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  "full_text": "David Westin:\nThis is \"Wall Street Week.\" I'm David Westin, bringing\nyou stories of capitalism. The U.S. government\nhas become a venture capitalist buying equity\nin quantum computing companies as a bet on the future. Plus Google turns to AI in making the biggest changes\nin its search engine in over 20 years. And the World Cup\nreturns to North America for the first time since 1994 with a lot more teams,\na lot more matches, and a lot higher price tag\nfor fans. But we start with the arrival\nof the mega IPO led by SpaceX with Anthropic\nand OpenAI right behind. What does starting out with a one trillion dollar\nmarket cap mean for the markets and those of us\ninvesting in them? Steven Rattner is chairman\nand CEO of Willett Advisors which invests the personal\nand philanthropic assets of our founder and majority\nowner Michael Bloomberg. Steve, this week we have had\nthe IPO of SpaceX, long awaited, and it's not the only one that appears to be going out\nat a trillion dollars or more. We also have Anthropic\nand we have OpenAI. There's a lot of talk about this\nin the financial press. Is it that big a deal? -Oh, yeah.\nThis is extraordinary. I've been in this business\nfor a pretty long time, back in the day when a few hundred million\ndollars a market cap on an IPO of $50 million was,\nyou know, reasonable. And now look where we are. We've never had companies\nof this kind of valuation on the day they go public,\ngo public. We've never had\nthis amount of capital being raised in an IPO. It's extraordinary. And perhaps it's a natural part of the evolution\nof capital markets. But it is still extraordinary. Westin: It's also, I would say,\nrelatively concentrated as much of the stock market\nhas been actually in big tech. I mean it's all tech-related,\nAI-related. Is that a problem, potentially? -People certainly\nworry about it. The fact that you have\nsuch a high percentage of the stock market in a relatively small number\nof 7 to 10 companies, depending on how you count. I've seen the charts showing that if you look back\nat the dot-com bubble, if you look back at 1929, and some\nof the other corrections, there was a similar phenomenon. I'm not sure why\nthose two things necessarily should go together. But certainly the world is in love with tech\nat the moment. And whether that will prove\njustified or not, time will tell. Westin: Are the normal rules\nof finance suspended when it comes to these? Because, I mean,\nif you look at things like valuations, I mean,\nthey're really extraordinary. I mean, for example,\nwhat they're talking about with SpaceX is, it really... You're saying like 95 times\ntheir trailing revenue. Not earnings, revenue. -Yeah, I think, I absolutely\nwould agree with that. But I would also say\nthat back in the dot-com bubble we had companies going public,\nI think, with no revenue or some\nde minimis amount of revenue. Again much smaller valuations,\nmuch smaller offering sizes. But yes the valuations\nvery much depend on what you believe\nis going to happen in the future as opposed\nto what already happened or what's happening\nat the moment. Westin: When I talk about SpaceX\nand Anthropic and OpenAI, they're very different\nin one respect, which is profitability. SpaceX actually\nhas been losing money, making money in some parts,\nlosing money in others. And OpenAI\nhas yet to make money. Anthropic\nactually is making money. Should that make\na difference to investors as they look at these 3 stocks? -Not necessarily. I mean, certainly\nmaking money now is better than making money\nsomewhere down the road. But an investment decision is essentially looking\nat the present value of future cash flows. And so if you believe\nthe future cash flows will be there, then the fact\nthat it doesn't make money now is not the end of the world. Obviously people who invest\nin private venture capital kinds of things\nor growth kinds of things are often investing in companies that make no money\nat that point. Some of them don't even\nhave a business at that point. But you're believing\nwhat's going to happen in the future. The problem is that\nthe further down the road the cash flows\nare going to occur, the positive cash flows, the more uncertainty\nobviously there is around them, the more you get into questions of what's the right\ndiscount rate and how do you really\nvalue cash flows that are 5, 6, 7 years out. Westin: As an investor\nlooking at these stocks, we have SpaceX, which is\na fairly complex creation. I mean it's...\nYou've got space launch, you've got AI, you've got all sorts of things\nin there as opposed to,\nfor example, Anthropic, which is a cleaner play. Does that make SpaceX\nmore attractive or less attractive? -I think you could go\neither way. I think\nthere are plenty of companies with one line of business\nthat have done fine. And there are other companies\nwith multiple lines of business that have done fine. If you look at SpaceX, the launch business\nis a excellent business. Musk has done a fantastic job of essentially winning that race\nso to speak. If you look at that...\nBut it's a small business, and it's never going to be a trillion dollar valuation\nkind of business. If you look\nat the Starlink business, he's clearly done a great job\nwith that as well. But again, it's not going\nto fully justify, probably, the valuation. And so you have to believe\nthat out there there's something else. There's an AI business, whether it's data centers\nin space, or Grok, actually, becoming more viable\nthan it seems to be so far, or something like that. Westin: We can't know right now. But as you look at this\nas an investor, do you wonder\nwhere the upside is? I mean, as you know so well, companies are taking\na lot longer to go public in general, which means\nthat a lot more of the upside may be before it goes public. And a lot of the growth\nmay be behind you as you go public. Is there a risk in something\nlike a SpaceX that, actually, the good parts\nare even realized? -Absolutely. Absolutely. There's lots of research\nthat's been done on IPOs. Smaller IPOs\nof smaller companies tend to not perform\nas well over... in the fullness of time\npost IPO. Bigger companies, obviously,\nagain, have no experience with something of this size.\nSo who knows? But you remember\nwhen Facebook, now Meta, went public,\nit was a really messy IPO. The stock traded down.\nPeople were bailing out. And now look at it. Google had this weird IPO\nwith their Dutch-reverse... Dutch-auction, whatever,\nyou want to call it, thing. Also a little complicated. Eventually,\nlook where Google is now. But then there's... then there's plenty\nof tombstones out there for the ones...\ngraveyard kind of tombstones, not celebratory tombstones, for the ones\nthat didn't work out so well. Westin: So there's concentration\nin the big tech AI area. There's also a concentration\nin the person of Elon Musk. He has 85%, something like that,\nof the voting control. He also is the CEO, the CTO,\nand the chairman. What are the risks involved\nin that as an investor? -Well there's definitely\nwhat we call a key man risk. This company\nis a unique creation of Elon Musk. I think he's got a good team. Gwynne Shotwell\nhas a great reputation. He doesn't suffer fools,\nobviously. So only people\nwho really can produce stay with him. But nonetheless\nit's hard to imagine many other people\nwho could have achieved something\nof this extraordinary magnitude. So I would separate\nthe voting control issue, which we can talk more about,\nfrom Elon, the person\nactually calling the shots, making the important decisions, that I think\nis critically important. The voting thing, I think\nis a different kettle of fish. Westin: What do 3 IPOs,\nas we're looking at right now, mean for the rest\nof the marketplace and other investors? I mean, first of all, could it be a slipstream effect where there are\nother ancillary businesses that serve these businesses that could be brought along\nin the slipstream? -Depends how they go. If they go well,\nthen you will see more of them. It's not completely\na coincidence. I don't think that\nyou haven't seen that many IPOs of these kinds of companies and they've been staying private\nfor longer. Part of is the IPO market\nhas not been really robust for a good number of years now. I think it's finally\ncoming out of that. And partly I think people\nhave not really wanted the hassle of being\na public company and like being private. Now when you need\nthe amounts of capital that these companies need, you really, at some point,\nhave no choice. And so I think\nif this goes well, these 3, or most of them, I think you will see more\nof them come out of the venture growth world\nand into the public markets. Westin: One of the things is the circular nature\nof some of the transactions going on among these companies. I mean,\nspecifically with SpaceX, they have a deal\nwith Anthropic, right? Where Anthropic is paying them\na lot of money. I think like $1.25 billion\na month, but with a 90 day out. But there are a lot\nof other circularities among the ownership\nand the relationships among these companies.\nIs that a risk? -And people go back\nand they use analogies, again, the dot-com era, when people were doing\nthese contracts for dark fiber, but they were never\ngoing to need it. They were never going to use it.\nIt was never going to get built. Whatever. I don't think\nit's that much of a risk here because, fundamentally,\nwhat we do know this this far is that AI\nis going to be a game changer. When you look at the pace\nof revenue growth for the providers\nof the large language models, it is... I don't think I've ever\nin my career seen businesses exceed a set of projections by as much\nas these companies have. More often than not, businesses fall a bit shorter\nof your projections, whatever. This has been extraordinary, and the usage the adoption rate, is unlike any technology item,\nI believe, in history, in terms of how fast\nit's being used and how much\nit's being used by people. So there's a real business\nat the bottom of this. If Musk wants to use some\nof his excess data capacity to generate some revenue\nin the meantime while he tries to build Grok\ninto a viable LLM, I don't have\na problem with that. You just have to,\nas an investor looks at that, you have to understand\nwhat it is you're doing, how long the contracts are, what the repeatability is\nand so forth. Westin: The dramatic growth\nyou described also comes with what I would say\nis dramatic capital investment. I mean, the capex\nis extraordinary. When does it need to pay off? I mean, at some point\nyou put all that capital in. You need to get a return\non that capital, and given\nthe amount of capital going in, it's got to be a lot of return. -Sure.\nAnthropic is already profitable. And so we can kind of see\nwhat this can look like. Yeah, I'm not going\nto argue about that. It's an extraordinary\namount of capital, and you expect\nextraordinary returns. But I do believe\nthat AI is a game changer unlike anything\nI've seen in my lifetime in terms of the impact\nit could have on business, and how business is conducted, and how we use technology,\nand things like that. Westin: But it must be\nsiphoning capital off from other possible uses\nof the capital. I mean is it starving\nother businesses that could be using capital\nto good effect? -As a matter of corporate\nfinance theory, sure. If you use more of something,\nthe price of it should go up. But you can't find that\nin the marketplace, I don't think, in terms of where\ncorporate bonds are trading, the ability of these companies\nto raise capital, and they've mostly\nbeen raising equity. It should be noted as well. One of the things\nwe're learning from this period is that the capital markets are deeper, and more robust,\nand more fulsome than we probably\never would have imagined. Westin: Is this one and done? Will there ever be\nany series of IPOs like this again\nat this level of magnitude? We've never seen it before. -No, we've never seen it before. But again, I think\nif you looked at other periods where we had\nvery robust IPO activity, I don't know,\nwhen Alibaba went public, and the $20 billion IPO,\nwe might have said, \"Well, we're not going\nto see that again.\" Or Saudi Aramco,\nor General Motors. The other two big\n$20-ish billion ones, we might have said,\n\"Oh, that's, like, kind of once in a lifetime.\" And now we're at $75 billion. So I would never say never. I think the numbers\njust get larger over time. I would not have predicted this. I'm not going to predict\nthe next one will be $150 billion IPO. But I wouldn't say never. Westin: Up next,\nthe United States is investing two billion dollars\nin quantum computing. What does it mean when Uncle Sam\nbecomes a venture capitalist? And what does it say about where the world\nof computing is headed? This is a story\nabout the government as venture capitalist. The Trump administration has announced it will invest\n$2 billion in 9 quantum computing firms. -The Trump administration taking stake in select\nquantum computing firms... -That entire ecosystem\nof quantum computing stocks like Rigetti and D-Wave, all moving higher\non the back of that news. -Really strong optimism on\nthis quantum computing sector. Westin: These investments\nwill not be grants or contracts to buy from these firms. They will be equity stakes\nin the frontier technology of harnessing quantum physics to build an entire\nnew form of computing. Something talked about\nand researched for years, but that has remained\nstubbornly on the horizon. IBM by itself will receive half\nof the government investment. Sam Palmisano\nspent 40 years at IBM, rising to be its chairman\nand CEO. He was there when the company\nbegan its quantum quest. -I think the societal\nimplications are greater\nthan the financial investment. I mean, to put it\nin perspective, three decades ago I invested in quantum\nand IBM research. So when I left the board,\nwhich was 20 years ago, I said, \"It will be there\nin 10 to 15 years.\" I'm wrong again, wrong again. It's very difficult\nscientific problems, disease, energy,\nfinancial markets, logistics,\nnational security, cyber. It has the technology\nto do things that would have taken days on a supercomputer\nthat IBM built, could maybe take an hour or two,\nliterally. I mean, there's things\nthat are intractable that we deal with as a society. Climate change,\nthose kinds of things. Things that are heavily\nscientific. And I'll say physics\nin this field can all be addressed, assuming,\nyou know, where they are, actually does happen\nin the next two or three years. Westin: The potential\nmay be enormous, but what exactly is quantum and why has it taken so long\nto realize the potential we've been promised? Last year, we talked\nwith Jamie Garcia, Director of Strategic\nGrowth and Quantum Partnerships at IBM. A Ph.D. chemist, she's working\nat the Cleveland Clinic, where IBM has installed\none of its quantum computers with the goal\nof transforming healthcare. -Quantum computers are just\na totally different paradigm to calculate\nsolutions to problems. And so what most, you know,\nexperts have done today, that are studying\nquantum computing for different application\nspaces, is to really sit down\nwith the math and figure out, like, are the algorithms here that I can use\nand that I can exploit using a quantum computer going to bring me\nany sort of advantage over what can be done today in classical sort of\nstate-of-the-art techniques? Westin: At the core\nof classical computing are bits, single pieces of information that can have the value\nof zero or one. But quantum technology\nrelies on qubits, a unit that can have\nmultiple values simultaneously. It's like holding a coin\nin your hand that is heads, tails,\nand everything in between until you open your hand\nto check. Physicist Jerry Chow is IBM's CTO of Quantum-Centric\nSupercomputing, working at the Thomas J. Watson\nResearch Center just north of New York City. -Really fundamentally,\nthere's a different math, right? So, it's the mathematics\nof quantum mechanics that is governing\nhow you actually manipulate these quantum bits, which then gives rise\nto a whole host of different opportunities\nfor algorithms and types of problems that you can actually solve\nusing quantum computers. Westin: A turning point\nin IBM's efforts to make quantum computing\na reality came when it made it available\nto the world on the cloud. -2016, the IBM\nquantum experience was really\na pivotal moment for us in terms\nof getting quantum computers for the first time\nout onto the cloud and into the hands of anybody,\nreally people, right? What's interesting\nis that before that period, I'd say it was really much more\nin the realm of physics, right? That we were doing experiments\non small devices, qubit devices, that we were looking at,\nunderstanding how they worked, trying to make them better. But we didn't have\nany kind of real thought about how is this going\nto be used for computation? Westin: In the 9 years since you put quantum experience\nout there, what have you learned at IBM? -There was a whole lot of people\nout there who wanted to touch\nand learn about quantum. I think we were sitting there that first night\nafter we launched it, watching these circuits\ncoming in, and people\nwere actually running things. And we were like, \"Oh, wow, this is picking up\nsome steam here.\" And then to this point,\nwe've had tremendous uptake in terms of using the platform to actually generate\nnew papers and research. Thousands of papers\nhave been generated, which would have\nbeen impossible for us to do just as individual scientists\nor researchers studying these devices\nin our own lab and working\nwith other scientists in collaborations. Westin: And in success, that community could go places\nthat classical computing, even using the large\nlanguage models of AI, could never take us. So it's not just speed.\nIt's actual accuracy. When we're using classical,\nno matter how infinite we get, it's an approximation. -Right. Absolutely. It's absolutely not just...\nnot a question about speed. The whole point\nof the quantum computer and what it can do is that it can give us\nthe ability to actually get potentially\nmore accurate results, also get results\nthat otherwise are unattainable using the classical computer\nalone. Westin: Companies like Google,\nMicrosoft and Intel are all exploring the potential\nof quantum computing. But there's also\na new group of contenders, startups that are betting it all on the hope that quantum tech\nwill one day become profitable. One of those firms\nis Maryland-based IonQ. Its CEO is Niccolo De Masi, who believes he has\nthe best horse in the race. -We supply quantum computers\nto our both federal, state and commercial\ncustomer partners. We also provide\nquantum key distribution, and we do that\nboth on the ground and up in the heavens. Quantum key distribution is effectively\nquantum cyber security. And we're very focused\non this not being just proof points in the lab, but doing useful\nquantum advantage examples for our customers and embedding ourselves\ninto their workflows on an ongoing basis. Westin: The potential\nmay be great, as are the investments\nbeing made. But when can we expect to see these potentially\ndramatic results? It turns out that that depends\non whom you ask. IBM has made getting\nto quantum advantage in the real world\na strategic priority, and has a timeline\nof getting there in a big way by 2029. -Our roadmap really shows\nthe detail in terms of how we want\nto get from today to 2029. In between, we have\nthis real important milestone, also, that we believe\nthat with the community we'll be hitting\nquantum advantage, right? Where there'll be some problems\nand claims of advantage where we'll see quantum\nreally surpassing any classical methods of solving\ncertain types of problems. Westin: IBM says it's on track\nto have quantum computing payoff in a big way by 2029. But IonQ's De Masi's\nsays they're already there. -So our machines, we announced on September 12th\nat our Analyst Day, are 36 quadrillion times\nmore powerful than anyone else's machine. And that gap is increasing. Not only do we believe\nwe are 5 years ahead of anybody else in the quantum\ncomputing business, whether it's government\nprograms, adversaries\nor commercial companies, but we also have\nthe lowest unit economics. So we're able to build\na fully fault-tolerant two million qubit system and keep our cost of goods\nsold under $30 million. Westin: The quantum race is on\nand the promises are big. But the winner\nis in the eyes of the beholder. IBM says it's ahead because it has more total qubits\nin its machines. IonQ says\nit's not the number of qubits, but the number\nof algorithmic qubits putting it in front. Previously, these were questions\nfor investors to weigh. But now the government\nhas entered the race and placed bets on 9\nquantum computing companies. Those left out\ninclude big players like Google and Microsoft, and smaller contenders\nlike IonQ. Google says that funding\nfrom the government would have come with\nconditions that would have slowed down\nits progress. Why do we need the government\nto participate? Why can't the private markets\ntake care of it on their own? -If you go back\nto the original investments in the internet, it was ARPA,\nthen it became ARPANET. It was basically a link\nto communicate... to connect\nthe scientific laboratories and the academic research\nuniversities to exchange information on what\nthey were doing in research. That became the\ntelecommunication backbone\nfor the internet. The government didn't create\nthe digital economy. The government\ncreated the infrastructure. But built on the infrastructure\nwere the companies, the ecosystem for innovation,\nas well as investment. An example of where things\nhaven't worked so well had to do\nwith the energy company back in the 70s under Nixon. There was an energy crisis. That failed miserably,\nneedless to say, because they tried\nto pick a company. So when the governments,\nnot just here, when the governments\naround the world, look at state-owned enterprises if you want to go to China\nand places like that. When they try to pick companies, their history says\nthey aren't as successful as when they create\nthe environment for the private sector\nto be successful. Westin:\nThis is an equity investment. -That's correct. Westin: But there's\na range of companies that they're investing in. But it's equity participation, which is different\nfrom what happened with ARPA. That was a grant. -Yes, correct.\nYeah, it's absolutely right. And this is where I think\nthe model is challenged, because when you make\nan equity investment, maybe they're spreading\ntheir risk. I mean, like a pro-growth\nequity PE firm. But at the end of the day,\nyou're picking. The risk associated with picking\nthis in the past is that government doesn't do\na very good job of operating. And government doesn't have\na long-term attention span. This technology\nis going to take 10, 15... I'm already in\nfor 30 years, right? I mean, so, you know, you need stability\nin that regard. And that's where government\nstruggles, in operational detail. They do policy, right? They can make grants,\ndo research, and they need to fund\nlong-term stuff. But they're not strong\nat actually running companies. And that's where they fail. To most of us, $2 billion sounds\nlike a lot of money. But when you compare that\nwith some of the investments being made right now in AI,\nI mean, $850 billion, so is this priming\nthe pump for investors? Is this a way\nthe government's saying, \"We're willing to invest,\" and that will encourage\nother investors to come in? -I think the reason why...\n$2 billion is nothing. It's what it's going to take, just go through\nthe development cycles. When they talk about\na hybrid model for quantum, what they're talking about is marrying\nthis quantum advantage, the technology,\nto the traditional approaches, which is cloud and AI. But it's not\ncommercial computing, right? It doesn't have what you need to make this thing\na robust commercial system. The data management,\nmemory management, backup and recovery, all the things you expect,\nright? Accuracy of your answers,\nand things like that, that you expect\nif you're running a hospital, or a bank,\nor whatever it happens to be. I don't think it's going\nto be there in 2 or 3 years. I mean, they're working on it\nlike crazy. But I think this thing\nhas got a way to go from a financial perspective. The $2 billion, I mean,\nit's a start, but it's certainly\nnot going to be the finish. Westin: Coming up,\nquantum computing may still be on the horizon, but AI is here now, and Google is redoing\nits entire approach to search because of it. We talk with the man spearheading the changes,\nNick Fox. This is a story about\nanticipating your every want. Last week, we told you how AI is cutting into traffic\nfor Internet publishers and what that could mean\nfor their business. But Google isn't standing still for all the challenges\nfrom chatbots. Last month, it announced\nthe biggest changes to its search approach\nin over 20 years. Nick Fox is Google's\nSenior Vice President for Knowledge and Information, and the man\nresponsible for the changes. With your experience,\nrank order, which is probably unfair,\nthis change with AI compared to other innovations\nyou've done. -Oh, I think number one\nfor sure. Westin: For Google,\nthat transformation includes AI-generated answers,\nconversational search and new tools that can reason\nthrough complex questions, monitor information\nacross the web and even complete tasks\non a user's behalf. How would you\ndescribe the change? -You know,\njust to take a step back, AI is the best thing\nthat's ever happened to search. And, you know, a lot of people\nare questioning that. A lot of people are saying, \"Hey, what does AI\nmean for search?\" And what we see, you know,\nthe vision of search, is you should be able to ask whatever question\nis on your mind. And the way I think\nabout that is we have probably\nthousands of questions that go through our head\nany given day. We ask maybe a few of them, maybe we ask 5 of them,\nmaybe we ask 10 of them. Why do we not ask them all?\nWell, we don't know if there will\nbe a helpful response to it. It might be hard\nto ask that question. So our big idea is you should\nbe able to ask anything. And AI\nreally supercharges that. AI enables people to ask whatever question\nis on their mind and get a helpful response. And so that's\nwhat we're pushing on. Westin: The quality\nof the user experience is a priority for Google, even as it's changed its search\nengine to put AI at its core. And Rand Fishkin, who's specialized in the busines\nof online search, says that improved experience is very much central\nto Google's business. -Instead, they push those down and they put the instant answer\nfrom AI right up at the top. They call them AI overviews. In the long run, it's better\nfor their user experience and it creates an addiction\nto search and quick answers. If they can get people\nsearching more and instantly answering\ntheir queries, they would come back more often, they would trust Google more, and they would click\non more ads in the future. So Google is hurting themselves\na little tiny bit right now, costing themselves\nmaybe a dollar that they could charge so that in the future\nthey make $5, $10, $50, $500 from you. Westin: Fox does not deny\nthe advantages to Google if its new approach\nto AI driven search gives users more reason\nto use its product, but sees that as a feature\nrather than a bug. -What we're seeing with users is they're asking\nfar more questions than they've ever asked before. They're getting the approach\nthat we've taken, the approach that really defines what Google in search\nis doing with AI is that we're able to bring\nthe best of the web together with the best of AI. Where we're able to bring\nfrontier AI capabilities built on our Gemini technology in close collaboration\nwith DeepMind. And then we're able to bring\nthat together with the web so people can get links, they can discover content\nacross the web, but they can also get\nhelpful responses that contextualize the web and also give\ncontextualized responses that answer their question. Westin: But Fox insists\nthat time spent on a search is not the right metric\nfor success. He'd rather people\nspend less time on a particular question\nor search and be able to press further\nto get their answers, including from the web. -For us, it doesn't\nhave to be about time, and to some extent, attention. But we don't measure search\nby how many minutes are people spending on search. We measure search\nby how many queries are people doing, how many tasks are people doing,\nactually. If it takes two queries\nto do a task instead of five queries\nto do a task, we would prefer that. We actually don't want people\nto do more queries in a way where, you know, if they're doing more queries\nbecause they're thrashing and they're not getting\na good experience, or they're spending more time\nbecause they're thrashing and not getting\na good experience, that's not what we optimize for. We actually try\nto get people off Google as quickly as we can\nas kind of the, you know, one of the things\nthat I think has been a hallmark of Google. We do want people to be doing\nmore things with Google. If we can help people with,\nyou know, twice as many of their questions\nas we could before, that's great. But it should be they're doing\nmore with Google because they're getting\nmore done, rather than\nthey're spending more time to get the same\nset of things done. Westin: As AI takes on\na greater role in helping us gain access\nto content on the web, there are those concerned\nabout its use discouraging\nthe creators of the content. Caitlin Petre\nis author of the book \"All the News\nThat's Fit to Click.\" -I think\nthat it's really important to think about what's happening with people who make content\nand AI as this kind of longer story\nof a tussle or a conflict between tech companies and people who create\nmedia and information. And then the question becomes, if the business model\nfor making original content, and particularly I'm concerned\nwith journalism and art, but if the business model\nfor making original stuff kind of goes away\nor becomes even more challenging and even more punishing\nthan it already is, what do we do about that? -You know people today expect that when you come to Google,\nit's accurate, it's reliable. Westin: Fox says\nhe has similar concerns that whatever Google does\nwith AI and search not take away from the value\nof the content on the web for the sake of all involved. What does this mean\nbeyond the users, but for the rest of the web, the rest of content generators? I mean,\nbecause Google was originally a way to organize\nthe web, right? And a lot of content generators got linked back\nto their material. What does this new approach\nmean for them? -So we remain committed\nto Google organizing the web. Right? That's a core part\nof what we do. And, I would say, relative\nto really any other company, really any other organization\nout there, we care about the web\nincredibly, incredibly deeply. We're a company\nthat started in the web. We're a company\nthat still is deeply in the web. And so that is\na bedrock commitment for us. And so that leads to how we actually build\nour products as well. So, for example,\nin search it's not just AI. It's AI with links\nwithin the AI as well. We don't think it has to... The users need to make a choice. Do I want AI or the web? But rather we can bring\nboth of those together in a really effective way. So we have lots of links\nwithin the AI responses. It's not just because\nof a commitment to the web. We also think\nit's really useful for users. Right?\nIf you're interested in a topic, you want to go deep on a topic,\nyou might get an AI summary, you might get\nan AI sort of overview to give you the context. But then you want to read it. You want to read it more deeply. You want to see\noriginal reporting on a topic. You might want to see, you know, firsthand perspective. You might want\nto hear from someone who was actually there. You actually...\nyou want to get that. You don't just want\nto hear from the AI. And so we're cognizant of that. And we design around that. People are searching\nmore than ever. People are searching for topics they were never\nsearching for before. That all creates\nopportunities for websites to get discovered\nthat never would have before. Right? If a user\nwas never asking the question the website\nnever would have gotten traffic, never would have gotten a click. This is an expansionary moment, not just for search,\nbut for the web overall. Westin: Accuracy and trust\nhave long been the foundation of Google search. But in an era\nof AI generated answers where users\nmay never click through to that underlying source, ensuring the quality\nof that information has become more important\nthan ever. Accuracy and trust are important\nwhen you're searching. How do you monitor that? Because there are\na lot of people out there who actually have almost a goal of putting out information\nthat's not reliable. That's not accurate. How do you monitor\nhow you're doing? -I mean, this is\nwhat Google has been doing for years and years, is what we've been doing\nfor decades. We understand the web. We understand the web very well. We understand, you know,\nthe very early days of PageRank was\nthat you could use the citations across the web\nto understand what's more valuable\nthan others. We've obviously built on that, you know, tremendously\nover time. But we understand the web well. We understand\nwhat's accurate on the web. We understand what's reliable. We understand\nwhat's trusted across the web. We're also able to understand when we get it right,\nwhen we don't get it right, because we're able to understand sort of metrics\nacross our user populations. So, for example,\nwhen we roll out a new AI experience\nwithin search, we know, based on, you know, we run experiments,\nwe run tests, and we can analyze those to see, has this improved\nthe experience or not? We only release changes\nthat that actually do improve the experience. Westin: Are there\nsome categories of information that you have to be\nparticularly careful about? I mean, I'm mindful of the fact we're gonna have elections here,\nin United States coming up in November,\nand you can have a lot of people trying to use AI and the web to misinform\neither political rivals or foreign governments. What do you do\nto protect against that? -We are particularly careful\non those types of questions. So if an election type\nof question, we're particularly careful\na finance type of question, a health kind of question. The way we approach that\nis in a few ways. Number one, if we don't think\nthat the accuracy of the information\nis high enough, we won't show an AI response\nin that kind of a case. So that's kind of,\nthat's the first, that's the first level of it. The second is we invest\nincredibly heavily here. We focus particularly heavily in categories where the, where the stakes\nare particularly high. And then the third piece is where we're clear with users\nabout what is AI-generated. And we indicate, you know,\nAI can make mistakes so that users can be cognizant\nof that as well. Westin:\nAs AI reshapes how people find information online, it is also reshaping\nthe competitive landscape. And while Google\nmay dominate search today, the rise of AI\nhas opened the door to a new wave of competitors. You come from a very strong\nposition in search. I mean, you've become a verb in addition to a noun\naround the world. Do you have\na comparative advantage against other AI companies in that you have search\ncoming to AI rather than starting in AI? -I think our advantage comes\nfrom a deep expertise and a deep focus on innovation\nand continual reinvention. I think one of the maybe\nunderstated advantages that Google has\nis we've been through many disruptions before. We went through\na mobile disruption. We arose, you know,\nin the web disruption. There was Ajax technologies,\nthere was voice, there's been sort of time\nafter time disruptions. Each time it would be,\n\"Is this the Google killer?\" And we have worked through those and we have really a playbook\nof how to work through those, which is\nlean into the innovation, innovate through--\ninnovate through the disruption with a an excitement about what the technology\ncan enable and a promise to build a better product\nfor users through it. And so I think that's a\ncore advantage through any\nof these transformations is to rely on that playbook. Westin: You raise, I think,\na really interesting point. I mean, was there\nany hesitation anywhere at Google to say, \"We're doing\npretty well in search, why do we need\nto disrupt ourselves on this?\" It's sort of a form\nof innovators dilemma. Was there any sense of,\n\"You know what, we're doing pretty well,\nwhy rock the boat?\" - Never. Because... Because we've seen it before and we understand\nthat, if you stand still, if you don't innovate for users, you'll become irrelevant. And that's so clear. We know that. We know that\ntime and time again. And so we see\na new technology come along. We jump on it. We invent the new technologies\nin most cases. But we see it. We jump on it. And we know\nthat if we innovate for users, it will be--\nit will be expansionary. We know that our business\nwill thrive through it. Westin: For Google, the choice\nwas between disrupting its strong business and search or having someone else\ndisrupt it. As AI yet again reshapes\nhow information is discovered and consumed, the question will be,\nas it always is, whether this new innovation\ngives people what they want and need. -We're seeing\nthat users are loving it. And, you know, the best sign that we see is\nthat queries are growing. Westin: Up next, the Men's World Cup has returned\nto the shores of North America for the first time since 1994. It's bigger and longer\nand higher profile than ever. But can the fans afford it? Westin: This is a story\nabout having too much of a good thing. The Men's World Cup has returned\nto the United States this summer for the first time\nin over 30 years. And this time Mexico\nand Canada have joined in. It's a dramatically\ndifferent championship than we saw in 1994 with more teams, more matches, and a lot more money. But is there such\na thing as going too far in extracting cash\nout of mega sports events? Manchester local\nAndy Milne arrived in Miami ready to cheer on England. -I can't wait\nfor that first match, when the national anthem\nstrikes up and I know that kickoff\nis two minutes away, and it's England\nagainst Croatia, and our World Cup\nis going to start, there's nothing\nlike that feeling in the world. Westin: After attending\nhis first football, or soccer in America, World Cup in 1982, this will be his 10th\nand easily the most expensive. -And this is me\nwith the lads at university with my England shirts on eager and ready to go over there and watch the finals. Westin: So expensive he wrote a book\nto help fund the trip. -So in 1982, obviously,\na completely different era, prices were cheap\nand you didn't have to get your tickets in advance. You could queue for tickets\noutside the stadium. So for the final itself I queued for three days, which maybe sounds\nlike a terribly boring thing to do but it's\nactually great fun. And then eventually I got\nmy ticket and the ticket came to a princely sum\nof 800 pecetas, which was equivalent\nto four pounds and 15 pence. I guess around about\nfive U.S. dollars. It's changed a bit now. Westin: It sure has. A recent economist report\nfound that tickets for this year's World Cup dwarf previous versions\nof the event. The list price\nfor the final match is much higher than that\nof other marquee sports fixtures including the Super Bowl. And that's the list price on FIFA's official\nresale platform. Tickets for the final are going\nfor far beyond face value with the organizer\ntaking a 30% cut. -Six billion people\nall over the world will watch the World Cup. Westin: It's little wonder\nthat FIFA head Gianni Infantino expects overall revenue\nto break the record reaching over\n$11 billion. Leading some to question\nwhen enough is enough. -I guess my advice\nto Gianni Infantino, \"Well, just make\nit seven or eight billion, and put a few billion\nback to make this what it should be, which is a very accessible\nand inclusive World Cup.\" Westin:\nPeter Moore is the former CEO of Liverpool Football Club and is now part\nof the ownership group of football teams\nin California and Poland. -This World Cup it feels\na little different to say the least because I don't think\nit's accessible. This is the world's game. This should be a platform for everybody that loves\nthe game all around the world to be able to come,\nto afford to come, as they've done in all\nof the previous World Cups. And I've been fortunate\nto attend six World Cups. But we've got the issues\nof dynamic pricing, the secondary market, and, basically,\nI think FIFA has decided that this World Cup is\nwhere they're going to make a stated $11 billion and make this\na very exclusive World Cup rather than what it should be, which is an incredibly\ninclusive World Cup. Westin: The idea of leaving\na few billion dollars in potential revenue\non the table might not be a sound strategy\nfor most businesses, but Moore says\nsports are different. -Football has changed\nsince I first went to Anfield with my dad in 1959. It's a very different economy. In those days,\nit was, here's five shillings through the turnstile\nand in you go and you stand on the terraces. Now it's a multi-hundred billion\ndollar business worldwide. And I get that. But you've got\nto balance out the fact that the people who made\nthis game the world's game is the average\nJack and Jill on the street. And it's not\nthe corporate hospitality. And what we love about the game, what we love about World Cups\nis the passion that comes from the stands. So it's not just filling\nstadiums with people. It's the right people. And by that,\nthe average football fan who will have a trip\nof a lifetime to the United States,\nCanada, and Mexico. And you need to respect the fact that they've got\nthis dream to do it. But right now I worry very much that there are hundreds\nof thousands if not millions of tickets\nin the wrong hands. When I say the wrong hands, it's people who are\nspeculators type scalpers that are looking... They see these tickets\nas a fungible asset that they can make money on rather than the precious seat\nat the world's game. It's a bigger issue\nfor football in general is that it's becoming\nmore expensive. You've got an older fan\nwho maybe has had that season ticket\nfor 30, 40 years. It's the issue of how do you\nmaintain the ability for multigenerational support. My granddad was a Liverpool fan. My dad was a Liverpool fan. I'm obviously a Liverpool fan. But more and more people\nare somewhat being priced out. And the energy in the stadium, for bluntly an older demographic if you will rather than\nthe younger demographic that I grew up with,\nis starting to dwindle. And so you've got\nto find ways of allowing people that bring\nthe energy, the passion, the excitement, the singing, back in there\nand can afford to do so. Westin: It's not just\nthe so-called beautiful game either. Sports team valuations\nare soaring and investors are seeing opportunities\nin a wide range of sports, from basketball to cricket, from baseball to pickleball. Kathy Carter has spent\nher career in commercial roles in sports,\nfrom the 1994 FIFA World Cup until recently as the former CEO\nof the LA 2028 Olympics. -We obviously all know\nthat we've seen a massive disruption\nin media in our country and, quite frankly,\nacross the globe. And so, you know,\nyou have different ways and micro-communities\nthat actually follow different, either sports,\nteams, or communities that are developed around\nwhatever the content might be. And I'd say\nthat has both complicated and also given opportunity\nto the World Cup to what is actually happening\nthis summer. But it does mean\nthat there are so many ways that companies or fans\ncan engage with the game and creates what you-- what you might say is\nthis groundswell of commercial support\nfor the event. And, in some cases,\nso much more money that's at stake\nboth in terms of media rights, obviously, we can talk about the ticketing,\nsponsorship, merchandise, I mean, just--we're at a scale\nthat is very different. In 1994,\nwe were introducing the game. And now I would say that from a World Cup\nstandpoint, FIFA is really saying how do we now maximize\nthe opportunity so we can take dollars\nand redistribute those dollars around the world. Westin: You mentioned\nseveral revenue sources, ticket sales, media rights, merchandising,\ncorporate sponsorships. Have they grown together or have some become larger\nthan others? -Well, listen,\nI'd say media rights has-- is, historically, the major or the number one\nrevenue source in this particular World Cup given the number of tickets\nand certainly the pricing on the games, that is going\nto break all records. I would say\nthat the FIFA World Cup final, there's no question in my mind that will become\nthe largest gate in the history of any sort of event\nthat's ever been produced, just by virtue\nof the premium opportunities and the overall ticket\npricing, etc. Westin:\nWhile many fans will gripe about the cost of tickets\nto attend matches, Carter says the money made\ncan go towards making the sport bigger\nand yes, better in the long run. -You know, we're a capitalist\neconomy and, you know, we subscribe to the adage\nof supply and demand. I do believe\nthat we will see many kids and many families\nthat will still be able to go. I think it'll be\nthrough different routes. But by the same token, you know, there is a market\nin this country for events. There's a market\nin this country to buy premium. And I'd say we're seeing\nwhat the actual ceiling on that might be\nas a result of this World Cup. -Where does the money go? I mean, in other American\nprofessional sports, it goes, frankly, a lot\nof it to the players. They get paid\nan awful lot of money, and then to the owners\nand the values of the team. Where does it go\nin the World Cup? -Yeah.\nSo that's a great question. You know, a lot of it is in support of the teams\nthat do make it and participate. And in some cases,\nthat funds an awful lot of their youth\ndevelopment programs, some of the smaller countries. It allows federations\nacross the world to invest in the game and in the grassroots game\nin their countries. But it also then,\na disproportionate amount will stay with FIFA,\nwhich then goes into what they do to help grow\nthe game across the world. And whether that is investing\nin women's soccer is a great example, and what they've done to build\nthe FIFA Women's World Cup into a much more significant\nand revenue generating... and really the level of exposure\nfor the women's game starts to create\nopportunity for women that perhaps\ndidn't exist before. And you could say\nthat across many different areas whether that's\nin the youth space or that's in the Paralympic\nspace where you've got cerebral palsy teams,\nyou've got beach soccer. So there's a lot of ways\nthat they will contribute money to help the federations\naround the world continue to provide\nopportunity for kids and for those that are coming up through the system, if you will. Westin: Both Carter and Moore\nagree to keep up in the world of sports,\nlike in business, you need to be strong\ncommercially, but you also need to keep\nthe next generation engaged. And although\nthere may be a market for the high price tickets\nin the United States, Moore worries\nthat the pricing might tarnish the World Cup's legacy, and damage future tournaments. -When the stadiums\nbecome soulless, where there's\nno real atmosphere, where it becomes\n\"I'm going to an event that I want to go to\nbecause it seems like fun,\" rather than \"This is my team.\" \"This was my dad's team.\" \"This was my granddad's team.\" \"I live and die for this team.\" \"They mean everything to me.\" \"My mood,\nmy personality is based on whether we win or lose.\" Those fans are being priced out. And that is\na long term price to pay that sports will have\nto deal with in the future if these pricing structures\nstay the same. Westin: As the football\ngets underway, Moore hopes\nthe tournament is remembered for the action on the field and not for the cost\nof admission. As for whether he's attending... -You know what I did? I bought 100 inch TV for half of the price\nof an England ticket against Croatia. And I am, \"This works.\" And seriously I did. I went to Best Buy. I rationalized\nthat this is half of the price of a Category 3 ticket to watch\nEngland against Croatia. And I bought a 100 inch TV. Westin:\nWith all the commercial deals and billions in revenue, modern football can feel\nlike a complex game, but the secret may lie\nin the simplicity. -At the end of the day, it's still 11 guys in shorts\nand a soccer ball. I mean, that's\nthe beauty of the game. I mean, and as they often say,\n\"In its simplicity, it's what makes it complex.\" And so, you know, I believe\nonce the national anthems get played and the ball is put\nin the middle of the field, it's just 11 guys playing\nagainst the other 11 guys. Westin: Next,\nwhen government investing in disruptive innovation\nmakes sense and when it doesn't. Westin: Big changes\nin technology come in a variety of shapes and sizes\nand governments can support them in very different ways. Over his 40 years at IBM,\nSam Palmisano saw a full range of possibilities. The U.S. government has said\nthey're going to invest two billion dollars\nin quantum computing. Apart from\nthe business side of that, give us a sense of what the U.S.\ngovernment is investing in. What's the larger implications\nfor society and the country? -That's a great question\nbecause I think the societal implications\nare greater than the financial investment. The technology,\nif architected correctly, with this current infrastructure\nof the technology, will be dramatic in taking\non absolutely difficult, very difficult\nscientific problems. Disease, energy,\nfinancial markets, logistics, national security, cyber. It has the technology\nto do things that would have taken days\non a supercomputer that IBM built\ncould maybe take an hour or two. Literally, you know. And the problem\nwith the ones that take days, the system can fail in between, it's not accurate,\nthere's a lot of issues with the old traditional\ntechnologies. But having said all that,\nthat's it. I mean, there's things\nthat are intractable that we deal with as a society. Climate change,\nthose kinds of things, things that are\nheavily scientific and I'll say physics\nin this field can all be addressed assuming, you know, where they are\nactually does happen in the next two or three years. But that's the outlook. And the encouraging thing\nto me are companies like IBM are saying\nthey'll be there in two or three years. They've been doing this\na long time. Westin: So, on that spectrum,\non the one hand, government creating sort\nof a basic platform or infrastructure\nand let the companies compete and succeed or fail,\non the one hand. On the other hand,\npick specific companies. Where does\nthe quantum investment we've just heard about fall? -I think it falls in the area\nof government investment, but it's tied into the research\nof the commercialization because the commercial use cases or IBM, and even IBM saying\ntwo or three years away. That's just\nfor certain use cases. But the other thing,\nwhat they've done, which to me is very attractive\nto build the ecosystem, but, fundamentally, how it works\nit's open to everybody. Everybody can use it. Learn from it. Purchase the stuff,\nwhat have you. It's not--\nthey're not trying to come up with a lock, which we used\nto call stickiness. This isn't that.\nIt's meant to be one that can be used by anybody\nthat wants to participate. That's what's a little bit,\nI think, attractive to what we're trying to do. It'll speed up innovation because there'll be a lot\nof companies that have creative ideas, perhaps don't exist\nin the IBM laboratories that could add to this\nlike they did in the open source movement\nunder Linux. -All the talk right now is\nabout artificial intelligence. How does artificial\nintelligence fit with quantum computing\nin success? How does it change\nartificial intelligence? -Well, I think, basically,\nwhat will happen in artificial intelligence, there are a lot of things\nthat does extremely well, but there are a lot of things\nthat it will never do as it is today. You know, this is\nall changing like crazy. I mean, you know,\nthey said December was the watershed event\nfor artificial intelligence. That's when Anthropic came out\nwith Claude. I mean, the whole world changed. It might change again.\nI don't know, right? It could change that quickly. But what it lacks today,\nand it's by design, it's matching words as you know,\nprobabilistically. It's not giving you\na definitive answer. It's not--\nIt's called deterministic. Right? So it's not\ndeterministic. It needs to be deterministic\nfor these applications I refer to, for if\nyou get the complexity to be accurate to 100 percent. You cannot run\na trading floor with that-- with 90% correctness. You can't move\ncurrencies with 90%. You can't cure the disease\nand be 90% right. You don't want to be\nthe person in the 10%. So that, it'll\ndo that well. But it's going to position\nwhat it requires to get to this determinism\nor this accuracy of the answer. And they'll be\nfor the very complex cases that require, you know,\nthousands of variables and the mathematics and physics and all that sort of stuff. That's where it'll go. It'll get the 100%\naccurate answer. It'll pass it back to the--\nI almost think about large language models, I mean, this is very simplistic and I'm sure I'd have my friends\nin Silicon Valley go crazy when I say this, it's the goo of\nthe user interface. It's like language. You think\nyou're talking to a person. It goes in. It comes out. It's language and you think\nit's a top person again. Unfortunately, the person\nyou're talking to today is about accurate about 98,\n95 percent of the time. But for these things\nwe're talking about, you need to be accuracy to 100 percent. Westin: Much of the talk is\nabout hybrid. -Yes.\nWestin: And as I understand, that means it's not like you've\ngot a quantum computer over here and you've got\na classical computer over here. You put the two together. -Right. Exactly.\nWestin: With each other. -You link it\nto a high speed optical link. But yes, they're linked. They're separate architectures. If you get--if you want to look\nat a data center, how it would be built, there'd\nbe two things there, right? But you don't have\nto have them adjacent, but they would be there, right? And then one would be\nthe quantum specialized architecture,\nthe attached processor, the vector machine. And then the other\nwill be the traditional, today it'll be a cloud. It probably won't be\na big mainframe like it used to be. It'd be some large cloud\ninfrastructure that will do\nthe commercial application that required\nall the mathematics, just take logistics\nas an example. It would pass it\nto the quantum machine. You know, technically\nmove that there. It'd run its algorithms, give it the responses\nthat it needs, the inputs, to go back\nto the commercial application. When IBM calls it a hybrid, when they call it\nquantum advantage, they're basically modeling\nwhat we did, with half a century ago,\nwith different technology, you know, obviously.\nAs somebody said to me once one of these IBM fellows,\nthese geniuses said, \"You know, Sam, there's\nnothing new in computer science. All we do is change the names.\" That is a quote from a guy who was up\nfor a Nobel Prize, by the way. \"We just changed the names.\" Westin:\nThe government's investing in nine different companies. IBM is the lead,\nbut nine different companies. -Yeah, that's correct. Westin: Is that a portfolio\napproach saying we don't know which one's going to work or when we talk about quantum, is it more subtle than that, that there are different quantum\ncomputing applications for different means? -Yeah, well, there are\ndifferent technologies that still need to be built. So part of the hedging is more\nthan just the financial hedge. I mean I have friends that are\nare doing that themselves, right? But they're not hedging\nthe technology and what's required. They're hedging\nwhich one's going to work. They don't--they don't need\nall nine to work, as, you know,\nif they get four or five to work, it's going to be\na successful return. That's going on financially. But on the technology side,\nthere are lots of things that need to be built out. There's the whole software layer that needs to be built out\nfor commercialization. There's all the logistics\naround the hard-- Not just the chips,\nbut there's all layers of the hardware that moves\nall this stuff around, and gives you error correction. IBM saying\nthey have error correction. That's another whole layer\nof stuff that needs to be resolved. It's not--\nit's not done yet, right? It will be done.\nI mean, they know. I mean, I say that\nhaving lived with these guys who are given\nthe IBM projection, they know, mathematically,\nwhere they'll be by 2030. Mathematically, I mean,\nsomething could go wrong, but they know\nwhat the math tells them today. Like, the Jeopardy machine. When I first saw\nthe Jeopardy machine, before it ever went on TV, and it was coming out\nwith answers that probably\nweren't appropriate for PG television at 7 a.m. and I said to this guy Ferrucci, who was the inventor,\nthe IBM fellow. I said David, \"Remember,\nwe're prime time, buddy. These are family television.\nYou got to help me out.\" He goes, \"It'll be fixed.\nIt'll take me...\" And he has\nthe mathematical model. So what it has to do to get\nthe error correction down, what has to do to clean up\nthe Anglo-Saxon expressions, and all that sort of stuff. So they know mathematically\nwhere it's going to take them. Westin:\nWhether it's AI or quantum, we talk about China, and perceived\ncompetition with China. How does the U.S. approach\nwith U.S. government putting some money in now,\nrelying on private, compare with how China\nis going at this? -Well, China is-- Well, they're privates\nthemselves. It's the government. They don't have this robust VC\nindustry, private equities, and mature, you know, and\ncompanies, that were... A lot of the companies\nthat were very innovative, by doing those kinds of things, the government\nbasically restricted. So now, all of a sudden,\nthe government likes them again. But so China\nhas a mixed track record, is how they're going\nto make investment, other than state-owned\nenterprises which is government investment,\nindustrial policy. And you could argue up until now they've been pretty good\nwith industrial policy especially in national security. In national security\nand technology, we could argue\nthey're very good. I mean, they are very good. And that's the truth. And there are a lot\nof independent studies, not just American points\nof view that would say that. But in the broader market per se there--they have not had\na track record of consistency for investment. So people aren't going to go in for the sums of money\nthat they need unless it's 100 percent\ngovernment. People are going to be\nmore cautious. But the national security front\nis a different scenario where the government\nhas control of those companies and including the management\nof those companies. And they're off\nto a pretty good track record, especially in the areas\naround quantum and cyber and the areas that matter\nto national security. Westin: That does it for us here\nat \"Wall Street Week.\" I'm David Westin. See you next week\nfor more stories of capitalism.",
  "timestamped_text": "0:11 David Westin:\nThis is \"Wall Street Week.\"\n0:12 I'm David Westin, bringing\nyou stories of capitalism.\n0:15 The U.S. government\nhas become a venture capitalist\n0:18 buying equity\nin quantum computing companies\n0:21 as a bet on the future.\n0:22 Plus Google turns to AI\n0:24 in making the biggest changes\nin its search engine\n0:27 in over 20 years.\n0:28 And the World Cup\nreturns to North America\n0:31 for the first time since 1994\n0:33 with a lot more teams,\na lot more matches,\n0:36 and a lot higher price tag\nfor fans.\n0:40 But we start with the arrival\nof the mega IPO\n0:43 led by SpaceX with Anthropic\nand OpenAI right behind.\n0:47 What does starting out\n0:48 with a one trillion dollar\nmarket cap\n0:50 mean for the markets\n0:51 and those of us\ninvesting in them?\n0:53 Steven Rattner is chairman\nand CEO of Willett Advisors\n0:56 which invests the personal\nand philanthropic assets\n0:59 of our founder and majority\nowner Michael Bloomberg.\n1:03 Steve, this week we have had\nthe IPO of SpaceX, long awaited,\n1:08 and it's not the only one\n1:10 that appears to be going out\nat a trillion dollars or more.\n1:14 We also have Anthropic\nand we have OpenAI.\n1:17 There's a lot of talk about this\nin the financial press.\n1:21 Is it that big a deal?\n1:22 -Oh, yeah.\nThis is extraordinary.\n1:25 I've been in this business\nfor a pretty long time,\n1:27 back in the day\n1:28 when a few hundred million\ndollars a market cap\n1:30 on an IPO of $50 million was,\nyou know, reasonable.\n1:34 And now look where we are.\n1:36 We've never had companies\nof this kind of valuation\n1:39 on the day they go public,\ngo public.\n1:41 We've never had\nthis amount of capital\n1:43 being raised in an IPO.\n1:46 It's extraordinary.\n1:47 And perhaps it's a natural part\n1:48 of the evolution\nof capital markets.\n1:50 But it is still extraordinary.\n1:52 Westin: It's also, I would say,\nrelatively concentrated\n1:54 as much of the stock market\nhas been actually in big tech.\n1:58 I mean it's all tech-related,\nAI-related.\n2:01 Is that a problem, potentially?\n2:03 -People certainly\nworry about it.\n2:04 The fact that you have\nsuch a high percentage\n2:06 of the stock market\n2:08 in a relatively small number\nof 7 to 10 companies,\n2:10 depending on how you count.\n2:12 I've seen the charts showing\n2:13 that if you look back\nat the dot-com bubble,\n2:15 if you look back at 1929,\n2:16 and some\nof the other corrections,\n2:18 there was a similar phenomenon.\n2:20 I'm not sure why\nthose two things\n2:22 necessarily should go together.\n2:24 But certainly the world\n2:25 is in love with tech\nat the moment.\n2:26 And whether that will prove\njustified or not,\n2:29 time will tell.\n2:30 Westin: Are the normal rules\nof finance suspended\n2:32 when it comes to these?\n2:33 Because, I mean,\nif you look at things\n2:34 like valuations, I mean,\nthey're really extraordinary.\n2:37 I mean, for example,\nwhat they're talking about\n2:39 with SpaceX is, it really...\n2:40 You're saying like 95 times\ntheir trailing revenue.\n2:45 Not earnings, revenue.\n2:47 -Yeah, I think, I absolutely\nwould agree with that.\n2:50 But I would also say\nthat back in the dot-com bubble\n2:52 we had companies going public,\nI think,\n2:54 with no revenue or some\nde minimis amount of revenue.\n2:57 Again much smaller valuations,\nmuch smaller offering sizes.\n3:01 But yes the valuations\nvery much depend\n3:04 on what you believe\nis going to happen in the future\n3:06 as opposed\nto what already happened\n3:08 or what's happening\nat the moment.\n3:09 Westin: When I talk about SpaceX\nand Anthropic and OpenAI,\n3:13 they're very different\nin one respect,\n3:15 which is profitability.\n3:16 SpaceX actually\nhas been losing money,\n3:18 making money in some parts,\nlosing money in others.\n3:21 And OpenAI\nhas yet to make money.\n3:25 Anthropic\nactually is making money.\n3:27 Should that make\na difference to investors\n3:28 as they look at these 3 stocks?\n3:30 -Not necessarily.\n3:31 I mean, certainly\nmaking money now\n3:33 is better than making money\nsomewhere down the road.\n3:35 But an investment decision\n3:37 is essentially looking\nat the present value\n3:38 of future cash flows.\n3:40 And so if you believe\nthe future cash flows\n3:43 will be there,\n3:44 then the fact\nthat it doesn't make money now\n3:46 is not the end of the world.\n3:47 Obviously people who invest\nin private venture capital\n3:50 kinds of things\nor growth kinds of things\n3:52 are often investing in companies\n3:54 that make no money\nat that point.\n3:55 Some of them don't even\nhave a business at that point.\n3:57 But you're believing\nwhat's going to happen\n3:59 in the future.\n4:01 The problem is that\nthe further down the road\n4:03 the cash flows\nare going to occur,\n4:04 the positive cash flows,\n4:06 the more uncertainty\nobviously there is around them,\n4:08 the more you get into questions\n4:09 of what's the right\ndiscount rate\n4:11 and how do you really\nvalue cash flows\n4:12 that are 5, 6, 7 years out.\n4:14 Westin: As an investor\nlooking at these stocks,\n4:18 we have SpaceX, which is\na fairly complex creation.\n4:21 I mean it's...\nYou've got space launch,\n4:23 you've got AI,\n4:25 you've got all sorts of things\nin there\n4:27 as opposed to,\nfor example, Anthropic,\n4:28 which is a cleaner play.\n4:30 Does that make SpaceX\nmore attractive\n4:32 or less attractive?\n4:33 -I think you could go\neither way.\n4:34 I think\nthere are plenty of companies\n4:35 with one line of business\nthat have done fine.\n4:38 And there are other companies\nwith multiple lines of business\n4:40 that have done fine.\n4:41 If you look at SpaceX,\n4:42 the launch business\nis a excellent business.\n4:45 Musk has done a fantastic job\n4:47 of essentially winning that race\nso to speak.\n4:50 If you look at that...\nBut it's a small business,\n4:52 and it's never going to be\n4:53 a trillion dollar valuation\nkind of business.\n4:56 If you look\nat the Starlink business,\n4:58 he's clearly done a great job\nwith that as well.\n5:00 But again, it's not going\nto fully justify,\n5:03 probably, the valuation.\n5:05 And so you have to believe\nthat out there\n5:07 there's something else.\n5:09 There's an AI business,\n5:11 whether it's data centers\nin space,\n5:13 or Grok, actually,\n5:14 becoming more viable\nthan it seems to be so far,\n5:17 or something like that.\n5:18 Westin: We can't know right now.\n5:20 But as you look at this\nas an investor,\n5:22 do you wonder\nwhere the upside is?\n5:24 I mean, as you know so well,\n5:26 companies are taking\na lot longer\n5:28 to go public in general,\n5:30 which means\nthat a lot more of the upside\n5:31 may be before it goes public.\n5:34 And a lot of the growth\nmay be behind you\n5:35 as you go public.\n5:37 Is there a risk in something\nlike a SpaceX that, actually,\n5:39 the good parts\nare even realized?\n5:41 -Absolutely. Absolutely.\n5:43 There's lots of research\nthat's been done on IPOs.\n5:46 Smaller IPOs\nof smaller companies\n5:48 tend to not perform\nas well over...\n5:50 in the fullness of time\npost IPO.\n5:52 Bigger companies, obviously,\nagain, have no experience\n5:55 with something of this size.\nSo who knows?\n5:57 But you remember\nwhen Facebook, now Meta,\n6:00 went public,\nit was a really messy IPO.\n6:02 The stock traded down.\nPeople were bailing out.\n6:04 And now look at it.\n6:06 Google had this weird IPO\nwith their Dutch-reverse...\n6:09 Dutch-auction, whatever,\nyou want to call it, thing.\n6:11 Also a little complicated.\n6:13 Eventually,\nlook where Google is now.\n6:14 But then there's...\n6:15 then there's plenty\nof tombstones out there\n6:17 for the ones...\ngraveyard kind of tombstones,\n6:19 not celebratory tombstones,\n6:21 for the ones\nthat didn't work out so well.\n6:23 Westin: So there's concentration\nin the big tech AI area.\n6:27 There's also a concentration\nin the person of Elon Musk.\n6:30 He has 85%, something like that,\nof the voting control.\n6:33 He also is the CEO, the CTO,\nand the chairman.\n6:36 What are the risks involved\nin that as an investor?\n6:39 -Well there's definitely\nwhat we call a key man risk.\n6:42 This company\nis a unique creation\n6:44 of Elon Musk.\n6:46 I think he's got a good team.\n6:47 Gwynne Shotwell\nhas a great reputation.\n6:49 He doesn't suffer fools,\nobviously.\n6:52 So only people\nwho really can produce\n6:54 stay with him.\n6:55 But nonetheless\nit's hard to imagine\n6:57 many other people\nwho could have achieved\n6:59 something\nof this extraordinary magnitude.\n7:01 So I would separate\nthe voting control issue,\n7:04 which we can talk more about,\nfrom Elon,\n7:06 the person\nactually calling the shots,\n7:08 making the important decisions,\n7:10 that I think\nis critically important.\n7:11 The voting thing, I think\nis a different kettle of fish.\n7:13 Westin: What do 3 IPOs,\nas we're looking at right now,\n7:17 mean for the rest\nof the marketplace\n7:18 and other investors?\n7:19 I mean, first of all,\n7:21 could it be a slipstream effect\n7:22 where there are\nother ancillary businesses\n7:24 that serve these businesses\n7:25 that could be brought along\nin the slipstream?\n7:28 -Depends how they go.\n7:29 If they go well,\nthen you will see more of them.\n7:31 It's not completely\na coincidence.\n7:33 I don't think that\nyou haven't seen that many IPOs\n7:36 of these kinds of companies\n7:38 and they've been staying private\nfor longer.\n7:40 Part of is the IPO market\nhas not been really robust\n7:42 for a good number of years now.\n7:43 I think it's finally\ncoming out of that.\n7:46 And partly I think people\nhave not really wanted\n7:48 the hassle of being\na public company\n7:49 and like being private.\n7:51 Now when you need\nthe amounts of capital\n7:53 that these companies need,\n7:54 you really, at some point,\nhave no choice.\n7:56 And so I think\nif this goes well, these 3,\n7:59 or most of them,\n8:00 I think you will see more\nof them come out\n8:02 of the venture growth world\nand into the public markets.\n8:05 Westin: One of the things\n8:06 is the circular nature\nof some of the transactions\n8:09 going on among these companies.\n8:10 I mean,\nspecifically with SpaceX,\n8:12 they have a deal\nwith Anthropic, right?\n8:14 Where Anthropic is paying them\na lot of money.\n8:17 I think like $1.25 billion\na month,\n8:21 but with a 90 day out.\n8:22 But there are a lot\nof other circularities\n8:24 among the ownership\nand the relationships\n8:27 among these companies.\nIs that a risk?\n8:28 -And people go back\nand they use analogies,\n8:31 again, the dot-com era,\n8:32 when people were doing\nthese contracts for dark fiber,\n8:35 but they were never\ngoing to need it.\n8:37 They were never going to use it.\nIt was never going to get built.\n8:38 Whatever. I don't think\nit's that much of a risk here\n8:40 because, fundamentally,\nwhat we do know this this far\n8:43 is that AI\nis going to be a game changer.\n8:45 When you look at the pace\nof revenue growth\n8:48 for the providers\nof the large language models,\n8:50 it is...\n8:52 I don't think I've ever\nin my career seen businesses\n8:55 exceed a set of projections\n8:56 by as much\nas these companies have.\n8:58 More often than not,\n8:59 businesses fall a bit shorter\nof your projections, whatever.\n9:02 This has been extraordinary,\n9:03 and the usage the adoption rate,\n9:05 is unlike any technology item,\nI believe, in history,\n9:08 in terms of how fast\nit's being used\n9:09 and how much\nit's being used by people.\n9:11 So there's a real business\nat the bottom of this.\n9:13 If Musk wants to use some\nof his excess data capacity\n9:17 to generate some revenue\nin the meantime\n9:19 while he tries to build Grok\ninto a viable LLM,\n9:23 I don't have\na problem with that.\n9:24 You just have to,\nas an investor looks at that,\n9:27 you have to understand\nwhat it is you're doing,\n9:29 how long the contracts are,\n9:30 what the repeatability is\nand so forth.\n9:32 Westin: The dramatic growth\nyou described\n9:33 also comes with what I would say\nis dramatic capital investment.\n9:37 I mean, the capex\nis extraordinary.\n9:39 When does it need to pay off?\n9:40 I mean, at some point\nyou put all that capital in.\n9:43 You need to get a return\non that capital,\n9:45 and given\nthe amount of capital going in,\n9:47 it's got to be a lot of return.\n9:48 -Sure.\nAnthropic is already profitable.\n9:51 And so we can kind of see\nwhat this can look like.\n9:55 Yeah, I'm not going\nto argue about that.\n9:57 It's an extraordinary\namount of capital,\n9:58 and you expect\nextraordinary returns.\n10:00 But I do believe\nthat AI is a game changer\n10:03 unlike anything\nI've seen in my lifetime\n10:06 in terms of the impact\nit could have on business,\n10:09 and how business is conducted,\n10:10 and how we use technology,\nand things like that.\n10:13 Westin: But it must be\nsiphoning capital off\n10:14 from other possible uses\nof the capital.\n10:16 I mean is it starving\nother businesses\n10:20 that could be using capital\nto good effect?\n10:21 -As a matter of corporate\nfinance theory, sure.\n10:24 If you use more of something,\nthe price of it should go up.\n10:27 But you can't find that\nin the marketplace,\n10:29 I don't think, in terms of where\ncorporate bonds are trading,\n10:33 the ability of these companies\nto raise capital,\n10:35 and they've mostly\nbeen raising equity.\n10:37 It should be noted as well.\n10:39 One of the things\nwe're learning from this period\n10:41 is that the capital markets\n10:42 are deeper, and more robust,\nand more fulsome\n10:45 than we probably\never would have imagined.\n10:47 Westin: Is this one and done?\n10:49 Will there ever be\nany series of IPOs\n10:51 like this again\nat this level of magnitude?\n10:53 We've never seen it before.\n10:54 -No, we've never seen it before.\n10:56 But again, I think\nif you looked at other periods\n10:57 where we had\nvery robust IPO activity,\n11:00 I don't know,\nwhen Alibaba went public,\n11:02 and the $20 billion IPO,\nwe might have said,\n11:05 \"Well, we're not going\nto see that again.\"\n11:06 Or Saudi Aramco,\nor General Motors.\n11:10 The other two big\n$20-ish billion ones,\n11:12 we might have said,\n\"Oh, that's, like,\n11:13 kind of once in a lifetime.\"\n11:15 And now we're at $75 billion.\n11:17 So I would never say never.\n11:18 I think the numbers\njust get larger over time.\n11:20 I would not have predicted this.\n11:22 I'm not going to predict\nthe next one\n11:23 will be $150 billion IPO.\n11:25 But I wouldn't say never.\n11:29 Westin: Up next,\nthe United States\n11:30 is investing two billion dollars\nin quantum computing.\n11:33 What does it mean when Uncle Sam\nbecomes a venture capitalist?\n11:37 And what does it say\n11:38 about where the world\nof computing is headed?\n11:44 This is a story\nabout the government\n11:46 as venture capitalist.\n11:48 The Trump administration\n11:49 has announced it will invest\n$2 billion\n11:51 in 9 quantum computing firms.\n11:54 -The Trump administration\n11:56 taking stake in select\nquantum computing firms...\n11:58 -That entire ecosystem\nof quantum computing stocks\n12:02 like Rigetti and D-Wave,\n12:04 all moving higher\non the back of that news.\n12:06 -Really strong optimism on\nthis quantum computing sector.\n12:10 Westin: These investments\nwill not be grants or contracts\n12:13 to buy from these firms.\n12:15 They will be equity stakes\nin the frontier technology\n12:18 of harnessing quantum physics\n12:20 to build an entire\nnew form of computing.\n12:23 Something talked about\nand researched for years,\n12:25 but that has remained\nstubbornly on the horizon.\n12:29 IBM by itself will receive half\nof the government investment.\n12:33 Sam Palmisano\nspent 40 years at IBM,\n12:36 rising to be its chairman\nand CEO.\n12:38 He was there when the company\nbegan its quantum quest.\n12:42 -I think the societal\nimplications\n12:44 are greater\nthan the financial investment.\n12:46 I mean, to put it\nin perspective,\n12:48 three decades ago\n12:50 I invested in quantum\nand IBM research.\n12:51 So when I left the board,\nwhich was 20 years ago,\n12:54 I said, \"It will be there\nin 10 to 15 years.\"\n12:56 I'm wrong again, wrong again.\n12:59 It's very difficult\nscientific problems,\n13:01 disease, energy,\nfinancial markets,\n13:04 logistics,\nnational security, cyber.\n13:07 It has the technology\nto do things\n13:10 that would have taken days\n13:11 on a supercomputer\nthat IBM built,\n13:13 could maybe take an hour or two,\nliterally.\n13:16 I mean, there's things\nthat are intractable\n13:18 that we deal with as a society.\n13:20 Climate change,\nthose kinds of things.\n13:22 Things that are heavily\nscientific.\n13:24 And I'll say physics\nin this field\n13:27 can all be addressed, assuming,\nyou know, where they are,\n13:31 actually does happen\nin the next two or three years.\n13:35 Westin: The potential\nmay be enormous,\n13:37 but what exactly is quantum\n13:39 and why has it taken so long\nto realize the potential\n13:42 we've been promised?\n13:44 Last year, we talked\nwith Jamie Garcia,\n13:46 Director of Strategic\nGrowth and Quantum Partnerships\n13:49 at IBM.\n13:50 A Ph.D. chemist,\n13:51 she's working\nat the Cleveland Clinic,\n13:53 where IBM has installed\none of its quantum computers\n13:56 with the goal\nof transforming healthcare.\n13:58 -Quantum computers are just\na totally different paradigm\n14:02 to calculate\nsolutions to problems.\n14:05 And so what most, you know,\nexperts have done today,\n14:09 that are studying\nquantum computing\n14:10 for different application\nspaces,\n14:13 is to really sit down\nwith the math and figure out,\n14:16 like, are the algorithms here\n14:17 that I can use\nand that I can exploit\n14:19 using a quantum computer\n14:21 going to bring me\nany sort of advantage\n14:23 over what can be done today\n14:26 in classical sort of\nstate-of-the-art techniques?\n14:30 Westin: At the core\nof classical computing are bits,\n14:33 single pieces of information\n14:35 that can have the value\nof zero or one.\n14:38 But quantum technology\nrelies on qubits,\n14:41 a unit that can have\nmultiple values simultaneously.\n14:45 It's like holding a coin\nin your hand\n14:47 that is heads, tails,\nand everything in between\n14:50 until you open your hand\nto check.\n14:52 Physicist Jerry Chow\n14:54 is IBM's CTO of Quantum-Centric\nSupercomputing,\n14:57 working at the Thomas J. Watson\nResearch Center\n15:00 just north of New York City.\n15:02 -Really fundamentally,\nthere's a different math, right?\n15:04 So, it's the mathematics\nof quantum mechanics\n15:08 that is governing\nhow you actually manipulate\n15:11 these quantum bits,\n15:13 which then gives rise\nto a whole host\n15:16 of different opportunities\nfor algorithms\n15:19 and types of problems\n15:20 that you can actually solve\nusing quantum computers.\n15:24 Westin: A turning point\nin IBM's efforts\n15:25 to make quantum computing\na reality\n15:28 came when it made it available\nto the world on the cloud.\n15:32 -2016, the IBM\nquantum experience\n15:34 was really\na pivotal moment for us\n15:38 in terms\nof getting quantum computers\n15:41 for the first time\nout onto the cloud\n15:42 and into the hands of anybody,\nreally people, right?\n15:47 What's interesting\nis that before that period,\n15:49 I'd say it was really much more\nin the realm of physics, right?\n15:54 That we were doing experiments\non small devices, qubit devices,\n15:58 that we were looking at,\nunderstanding how they worked,\n16:01 trying to make them better.\n16:04 But we didn't have\nany kind of real thought\n16:06 about how is this going\nto be used for computation?\n16:09 Westin: In the 9 years\n16:10 since you put quantum experience\nout there,\n16:12 what have you learned at IBM?\n16:15 -There was a whole lot of people\nout there\n16:18 who wanted to touch\nand learn about quantum.\n16:21 I think we were sitting there\n16:22 that first night\nafter we launched it,\n16:23 watching these circuits\ncoming in,\n16:26 and people\nwere actually running things.\n16:27 And we were like, \"Oh, wow,\n16:28 this is picking up\nsome steam here.\"\n16:31 And then to this point,\nwe've had tremendous uptake\n16:34 in terms of using the platform\n16:35 to actually generate\nnew papers and research.\n16:39 Thousands of papers\nhave been generated,\n16:40 which would have\nbeen impossible for us to do\n16:42 just as individual scientists\nor researchers\n16:45 studying these devices\nin our own lab\n16:47 and working\nwith other scientists\n16:49 in collaborations.\n16:50 Westin: And in success,\n16:52 that community could go places\nthat classical computing,\n16:55 even using the large\nlanguage models of AI,\n16:58 could never take us.\n17:00 So it's not just speed.\nIt's actual accuracy.\n17:02 When we're using classical,\nno matter how infinite we get,\n17:07 it's an approximation.\n17:08 -Right. Absolutely.\n17:09 It's absolutely not just...\nnot a question about speed.\n17:12 The whole point\nof the quantum computer\n17:14 and what it can do\n17:15 is that it can give us\nthe ability\n17:16 to actually get potentially\nmore accurate results,\n17:19 also get results\nthat otherwise are unattainable\n17:22 using the classical computer\nalone.\n17:25 Westin: Companies like Google,\nMicrosoft and Intel\n17:28 are all exploring the potential\nof quantum computing.\n17:31 But there's also\na new group of contenders,\n17:34 startups that are betting it all\n17:35 on the hope that quantum tech\nwill one day become profitable.\n17:39 One of those firms\nis Maryland-based IonQ.\n17:42 Its CEO is Niccolo De Masi,\n17:45 who believes he has\nthe best horse in the race.\n17:49 -We supply quantum computers\nto our both federal,\n17:54 state and commercial\ncustomer partners.\n17:57 We also provide\nquantum key distribution,\n18:00 and we do that\nboth on the ground\n18:02 and up in the heavens.\n18:03 Quantum key distribution\n18:04 is effectively\nquantum cyber security.\n18:07 And we're very focused\non this not being\n18:09 just proof points in the lab,\n18:11 but doing useful\nquantum advantage examples\n18:14 for our customers\n18:15 and embedding ourselves\ninto their workflows\n18:18 on an ongoing basis.\n18:20 Westin: The potential\nmay be great,\n18:22 as are the investments\nbeing made.\n18:24 But when can we expect to see\n18:26 these potentially\ndramatic results?\n18:28 It turns out that that depends\non whom you ask.\n18:32 IBM has made getting\nto quantum advantage\n18:34 in the real world\na strategic priority,\n18:37 and has a timeline\nof getting there in a big way\n18:40 by 2029.\n18:41 -Our roadmap really shows\nthe detail\n18:44 in terms of how we want\nto get from today to 2029.\n18:47 In between, we have\nthis real important milestone,\n18:50 also, that we believe\nthat with the community\n18:52 we'll be hitting\nquantum advantage, right?\n18:54 Where there'll be some problems\nand claims of advantage\n18:58 where we'll see quantum\nreally surpassing\n19:02 any classical methods of solving\ncertain types of problems.\n19:05 Westin: IBM says it's on track\nto have quantum computing\n19:08 payoff in a big way by 2029.\n19:11 But IonQ's De Masi's\nsays they're already there.\n19:14 -So our machines,\n19:16 we announced on September 12th\nat our Analyst Day,\n19:18 are 36 quadrillion times\nmore powerful\n19:20 than anyone else's machine.\n19:23 And that gap is increasing.\n19:26 Not only do we believe\nwe are 5 years ahead\n19:28 of anybody else in the quantum\ncomputing business,\n19:32 whether it's government\nprograms,\n19:33 adversaries\nor commercial companies,\n19:36 but we also have\nthe lowest unit economics.\n19:39 So we're able to build\na fully fault-tolerant\n19:42 two million qubit system\n19:43 and keep our cost of goods\nsold under $30 million.\n19:48 Westin: The quantum race is on\nand the promises are big.\n19:51 But the winner\nis in the eyes of the beholder.\n19:54 IBM says it's ahead\n19:55 because it has more total qubits\nin its machines.\n19:59 IonQ says\nit's not the number of qubits,\n20:02 but the number\nof algorithmic qubits\n20:04 putting it in front.\n20:05 Previously, these were questions\nfor investors to weigh.\n20:08 But now the government\nhas entered the race\n20:11 and placed bets on 9\nquantum computing companies.\n20:15 Those left out\ninclude big players\n20:17 like Google and Microsoft,\n20:19 and smaller contenders\nlike IonQ.\n20:21 Google says that funding\nfrom the government\n20:24 would have come with\nconditions that\n20:25 would have slowed down\nits progress.\n20:28 Why do we need the government\nto participate?\n20:29 Why can't the private markets\ntake care of it on their own?\n20:32 -If you go back\nto the original investments\n20:34 in the internet, it was ARPA,\nthen it became ARPANET.\n20:38 It was basically a link\nto communicate...\n20:40 to connect\nthe scientific laboratories\n20:43 and the academic research\nuniversities\n20:45 to exchange information on what\nthey were doing in research.\n20:48 That became the\ntelecommunication\n20:51 backbone\nfor the internet.\n20:53 The government didn't create\nthe digital economy.\n20:56 The government\ncreated the infrastructure.\n20:58 But built on the infrastructure\nwere the companies,\n21:01 the ecosystem for innovation,\nas well as investment.\n21:04 An example of where things\nhaven't worked so well\n21:06 had to do\nwith the energy company\n21:08 back in the 70s under Nixon.\n21:10 There was an energy crisis.\n21:11 That failed miserably,\nneedless to say,\n21:14 because they tried\nto pick a company.\n21:16 So when the governments,\nnot just here,\n21:18 when the governments\naround the world,\n21:20 look at state-owned enterprises\n21:21 if you want to go to China\nand places like that.\n21:24 When they try to pick companies,\n21:26 their history says\nthey aren't as successful\n21:28 as when they create\nthe environment\n21:31 for the private sector\nto be successful.\n21:33 Westin:\nThis is an equity investment.\n21:35 -That's correct.\n21:36 Westin: But there's\na range of companies\n21:37 that they're investing in.\n21:38 But it's equity participation,\n21:39 which is different\nfrom what happened with ARPA.\n21:42 That was a grant.\n21:43 -Yes, correct.\nYeah, it's absolutely right.\n21:45 And this is where I think\nthe model is challenged,\n21:47 because when you make\nan equity investment,\n21:49 maybe they're spreading\ntheir risk.\n21:51 I mean, like a pro-growth\nequity PE firm.\n21:54 But at the end of the day,\nyou're picking.\n21:56 The risk associated with picking\nthis in the past\n21:59 is that government doesn't do\na very good job of operating.\n22:03 And government doesn't have\na long-term attention span.\n22:06 This technology\nis going to take 10, 15...\n22:09 I'm already in\nfor 30 years, right?\n22:11 I mean, so, you know,\n22:12 you need stability\nin that regard.\n22:14 And that's where government\nstruggles,\n22:16 in operational detail.\n22:18 They do policy, right?\n22:19 They can make grants,\ndo research,\n22:21 and they need to fund\nlong-term stuff.\n22:23 But they're not strong\nat actually running companies.\n22:26 And that's where they fail.\n22:28 To most of us,\n22:29 $2 billion sounds\nlike a lot of money.\n22:31 But when you compare that\nwith some of the investments\n22:32 being made right now in AI,\nI mean, $850 billion,\n22:36 so is this priming\nthe pump for investors?\n22:39 Is this a way\nthe government's saying,\n22:40 \"We're willing to invest,\"\n22:41 and that will encourage\nother investors to come in?\n22:44 -I think the reason why...\n$2 billion is nothing.\n22:48 It's what it's going to take,\n22:49 just go through\nthe development cycles.\n22:52 When they talk about\na hybrid model for quantum,\n22:55 what they're talking about\n22:57 is marrying\nthis quantum advantage,\n22:59 the technology,\nto the traditional approaches,\n23:02 which is cloud and AI.\n23:04 But it's not\ncommercial computing, right?\n23:07 It doesn't have what you need\n23:09 to make this thing\na robust commercial system.\n23:12 The data management,\nmemory management,\n23:14 backup and recovery,\n23:15 all the things you expect,\nright?\n23:17 Accuracy of your answers,\nand things like that,\n23:20 that you expect\nif you're running a hospital,\n23:23 or a bank,\nor whatever it happens to be.\n23:26 I don't think it's going\nto be there in 2 or 3 years.\n23:28 I mean, they're working on it\nlike crazy.\n23:30 But I think this thing\nhas got a way to go\n23:32 from a financial perspective.\n23:33 The $2 billion, I mean,\nit's a start,\n23:36 but it's certainly\nnot going to be the finish.\n23:40 Westin: Coming up,\nquantum computing\n23:41 may still be on the horizon,\n23:43 but AI is here now,\n23:46 and Google is redoing\nits entire approach to search\n23:48 because of it.\n23:50 We talk with the man\n23:51 spearheading the changes,\nNick Fox.\n23:55 This is a story about\nanticipating your every want.\n23:59 Last week, we told you how AI\n24:01 is cutting into traffic\nfor Internet publishers\n24:04 and what that could mean\nfor their business.\n24:06 But Google isn't standing still\n24:08 for all the challenges\nfrom chatbots.\n24:10 Last month, it announced\nthe biggest changes\n24:12 to its search approach\nin over 20 years.\n24:15 Nick Fox is Google's\nSenior Vice President\n24:17 for Knowledge and Information,\n24:19 and the man\nresponsible for the changes.\n24:22 With your experience,\nrank order,\n24:25 which is probably unfair,\nthis change with AI\n24:27 compared to other innovations\nyou've done.\n24:30 -Oh, I think number one\nfor sure.\n24:32 Westin: For Google,\nthat transformation\n24:33 includes AI-generated answers,\nconversational search\n24:37 and new tools that can reason\nthrough complex questions,\n24:40 monitor information\nacross the web\n24:43 and even complete tasks\non a user's behalf.\n24:46 How would you\ndescribe the change?\n24:48 -You know,\njust to take a step back,\n24:49 AI is the best thing\nthat's ever happened to search.\n24:51 And, you know, a lot of people\nare questioning that.\n24:53 A lot of people are saying,\n24:54 \"Hey, what does AI\nmean for search?\"\n24:56 And what we see, you know,\nthe vision of search,\n24:58 is you should be able to ask\n24:59 whatever question\nis on your mind.\n25:00 And the way I think\nabout that is we have\n25:02 probably\nthousands of questions\n25:03 that go through our head\nany given day.\n25:06 We ask maybe a few of them,\n25:07 maybe we ask 5 of them,\nmaybe we ask 10 of them.\n25:09 Why do we not ask them all?\nWell, we don't know\n25:11 if there will\nbe a helpful response to it.\n25:13 It might be hard\nto ask that question.\n25:14 So our big idea is you should\nbe able to ask anything.\n25:17 And AI\nreally supercharges that.\n25:19 AI enables people\n25:20 to ask whatever question\nis on their mind\n25:22 and get a helpful response.\n25:24 And so that's\nwhat we're pushing on.\n25:25 Westin: The quality\nof the user experience\n25:27 is a priority for Google,\n25:28 even as it's changed its search\nengine to put AI at its core.\n25:33 And Rand Fishkin,\n25:34 who's specialized in the busines\nof online search,\n25:37 says that improved experience\n25:39 is very much central\nto Google's business.\n25:41 -Instead, they push those down\n25:43 and they put the instant answer\nfrom AI right up at the top.\n25:47 They call them AI overviews.\n25:48 In the long run,\n25:49 it's better\nfor their user experience\n25:51 and it creates an addiction\nto search and quick answers.\n25:56 If they can get people\nsearching more\n25:58 and instantly answering\ntheir queries,\n25:59 they would come back more often,\n26:01 they would trust Google more,\n26:03 and they would click\non more ads in the future.\n26:06 So Google is hurting themselves\na little tiny bit right now,\n26:09 costing themselves\nmaybe a dollar\n26:11 that they could charge\n26:12 so that in the future\nthey make $5, $10,\n26:15 $50, $500 from you.\n26:17 Westin: Fox does not deny\nthe advantages to Google\n26:20 if its new approach\nto AI driven search\n26:22 gives users more reason\nto use its product,\n26:25 but sees that as a feature\nrather than a bug.\n26:28 -What we're seeing with users\n26:29 is they're asking\nfar more questions\n26:31 than they've ever asked before.\n26:32 They're getting the approach\nthat we've taken,\n26:35 the approach that really defines\n26:36 what Google in search\nis doing with AI\n26:38 is that we're able to bring\nthe best of the web\n26:40 together with the best of AI.\n26:41 Where we're able to bring\nfrontier AI capabilities\n26:43 built on our Gemini technology\n26:46 in close collaboration\nwith DeepMind.\n26:48 And then we're able to bring\nthat together with the web\n26:50 so people can get links,\n26:51 they can discover content\nacross the web,\n26:54 but they can also get\nhelpful responses\n26:56 that contextualize the web\n26:58 and also give\ncontextualized responses\n27:00 that answer their question.\n27:02 Westin: But Fox insists\nthat time spent on a search\n27:04 is not the right metric\nfor success.\n27:07 He'd rather people\nspend less time\n27:09 on a particular question\nor search\n27:11 and be able to press further\nto get their answers,\n27:14 including from the web.\n27:16 -For us, it doesn't\nhave to be about time,\n27:18 and to some extent, attention.\n27:19 But we don't measure search\nby how many minutes\n27:22 are people spending on search.\n27:24 We measure search\nby how many queries\n27:26 are people doing,\n27:27 how many tasks are people doing,\nactually.\n27:29 If it takes two queries\nto do a task\n27:32 instead of five queries\nto do a task,\n27:34 we would prefer that.\n27:35 We actually don't want people\nto do more queries\n27:37 in a way where, you know,\n27:38 if they're doing more queries\nbecause they're thrashing\n27:40 and they're not getting\na good experience,\n27:41 or they're spending more time\nbecause they're thrashing\n27:43 and not getting\na good experience,\n27:44 that's not what we optimize for.\n27:46 We actually try\nto get people off Google\n27:47 as quickly as we can\nas kind of the, you know,\n27:49 one of the things\nthat I think\n27:51 has been a hallmark of Google.\n27:53 We do want people to be doing\nmore things with Google.\n27:55 If we can help people with,\nyou know,\n27:57 twice as many of their questions\nas we could before,\n28:00 that's great.\n28:01 But it should be they're doing\nmore with Google\n28:03 because they're getting\nmore done,\n28:04 rather than\nthey're spending more time\n28:05 to get the same\nset of things done.\n28:08 Westin: As AI takes on\na greater role\n28:10 in helping us gain access\nto content on the web,\n28:13 there are those concerned\nabout its use\n28:15 discouraging\nthe creators of the content.\n28:17 Caitlin Petre\nis author of the book\n28:19 \"All the News\nThat's Fit to Click.\"\n28:22 -I think\nthat it's really important\n28:23 to think about what's happening\n28:25 with people who make content\nand AI\n28:29 as this kind of longer story\nof a tussle or a conflict\n28:33 between tech companies\n28:34 and people who create\nmedia and information.\n28:37 And then the question becomes,\n28:39 if the business model\nfor making original content,\n28:43 and particularly I'm concerned\nwith journalism and art,\n28:47 but if the business model\nfor making original stuff\n28:50 kind of goes away\nor becomes even more challenging\n28:53 and even more punishing\nthan it already is,\n28:56 what do we do about that?\n28:57 -You know people today expect\n28:59 that when you come to Google,\nit's accurate, it's reliable.\n29:02 Westin: Fox says\nhe has similar concerns\n29:04 that whatever Google does\nwith AI and search\n29:07 not take away from the value\nof the content on the web\n29:10 for the sake of all involved.\n29:12 What does this mean\nbeyond the users,\n29:16 but for the rest of the web,\n29:17 the rest of content generators?\n29:19 I mean,\nbecause Google was originally\n29:21 a way to organize\nthe web, right?\n29:23 And a lot of content generators\n29:24 got linked back\nto their material.\n29:27 What does this new approach\nmean for them?\n29:29 -So we remain committed\nto Google organizing the web.\n29:32 Right? That's a core part\nof what we do.\n29:34 And, I would say, relative\nto really any other company,\n29:38 really any other organization\nout there,\n29:40 we care about the web\nincredibly, incredibly deeply.\n29:43 We're a company\nthat started in the web.\n29:45 We're a company\nthat still is deeply in the web.\n29:47 And so that is\na bedrock commitment for us.\n29:51 And so that leads\n29:53 to how we actually build\nour products as well.\n29:55 So, for example,\nin search it's not just AI.\n29:58 It's AI with links\nwithin the AI as well.\n30:00 We don't think it has to...\n30:02 The users need to make a choice.\n30:04 Do I want AI or the web?\n30:05 But rather we can bring\nboth of those together\n30:07 in a really effective way.\n30:09 So we have lots of links\nwithin the AI responses.\n30:12 It's not just because\nof a commitment to the web.\n30:14 We also think\nit's really useful for users.\n30:17 Right?\nIf you're interested in a topic,\n30:18 you want to go deep on a topic,\nyou might get an AI summary,\n30:20 you might get\nan AI sort of overview\n30:22 to give you the context.\n30:25 But then you want to read it.\n30:26 You want to read it more deeply.\n30:27 You want to see\noriginal reporting on a topic.\n30:29 You might want to see,\n30:31 you know, firsthand perspective.\n30:33 You might want\nto hear from someone\n30:34 who was actually there.\n30:35 You actually...\nyou want to get that.\n30:37 You don't just want\nto hear from the AI.\n30:39 And so we're cognizant of that.\n30:41 And we design around that.\n30:42 People are searching\nmore than ever.\n30:44 People are searching\n30:45 for topics they were never\nsearching for before.\n30:47 That all creates\nopportunities for websites\n30:49 to get discovered\nthat never would have before.\n30:51 Right? If a user\nwas never asking the question\n30:53 the website\nnever would have gotten traffic,\n30:54 never would have gotten a click.\n30:56 This is an expansionary moment,\n30:57 not just for search,\nbut for the web overall.\n30:59 Westin: Accuracy and trust\nhave long been the foundation\n31:01 of Google search.\n31:03 But in an era\nof AI generated answers\n31:05 where users\nmay never click through\n31:07 to that underlying source,\n31:09 ensuring the quality\nof that information\n31:11 has become more important\nthan ever.\n31:13 Accuracy and trust are important\nwhen you're searching.\n31:17 How do you monitor that?\n31:18 Because there are\na lot of people out there\n31:20 who actually have almost a goal\n31:22 of putting out information\nthat's not reliable.\n31:24 That's not accurate.\n31:25 How do you monitor\nhow you're doing?\n31:27 -I mean, this is\nwhat Google has been doing\n31:29 for years and years,\n31:30 is what we've been doing\nfor decades.\n31:32 We understand the web.\n31:33 We understand the web very well.\n31:35 We understand, you know,\nthe very early days\n31:38 of PageRank was\nthat you could use\n31:40 the citations across the web\nto understand\n31:43 what's more valuable\nthan others.\n31:45 We've obviously built on that,\n31:46 you know, tremendously\nover time.\n31:48 But we understand the web well.\n31:49 We understand\nwhat's accurate on the web.\n31:52 We understand what's reliable.\n31:53 We understand\nwhat's trusted across the web.\n31:56 We're also able to understand\n31:58 when we get it right,\nwhen we don't get it right,\n32:00 because we're able to understand\n32:02 sort of metrics\nacross our user populations.\n32:05 So, for example,\nwhen we roll out\n32:06 a new AI experience\nwithin search,\n32:08 we know, based on, you know,\n32:11 we run experiments,\nwe run tests,\n32:13 and we can analyze those to see,\n32:15 has this improved\nthe experience or not?\n32:17 We only release changes\nthat that actually do improve\n32:19 the experience.\n32:20 Westin: Are there\nsome categories of information\n32:22 that you have to be\nparticularly careful about?\n32:23 I mean, I'm mindful of the fact\n32:25 we're gonna have elections here,\nin United States\n32:26 coming up in November,\nand you can have a lot of people\n32:28 trying to use AI and the web\n32:31 to misinform\neither political rivals\n32:33 or foreign governments.\n32:34 What do you do\nto protect against that?\n32:36 -We are particularly careful\non those types of questions.\n32:40 So if an election type\nof question,\n32:41 we're particularly careful\na finance type of question,\n32:44 a health kind of question.\n32:46 The way we approach that\nis in a few ways.\n32:48 Number one, if we don't think\nthat the accuracy\n32:50 of the information\nis high enough,\n32:51 we won't show an AI response\nin that kind of a case.\n32:53 So that's kind of,\nthat's the first,\n32:55 that's the first level of it.\n32:57 The second is we invest\nincredibly heavily here.\n32:59 We focus particularly heavily\n33:02 in categories where the,\n33:03 where the stakes\nare particularly high.\n33:05 And then the third piece is\n33:06 where we're clear with users\nabout what is AI-generated.\n33:09 And we indicate, you know,\nAI can make mistakes\n33:12 so that users can be cognizant\nof that as well.\n33:16 Westin:\nAs AI reshapes how people find\n33:18 information online,\n33:20 it is also reshaping\nthe competitive landscape.\n33:23 And while Google\nmay dominate search today,\n33:25 the rise of AI\nhas opened the door\n33:28 to a new wave of competitors.\n33:30 You come from a very strong\nposition in search.\n33:33 I mean, you've become a verb\n33:36 in addition to a noun\naround the world.\n33:39 Do you have\na comparative advantage\n33:41 against other AI companies\n33:43 in that you have search\ncoming to AI\n33:45 rather than starting in AI?\n33:47 -I think our advantage comes\nfrom a deep expertise\n33:52 and a deep focus on innovation\nand continual reinvention.\n33:56 I think one of the maybe\nunderstated advantages\n34:00 that Google has\nis we've been through\n34:02 many disruptions before.\n34:03 We went through\na mobile disruption.\n34:05 We arose, you know,\nin the web disruption.\n34:07 There was Ajax technologies,\nthere was voice,\n34:10 there's been sort of time\nafter time disruptions.\n34:13 Each time it would be,\n\"Is this the Google killer?\"\n34:16 And we have worked through those\n34:17 and we have really a playbook\nof how to work\n34:20 through those, which is\nlean into the innovation,\n34:22 innovate through--\ninnovate through the disruption\n34:26 with a an excitement\n34:28 about what the technology\ncan enable\n34:31 and a promise to build\n34:33 a better product\nfor users through it.\n34:35 And so I think that's a\ncore advantage\n34:38 through any\nof these transformations is\n34:40 to rely on that playbook.\n34:42 Westin: You raise, I think,\na really interesting point.\n34:44 I mean, was there\nany hesitation anywhere\n34:47 at Google to say, \"We're doing\npretty well in search,\n34:50 why do we need\nto disrupt ourselves on this?\"\n34:52 It's sort of a form\nof innovators dilemma.\n34:55 Was there any sense of,\n\"You know what,\n34:56 we're doing pretty well,\nwhy rock the boat?\"\n34:58 - Never. Because...\n35:00 Because we've seen it before\n35:02 and we understand\nthat, if you stand still,\n35:04 if you don't innovate for users,\n35:06 you'll become irrelevant.\n35:08 And that's so clear.\n35:09 We know that.\n35:10 We know that\ntime and time again.\n35:12 And so we see\na new technology come along.\n35:14 We jump on it.\n35:15 We invent the new technologies\nin most cases.\n35:18 But we see it. We jump on it.\n35:19 And we know\nthat if we innovate for users,\n35:22 it will be--\nit will be expansionary.\n35:24 We know that our business\nwill thrive through it.\n35:28 Westin: For Google, the choice\nwas between disrupting\n35:30 its strong business and search\n35:32 or having someone else\ndisrupt it.\n35:34 As AI yet again reshapes\nhow information is discovered\n35:38 and consumed,\n35:40 the question will be,\nas it always is,\n35:42 whether this new innovation\ngives people\n35:44 what they want and need.\n35:48 -We're seeing\nthat users are loving it.\n35:50 And, you know, the best sign\n35:51 that we see is\nthat queries are growing.\n35:54 Westin: Up next,\n35:55 the Men's World Cup has returned\nto the shores of North America\n35:58 for the first time since 1994.\n36:00 It's bigger and longer\nand higher profile than ever.\n36:04 But can the fans afford it?\n36:10 Westin: This is a story\nabout having too much\n36:12 of a good thing.\n36:13 The Men's World Cup has returned\nto the United States\n36:16 this summer for the first time\nin over 30 years.\n36:18 And this time Mexico\nand Canada have joined in.\n36:22 It's a dramatically\ndifferent championship\n36:24 than we saw in 1994\n36:26 with more teams, more matches,\n36:28 and a lot more money.\n36:30 But is there such\na thing as going too far\n36:32 in extracting cash\nout of mega sports events?\n36:41 Manchester local\nAndy Milne arrived in Miami\n36:44 ready to cheer on England.\n36:46 -I can't wait\nfor that first match,\n36:47 when the national anthem\nstrikes up\n36:50 and I know that kickoff\nis two minutes away,\n36:52 and it's England\nagainst Croatia,\n36:54 and our World Cup\nis going to start,\n36:56 there's nothing\nlike that feeling in the world.\n36:59 Westin: After attending\nhis first football, or soccer\n37:02 in America, World Cup in 1982,\n37:05 this will be his 10th\nand easily the most expensive.\n37:08 -And this is me\nwith the lads at university\n37:10 with my England shirts on\n37:13 eager and ready to go over there\n37:15 and watch the finals.\n37:17 Westin: So expensive\n37:18 he wrote a book\nto help fund the trip.\n37:20 -So in 1982, obviously,\na completely different era,\n37:23 prices were cheap\nand you didn't have\n37:25 to get your tickets in advance.\n37:27 You could queue for tickets\noutside the stadium.\n37:29 So for the final itself\n37:31 I queued for three days,\n37:32 which maybe sounds\nlike a terribly boring thing\n37:37 to do but it's\nactually great fun.\n37:38 And then eventually I got\nmy ticket and the ticket came\n37:41 to a princely sum\nof 800 pecetas,\n37:44 which was equivalent\nto four pounds and 15 pence.\n37:48 I guess around about\nfive U.S. dollars.\n37:51 It's changed a bit now.\n37:53 Westin: It sure has.\n37:54 A recent economist report\nfound that tickets\n37:56 for this year's World Cup\n37:58 dwarf previous versions\nof the event.\n38:00 The list price\nfor the final match\n38:02 is much higher than that\nof other marquee sports fixtures\n38:05 including the Super Bowl.\n38:07 And that's the list price\n38:10 on FIFA's official\nresale platform.\n38:12 Tickets for the final are going\nfor far beyond face value\n38:16 with the organizer\ntaking a 30% cut.\n38:19 -Six billion people\nall over the world will watch\n38:23 the World Cup.\n38:25 Westin: It's little wonder\nthat FIFA head Gianni Infantino\n38:28 expects overall revenue\nto break the record\n38:30 reaching over\n$11 billion.\n38:35 Leading some to question\nwhen enough is enough.\n38:38 -I guess my advice\nto Gianni Infantino,\n38:40 \"Well, just make\nit seven or eight billion,\n38:42 and put a few billion\nback to make this\n38:44 what it should be,\n38:46 which is a very accessible\nand inclusive World Cup.\"\n38:49 Westin:\nPeter Moore is the former CEO\n38:51 of Liverpool Football Club\n38:53 and is now part\nof the ownership group\n38:55 of football teams\nin California and Poland.\n38:58 -This World Cup it feels\na little different\n38:59 to say the least\n39:00 because I don't think\nit's accessible.\n39:02 This is the world's game.\n39:03 This should be a platform\n39:05 for everybody that loves\nthe game all around the world\n39:08 to be able to come,\nto afford to come,\n39:10 as they've done in all\nof the previous World Cups.\n39:13 And I've been fortunate\nto attend six World Cups.\n39:15 But we've got the issues\nof dynamic pricing,\n39:18 the secondary market,\n39:20 and, basically,\nI think FIFA has decided\n39:23 that this World Cup is\nwhere they're going to make\n39:25 a stated $11 billion\n39:28 and make this\na very exclusive World Cup\n39:30 rather than what it should be,\n39:32 which is an incredibly\ninclusive World Cup.\n39:34 Westin: The idea of leaving\na few billion dollars\n39:36 in potential revenue\non the table\n39:38 might not be a sound strategy\nfor most businesses,\n39:42 but Moore says\nsports are different.\n39:44 -Football has changed\nsince I first went to Anfield\n39:47 with my dad in 1959.\n39:48 It's a very different economy.\n39:50 In those days,\nit was, here's five shillings\n39:53 through the turnstile\nand in you go\n39:55 and you stand on the terraces.\n39:57 Now it's a multi-hundred billion\ndollar business worldwide.\n39:59 And I get that.\n40:01 But you've got\nto balance out the fact\n40:03 that the people who made\nthis game the world's game\n40:05 is the average\nJack and Jill on the street.\n40:08 And it's not\nthe corporate hospitality.\n40:10 And what we love about the game,\n40:12 what we love about World Cups\nis the passion\n40:14 that comes from the stands.\n40:15 So it's not just filling\nstadiums with people.\n40:18 It's the right people.\n40:20 And by that,\nthe average football fan\n40:22 who will have a trip\nof a lifetime\n40:24 to the United States,\nCanada, and Mexico.\n40:27 And you need to respect the fact\n40:29 that they've got\nthis dream to do it.\n40:31 But right now I worry very much\n40:34 that there are hundreds\nof thousands\n40:36 if not millions of tickets\nin the wrong hands.\n40:38 When I say the wrong hands,\n40:40 it's people who are\nspeculators type scalpers\n40:43 that are looking...\n40:44 They see these tickets\nas a fungible asset\n40:47 that they can make money on\n40:48 rather than the precious seat\nat the world's game.\n40:52 It's a bigger issue\nfor football in general\n40:54 is that it's becoming\nmore expensive.\n40:56 You've got an older fan\nwho maybe has had\n40:58 that season ticket\nfor 30, 40 years.\n41:00 It's the issue of how do you\nmaintain the ability\n41:03 for multigenerational support.\n41:05 My granddad was a Liverpool fan.\n41:07 My dad was a Liverpool fan.\n41:08 I'm obviously a Liverpool fan.\n41:10 But more and more people\nare somewhat being priced out.\n41:13 And the energy in the stadium,\n41:15 for bluntly an older demographic\n41:17 if you will rather than\nthe younger demographic\n41:19 that I grew up with,\nis starting to dwindle.\n41:22 And so you've got\nto find ways of allowing\n41:25 people that bring\nthe energy, the passion,\n41:27 the excitement, the singing,\n41:29 back in there\nand can afford to do so.\n41:32 Westin: It's not just\nthe so-called\n41:33 beautiful game either.\n41:35 Sports team valuations\nare soaring and investors\n41:38 are seeing opportunities\nin a wide range of sports,\n41:41 from basketball to cricket,\n41:42 from baseball to pickleball.\n41:45 Kathy Carter has spent\nher career in commercial roles\n41:48 in sports,\nfrom the 1994 FIFA World Cup\n41:52 until recently as the former CEO\nof the LA 2028 Olympics.\n41:56 -We obviously all know\nthat we've seen\n41:58 a massive disruption\nin media in our country\n42:01 and, quite frankly,\nacross the globe.\n42:03 And so, you know,\nyou have different ways\n42:06 and micro-communities\nthat actually follow\n42:08 different, either sports,\nteams, or communities\n42:11 that are developed around\nwhatever the content might be.\n42:14 And I'd say\nthat has both complicated\n42:17 and also given opportunity\nto the World Cup\n42:20 to what is actually happening\nthis summer.\n42:22 But it does mean\nthat there are so many ways\n42:25 that companies or fans\ncan engage with the game\n42:28 and creates what you--\n42:30 what you might say is\nthis groundswell\n42:32 of commercial support\nfor the event.\n42:34 And, in some cases,\nso much more money\n42:37 that's at stake\nboth in terms of media rights,\n42:39 obviously, we can talk\n42:41 about the ticketing,\nsponsorship, merchandise,\n42:43 I mean, just--we're at a scale\nthat is very different.\n42:47 In 1994,\nwe were introducing the game.\n42:50 And now I would say\n42:51 that from a World Cup\nstandpoint,\n42:54 FIFA is really saying\n42:55 how do we now maximize\nthe opportunity\n42:57 so we can take dollars\nand redistribute\n42:59 those dollars around the world.\n43:01 Westin: You mentioned\nseveral revenue sources,\n43:03 ticket sales, media rights,\n43:05 merchandising,\ncorporate sponsorships.\n43:07 Have they grown together\n43:09 or have some become larger\nthan others?\n43:12 -Well, listen,\nI'd say media rights has--\n43:14 is, historically,\n43:15 the major or the number one\nrevenue source\n43:18 in this particular World Cup\n43:20 given the number of tickets\nand certainly the pricing\n43:22 on the games, that is going\nto break all records.\n43:25 I would say\nthat the FIFA World Cup final,\n43:27 there's no question in my mind\n43:29 that will become\nthe largest gate in the history\n43:31 of any sort of event\nthat's ever been produced,\n43:34 just by virtue\nof the premium opportunities\n43:36 and the overall ticket\npricing, etc.\n43:40 Westin:\nWhile many fans will gripe\n43:42 about the cost of tickets\nto attend matches,\n43:44 Carter says the money made\ncan go towards making\n43:47 the sport bigger\nand yes, better in the long run.\n43:51 -You know, we're a capitalist\neconomy and, you know,\n43:53 we subscribe to the adage\nof supply and demand.\n43:57 I do believe\nthat we will see many kids\n43:59 and many families\nthat will still be able to go.\n44:01 I think it'll be\nthrough different routes.\n44:03 But by the same token, you know,\n44:05 there is a market\nin this country\n44:07 for events.\n44:08 There's a market\nin this country to buy premium.\n44:11 And I'd say we're seeing\nwhat the actual ceiling on that\n44:14 might be\nas a result of this World Cup.\n44:17 -Where does the money go?\n44:19 I mean, in other American\nprofessional sports,\n44:21 it goes, frankly, a lot\nof it to the players.\n44:23 They get paid\nan awful lot of money,\n44:25 and then to the owners\nand the values of the team.\n44:27 Where does it go\nin the World Cup?\n44:29 -Yeah.\nSo that's a great question.\n44:31 You know, a lot of it is\n44:32 in support of the teams\nthat do make it and participate.\n44:35 And in some cases,\nthat funds an awful lot\n44:37 of their youth\ndevelopment programs,\n44:39 some of the smaller countries.\n44:40 It allows federations\nacross the world\n44:42 to invest in the game\n44:43 and in the grassroots game\nin their countries.\n44:46 But it also then,\na disproportionate amount\n44:48 will stay with FIFA,\nwhich then goes\n44:50 into what they do to help grow\nthe game across the world.\n44:53 And whether that is investing\nin women's soccer\n44:57 is a great example,\n44:58 and what they've done to build\nthe FIFA Women's World Cup\n45:01 into a much more significant\nand revenue generating...\n45:04 and really the level of exposure\nfor the women's game\n45:08 starts to create\nopportunity for women\n45:10 that perhaps\ndidn't exist before.\n45:12 And you could say\nthat across many different areas\n45:14 whether that's\nin the youth space\n45:16 or that's in the Paralympic\nspace where you've got\n45:19 cerebral palsy teams,\nyou've got beach soccer.\n45:21 So there's a lot of ways\nthat they will contribute money\n45:24 to help the federations\naround the world\n45:27 continue to provide\nopportunity for kids\n45:29 and for those that are coming up\n45:31 through the system, if you will.\n45:32 Westin: Both Carter and Moore\nagree to keep up\n45:35 in the world of sports,\nlike in business,\n45:38 you need to be strong\ncommercially,\n45:40 but you also need to keep\nthe next generation engaged.\n45:43 And although\nthere may be a market\n45:45 for the high price tickets\nin the United States,\n45:47 Moore worries\nthat the pricing might tarnish\n45:50 the World Cup's legacy,\n45:51 and damage future tournaments.\n45:53 -When the stadiums\nbecome soulless,\n45:56 where there's\nno real atmosphere,\n45:57 where it becomes\n\"I'm going to an event\n45:59 that I want to go to\nbecause it seems like fun,\"\n46:02 rather than \"This is my team.\"\n46:05 \"This was my dad's team.\"\n46:06 \"This was my granddad's team.\"\n46:07 \"I live and die for this team.\"\n46:09 \"They mean everything to me.\"\n46:11 \"My mood,\nmy personality is based\n46:13 on whether we win or lose.\"\n46:14 Those fans are being priced out.\n46:16 And that is\na long term price to pay\n46:19 that sports will have\nto deal with in the future\n46:21 if these pricing structures\nstay the same.\n46:24 Westin: As the football\ngets underway,\n46:26 Moore hopes\nthe tournament is remembered\n46:28 for the action on the field\n46:30 and not for the cost\nof admission.\n46:32 As for whether he's attending...\n46:34 -You know what I did?\n46:35 I bought 100 inch TV\n46:36 for half of the price\nof an England ticket\n46:38 against Croatia.\n46:39 And I am, \"This works.\"\n46:41 And seriously I did.\n46:42 I went to Best Buy.\n46:43 I rationalized\nthat this is half of the price\n46:45 of a Category 3 ticket to watch\nEngland against Croatia.\n46:48 And I bought a 100 inch TV.\n46:50 Westin:\nWith all the commercial deals\n46:52 and billions in revenue,\n46:54 modern football can feel\nlike a complex game,\n46:56 but the secret may lie\nin the simplicity.\n46:59 -At the end of the day,\n47:00 it's still 11 guys in shorts\nand a soccer ball.\n47:02 I mean, that's\nthe beauty of the game.\n47:04 I mean, and as they often say,\n\"In its simplicity,\n47:07 it's what makes it complex.\"\n47:09 And so, you know, I believe\nonce the national anthems\n47:12 get played and the ball is put\nin the middle of the field,\n47:16 it's just 11 guys playing\nagainst the other 11 guys.\n47:21 Westin: Next,\nwhen government investing\n47:23 in disruptive innovation\nmakes sense\n47:25 and when it doesn't.\n47:31 Westin: Big changes\nin technology come in a variety\n47:33 of shapes and sizes\nand governments can support\n47:36 them in very different ways.\n47:38 Over his 40 years at IBM,\nSam Palmisano saw\n47:41 a full range of possibilities.\n47:45 The U.S. government has said\nthey're going to invest\n47:47 two billion dollars\nin quantum computing.\n47:50 Apart from\nthe business side of that,\n47:52 give us a sense of what the U.S.\ngovernment is investing in.\n47:54 What's the larger implications\nfor society and the country?\n47:57 -That's a great question\nbecause I think\n47:59 the societal implications\nare greater\n48:01 than the financial investment.\n48:03 The technology,\nif architected correctly,\n48:06 with this current infrastructure\nof the technology,\n48:08 will be dramatic in taking\non absolutely difficult,\n48:13 very difficult\nscientific problems.\n48:15 Disease, energy,\nfinancial markets, logistics,\n48:19 national security, cyber.\n48:21 It has the technology\nto do things\n48:24 that would have taken days\non a supercomputer\n48:26 that IBM built\ncould maybe take an hour or two.\n48:29 Literally, you know.\n48:31 And the problem\nwith the ones that take days,\n48:33 the system can fail in between,\n48:34 it's not accurate,\nthere's a lot of issues\n48:35 with the old traditional\ntechnologies.\n48:37 But having said all that,\nthat's it.\n48:40 I mean, there's things\nthat are intractable\n48:42 that we deal with as a society.\n48:44 Climate change,\nthose kinds of things,\n48:46 things that are\nheavily scientific\n48:48 and I'll say physics\nin this field\n48:50 can all be addressed\n48:52 assuming, you know,\n48:54 where they are\nactually does happen\n48:56 in the next two or three years.\n48:58 But that's the outlook.\n48:59 And the encouraging thing\nto me are companies\n49:01 like IBM are saying\nthey'll be there\n49:03 in two or three years.\n49:04 They've been doing this\na long time.\n49:06 Westin: So, on that spectrum,\non the one hand,\n49:08 government creating sort\nof a basic platform\n49:10 or infrastructure\nand let the companies compete\n49:12 and succeed or fail,\non the one hand.\n49:14 On the other hand,\npick specific companies.\n49:17 Where does\nthe quantum investment\n49:18 we've just heard about fall?\n49:20 -I think it falls in the area\nof government investment,\n49:23 but it's tied into the research\nof the commercialization\n49:26 because the commercial use cases\n49:28 or IBM, and even IBM saying\ntwo or three years away.\n49:31 That's just\nfor certain use cases.\n49:33 But the other thing,\nwhat they've done,\n49:34 which to me is very attractive\nto build the ecosystem,\n49:37 but, fundamentally, how it works\nit's open to everybody.\n49:41 Everybody can use it.\n49:42 Learn from it.\n49:43 Purchase the stuff,\nwhat have you.\n49:44 It's not--\nthey're not trying to come up\n49:46 with a lock, which we used\nto call stickiness.\n49:48 This isn't that.\nIt's meant to be one\n49:50 that can be used by anybody\nthat wants to participate.\n49:53 That's what's a little bit,\nI think, attractive\n49:56 to what we're trying to do.\n49:57 It'll speed up innovation\n49:59 because there'll be a lot\nof companies\n50:00 that have creative ideas,\n50:02 perhaps don't exist\nin the IBM laboratories\n50:04 that could add to this\nlike they did\n50:06 in the open source movement\nunder Linux.\n50:08 -All the talk right now is\nabout artificial intelligence.\n50:11 How does artificial\nintelligence fit\n50:13 with quantum computing\nin success?\n50:15 How does it change\nartificial intelligence?\n50:17 -Well, I think, basically,\nwhat will happen\n50:18 in artificial intelligence,\n50:20 there are a lot of things\nthat does extremely well,\n50:23 but there are a lot of things\nthat it will never do\n50:24 as it is today.\n50:26 You know, this is\nall changing like crazy.\n50:27 I mean, you know,\nthey said December was\n50:29 the watershed event\nfor artificial intelligence.\n50:32 That's when Anthropic came out\nwith Claude.\n50:33 I mean, the whole world changed.\n50:35 It might change again.\nI don't know, right?\n50:37 It could change that quickly.\n50:38 But what it lacks today,\nand it's by design,\n50:41 it's matching words\n50:42 as you know,\nprobabilistically.\n50:44 It's not giving you\na definitive answer.\n50:47 It's not--\nIt's called deterministic.\n50:48 Right? So it's not\ndeterministic.\n50:51 It needs to be deterministic\nfor these applications\n50:54 I refer to, for if\nyou get the complexity\n50:57 to be accurate to 100 percent.\n50:58 You cannot run\na trading floor with that--\n51:00 with 90% correctness.\n51:02 You can't move\ncurrencies with 90%.\n51:04 You can't cure the disease\nand be 90% right.\n51:06 You don't want to be\nthe person in the 10%.\n51:08 So that, it'll\ndo that well.\n51:10 But it's going to position\nwhat it requires\n51:12 to get to this determinism\nor this accuracy of the answer.\n51:15 And they'll be\nfor the very complex cases\n51:18 that require, you know,\nthousands of variables\n51:20 and the mathematics and physics\n51:22 and all that sort of stuff.\n51:23 That's where it'll go.\n51:25 It'll get the 100%\naccurate answer.\n51:27 It'll pass it back to the--\nI almost think\n51:30 about large language models,\n51:31 I mean, this is very simplistic\n51:33 and I'm sure I'd have my friends\nin Silicon Valley\n51:35 go crazy when I say this,\n51:36 it's the goo of\nthe user interface.\n51:38 It's like language.\n51:39 You think\nyou're talking to a person.\n51:40 It goes in.\n51:41 It comes out.\n51:43 It's language and you think\nit's a top person again.\n51:45 Unfortunately, the person\nyou're talking to today is\n51:47 about accurate about 98,\n95 percent of the time.\n51:50 But for these things\nwe're talking about, you need\n51:52 to be accuracy to 100 percent.\n51:54 Westin: Much of the talk is\nabout hybrid.\n51:56 -Yes.\nWestin: And as I understand,\n51:57 that means it's not like you've\ngot a quantum computer over here\n51:59 and you've got\na classical computer over here.\n52:01 You put the two together.\n52:02 -Right. Exactly.\nWestin: With each other.\n52:04 -You link it\nto a high speed optical link.\n52:05 But yes, they're linked.\n52:07 They're separate architectures.\n52:08 If you get--if you want to look\nat a data center,\n52:10 how it would be built, there'd\nbe two things there, right?\n52:12 But you don't have\nto have them adjacent,\n52:14 but they would be there, right?\n52:15 And then one would be\nthe quantum specialized\n52:17 architecture,\nthe attached processor,\n52:20 the vector machine.\n52:21 And then the other\nwill be the traditional,\n52:23 today it'll be a cloud.\n52:25 It probably won't be\na big mainframe\n52:26 like it used to be.\n52:27 It'd be some large cloud\ninfrastructure\n52:29 that will do\nthe commercial application\n52:31 that required\nall the mathematics,\n52:33 just take logistics\nas an example.\n52:35 It would pass it\nto the quantum machine.\n52:37 You know, technically\nmove that there.\n52:39 It'd run its algorithms,\n52:40 give it the responses\nthat it needs, the inputs,\n52:43 to go back\nto the commercial application.\n52:45 When IBM calls it a hybrid,\n52:46 when they call it\nquantum advantage,\n52:48 they're basically modeling\nwhat we did,\n52:51 with half a century ago,\nwith different technology,\n52:54 you know, obviously.\nAs somebody said to me once\n52:56 one of these IBM fellows,\nthese geniuses said,\n52:59 \"You know, Sam, there's\nnothing new in computer science.\n53:01 All we do is change the names.\"\n53:05 That is a quote from a guy\n53:06 who was up\nfor a Nobel Prize, by the way.\n53:09 \"We just changed the names.\"\n53:12 Westin:\nThe government's investing\n53:13 in nine different companies.\n53:14 IBM is the lead,\nbut nine different companies.\n53:16 -Yeah, that's correct.\n53:16 Westin: Is that a portfolio\napproach saying we don't know\n53:19 which one's going to work\n53:20 or when we talk about quantum,\n53:22 is it more subtle than that,\n53:24 that there are different quantum\ncomputing applications\n53:26 for different means?\n53:28 -Yeah, well, there are\ndifferent technologies\n53:29 that still need to be built.\n53:31 So part of the hedging is more\nthan just the financial hedge.\n53:34 I mean I have friends that are\nare doing that themselves,\n53:36 right? But they're not hedging\nthe technology and what's\n53:39 required. They're hedging\nwhich one's going to work.\n53:42 They don't--they don't need\nall nine to work,\n53:43 as, you know,\nif they get four or five\n53:44 to work, it's going to be\na successful return.\n53:47 That's going on financially.\n53:48 But on the technology side,\nthere are lots of things\n53:50 that need to be built out.\n53:52 There's the whole software layer\n53:53 that needs to be built out\nfor commercialization.\n53:56 There's all the logistics\naround the hard--\n53:58 Not just the chips,\nbut there's all layers\n53:59 of the hardware that moves\nall this stuff around,\n54:02 and gives you error correction.\n54:03 IBM saying\nthey have error correction.\n54:04 That's another whole layer\nof stuff that needs\n54:06 to be resolved.\n54:07 It's not--\nit's not done yet, right?\n54:09 It will be done.\nI mean, they know.\n54:11 I mean, I say that\nhaving lived with these guys\n54:13 who are given\nthe IBM projection,\n54:14 they know, mathematically,\nwhere they'll be by 2030.\n54:17 Mathematically, I mean,\nsomething could go wrong,\n54:20 but they know\nwhat the math tells them today.\n54:21 Like, the Jeopardy machine.\n54:22 When I first saw\nthe Jeopardy machine,\n54:25 before it ever went on TV,\n54:27 and it was coming out\nwith answers\n54:28 that probably\nweren't appropriate\n54:29 for PG television at 7 a.m.\n54:33 and I said to this guy Ferrucci,\n54:34 who was the inventor,\nthe IBM fellow.\n54:36 I said David,\n54:37 \"Remember,\nwe're prime time, buddy.\n54:39 These are family television.\nYou got to help me out.\"\n54:41 He goes, \"It'll be fixed.\nIt'll take me...\"\n54:43 And he has\nthe mathematical model.\n54:44 So what it has to do to get\nthe error correction down,\n54:46 what has to do to clean up\nthe Anglo-Saxon expressions,\n54:48 and all that sort of stuff.\n54:50 So they know mathematically\nwhere it's going to take them.\n54:52 Westin:\nWhether it's AI or quantum,\n54:53 we talk about China,\n54:54 and perceived\ncompetition with China.\n54:57 How does the U.S. approach\nwith U.S. government\n55:00 putting some money in now,\nrelying on private,\n55:02 compare with how China\nis going at this?\n55:04 -Well, China is--\n55:05 Well, they're privates\nthemselves.\n55:06 It's the government.\n55:07 They don't have this robust VC\nindustry, private equities,\n55:12 and mature, you know, and\ncompanies, that were...\n55:14 A lot of the companies\nthat were very innovative,\n55:17 by doing those kinds of things,\n55:18 the government\nbasically restricted.\n55:20 So now, all of a sudden,\nthe government likes them again.\n55:22 But so China\nhas a mixed track record,\n55:25 is how they're going\nto make investment,\n55:26 other than state-owned\nenterprises\n55:28 which is government investment,\nindustrial policy.\n55:31 And you could argue up until now\n55:32 they've been pretty good\nwith industrial policy\n55:34 especially in national security.\n55:37 In national security\nand technology,\n55:38 we could argue\nthey're very good.\n55:40 I mean, they are very good.\n55:42 And that's the truth.\n55:43 And there are a lot\nof independent studies,\n55:45 not just American points\nof view that would say that.\n55:48 But in the broader market per se\n55:51 there--they have not had\na track record\n55:53 of consistency for investment.\n55:56 So people aren't going to go in\n55:57 for the sums of money\nthat they need\n55:59 unless it's 100 percent\ngovernment.\n56:00 People are going to be\nmore cautious.\n56:01 But the national security front\nis a different scenario\n56:04 where the government\nhas control of those companies\n56:07 and including the management\nof those companies.\n56:09 And they're off\nto a pretty good track record,\n56:11 especially in the areas\naround quantum and cyber\n56:13 and the areas that matter\nto national security.\n56:18 Westin: That does it for us here\nat \"Wall Street Week.\"\n56:20 I'm David Westin.\n56:21 See you next week\nfor more stories of capitalism."
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