AI deals in the cross hairs
Tech giants like Microsoft, Amazon and Google have gained a lead in the artificial intelligence race by investing in innovative start-ups like OpenAI and Anthropic.
But that strategy is attracting more attention, as the FTC joins international counterparts in investigating those deals. It’s the agency’s latest effort to check the power of Big Tech, but it raises questions about whether it will also hamper the ability of start-ups to raise needed cash.
The big question: Do these deals hinder competition? Neither arrangement is a straight-up acquisition. But in the Microsoft-OpenAI deal, the relationship appears to be especially close: Microsoft has committed to investing $13 billion for a 49 percent stake in the ChatGPT parent (staying below 50 percent to avoid antitrust investigations. Has sought) and obtained rights to the intellectual property of OpenAI.
Microsoft is not represented on OpenAI’s board. But its influence on the start-up came into the spotlight in November, when it offered to hire Sam Altman after he was ousted as OpenAI’s CEO.
Amazon and Google don’t seem to have that much influence over Anthropic, although they have together committed to investing $6 billion in it. (A Google spokesperson said his company’s deal with Anthropic does not include exclusive technology rights, unlike Microsoft’s investment in OpenAI.)
FTC wants more details on deals, Including their strategic rationale and implications for competition. “Our study will shed light on whether investments and partnerships made by major companies risk distorting innovation and undermining fair competition,” FTC Chairwoman Lina Khan said in a statement.
The FTC’s investigation follows investigations by Britain’s Competition and Markets Authority and the European Commission over similar concerns.
Regulators are trying to avoid past mistakes. Khan rose to fame by proposing a new antitrust approach to rein in internet giants. The AI industry needs similar oversight, he said in a Times guest essay last year, writing that “AI adoption risks further disrupting the market dominance of large incumbent technology companies.”
AI companies are concerned: Their operations are extremely expensive, requiring massive amounts of computing power to run their AI systems. The investment in OpenAI and Anthropic includes cloud computing credits, which helps defray costs. Restricting Big Tech’s ability to invest in those companies could hinder their ability to continue innovating.
In other AI news: Elon Musk’s XAI is reportedly exploring up to $6 billion The new funding, which also includes investors from Hong Kong – could raise political concerns in the US
What’s going on over here
The White House plans to limit exports on liquefied natural gas. The Biden administration said on Friday that it would Stop approval of new licenses for such shipments as it examines their environmental impact. The move could hurt customers in Asia and Europe, which have become increasingly dependent on U.S. natural gas since Russia’s invasion of Ukraine in 2022.
JPMorgan Chase reshuffles its top executives. Jennifer Piepszak and Troy Rohrbaugh will Become a co-CEO of a newly expanded commercial and investment bank, while Marian Lake would become sole head of the firm’s huge commercial bank. All three are seen as potential successors to bank CEO Jamie Dimon – although he has said he is not leaving anytime soon.
Investors are waiting for inflation data. Treasury Secretary Janet Yellen said Thursday that inflation “well under control,” a thesis that can be tested when personal consumption expenditure price index data is released on Friday. Economists expect the closely watched report to show that prices of “core” goods and services rose last month. from 3 percent on an annual basis. This is the last major inflation report before the Fed’s rate-making meeting next week.
Cruz blames the hostility of regulators for his problems. General Motors’ autonomous vehicle division said that although executives did not mislead regulators about an incident in which one of its cars dragged a pedestrian, they failed to explain key details. This led to the suspension of nationwide operations and investigations by the Justice Department and others; Several executives have already resigned, including Kyle Vogt, co-founder of the GM subsidiary.
opening the app store
Apple has agreed to a major overhaul of its digital services business that will allow customers in the European Union to download apps from rival app stores, use third-party payment systems and more easily choose a default browser over Safari. Not there.
It’s the latest example of regulators imposing major changes on Big Tech.
Apple is making changes to comply with the EU Digital Markets Act, Which comes into effect in March. The legislation is a major test for the bloc, which has for years been trying to limit the market dominance of US companies like Apple, Amazon and Google, fearing their size hurts competition and consumers.
The EU is a big market for the iPhone maker. The block accounts for about 6 percent of the company’s App Store business, which has an estimated global revenue of $24 billion. Apple’s shares fell 1 percent due to this news on Thursday.
Apple warned that the requirements would be bad for customers. Phil Schiller, who leads the App Store business, Complaint The Financial Times was told that the reforms were being forced upon the company and that the measures would make the user experience in Europe inferior to “the rest of the world”.
Opening the App Store addresses some of the criticisms from developers and regulators. Apple has long resisted making changes to the App Store, which has come under criticism for charging high fees and requiring developers like Spotify and Epic Games to adapt their technology to Apple’s platform.
App developers consider DMA as a great leveler. In a blog post This week, Spotify said that its EU customers who use Apple products will soon be able to change their subscription plans and pay for those changes inside the app.
“It should be this easy for every Spotify customer everywhere”the company wrote.
“Spine shivers” of Western business in China
Ian Stones spent decades in China as a high-profile member of the international business community, helping companies such as General Motors and Pfizer set up operations. Five years ago, he was secretly detainedAccording to The Wall Street Journal, a case that raises concerns about the risks faced by foreign officials and companies in the country.
Relatives of the Stones say they have not seen any Chinese court documents. A spokesman for China’s Foreign Ministry said this morning that Stones was sentenced to five years in prison in 2022 for “illegally obtaining intelligence for foreign actors” and that his appeal was rejected last September. Was. The Stones’ daughter, Laura, told The Journal that he did not confess and that neither the family nor British Embassy officials were allowed to attend his trial.
US experts on Chinese law say the secrecy surrounding his detention suggests that other foreign officials are also being detained.
The arrest of such a prominent executive could cause an uproar among Western businesses. Peter Humphrey, a British due-diligence expert Detained for 23 months In China, the Stones have an old friend. He said the Stones’ detention is a sign of the uncertain business environment under President Xi Jinping. “This should send a shiver down the spine of every Western businessman living in China,” he told DealBook.
Japan goes up, China goes down
Japan’s benchmark stock index, the Nikkei 225, is trading at a high last seen in 1989 and is close to a record. The market is rising because the weak yen makes stocks look cheap and corporate reforms have given shareholders more rights.
Geopolitics has also helped, because Western investors are looking for alternative sources of growth because they are angry with China, where it is the opposite story. Development has slowed down. Its property market is in deep trouble and shares have fallen in recent years.
Given the divergence, investors are also involved warren buffettThey are investing money in Japan because they see a development story in the making.
Large companies are surrounded by bureaucracy, inefficiency, and process that often hinders rather than helps. In “The Friction Project,” Stanford University Business School professors Bob Sutton and Huggie Rao examine why working in organizations can be hard, and how to fix it.
DealBook talked to Sutton about the friction that can slow down business. This interview has been edited and condensed.
How does friction start?
Whether it’s fixing a university, fixing a Lego model or planning a trip, our default approach to solving problems is to simply add more and more complications. Additionally, organizations create a set of incentives to add further complexity. People create fiefdoms, especially those who handle things like accounting, human resources, or legal. Some of those functions are valuable, but often they hinder the completion of tasks.
What does “good” friction look like?
Laszlo Bock, who was head of people at Google, told us that the company has a history of interviewing applicants 25 times before offering them a job. So he created a simple rule: If you’re going to interview someone more than four times, you have to get their written permission. This was an example of using good friction to prevent bad friction.
How can leaders recognize and heal bad conflict?
We call it the game of subtraction. Turn to the person next to you and consider what is driving you crazy, and then identify something you can actually get rid of that will make things easier.
I played this game with a pharmaceutical company. “We have over 85 different parental leave policies, and I think we can do better than that,” the general counsel said. After two weeks, they were down to 60.
Blackstone’s fourth quarter profit increased by 4 percent As its private equity business recovered; Meanwhile, the company plans raise 10 billion dollars For a new opportunistic credit fund. (Bloomberg)
A group of bondholders in farfetch Is trying to challenge Coupang’s takeover of the beleaguered online luxury marketplace. (News release)
Conservative activists and tech industry lobbyists plan to protest President Biden’s executive order requiring AI companies reveal more details About his biggest projects. (Politico)
Former Republican Representative Liz Cheney urged Nikki Haley to remain in the GOP primary until Super Tuesday in March. (NYT)
best among the rest
In layoff news: Microsoft is cutting 1,900 jobs in its video game division after closing its acquisition of Activision Blizzard; sales force is laying off 700 employees; And Business Insider is eliminating 8 percent of its staff positions. (NYT, WSJ)
“Elon Musk is spreading election misinformation, but X’s fact checkers are long gone” (NYT)
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