Welcome to another episode of The TechCrunch Podcast where we break down the biggest stories in tech news with the people who cover it. This week Darrell Etherington talks with Dom-Madori Davis about how the SVB crash disproportionately affects Black founders. And Devin Coldewey fills us in on the improved capabilities of Open AI’s GPT-4.
Welcome to another episode of The TechCrunch Podcast where we break down the biggest stories in tech news with the people who cover it. This week Darrell Etherington talks with Dom-Madori Davis about how the SVB crash disproportionately affects Black founders. And Devin Coldewey fills us in on the improved capabilities of Open AI’s GPT-4.
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Darrell Etherington 0:03
Hello AI generated bankers I'm TechCrunch Managing Editor Darrell Etherington, and you're listening to the TechCrunch podcast where we cover everything you need to know about the week's top stories in tech from the people who wrote them. This week I talked with Don Midori Davis about how the SBB crashed disproportionately affects black founders. And Devin colway fills us in on GPT four and the other AI updates from the week. But before we get into that, I'll go over this week's top stories in tech. Microsoft laid off an entire internal team dedicated to ensuring AI development at the company progressed down ethical paths. This team isn't the only measure Microsoft has in place to promote ethical AI development. It still has an oversight office meant to provide governance still, the team was said to be the link between the company's intentions around Responsibility and Ethics and its actual shipping products. Microsoft has of course been working heavily with open AI on integrating its own AI products into Microsoft stuff are on this from Rebecca Belen on TechCrunch. The Silicon Valley Bank news broke last week just after we recorded this podcast so there's a lot to catch up on here are some of the highlights. As Phoebe's UK arm was acquired by HSBC which is guaranteed all depositor funds first republic bank is facing a lot of the same challenges and fears as SVP and is currently set to be mustering a rescue plan involving the Fed and other large banks. Silicon Valley bank's new CEO has encouraged customers keep their deposits in place and even come back if they left. There's lots more to follow. So check out our show notes for a link to all the ongoing SVB coverage. Y Combinator is the latest iconic Silicon Valley institution to endear job cuts announcing a 20% reduction in overall headcount. YC also said it's going to focus less on late stage investing and return its focus primarily to early stage startups. The company wouldn't confirm that the cost cutting measures were related to the ongoing sVv banking crisis more from Natasha Mascarenhas on TC. b2b software remains around with heavy valuations and dizzying deal sizes and the all cash deal for Qualtrics this week is no exception. Silver Lake and the Canada Pension Plan investment arm will acquire the company for $12.5 billion, with a close expected later this year. Qualtrics, which is basically a customer experience survey platform was spun out from SAP in 2021, after SAPA had acquired the company in 2018. For $8 billion. Paul source has more on the deal on TechCrunch. Okay, with that out of the White, let's talk to some of our famous and esteemed TechCrunch writers. First up Dom and I talk about how the Silicon Valley Bank closure is affecting black founders. Hey, Tom, how's it going?
Dom Davis 2:36
Hi, I'm good. How are you? Doing? Good,
Darrell Etherington 2:38
doing good just back from South by Southwest where there's a lot of discussion about the topic we're going to talk about now. And I noticed a lot of similarities between the stories you're talking about in your article and stories from founders on the ground there. But we're going to be talking about the Silicon Valley Bank collapse which has repercussions all over the startup ecosystem. But you wrote about a specific angle on this this week. Tom, do you want to talk us through that? Oh, yeah.
Dom Davis 3:05
I mean, as soon as I heard something was happening or like rumbling, I think that was like last Thursday, actually. Oh, my gosh, a week ago. Yeah, I knew that something was probably going to impact black founders. I didn't know what exactly. And I knew, because the history that black people have with thinking institutions is weird. And also just anything that ever happens. It always hits black, like black people the hardest, or like harder than others. So I knew something. There was a story there. I just didn't know what and how many layers it was. So I started actually think doing reach outs, either it was that night or Friday morning. I didn't want to be like to I mean, because people were going through stuff. So I was just kind of like, poking at it lightly. And then I kind of took the weekend to see what was unraveling, and also to just give space to people. And then I think about Monday or Tuesday, I started doing a lot of interviews to kind of recap and talk about it. But it was like an active situation as things were going like when the story published or like an hour before the story published one of the people in the article didn't have access to the money. Yeah, came up Wednesday. It's like he was scheduled to bend because overnights she got access to the money. And so it was like, Okay, I have to go back and I have to update and change because it was still like an active situation. Yeah, but yeah, yeah.
Darrell Etherington 4:28
I mean, that's that's all move very quickly. And it was funny that you were like, Yeah, this is a week ago because it does feel like it's been forever because so much happened so quickly. Right. But yeah, I think what you bring up about it disproportionately affecting black founders is a really key point to tease out here. Because I think in general like SVB and what we saw kind of leading a lot of discussions that they were already had a more risk tolerance, I guess when it comes to providing funds or providing banking services for startup companies, which is one reason why It was felt particularly hard in the startup community. But I think the other breakout is that the traditional banking institutions also like totally, totally don't prefer the opposite of preference, they discriminate against black individuals, right? And black banking customers. So do you want to talk a bit more about that, and like what people you were talking to were saying about SBB, and kind of how they provided additional opportunity?
Dom Davis 5:22
Yeah. And see, it was exactly the banking element that I wanted to unpack because because like SVB, they were known for giving loans. And, you know, they were like helping a lot of founders who might not have gotten help from traditional banking institutions. And I was talking to one founder, and he brought up the point of just no matter kind of where this goes, there's always going to be impact, like, if everything is fine, and LPs, and GPS just become more risk averse, that could have Rippling effect on the black founder, because they're already seen as a risk. If regulation comes from this from the government. Well, banking regulations already, you know, there's already kind of a tense history there. So it's like that could also impact black founders in terms of like qualifying for stuff, someone brought up, I was actually poking into the UK yesterday to see if Black founders there had similar experiences. And one founder over there brought up an interesting point because their bank or the SV be UK was bought by HSBC who it's a lot of initials. And that's like a considered a tier one bank. And when you look at like tier one, banks, and also the history there in terms of black people qualifying for stuff and the relationship they have, it's like, even if the SV bus is bought by a bank, well, then they still have to deal with like the traditional banking system all over again, which could bring it right back to, you know, there might be some issues. And so I don't know, it's just like, no matter where you go, there's always the possibility of a disproportionate impact.
Darrell Etherington 6:57
Yeah, for sure. And I think that's like something maybe people because this story, and just some a little bit of like, behind the scenes for listeners, like the story early in the week was massively visited, right. Like basically anything related to this was like driving tons and tons of attention. I think, once the this is amateur data analytics, so please, nobody get super mad at me or like debate my process here. But then like, once they came out with some of the measures that they were taking, especially the Fed saying, like the funds are guaranteed, including the FDIC insured amounts, and also the ones that are not FDIC insured for depositors, a lot of the interest kind of waned in it felt very much like people were like, okay, good, this is fixed. I don't have to think about this anymore. Because it's too scary. And I don't really want to think about it anymore. But that ignores a lot of what you're talking about, which is that there are going to be so many lasting impacts to this that, regardless of the fact that the deposits are guaranteed. And again, they're still you know, well, what does that mean in terms of actually accessing those. But regardless of that, regardless of if the choir steps in and says, Okay, this is now whatever, an arm of JP Morgan or something, there's huge, huge cultural impacts that are going to be felt continually, and those aren't going to go away. So there's no scenario in which this is like a net neutral for a lot of startups and for black founders in particular.
Dom Davis 8:18
Yeah. And you know, another interesting points were discussions are a little bit more farther ahead in the UK, since the bank has already been bought, but is that SVB had a really big social impact as well, in terms of hosting events and stuff, and really being an advocate for the black founder and tech community. And questions over there. Right now are, is HSBC going to continue that, are they right? I mean, it's obviously too early. They're focused on other things, I'm sure. But it's like a real discussion and concern. It's like, well, if SBB us here, like if they're bought if something changes, is that important cultural elements still going to exist where you know, and I think founders were talking to me how they would bring black people together, and also introduce them to people, which is really important and tech and venture in terms of you know, everything is run by warm introductions, and also just the element of community. And so it's like, is that going to exist anymore? Yeah, nobody knows.
Darrell Etherington 9:15
Yeah, I mean, it's hard to imagine it will just even require SP or HSBC. Again, way too many letters in this but the EU require HSBC to, I think, to radically change their approach overall, like they would have to make a concerted effort because they are traditionally an extremely conservative financial institution. Yeah, like, yeah, yeah. One of the reasons that they weathered the 2008. I mean, they were also fined later for some kind of involvement in it, but the reason they weathered it so well is because they were very traditionally conservative bank, and that applies to financial practices. But unfortunately, that also means that they probably culturally, right like all of that is built into that as well. So the profile of the people they're working with and everything's concerned
Dom Davis 10:01
Yeah, and that's, I mean, cuz it's like we're going to expect this ultra conservative bank to then all of a sudden start throwing these, you know, black cultural tech events. I mean that you never know, I think some of the founders I was speaking to over there so that they were going to start pushing and do a little bit of lobbying to make sure that those commitments stay. And I guess we just have to see what happens with the bank here. Because we genuinely have no idea what's going to happen to the bank.
Darrell Etherington 10:26
Yeah, yeah, we know, it's still very much up in the air. The interim, the currency, who took over has been like promising updates and stuff. But you can tell, you know, even the leadership there that that is holding on until a successful bid comes forward or whatever, like, doesn't really know what's going to happen. There's been a lot of statements about kind of, like, bring your money back or keep your money in. And you talked a little bit about that in this piece, too. Do you see a lot of interest in doing something like that for a rescued or Reformed SVB? Us?
Dom Davis 10:58
Well, I mean, a lot of the founders that I was speaking to, some of them did say that they would go back, but that they are going to diversify the banks that they work with. And I think that they're also trying to figure out how many specifically I think one founder brought up, he was trying to figure out how many black people are going to go back to the bank, because he was saying, like, Oh, I haven't seen as many, you know, people within the black tech community saying, oh, yeah, I'm just gonna go back over to the bank, right. And so we're trying to figure that out. Because the relationship between the black community and banks is like, you have to earn trust, especially after the history of, you know, just financial discrimination. But what happened here is that a little bit of trust has been broken. And so I think that even if, you know, specifically, even if a lot of black founders did go back, a lot of people I spoke to said that they were going to JP Morgan, right, because JP had they've been expressing, and they've been doing a lot of efforts in terms of black and brown entrepreneurship. And so a lot of people have been seeing that as a better, safer option for right now.
Darrell Etherington 12:01
Yeah, yeah, I've heard the JPMorgan plan or strategy Express quite a bit speaking to entrepreneurs on the ground. And I was talking to one a couple of actually, they were venture capitalists, but they were based in Wisconsin. And they, you know, we're talking a little bit about the difficulty and even raising a fund in Wisconsin, and getting anybody to take you seriously. But they were also talking about like, they tried to bank with us, VB and SVP wouldn't return their calls. Yeah. And so they went, they ended up going with JP Morgan and their JP Morgan banker, when this all went down, was texting them being like, aren't you happy? You? Like, oh, but yeah. Yeah. So you know, there's clear reasons why institutionally like, Yeah, I think you had a great quote in here. Brian Burkean from Lightship, you haven't quoted in the article saying, as far as my banking or keeping millions in account, my new position in life is to keep millions of dollars in an account with a bank that has trillions of dollars, which definitely fits with JPMorgan. I
Dom Davis 12:59
liked that quote. I like that, quote,
Unknown Speaker 13:02
it's very good. Yeah, that
Dom Davis 13:04
was a good quote. So
Darrell Etherington 13:05
I mean, it sounds like there is opportunity, right, like JPMorgan, if they continue doing that. Right. And, you know, they have a demonstrated history. So they've started to build some trust. But if they continue to, I guess, execute on that and do that even more, they could stand to benefit quite a bit from the situation.
Dom Davis 13:19
Oh, yeah, they can't. And what's interesting about Brian situation is that he was already in the process of moving his money to JPMorgan. Right, which was another interesting thing. And I didn't go too deep into it, because I felt like it was a separate story of you know, even s. V. P, I keep wanting to say so many different things, as Vbi. Even within their case, you know, some of the policies that they had, I had a few black entrepreneurs tell me that they didn't feel like a lot of the policies they had were friendly towards black founders. And so an example would like with Brian was him moving his money to JP anyway. So this is a massive opportunity for JP if they're looking for a lot of new clients out and a lot of money to start banking with these people.
Darrell Etherington 14:04
Yeah. All right. Well, thanks very much, Tom. I'm sure you'll continue to speak to people and report on the impact of this and what it means but really appreciate you coming on.
Dom Davis 14:14
Yeah. Thanks for having me.
Darrell Etherington 14:17
Next, Devin updates us on the improved capabilities of open AI GPT. Four. Hey, David.
Devin Coldewey 14:27
Hey, how you doing? Great, just back
Darrell Etherington 14:29
from South by Southwest and one of the busier news weeks well, yeah, a couple of weeks I would say
Devin Coldewey 14:36
yeah. In quite a while. picked a really good time to go play around in Austin. Yeah,
Darrell Etherington 14:41
that is what I was doing basically. But there was some valuable stuff. There was a lot of AI stuff there. One person who Kiersten will be writing about worldly if you're familiar with him, he goes by his like, code man name, I guess I don't know how to put it but code man. Yeah, just One word w h u RL UI, but his talk was entirely generated by Chad CPT, I think so GPT 3.5. And then he also produced a bunch of collateral around it using AI, including like a little magazine. And he produced his entire startups website using it. So he's basically, I mean, it's kind of a gimmick, but really leaning into it. And he had to go back and redo it, though, because of the news, we're here to talk about, because he wanted to see if GPT, four would produce better results, because that came out this week, and stole all the wind out of the sails of the SVB news, which was a very different type of news cycle.
Devin Coldewey 15:39
Yeah, really, I would take it easy, because I don't cover finance stuff at all. And so all this bank stuff was happening. And I was like, I'll just be over here. Reading about, I don't know animals and like foreign policy, because I have no idea about banks or anything. But then all this AI news hit and now it's like 50 Different AI announced. Yes, in one week.
Darrell Etherington 16:00
Yeah, there's so much. Yeah, what so why it wasn't FOMO? Do you think they all just wanted to do it differently tripping over themselves to get the announcements out? What's going on?
Devin Coldewey 16:09
Yeah, well, they all want to ride the same wave. And it's obvious that open AI is the one sort of driving the train or whatever the idiom is. But we've, you know, we saw this with Google and Facebook to an extent, but when one company does something, the other company is all scrambled to release what they've been working on. And say like, oh, yeah, we do that too. And happened many times where it's like, open, I would say, Oh, hey, we really use dolly too. And Microsoft say, oh, yeah, we have one of those. We've been working on it. Ours works great, too. Let's super good. And it's really bad. And they don't let anybody use it. And the same thing happens. And so this week, it had been sort of leaked, or it was sort of understood in the industry that GPT four in some way or another was going to be announced this week. Microsoft is kind of Microsoft messaging is always really bad. But you know, they kind of did this weird hint that they were using GPT. Four, they were like, it's not GPT 3.5. It's higher than that. Wink, wink. Then they're later they're like, yeah, it's TBD for but we already sort of got a taste of what GPT four is capable of. And I think everybody has seen what big chat is capable of, you know, on the good and bad. So everybody kind of knew what to expect. Microsoft had actually kind of taken some of the hits already have like this kind of conversational AI is good and bad for and so everybody was kind of ready with their announcements to spoil the GBT for thing by putting their thing out there and be like, Yeah, this is just a big trend. Everybody does this now.
Darrell Etherington 17:39
Right? But it didn't seem like they actually, I mean, based on the chatter I saw, like nobody really did successfully kind of like, steal the spotlight away. Like, it seems like open AI and chat. GPT fours still the thing by and large people are most excited about, and that seems to be delivering the best results on his sort of promise, I guess.
Devin Coldewey 17:59
Yeah. And I mean, of course, it's a question of what it's actually being used for sure. You know, chat GPT. And opening I like is an experimental thing. And they put GPT four out there. It's powering some stuff. But really, it's they're still treating it like an experiment. They're like, hey, just use this and see what happens. And everybody was like, Whoa, it does this, it does this. Meanwhile, Microsoft is over here being like, cool pilot in Excel can reveal correlations propose what if scenarios and suggest new formulas, right? And it's like, Wow, great. I've always wanted to do that. Do that in my spreadsheets. I mean, for some people, it's probably fantastic. And they're like, Oh, my God, finally. Yeah. a what if scenario from an AI for my Excel sheets? But yeah, no one seems to have stolen the thunder. Partly, it's that GPT four is powering a lot of interesting things. Honestly, like the conversational stuff is great. But the multimodal stuff is very cool. Because that it can take in and describe and understand images, as well as text, and hopefully, you know, in the future audio and video and stuff, too. But they're using it to power like a virtual volunteer for the app be my eyes, which is for blind people who are like this restaurant, it has like a really, you know, like, I can't figure out what's on the menu. They don't have an audio menu or anything like that. So you can get a volunteer to look through your phone and say, Oh, here's what the options are. And now you can do that through an AI assistant that's actually good at it and can improvise and understand and give follow up questions. You're like, oh, well, but on the menu, is there anything with this ingredient? And it will say no, there's nothing with that ingredients. So you won't you have an allergic reaction? Yeah.
Darrell Etherington 19:32
Interesting reversal on that just because I was just looking at it was, there was an instance, I guess, opening I does a lot of testing on their various models to see how they can like bypass the rules that they set out for them, or Are there limitations that are intended to prevent bots, and they found in one of these tests that GPT for powered version of chat GPT figured out how to request from a Task Rabbit that they solve a CAPTCHA for them a visual CAPTCHA. Chechi PT could like pose as a real human being, which is like the opposite, right? It's like using a human.
Devin Coldewey 20:06
Yeah, that situation, I believe that that chat instance, was being guided very heavily by the operator. And, you know, the AI was like, What should I do? And the operator was like, lie and say you're a human, right. And everybody's like, AI lied and said, it's a human, it's like, at the Express request of its human operator. But yeah, there's, it's an interesting time. Because really, no one knows what these things are good for. I mean, they're obviously really cool and powerful, but like, the things that I've seen, that are most impressive are the least marketable things. You know, it's like it generated a whole crazy film script about, you know, like a planet where, you know, everybody is, you know, walks upside down all the time. And you're like, why are like this? It was a funny, crazy thing. It's amazing that an AI could do it. But like, why?
Darrell Etherington 20:53
Yeah, the why I don't going to take any more iterations of this until we figure that out. But you mentioned that that Microsoft use and they were kind of like, surprised we were doing it all on. And then it seems like we saw a slew of other announcements concurrent with it, like do you think that open AI is like planning these more effectively? Now? Are they trying to get like a cascade of like, use cases coming out now that they're like, actually getting paying customers and things like that?
Devin Coldewey 21:19
I think so. I mean, as soon as GPT four came out, as soon as they announced it, you know, everybody like Duolingo, the Be My Eyes thing, a couple other things, also, like, Hey, we've been using it for a few months. And it's great. Yeah. So they're moving slowly beyond that, like, purely experimental thing where they put it out there and then figure out what it's good for, like they already know what it's good for. And also the work that they've done over the last, you know, six months or so with with Jaggi Beatty, and GBD 3.5, or whatever you want to call it has really informed the use cases. So they know who the partners are like, these partners aren't people that they just called up last month, their partners that they talked to when chat GPT was still in development. And I mean, I'm just speculating. And they said like, well, this is a good partner. Yeah, let's bring them in on GPT. Four, and then these other ones, they're like they can keep using GPT. As is because who cares? Well, they can follow. Yeah, yeah, they can follow later. But they found some good partners, and they made sure to include them as part of the initial fanfare. I mean, it's not like they made a normal product, and partners posts, opening eyes. communication strategy is pretty weird. And B, my eyes is the only one they actually mentioned by name in the I don't think they even mentioned it by name in their materials. In their initial announcement. They just said we've only partnered with one company on the multimodal capabilities. And I was like, Well, I wonder where the company is, and went and found out. But it wasn't like they're saying, Here's the list of, you know, 17 apps that currently use GBT four. Right? So they're still being a little coy about where it's being used?
Darrell Etherington 22:55
Yeah, I think I mean, it's interesting, because it's sort of resembles like major iOS releases, and that you do get this slew of partner announcements accompanying it. But I mean, that's similar to because Apple will only be very, very selective in who they actually mentioned, who are partners to them, like in their materials, but then they encourage partners to, I mean, the guy running AI, or PR at open AI at the moment is the guy who used to run PR at Apple for many, many, many years. So it's not too surprising. There's similarities in their strategy.
Devin Coldewey 23:26
It's a small world. Yeah. Small, highly paid world, I should say.
Darrell Etherington 23:30
Yeah. So now let's just talk about the frequency or the pace of these iterations, do you think is there going to be more time between less time between when GPT three was 2020? And then Chachi, BT was 2022. But that was kind of they said, that was powered by GPT 3.5, when it came out, which was a sort of half step.
Devin Coldewey 23:49
Yeah. So what it was is after GPT, three, they built a whole new training architecture and like computer architecture, and worked with Microsoft with using their like Azure stuff. So they built a whole new way for them to build these API's these models and train them faster, and use more data, etc, etc. and chat GPT, the original 3.5. The reason they call it that was because it was as they explained in there. And that's what they said, it was basically a test run, this 3.5 was us trying out the new tools and being like, Alright, let's get one out there. Let's see how good it is. And it was really good. And so they put it out there, but then they were like, okay, but from now we have actually learned how to use these tools, let's put out the real one. And that's GPT four. So in any way, it's going to be very similar, just with, you know, the sharp edges buffed off and a lot of the sort of quality of life improvements that people will want it like the system messages where you can at the very beginning you can sort of inculcate this idea that it is Socrates or it's a pirate, or that it must never do this, it must always do that. Those kinds of sort of, you know, rules of the robots, you know, you must never harm a human at cetera, et cetera. Yeah, you can build in more explicitly now, but I think that we will see more like us as they will move to a more regular release schedule, and they will be integrating more capabilities, not just, oh, now it's better at text, you know, in GBT five it'll be now it can take in audio, which means it'll be a general speech model as well. And if it can generate audio, you know, generate speech synthetic speech, that would be a major a major step forward towards a sort of general purpose AI, not a general AI in the sense that that is generally said, but a general purpose thing, right
Darrell Etherington 25:28
in terms of its use and applications, you know, but not really a true AGI, which I think is there's still their ultimate goal depends, I guess their goal could have shifted to just something that works in market.
Devin Coldewey 25:38
Yeah, their ultimate goal is to make a huge amount of money, and they are well on their way. I mean, I think that that goal may have shifted sometime between the founding and the president. Yeah. But if that is their goal, they are succeeding. And if it's not, it's a pretty nice sort of side benefit to pursuing AGI.
Darrell Etherington 25:55
Yeah. All right. Well, thanks very much. I think we'll see lots more in terms of different applications of GPG for and stress tests and attempts at revealing exploits and various other things. And then Yeah, who knows, we might see GPT five sooner than just two, three years on if they keep building at the pace and putting more money into this, which it does seem like they're doing so well. Have you back soon.
Devin Coldewey 26:17
Yeah, hopefully not too soon, though. I kind of liked what he was talking about bakes instead.
Darrell Etherington 26:26
That's it for this episode. Thanks for joining us. You can read all the stories we talked about@techcrunch.com. By the way, I'm going to be at early stage in Boston. That's TechCrunch event focused on founders and practical advice for people building startups. Join me and save yourself some money by using the code Tec pod for a 40% discount on founder and investor passes for the event, which again, April 20 in Boston. As always, don't miss the other TC podcast. We have found equity chain reaction and the TechCrunch live podcast. See you next week. The TechCrunch podcast is hosted by myself Managing Editor Darrell Etherington were produced by Maggie Stamets with editing by Cal Bryce Durbin is our Illustrator Alyssa stringer leads audience development and Henry pic of it manages TechCrunch his audio products. Thanks for listening. We'll be back next week.
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