Google Is Burning Its Free Cash Flow To Win AI

So Neil, I think Google is doing something right now that is shocking to me because this is the first time that they're using up their free cash flow to win the AI race. So Google is going negative on their free cash flow, right? And so by the way, they make a lot of money. It's not like they're starving for money.

I want to show this little chart over here and then we can react to it. Anthony Pompliano here tweets this. So Google is willing to risk the entire company to win the AI race. And then Google reports first quarter of negative cash flow.

So this is free cash flow, right? This is reported by Bloomberg. And you can see it for the first time it's gone down. They started in 2004 and they've continued to move up.

So anyway, I think it's interesting because my first reaction to this is, are they betting on the right thing? Now let's think about everything that Google has, right? Google has search, which is their money-making machine.

Google also has, they have their TPUs. Okay. Google also has YouTube as well. Google also has Google cloud. Uh, and then Google also owns what else? They, they, they, they have Android.

So Android ecosystem, um, they have Chrome as well. And so they just have all the distribution in the world. They have Waymo as well. Um, by the way, there's, you, you think about some of the investments that they've made, um,

from Google Ventures. They do pretty well there as well. And so all this data center investments, build-outs that they're doing right now, is it truly a risk at the end of the day to win this AI race?

In my opinion, I don't think it's much of a risk because of how well they've done over the years. You can say they're a big conglomerate now, But, you know, I think I was listening to the All In podcast. Did you listen to the recent one where Chamath was just talking about what the return on their investments has been in the last, I don't know, let's call it 10, 20 years or so?

Do you know? I think he was talking about the Google stock in which the average returns of your shareholders roughly 30% a year, not necessarily their revenue growth or their EBITDA growth.

But what most people tend to forget is Google's not investing only for the sake of investing. They have a $514 billion backlog for its Google Cloud division to give everyone a quick perspective on the numbers and why they're spending all this money. They want to actually take that backlog and realize the revenue from it.

Yep. So I think, and I think they will, right? You look at all the demand. By the way, you look at Microsoft yesterday, they reported earnings, right?

Their stock has gone up quite a bit. You look at how Azure, which is their cloud provider, like how much it's gone up. I think it was like 100% year-on-year growth or something like that. So all that to say is they already have proven business models.

And in fact, most people are going to be coming to them And they're not risking everything. You look at kind of how shaky things might be right now with like an anthropic or open AI with these open models, right? And so I think their business models are going to work, but I think they're getting a lot of pressure in other areas versus Google has already established themselves.

Like they have plenty of business models that are already working for them, so. Dude, totally. And people tend to forget businesses operate to maximize revenue growth and profitability. Their whole purpose is to keep making more money.

People just don't invest for the sake of investing, especially this amount of money without really realizing how much more money they can end up making.

It's done intentionally. And they're looking at how much more growth potential they can get if they do some of these investments. So one thing I want to talk about, so I was reading this tweet from Naval, and I think this stuff all kind of ties in together. So you look at what Naval is tweeting over here.

So he says, when software was expensive, so thin, horizontal, best of breed software stacks extracted rents across every business. So what does that mean exactly? So...

We're talking about thin and horizontal. So horizontal means it can cover like a bunch of people, right? And well, what he's saying now is that now that software is cheap, keep in mind before you needed a bunch of software engineers. You still do, but today anybody can vibe code something up, right?

And that's kind of how he's saying that software is cheap now. So now that software is cheap, value moves to vertically integrated businesses that deliver opinionated end-to-end experiences, right? So what does that mean exactly? That means instead of trying to be everything to everyone, you actually now are, let's say Neil and I are both in marketing.

So marketing would be one vertical. So vertically integrated would be, and then let's say Neil has data from his companies that he works with. I have data on the stuff that I do. So Neil's going to have his opinion on how something should be built.

I'm going to have my opinion as well. But now that software is more democratized, this is where the value is occurring now. And that's why I think everyone needs to build a revenue brain, right?

So I've talked about single brain, but a revenue brain is more vertical, meaning that it covers sales, it covers marketing. That revenue brain can be something that

integrates with your cold outbound system. So it's handling cold outbound for you, but maybe it's also integrated with your AEO SEO software suite too. So it's creating content. It's also looking at the customer calls that you're having.

So it's taking all the connectors that you have and it's figuring out, oh, where should we make retargeting ads from account-based marketing standpoint? Where should we figure out where we should attack more on the cold outbound or just outreach standpoint? So If you have a revenue brain that's going, we've talked about having your website be like its own revenue agent.

That is an example of a vertically integrated experience that you can deliver. Because what I'm seeing right now is when you look at companies out there like Victor, they're doing really well. That's like a little brain that lives inside your Slack.

There's plenty of other competitors out there that's much more horizontal and that's self-serve. The way I look at it, I don't think agencies are going anywhere. I think agencies are going to evolve. I think for us, I know for us, it's more so, hey, we're on the revenue side because that's what we understand and we have our opinions there.

And I had a conversation with Google this week, Neil. a couple people from the Google Ads team. And they're like, oh man, they're like, we think traditional agencies are dead. I'm like, oh, it's interesting that you say that, right?

Because I've talked to a handful of these traditional agencies, people that are trying to jump ship. They're like, yeah, that model doesn't work anymore. We're more interested in what you're doing on the agent side right now because we think what you're doing is going to, that's going to affect how agency work is going to be done in the future. So that was the conversation that I was having.

And I think all this stuff kind of ties in together. So I think whether you need a finance brain or a revenue brain, or a company brain, whatever brain you need, you need these vertically integrated brains, and there's going to be plenty of companies offering this stuff. Neil and I are probably more on the marketing brain, revenue brain side of things.

not only are we seeing people build it themselves, we're seeing a lot of companies trying to offer solutions for it. But I think you're going to start seeing a lot of this stuff just productized by some of the major SaaS players and different verticals. So like the NetSuites of the world, my guess is over time, they'll offer like a financial brain.

A lot of the marketing software solutions will do that on the marketing side, so forth, so on. And I believe that people can end up building it in-house. And I think a lot of people will.

But majority of companies will just pay for a solution that already exists and they can just plug and play with everything else that they're already doing. And I believe most of the software solutions that they're already paying for will start offering some of this stuff for free. It'll just be value added to keep retaining you. Yep.

And that's why I think right now, the way we think about the single brain stuff, we're doing a lot of these free pilots. We're not even charging in many situations, right? Because it very much is a situation where how do you just get more logos in the door? Because it is a retention and an expansion game for a lot of these companies.

And what I communicated a week or two ago was right now... When we talk to one of these investors, they're like, oh, we talked to our portfolio company. Everyone's building this right now. And therefore, they think that because everyone's building right now, it's not going to be a hot thing.

I think, in fact, if everyone's building it right now and they have the engineering resources, it means that more people are going to need this because you're going to need people that are managing the who's going to manage it, who's going to optimize it, who's going to upgrade it. So anyway, I think to Neil's point too, yeah, like a lot of these companies are just going to offer this as well. Or they're probably going to gobble up companies that are doing it too.

All right. So what's the next topic that you want to move on to? Yeah. So Neil, have you been using ChatGPT voice at all? You know, I've never used the voice feature inside ChatGPT.

Not once. Okay. Do you remember watching Iron Man? Uh-huh. Jarvis. Jarvis. Okay. This is basically getting very close to a Jarvis. And so what I do in the morning now, I take out my phone.

I'm like, hey, give me the daily command center, right? It's like, okay, here's what's happening right now on the recruiting side. Here's what's happening on sales side. It's also evaluating all of the forms I have on my site to make sure nothing's broken.

I just want to make sure everything's working, right? And it's like, here's a recommended action for these things over here. Do you approve or disapprove? And I'm like, approve, disapprove.

I'm like, what about this thing that we're working on yesterday? Where's that at right now? Where's that? Oh, by the way, not only is this operating in chat GPT, it's connected to all my other harnesses because my chat GPT can use my computer, right?

So yesterday I was setting up Buzz, which Jack Dorsey released. You know what I did to set that up? I was just talking to him. I was just talking to my chat GPT voice.

I'm like, hey, I need you to set up Buzz for me. I need you to invite these people over here. I need you to make sure that all the permissioning is set up correctly. And

And so now, by the way, it's hooked in. You can hook it in with, you know, you can have it sourced for you on the recruiting side. You can have it send partnership emails. You can have it do whatever you want, right?

But ChatGPT voice has been great because ChatGPT has a browser. And plus, you can control the other apps that you have. And so my Hermes harness is available because my Hermes is much more powerful from like a connector standpoint. So all that to say is that, you know, you hear about these people right now going on these like four hour hikes and they're just talking to these things.

Now, Neil, now when I'm on a commute to go see my dad on the weekends, guess what? I'm just going to be talking. No more need to listen to podcasts. I'm just going to be talking to this thing for an hour and asking it to do things for me.

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And if it seems like a fit, we'll get in touch and help you with a free marketing plan. Yeah, dude, and I think voice is going to get better and better.

What I'm really waiting for is Apple to have a better Siri and it just being all integrated within your hardware that you have. And I believe they were supposed to partner with ChatGPT. It did not work out because ChatGPT or OpenAI is supposedly building hardware with Johnny Ivey because they ended up buying his company.

And I think Apple claims that they stole some intellectual property or something like that. They definitely did. And then OpenAI is claiming that Apple never ended up integrating.

I believe Apple is moving over to Google, but I'm waiting for their tech to get better and it just be integrated within the current systems and workflows. Yeah, but Neil, why do you even need that when you're already paying for ChatGP? You're paying for the $200 a month version.

And so your home computer, right? So the main thing is I have it set up on my home computer over here to desktop, right? So it's like your command center. It's already hooked in with everything else.

It already has all the context. Plus you can control like your phone too. And so you already have all the context in the world. You want to just do this right now.

Honestly, I don't trust ChatGPT. I've deleted a lot of my backlog and history and it still pulls through it when I ask questions. Oh, wow. They don't fully delete your data.

I fully deleted my data as an experiment. And then people are like, give it a few days, give it a week. I'm telling you, it's still pulling stuff from the past. Not everything.

So if I uploaded files, and I was careful, I never uploaded files that I shouldn't have uploaded. But some of those files, Yeah, you can get it from the pantry, buddy.

Some of those files, they don't actually have the file to reference, but they reference it in chats in the past and the data that it referenced in the chats, that stuff... It's still there when I ask it questions. It's still pulling from it. But if I had to ask something new and I had to pull from the original file again, it's not doing that.

But it's pulling from past chats where we analyze data. And I just don't like it. So I hate to say it. I don't trust it. I still use it, just being honest.

But I won't use it for anything sensitive. So here's a question for you. Which companies would you trust with your data? Apple? I trust Apple. I trust Apple probably more than most.

I also trust Google and Microsoft. Sure, sit here and eat it, buddy. The reason I trust Google and Microsoft is they're so big. Everyone's like, oh, they're using their data to figure out what search results to show.

That kind of stuff, I don't mind. You're so OCD. Just let William eat whatever he wants. Uh-huh. Yeah. Well, I look to see, and my wife, he ate a little piece of chocolate, but the chocolate doesn't taste good.

I'll just tell you that. So you can assume what's in it. Her brownies are made of sweet potato and dates and chocolate powder and vegetables. That's a scam.

That's a scam chocolate. And I'm like, yeah, this stuff. She won't do dark chocolate because of caffeine. But still, I've tried it. And I'm like, what the heck is this?

Yeah. So even before we get back to last night, my wife was gone. She had a family emergency. So I'm taking care of the kids by myself. And they're like, mom's not here.

We want a popsicle. So I gave them one of their popsicles. And there was three in there. So I had one because the kids were like, eat one with me. It's like no added sugar.

It's made of pure food. It tastes so nasty. And the kids are like, this is delicious. Because they don't know what the real stuff tastes like. You know, like the stuff we ate as kids.

I took one bite and I threw it away. They're like, it's delicious. You don't like it? I'm like, no. You don't know what delicious is. But see, that's good marketing.

That's good marketing. That's the stuff that your wife has consumed is healthy, right? But it's all stuff that she's probably seeing on Instagram or YouTube, so.

Yeah, but going back to Google and Microsoft, if I delete my data from Google and Microsoft, I'm not talking about search results or whatever, but I believe Google would genuinely delete my data and not reference it in the past for questions that I asked.

And ChatGBT can say whatever. I swear I'm asking questions and it's pulling from the past on stuff that I already deleted. I would tell you, okay, let me tell you who I trust first and then what you would do if you're a little patient with this. This is more for the audience.

So I trust Amazon. I trust Microsoft. I trust Google. I trust Apple, right? I trust NVIDIA as well. Like, you know, never had any issues there, right?

But those are kind of the main companies that I trust. Now, what I'll say is this. I don't necessarily trust Anthropic either. So I don't trust Anthropic or OpenAI.

And so I wouldn't go like with super sensitive stuff ultimately. Here's what I would say. if you want to run this cause Hermes voice just came out yesterday, which is open source by the way. Um, so Hermes, you can run it on your own box.

You can run it on your own systems. Um, and so you can talk to it, you can activate it just saying, Hey Hermes, kind of like, like, Hey Siri. Right. So that Neil, you can actually set up, um,

And because my Hermes harness is very powerful, I can just run it through that. And you can run it through open weights, like open source models, right? So you can definitely do that.

Now, if you're impatient right now, you want the chat cheapity voice experience, like it's unparalleled for the moment. I would say that Claude just came out with their own voice as well. Just keep in mind that they have their own incentives ultimately. And one more thing I'll say is that I believe that

like OpenAI and Anthropic, they're probably just going to build more and more applications and attack more of the profitable niches that they see their customers. Like legal, they're getting into legal. They're getting into life sciences. I think they're going to get into more and more stuff because they have these frontier models, right?

And I think there's also good reason to not trust both companies because of how both of the, let's just say the executives, how they operate. And I believe that how you do anything is how you do everything. So that being said, I still take advantage of it.

Yeah. So right now you're using voice, okay, on chat GPT. Are you asking it anything sensitive relating to data that it shouldn't have or you're worried that it could end up using in the future?

No, I don't do very sensitive stuff like financial analysis and like that type of stuff using these, so. Yeah, when we do financial analysis, we do it in a controlled environment. We do not upload it to chat GPT. We never have for stuff like that.

I've used it for like personal stuff, like just asking like, hey, analyze my blood test results, right? If that went out into the public, I know people like, oh, health information and hip and stuff. Honestly, if my blood test information went out into the public, I really wouldn't care.

But the fact that I can still ask it questions related to that pisses me off and it still shows it. To me, it just makes me not want to trust them. If you're asking questions related to your business and getting stuff done, you're saying with chat GPT voice, because none of it's really sensitive, you're okay with just pushing it out there. Yeah, and I'll give you some examples.

Okay, so some things I use ChatGP2 voice for right now are, oh, hey, look at the latest Marking School YouTube channel. I want you to create trial reels for it. I want you to edit the videos, put an overlay, and then create six trial reels, and then publish them, right? And that can do it, right?

Because it has the metrical API, right? That's one thing I ask it to do because then it just controls my Hermes. My Hermes has all the connectors. Another thing I ask it to do is, yesterday, I didn't want to set up Jack Dorsey's new Buzz, right, which is like their Slack for agents.

I didn't want to set up, it just set up all the stuff for me. It set up all the harnesses and it invited the right people and it put together all the channels. That was very nice for me, right? The other thing too, as I was just testing this out, because on our talent side, we're trying to recruit more people right now.

But I was just testing out like a couple of these recruiting flows. What it did was it logged into LinkedIn. It logged into our applicant tracking system. It logged into our juice box, which is our like recruiting agents.

And it figured out a way for it to reach out to these people in a tasteful way and figure out how to combine all the things, right? And so that to me is helpful because now I can hand that off to other people on my team and then they will work like that. And that to me is a very high leverage thing because in my opinion, the more time you spend on recruiting, the less time you spend on management.

You're saying the more time you spend on recruiting, the less time you spend on management? Yeah, if you spend more time on recruiting great people, great people don't need to be managed as much.

Yeah, I thought you meant the more time you spend like just recruiting, like as an entrepreneur should spend all their time recruiting. Oh, no. You just mean if you recruit the right people, you don't have to deal with management. So that is it for today.

And we will see you tomorrow.