Microsoft Wants AI in Everything

Plus: Goldman Sachs fumbles the crown to Morgan Stanley. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

January 18, 2023

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TOGETHER WITH

Good morning.

For all those authentic if environmentally unsound merrymakers who buy only real Christmas trees, there’s always one issue – what do you do with the withering fire hazard in your living room once the festivities are over?

Don’t just chuck it in the woods, or leave it on the side of the road. Pennsylvania farmers have found the perfect solution for the by-product of a $1 billion industry. Every January in Philadelphia, flocks of goats looking to kick start their New Year’s diet gorge themselves on old Christmas trees provided by locals. One farmer told The Wall Street Journal her goat loves Balsam fir because “it’s like the Godiva chocolate of pine trees.” Now if only spinach salad tasted as sweet to us humans.

Morning Brief

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Microsoft rides the ChatGPT hype.

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Morgan Stanley is now Wall Street’s Alpha I-bank.

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Giving them a square deal.

Tech

Microsoft Wants To Put ChatGPT-style AI Tools in Every Product

Can AI experience cognitive dissonance?

Microsoft CEO Satya Nadella told Davos attendees on Tuesday that the tech giant plans to use OpenAI, the startup behind viral text generator ChatGPT, to build AI tools into every Microsoft product. Nadella’s mic drop comes on the heels of Getty Images announcing it is suing image-generation AI tool Stable Diffusion, alleging it scraped copyrighted images without permission.

ChatGPT-Party

ChatGPT took the internet by storm in November when it was opened up to the public, with netizens enthralled by its ability to produce convincing-sounding imitations of news articles, song lyrics, resumes, and more. Microsoft, an investor in OpenAI, has been eager to capitalize on the hype. The Information reported earlier this month that Microsoft is working to integrate ChatGPT into Bing, bringing some tortoise-and-the-hare optimism to its possibly until now lopsided competition with Google.

The technology has creatives spooked, but professional writers are almost certainly not first for the chop. Dr. Nakeema Stefflbauer, an expert in AI policy, told The Daily Upside that ChatGPT’s most obvious first commercial application would be speeding up the work of customer service workers and marketers. “It will only be able to replace jobs if brands give up on the ‘human factor’ as a differentiator in how happy their customers will be with interacting purely with bots,” she said.

As Microsoft doubles down on OpenAI, Getty’s lawsuit against StabilityAI, the company behind Stable Diffusion, casts an uncomfortable spotlight on the data AI tools hoover up:

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Getty Images CEO Craig Peters told The Verge he views generative AI tools as being at the same stage the music industry found itself at in the age of Napster and Limewire – which is to say, behind the eight ball. “We think similarly these generative models need to address the intellectual property rights of others, that’s the crux of it,” he said.

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Stefflbauer drew another musical comparison, pointing to instances where particular artists’ styles are imitated on Stable Diffusion. “The problem is that it’s possible to ‘remix’ images by specific artists such that images seem to be retrievable with an artist’s name ‘in the style of…’ but those artists don’t get compensated. Kinda like the early days of rap music, when sampled artists’ work was included in new songs, which the original artists didn’t get paid for,” Stefflbauer said.

Cave In: One artist is using his clout to take the fight to the AI pretenders. Alt-rock icon Nick Cave put up a blog post Tuesday saying dozens of people have sent him ChatGPT-generated songs imitating his style. Picking out a particular set of lyrics sent to him by a fan, the famously poetic Cave railed against the “emerging horror of AI” in a markedly prosaic fashion: “This song sucks.”

–Isobel Asher Hamilton

Finance

Goldman Sachs’ Latest Stumble Gives Morgan Stanley the Lead

Goldman Sachs has its David, but Morgan Stanley is Wall Street’s investment banking Goliath.

The shrinking economy unsurprisingly made itself felt in the results Goldman Sachs and Morgan Stanley released Tuesday morning. But how the latter managed the downturn is the latest evidence that Goldman really is the former…king of investment banks.

Rough Quarter, Bro

Goldman’s fourth-quarter results for 2022 were the worst in more than a decade, missing badly on earnings estimates after profits fell 70% compared to the same period in 2021, a decline that comes one week after CEO David Solomon laid off more than 3,200 bankers. All in all, Tuesday’s results reflected Solomon’s now-abandoned journey toward making Goldman into a consumer banking player. You can nearly forgive Morgan Stanley chief James Gorman’s schadenfreude smile.

Gorman, whose 12-year reign has been a crusade against Goldman’s dominance, also saw his profits fall for 2022’s final quarter but managed to beat Wall Street’s estimates thanks to surprisingly strong performances from the bank’s wealth management and trading divisions, the kind of deck chair re-arranging that was perfected by Goldman under Solomon’s predecessors:

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The market’s reaction to the dichotomous results was unsubtle, with Goldman shares falling 6.4% on the day and Morgan shares surging 5.9%, widening Gorman’s market cap lead on Solomon.

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Solomon isn’t in any position to counterpunch. Citing an uncertain outlook for 2023, Goldman set aside $1 billion to buffer unforeseen losses in the new year, while Morgan set aside… less: $87 million.

The moment was not lost on the main players. “Overall, 2022 was a strong year for the Firm,” Gorman said in a statement accompanying the results, while Solomon, pressed by an analyst on an earnings call, was comically understated: “Everything has not gone perfectly.”

It can’t last forever: The 64-year-old Gorman said last January that “I’m not going to be here in five years.” As for Solomon, who “celebrated” turning 61 on Tuesday, it’s probably not going to be his call. Solomon has repeatedly rankled the Goldman rank and file during his four years at the helm, and his lack of popularity is reflected in the name bankers reportedly gave the recent layoffs: “David’s Demolition Day.”

–Thornton McEnery

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Policy

FTC Targets Retail Giants with 1930s Antitrust Law

(Photo Credit: Franki Chamaki/Unsplash)

The FTC is channeling trustbuster-in-chief Teddy Roosevelt, who made life miserable for Wall Street financiers and others whose deals often came at the expense of ordinary folks.

The Federal Trade Commission is set to revive a near-100-year-old law – which went on the books not long after Teddy’s presidency – that bans suppliers from offering deals to big box chains without offering the same discounts to independent retailers, Bloomberg reported. That’s good news for small business owners, but it could spell price increases for consumers wherever they shop.

Trust Busting

Congress passed the Robinson-Patman Act in 1936 as a way to even the playing field for small merchants and prevent price discrimination. Discounts on large orders were fine as long as they were extended to all retailers, and suppliers were not allowed to give preferential treatment for promotional packaging or scarce inventory.

The law never went away, but it hasn’t been enforced since 1988 when six book publishers allegedly gave deals to large chains and not independent shops. But long after the rise of deal behemoths like Amazon, Kroger, and Costco, Washington is dusting off its trust-busting stick:

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The National Grocer Association – composed mostly of rural and urban American businesses – has been pushing the Biden Administration to get tougher on suppliers and their big-box counterparts. R.F. Buche, a small grocer in South Dakota, told Bloomberg he has to pay $6.30 for a box of Cheerios while Walmart buys the same item for $4.78.

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Some economists believe reviving the law will create less consumer choice in an already inflated market where the average price of a dozen eggs has shot up from $1.80 to $4.25 in just a year.

“(Ramping up enforcement) ignores its decades-long record of failure and would ultimately hurt consumers through less market competition and higher prices,” Sean Heather of the US Chamber of Commerce told Bloomberg.

The War on Cola: The seemingly no-nonsense FTC Chair Lina Khan has already hit the ground running and opened preliminary probes for price discrimination by Coca-Cola and Pepsi, which control 46% and 26% of the US market share, respectively. The FTC recently reached out to Walmart, seeking how much the chain pays for soda, Politico reported. We guess for Khan, buying the world a Coke should cost the same for everyone.

-Griffin Kelly

Extra Upside

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GM revealed its fastest Corvette ever: A hybrid starting at more than $100K

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India will become the most populous country. Where are its jobs, though?

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Just For Fun

Splash Fight.

Couch Surfing.

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