07 September 2023

On today’s episode, Clay is joined by Bob Muglia to discuss the AI boom, Bob’s experience working with Bill Gates, and how he helped lead Snowflake from $0 to $200 million in revenue during his tenure as CEO.

Bob Muglia is a prominent technology executive known for his influential roles at Microsoft, including Senior Vice President of the Server & Tools Division, and is also the former CEO of Snowflake, a leading cloud data warehousing company. Bob helped lead Snowflake to go from zero to a $200 million business. Today, he remains a key figure in the tech industry, contributing his expertise in various leadership and advisory positions.

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  • How Bob first got immersed in the technology industry.
  • Bob’s lessons from working with Bill Gates and Steve Balmer.
  • When he realized that data was going to be one of a company’s most valuable assets.
  • What differentiates Snowflake from their competitors in the data warehouse space.
  • Bob’s view of the competitive landscape in the data warehouse industry.
  • Whether Bob was surprised that Berkshire Hathaway bought into the Snowflake IPO.
  • What The Arc of Data Innovation is.
  • When Bob foresees Artificial General Intelligence to become a reality.
  • What industries Bob sees AI impacting the most.
  • What the end game is for AI and where technology is heading.
  • Isaac Asimov’s role in the governance of technological innovation.
  • If regulators are taking appropriate actions to safeguard against the potential downsides of AI.
  • What Bob looks for when investing in technology companies.
  • Why technology in many cases won’t replace people and their jobs.
  • What the future of online search will look like.


Disclaimer: The transcript that follows has been generated using artificial intelligence. We strive to be as accurate as possible, but minor errors and slightly off timestamps may be present due to platform differences.

[00:00:00] Clay Finck: On today’s show, I’m joined by Bob Muglia. Bob spent 23 years working with Microsoft and he held a number of executive positions with the company, the last of which being his role as the president of the server and tool business unit prior to resigning in 2011. In 2014, Bob became the CEO of Snowflake, and he helped lead the company from zero to $200 million in revenue before parting ways.

[00:00:23] Clay Finck: In 2019, Bob recently released a book called The Data Entrepreneurs, which explores how technology got to where it is today and where he foresees technology and AI going in the future. This episode touches on a lot of interesting topics such as Bob’s lessons from working with Bill Gates and Steve Balmer.

[00:00:41] Clay Finck: What differentiates Snowflake from their competitors in the data warehouse space? Whether Bob was surprised that Berkshire Hathaway invested into snowflake’s I p o, what the arc of data innovation is when Bob foresees artificial general intelligence becoming a reality. What industries he sees AI impacting the most, what he looks for when investing in technology companies, what the future of online search may be, and so much more.

[00:01:06] Clay Finck: Without further ado, here is my chat with Bob Muglia.

[00:01:13] Intro: You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected.

[00:01:33] Clay Finck: Welcome to The Investors Podcast. I’m your host, Clay Finck, and today it is such an honor to be joined by Bob Muglia. Bob, welcome to the show. 

[00:01:42] Bob Muglia: Great to be here. Clay. 

[00:01:44] Clay Finck: Well, Bob, we got connected because of the book you’ve recently published called The Data Entrepreneurs, which I’m holding up here for those watching.

[00:01:51] Clay Finck: And as I was looking into your background, I’m thinking, man, I just have to get Bob on the show. You are really one of the builders and the visionaries of all these different technologies that are developing and especially AI and where all this is heading with all the companies you’re involved with, and especially your experience working with Microsoft and Snowflake.

[00:02:11] Clay Finck: So I think a good place to start would just be to touch on some of your background. So could you please walk us through your journey of what brought you here today? 

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[00:02:20] Bob Muglia: Sure. So it’s interesting ’cause when I was in college I was sort of studied, I was computer science degree at University of Michigan and I sort of was focused on networking and communications ’cause this was the early 1980s and I felt like they would be, that would grow tremendously.

[00:02:32] Bob Muglia: And I joined my first, , when I was at Ann Arbor, at University of Michigan. My first technical job was at a company called Condor Computer, which is in the late 1970s. It was an actual true relational database. It ran on incredibly early microprocessor system called a Cromemco it was this big box with large, if you can believe it, eight inch floppy discs.

[00:02:53] Bob Muglia: It hold held a tiny amount of data. It had just a tiny amount of memory in the machine, and yet it was a real relational database. And that’s where I started building business applications with data. And then when I joined Rome, which is a communications company, back in the 1980s, I wound up building business applications there and working with databases, some of the early networking databases that ran on PCs back in the early 1980s.

[00:03:17] Bob Muglia: And that led me to Microsoft. My wife and I actually had a desire to move up to the Seattle area and she was the one who really found Microsoft. She’s a Stanford MBA and a pretty smart cookie. And she was the one that spotted Microsoft in like 1985. And I joined Microsoft in, in early 88. My wife actually joined six months later and was there for five years.

[00:03:38] Bob Muglia: I spent 23 years at Microsoft. My first job was on SQL Server. I was the first technical person on SQL Server. We had a product manager and I was the technical program manager helping to work with Cybase, who actually built the product down in the Bay area and helping to deliver it on PCs, running OS two at the time.

[00:03:57] Bob Muglia: Initially it was running OS two back in these crazy days, and then I wound up working at Microsoft doing a series of real sort of startup kind of things inside Microsoft for really throughout the 1990s, staying on a business for like two years or so. I helped to build Windows NT and the Windows server business.

[00:04:15] Bob Muglia: I ran the early server products and actually ran the tools part of Microsoft brought together Visual Studio. That was in 1996 when we first created Visual Studio, and I was running it the division at the time did a whole bunch of things that were really solving problems at Microsoft.

[00:04:32] Bob Muglia: New problems. And then spent my last seven years running the server and tools group at Microsoft, which was Windows server, SQL Server System Center, and the developer tools products. So I brought that division to about 17 billion in revenue, nine to 17 billion. It was interesting.

[00:04:49] Bob Muglia: Back then we never got mentioned. The server business was growing 15% a year, constantly, just 15%, 12%, 18%. Every we would never get mentioned in the earnings report unless something bad was happening in Windows or the office. ’cause they would always talk about those things. But you knew if servers was being talked about that it meant that they wanted to highlight something back then.

[00:05:10] Bob Muglia: I left Microsoft in 2011, spent a couple years at Juniper, which reintroduced me to the Bay Area, and then took the Snowflake job in 2014, may of 2014 and ran the company for five years. Subsequently, since I left Snowflake in 2019, I’ve been working on boards. I’m on five boards of small private companies, and I really act as an advisor to CEOs, all the small companies helping them build their business model.

[00:05:36] Bob Muglia: Most, we’ve got a lot of brilliant technical people out there, and yet they don’t necessarily have the business side of things. And I picked all of that up. I was fortunate to learn at the hands of people like Bill Gates and Steve Bomber, who are as brilliant a businessmen as I’ve ever seen.

[00:05:51] Bob Muglia: And so I was able to help a lot of small companies as in their CEOs as they start to build their business. So that’s what I’m focused on now. 

[00:05:58] Clay Finck: Man, what a resume. 23 years with Microsoft, ended up being a president of one of their divisions there when you left in 2011. And then CEO of Snowflake for five years, which we’ll be talking about a bit here.

[00:06:11] Clay Finck: I was curious if you could share some of your takeaways and experiences and key learnings from working with people like Bill Gates at Microsoft. 

[00:06:20] Bob Muglia: There’s a ton, an amazing amount I learned from Bill and Steve. Bill is technically one of the strongest people I’ve ever met. He’s a brilliant guy. Also very good with people and recruiting technical people.

[00:06:31] Bob Muglia: Bill has a great ability to build strong technical relationships with people and that I think has really guided him on his career. And I think maybe if I look, if I wanna say, if there’s one thing I learned from Bill, it’s that building these relationships with people, the technical people is so critical.

[00:06:47] Bob Muglia: If you look at my career, I’ve mostly assisted brilliant technical entrepreneurs to build their technology and their product. It’s really the, where the idea of the data entrepreneurs came from. This idea of data entrepreneurs. And even when I was at Microsoft, I had the recognition that I was working with data entrepreneurs while I was at Microsoft.

[00:07:06] Bob Muglia: And then of course subsequently have done so at places like Snowflake and the things I’ve done since then. But I learned an enormous amount of how to work with those technical people from Bill, because I think Bill is about as good at that as anyone was. Although he could sometimes be, bill can be pretty aggressive sometimes, and sometimes relatively dismissive of people.

[00:07:24] Bob Muglia: I try and be respectful, a little bit more respectful than that. Bill’s one of, Bill’s, one of the things Bill is known for saying is that’s the dumbest thing I’ve ever heard, and he used that line so often. It started to lose its effectiveness because eventually you’ve decided that once you’ve heard something’s, the dumbest thing you’ve ever heard a hundred times, it must not be that dumb.

[00:07:42] Bob Muglia: But from Steve, on the other hand, Steve is an incredible businessman. Probably one of the most multidimensional, smart. Mathematical thinkers I’ve ever seen. Steve could keep in his head a relative spreadsheet of the Microsoft revenues byproduct by country and have a really good understanding of that.

[00:08:05] Bob Muglia: A stunningly good understanding of that. Like literally to the point where, this is a notorious thing at Microsoft is there was this thing called the rev sum. It’s a brilliant idea. This idea that there’s a so much wallet, a share of wallet, and you wanna understand what you’re getting across all of your d different markets and things.

[00:08:22] Bob Muglia: And what Steve would do is he focus on key drivers. Like a socket, like a PC is a socket. It’s a sell. It’s something you can sell into. So when a PC is sold it’s something that you could then Microsoft would earn revenue on Windows, but there was also opportunity for office and all sorts of other tag on products.

[00:08:40] Bob Muglia: And Steve would build these spreadsheets to have the finance build these spreadsheets that had all of the products and all of the regions and countries. And it would literally be this giant sheet of paper, this 11 by 17 sheet of paper, which Microsoft loved. And there was 2,500 numbers on one piece of paper, I swear to God.

[00:08:56] Bob Muglia: And you would look at this thing, and Steve could Steve would get presented to this in a meeting and he would stare at it for about 30 seconds and he would go, this is all wrong. I know it’s wrong because that number is wrong. And he would point to a number in the middle of this page of numbers, which I’m like, I could, to me it was just all a bunch of numbers.

[00:09:14] Bob Muglia: I could barely see the thing. And at that point, the finance guy would start. These papers, there’d be a 10 minute period where there’d be a discussion about whether that number was wrong. And honestly, I swear eight outta 10 times Steve was right. And it may be real, the meeting and it maybe it wasn’t counterproductive even, but it’s still, it created a set of expectations, if that makes sense.

[00:09:36] Bob Muglia: That everyone knew when you presented that spreadsheet to Steve that he was gonna look at it and if there was something wrong, he was gonna find it. And it really drove the company. In a lot of senses, my style is very different than that. And Steve could be very aggressive and sometimes disrespectful in meanings.

[00:09:51] Bob Muglia: I always tried to be respectful in things like that, but I do think that pushing people to do more than they, they expect they can do is an important thing. And that’s certainly something that I learned from both of them. 

[00:10:03] Clay Finck: Yeah, it’s fascinating. I think about what you said about Bill, where you look at many of these great companies and I think a key attribute.

[00:10:10] Clay Finck: You look at Steve Jobs and Musk, they’re just brutally honest people and they will just achieve what they wanna achieve at all costs. So, and 

[00:10:17] Bob Muglia: difficult, frankly, they’re all difficult. Okay. Find one that isn’t difficult. All these brilliant founders, mark Zuckerberg, you think he’s easy jobs was difficult, bombers a pain in the tail.

[00:10:28] Bob Muglia: They’re all fairly difficult, but as part of what makes them what they are really. In 

[00:10:34] Clay Finck: your book, you talked about how data is one of a company’s most critical assets. Given that you’ve been in this, we’ll just call it the technology industry for so long, when did you realize how critical data was going to be for companies and how has your opinion on that changed over time?

[00:10:52] Bob Muglia: I think really very early. When I started working at rom, even I was working on collecting data. We were selling P B X systems business telephone systems ROM built the first digital P B X and which was very innovative back in late 1970s and early 1980s. And that point, even then, we were collecting information about customers that we were having to put into these systems.

[00:11:13] Bob Muglia: So I recognized how important it was When I joined Microsoft I was focusing on collecting data and working on information with SQL Server. 


[00:11:20] Bob Muglia: SQL Server really did change the industry in that it brought business computing to businesses of all sizes. If you go back to the early 1990s, most small businesses kept their books on pencil and paper, and that all changed largely because of the work we did at Microsoft with the products that we built that were specifically targeted at those industries.

[00:11:40] Bob Muglia: Whereas most of the other companies were targeting larger businesses. So I recognize that data had an ability to impact. Businesses of all sizes, certainly when I was at Microsoft working on SQL Server, but also because very early on Bill started an initiative called Information at Your Fingertips was really about using technology together, business information, and to be able to bring that two people, ultimately it has turned into the actual implementation of it is turned into the internet and Google for all practical purposes, search.

[00:12:12] Bob Muglia: But you know, that vision that Bill said in 1990 which I do talk about in the book, it was very much a big driver of all of the things that happened and it was a big driver in shaping my focus on the importance of data. I 

[00:12:25] Clay Finck: also wanted to touch on a little bit about your role at Snowflake. To my knowledge, they sort of were operating under stealth mode for some period of time while they developed these products and services, and then they took those products to market once they were ready to go.

[00:12:40] Clay Finck: So talk about how you ended up joining Snowflake in 2014 and how your journey with them evolved over time as they sprung out of this stealth this stealth mode. 

[00:12:52] Bob Muglia: When I left Juniper in late 2013, I decided I was, I wanted to work at a much smaller company than I had been working at Juniper.

[00:13:00] Bob Muglia: I had an amazing realization, which was that Microsoft, I was building new businesses all the time and Microsoft was able to do that. And I realized that part of the reason I was able to do that is had this cash cow called Windows in office. It was throwing off a lot of profitability. I joined Juniper, and Juniper was, had stagnated.

[00:13:16] Bob Muglia: I. Shortly after I joined, it wasn’t growing and I realized that it is almost impossible. I was trying to build a software business in a hardware company, and I learned that it was almost impossible to build a new business at a company that wasn’t growing because there just simply isn’t enough cash to feed both the primary products that are generating the revenue and to build these new businesses.

[00:13:35] Bob Muglia: And I wanted, and I came to, and while many people love fixing broken things, and there’s certainly a lot of joy that can come in, that I had seen a lot of that at Juniper. I was fixing a bunch of broken things and I decided I wanted to build something new, which is what led me to small companies. And I started looking around.

[00:13:52] Bob Muglia: I was connected through, I had a contact at Sutter Hill, which was the founding VC of Snowflake. And that created the connection that when I met Benoit and Terry, and when I first met with them they had this, what they would do is, the way they would interview people is they would ask them to do a presentation in front of a group of them.

[00:14:10] Bob Muglia: So I came in as a CEO candidate. And they essentially asked me to talk about what I was doing at Juniper and some of the things I was trying to do from a pricing perspective there. And so I had a presentation that I essentially had to do in front of them, and then they talked to me about what they were building at Snowflake.

[00:14:26] Bob Muglia: And I recognized that although the product was early and it was still not fully functional, if it did though what they said it was going to do, that it would revolutionize the industry. That in fact, databases had always been limited in the number of users they can support and the size of data. And because of the architecture that Benoit and Terry had created with Snowflake, leveraging characteristics of the cloud which were not available before because of the way the cloud works, it was possible to build a database that separated storage and compute and allowed those to be scaled independently, essentially letting you put in any amount of data you want and work with as many users as you want.

[00:15:04] Bob Muglia: Remarkably a single snowflake system can scale to essentially any size. And the way they described what they were doing made total sense to me. And so they seemed like pretty smart guys and so I decided to take a bet on, on the fact that they would make it work. And fortunately, that was a good bet.

[00:15:21] Bob Muglia: I 

[00:15:21] Clay Finck: recently had a guest on the show who is an investor and an incredibly intelligent guy, and I had asked him about what technologies today excite him. And the one thing you mentioned was just how much he loved snowflake’s products. So I’m curious if you could dive more into what sets Snowflake apart in the data warehouse space and what makes them so special and to allow them to create something that just isn’t available in the market.

[00:15:49] Bob Muglia: I think it’s in multiple things, right? First of all, I think it’s being at the right place at the right time. You couldn’t build Snowflake today. It’s just fact people are trying to introduce technologies that have characteristics like Snowflake. Good luck. You’ve got well established players in the business, all of whom have a whole lot more money than you have if you’re a small company.

[00:16:07] Bob Muglia: We were competing against companies that always had a thousand times more capital than we did. They had names like Amazon, Google, and Microsoft, and how do you compete with them? Well the answer is you have a better product. I said many times that if we were just a little bit better, like 20% better than Amazon’s competing product, Redshift, we would’ve been totally wiped off the face of the earth.

[00:16:28] Bob Muglia: But in fact, snowflake was effectively infinitely better because it solved problems that Redshift couldn’t solve. We were also fortunate in the sense that I mentioned Redshift. Redshift is the data warehouse that Amazon built. Still, it’s still available. It’s a good product, always been a good product, but it doesn’t scale.

[00:16:44] Bob Muglia: It was built using the, a more traditional database technology that was built in an on-premises environment and it didn’t have the cloud scalability characteristics that Snowflake had. And so what happened is that Amazon in doing incredible work, establishing the cloud and frankly building a very good product in Redshift, what they did is they seeded the market for us.

[00:17:06] Bob Muglia: And customers who adopted Redshift, if they scaled and grew in size, they would need an alternative solution. ’cause RedShift’s ability to handle large amounts of users or data was much more limited. And Snowflake turned out to be the answer. So we were able to move a lot of customers over. We were just, the product was a lot better than anything else.

[00:17:24] Bob Muglia: It could solve problems that nothing else could solve. And I think the way we built it was in a way that was very Friendly to customers. I give Ben Juan Criter almost all the credit for building a phenomenal product. But I do take some credit in building a phenomenal company and I feel very good about the values we put in place and the approach that we took.

[00:17:47] Bob Muglia: I always felt that in order for companies to adopt a product, they really want to like the company and want to want, like, working with the company. I’ve dealt with so many difficult companies in my days that I realize it’s such a breath of fresh air when you’re working with companies that want to solve your problems.

[00:18:03] Bob Muglia: And we built into our values this realization that helping the customer succeed. Our first value, which we put in place was we put our customers first. And I learned that value from honestly, Jeff Bezos, who I was fortunate enough to spend a small amount of time with. When I was at Microsoft and I realized how customer-centric Jeff made Amazon and I wanted to make sure Snowflake was as customer-centric as Amazon.

[00:18:31] Bob Muglia: So we put our customers first and and in that value, the first line of that value is we only succeed where when our customers succeed. Which turns out to be true from a actual revenue generation perspective because Snowflake is a usage-based pricing model. And so essentially we didn’t get paid unless the customers used our product.

[00:18:50] Bob Muglia: And so we had a lot of reason to want them to be successful in using it. We were motivated to do that. They were motivated to do that ’cause they wanted, they had a problem they wanted to solve and we were in a good place to solve that. So in addition to an incredible product, we built a very customer-focused company and a very values-based company and that was important.

[00:19:11] Bob Muglia: Values were something I discussed in every team meeting I ever had. We put the values together about. 12, 18 months after I got there, it was a bottoms up process. It started in the engineering team with some leaders in engineering and included a process that touched on every group in the company, and people had an opportunity to contribute to that.

[00:19:30] Bob Muglia: When we had these values, we really embraced them. Drove the company that way. The other thing I’ll say is that Snowflake didn’t try and solve every problem ourselves. There was so many the space is so large. So you know, we put in place a company that was very partner centric, that works with partners across the industry and does so very openly.

[00:19:48] Bob Muglia: And I’m pleased that culture is still in place today. I think that came from Microsoft, myself and the head of product at Snowflake now, Christian, Kleinman’s, ex Microsoft, bunch X, Microsoft, DNA now in there. And Microsoft, in my opinion, is the most partner centric company that the world has ever seen.

[00:20:04] Bob Muglia: So we learned there, 

[00:20:07] Clay Finck: it’s quite amazing to me how you and your team at Snowflake managed to convince the big tech players, the Microsofts, the Amazons, the Googles convince these guys to work with you instead of heavily competing with you. 

[00:20:20] Bob Muglia: I’m not so sure about that. They always competed at the same time.

[00:20:24] Bob Muglia: It was always, and it varied. I had a horrible relationship with Amazon while I was running Snowflake, largely because of my past history with Andy. Andy and I had our first, I. Tangle when I was at Microsoft Andy Jassy, who now runs Amazon, so Andy never forgave me for the years ago when he was building a w s and he wanted to license Windows server and I was happy to license him Windows server.

[00:20:48] Bob Muglia: I just wanted to license it the way I licensed it to all my other customers, and he wasn’t happy about that. So he, I don’t think, I think that was there for a long time and I was able to build a reasonable relationship with the Microsoft team when I was running Snowflake. Then as soon as I left, it totally reversed.

[00:21:03] Bob Muglia: And Frank built a good relationship with the Amazon team and Microsoft. The Microsoft thing, soured. But the cloud guys of all were always a little bit of a co-opetition and a lot of it was competition, to be honest. 

[00:21:17] Clay Finck: To my understanding. You still have a stake in Snowflake today? I just read that you unloaded some of your stake at the IPO.

[00:21:25] Clay Finck: Would you consider there to be any major competitors to Snowflake today, or what’s your view on the competitive landscape? 

[00:21:32] Bob Muglia: Oh, it’s very competitive right now. You know there are five, I always say this, there are five major data. Providers, data platform providers this is often called the modern data stack.

[00:21:43] Bob Muglia: It’s really this idea that you take you can consume data from any source, it goes into a cloud service. The cloud is, it provides you with the scalability and the flexibility that’s there. And SQL is used to help cut to help work with data. So the modern data stack has become very pervasive.

[00:22:01] Bob Muglia: In addition to Snowflake as a platform provider. Databricks is another independent provider that has done quite well. They focus more on the machine learning side, less on the data warehousing side, but they’re building data warehousing and snowflakes, building machine learning. So they’re competing very fiercely with each other.

[00:22:17] Bob Muglia: And then there’s the three cloud providers, all of which have viable products these days. Amazon has Redshift in their data product line. Google has BigQuery and Microsoft has built what they now call Fabric, which is an integrated set of data products. So they all have products that compete with Snowflake.

[00:22:33] Bob Muglia: I still think snowflake’s the best product in the market. But that’s, and snowflake’s ahead in a variety of ways. But it’s a highly competitive space, which I think is great for the industry. I think that’s a super good thing, 

[00:22:44] Clay Finck: And I think one of your jobs with Snowflake was to create that successful business model within the company.

[00:22:51] Clay Finck: And one of the things I found interesting, In that development is, you didn’t go the subscription model route. You ended up, essentially the clients pay for what they use with the product. So how critical was this commitment and why was this a appropriate route for you to go? 

[00:23:06] Bob Muglia: Well, it was the only route at some level because when you move to a cloud platform like Snowflake is, you are paying, you have real cogs underneath you.

[00:23:16] Bob Muglia: So you have to have a model that is somewhat driven by usage and the more directly correlated, those two are, the better you off you are. So usage-based pricing had been in place previously, and in fact Amazon probably should be given credit for driving that with their with AWS, which is almost entirely a usage base.

[00:23:38] Bob Muglia: Pricing model. Now, Amazon is an infrastructure as a service provider, and so their pricing model is very physical in its nature. You are literally paying per computer you buy, or the amount of storage you’re using or the amount of data you’re flowing across the network. All of those are measured and you’re charged for their, your usage associated with it.

[00:23:58] Bob Muglia: The biggest thing that I did at Snowflake when I put the pricing model in place was move away from a very physical based model to a logical model. So instead of saying a customer gets a warehouse that has four nodes in it we said that was a medium warehouse I think is what that is.

[00:24:17] Bob Muglia: And so I went to t-shirt sizing on it where each warehouse size doubles the previous size, just like it’s a small, medium, large, extra large. I think they go up to six XL now. So it’s gets to very large clusters of servers that can work together and we created this idea of a credit.

[00:24:35] Bob Muglia: Which is a effectively a credit is an hour of usage of one of these nodes. But by calling it and creating it as an object, a virtualized object, it allowed us, it made it easier for us to discount it, easier for customers to consume it. And I very much wanted customers to think about Snowflake as a value-based service, not a physical service that you’re paying for the rental of these hardware.

[00:25:00] Bob Muglia: ’cause it isn’t that, it very much is a, an application service, a platform service for customers. And so by moving to credits and this t-shirt sizing, it moved to much more logical approach to prescribing things, which allowed us to apply a discount. The biggest thing about a credit is it’s a vehicle.

[00:25:17] Bob Muglia: It’s something to discount that customers can based on how much they’re purchasing, et cetera. You could give a customer an appropriate. Appropriate price. And so that’s what put the whole thing together. It is now pretty widely accepted in the industry as of model, as a variation of the usage-based pricing model.

[00:25:33] Bob Muglia: There are a lot of details in there too, by the way. Like for example a customer buys a hundred thousand dollars in capacity. They can use that capacity any way they want. They can use it for compute, they can use it for storage, they can use it in any region in the world they want. And when they run out of capacity, they go back to essentially book pricing, list pricing.

[00:25:52] Bob Muglia: They lose their discount so the customer and the company are incented to do another deal and purchase more capacity. And that model has worked very effectively. 

[00:26:04] Clay Finck: I had mentioned that you had unloaded some of your shares at the Snowflake i p o and to my surprise, I was reading on according to Forbes, anyways, they said that.

[00:26:13] Clay Finck: It was Berkshire Hathaway that had purchased shares at the IPO from you. And I think people like to say that Warren Buffett purchased shares in Snowflake, but I think it’s safe to assume that some of his colleagues did the research on that one and made that decision. And Buffett, he’s generally had a bit of a distaste for IPOs and technology in general.

[00:26:33] Clay Finck: As many in the audience know he thinks about things like the Wall Street incentives of trying to get the highest price at the IPO. So I’m curious if Berkshire Hathaway investing in Snowflake at the IPO, if that surprised you? 

[00:26:45] Bob Muglia: I didn’t expect it by any means, and it wasn’t something I was directly driving.

[00:26:49] Bob Muglia: I did know that was happening. I think it was great for the stock. It helped to really drive the stock up. I do think I feel a little bit bad. No, I feel a lot bad, not a little bit bad. I feel a lot bad for public investors of Snowflake because very few, if any, people have made money on Snowflake in the public market because it opened at a very high price and then it went up from there.

[00:27:09] Bob Muglia: And it’s subsequently down below Its initial, it’s below what its initial offering price was when this market first opened, I think it was two 40 or something like that. So I, that to me is disappointing, but I’m, I wasn’t shocked by what happened. The board very much wanted a big bang. IPO, they got it.

[00:27:27] Bob Muglia: They got it. Problem is it’s hard to maintain that afterwards. 

[00:27:31] Clay Finck: So, transitioning to some of the ideas in your book, one of the great charts you included was what you called the arc of data innovation. So can you talk a little bit about this chart? It sort of shows the, how you see technology, how it’s progressed over time in the past and then in the future.

[00:27:46] Clay Finck: So I’d love for you to paint some color around this. 

[00:27:49] Bob Muglia: Well, I’m I’ve been in the industry for so long and I’ve been working with a number of the players for so long. I think I’ve had a really unique viewpoint on how the industry’s evolved. And what the ARC really does is it talks about the key data innovations that have happened over really the last 50 years.

[00:28:07] Bob Muglia: And it describes key things that have happened. 1960, it’s more than 50 years, 1960s, the advent of static data or structured data and some of the early database products, relational coming out in the 1970s and then really taking off in the 1980s. We have. Text and internet and search appearing in the 1990s with semi-structured data coming from that, all the log files being thrown off by these business systems, these applications, web servers, that now you have the ability to analyze behavior and then in the two 2010s, the modern data stack, making it possible for people to analyze that data at real scale.

[00:28:44] Bob Muglia: I’d always seen an arc of data innovation and the book always had in it an arc of data innovation, but where I, my head was that it was all about driving better decision making, the digital data economy where the world is today being driven by data. And that was the world I sort of saw when I started writing the book.

[00:29:05] Bob Muglia: And then in the 20 months or so that I spent writing the book, I watched how the industry was advancing. In the areas of ai, these foundation and large language models, and I was sort of caught, like many of us caught breathless by how fast things were going. And I realized that the arc had changed in that this idea of artificial general intelligence.

[00:29:30] Bob Muglia: A machine that is as smart as a human being, I have for my entire career believed that’s where we were headed, that people were building and were going to build such devices. I’ve always believed that, but I thought it would be more like 2100 or 2050 when that happened, and I figured I wouldn’t be around to see it.

[00:29:49] Bob Muglia: And now I think it’s gonna happen by like 2030. And I sure hope to be around by in that timeframe. And so I recognized the horizon for progress had moved in considerably. And so the ARC now changes and talks about things like artificial general intelligence and even super intelligence and beyond 

[00:30:08] Clay Finck: tapping into artificial general intelligence there, you mentioned that’s technology.

[00:30:13] Clay Finck: That’s as smart as like the median human, I believe you say in the book 

[00:30:17] Bob Muglia: give or take. That’s, that was Sam Altman’s, that’s one of Sam Altman’s definitions and seemed like a reasonable one to me. 

[00:30:22] Clay Finck: Yeah. So you mentioned originally you thought it was gonna be far out into the future. What were some of the key things that led you to believe it’s gonna be coming much sooner, say 2030?

[00:30:34] Bob Muglia: Well, my first I work with Microsoft and sometimes I get a preview on things that are coming at Microsoft. And I had seen in early 2022, the co-pilot work that the GitHub team was doing. And I found that breathtaking. I found that sort of breathtaking that this technology was writing a material part of the code for a programmer.

[00:30:57] Bob Muglia: And Microsoft believed that number would be around 40%. And that seems to be holding true that when developers use co-pilot, that 40% of the code that they check in is actually written by copilot, which is a stunning number. You’re talking about a massive increase in productivity of developers, which is one of the biggest gating factors to technology advancement is how fast can developers write code.

[00:31:22] Bob Muglia: All of a sudden we have. A very significant 30 40% increase in capacity from this technology. And that seemed pretty breathtaking. And then I watched with the stuff that was happening with stable diffusion and the dolly and the drawing apps and then like the rest of the industry, I was just caught sort of breathless by how fast and how far chat GPT has come.

[00:31:44] Bob Muglia: And so that made me realize the world is totally changing and changing it at a pace that’s much faster than I anticipated. And the really, the remarkable thing about this is that for the first time, We have what you can think of as intelligence, the ability for a machine to make independent decisions that are not driven by logic that was created by a person.

[00:32:05] Bob Muglia: Programs are written by people and they’re very logical in the way they do things, and that’s the way a lot of artificial intelligence used to work, rules-based things. Now with these neural networks that have grown in very large scale, all of a sudden these networks have a type of intelligence that very is very similar to human intelligence and the ability to think through processes.

[00:32:25] Bob Muglia: It’s not as advanced yet as human intelligence, and there’s definitely missing elements, but the technology is able to solve problems that literally were unsolvable. Two years ago, and all of a sudden there’s this vast set of problems that I’ve wanted to solve, and I have companies that wanna solve that.

[00:32:39] Bob Muglia: Now all of a sudden you can solve them. And essentially this idea that you can take any task, any process that people do, and knowledge that is in people’s heads on how to do that, and you can effectively bottle it and put it inside a piece of software and take that knowledge, that domain knowledge that you have, and actually make it so that a computer can replicate that.

[00:33:02] Bob Muglia: It’s a remarkable advance and it affects effectively everything. So it’s an incredibly exciting time. 

[00:33:09] Clay Finck: One of the amazing things that sort of stands out to me is I look at the founding story of Snowflake and how they’re in stealth mode and no one knew what they’re really up to.

[00:33:19] Clay Finck: And today everyone’s familiar with Chat, GPT, but what we’re not familiar with is all the things, the Googles, the Microsofts, the open ais of the world, what they’re developing that they haven’t released yet. 

[00:33:31] Bob Muglia: Right. And we’re in that period. We’re in a waiting period right now. I actually feel like I there’s, Gartner has this thing called a hype curve.

[00:33:37] Bob Muglia: I don’t know if your viewers, if your readers or your listeners are familiar with this, but it is when a new technology is introduced, it goes on a hype cycle and it’s, it the sort of, the curve goes up at a very fa at a fast pace of high pipe, and then the hype hits the peak of hype.

[00:33:52] Bob Muglia: And then it goes into what they call the trough of disillusionment, where reality strikes and in that period people become disillusioned about things and then eventually it goes into a cycle of usefulness and it has a lot, a lifetime afterwards where people understand what really is possible.

[00:34:09] Bob Muglia: Well, the first six months of this year were the hype. I’ve never seen hype like AI hype. It was the most fast hype, biggest hype I’ve ever seen in my career, and I think we actually hit the peak of that hype cycle sometime in early July. And I think we’re now beginning to enter this trough of disillusionment as people are saying, okay, fine.

[00:34:30] Bob Muglia: How does this affect me? How does this affect my job and what I do? And we’re waiting for products right now, and there’s a chance that those first products might be a bit disappointing, which is what often happens that when first generation products come out. And so that’s all part of that trough. And now that the hype cycle, when is fast in ai, is anything’s ever gone?

[00:34:49] Bob Muglia: What’s really gonna be interesting now is how quickly do we go through this trough of disillusionment? I think the fall we’ll have some disillusionment, but by the time in winter will we begin to exit that and start to see real products that are solving problems. I don’t know. We’ll find out, won’t we?

[00:35:03] Bob Muglia: I’m hopeful, but only time will tell. 

[00:35:06] Clay Finck: In real time it, it sort of feels like it’s gonna develop slow, but when you look at the bigger picture, it’s happening at a very rapid pace as you’ve seen throughout your career and how the timeline has sort of shrunk with these technologies. I’d like to get your point of view on what industries you think will be most impacted by.

[00:35:23] Clay Finck: The advancement of ai? 

[00:35:25] Bob Muglia: Well, I think that you hit on the real big thing actually. It’s just the shrinking of timelines and that’s what’s happening. And if you talk about the trend in the arc of data innovation, it’s actually been a, it’s been a constant speeding up of how things move over time.

[00:35:42] Bob Muglia: If you look back in the 1970s and 1980s this was before email even, and information moved between people at a much, much slower pace than it moves today. So technology has sped up and the ability for people to work with and exchange data has constantly been increasing the pace of innovation, AI is exactly the same way.

[00:36:02] Bob Muglia: It will be a significant increase in the pace that innovation happens, and ultimately it make. Continue to go faster than really we can even really understand. We’ll see over time you ask about what industries are impacted. I think a bigger question is what industries are not impacted? And I can’t think of any every industry is impacted with this because if you look at what is behind every industry, intelligence is a big part of every industry.

[00:36:27] Bob Muglia: If you sort of see what’s behind an industry, well you’ve got labor for sure. So there’s that. There’s intelligence and there’s knowledge. Those are all elements of every industry. Well, we have, computers have done an amazing job of storing knowledge and that is really what is knowledge?

[00:36:44] Bob Muglia: Knowledge is data that has been analyzed. A conclusion has been reached that’s thought of as knowledge. And sometimes those conclusions are correct. Sometimes they’re wrong. Society over time reaches what are generally believed to be correct knowledge, conclusions. Often that gets encoded in things like Wikipedia.

[00:37:05] Bob Muglia: Sometimes it’s right mostly it’s right. Occasionally it’s wrong, but that’s knowledge. So we’ve had knowledge, now we have intelligence for the first time that we can combine with that knowledge to solve problems. And so every industry is is going to be impacted to some degree. What industries are the least impacted?

[00:37:22] Bob Muglia: Well, it looks like in the short run, the industries that are least impacted are the ones that involve human labor in some ways. It’s been said that the last we thought that the jobs that were gonna be impacted in the short run would be drivers and things like that. Well, that may happen.

[00:37:39] Bob Muglia: But in the short run, the impact is probably on information workers and how they work in their jobs. And the people that are cutting lawns and doing all of the tasks that are required in life are probably the least impacted in the short run. Now, that may change. I believe that will change in the 2030s because the 2030s I think is the era of robotics, and that’s where we will really begin to have robots.

[00:38:03] Bob Muglia: Live and work with us as a part of our daily lives, whether it’s autonomous vehicles or robots that help us to clean the house or care for elderly people or cut the lawn. All of those things are gonna happen. Some of that is a bit further away 

[00:38:16] Clay Finck: though on this arc of data innovation. The last four parts I’m reading here is intelligent robots, humanoid robots, super intelligence, and then technological singularity.

[00:38:28] Clay Finck: So I’m sure you’ve thought a little bit about sort of the end game of this arc of data innovation. So I’d love to get your take on this as well. 

[00:38:36] Bob Muglia: Well again, I sort of have always viewed I start by saying that when I was a young man, I spent a lot of time reading Isaac Mov in the early days and went through, he wrote over 400 books and, which is ridiculous and I can’t say I read all of them, but I read a lot of them.

[00:38:50] Bob Muglia: I’ve covered a lot of o mov. And so I’d always had in my head this idea that people would’ve developed intelligent robots that are machines that work and live amongst us. ’cause that’s what many of Asimov’s stories talked about. And I always believed that people would develop these systems that go beyond us.

[00:39:08] Bob Muglia: And in some senses, that’s our purpose, is to build something that can take the next step. And again, I never thought I would see this. I thought this was all. Post my lifetime and now I see it coming closer. The idea of, first of all, you’ve got artificial gel intelligence, which is essentially a machine that’s as smart as a person.

[00:39:27] Bob Muglia: Super intelligence is when these machines continue to get smarter and smarter, where they’re really smarter than all of us. That’s the idea of super intelligence and what’s happening through this process and when we feel it and see it almost every day in our lives is an increase in pace and innovation.

[00:39:43] Bob Muglia: Things are happening faster and that potentially will continue to increase, and if in fact we do build these machines that are very intelligent, that will continue to increase the pace of innovation. What a technological singularity is effectively a situation where machines begin to.

[00:40:01] Bob Muglia: Advance science and technology at a pace that is beyond human capacity to really understand. And that’s this idea that things go very quickly. Ray Kurzwell was the one who first brought this up many years ago with his book about the singularities near I’ve had a chance to meet Ray once in my life and I I think he’s probably right about what he mostly wrote.

[00:40:21] Bob Muglia: He would tell you, I think it’s a lot sooner than even he thought now. And so that direction seems to be happening. It may not happen. We don’t know for sure, but to me the real key is let’s make sure that as we build these machines that may to be able to do things beyond us, that we instill within them the values that we think are important.

[00:40:40] Bob Muglia: I mentioned values earlier on. I can’t stress the importance of this enough in building companies in leading your life, but for goodness sakes, when you’re building technology, the values of the people are imbued inside the service and the technologies that are created. And I can see these things. I know the values of Microsoft.

[00:41:00] Bob Muglia: I can see them inside their products. You can see the values. Meta inside Instagram and Facebook, you can see the values as much as they exist in Google, inside the Google products. And so as we create these new things, the values that we imbue in them will be very important and we’ll direct what they do for those 

[00:41:20] Clay Finck: listening.

[00:41:21] Clay Finck: What was the name of the title you held 

[00:41:22] Bob Muglia: up there? Oh, it’s the title. It’s The Singularity is Near. He wrote this book. He wrote this book about 20 years ago, but it just released a newer version, a new book that updates this. 

[00:41:32] Clay Finck: You mentioned Asimov and he’s someone you touch on a lot. At the end of your book, he sort of helps you shape your framework around the governance of these sort of types of intelligences.

[00:41:44] Clay Finck: So can you talk about the role of Asimov, you think the role, some of his ideas are gonna play into this. One of the pieces that are outlined in your book is what you call Asimov’s Law of Robotics. So it’s kind of a way of coding these things in a way where we can kind of control where this is all gonna be going.

[00:42:04] Bob Muglia: You have to put this in perspective of this guy. He was, ESMO was a brilliant man. I think he was actually a prophet in the sense that he saw things ahead of the, of where the rest of humanity was in the early 1940s before. Digital computers were invented. Asimov was toying with this idea of intelligent robots living amongst people, and as he began, and he was a science fiction writer.

[00:42:30] Bob Muglia: That’s what he was. He was a very good one. But he wrote stories. They’re all stories, right? Fictional stories. And he had this idea that unlike previous generations of people that thought of intelligent beings as Frankensteinian monsters that were created by man that proved that man should not create these things.

[00:42:48] Bob Muglia: That’s essentially what. Thousands of years of history associated with humans creating super intelligent things, or robotics. Sorts of things came from ov, unlike all the previous that came before him, the writers that came before him, he saw these devices as machines that were created by people to serve people.

[00:43:07] Bob Muglia: And he recognized if you’re going to have machines interacting with people, helping us with tasks, there needed to be some rules that they operated by. And so in the early 1940s, he came up with three laws of robotics. The first law, a robot, may not harm, may not injure a human being, or through an action, allow a human being to come to harm.

[00:43:27] Bob Muglia: That’s the first law and it dominates everything. The second law, a robot must obey the orders given to it by human beings, except where such orders. Would conflict with the first law. So it has to follow orders. And the third law is a robot must protect its own existence as long as such protection does not conflict with the first or second law.

[00:43:45] Bob Muglia: So this idea that these creatures would live amongst us, but following very directly these laws. And of course humans do not, right? We follow we do what we do. And most of Asimov’s stories about robots are actually, all the stories are parables of how you live and work with robots, where robots are following these laws and people are not.

[00:44:06] Bob Muglia: And so this idea like, like what does it mean to not injure a human being or to have a harm come to a human being? It’s very vague, right? It’s not obvious. Well, Asimov spent many of the stories talking about that and different types of harm and how that happened and how the robot would react following the laws.

[00:44:23] Bob Muglia: And so it’s a chance to think through these issues. ’cause these are values essentially. And as we create these large language models and these intelligent machines, unlike Asimov’s robots, which follow these laws because they were hard coded in their positronic brain. These are models that are very malleable, created by people.

[00:44:45] Bob Muglia: And what they do will be dependent on what we tell them to do. And so, It’s very much based on values, in values out. And so I think the industry has recognized how important it is that these models operate with a high set of ethics and standards, and they will be built based on the values of people creating it.

[00:45:06] Bob Muglia: Now, since I wrote the book and finish the book, the thing that has changed in the industry that is an incredibly positive change is that in addition to having GPT four from open AI and Bard from Google, and whatever, the big companies, we now are seeing open source models be introduced, which have very powerful capabilities, but can be used by anyone to do effectively anything.

[00:45:36] Bob Muglia: Now, some of those things will be not so good. People will do bad things with them. These models are tools, just like anything else humans have built, and every tool that people have built has been used for every possible purpose. Good, bad, and evil. And that’s going to be true for these large language models as well.

[00:45:53] Bob Muglia: But because they’re open, we’ll also see lots of good things come from it. And I think the fact that there is a lot of innovation will allow us to stomp down the bad uses and focus on the good uses. That’s the thing that’s amazing about this. It’s such a multipurpose tool. 

[00:46:09] Clay Finck: I think we’re really getting at, touching on I think a key player in this obviously is governments and regulators.

[00:46:16] Clay Finck: I’m curious if you think that today’s governments are taking appropriate precautions to safeguards against some of the potential downsides or in other ways it almost feels like an impossible job. So I’m curious to get your thoughts on this as 

[00:46:28] Bob Muglia: well. Well, when January was, and I was finishing the book, it was unclear how people were gonna react to this.

[00:46:35] Bob Muglia: And I was worried that I didn’t know how strongly people would react. I’m no longer worried about that. The volume has been as set to 11 since then, and every possible concern has been written. There’s a new article every day it’s all over the business press. The, it’s in the New York Times, it’s in Vogue Magazine.

[00:46:54] Bob Muglia: It’s everywhere. And so the concerns are very present and there are valid concerns and there are needs for some government regulation. To me a very good example of that is 


[00:47:04] Bob Muglia: deep fakes. It was never possible. To build a video of a person saying something that they don’t believe.

[00:47:13] Bob Muglia: I mean it, you could never really get away with that. You can now. These systems, it is possible to create a deep fake, which is pretty indistinguishable from an from an original. And it’s, while it’s possible today, it’s probably going to be trivial. Within a year or two and there’ll be apps for the phone that’ll, that kids will be able to do it with.

[00:47:33] Bob Muglia: This is a potentially very dangerous thing, and we do need to make sure that laws prevent people from impersonating others without their consent or acknowledgement. I don’t have any problems with people kidding other people. Comedians have been mocking people for decades. As long as you say it was created by AI and you don’t misrepresent it, whatever.

[00:47:55] Bob Muglia: But when you misrepresent it, I think it should be illegal. And that’s an area where regulation is required. Some of these other concerns like of how these things get super intelligent and things like that, it’s too far out to regulate. There’s no way to regulate those things. It’s just too soon to understand what the issues are.

[00:48:10] Bob Muglia: But as we begin to build real, as real products emerge from AI and capabilities appear, AI will be an incredible spamming device. You can use it to spam people. You can also almost certainly use it to block spam. So we’ll see all of these things happening. And some of the laws like antis spamming laws will apply directly because they’re just a new tool people are using.

[00:48:32] Bob Muglia: But there are cases like perhaps with DFAS where new laws are required. On the other hand, I think we should be cautious and not over-regulate because government can’t possibly anticipate the way the industry’s gonna go. 

[00:48:42] Clay Finck: And you mentioned spamming. I think it’s already an issue today. Just being in the, it was 

[00:48:47] Bob Muglia: an issue before AI though, wasn’t it?

[00:48:49] Bob Muglia: I got plenty of it before ai, it seemed like. So, but it’ll get worse. It’ll get worse. Yeah. There’s gonna be 

[00:48:53] Clay Finck: plenty of spam in the YouTube video for this conversation. Even so, since we mentioned the potential dangers of ai, I can’t help but think of Elon Musk, who’s been very outspoken about where companies like Alphabet are heading.

[00:49:07] Clay Finck: And he was actually involved in the creation of Open ai, which to my understanding started out as a nonprofit organization, but is now for-profit, and they also received a $10 billion investment from Microsoft. So I’m curious if you believe that Elon Musk or his companies play a role in the development of the future of these technologies and AI.

[00:49:31] Bob Muglia: I, they surely do. And he’s investing, he’s investing actively in building artificial intelligence. I think it’s connected to his New ex service that he’s creating. Whether like Elon Musker hate him. He has a right to build his own solution around there. Just like Meta has their right and Google has their right.

[00:49:51] Bob Muglia: Microsoft and OpenAI have their right, and we’ll see all these companies build things. To me, the great thing is now that we have these open source models, and by the way, I have to give Meta and Mark Zuckerberg incredible credit for releasing the open 


[00:50:03] Bob Muglia: I. Lama two model recently, which is really having a dramatic impact in the industry.

[00:50:09] Bob Muglia: It is, it does appear to be a really good model in open source and it’s competitive with some of the frontier models from companies like OpenAI even. But what this means is that we’re gonna have every possible solution. You’re gonna have counselors that help counsel people that are AI counselors.

[00:50:26] Bob Muglia: Hopefully we’ll have all kinds of tutor bots. I look forward to tutor bots that help to tutor young children. Lord knows our education system. I don’t know that’s the answer to our education system. I’m not claiming that’s the answer to our education system, but Lord knows something needs to be done to our education system and this might help.

[00:50:42] Bob Muglia: I can see ways where this could help. I’m not claiming it’s a magic bullet, however we will see. Like I say, psychologist bots, we’re gonna see answer bots. We already see some of those that answer questions. They do a pretty good job of that today. Actually, a pretty amazing job in some senses. Soon we’re gonna see action bots that do things for us.

[00:51:00] Bob Muglia: Like schedule a reservation at a restaurant for us where we don’t have to go through the process of doing it, just tell it what to do and it’ll do it. These things are all gonna appear and they’re gonna be from different companies. And Elon will have his bot, he’ll have his xbo and mark Zuckerberg will have his Facebook bots.

[00:51:17] Bob Muglia: So, and of course Google will have theirs and now lots of little companies will be there too. 

[00:51:22] Clay Finck: Given your extensive experience with Microsoft, building out what all happened at Snowflake from zero to 200 million in revenue, now you’re on the board of a number of different companies. I think it’s fair to say a thing or two about differentiating a successful technology business versus an unsuccessful one.

[00:51:39] Clay Finck: So I’m curious if you could share some of the key things you look for companies that you invest in, in this space. 

[00:51:47] Bob Muglia: Well, I’m not a traditional investor. Let me just start by saying that because my number one concern is actually learning and advancing technology in areas that I care about. Not so much return on investment, although I try and make investments that’ll have rational returns.

[00:52:01] Bob Muglia: I try and be rational about investments, so my focus is always on things that are our new and cutting edge, that are in the data space, that are solving problems that couldn’t be solved before. Like an example of a company I’ve been involved in is called docu. It’s solving the problem of taking business contracts and turning those contracts into data.

[00:52:20] Bob Muglia: That can be actioned by an organization. Today contracts are programs that are interpreted by lawyers and executed by people. And over time that 


[00:52:30] Bob Muglia: is going to be interpreted by AI and executed by computing systems. And Dami is playing a pivotal role in, in connecting those dots together.

[00:52:39] Bob Muglia: It’s a class example of a problem that could not be solved three years ago. It literally, with the technology three years ago it was not there. Now it’s there and it’s actually working. So to me it’s about innovative things that break new ground in data. And I’m looking at new ways that you can apply the relational model to both analytics as well as to operational applications and my investments in small companies fall into these categories.

[00:53:05] Clay Finck: One of the key points that sort of stood out to me in your book, you talked about how everyone’s aware that software is eating the world. And you had this quote in the next 10 years, you predicted that models will eat software. Could you explain what you meant by this? 

[00:53:20] Bob Muglia: So we’ve always built, we’ve built software directly to do things.

[00:53:23] Bob Muglia: We, today, we write software very directly, and it’s focused on you learn what something does. You write a piece of code that solves that problem. Where we’re moving towards a world is where we create essentially a twin, a digital twin of an organization. And that is a model of the organization, what it does.

[00:53:43] Bob Muglia: Today it’s very difficult to create, to do that and software does it in a way, but it’s very opaque and it’s not structured in a logical sense. I think over time the way we operate our business and run things will be to have these models that define what our business process is. And as we learn from that model will reflect what that business process does.

[00:54:03] Bob Muglia: All of these machine learning and artificial intelligence things are models. They’re a type of model that emulate and essentially are that they’re emulating some physical thing and doing it in a virtual world. And those models are gonna become more and more the software that we build.

[00:54:20] Bob Muglia: If you look, it’s happening already. The entire software industry is moving. Now this year to perfect models and to take these language and artificial intelligence models and tune them, fine, tune them for different applications. So instead of writing codes specifically to do things, we’re gonna take these models that are general purpose models and apply them to solutions.

[00:54:40] Bob Muglia: And that’s the new type of coding. That’s the way the coding is gonna work in the future. So models are gonna eat the old way of doing software. Quite 

[00:54:48] Clay Finck: interesting. And I think a point that sort of ties into this is thinking about the investment and asset management industry, many likely speculate that eventually software is gonna take the jobs of many investment managers.

[00:55:02] Clay Finck: I’m curious if you have any thoughts on this. 

[00:55:05] Bob Muglia: I think investment managers are people that work with people and talk to them. So I don’t, it’s just like everything else, there’s, the software will make the job of an investment manager different for sure, and maybe easier in some ways. But I think the human interaction is still going to be important.

[00:55:22] Bob Muglia: And I think that we’ll continue to see that in, in most industries. That in fact this software won’t replace people. It will augment what people are doing. That’s the way technology has always worked. I think this is the way it’s going to work this time. That said, when we have technological disruptions, while it does create a lot of new jobs it does impact people in their current roles.

[00:55:41] Bob Muglia: So some people will whatever, how the world changes. Will change in a way that is difficult for some people to actually make the transition. So it has a human impact and I don’t want to, I don’t want to diminish the importance of that human impact, but in general I think it will advance society and help things for people, including for investment managers who I think very much play a real role going forward.

[00:56:02] Clay Finck: I think another glaring questions in our audience’s minds as investors with the rise of chat, GPT is its impact on other business models, especially one like Google Search. Google Search is a business that earned over $162 billion in revenue in 2022. I’m curious if you believe this business model will be totally disrupted by technologies such as chat GPT within the next say five, 10 years.

[00:56:32] Bob Muglia: I think search will be totally different 10 years from now than it is today. Lemme start by saying that I don’t think search will be the way the Google is today with the 10 blue links. And there’s zillions of ads, all the damn ads in front of it. So I think that it will be disruptive in the sense that these answer bots are already very disruptive.

[00:56:51] Bob Muglia: I use an answer bot, which I, there’s one I’m an investor in called Perplexity, that I think does a nice job of giving you good summarized answers to your questions with references to tell you how it got to those answers. And it avoids hallucination by working with current data. And I think they already do a better job than search for a lot of problems.

[00:57:10] Bob Muglia: And I’m already switched. I’ve switched away from Google to those problems. Interestingly enough, where Google is still most useful is where you need the ads, where you want the ads. That’s where Google is really particularly good these days. But other than that, some of these other things can solve a problem.

[00:57:24] Bob Muglia: Search is the most. Profitable. It’s the biggest and most profitable app on the planet. Let’s just start with that. So in terms of you give the numbers in terms of any app, nothing is bigger than that. It’s the biggest it gets, and it was impenetrable. Google was impenetrable until now. I was at Microsoft.

[00:57:40] Bob Muglia: We competed with using, we did and still we did. And they still do compete using with binging. I watched us try and compete. It was one of the most heart wrenching things to watch because what I learned from the leaders at the time from Microsoft was how, just because of the way the industry is structured, it resulted in one big winner.

[00:58:00] Bob Muglia: Typically in an industry you get a big winner. You get a winner that is the leader, but then you have three or four other companies that have material market shares as well, and or at least two, like you’ve got Android and Apple. You have at least something like that. Search was really different because it just, it was a singularity.

[00:58:19] Bob Muglia: It turns out to be its own type of singularity where everything went to one vendor and the cost of running it was so high in different regions around the world that it was almost impossible to replicate that. And the only company that’s managed to do a decent job of it is Microsoft. And that’s Cacha just hung in there and did an incredible job of turning, binging from a money losing thing to at least being a.

[00:58:43] Bob Muglia: Decent business from Microsoft. Not a great business, but a decent business. And then he hung in there for all this time until this new innovation came out, which changes everything. It’s a total change. And it’s the first time where Google is vulnerable. Now, will they be unseed? No I don’t predict that.

[00:59:01] Bob Muglia: I don’t predict that. ’cause I predict that Google will respond and build great products that take on this new paradigm. But I do predict they will lose share. I think they will almost certainly lose share. The other thing that’s interesting is that with a behavior, Of people has been trained to go to Google.

[00:59:17] Bob Muglia: When we have these bots in front of us, I think we’re gonna be trained to go to them. So there may not just be one place you go, there may be many bots you talk to, and those bots will talk to search bots. So it may be that the portal is not, the search is not the search browser. In the future, it may be that whatever app you’re working on.

[00:59:35] Bob Muglia: So the whole model has a chance of changing, but we haven’t really seen that fully play out yet. I do predict Google will lose share, but I don’t believe they’ll lose their position as the leader. 

[00:59:44] Clay Finck: Yeah, that’s one of the things I’m really interested in seeing is what Google’s plan is gonna be to reinvent itself because I’m sure it’s been who knows how long, but it’s been probably a number of years where they’ve sort of seen this coming and they’re ready to try and make that pivot to its reinvention.

[01:00:01] Bob Muglia: They didn’t act like very ready though. They didn’t act that ready. I mean they got kind of caught flatfooted, didn’t they? I mean they really felt to me like they got caught flatfooted and they had all this technology. The idea that Microsoft is leading Google in this is crazy. Google was so far ahead in ai.

[01:00:18] Bob Muglia: Everybody knew Google was gonna be the winner and somehow because of open AI and some really smart moves on Sacha’s part it really changed some things. And I think it’s good ’cause it’s a shakeup that the industry needs in general. I think it’s useful for large numbers of companies to have access to this technology to build their own solutions.

[01:00:34] Bob Muglia: And now we know that’s gonna happen. 

[01:00:37] Clay Finck: Well, Bob, it’s such an honor having you on the show. Thank you so much for sharing your time with us. Highly encourage the listeners, if you enjoy this chat, pick up Bob’s new book called The Data Entrepreneurs. Bob, before I let you go, please give a handoff to the audience on how they can maybe get connected with you or give the handoff to your book.

[01:00:56] Bob Muglia: Well, they can learn more about the book by going to the data preneurs.com and learn a lot up there. They got some, there’s a bunch of links to other podcasts and things up there as well, some information about the book, and I hope the people enjoy it. And if they do, please leave a review on Amazon, so.

[01:01:09] Clay Finck: Got it. Thank you so much, Bob. 

[01:01:11] Bob Muglia: Thanks a lot.

[01:01:31] Outro: Thank you for listening to TIP. Make sure to subscribe to Millennial Investing by The Investor’s Podcast Network and learn how to achieve financial independence. To access our show notes, transcripts, or courses, go to theinvestorspodcast.com. This show is for entertainment purposes only. Before making any decision, consult a professional. This show is copyrighted by The Investor’s Podcast Network. Written permission must be granted before syndication or re-broadcasting.


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