay Apple.
14:31 Brad They paid Apple for that.
14:32 Scott And so,
14:34 Scott I
14:35 Brad But there's
14:36 Scott mean, there's...
14:36 Brad not as much, there's not as much direct in.
14:40 Brad You know, that's what that's what I'm saying. Like, I don't
14:42 Scott Yeah,
14:42 Brad think there's
14:43 Scott it's
14:43 Brad as much direct monetization from the LLM's voice recognition feature,
14:50 Brad you know.
14:52 Scott fascinating.
14:54 Scott Well,
14:55 Scott I'm excited to get to use Gemini on my phone.
14:59 Brad yeah last time we were talking about this every time i said the word siri it lit my phone up and i had to tell it stop no i'm not talking to you siri um so that's one thing that's happened i think it's really i mean this is such a it's such an interesting space and i um you know again like it's it's fascinating times we live in right now
15:22 Scott Yeah, that's one way of putting it for sure.
15:28 Scott Uh,
15:29 Scott do you remember Yahoo Pipes?
15:35 Brad Maybe.
15:37 Scott Well,
15:38 Scott then you might remember a series of tools came out like
15:41 Scott I-F-T-T-T and Zapier and
15:43 Brad Yeah,
15:43 Scott make,
15:44 Brad yeah,
15:44 Scott those
15:44 Brad yeah, yeah, yeah.
15:45 Brad If this, then that.
15:46 Scott are just,
15:46 Scott yep.
15:47 Brad Zapier is still around.
15:48 Brad Zapier, hey,
15:50 Brad talk about people sticking to their knitting.
15:51 Brad Zapier is a fantastic example of a bootstrapped company. Never took any venture funding and just like crushing it.
16:01 Scott Well,
16:02 Scott Yahoo Pipes was sort of the precursor to
16:06 Scott zapier yahoo pipes so there's a thing where you could like visually drag and drop pipes each each little i mean the pipes didn't do anything but the little you know the y's and t's and things you know the pipe shapes did and you could like create these little workflows and it was all drag and drop and the workflows could do things like read in an rss feed and then send emails based on it or whatever all sorts of stuff like that and then
16:30 Scott If this than that and Zapier those things came along it was the same kind of thing you have these connectors you connect them up and it could based on this do that but I just saw today that Google released Google flows you want to know what Google flows can do they're
16:44 Brad send stuff to an LLM.
16:48 Scott now using LLMs to do stuff like this I mean it was really I mean they're look they're just doing great work over at Google.
16:58 Scott Let's see, they can notify me about urgent emails,
17:01 Scott can catch up on news,
17:03 Scott I can get a pre-meeting brief,
17:04 Scott I can get a daily summary of unread emails,
17:08 Scott can notify me about emails from key people.
17:11 Scott When they're using these expensive AI to do stuff that Yahoo could do in 1997.
17:16 Brad Yeah, yeah, yeah, yeah, yeah.
17:18 Brad Yeah.
17:19 Scott I don't know when Yahoo pipes really came out, but it was probably about 97.
17:23 Scott Let's actually, let's just Google that real quick.
17:26 Scott I should really go to Yahoo.
17:27 Scott Can you even go, does Yahoo even exist anymore?
17:30 Scott Indeed,
17:31 Scott it does.
17:32 Scott Yahoo pipes, just searching for it.
17:35 Scott See what comes up here.
17:36 Brad Oh, Wikipedia's first article, of course.
17:39 Scott Yeah,
17:40 Scott it was launched in 2007 and it was shut down in 2015.
17:44 Brad There you go.
17:46 Brad Hey,
17:46 Brad speaking of Wikipedia,
17:48 Brad have you heard of Grokopedia?
17:52 Scott Is Grokopedia Elon Musk's version of a...
17:58 Scott Yeah. Elan's view of the world.
18:00 Brad Well,
18:01 Brad it's it's, you know, I mean, it's grok based Wikipedia and,
18:06 Brad you
18:06 Scott What's that mean,
18:07 Scott grok
18:07 Brad know, I mean,
18:07 Scott -based Wikipedia?
18:08 Scott I don't even know what that means.
18:09 Brad they're basically, you know, building out.
18:13 Brad I mean, I think that your your characterization of it is Elon Musk's version of the truth of the world. Well, that's certainly not the way that he would describe it,
18:21 Scott Oh,
18:21 Brad you
18:22 Scott isn't
18:22 Brad know.
18:22 Scott grok
18:23 Brad -
18:23 Scott So I'm reading on Wikipedia what Grokopedia is.
18:26 Scott It is an AI-generated online encyclopedia. That's actually kind of interesting.
18:30 Brad Yeah, right
18:32 Scott When it's just a search box.
18:36 Scott Or should I type in that search box?
18:38 Scott I'm going to type in my own name.
18:39 Scott Of course, that's what you always do.
18:41 Scott Now it's given me 85 pages of names.
18:44 Scott My name has yielded 1,010 results, but none of them are my name.
18:50 Scott They're other people's names.
18:52 Scott That's not what I wanted.
18:53 Scott But this is actually kind of interesting.
18:55 Scott So what this is telling me is there are no articles in this thing.
18:58 Scott It is just AI generated like real time.
19:05 Scott Oh, this is interesting.
19:06 Scott Up at the top of this page, I clicked on one of these guys, Scott Wolf,
19:10 Scott who apparently is an American actor.
19:11 Scott He played Bailey Salinger in Party of Five.
19:15 Scott It says fact-checked by
19:17 Brad Yeah.
19:17 Scott Grok two weeks ago.
19:19 Brad Yeah.
19:20 Scott That's interesting.
19:21 Brad Yeah.
19:22 Scott Very
19:22 Brad Yeah.
19:23 Scott curious.
19:23 Brad So there you go.
19:24 Brad So there's more more news in AI is AI generated Wikipedia.
19:31 Scott Fascinating.
19:32 Brad Yeah.
19:33 Scott Fascinating.
19:34 Scott You know, it's a fun time to have a bucket of popcorn and be watching it all unfold.
19:41 Brad Right. I mean, unless,
19:42 Brad say, you're worried about white collar job attrition and you've got you're a young person or you're closely aligned with a young person struggling to find work in this in this new economy or all these different things.
19:59 Scott if you care about climate change.
20:01 Brad Or if you care about climate change.
20:03 Scott Yeah.
20:05 Brad Well, there you go. Did we got
20:06 Scott Yeah,
20:07 Scott if we solve nothing today.
20:09 Brad well,
20:10 Brad so what did we what did we learn? We learned that anthropic is being more business focused in building their business.
20:18 Brad Open AI is swinging for the fences. There's massive amounts of churn going on.
20:23 Brad We we've got our big giant bags of popcorn to watch it all and it's fine.
20:29 Brad It's fine.
20:30 Brad As flames are around us.
20:33 Scott This is fine.
20:35 Scott Yeah, we learned, look, I think we also learned something else. The big players,
20:39 Scott we talked about Apple and Gemini.
20:41 Scott Ultimately, the big players have such, it's not like monopoly power,
20:46 Scott but they've got such power in the marketplace that they're going to get a huge chunk of share,
20:51 Scott right?
20:53 Scott And I mean, just look, I'm going to just use a concrete example from where I'm at at TaskRabbit.
20:57 Scott We didn't buy everybody an OpenAI license for ChatGPT.
21:01 Scott We bought everybody a Gemini license.
21:04 Scott Because
21:04 Brad Oh.
21:04 Scott why?
21:05 Scott Because we're a Google workspace company and it's just right there and it's integrated with everything.
21:10 Scott And in fact, in fact, it's been making me think, and this would be hard to do, that we should force people at our company that we should stop using Slack and start using.
21:19 Scott using Google chat because Jim and I can see all of our Google chat and you can query your chats and get stuff.
21:25 Brad I, by the way, now you just like one more piece of news that I heard was and I don't have the exact numbers here,
21:32 Brad but.
21:33 Brad Yeah,
21:33 Brad like number of tokens being processed and generated by Gemini have just been skyrocketing over the last six months.
21:40 Brad So they have come back. I mean, they were supposedly nowhere and they have come roaring back.
21:46 Brad Like they're by far, you know, the fastest growing of the foundation models.
21:50 Brad So don't write Google off.
21:55 Scott I think that's because I have a hypothesis on that I could be wrong.
22:00 Scott I was talking to a guy at Microsoft who works on Copilot, and Google has added,
22:07 Scott they gave you Gemini for free with your workspace account and then simultaneously raised the prices of workspace by two bucks a month.
22:17 Scott So it's free,
22:18 Scott but we're charging you more.
22:20 Brad Exactly.
22:20 Scott Microsoft did not do that. They strategically,
22:23 Scott this guy told me they strategically, you know, it was a competitive thing, decided not to do that.
22:27 Scott And so I wonder if it's just like it's there, it's in front of people and they can use it.
22:32 Scott And so and also Google has released,
22:34 Scott I don't know if you've seen, if you've just gone to Google and searched,
22:37 Scott they have this new thing called AI mode,
22:39 Scott which
22:39 Brad Oh, yeah.
22:39 Scott basically you're not searching anymore,
22:41 Scott you're just doing an AI prompt.
22:42 Scott And so they're nudging their customers into that space.
22:46 Brad Yeah,
22:46 Brad for sure.
22:47 Brad And also,
22:48 Brad you know, you see the, you know, another example of like, is OpenAI focused on the right things?
22:53 Brad They released
22:54 Brad released a version of chromium browser that's the the ai the open ai version of the chromium browser it's
23:01 Scott Mm hmm.
23:01 Brad like that's not gonna last like like you're gonna compete with you're gonna compete with google chrome like
23:09 Scott And
23:09 Brad no
23:09 Scott as a matter of fact, I have a button up here in the upper right of Chrome now,
23:14 Scott which.
23:15 Scott uh goes right to gemini so
23:17 Brad Yeah, exactly.
23:18 Scott like this this is the same story of the browser you know microsoft windows and the browser is it isn't quite monopoly power but google has that you know frankly google and apple have this footprint that they can push ai on people in a way push their products on a people that way that nobody else can i mean between android and chrome and then
23:41 Scott And iOS,
23:42 Scott it's like, that's your game.
23:44 Scott I think if I'm looking at investing in anthropic or investing in open AI, I'm saying to myself,
23:49 Scott open AI is going to lose,
23:51 Scott anthropic is going to build a nice business and the winners are going to be the major platforms.
23:57 Brad Yep.
23:58 Brad That sounds like not a not that controversial of an investment
24:02 Scott Well,
24:03 Brad thesis.
24:03 Scott that is my armchair. I will take my $7 and go put it where I can put it. All right,
24:11 Scott Brad,
24:12 Scott this has been fun again.
24:13 Brad Yes, as always.
24:14 Scott News roundup.
24:17 Scott Oh, what do we do when
24:18 Brad What do we do? We smash that subscribe button.
24:20 Scott we rate and review?
24:22 Brad We get agents. We program our agents to rate and review.
24:25 Scott Yeah,
24:25 Scott we should try that.
24:27 Brad All right, everyone.
24:28 Scott All right. Talk to you later,
24:29 Scott Brad.
24:29 Brad Bye.
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