Nach etwas längerer Weihnachtspause und Einleben in das neue Jahr sind wir mit der Freitagsrunde wieder auf Sendung.
In Folge 9 diskutieren wir:
- Wann gehen die Tech-Wehen zu Ende oder wird es noch weitere Massenentlassungen geben? Wie verträgt sich das mit der Tatsache, dass die Arbeitslosigkeit in den USA auf den niedrigsten Stand seit 53 Jahren gesunken ist? Handelt es sich hier auch um die berühmte Silicon Valley Bubble? Sinken demnächst hier die Gehälter?
- Der Text-Roboter ChatGPT von Open AI aus San Francisco ist in aller Munde. Was macht diese Künstliche Intelligenz so interessant, dass jetzt sogar Google handeln muss? Steckt ein Hype dahinter, wie etwa vor einem Jahr beim Metaversum? Was passiert eigentlich in Deutschland in Sachen AI?
- Es gab große Hoffnung, dass die Öffnung von China die Weltwirtschaft anschiebt und auch die westliche Welt davon prosperiert. Nun hat US-Außenminister Anthony Blinken seinen Besuch in Peking wegen eines vermeintlichen Spionageballons verärgert abgesagt. Stehen wir vor einer weiteren Verschärfung des Konfliktes, was bedeutet das für die Wirtschaft?
The „Freitagsrunde“ (Friday Roundup) is back on air after the Christmas break.
In episode 9, the topics discussed include the tech industry’s troubles and the possibility of more layoffs, the popularity of Open AI’s ChatGPT, and the recent cancelation of US Secretary of State Anthony Blinken’s visit to Beijing and its potential impact on the global economy.
- When will the tech travails end, or will there be more mass layoffs? How does this square with the fact that unemployment in the U.S. has fallen to its lowest level in 53 years? Is this also the famous Silicon Valley Bubble? Are salaries going down here anytime soon?
- ChatGPT is the talk of the town. What makes this artificial intelligence so interesting that even Google has to act now? Is there hype behind it, as was the case with Metaversum a year ago? What is actually happening in Germany in terms of A.I.?
- There was great hope that the opening of China would boost the global economy and that the Western world would also prosper from it. Now U.S. Secretary of State Anthony Blinken has angrily canceled his visit to Beijing because of an alleged spy balloon. Are we facing a further intensification of the conflict? What does this mean for the economy?
230203 Freitagsrunde (automated transcript and translation)
Marcus: Here’s the Friday roundup with our first edition in the new year. You’ve noticed. We all took a slightly longer Christmas and New Year’s vacation. But now we’re back to full strength.
Matthias: Yes, and unfortunately with bad news for the high-tech industry. After Meta led the way and then Amazon Sales Force and many others followed, now Google also had to lay off people in a big way, namely about 12,006% of the team. And the quarterly figures this week were also poor. Even model pupil Apple had to report a decline in sales.
Olaf: ChatGPT is the talk of the town at the moment. The clever text robot from San Francisco-based OpenAI has even passed MBA exams and replaced Metaversum in terms of hype. Why all the excitement?
Marcus: We’ll talk about that in a minute. Next week we have two very exciting events, one here in Silicon Valley and the other up north where Microsoft is based. And you can probably guess what those are about. We are also very excited. Because with Olaf, we also have an expert on the difficult mix between the Americans and the Chinese. And that’s what we’ve seen in the last few days. You have all noticed that a weather balloon in quotation marks has allegedly appeared over Montana. The Americans said, hello, hello, do you have another one on your hands? Of course, it wasn’t a weather balloon, it was a Chinese spy balloon. Well, and now the U.S. Secretary of State Anthony Blinken has canceled his trip to China over the weekend, and actually that’s how they wanted to move back toward normalization with China. After China opened up and took the curve of measures down, they wanted to go back towards normalization. And we want to know, of course, what happens now?
Olaf: Yes, this normalization, that was also addressed by the two heads of state in Southeast Asia a few months ago. The will is certainly there, but you can see here quite clearly how volatile this situation is. So this weather balloon, which is certainly more than just a civilian weather balloon. One can already assume that. It’s already collecting, of course, even though it’s collecting meteorological and atmospheric information, it’s already collecting information that is very important for national security. Because in Montana, so where it was discovered over Montana, there are missiles, silos, a whole, whole lot of missile silos of the United States. So that means there is already a connection that you can’t ignore. But I think here, here three things stand out. One is, even though the will may be there, at the beginning it’s still the case that you realize we don’t actually have any guardrails between the U.S. and China. That also came out in our book research when we interviewed other experts. There are no protocols, no security protocols, communication protocols between China and the U.S., like we had with Russia, for example, that then deal with such events in terms of protocol and also have safeguards that you don’t get into an exchange of fire in quotes here, which is not good for either side, that’s missing. Secondly, yes.
Marcus: Sorry, go ahead.
Olaf: Yes. Secondly, the point that the balloon was not steerable is not entirely understandable on the Chinese side. Because the latest technologies that are available in these airships, they are already geared in such a way that you can roughly steer the thing. So, of course, that can fail every now and then. Clearly, no technology is flawless, but I think that’s a fairy tale. And thirdly, the key question is whether Beijing really stands behind Xi Jinping’s actions and statements as one would expect. You have to remember that even after ten years, Xi and also China, let’s say, are not necessarily as experienced in international relations, even in the nuances of those relations, as we might know them from the West. And that, of course, is now also a challenge for the Western world, that the interpretation of these statements from the Chinese side is perhaps quite different from what we are used to in diplomatic circles. So this is already an event, what, what should concern us.
Marcus: And we all noticed that this week at the end of the week. On the one hand, the quarterly results, we have already indicated, in the tech sector not so good, but this balloon then also caused some excitement on the stock market and then had the result that at the end of the week, the stock market has not gone as well as it has. How that can actually be. Because today, Friday, sensationally good unemployment figures for the U.S. were published.
But it will be an exciting Friday round. We, that’s Matthias Hohensee from Wirtschaftswoche and Olaf Groth, CEO of Cambrian Futures and economics professor at Berkeley University’s business school. And I’m Marcus Schuler from Bayerischer Rundfunk.
Opener: Friday round of the Silicon Valley finance and business podcast with Matthias Hohensee, Olaf Groth and Marcus Schuler.
Matthias: Yes, them. The tech industry is alarmed. After hiring like crazy, especially in 2020 and 2021, almost not a day goes by now without news of more job cuts. Paypal just announced, I think it was 2000 jobs to be cut there. At Google, the employees are really traumatized, because actually an employment contract at the corporation was like a job for life. And at the same time, as we heard today, we see that the unemployment rate in the U.S. has fallen to its lowest level in 50 years. To be exact, 53 years. It’s down to 3.4 percent. How does that fit together? Olaf Is this further proof that we are living in a bubble here in Germany? Or have we already reached the bottom?
Olaf: Yes, definitely with corn. I don’t think we’ve quite hit bottom yet. I don’t think the techleoffs are going to be a disaster now, like we had in 2000 with the dotcom bubble. But of course it has already taken some companies with it. People always say, well, these 60,000 jobs that have been lost, that’s in relation to the jobs that have been created. You have to think about it, Amazon has swelled to I think 1.5 million. That’s quite something. So that’s something. That’s quite a bit. You have to put that in perspective. But nevertheless, there is now such a scouring of the technology sector, which is actually quite healthy. So when I look at companies like Carl Werner, for example, which went from a valuation of 80 billion down to about 1.5 billion, that’s certainly painful for everyone who’s in it, and they have my empathy, too. But a recalibration like that, that’s actually relatively positive for the WCs, for the consumers, for the economy. But the figures you mentioned are contradictory. That is correct.
Olaf: On the one hand, we have this fallout in the tech sector, and on the other hand, we have these numbers from them, the economy is still going at, I don’t know, 2.9%. Unemployment is going down. We sprinted here in January with these numbers. 517,000 people have been hired. So even seasonally adjusted, that’s a very high number. And there are the economists looking at it. They are a bit perplexed, because one would have expected a slowdown here. Not only because the FED just raised it again at 2.25%, but also because this uncertainty about the rest of the year is still there. In other words, the question is whether this is a bit of a catch-up effect, that people are glad to be out of this difficult period of last year. The run-up to Christmas in particular was a difficult time, and the fact that there may now be delays could really put the brakes on the rest of the economy. But that’s where opinions differ.
Marcus: Yeah, what I find exciting about the mix right now is if you look at the employment situation, I don’t think you have to worry that much about the people who may have lost their jobs here in the Bay Area right now. For example, a new study by Zip Recruiter says that many 40 percent will find a new job within a month because the demand for workers here is incredibly high. And if you look closely at California, there’s actually something like full employment here. We’re really not far from that. So the labor market can handle a bloodletting like that just fine.
Matthias: You always have to look on the bright side. Of course, it’s not nice when someone gets laid off and you’re stuck in there. And for us with our German background, it’s maybe a little bit worse when you get laid off. Here in the U.S., I think it’s a little bit, a little bit, a little bit more normal. You get used to it, but the positive thing is also that now there is really talent available again. I was talking to a founder the other day, from a robotics company. It’s called Robotics, so they make service robots for an application, and they say we had such problems finding really good, experienced developers. And when we did, they were always quickly traded away by Facebook or Meta. And now he says: It’s unbelievable what good people were actually let go, who had 10 to 15 years of experience and now have. He would have had the opportunity to recruit such people, which was not possible before.
Marcus: Olaf talked about such a recalibration. Of course, this also includes when many people or more people come back onto the job market, then other companies are looking for what we’ve heard again and again in recent years, that insane salaries have been called up here in some cases, so a software developer or software developers who are new in the job, fresh out of university. They can easily earn $200,000 and more in Silicon Valley in their first year on the job. These are exorbitant salaries compared to Europe. Do you think, Olaf, that’s the case again now? Yes, you used the word. Readjusted, recalibrated.
Olaf: Yes, I think so. So the silver lining, as they say here. The silver lining is that the number of potential percentage wage increases, that these increases have decreased. That means that we are seeing a bit of a readjustment, especially since the non-tech sectors or industries cannot afford such salaries, especially not overseas. This means that expectations will have to be scaled back. This will certainly be a bit of a shock for all the young talents who are now coming from the tech industry and who are perhaps, I don’t want to say spoiled there, because they also have a very high cost of living, but who can expect completely different conditions here. On the other hand, it’s quite good for the rest of the economy, as you already indicated, Markus, because on the one hand they get talent, now and on the other hand they can also drive the techification or mechanization of their own companies. With this tech talent.
Matthias: It has also become clear this week. Mark Zuckerberg proclaimed the year of efficiency on Meta and yesterday I listened to the call at Google with the CEO Sunder Pichai, the head of sales Philipp Schindler and the head of finance Ruth Porat. One of the things they said was that they now want to use artificial intelligence to work more efficiently. In other words, they are looking much more at costs. I recently saw a tool where you can calculate when you do a conference, a job, what it costs, also on the basis of the hourly rates of the individual employees, that you can then immediately see, oh, that now costs several thousand dollars, if we add these and the people. So the waste that we’ve also seen at some tech companies, where really always a lot of money was spent, also on perks. So at Google, I think some of the masseurs there have been laid off and or or lavish buffets. I think that’s going to go down and people are going to pay a lot more attention to salaries as well. Was there such a memo that Amazon now wants to hire software developers away from college if possible and pay them cheaper there as well? I think this trend will be with us for a while.
Marcus: I wanted to make another point. If you look at these layoff figures, of course they don’t all relate to Silicon Valley, the B Area or California, but these are all global companies by now. So there are, so to speak, also a lot of people who have been laid off who are probably working in other parts of the world. Olaf Or?
Olaf: Yes, that’s right, because it affects different functional areas in the companies. It’s not just one area, the core developers, product developers, but of course also people in sales marketing and sales. Clearly, I don’t know the exact proportions. So this will certainly have an international impact, especially since there are a lot of international talents working here in Silicon Valley, and some of them, depending on the visa they have, have to go back home and look for jobs, which has both negative and positive effects. Especially since there are also a lot of international talents working here in Silicon Valley and some of them now have to go back home and look for jobs, depending on which visa they are on, which has both negative and positive consequences.
umal international talents are working here in Silicon Valley and some of them, depending on the visa they are on, have to go home and look for work, which has both negative and positive consequences.
Marcus: You have two months if you’ve lost your job and you’re here on the A B visa, for example. You have two months to find a new job in the US. So it’s probably not going to be that easy for some people. But can you say that? Matthias That many companies have also adorned themselves like that in recent weeks? You said it, one wants. They want to cut costs, they want to become more efficient, and that’s why they’ve dressed up a bit for the analysts and the stock market players. If you can show them, look here, our expenses are no longer so high, we’ve reduced them. That’s certainly good for the share price, isn’t it?
Matthias: Yes, you saw that quite clearly on Thursday when the Meta share went up, I think, 20 or 30 percent, I think 25 percent. That was the biggest increase in one fell swoop in the last ten years. Simply because Zuckerberg had actually reported bad numbers the day before, I would say. It was the third revenue decline in a row, so after three quarters. But what he just said, and that was kind of the magic word, was share buybacks for $40 billion and just this year of efficiency, that so you want to look much more closely at costs now. And you have to remember, for all the whining that we’re hearing now, of course these were not the numbers that were expected now, even at Google. But it’s still profits. It’s still revenue growth, even though at least at Google, there it was 1%. But the companies are still making insane profits and Meta has. I haven’t looked at the latest numbers now, but they’ve had a better return on sales for many years than Apple, for example. And that, of course, is grist to the stock market’s mill. Job cuts and share buybacks. And then the stock has to go up again. That also worked for Meta.
Marcus: And that’s a proven recipe, especially after all the tech companies kind of starved all last year, after their stock prices really went down significantly last year, so those kinds of measures are probably welcome. But we still need to talk about one company in particular. Matthias, you just mentioned it, that’s Apple. They’ve managed to do something so far that many other companies haven’t been able to do. They have never had to lay anyone off. What’s the reason for that?
Olaf: Olaf Yes, that’s because the numbers, which are certainly negative, you have to say, a five percent drop in revenue is certainly, let’s say, if you compare that to what Apple has had so far, the worst or the worst since, I think, 2016. And of course, that’s an eternity in the technology industry. So from that, you were used to seeing this, as I always describe it, this field hockey stick. But people already suspected that things couldn’t go on like this at Apple either, because they saw very significant problems there with the supply chain, with China of course, both in terms of supply, also in terms of the production of the iPhones, and also as a market, and so they had to adjust to that and that was probably already priced into the share price a little bit last year.
Marcus: But on the other hand Olaf, you also have to see. Apple was much more conservative than the Googles and the Amazons and the Medas. Especially in the pandemic phase, when it came to hiring more staff and expanding. Amazon and and Meta grew brutally there. Um, Apple more or less held back there. And if you look at Apple’s cafeteria, you have to pay for everything. The employees there also have to pay. And the laundry service and the massage service that the company pays for are not available at Apple either.
Olaf: Yes, that’s what Apple CEO Tim Cook said. He said we have a very strong focus and we will continue to drive that. So that was the recipe. They simply didn’t eat as much bacon in terms of the mass of employees, whereas other tech companies have certainly helped themselves abundantly from the employer pool. So it’s certainly commendable that they were more conservative and didn’t have to kick anyone out. Now, of course, the question is how things will continue, i.e. now until March in the next quarter and beyond. Tim Cook has also already admitted that they assume that they will get enough suppliers for the deliveries, for the shares and for the phones in the next quarter, but that didn’t sound so super convinced or convincing to me, because it’s not like China is opening up again in a completely linear way. There are also waves of foreclosure again. You can see that right now, too, so it’s a mess. I think the number was 37 million Chinese have Covered every day. That is an unimaginable dimension. And the question is, of course, what effect will this have on factories, on production, on consumption, and so on.
Marcus: Matthias, can we have another quick look? Maybe on Amazon, because they were really in the last months, especially during the pandemic, they really always led the profit records there, earned billions. And now the bottom line is only $278 million. And Amazon claims to be a particularly frugal company, where they really turn over every penny. And anyone who knows the story from the early days of Amazon knows that Jeff Bezos‘ desk consisted of the wooden panel of an old door. And that was simply folded up because they said they were saving money and they wanted to make as much money as possible with as little effort as possible. What’s going on with Amazon? Don’t they celebrate their frugality anymore?
Matthias: Well, they’ve certainly neglected that frugality in the last two years, since Corona broke out. Have you had to? So we had the Corona pandemic. That’s when people were ordering online like crazy. Amazon was expanding its logistics network, its drivers, etc., investing like crazy, and now you’re finding that a lot of those sales that you were doing were a little bit preempted after all. It’s similar to Peloton, for example, and other companies, where people thought that things would really take off now. And now it turns out that it wasn’t so sustainable after all. And Andy Jesse, who took over the leadership position from Jeff Bezos. So now he has to see how he turns back this, this overextension that was had. And he’s just doing that with, with, with, again, layoffs. At the moment, everything at Amazon is really being put to the test. Many pilot projects that you have done, you have stopped again. So, for example, with the delivery robots or also with the drone deliveries. Or even there, I think we already talked about it last year. Also with Alexa actually a flagship product and that will probably take a while to recapture those effects of overextension. And you mentioned it, Marcus, we just saw it in the numbers. There, Amazon was able to grow, I think, 5% in the holiday shopping season because people did shop very well, but it was just left with a profit of $278 million.
Matthias: Mainly because that was also a consequence of the exaggeration that the value of the stake in the electric car manufacturer revier really had to be corrected again. I think it was around 2.3 billion dollars that Amazon had to write off. And that’s how you get to those numbers. And for the whole year, I just have it in my head now, it was even a loss of 2.7 billion dollars. So that’s the biggest loss Amazon has ever made in one year. So that. That’s where the heads go down a little bit. At Amazon, especially because the growth driver cloud computing – Amazon Web Services – is Amazon’s gold mine par excellence. It continues to grow and develop well, but not as fast as it used to. And that’s also the question that worries me a bit. So if all the tech companies are now saying that this is the year of efficiency and we have to look at costs, we might also have to cut back on investments. How does that affect the overall market then? Well, people are already complaining that they are actually in this situation because the customers they have are cutting back on their advertising budgets or their cloud budgets despite digitization. So we’re getting into a kind of vicious circle, or am I seeing it wrong, Olaf?
Olaf: Of course, supply chains are also involved here, and it is certainly the case that some service providers are also dragged down. First and foremost, of course, the companies that offer part-time work. So from that point of view, I agree with you. Now we can only hope that the landing in the rest of the economy will be a soft landing, that they will be able to partially compensate for these layoffs and that we will slowly move towards each other again in the course of the year and that there will not be a total break in this fragile, very fragile circularity that you are describing.
Marcus: But couldn’t the Fed, the Federal Reserve, be applauded and applauded more? If you look at it, it’s been doing quite well so far. We haven’t had these slumps, we haven’t had this recession, and we’re seeing that the U.S. economy is doing better than we thought.
Olaf: Yes, well, the Fed has also indicated that it has only raised the rate a little bit for the time being. So 0.25 is not so much, at least not in the tenor of the previous increases, which were more like half a percent around half a percent. But she has already indicated that this is now for observation purposes. In other words, we want to see in small steps how things develop. How is this sensitive balance developing? Because if it becomes too much of a factor now and is raised too much, then it may lead the economy into a recession. I think that’s a good, a good touch. But at the same time, Powell has said that he is ready and his boat is behind him. The Fed funds rate, which controls primary interest rates, will certainly then also be at up to from now. I don’t know what from 4.7 or so to raise above 5.5 or so. That is, that is already a signal that one is prepared to become more draconian again here. Because it would be fatal, of course, if we collapsed now and the Fed then had to raise rates quite dramatically. We would then be back in this valley of despair, as we were in the 1970s.
Marcus: But it doesn’t look like that’s going to happen at the moment. Because the Americans are now also putting on the brakes and tightening their belts. If we look at the fact that consumption has declined in recent weeks, in supermarkets, in services and also in rents, which are stagnating. I would like to talk about another issue. Sometimes it almost comes out of my ears again, because you hear it almost everywhere and everyone is talking about it. That is, of course, artificial intelligence. Gtpt in the form of GTBT is suddenly AI, AI has suddenly become popular again. A company in San Francisco has managed to get us using this engine with great amazement. And next week, there are two dates that I think will be quite exciting, because it’s also about the old race between Microsoft and Google again. On Tuesday, I can reveal, Google has invited to Redmond to the company headquarters to present something. At the moment, one can only speculate. Microsoft is not commenting on it. It has also been asked not to make a big fuss about it. It could probably be Chat GPT. After all, Microsoft is said to have invested $29 billion in the San Francisco-based company. And Microsoft runs a search engine Bing, which of course has been lagging Google for years, which I believe has a roundabout 90% market share with Google search. But Chat Cpt. Matthias might be able to steer this game a little bit more in Microsoft’s direction.
Matthias: Yes, interesting was already a small Freudian slip in your moderation. Markus, you said earlier that Google invited us to the company headquarters in Redmond, but maybe we can get there, maybe we can go there. So maybe. Or have you there yes or that will take over Google Microsoft later and then the insane search engine still with with AI. I think there’s music in it again now, and it’s actually quite good that Open Air has forged ahead, because Google has also invested very, very heavily in AI. I think six years ago, Pichai proclaimed that Google AI was the first company. But then you actually saw relatively little from the outside, except for presentations. There have been presentations every now and then. I was also invited to presentations on what they wanted to do with AI. But these were all things in the lab, and people were very cautious because they were afraid that mistakes would happen. That’s the distortion caused by the AI. I know the example of this chatbot that I think Microsoft had. It immediately made some racist comments and had to be stopped very quickly. So Open Air has taken the lead here and is also relatively impressive.
In preparation for our conversation this afternoon, I asked BT, for example, this question that we have just discussed, also when will things pick up again in the technology sector? And the answer, and I’m not imitating a robot voice now when I read it out. But I mean, they’re also ringing now, of course. So to that question, when is the tech industry going to pick up? It’s difficult to make an accurate prediction of when things will pick up in the tech industry, as it depends on many factors, including the global economic situation, political developments and technological trends. However, based on past experience and historical development, technology companies are generally very resilient and able to adapt quickly to changing market conditions. It is therefore likely that the technology industry will continue to grow and prosper in the future. We can all subscribe to that, can’t we?
Olaf: I think so, Matthias. Because. Because I have had similar experiences. For example, for a customer project that I will now be doing in the Middle East for a European company, I once asked Z a question about how this company is positioned and the answer that came back was something like this: it wasn’t earth-shattering, but it was correct in its basic outlines and, of course, we would have to refine it. When I then asked what the strategy of this company should look like? He then gave an answer that was not of such high quality, because of course he has to synthesize, think ahead, and perhaps also break new ground for which there is no data yet. After all, strategy is not just a construct of empirical data. So that’s where it’s still missing. But we’ve already done experiments, for example, at the HS, at the University of Berkeley, that show that the use of Z gives or other transformers can also already help people pass exams. Maybe not with a straight A, but you can get through. And right now we’re seeing those, the universities, they’re now going in circles and just trying to figure out how do we actually still set ourselves up with our education when the writing of papers, of articles, of memos, etc. can now basically be taken over by AI, often in such a way that you don’t even know the difference anymore. Then, of course, there are programs that can do forensic analysis, but that’s very defensively thought of. And there’s also an opportunity there to think ahead at universities as well and say, look, we’ve always known that universities, the education system has to change. We simply have to adapt it to the times. We’ve been talking about it for 20 plus years now and now we’re getting, as they say in America, such a kick in the pants. And now we have to, otherwise we won’t be able to distinguish it at all.
Marcus: Three things come to mind. You brought it up. At the moment, more and more machines and services are springing up and the web, where you can look up whether a certain text is AI-generated. There are good tools that work very reliably and there are other tools where the hit rate is not so good. But I think that’s one way to see what it AI generates. And then. Matthias your text example, that was of course very generalizing, but I think now you also have to take CPT three in defense because the data set that all these answers are based on, it’s already a few years old. So this is not the latest data and that’s why CPT is not familiar with newer developments, for example, in the drug market, drugs that came onto the market a year ago. There the chat CPT simply does not know because it does not know these data, because it has not learned these data. Because it hasn’t learned these data. So there you have to give them a chance. But maybe next week we will already see Chat go public. Then not as then Francisco, but then just up in Redmond and not at Google, but of course at Microsoft. But one last point I want to mention quickly, that is already. There are many who say that Google seems to be afraid with its developments. London is where Google AI’s main lab is, that they’re so clearly holding back there.
Marcus: Out of fear. We remember three or four years ago, there was the Google io, the developer conference, and there was quite proudly demonstrated a phone call that a voice robot made to a woman who called a call center. And it was really indistinguishable. And Google really is a burned child. There was a lot of criticism afterwards about how Google could do something like that and that they announced at the time, oh, we’re going to unleash that on the public soon. They took a lot of punishment and then turned the tide in the other direction. With the effect that many people in the AI Lab in London switched from Google to Open AI. There was then a real move of developers who had been working in London to San Francisco. Not exactly to Google, but to the Open AI conference, which also lured with incredible salaries. And Google is now losing out because really the top people who built Google’s services, now these, these people are suddenly missing. And they’re under pressure and now they’re going to go public next week as well. But the last point I think we have to get used to in the future. We used to throw random snippets of words into Google search, but to get good results with AI, you also have to ask damn good questions.
Matthias: No question. By the way, I also asked Google the same question about whether the tech industry was on the upswing again, and the answer was 1.49 million results in zero 0.44 seconds from Google, followed by a barrage of articles from Die Zeit, Handelsblatt, Tagesschau, Süddeutsche Zeitung, all of which you would have to go through now. So Google has to stretch itself a bit. They are now under pressure, as you rightly say, Markus, and they will also present something. But they are under pressure, no question about it, and they will probably be much more critically eyed than Open AI, for example. I think they will look very, very closely, especially because it’s also a young company, a new product, and it will be interesting to see what Google will present there. So the idea that I ask a question to the search engine, which is yes, so at least 20 years old. I remember Arzt here, this company here in the FRG. Olaf may remember that as well. So 2002, 2003 was the idea, so finally away from these keywords, but to ask real questions to the search engine.
Marcus: Or Wolfram Alpha.
Matthias: Do you remember that exactly? That too. We’ve all had that before. The idea is not new, but there just seems to be a lot more opportunity now through the appropriate computing power and through machine learning, through the advances that have been made in neural neural networks as well, to really do that in an impressive way. But of course, it could be a little bit like the metaverse, if you remember. That was also about a year ago where there was such a real hype about what you could do with the metaverse, future of the Internet. And yes, and then came more and more criticism, of that, so just Mark Zuckerberg’s vision. And it may well be that now, with artificial AI, it’s also going a bit in this direction, because it’s becoming clear that these questions are only, as you’ve already said. Markus, of course, it always depends on how current this artificial intelligence is and that there will certainly also be racist excesses. I could swear that Sam Altman, the head of AI, is already worried about how it can be abused, especially in the creation of videos and images, where in the Revenge Porn stuff, if you want to denigrate someone with porn on the Internet, there are corresponding tendencies that are very difficult to stop.
Marcus: But Matthias, these image generators where you can stick people in have been around for a long time. In contrast to the metaverse a year ago, when Zuckerberg introduced these pixel people, the spark didn’t take off. But it did for me. When I look at the services that are now available, as they are to me as a journalist and to me. I can imagine that Matthias, and with Olaf you at the university, it is no different. When you throw texts into an egg machine and it says, look, here you have some word duplications and you could formulate the sentence like this. Or if you can just have texts checked Is that really the case. Is that really based on facts or is that conclusive? Do I maybe need to construct the text in a completely different way? These are incredibly welcome tools for me as someone who deals with language a lot professionally. And I look forward to them. And I’m always surprised when I read in Germany: Uiuiui, uiuiui, we have to be careful now. And then there is always a very nebulous talk of a danger and one takes on a life of its own. But in the texts that want to deal critically with this technology, I find few concrete examples where this is concretized and where one finds, so to speak, a proof. It’s always very general and a hint where you say, oh, that could be dangerous. That actually annoys me much more than these many new possibilities that are opening up. And for me, the question to both of you or maybe to you first would be: Do you feel the same way? Or do you also say „Boah ey, that’s really dangerous?
Olaf: Yes, let’s put it that way. I definitely feel the same way. In Germany, we are certainly the ones who have reservations, and we certainly have the ability to look at everything from many different angles. But we often have a negative and defensive attitude, which often doesn’t help us. So there is certainly potential for a significant disruption. Just as professors have to change, editors have to change. I can tell you, even in our consulting and in our consulting company, we have to think about how we work with there now, when it can also already write reports, for example. But I see it like you do. Nice, positive. We have always built on outdated technologies. We’re, I think I’ve said this before as humanity, we’re, we’re tool makers and we got away from the abacus and then invented a, how do you say, calculator and then speech sets and now you just have to speak it into Siri and Siri does the calculations for you. So our lives haven’t necessarily gotten worse. Then, of course, you can talk about Pisa, about studies and so on, to what extent pupils and students are still mathematically savvy. But the question is: Can mathematics be taught differently? Can you raise them to a much higher level of critical thinking, also project work, productivity, satisfaction, also their own personal growth? By just, I’ll say, sparing them this piecing together, this manual piecing together, just like we did in agriculture, before, a few hundred years ago. So I think that’s a good thing, I’m going to ask my students, for example, to critically examine the texts. I think you’ve already touched on that. Markus, and above all, I’m working in a field where synthesis and future projections and visions and strategies, yes, become very important. And for strategy, you still need human creativity. Maybe one day you won’t, but I’m not really worried about that for the next 5 to 10 years.
Matthias: Yes, I see it similarly to Olaf and you are right, Markus and we unfortunately have this German attitude. That everything progressive is always immediately seen negatively, that doesn’t always have to be the worst thing. Of course, you can also discuss the dangers, but when I look at it now with the chat, it also reminds me a bit of Wikipedia, the discussion we once had, also 20 years ago, whether you want to have that at all. So it’s an online encyclopedia rather than the Encyclopedia Britannica or the Brockhaus. There is no editorial team behind it. It’s all far too dangerous, and I think Wikipedia has actually established itself today, but you still have to be careful, and I think that’s also a challenge for us journalists now. So a lot of what’s there sounds almost good, but not everything has to be right all the time, there are also misinterpretations in there or also simply misinformation about outdated information, that you just have to be a bit more careful there. But otherwise? I see great opportunities. Well, I was like this.
Matthias: I did the property tax declaration in Germany with my wife over Christmas for my mother-in-law here. It still worked for the house, but she also has some farmland and we couldn’t believe how bad the declarations were in this Elster program, so we really had to go on the Internet and search and watch YouTube videos of how others did it. So I really would have liked to have a virtual assistant who simply tells me what I have to enter or what I’m not allowed to enter and why it doesn’t work now and why it doesn’t continue, instead of me having to call the tax office, where no one answers the phone because they’re all so overloaded. So I think there are a lot of possibilities. We also have a shortage of skilled workers. A shortage of skilled workers everywhere. So that at least in such information services or in customer care, there are certainly great opportunities. And you’re right. So, of course, here you can see from the outset the advantages that you can have, whereas with a metaversum, that’s still a bit of a stretch. Yeah.
Marcus: Say friends, what I’m interested in, one knows four companies in Germany that are active in the field and are doing something there. Whenever I look at these different services that offer text creation, images, conversion, etc. or video editing using AI, I kind of end up with companies that are even based here in Silicon Valley. I know of only one company in Cologne that I think makes the best translation engine in the world. That’s PP. They have now also offered a kind of back-translation service, so to speak, that translates texts back into clean English or German. Are there any German companies that he still knows that he might be able to recommend?
Olaf: Well, on the one hand there is certainly the well-known company SAP, they also have AI competencies. They are described to me as not necessarily playing in the top league, which is a shame for such a renowned and large global company. Then, if you look at the incubators in Germany, for example, whether that’s Entrepreneurship, in Munich or in Hamburg, where I’m a bit active, and certainly then also the big ones in Berlin, we certainly have a tremendous amount of talent. We have very promising small companies. The only question is always: What do we do with them? Yes, it’s easy to make fun of IBM Watson, for example. They’ve burned their fingers. Marketing beat the engineers to the punch and promised far too much. So the better cancer doctor and so on, which never happened. And they got their fingers burned, and then of course it’s easy to sit back, even from a German perspective, and say, yes, you Americans with your hype, yes, we Germans don’t need that. You’re right. Where are not only the small companies now? But where are the really big, successful global companies that simply make something like Watson better or invent something like eHTTP? Of course, that’s billions going into it. It’s a systemic problem with us, clearly. And we can discuss that in detail another time.
Matthias: Yes, I would have thought of Blue first, no question, I’m always amazed at how good their product is and especially compared to Google Translate, which has been in business much longer. So I was already very impressed by the product of this Cologne company and there are certainly many smaller companies that are not so well known. Now I’m not a specialist for German startups, but rather for American startups. But actually we should have them, because we also have a lot of expertise in Germany. We have the Max Planck Institute, I think in Saarbrücken, especially when it comes to language models. So we have a lot there. The only question is, how will it be used? Will they really be turned into business ideas? Will they become companies, can they become big, or will they be bought up again? That is the general problem we have in Germany. But I believe in one. We don’t lack experts. And we also have people like Richard Locher, who has now gone to the U.S. and is also very active in this area. He is very active and has also introduced his own search engine there, and he also told me that we actually already have good people in Germany, but there is still a lack of such points of excellence, where all the knowledge is simply brought together.
Olaf: The DFKI is the German Research Center or Institute for Artificial Intelligence, known worldwide, now also quite clearly. And they also cooperate with industry, including transatlantically. But it’s exactly right, as we’ve all also said by now. There is a lack of scale and there is a lack of system. Yes, someone like Richard Soche, he, he has to be able to go where he wants to go and have the best conditions. We just have to make sure that we create these conditions. And that includes, let me say, the scale of start-up capital. This includes the liquidity and the risk affinity of the system, that you can make transfers between the universities, that you can also license patents, that you can take IP with you, that you can take professors and doctoral students with you, who can then also come back once they have worked in a startup. So there are definitely 20 factors there that are important, just unfortunately, unfortunately despite Sprint and all sorts of others at the federal level, all sorts of other institutions and ideas. We’re not getting off the couch, unfortunately, it just has to be said. And if you are the fourth-largest or I don’t know now fifth-largest economy, because California is now supposedly larger than Germany, if you then look at how many global corporations come from Germany, then you see that they have really grown in the last 20 years.
So where is the new growth coming from? And you can’t just talk about talent, that’s very clear, and science, but really about scaling, about projecting this economic power.
Marcus: Germany has more and more problem areas, not only how to promote companies and knowledge and how to implement that. And above all, how to attract companies to Germany as a business location. And not that they then go abroad, to Silicon Valley, to found their companies there. So there are a lot of problems that are immanent in Germany. I look at the clock. We’ve been here for a relatively long time and we deserve a very short detour. We brought this up at the beginning with China. Olaf: The relationship should actually be put back on a better track in the new year. But the Chinese are there and are not acting happily there. The Americans, of course, are also unhappy with their economic policy. So both are heading for a less relaxed terrain.
Olaf: Yes, and that’s not a good omen for the economy, I have to say. So maybe if we look at China first, we’ve now seen, for 2022, only 3 percent growth, although they had actually announced 5.5. That’s a lot of money for such a powerful country as China with 1.4 billion inhabitants. That’s clear. So the financial institutions have taken in much less money. The international exchange with business partners is completely frozen by the lockdown policy from Beijing. Now comes the brutal opening and now we have to see what that does to the economy. I believe that we will see a very shaky China in the next six to three quarters of a year, purely in economic terms. Because Xi Jinping has taken on a lot, not only opening up, but he has also tried and is still trying to change the structure of the economy. Less consumer-oriented services, so B2C, as they say here, but B2B, so business services for industry, because more capacities are built up there and that’s and then of course to create many more jobs also in the hinterland of China, not only on the coast. So you can see, those are some very, very difficult priorities that he’s got on his plate there. And then, in between, to stir up conflicts with the U.S. over Taiwan, I think that’s very dangerous.
Olaf: So not only for the whole world USA, but especially for China itself. I don’t know how this is going to continue. Now, I guess you have to say, if that, if that China so 2023 is still shaky for now, then that can also globally for now, I say, not necessarily have negative effects. But first have positive effects, for example, when it comes to energy prices, so China. But China consumes 1/5, so 20% of the world’s oil. Half of Cooper, nickel and zinc, and Moore more than 3/5 of iron. So that’s a tremendous pull that’s there, and as you know, from the press that you write. German industry, global industry is already worrying about how they’re actually going to get affordable means of production then. So if China claims everything for itself and then of course favors itself. So it may be that this will enable the light clothing for the light ones. In the longer term, I already believe that China will remain one and the second largest economic power in the world. Then comes India. But India is a very difficult democracy with a very difficult economy and also economic policy. We still have to see that, that will go far beyond 23, 24 until that crystallizes.
Olaf: So not only for the whole world USA, but especially for China itself. I don’t know how this is going to continue. Now, I guess you have to say, if that, if that China so 2023 is still shaky for now, then that can also be globally for now, I say, not necessarily negative. But first have positive effects, for example, when it comes to energy prices, so China. But China consumes 1/5, 20% of the world’s oil. Half of Cooper, nickel and zinc and Moore more than 3/5 of iron. So that’s a tremendous pull that’s there, and as you know, from the press that you write. German industry, global industry is already worrying about how they’re actually going to get affordable means of production then. So if China claims everything for itself and then of course favors itself. So it may be that this will enable the light clothing for the light ones. In the longer term, I already believe that China will remain one and the second largest economic power in the world. Then comes India. But India is a very difficult democracy with a very difficult economy and also economic policy. We still have to see that, that will go far beyond 23, 24 until that crystallizes.
Olaf: Now we have to see whether the supply chain makes it, whether the market recovers, whether Xi Jinping is pragmatic. So far, he hasn’t been. You have to look at it this way. For all that the U.S. is said to be. The Americans are very pragmatic, now, of course, at a point where they’re saying, yes, if that’s the case and you don’t, let’s say, comply with world trade rules, then we can’t continue to put our workforce at risk. That is, there really is an industrial policy impetus here. After all, this has also led to tensions and hopefully to solutions with the European partners. So you see this, this situation, this complicated situation, which could now either go in the direction of getting together this year and next year, which would be desirable, of course. You can also selectively cooperate with a competing system or whether a parallel system develops there, where China then tussles with Russia. Yes, and? And with all the other countries that, let’s say, might not necessarily be friendly to America or Europe or at least then vacillate between the two, depending on what the issue is. So that would be a very difficult economy and let’s hope it doesn’t come to that. But we’ve tried to develop a strategy for that as well. And that’s in the book.
Marcus: In October one said Can it be that we have experienced during the pandemic that China in particular is no longer so strongly the country that produces these special cheap products, but that it has lost this task, this role to other market participants, to Vietnam for example, to Cambodia, to Arm, to Bangladesh. There, in the last months, according to my observation, if you read so in the Wall Street Journal, but if you also buy yourself, you notice that more and more comes from Thailand, that more and more products come from the Philippines. Could it be that because of Corona, but also because the Americans are, so to speak, redirecting the economy a bit, that these cheap products are no longer coming from the Chinese?
Olaf: Yes, there will certainly be relocations. This is not only a question of national policy, but the business leaders have to ask themselves, where do I go if I don’t get any workers in China and have no market. And there are of course the countries that you mentioned, Vietnam, partly, Thailand, then among others also Mexico now are there, are available there of course and Vietnam has put in a lot of effort. This is a highly qualified labor market with a very good education, which, similar to the Chinese, also ticks very entrepreneurial, are very agile and of course also stand between the worlds, but are also America affine. In Mexico, it’s a bit different, because some of the Chinese manufacturers are saying that I’d rather produce for the Americans, for my American customers in Mexico, before these customers run away from me because I can no longer do that in China. And this is now a very difficult balancing act for Xi Jinping as well. I don’t believe that the global economy will turn away from China, that they will completely dismantle there. That would be, that would not, not, not. That would not be desirable for anybody, clearly. And it’s not going to happen. But also there a balance, I think, that the singular focus on China in the last 40 years and there we will still, these are such these tectonic fractures that we also describe in the book, that are coming and that can be managed. But there are a lot of them coming, which I think the World Economic Forum calls polycrises, so a lot of them stacked next to each other and on top of each other. And that’s going to be an interesting year 2023 2024, we can look forward to that.
Matthias: So if I just 2024 is yes the race for the White House reopens again. Donald Trump already did that a few months ago. But then it will enter the hot phase and I think that the conflicts with China will also be addressed accordingly. So I already have a bit of a stomach grumble when I think about next year. There was already a U.S. general here who said that in two years there could be a war with China over Taiwan. So these are all things that hopefully will not happen. But it is very, very difficult. And we mentioned Apple earlier, Tim Cook, so he certainly has his toughest nut to crack. He has his contract manufacturer in China, Foxconn, and Apple would, well, he has his bestseller iPhone and could not survive without that. They are very dependent on China. Although they are now going more to Vietnam and, as I hear, more to India, the question is of course always, is the corresponding supply chain there? Is the corresponding competence on site at all? Can I build it up so quickly and, above all, won’t I perhaps upset my Chinese customers and then I won’t be able to sell my iPhone in China or won’t be able to sell it as much or it will even be boycotted. So that’s one of those questions where you think, well, it’s nice that everything is actually so networked and hopefully it won’t break us apart, because if we had two big blocks afterwards, I don’t think that would really be so good.
Marcus: There couldn’t be a better, more thoughtful closing. That was the Friday roundup for the first time this year. We’ll see you again soon. Thanks for listening. Stay tuned and download us again next week. See you then and bye.