Ep5. Stock Comp, AI Cold War, Valuations for LLM | BG2 with Bill Gurley, Brad Gerstner, & Bob Mylod
Mar 21, 2024
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Discussions cover stock compensation, AI Cold War between Google & Apple, TikTok US situation, Microsoft's Inflection acquisition, and VC valuations for LLM models. Insightful conversations on tech, investing, and markets with Brad Gerstner, Bill Gurley, and Bob Mylod.
Stock-based compensation is a critical issue in Silicon Valley, emphasizing the need to align incentives and value equity grants.
Tech industry discusses the importance of alignment and accountability in executive compensation, advocating for fairness and shareholder value.
Startups focus on offering stock options and RSUs, prioritizing profitability and aligning employee incentives with company success.
Tech giants like Apple and Google explore potential AI partnerships, indicating a continuous evolution in AI strategies and applications.
Deep dives
Stock-Based Compensation in Silicon Valley
Stock-based compensation in Silicon Valley is a critical issue discussed in the podcast. It highlights the prevalence of stock options and RSUs in rewarding employees, emphasizing the need to align incentives and be mindful of the real value of equity grants. Bob Mylod, the former CFO of Priceline, shares insights on the shift from options to RSUs, the impact of FAS 123 accounting rule, and the importance of treating a dollar of stock as equal to a dollar of cash.
Alignment and Accountability in Executive Compensation
The podcast delves into the importance of alignment and accountability in executive compensation. It critiques the trend of excessive stock-based compensation in public markets, advocating for a more honest assessment of expenses and a focus on cash equivalent value. It emphasizes the need for companies to lead with integrity in designing compensation structures that prioritize shareholder value and fair rewards for employees.
Tech Industry Compensation Practices
Discussions in the podcast shed light on compensation practices in the tech industry, particularly in startups. It touches upon the common practice of offering stock options to employees alongside the transition towards RSUs. The conversation highlights the need for startups to prioritize profitability, manage dilution effectively, and align employee incentives with company success.
The Role of Cash and Stock in Compensation
The podcast explores the balance between cash and stock in compensation packages, emphasizing the importance of treating stock grants as real expenses. It reflects on the impact of dilution, investor scrutiny, and the need for companies to view stock-based compensation from a shareholder perspective. The discussion underscores the value of transparency, sound financial management, and independent leadership in shaping compensation practices.
Apple and Google's Rumored Partnership
The podcast touches on the rumor of a potential partnership between Apple and Google regarding Gemini, an AI technology. While the speculation suggests collaboration or outsourcing of AI, the likelihood of Apple outsourcing such a critical component to Google is considered minimal. The conversation highlights the competitive dynamics in the tech industry and the continuous innovation and exploration of strategic partnerships among major players like Apple and Google.
Apple's Collaboration with AI Companies and a Generative Search Application
Apple is considering collaborating with companies like Google, Meta, and OpenAI to enhance their AI capabilities, specifically focusing on a new small language model for personal assistant tasks. The possibility of integrating multiple answer engines, including Gemini, into a generative search application is anticipated. Despite ongoing discussions and potential advancements, transformative changes are not expected immediately. The market dynamics between Apple, Google, and other tech giants indicate a continuous evolution in AI strategies and applications.
Implications of Regulatory Oversight on TikTok and the AI Cold War
The debate surrounding TikTok and ByteDance has escalated, driven by concerns over data privacy and national security implications. The regulatory landscape, including US House bills and potential discussions in the Senate, reflects a shift towards sovereign control in AI domains. The uncertain future of TikTok US under existing regulatory frameworks raises questions about potential bans and geopolitical responses, hinting at broader implications on global trade relations in the AI sector. The increasing scrutiny on AI technologies underscores the need for strategic partnerships and regulatory compliance to navigate evolving landscapes.
Open Source bi-weekly convo w/ Bill Gurley and Brad Gerstner on all things tech, markets, investing & capitalism. This week, joined by Bob Mylod, (Chair of Board, Bookings.com & Managing Partner of Annox Capital) they discuss stock compensation, Google Gemini / Apple, TikTok US & the New AI Cold War, MSFT / Inflection & VC Valuations for LLM’s. Enjoy another episode of Bg2.
Bill Gurley @bgurley https://twitter.com/bgurley BG2 Pod @bg2pod https://twitter.com/BG2Pod
Shownotes:
Bookings 2023 Notice of Annual Stockholders’ Meeting and Proxy Statement June 2023 (page 63 for Stock-Based Compensation Expense as a % of net cash provided by operating activities) https://bit.ly/3ISIauw
Michael Mauboussin - Stock-Based Compensation Paper: https://mgstn.ly/4cshBKn
Tom Hearden Tweet: https://bit.ly/4cqCoxQApoorv
Agarwal Tweet: https://bit.ly/3VumL2G
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