This is an AI Transcription. It’s pretty good, but please forgive any errors.

Welcome to The Difference Engine, the show for tech founders, investors and innovators.

What is coming up today? We'll be asking how builder AI built itself up before toppling itself over. Intel is going under the knife, can it pull through? But first, we're digging through the fallout from the 300 million pound

[00:00:25] Jonathan: cyber hack on m and s. It's all looking a bit pants.

Much has been written and more is to be learn, uh, from the cyber takedown, which started in Marks and Spencer's. That's a very large British retailer for those not based in the uk. Um, before others were also attacked, including co-op. Again, a very big food focused retail train deal. We all know because it makes us all sound sophisticated if you say, well, if we say deal and, uh, now Aida.

Um, the progeny of adult Dassler, um, the great shoe entrepreneur. Uh, anyway, it was a 300 million pound wake up call for the board and shareholders of m and s, um, and others may be cheap at the price. If as a digital society we can learn the lessons and become unile. So what is the opportunity for new categories to emerge in

[00:01:25] Paul: this space?

Right. So let's see. Like whether you are queuing in Marks and Spencer, uh, or watching its share price, anxiously dive, or you're a security cybersecurity vendor sitting smugly on the sidelines and waiting for the next quarter's quota with a long list of concerned prospects that you are gonna speak to as a result of Marks and Spencer going down.

This is the cyber story of the year so far, and not just in the uk. So beyond the who, what, wheres, which have been surprisingly forthcoming in this case as opposed to others. The whys and the how of what happened. I. And how to avoid it in the future are really the point here. So what we said

[00:02:05] Jonathan: at the beginning, what do such destructive disruptions mean for categorization?

You know, where is the line between ambulance chasing and preventing more accidents in inverted commas? By laying out what is at stake. I mean, frankly, is there room in tech's largest Uber category cybersecurity for yet

[00:02:24] Paul: more players? It's a good question. Uh, firstly, if I have to listen to yet another, this was not any hack.

It was a Marks and Spencer hack. I will puke up my Percy pigs. So this super cliche take not a hack, a Mark Spencer hack, which is a riff on Mark Spencer's most popular ad appeared in several, almost every writeup of this debacle. Um, and what's nice about this story from a. From a journalistic point of view is this combines the UK's number one purveyor of underwear with the seemingly new discovery of cybersecurity by the mainstream, meaning non-IT media, it really has captured the imaginations.

So what do we actually know? Yeah, let's get to so far for sure about this. This is just what we know so far. So Marks and Spencer's online shopping service won't be back with us until July. That's 90 days after discovery. Quite a lost lot of lost revenue there. Um. To cope with the chaos in store and I, and if you've been in the UK and, and wherever the branches are available, I think, um, Dubai, et cetera, you'll know that there are 75% more physical real world people assistance to cope with the in-store demand for their checkouts.

The board has also admitted that the costs for all of this is gonna run. North of 300 million, and that's an important number. We'll come back to why that is in a second. The rumor in the insurance press is that Europe's largest insurer ions will allegedly be on the hook for a hundred million of this.

The lawyers are gonna love. That's gonna be a nice fight. And finally. Share pickers in the financial times and elsewhere are telling everybody with shares, don't worry, it's gonna be okay. And they're still rating the stock a buy. So there's a lot going on.

[00:04:02] Jonathan: Yeah. I mean it's, it's sort of a, it's a real shame, you know, for those of us who have sort of grown up with Marks and Spencer's as a.

The national treasure that, you know, in, in, in recent years, it, it really had declined. But it's such a shame now for the CEO and the team who had, after frankly many years of soso to poor management, dug this hundred year old plus brand out to the mare, which actually, frankly, a much admire range of clothing to add to its food staples, which had been, you know, great for years.

Absolutely. And, and. And that whole brave decision to take on third party brands was beginning to pay off. In fact, I'm currently wearing one of those Marx and Sparks third party

[00:04:41] Paul: brand. We're not gonna ask about your under your underwear, but yeah, I mean, mark Michelle, it's m You can buy like, you know, several hundred pounds worth of Maui gym sunglasses at Mars and Spencer.

They really figured out how to make this online thing work well until. Recently, oh,

[00:04:55] Jonathan: I can't think who's got a, um, a softness for Maori gym sunglasses. Can you pull?

[00:05:00] Paul: I can't. Alright, so, uh, Mark Spencer was roaring along. With a profit heading for 400 million for the year. Brilliant. Then they get a 300 million pound bill.

Whoops. Yeah.

[00:05:12] Jonathan: But it wasn't a lazy bit of reporting saying, you know, this is an IT glitch. Uh, yeah.

[00:05:18] Paul: Well the management said

[00:05:19] Jonathan: customers should not worry.

[00:05:20] Paul: Yeah. Yeah. You know, a chairman, this was an IT glitch as if that's good enough these days. It was once upon a time. Um, the management. Has, as you rightly said, said, customers should not worry.

Well, well, you know, the reason that, that you could get away with calling things in it glitch and telling customers not to worry their data was safe, is just the poor standard of reporting around this back in the day. But now we've had the post office scandal on ITV, uh, suddenly we've all got a little bit more aware, uh, and realize that things like this are a little bit darker than just cues at tills.

Yeah, real customer data is out there on the dark web and the IT teams at m and s are in the firing line, and it's hard not to feel sympathy for them. Yeah, but you know, that

[00:06:03] Jonathan: said, the, the, the techies union, British commas has, has been in full swing, uh, defending the cyber and it ops teams have been reporting, sleeping on, reported, sleeping on floors, sounds like 1970s British carpenter, um, and working around clock.

I mean, you know, just, just look at the comments we've seen in, in the major newspapers, you know, um, to see that the, those in glass houses and it, it could happen to anybody. Comments, you know, on the other side of the coin, the, those that seek to place the brain blame on outsourcing it support to India allegedly, and a lack of management care about.

Tech.

[00:06:41] Paul: So whatever the case about the issue, the effects are clear and we believe are gonna become even clearer in the next set of m and s financial results. Not giving out any financial advice, but just beware about buy signals from, uh, major newspapers, no amount, because customer sympathy will pay for all of that overtime and the admission by m and s management.

Uh, and m and m and s uh, leader Stuart Macon, describing this as just a glitch. It will need to bring forward millions in IT spend. Hence the cybersecurity vendors rubbing their hands with g Lee, which sort of begs the question, why only do that after the event, after an event that wiped off 750 million pounds in shareholder value.

[00:07:22] Jonathan: Yeah. So, so go back to, let's go back to the original question we posed in this section, which is, you know, what about cyber and new categories?

[00:07:30] Paul: Yeah. Stating the obvious, the existing cyber systems didn't stop the disaster. Right? So do retailers simply replace what they have luckily for their existing tech suppliers?

[00:07:39] Jonathan: Others will hit too, right, too? Yeah. Yeah. So the answer for lots of sparring, cybersec vendors are rubbing their hands with glee. Um, sort of ironic 'cause, 'cause many had largely given up on retailers, a sector deciding just how tight retailers were with

[00:07:55] Paul: their IT budgets. You are so, right. So cybersec vendors avoided retail 'cause they said these guys never spend anything.

Not anymore. Not anymore. They might, they might be getting their hands in their pockets. It does also point out that the cyber platform leaders, uh, and, and, and many of the ve leading vendors are saying, we've got a cyber platform, Cisco, Palo Alto, CrowdStrike, we are all that you need. But there are clearly still holes.

And AI is making them larger by the day. Hence opportunity.

[00:08:22] Jonathan: The specifics of this case, you know, where where many are pointing to social engineering throw up lots of new category

[00:08:29] Paul: for all, it's gonna increase interest in those solutions who can stop, um, and could prevent users from being the weakest link in cyber defense.

And there are lots of those around.

[00:08:37] Jonathan: Yeah, we know

[00:08:38] Paul: this space quite well, Jonathan.

[00:08:39] Jonathan: We do indeed And, and this is a new set of solutions which encompasses. Old school security awareness from multi-billion players like know before and the latest stack from startups. Like we have to say this is a client, uh, re cyber whose behavior I.

Detection and a response solution Sounds useful. Yeah, it is. But it does define a new way to ensure employees and contractors all remain on the same page with cybersecurity.

[00:09:06] Paul: Yeah. And what's nice about, uh, BDR and, and some of these new categories that we think are gonna emerge after this shock is there's clearly a real need.

And a real solution. Forget about product market fit. It's right in front of your eyes. There really could not be a clear example of a real impressing business need. So perhaps some good can come

[00:09:24] Jonathan: out of this. Wouldn't,

[00:09:25] Paul: after all. Wouldn't that be? Yeah. Some good can come out of this. Yeah. So, so, so what have we learned here?

Where we learned from our suspense is supply chains, especially global ones, which extend, uh, all over the world and, and, and include many different vendors are fragile.

Yeah. And,

[00:09:38] Jonathan: you know,

cybersecurity. At last is mainstream new hurrah. It's not something weird. We need to pay attention. Yeah. And for the insurance company, yes.

They love it. They love it. Because

[00:09:49] Jonathan: guess what? Cyber insurance is now a mainstream proposition.

[00:09:52] Paul: Yeah. So, um, I should imagine the, uh, premiums next year for Mark Spencer will be somewhat higher and for everybody else who's anything like this. Yeah. So, so money's gonna be spent. And of course retailers are gonna have to start on opportunity.

Opportunity next. Yeah. Retailers are gonna have to give up this penny pinching, yeah. Um, reputation, which probably means that all underpants, uh, are gonna go up in price. But, and, and shirts, Paul and shirts. Uh, and from a category point of view, as with anything that is truly needed, that it's not that. The pie is being redistributed, the pie is growing, there's gonna be lots of new categories.

Um, and just to nakedly advertise here, we actually know quite a bit about cybersecurity

[00:10:40] Jonathan: builder ai. Is it.com time again? Um. From what we've seen in, in recent weeks, builder, AI huffed and puffed and blew itself out. Um, it's worthwhile going back to some first principles and, uh, that of the legendary investor, Warren Buffet, who, who pointed out, it's only when the tide goes out, you see who's swimming without trunks.

Now, tech companies, as they move from. Hot to not more regularly these days, and it's not all one way traffic. When new attack firms do go into reverse, the hubris of their funders and founders is laid bare. So is it true as Europeans we see fewer category dominating tech firms? It is. It is. But in the current uncertainty in the startup scene scenes, we also see a lot less chaos.

We do. Paul, what about the wrecking ball? Um, which toppled British eye hope for, uh, well builder ai.

[00:11:42] Paul: Or builder, let's be familiar. Let's just call it builder. Yeah. Builder. Uh, Bob the builder is a powerful reminder that tech attracts many, let's call 'em colorful characters. Mm-hmm. Who, when, uh, they make big promises, uh, and you mix that with investor naivety and a lot of tech exuberance, which we do support things can go bad quite quickly.

[00:12:03] Jonathan: So the facts of this Yeah. Is that Microsoft back builder. We recruited to call it builder. Didn't we build it? Yes. Announced it was, uh, seeking to enter insolvency this month, which is generally pretty bad news unless you're insolvency practitioner when it's very, very good news. Um, the company wants valued and we say inverted comm because we have seen some pretty rich valuations to companies that clearly, uh, don't actually deserve it.

In recent years, um, was 1 billion. It was a unicorn, and now it's, uh, allegedly. For sale bys, founder for $35 million, a mere $35 million.

It doesn't.

[00:12:51] Paul: Right. Um, so is this a case of irrational exuberance, AI hype, or something more sinister? Either way, it's not a good look for European tech. Was this the wrong category choice? Was it failed execution or was it something else?

[00:13:05] Jonathan: Right. Well, you know, they do say that one of the most positive features of the US entrepreneur system is its tolerance for failure.

But there is a fine line, a really fine line between build it and they will come, Zuckerberg's move fast and break things. And fake it till you make it. That's all. A bit wild west to us Europeans.

[00:13:25] Paul: Yeah. Uh, and luckily we don't fake it till we make it as much. Uh, although we are accused of, um, not doing that in Europe.

Uh, but think about the very US-centric behavior of Theranos and FTX for instance. These were pioneers in the two, good to believe cancer diagnosing blood tests and get rich crypto. Those founders ended up in US prisons for overreaching and other bad behaviors, including in both cases. Awful dress sense,

[00:13:51] Jonathan: right?

There's a little update on that, isn't it? Oh, yeah.

[00:13:53] Paul: Elizabeth, who you'll be glad to know, Elizabeth Holmes has had her sentence reduced from 11 years to nine for good behavior. Mm. Some would, uh, some would doubt that. And Sam Bankman free has also had his 25 year sentence reduced for good behavior by four years.

Hurrah. Bless her both and, and the world can look forward to benefiting from more entrepreneurialism in around 2032 or 2044 respectively

[00:14:17] Jonathan: right now. Come on. And like others, we are certainly not alleging. Definitely. And the mal, feas, or illegality at. Builder, although we did note some short practices, um, when its sales team reached out with a partnership agreement proclaiming, I love this.

I'm gonna try not to laugh. Technology is the ultimate equilibrium creator, and, and we are the next gen app development platform for every company and idea on the planet.

[00:14:47] Paul: So thanks for emailing that over. Uh. Merch. Mm-hmm. Yeah, certainly. Uh, the public rumors of alleged impropriety by that some of the executives is concerning, but isn't Steve Jobs like reality distortion just par for the course when we're building new markets here?

Shouldn't we just get with the program? No. Is it,

[00:15:05] Jonathan: is it certainly true in the uk or was to have to. Build up our heroes and even our sports teams just to knock 'em down. Uh, a look at poor old Manchester United or, or is this a case of no smoke without fire? To be fair,

[00:15:20] Paul: the builder AI or builder idea was not a bad one.

A way for SMEs to outsource their digital goods and services selling globally without retaining a large in-house team of, uh. Web builders. Uh, so was the issue here just timing by builder? Uh, or was it that those people it was selling to were already aware and probably using Shopify and other tools?

Time will tell.

[00:15:45] Jonathan: Yeah. I mean, but the reality is builder is, is not the only former high-flying European tech firm in reverse recently. Yeah. Which brings us to another European hopeful. Seemingly in decline are

[00:15:57] Paul: hopefully not terminal Well, the hopeful of all hopefuls actually, uh, described in the go-go area of 2021.

Remember that? Yeah. Yeah. As Europe's largest unicorn by no less than sifted with a valuation, an alleged valuation of 15 billion more recently, that's come down to below. 10 billion. So are you gonna, are gonna name this, this company checkout.com? Of course. Um, so full disclosure, we did a little bit of work with this team, uh, in its early days.

As far as we are aware, there are no. Underlying issues whatsoever. And we, uh, we would, uh, make that very clear. But so why are the journalistic knives out now for checkout for builder and all that sort of stuff? Is this some sort of antis successs gene here in Europe, or was the hype too much to start with?

[00:16:43] Jonathan: Yeah, I mean, the founder, GIA and Paz is, is very much not in prison. It's not in prison. Yeah. Rather, um, he's, he's legging it to the tax haven of Monaco. Yeah. Yeah. Nice, nice one. Rachel Reeves. Thanks. Rachel

[00:16:55] Paul: Reeves. Yeah. Brilliant. So, um, raising the taxes of high Netwealth individuals, you can say what you want, but this business is se clearly a successful European tech business.

Still not profitable after nearly a decade. Okay. But it's worthy, we think of celebration, not denigration.

[00:17:11] Jonathan: Yeah. But meanwhile, the naysayers are doing down Europe again. Yeah, yeah. Did see the post. That LinkedIn post, which which clearly went viral into our inboxes, pointed out that Apple was worth more than Germany and that the tech stack is consolidating and Europe is outside its gravitational pool.

Furthermore, Europe didn't just miss the last tech revolution. Its sleepwalking through the next one, two, sorry

[00:17:37] Paul: dudes.

[00:17:37] Jonathan: No, what a load of pants.

[00:17:39] Paul: Not even marks and Spencer pants. Those ones, those who are in late stage empires, and you know who I'm talking about. Should take note. Yeah. Yeah. The European founder guests on this pod not only reject the notion that Europe's missed the boat.

We revel in the ignorance that it displays.

[00:17:55] Jonathan: Yeah. The, the risk then is, is that others see negativity though, right. And, and, and pile on. You know, that way Europe may not even come second. We need to be very careful in these uncertain times.

[00:18:06] Paul: Yeah. And without wishing to be negative to our American cousins, boastful.

Commentators over there, including some on major tech pods and you know who we're talking about, may want to remember. It's they who may come second, uh, to their Eastern rivals.

[00:18:21] Jonathan: Yes. A little bit of humility. We've been through the great decline of empire. I. Have a look at our history. I like that. Of people who might be at the zenith of their power.

I like that. So finally, you know, perhaps given the recent, hopefully temporary disruption to tech startup funding, perhaps we should look at the pent up success of slightly late stage. I. Tech firm.

[00:18:45] Paul: Exactly. There is some, uh, light at the end of the tunnel here. So while many of the puffed up zombie businesses of tech, those who raised money in 2021 when money was free, they are quietly shuttering, you know, builder, maybe not so quietly.

They're merging with rivals and they're doing stealth layoffs. Looking at you, Sophos and others.

[00:19:04] Jonathan: It's a classic cycle of consolidation. Nothing new in that. No. You know, so, you know, many of the previous generation text elder guard who are, you know. Hiding proven software assets, you know, with their steady and reliable cash flows.

Oh, lovely. They, they'll less, less the course, you know, and occasionally swooping flush pea owners are doing well. All that pea dry powder has to go somewhere. So, you know, luckily. I think your firm,

[00:19:34] Paul: Paul, uh, represents some of the latter. And so we know for a fact that tech is a sector that is way too big to fail despite the high profile.com bursts and, and builders of this world, et cetera.

So guys, take heart, seek out those future categories. I. And if you are in a PE funded firm, shepherd it because there's still a lot of dry powder there.

[00:19:54] Jonathan: And I think it's worth going back to another old bloke recently retired, uh, fate yet to, uh, meet us. But back to Warren, Warren Buffet, who also said, be nervous when others are greedy.

And greedy one. Others are nervous that we believe the founders and funders of Europe are made of sterner stuff.

[00:20:22] Paul: Next up, Intel, the surgeries underway, but will a dissection begin? So back in episode 39, we looked at the state of intel. One of the world's largest chip makers post the departure of X VMware, CEO, pat, and ex intel, CEO, pat Gelsinger, and the rapidly evolving competitive environment. From the out and out semiconductor category leader, we concluded looking at our semiconductor crystal balls, that radical surgery beckon and possibly.

A breakup of the corporation li it was going to survive. What's the update?

[00:20:54] Jonathan: Well, in the run up to its latest results, Bloomberg reported citing an anonymous resource, um, anonymous source that Intel would share plans to cut more than 20% of its workforce.

Yeah. Um.

[00:21:09] Jonathan: That's fine. Um, but I think one of the most interesting things to look at in the current environment is Intel's stock performance, which really is not great at all.

And if you had a mirror to the performance of the s and p 500 index intel, is it?

[00:21:27] Paul: Yeah. One's

[00:21:28] Jonathan: going up, the other's going down, Intel's going down. It's looking like a great big crocodile gate at the moment. Absolutely. Um, but. And the important thing here is, is that the rumored upcoming layoffs are part of the new CEO is called lip Bhutan.

Who is a turnaround veteran from Cadence Design Systems, who once a client of mine in the old days, good company, um, his broader plan is, is to build an engineering first culture at the company and restructure its balance sheet in the light of the growing competition from Nvidia and particularly Taiwan's, TSMC.

Now, according to the, this report Intel, which underwent mayor major layoffs in 2024, um, getting rid of 15% of its workforce had roughly, I. 109,000 employees. That's a year's a big number these days. Days they're a big company. Yeah. You know, so brace, if we do our simple mass for a possible new cohort of over 20,000 people getting their pink slips.

[00:22:25] Paul: And unfortunately, um, as Microsoft just did a bunch of layoffs, they're gonna be competing with some pretty serious, experienced old school. Engineering heavy tech talent in the market.

[00:22:36] Jonathan: Indeed. Um, and you know, when Intel delivered its earnings back on the 24th of April, its revenue forecast was below Wall Street estimates, uh, mid trade war concerned.

Thanks Donald. And, uh, you know, flat growth, flat growth. I mean, people talk about flat growth, it's ridiculous, but, you know, nothing much happening, uh, from a year earlier. Um, it did also reveal that tariff fears had led to. Chip stockpiling, which of course impacted Intel's second quarter outlook. Um, positively one would imagine.

Yeah. Yeah. But, you know, no mention of layoffs and announcements, uh, but it confirmed its plan to cut costs. Cut costs, right. Reducing operating expenses and capital expenditure targets, plans to reduce its operating expenses. Were $500 million this year. Another 1 billion next year. Unsurprisingly, shares were down sharply in NAFTA hours trading and pretty much have continued, continued on that track.

[00:23:35] Paul: Well one would speculate if people, if the market thought that was gonna save them, share price would go up.

[00:23:42] Jonathan: Yeah. But I know, um. You've gotta look at a more strategic view of this really. And, and one result of, of looking to reduce capital expenditure, Satan. Um, Intel is examining its factory footprint.

Having already said back in February it was gonna push back the 28 billion factory project in Ohio until 2030. Now. That, that must have been a Trump pleasing move, must it? Well, I think

[00:24:08] Paul: that was a bait and switch with, uh, good old Dory Biden. It's like, you know, some, some good news for him to announce and then, oops, we moved it.

[00:24:14] Jonathan: We've moved it. You know? Yeah. A little

[00:24:15] Paul: history might help to frame why it is that we care so much about the Intel Corporation. Well, it powers several cycles of innovation based on its cutting edge. Research-based technology originally, uh, which came from post-war engineers. It's founder Gordon Moore, coined Moore's Law, which obviously named after him, which the tech industry lived by for more, uh, uh, decades than I care to remember, and its amazing.

Former, uh, refugee, CEO Andy Grove, famously stated. Only the paranoid survive and Intel did at the forefront of the digital revolution for decades.

[00:24:50] Jonathan: Yeah. And, and from a category point of view, its partnership with Microsoft. The so-called Wintel Alliance dominated the personal computer revolution brilliantly.

It created the category of named Microprocesses with 2 8 6 3 8 6 4 8 6. Um, Pentium. This reframe buyers' perceptions of why components mattered. And that was a, that was a very, very, very important, uh, campaign they ran. Um, you know, you do need to care about what's inside. Oh, Intel inside and so on. Classic category framing.

Yeah. Brilliant stuff. Um, and that ensured its value relative to all others in the fast commoditizing PC market at the time. Stayed up amongst that. Tech as in life leadership can be fleeting, missed a couple of key moves, brings us back to today.

[00:25:39] Paul: Over to you then Jono. Where

[00:25:41] Jonathan: are we today? Right. So this is all about transformation.

Um, so you know, clearly it's obvious benefits of all the cost reductions. What's really going on? Intel cost cuttings and layoffs may be the headline, but it's transformation. That's the actual story here. So listening to the results and looking around the web, some things are clearly apparent. The new CEO seems to be driving the company back to this engineering first culture.

That we talked about and those of us who worked with Intel, you know decades ago know that engineering first was where its head was definitely at. What that means for term is removing the meetings, heavy bloated management structures that typify. Late stage US corporations and and have done in every aspect of technology.

Basically, tan wants to empower technical talent and eliminate bureaucracy, but it's not just the middle managers who are gonna get it in the neck. A big leadership shakeup is underway. Also aimed at actually making the elephant dance to use Rosabeth moss canter's phrase. Um, the key chip units are gonna report directly to the CEO.

We're Sashin Kati taking over as chief Technology and AI officer. Interesting note, the explicit, uh, recognition of ai, it's now very important to Intel as it should be. Um, and it looks like specialization is the future, and that makes us more convinced that breakups or spinoffs could be the route that makes Intel Corporation leaner faster.

And. Crucially more innovative. Go on Intel, right? So CEO Tanley is already selling 51% of Alterra acquired by Intel in 2015 to private equity Silver Lake. But insiders say the company is beset. This is, this is UL Altera, the same management issues as the current Intel. So we'll see whether Silver Lake is X friendly too, and if they intend to create.

So, you know the answer to that. A return from their investment. Yes, I'm sure I can see those axes. And they're very, very sharp edges, twinkling in the distance. Um, so Tan also revealed on, on that earnings call, uh, that he has actually met. With, uh, T-S-M-C-C-E-O-C-C-Y and former CEO Morris Chang. So, according to Reuters, the purpose he said was to find areas of possible collaboration and create a win-win situation.

[00:28:23] Paul: And you, however, are going down the shop to buy yourself a hat.

[00:28:25] Jonathan: Yes, I am. I'm, which is, which is a

[00:28:28] Paul: British way of saying there may be a wedding. Imminent.

[00:28:30] Jonathan: There may be, or I might need to eat it. Given the words I've just said in Intel, of course has, has been a long-term partner with with TSMC. But interestingly, and this is I think very interestingly, TSMC held its annual US Technology Day in Santa Clara In California.

Yep. Quite recently. Right in the middle there, which was attended by both. Tan and way now, now, you know, call me imaginative here, but the word smoke and fire, uh, come to mind here. Um, you know, and perhaps Tan is gonna make some really major changes. The problem always is when you start a radical reinvention that the talent you don't want to leave also heads to the door.

Now that's something a direct experience of in the, um, mid 1990s. Um, when IBM. Got that spectacularly wrong. Its best people were leaving with massive payoffs on Friday and starting new gigs on, on Monday, uh, with very fat wallets. Um, you know, but that was, uh, in, and that was the beginning of IBM's own near death, uh, moment when, you know, the former food, Fon Siggis, exec Lucason arrived to shake things up and he really did and save the company.

Um, that's the real danger right now. Um. Particularly that the top engineers may exit. There are plenty. Exciting, well funded startups and competitors out there ready to hire all the way from Taiwan to Saudi Arabia. Um, and in the era of Trump tariff and resulting crashing US economy, employment abroad may become a very attractive option.

[00:30:15] Paul: Yeah. Especially if you earn a lot of money And, um. You don't wanna pay too much tax.

[00:30:19] Jonathan: Yeah. So the moon music, Paul, what do you think?

[00:30:22] Paul: Well, uh, industry expertise is certainly what, uh, Intel is looking to recruit. And industry expertise is a theme that we're seeing with a lot of new categories, especially, uh, we just looked recently at the cybersecurity and has cybersecurity is now spreading into IOT and IoMT at last Internet of medical things that points to embedding.

Becoming where the market is going in a lot of these engineering heavy categories. Uh, and it makes sense, um, that there is a focus on engineering. 'cause if you look at an Nvidia rig these days, it's less like a microchip and more like a supercomputer. So this seems to be the setup for a whole new wave of new startups.

As you said, engineering led. Probably with a lot of experience from some of the major companies that have shaped this entire industry.

[00:31:10] Jonathan: Okay. So I mean, overall, the, the story of Intel currently is, it's very clear that this to us, that this isn't just about cost cutting, right? It's really the beginning of a bold attempt to reinvent Intel from the ground up.

Do we think Intel. Can make a comeback or, or is it too late? You know, as we said last time, this is hardly even the end of the beginning, but we'll continue to watch closely to see if Intel can regain its category mojo as a massive shift in the semiconductor landscape continues. If we know anything from the history of US corporate downturns, there comes a time when only the bold survive, but a turnaround of this magnitude takes time.

And we have to hope Intel shareholders have got the patience to back tan in his work.

Thank you for listening. If you wanna learn more about category design, head to be categorical.com. If you need help designing and dominating your category, then get in touch. Contact details are in the show notes.