Gagan Ghotra

Key Points

• Google’s Antitrust Case Outcome: The sanctions imposed were not as severe as initially anticipated. The judge rejected calls for major structural changes like spinning off Chrome or Android.
• Role of Free Market and Competition: Chamath Palihapitiya highlighted that the judge’s decision was “refreshing” because it acknowledged the power of competition and a free market. He argued that the most punitive remedies were unnecessary because the market itself, particularly with the advent of AI, is already addressing the issues of market dominance.
• AI as a Disruptor: David Sacks initially favored breaking up Google but reversed his stance, stating that Google is now facing an “existential threat” from AI. He explained that AI chatbots, by providing direct answers, are superior to traditional search results (20 blue links) and are causing a significant shift in user behavior and revenue.
• Shift from “Links Business” to “Answers Business”: The discussion emphasized that the search landscape is transforming from simply providing links to offering direct, synthesized answers, a domain where AI chatbots excel.
• Reduced Need for Drastic Intervention: The consensus was that the rapid evolution of AI technology, which has introduced new competitive forces, lessens the need for aggressive antitrust measures like breaking up Google. The market is seen as performing the necessary “creative destruction.”
• Continued Need for “Rules of the Field”: Despite the natural market disruption, Jason Calacanis and David Sacks agreed that regulations against anti-competitive tactics, such as exclusive deals that cement market dominance, are still necessary.

Jason Calacanis: Google as we know was found liable in this anti trust case, but the sanctions seem to not be as harsh as people thought they would be. Judge Meta rejected the request that Google have to spin off Chrome, Android and pointed out that Google is uh having massive competition. So we had four years of Lena Khan, you know, and these aggressive cases. There were there were tactical things we talked about here, like uh dark patterns, etc, that we all agreed with, I think, there was consensus there. But this one we found a little confusing because gosh, Google’s under so much pressure. What are your thoughts on…

Chamath Palihapitiya: I thought this ruling was excellent.

Jason Calacanis: Unpack it all.

Chamath Palihapitiya: Essentially the crux of the ruling was, look, there are some restrictions that Google has to live by, don’t get me wrong. But the most punitive remedies that were suggested were thrown out, and the reason they were thrown out was because the judge very eloquently cited competition and a fair and free and open market. And that is incredibly refreshing because the real question is, would this judge have had the wherewithal and the courage to actually be able to rule this way a few years ago, when there would have been an enormous amount of political pressure, they probably would have found a way to to run this case in a in a different place. It’s cetera, etc. But now what you saw was just very simple logic intervene, and at the core of it was, you know, when we started this lawsuit, things like Open AI and chat GPT didn’t exist, and when you fast forward, it’s incredibly fast moving. We are reallocating hundreds of millions or billions of users’ intentions. As a byproduct, we’re reallocating tens of, maybe hundreds of billions of dollars of revenue. And so the judge said the most severe remedies aren’t necessary because a free market is doing this job.

Jason Calacanis: Yes.

Chamath Palihapitiya: And then I I just think that’s incredibly refreshing because we forget that if the market is left to deal with these issues on its own, they do a very good job of cleaning things up. And it’s because as you said earlier, Jason, consumers want creative destruction. They want the next best thing.

Jason Calacanis: Lower prices, better services. It’s it happens by the free market.

Chamath Palihapitiya: And they’re willing they’re willing to reward better companies and better products. So I think the the great news for Google is that this takes an enormous risk off the table. And now I think that they probably have even more ambition and energy to just go for it and try to compete because they’re not going to be worried about everybody on the outside and probably some percentage of employees on the inside who are always trying to slow things down.

Jason Calacanis: Yeah. And to put it out correctly, and I’ll let you comment on this, is that they did get some tactical you know, penalties here, uh and they make sense, doing deals that are exclusive when you are a monopoly player, like getting Firefox and Apple to only do an exclusive deal with you, they’re not going to be allowed to do that. And man, that would change the game on the field if somebody like DuckDuckGo or Bing or a new entrant, Perplexity, whoever who’s doing search would be able to say to Apple, we will outbid Google for 10% of the searches. We’d like to buy 5% of the searches from the Safari browser or going to Firefox and saying, hey, we’d like to one up and we’d like some percentage of that. So that seemed like a good part of the ruling. Your thoughts overall about this.

David Sacks: So on this podcast, I think it was two or three years ago when this case first came up, I think I took the position that Google should be broken up into two or three companies. Because I thought it was this invulnerable monopoly and I don’t think monopolies are great for the star ecosystem. And what I mean by that is they had the Google Search monopoly and that YouTube business, which was basically a monopoly and so forth and so on. So I I was in favor of breaking this up, but I’ve got to admit I was wrong about that. For the reasons that the judge said, which is Google for the first time in a long while is existentially threatened by what’s happened with AI. I mean, their cash cow, the core of their business is search. And people are starting to substitute in droves from traditional Google search, which they own, or keyword search where they have this monopoly or dominant share to AI. And if you look at AI revenue, I think something like 90% of it is going to OpenAI. I mean, they have the dominant position among consumers.

Jason Calacanis: For now.

David Sacks: For now, and there’s let’s say five major AI companies that are hot on their heels and very competitive and performing equally if not better on performance benchmarks. So the point is just I think everyone can now see that the search business is either going away or transforming into something else, which is it’s basically merging with the it’s called AI chatbot business.

Jason Calacanis: It’s an answers business now. It’s not a like give me links, it’s just give me the damn answer.

David Sacks: Right, and we’ve been talking about this for a while where it’s so obvious that having AI just give you the answer is better than 20 blue links. Especially as the quality improves and it gets better at synthesizing those 20 blue links into the exact right answer and the speed improves. One of the things that Google’s really good at is just fast responses. You know, they’ve always shown you in milliseconds how long it takes to give you the search result and obviously if you’re looking for something quick and an AI chatbot’s going to take 30 seconds, you’re going to go with Google, but that’s going to get better too. So I think Google is kind of in the fight of its life right now. And I think this is why Sergey’s come back. You know, we saw him at the…

Jason Calacanis: He’s going to the office.

David Sacks: All the time, yeah. Right. And so you’re seeing that founder involvement again because they know that they’ve got a real existential threat to their business. And this is the argument that opponents of strong antitrust enforcement have always made, which is that the free market will eventually break up even the strongest monopolies if you just give it the chance to do it. And that’s what appears to be in motion right now. By the way, I’m not saying that Google’s going to get destroyed. I’m not saying it’s going away. I’m just saying that they have to pivot here in a big way. Their business is being disrupted and they suddenly have competition I think in their core business like they’ve never had before. So I do think that we don’t need to bring the hammer down on them in the same way that maybe we did a few years ago. I still would not let them pursue anti competitive tactics against say applications and the Android store where they basically have a duopoly. So I’m not saying I would let them do anything, but I certainly agree with this judge that we don’t need to break up that company right now.

Jason Calacanis: Yeah, and there’s there’s rules in the field that need to be adjudicated. So having a very simple approach with the FTC of saying, hey, these exclusive deals when you have 90% market share, that’s not allowable, but you can compete and you can fight versus the five new entrance and uh have at it and and give consumers a better product at a cheaper price. That’s really the goal of the FTC is to to have some basic rules of the field. We saw it in the media business as well. We spend a decade or two trying to fight the consolidation of media companies and then Netflix has trounced them all. And YouTube as well in terms of viewership. Netflix and YouTube are crushing the cable monopolies that we spend all this time trying to regulate.