Three Netflix What-Ifs: Bezos, Arnault and Blockbuster
Netflix was founded in 1997 and went public in 2002. The $500B+ company's trajectory changed with three crucial pre-IPO negotiations.
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Today, we are talking about some wild pre-IPO Netflix stories (involving Bezos, Arnault and Blockbuster).
Also this week:
Google I/O, OpenAI $6.5B Jony Ive Deal, Apple's AI Flop
Walmart’s tech pivot
…and them wild posts (including
Netflix recently crossed the $500B market cap mark.
If you had invested $1,000 at Netflix’s IPO in 2002 when the company was a ~$500m DVD-by-mail service with less than 1m subscribers, you’d now have $0 because you definitely would have paper-handed it during one of the 4x that the stock fell by 25%+ in a single day.
For the rare big-balled investors that actually HODL’d their NFLX bags, that $1,000 is now worth ~$100,000.
The crazy thing is that Netflix is up more than 5x since 2022. The gains came from adding subs, raising prices, rolling out an ad tier and forcing your cousin’s co-worker’s wife’s personal trainer to stop using your login credentials and actually pay for a subscription after the devastating password crackdown.
Netflix has clearly won the streaming war with 300m+ subscribers and annual sales near $40B. According to the Wall Street Journal, the streamer has very aggressive goals for 2030:
$1T market cap
410m subscribers
Sales of ~$80B with $9B from ads (up from the current ad sales of ~$2B)
The subscriber growth will have to be international as North America is very saturated. Meanwhile, the ads business will require more live content. But Netflix is willing to spend after success with NFL Christmas games and Mike Tyson’s naked ass. This changing business model is why Netflix stopped reporting subscriber growth and is training Wall Street on its new key benchmark of…oh god, sorry…have to say it…“engagement” (aka total hours viewed).
Whether or not Netflix achieves these milestones, the streamer has been on one heckuva run filled with multiple near misses that could have tanked the entire operation.
On that note, I looked through my highlights of Gina Keatin’s 2013 book “Netflixed: The Epic Battle for America's Eyeballs”. There were three wild “what-if” moments before Netflix’s 2002 IPO that would have changed the entire trajectory of my streaming binge-ing habits:
Jeff Bezos Gives a Low-Ball Offer
Bernard Arnault Throws a Lifeline
Blockbuster With An All-Time Fumble
1. Jeff Bezos Gives a Low-Ball Offer
Netflix was founded in 1997 by Reed Hastings and Marc Randolph.
Hasting’s had sold his company Pure Software — a UNIX debugging tool — for a then-Silicon Valley record of $750m. Randolph was a marketing director at the software firm and the two of them began kicking around new startup ideas.
You’ve probably heard some version of the origin story: Hastings had a lightbulb moment for Netflix after renting Apollo 13 from Blockbuster and getting hit with $40 in late fees for not returning the VHS on time.
That is just the perfect business rationale. Who in the 1990s hadn’t returned Top Gun or Pulp Fiction or Basic Instinct a few days late and forgotten to rewind the tape, which was also another onerous penalty fee (“Be Kind, Please Rewind”…shut up Blockbuster).
However, it's not true according to Randolph: “That’s a load of crap. It never happened…it’s a convenient fiction [because people want] a rage-against-the-machine story.”
The duo were actually trying to ape Amazon’s business model. In 1994, Jeff Bezos launched the e-commerce platform with a focus on books because they were easy to ship and there were more unique items in that category than any other category (an internet store front can stock millions of book titles, which is a huge differentiation relative to physical book stores).
A similar-ish category of product hit America’s shores in 1997: DVDs.
The video rental stores (Blockbuster, Hollywood Video, Movie Gallery) initially didn’t want to stock DVDs because they were competitive to VHS, so there was an opening for a new type of company.
Hastings invested $2.5m and Netflix launched as a DVD sales and rental business offering just under 1,000 titles. The two would run the startup as co-CEOs.
Within a year, it became clear that the real opportunity was in DVD rentals. Why? Because the “DVD sales” business had become a knife fight with Amazon and other Big Box retailers. Hastings and Randolph even met with Big Daddy Bezos to see how everyone could work together:
[Hastings and Randolph] had to solve their retention problems fast and get out of DVD sales before high-volume retailers got in and crushed them. Hastings made it clear to Netflix’s executive team that they were pulling out of DVD sales even though it was providing the company’s only profit. They were on notice that they had to find a way to make rental work, or the company would go down. Randolph and Hastings flew to Seattle and met with Amazon founder Jeff Bezos, who had indicated that he wanted to explore a partnership with Netflix. The two CEOs were willing to trade their DVD sell-through business for a crack at pitching online DVD rental to Amazon’s customers. Hastings also wanted to discuss selling Netflix to Amazon, if the price was right.
While Randolph and Bezos hit it off immediately, trading launch-day stories, Hastings was less than impressed with Amazon’s $12 million offer. Instead, they agreed to a cross promotion—Netflix would direct customers who wanted to buy DVDs to Amazon in exchange for placement of Netflix ads on Amazon’s Web site and a royalty for each recommendation. The arrangement went down hard at Netflix, where some team members felt Hastings had acted prematurely in ceding DVD sales to Bezos.
$12m? What is this? An acquisition offer for ants?!?!?! Hastings owned 70%+ of the startup and his decision to reject the offer was final.
Obviously, that turned out to be the correct move.
The funniest side bar for me is that Bezos’ offer was a fraction of what he paid for IMBD. Flush off of Amazon’s May 1997 IPO, Bezos actually dropped $155m on April 28th, 1998 to acquire three companies: IMDB, Bookpages and Telebook (or $55m each).
Netflix would have been a better call than any of those, but I will say that IMDB is probably my favourite Amazon deal ever. I’m making this assessment based solely on the fact that you can filter IMDB’s database for every movie that stars both Rob Schneider and Adam Sandler (the 200m+ monthly site visits and subsidiary Box Office Mojo are also pretty good).
The most regretful part of the IMDB deal is that Amazon shut down the message forums in 2017 due to toxic comments. This sucked because IMDB forums had some of the greatest internet content in existence. My favorites were people arguing about movie “plot holes” like this comment:
Was Forrest Gump imagining everything? None of the stuff he talked about when he was sitting on the bench actually happened? At least not to him directly. Think about it. Here’s a guy who won the medal of honor, international ping pong championship, cross-country runner, multi-millionaire, etc, etc, etc yet no one on the bench that he talks to recognizes him (or really believes him)? Also, once we’re in the present time, he doesn’t do anything extraordinary anymore, nor does he do anything to show his vast wealth!
If Bezos hadn’t spent money like a drunken sailor on that Spring day in 1998, he very well could have upped his Netflix offer and we’re looking at a very different tech timeline.
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2. Bernard Arnault Throws a Lifeline
By 1999, Netflix had sharpened its focus to a DVD rental subscription service mediated through a website. The new focus also meant that Hastings would take over as the sole CEO (with Randolph becoming Netflix’s President).
Hastings was more of a technologist and his reputation building Pure Software was catnip for VC funding. This was important because the logistical costs of DVD rentals combined with a slowing economy meant Netflix needed to keep raising funds.
However, the flood of VC money was slowing as the Dotcom Bubble started deflating. So, Netflix had to tap someone outside the Valley…leading to what may be the greatest cameo in tech funding history:
In early 1999, French luxury goods tycoon [and LVMH head] Bernard Arnault approached Technology Crossover Ventures cofounder Jay Hoag for advice about investing in dot-com companies. Hoag, a former fund manager whose earliest investments as a venture capitalist included Pure Software, pointed out Hastings’s latest enterprise and scheduled a pitch meeting at his office for Arnault with Hastings and Randolph. Arnault’s holding company committed $30 million to Netflix in July, becoming its largest investor just as the company was about to run out of money.
The details weren’t in the book but I’m guessing Arnault probably received ~10% of Netflix for his investment. That funding provided the momentum for Hastings to raise another $180m over the next 18 months.
Literally, he got in right under the wire as the Nasdaq’s Dotcom Bubble reached its peak in March 2000.
I couldn’t find any information on whether Arnault held the stock. Guessing he probably unloaded Netflix shortly after its 2002 IPO. But since we already started playing the “if you invested in Netflix 2002, you would have” game, Arnault’s ~10% stake would be worth $50B now (his current 49% stake in LVMH is worth about $120B).
Incredibly, Arnault’s legacy includes iconic luxury brands such as Louis Vuitton, Dior, Givenchy, Tiffany & Co., Moët & Chandon…and the Skip Intro button.
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3. Blockbuster With An All-Time Fumble
The greatest tech fumble in history was Yahoo! turning down Sergey Brin and Larry Page’s offer to buy their little search company in 1998 for $1m.
The two Stanford students were ready to cash out and get back to academia.
Yahoo! whiffed hard. Fast forward to 2002 and Yahoo! has another bite at the apple: it spent months negotiating with the now much more legit Google.
Yahoo! offered $3B but Page and Brin wanted $5B. It whiffed again. Ugh. The rest is history and Yahoo! ended up selling itself to Verizon for $4.8B in 2016 (my napkin math isn’t great but that’s a smidgen less than Alphabet's current $2T market cap).
Similarly, Blockbuster also had a legendary tech acquisition whiff and it also happened in the early-2000s with a smaller competitor.
Obviously, I’m talking about Netflix:
[Netflix] losses of $57.4 million loomed in 2000, so Hastings and [CFO Barry] McCarthy decided to approach Blockbuster again to try for an alliance that would give Netflix a ready source of customers and a link to an established rental brand.
It was a bit far-fetched, McCarthy thought, but he admired Hastings for having the guts to pitch it to the company they considered their top rival. Hastings got a call, during a staff retreat in the faux Dutch town of Solvang, that his contact at Blockbuster, Ed Stead, was ready to meet. He boarded a rented private jet that belonged to former game show hostess Vanna White early the next morning, along with McCarthy and Randolph, and flew to Dallas.
The summons was unexpected, and none of them had brought business attire along to the retreat. [Blockbuster CEO] John Antioco stopped in for a few moments to shake hands with them all at the glass-and-steel Renaissance Tower in downtown Dallas, and made a crack about McCarthy’s Hawaiian-style shirt and jeans. McCarthy still retained enough East Coast banking decorum to feel slightly mortified. Hastings laid out his proposal: Why not turn Netflix into an online arm of Blockbuster?
The win-win, as he saw it, was that Blockbuster would be spared the expense of converting its huge VHS inventory to DVDs and Netflix would get access to Blockbuster’s twenty million active store users, and pay a fee for the privilege. Netflix would concentrate on back catalog and niche films, leaving Blockbuster with the new-release trade that made up about 80 percent of its business. He envisioned putting Netflix promotional materials and a sign-up computer in every Blockbuster store. Antioco expressed skepticism about the viability of Internet companies and groused that the market had grossly overvalued unproven business models, a sentiment with which McCarthy secretly agreed. They weren’t surprised when Stead essentially laughed at Hastings’s alternate proposal—that Blockbuster buy Netflix for $50 million. Talk on the flight back to California was tinged with bravado: Blockbuster was making a mistake that it would soon regret. Antioco was kidding himself if he thought Blockbuster could replicate Netflix’s technological innovations. They now had no choice but to kick Blockbuster’s ass, Randolph vowed.
Laughed out of the room for asking for $50m? Damn, son. Also, sounds like Bezos picked the wrong companies to give $55m to! (Jokes on me though, Bezos also cut a $250k seed check into Google that was worth $300m at its 2004 IPO).
Anyway, Netflix shook off the Blockbuster rejection and the Dotcom bubble to go public at a ~$500m valuation in May 2002. The quarter prior to the IPO saw it post an operating loss of $4m on sales of $30m. It had 600,000 subscribers paying $19.99 a month (with no late fees) for access to a library of 11,500 films. After leading the company to a successful IPO, Randolph left Netflix a year later.
As for Blockbuster, its hubris was compounded by a series of Ls. For one, it was paying a fat dividend which could have been used to re-pivot the business…or, I dunno, buy a growing web-enabled DVD rental service? Then in 2004 — almost 20 years after its founding — the home video rental service finally cancelled late fees, which were $2 a day (!!!) on new releases and $1 a day on older films. The end of late fees was estimated to cost Blockbuster up to $400m a year in operating income, 40% of its ~$1B in total operating income (on revenue of $6B). That year, it also finally launched its web-based DVD-rental service (Blockbuster Online) but it was too little too late.
At its peak, Blockbuster operated over 9k stores and had a large rental expense. Netflix’s DVD business started eating into the foot traffic and the launch of Netflix streaming in 2007 led to the inevitable (Netflix announced its streaming service in the same week Steve Jobs announced the iPhone, which means a few days in January 2007 has led to 99.999% of our wasted time in the past 18 years).
By 2010, Blockbuster filed for bankruptcy and become fodder for an incredible Michael Scott joke in The Office.
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Final Thoughts
Those pre-IPO stories are just the tip of the iceberg. We could keep playing the Netflix “What if” game but that would need another 10,000 words.
Instead, enjoy these quick hits.
What if Enron wasn’t a scam and its partnership with Blockbuster in 2000 to deliver bandwidth for on-demand video worked out?
What if Wall Street didn’t give Netflix a ludicrous P/E ratio during the 2010s, thus allowing the streamer to use its equity cushion to issue a lot corporate debt and spend $100B on content to achieve escape velocity and become a staple for every household?
What if my cousin’s co-worker’s wife’s personal trainer found a way to keep using my login?
What if Google bought Netflix, which CEO Sundar Pichai recently said they strongly debated doing?
What if Netflix’s social network “Netflix Friends” (where your friends could see the content you liked) actually took off in the mid-2000s and sent the company down a completely different path?
What if someone didn’t recently take over the Blockbuster Twitter account to start shitposting? And What if someone didn’t put a Community Note on my hilarious (but admittedly fake) Twitter interaction between whoever is running the Blockbuster account and the Netflix account?
What if “Hulu and Hawk Tuah” became a more popular meme than “Netflix and Chill”?
What if Netflix’s first effort to create content — House of Cards in 2013 — flopped and the streamer gave up on its own production house?
What if Netflix actually had any films prior to the year 2000 that I was searching for?
What if House of Cards Season 5 and Season 6 didn’t suck?
Finally, what if the company didn’t survive its disastrous splitting of the DVD delivery and streaming business into Qwikster and Netflix, respectively. That 2011 move was done with some of the worst messaging in corporate PR history including a price hike which pissed off so many users that 80,000 subscribers immediately cancelled. NFLX stock fell by 75% to a split-adjusted price of under $10 (it’s now at $1,200).
Incredibly, if you had invested $1,000 in Netflix after the Qwikster debacle, you would now have….
This issue is brought to you by Liona AI
Launch a GPT Wrapper in Minutes
As many of you SatPost readers may know, I’ve been building a research app for the past few years (Bearly AI). The app required a flexible backend to manage all of the LLM APIs.
Inspired by the ease of use of Netflix's Skip Button...
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Google I/O, OpenAI $6.5B Jony Ive Deal, Apple's AI Flop
An absolutely insane week of AI news.
Google showed us it’s shoving AI down every single crevice it can find across its product suite. OpenAI acquired Sir Jony Ive’s hardware startup for $6.5B to build a family of AI devices. Meanwhile, Apple’s AI failures were placed front and centre in a viral Bloomberg long-read.
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First, Google held its annual I/O developer event. The Verge has a solid round-up of announcements here and I’ll flag the highlights:
“AI Mode”: Google CEO Sundar Pichai says that AI Overview — the hybrid search result feature that is, err, an overview provided by AI — now has 1.5B users. So, basically anyone that uses search. Google is now rolling out “AI Mode” in America on the search page, which is basically a Gemini-powered chatbot interface. It’s game time. Google can’t eff around anymore as ChatGPT hits 500m+ users. The search giant is clearly ready to risk the Greatest Business Model In The History of Capitalism™ to take on all AI challengers. Although, I buy the argument that people will pay more for clicks on AI Overview because they will be even more targeted, albeit probably fewer clicks…which also means traditional web publishers are gonna get clapped unless there's a new arrangement.
Everything is AI-Powered Now…If there is a Google product that has a crevice, AI is getting shoved into it:
Google’s phone assistant Project Astra uses voice, text, video and image to help you with various tasks.
Google Shopping users can upload a photo and see what clothes look like on them.
Chrome now has a Gemini-AI button of summaries and more AI functionality.
G-Mail can pull writing from your e-mail archive and Google Drive to make the AI-generated text sound more like you.
Most impressively, Google Meet now does real-time translations (which means you can keep saying “nothing on my end” after every meeting and have it translated into dozens of languages. I love technology.)
Google Glass is back…kind of. Google is partnering with Samsung, Gentle Monster and Warby Parker to create a competitor to Meta Raybans. They did an on-stage demo with real-time translation and it looked pretty decent. Crucially, these won’t make you look like a Glasshole like Google’s first Glasses go-around a decade ago.
All of the Gemini AI models received an update with the most impressive being Google’s video model Veo, which now generates dialogue (very good round-up of examples here, the most meta one I saw here and one of a prompt that reads “man doing stand up comedy in a small venue tells a joke; include the joke in the dialogue”).
Things are so real at Google HQ that co-founder Sergey Brin showed up and basically said he’s out of retirement (Brin says Gemini will be the first AGI and “there’s never been a greater opportunity” than now). Brin and Larry Page own 51% of Alphabet’s voting share and ultimately get to decide which crevice AI will get shoved into (presumably all of them).
While impressive, the entire presentation did have a spaghetti-on-the-wall feel.
Other than the AI Overview/Mode feature, everything is kind of scattered around in different apps…it’s giving vibes of that time Google had Meet, Hangout, Voice, Hangout and all these other communication apps.
The inevitable supercharged Google Phone could really bring it all together, which takes us to OpenAI.
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For the second news story, OpenAI acquired Jony Ive’s secretive hardware startup for $6.5B. It’s an all-stock deal for the startup with only 55 employees including a bunch of ex-Apple folk (so, more than $100m an employee). As many have noted, the announcement page is somewhere between “wedding registry” or “baby shower invitation” along with a slickly-made 9-minute video in which OpenAI CEO Sam Altman and Ive gas each other up.
Ive’s startup is named “io”, which makes the timing devilishly devious since it overtook the keyword hype for Google “I/O” just the day prior. A very good post said "this is like when Lebron joined the Lakers but for nerds" (my NBA analogy: this is like when Shaq joined the 2009 Suns).
Altman is taking Masa’s $40B investment and just going YOLO. He made this deal a week after acquiring AI coding startup Windsurf for $3B (also in stock).
While there are bubbly vibes for the price tag (~$100m an employee) with $0 and after Altman was shown demo — incredible work if you can get it — OpenAI clearly has a generational opportunity to turn its 800m+ ChatGPT user base into a $trillion consumer tech platform. A full stack one that has the brand (ChatGPT), chips (designing its own), data centre ($500B+ Stargate Project) and whatever hardware device they cook up.
In the AI race, OpenAI looks like it wants to more the Apple to Google’s Google.
So what will the device be? Altman and Ive want to “move away from screens” (Ive has recently expressed some regret on the iPhone negative impacts on society, specifically on social media).
The Wall Street Journal reports:
The product will be capable of being fully aware of a user’s surroundings and life, will be unobtrusive, able to rest in one’s pocket or on one’s desk, and would be a third core device a person would put on their desk after a MacBook Pro and an iPhone.
The Wall Street Journal earlier reported that the device won’t be a phone, and that Ive and Altman’s intent is to help wean users off of screens. Altman said the device also isn’t a pair of glasses, and that Ive had been skeptical about building something to wear on the body.
Altman’s fascination with the film Her and the related "did they steal Scarlett Johansson’s voice” controversy probably means voice will be the main type of interaction.
Ben Geskin has two speculative mock-ups worth flagging. One is based on the Wall Street Journal article (left). Another is based on details from leading Apple analyst Ming-Chi Kuo (right), who writes:
My industry research indicates the following regarding the new AI hardware device from Jony Ive's collaboration with OpenAI:
1. Mass production is expected to start in 2027.
2. Assembly and shipping will occur outside China to reduce geopolitical risks, with Vietnam currently the likely assembly location.
3. The current prototype is slightly larger than the AI Pin, with a form factor as compact and elegant as an iPod Shuffle. The design and specifications may change before mass production.
4. One of the intended use cases is wearing the device around the neck. 5. It will have cameras and microphones for environmental detection, with no display functionality.
6. It is expected to connect to smartphones and PCs, utilizing their computing and display capabilities.
In my view, one of OpenAI's motives for announcing its collaboration with Jony Ive now is likely to shift market focus from recent Google I/O.
Google’s ecosystem and AI integration, showcased in the I/O keynotes, pose a challenge that OpenAI currently struggles to address. As a result, OpenAI is leveraging a new narrative to redirect attention. That said, AI integrated into real-world applications, often termed "physical AI," is widely recognized as the next critical trend. While the success of the Jony Ive-OpenAI partnership remains uncertain, it clearly aligns with this trend.
This partnership also recalls Alan Kay’s well-known adage: “People who are really serious about software should make their own hardware.”
Altman told the OpenAI team that he believes the $6.5B acquisition will unlock $1T in value. The plan is to start shipping by end 2026 and says it’ll be the fastest consumer product to move 100m units ever (probably 2nd to the street coconut vendor I knew in Saigon that moved a biblical amount of product ever time I motorbiked past him on the way to work).
Now, I need to put my tinfoil hat on with some solid Hacker News content on what Altman might be really up to:
xgolwks: What the other commenters are forgetting is that this is the same Sam Altman who planned and executed the extraction of Reddit from Condé Nast [by maneuvering his chosen execs into Reddit and making well-timed investments].
This acquisition (and the Windsurf acquisition) are all-stock deals, which have the added benefit of reducing the control the nonprofit entity has over the for profit OpenAI entity.
How do you extract the for profit entity out of the hands of a nonprofit?
Step 1: you have close friends or partners at a company — with no product, users, or revenue — valued at $6.5billion.
Step 2: you acquire that entity, valuing it unreasonably high so that the nonprofit’s stake is diluted. And now control of OpenAI (the Public Benefit Corporation) is in the hands of for profit entities.
I have no idea if that pencils out. Wouldn’t everyone get diluted all the same? Not a lawyer or banker. Just putting it out there. That’s what 2-8% of you are here for.
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Third, Mark Gurman at Bloomberg has a brutal piece on Apple’s AI failures.
The iPhone maker seemed to be on top of AI’s potential when it acquired Siri in 2010. Steve Jobs was so enamoured by a demo of the AI assistant that he called Siri’s founder 24 days in a row until he agreed to sell (#founder mode). However, he died a year later and never shepherded the product.
Still, Apple looked to take AI very seriously in 2018 when Tim Cook poached Google’s Head of AI John Giannandrea (known as JG). While JG reported directly to Cook, he didn’t have the clout of Apple vets such as software chief Craig Federighi.
JG and Federighi battled over resources through the years. This tension was made worse by the fact that JG didn’t think chatbots were the right interface for AI.
Everything changed with the launch of ChatGPT. But even then, Apple was slow to move. JG is quite laid back when the Apple culture is a bit more intense. His AI team also was viewed in the rest of the company as spoiled. Example: Apple doesn’t do free lunches but JG made sure his team got free lunches (apparently, the AI/ML team at Apple has been derisively nicknamed “AIMLess”; sick burn!).
Further, the company’s former CFO was overly conservative and didn’t want to spend billions on Nvidia GPUs. Apple didn’t necessarily have to build its own foundation model. Nor did it have a cloud business like Microsoft, Google or Amazon to support. Still, it was completely out of the game relative to the Big Tech Frenemies.
Even if it had the chips, Apple’s long-standing position to protect user privacy went from a marketing pro to a potential con. Why? It didn’t have the user data to personalize AI features.
These challenges culminated with Apple’s embarrassing WWDC developer event in summer 2024. Well, it was only embarrassing in hindsight. The presentation flexed a bunch of Apple Intelligence and AI-powered Siri features that looked SICK!!!!!!!
BUT MOST OF IT WAS VAPOURWARE!
The rush to satisfy Wall Street met up with coding reality.
“The main technical issue is that Apple essentially had to split Siri’s infrastructure in half,” writes Gurman. “With the old code underpinning legacy features such as setting alarms and the new code underpinning requests that draw on personal data. The kludge was considered necessary to bring the new features to market as soon as possible, but it backfired, creating integration issues that led to delays. Individual features might look good, employees say, but when code is merged so the pieces can be tested together in Siri, things begin to fall apart.”
Hell, Apple had to pull a Siri ad that showed a non-existent feature.
Cook lost so much faith in JG that he took away his AI product responsibilities, including Siri. JG is staying on as a researcher while Mike Rockwell — who brought the Apple Vision Pro to market (it flopped but was a huge technical achievement and actually hit the market) — will oversee Siri and report to Federighi.
The most memorable artifact from Apple’s AI rollout was the billboard of that ridiculous Genmoji of a hot dog with a cowboy hat.
I hate to be the guy that says “if Steve Jobs was around” but I guarantee you he didn’t hound the Siri founder every day for nearly a month for crowning AI achievement of a hot dog with a cowboy hat 15 years later.
While OpenAI has a long way to go to produce 100m units of anything and could very well flop, Apple probably should have just opened up their wallet for Ive...years ago. The $6.5B acquihire includes some of the lead designers for Mac and iPhone. As Nikita Bier notes, “Apple fumbling Jony Ive is 100% due to their compensation structure. There are some employees who are worth 10 billion dollars to your market cap—and that is completely outside of their comfort zone.”
With Google and OpenAI pushing pedal to the AI metal — not to mention Microsoft, xAI, DeepSeek, Meta, Huawei, Amazon or Domino’s Pizza Tracker — it’s time for Apple to get in the game…or actually risk losing hardware share on either the smartphone (there’s a non-zero chance I’ll swallow a green bubble if Android devices have sick AI integration) or next form factor (whatever Jony Ive is cooking up, hopefully it’s not a pin).
Walmart’s Tech Pivot
The Economist has an interesting article on Walmart's tech pivot.
To set the stage, Walmart’s real-world footprint is bonkers. It has over 5,000 stores in America and 90% of the country lives within 10km of one. For a single company, it has the highest employee count (2.1m) and annual sales ($680B, including “10% of US retail all retail spending, excluding cars, and 25% of the outlay on groceries.”).
With its size, Walmart extracts large discounts from suppliers and is “still 4-5% cheaper than Target and 8-10% cheaper than other grocers” (that may change a bit with recent statements that it’ll raise prices due to the tariffs).
Let’s get to the tech. People forget but Sam Walton and his awesome trucker hats were first-movers on a lot of supply chain tech. They pioneered barcode scanning and RFID tech to track inventory. They also invented something called cross-docking, a warehouse design that allowed incoming trucks to unload immediately onto outgoing trucks, thus saving time and labor costs. Finally, they also provided fodder for the r/PeopleOfWalmart subreddit that has nearly 600,000 members and some insane posts.
As for more recent tech, Walmart is making serious ground on Amazon:
E-commerce sales hit $100B in 2024; while still short of Amazon's $480B, WMT's online business is growing 20% a year (vs. 10% a year for AMZN)
Online ads were $4.4B in 2024, up 30% YoY (while less than 1% of Walmart's total sales, high-margins on ads make it 10% of Walmart's operating profit)
Turned its supercenters (which usually stock 120k SKUs) into online distribution hubs (100s of millions of SKUs now)
Wall Street is recognizing the change and Walmart's P/E is ~40, more than Alphabet, Amazon, Apple, Meta or Microsoft (Walmart has healthily outperformed all of them in the past year).
While Amazon is still 3x more valuable than Walmart ($2T vs. $770B), the massive grocer has outperformed Big Daddy Bezos over the past 5 years (+130% vs. +69%).
Walmart has more room to gain because it’s grocery delivery business has a handle on the cold supply chain necessary for perishable items. Meanwhile, Amazon’s $13.7B acquisition of Whole Foods is still being digested (although Amazon does still have IMDB…so, winning).
Links and Memes
Man, Luke from Outdoor Boys is quitting YouTube after 1,100+ videos in 11 years…an incredible channel of outdoor survival living and a legit authentic dude in an otherwise clickbaity minefield of online content.
One main reason: he’s gotten too famous and his family have a lot less privacy. As he explained in a “Goodbye” video, his channel blew up in the past 18 months going from 2m subs to 15m subs…and he didn’t do any sponsorships (just the YouTube rev share).
A lot of the growth was out of his hands and unplanned. Basically, TikTok and Instagram Reel accounts were aggressively ripping off his content. While he had been viewed 2B+ times over the year, that figure almost 3x’d and his wife and 2 kids were getting approached a lot on the streets.
“My wife and I both have real concerns about [what this visibility] will do to our family if I keep growing my YouTube channel at this pace,” he says. “The right time to stop is before this problem gets out of hand and my family can’t live normal lives.”
Now he’s gonna pause making videos to let it cool off and also spend more time with the family. Huge respect on the decision. If you never seen his stuff, def check out this 23-minute video of him “Solo Camping Under 10ft of Snow” or this 10-second of how to prepare a freshly-caught fish for dinner.
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AI College Cheating: Two quick follow-ups on my “AI Killed The College Paper. So, What's Next?” piece from last week. A lot of thoughtful reader replies. Appreciate you readers!!
One I wanted to flag was from cognitive psychologist Christoph Hügle. I published his full response after the original essay. He points out the flaws in my suggestion to “grade the workflow (not the output)”:
Now, the idea of grading the workflow is interesting, but it immediately raises so many questions. Are you teaching your students a specific (AI) workflow you want them to demonstrate? How do you decide what's a good workflow? Getting fast and efficient from the first prompt to the final essay, or taking longer, querying the AI, and learning things along the way? Wouldn't it be enough for one class each year to assess this ability?
For me, that's just creating another way to grade students without aligning it to what you actually teach.I would ditch the essays except for essay questions in tests. Instead, I'd have students complete projects like conducting a study: Researching the literature, creating a research question, conducting experiments, writing it all up, presenting the results etc. This is much closer to what you're supposed to learn in uni and do after you graduate.
Separately, there was an article from the New York Times about “How Miami Schools Are Leading 100,000 Students Into the A.I. Future”. Basically, the 3rd largest school district in America went from banning ChatGPT to partnering with Google to create a safe version of Gemini and then work with teachers to find the best way to use them as a teaching tool.
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Some other links for your weekend consumption:
The US government struck over $500B in announced AI deal with Saudi Arabia and the UAE…this is such an important story and I hadn’t been able to write about it. TLDR: America will sell chips to make the Middle East the third main pillar of AI race (China the other). The controversy is whether these AI data centres be secured and if the partner countries — which offer a ton of land and cheap energy — are reliable long-term partners. Because if the are ultimately mis-aligned, the US just handed them huge leverage. The counter-argument is that if the US doesn’t supply chips, China will and that hurts America’s AI position for the decades ahead. ChinaTalk has a good round-up of the competing positions.
Marco Pierre White is Gordon Ramsay’s mentor…and probably only person to make him cry in the kitchen. He was the youngest (25) and first British chef to get 3 Michelin stars. Then, like a total gangster, told Michelin he didn’t want the stars anymore a few years later. Was recently recommended a 3-part series on the rise of White from nothing to the top of the restaurant game. It’s by the Eat Me podcast and damn good, so I’m recommending it to you.
AI publishing gone very wrong…the Chicago Sun-Times publishing a “summer reading list” made up of AI-generated books that don’t exist (but admittedly sound kind of dope).
Can AI blackmail? Yes, according to AI lab Anthropic, which said the latest version of its Claude chatbot tried to blackmail employees when it viewed them as an existential threat.
OnlyFans on sales for $8B…according to a Reuters report. From a pure valuation perspective, this looks like a massive deal. It’s like 5-6x revenue for a growing subscription platform that is uber-efficient (does $1.3B with only 42 full-time employees; or $31m per employee). Of course, there’s a fat discount because a lot of potential buyers have “no vice clauses” and…let’s just be real…OnlyFans is mostly NSFW. I wrote more on the economics and psychology of the platform in this previous article.
Is Tom Cruise The Last Irreplaceable Movie Star? With the 8th and probably Mission Impossible film coming out this weekend, check out this fun 11-minute video from Nerdstalgic exploring Cruise’s career and why he might be last true Hollywood star (oh, also, nothing can prepare you for how Cruise eats popcorn).
…and them wild posts:
