Technology

➚ MOVE FAST: Building up. After looking like it was caught flat-footed by intensifying competition, Chinese e-commerce giant JD.com may be back on track. It beat quarterly revenue projections, partly by taking on PDD, which owns Pinduoduo and Temu, on pricing. And now, it’s looking to expand globally.

➘ BREAK THINGS: Piling on. The political landmines around responses of AI chatbots is making firms vulnerable to more curbs. India now wants tech companies to obtain approval before releasing AI tools that are “unreliable.” That’s after Google’s Gemini noted Prime Minister Narendra Modi’s critics have described his policies as “fascist.”

Earlier this week, Anthropic released its Claude 3 family of AI models. As has become custom of major frontier model releases, Anthropic listed all the benchmarks in which it bests OpenAI.

I’ve been watching YouTube videos of people doing their own tests to compare Claude 3 and ChatGPT. They include math questions and brain teasers meant to throw off the models.

Watching these tests, it appears Claude 3 is right on par with GPT-4. But it doesn’t surpass it in any meaningful way. The conclusion is that AI benchmarks just don’t tell us much, and ratings for them are very subjective.

The one area in which ChatGPT performed better was censorship. And by better, I mean it was less censored than Claude. I found this part fascinating. Anthropic would argue that its model is safer, but users pretty much unanimously want their AI models uncensored, and the ones that are constantly refusing to answer questions are graded down by reviewers.

Aside from major breakthroughs in AI algorithms that jumpstart capability, what models are willing to answer may become one of the key differentiators going forward.

Investors still clamor for Elon Musk’s companies

The recent headlines about Elon Musk have painted him as an unhinged drug user who has lost his entrepreneurial touch. But private-market investors are still clamoring to funnel millions into his companies, leaving the picky Musk to select the financial backers he prefers.

On the secondary markets, where shares of private tech companies are traded, Musk’s SpaceX is the most valuable and most coveted stock, trading at a $180 billion valuation, roughly triple the valuation from a couple of years ago.

Musk’s brain implant company Neuralink and his tunnel digging company The Boring Company have both doubled in value over the last year, based on secondary markets. That’s despite the fact that the ventures are risky and ambitious endeavors, and have limited liquidity, forcing investors to hang on to shares for years.

“Generally people, even if they’re skeptical of some of his behavior, acknowledge that he is a very effective manager and executive. They’re not that worried about it at all,” said Noel Moldvai, co-founder and CEO of Augment, a secondary-market trading platform.

Even xAI, Musk’s new artificial intelligence firm that aims to compete against OpenAI, has drawn interest on the secondary markets. One trader said a client recently wanted to purchase $20 million in xAI shares. The problem: The company is so new that the market for secondary shares effectively doesn’t exist yet.

Buying stock in Musk’s companies can be difficult, according to secondary market traders. He is selective about who gets to own shares in his companies. Early SpaceX employees, who are more likely to have unrestricted stocks, are allowed to sell their interest in the company, but SpaceX has a right of first refusal.

Investors looking to acquire shares can hash out agreements with current and former SpaceX employees, but SpaceX usually steps in and snaps up the stock itself or arranges for a preferred buyer to take them instead.

Getting approved to directly buy SpaceX stock requires a lengthy vetting process or personal connections, traders said.

The easiest way to purchase shares in Musk’s companies is to use pooled investments known as special purpose vehicles. These funds can sometimes acquire shares of Musk companies, and then turn around and take on investors in the fund.

Some secondary market traders have found a way to make money on Musk companies without risking any capital. One told Semafor that he makes arrangements with sellers, say a former SpaceX employee, to purchase stock without any intention of going through with the sale. Despite not having secured capital to make the purchase, he submits the sale for approval at an above-market price.

The company would rather pay a higher price for the shares than allow the stock to go to an unknown buyer. Once the transaction is finalized with the employee, the broker said he collects a commission, often worth tens of thousands of dollars.

This game of stock option chicken also helps former SpaceX employees sell at a higher share price than the company offers them during regularly scheduled sales, known as tender offers.

The one Musk-owned company that hasn’t attracted much secondary market attention is X, the social media firm Musk purchased at an inflated value of $44 billion in 2022. But even for X, there is some interest. Despite Musk firing most employees and alienating advertisers with his shock-jock style antics on social media, one of the secondary market traders recently received interest in millions of dollars in X stock.

Musk didn’t respond to requests for comment.

A new bipartisan push in Washington to address longstanding national security concerns associated with TikTok is gaining momentum. The leaders of the U.S. House Select Committee on the Chinese Communist Party introduced a bill Tuesday that would require China-based ByteDance to divest TikTok or otherwise ban app stores from carrying the social media platform, which boasts well over 100 million American users.

TikTok, which has an aggressive lobbying effort in D.C. that has helped defeat past efforts to restrict the app, criticized the bill as an “outright ban” that would stifle free speech, but lawmakers forcefully disputed that: “It is not a ban,” Rep. Mike Gallagher, R-Wis. told reporters today. “Think of this as a surgery designed to remove the tumor and thereby save the patient in the process.”

The proposal has support from at least one member of House GOP leadership and the White House, but could face a rockier road in the Senate, where the chairman of the Intelligence Committee raised constitutional concerns. And the Trump administration tried a similar approach to ban TikTok, but got shot down by the courts.

— Morgan Chalfant

What struck me as odd about Elon Musk’s lawsuit against OpenAI is that, in order to win, he basically has to convince a judge or a jury that closed-source AI models are fundamentally unsafe and that open source is the only way to go.

That’s a debate raging in the AI industry today and it likely won’t be resolved in a San Francisco courtroom.

Musk’s 35-page lawsuit hinges on the release of GPT-4, OpenAI’s most powerful model. Because it’s not “open,” he argues, OpenAI departed from its mission of creating safe and open AI.

But it seems that even Musk — at least at one point in time — agreed that open sourcing the most powerful AI models was dangerous. (Read this article from a year ago if you want the backstory here.)

In an email exchange released by OpenAI Tuesday evening in response to Musk’s lawsuit, OpenAI co-founder Ilya Sutskever worried that if AI suddenly made a massive leap in capability, an open source model would allow someone “unscrupulous” to build unsafe AI. “It is totally OK to not share the science,” Sutskever said.

“Yup,” Musk responded.

Those emails happened in 2016, so it’s entirely possible Musk has now changed his mind. But it also shows this is not a cut and dried issue and it will be difficult to prove.

After being hit with a 1.8 billion Euro fine for allegedly stifling innovation in the music streaming industry and harming consumers, Apple argued the big winner was Spotify.

But there’s one constituency that seems ignored: musicians.

Nearly everybody around the music industry looks better off these days, except the artists making the music, and that includes customers. I remember, as a kid, saving up to spend $15 on a compact disk which, in most cases, only had a few really good songs. Now, for $15 a month, my entire family can listen to practically any song in the world, any time they want, on any device.

I was looking around the web for a smart take on this topic and I came across a thought-provoking argument from Jack Stratton, a member of the funk band Vulfpeck and a regular Spotify critic. Stratton believes Apple could win back artists — and consumers — with a drastic change to the streaming business model.

He says that right now, Spotify and Apple collect 30% of revenue from streaming subscriptions. The remaining 70% is then divided up among artists, based on how often their songs are played. In that model, accounts that are more active effectively have more “voting power” on how the money is distributed. That also creates a lot of fraud, Stratton says. Scam artists can create accounts and play certain songs on a loop, essentially stealing money from artists.

Apple could shake things up by dividing the revenue from each individual streaming account based on the songs played by it. In other words, if a person listened to only one band, only that band would receive revenue from that account.

Apple hasn’t played the “good guy” in a long time, but it certainly made me think. I’d love to hear your thoughts on it.

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