IBM’s AI Spending Shock Sends Software Stocks Reeling

Hey everyone. Happy Wednesday and welcome to Techstrong gang. Wow.

It's hump day already. There's just not enough days in the week to go through everything that we got to go through. But I want to lead off today's show with an ode to our New York Yankees, right?

John's wearing his Metro Expo shirt, so we're in a baseball state of mind. So, last night was the midsummer break of baseball season for the annual All-Star game, which is, for a game that literally means nothing, of all the All-Star games, the NBA is kind of just a free throw, three-point shooting contest and Harlem Globetrotter kind of exhibition. The NFL Pro Bowl has become, I don't even know what it's become because I won't watch it anymore.

It's flag football and some other stuff. I guess the hockey game, there's still players losing teeth in that game. But there's no All-Star game in major sports like the Baseball All-Star Game.

Yeah, they got the Home Run Derby and all that, but the game itself is the game. Best players in the game going at it. They're moving in and out every inning.

But how about them Yankees, huh, Mike? How about them Yankees? But what All-Star game did you watch?

The one that I saw was 4-0, three runs in the first and then boring for nine innings. Well, you're not a real baseball aficionado there. You don't need runs.

This is why you don't like soccer. Right? It's not all about the goals or the runs.

We'll get to that later in the show. But, you know. Well, congratulations to Corey Bellinger for winning AL MVP.

I thought it was well deserved that first inning. It did decide the game. " Bellinger comes up to the plate.

"This is why the Yankees aren't the Yankees anymore. There's no clutch hitting on this team. " Then here comes Corey Bellinger knocking in two and Ben Rice right behind him knocks in the next one.

So- All right ... go Yankees. So this is all about gloating for your son.

Is that where we're going? Yeah, that's pretty much what it is. He's not watching this, but I wanted to just mention that.

Anyway, turning to the gang for today. Let me introduce you to who we got here. We've got Mitch Ashley joining us in Colorado.

Out in the Pacific Northwest, Fred Wilmot. In New York City, speaking of New York, the one and only, Drew Gutstein. Drew, welcome.

It's great to have you back. John looks like he's back home in San Francisco. I'm home.

Yeah, I got home yesterday after- Yeah ... four days in Brooklyn. Yeah.

It was great. A tree grows in Brooklyn. It was beautiful.

Yeah. Our own John Swartz. John, welcome back.

And then, as he mentioned before, from his hidden hideaway deep in the Adirondacks, I don't know what he's running from that he's hiding out there, but it's Mike Vizard, our chief content officer. Gang, welcome. I'm smuggling stuff across the border.

It's great. Yeah. You're running prohibition.

Rum runner across the Canadian border there. So Mike, we had this SaaS apocalypse? I don't know.

What? I think it's an open source SaaS. It's software.

Well, funny that you mention the Yankees early on, because we have another venerable team known for wearing pinstripe suits that is struggling. Yeah. So, here we are.

That is. Yeah. Big Blue.

They had a bad quarter, man. Yeah. So they telegraphed that their upcoming quarter is going to be bad news, and they got pummeled on Wall Street for this.

But, there's an ongoing conversation around all of this stuff that I want Mitch to weigh in on here, because IBM's not alone, hardly. " But it seems like going to AI is now the default, and we're starting to see that show up in some of the financial reports, or at least that's what it looks like. Mitch, what's your take on what's going on here?

Well, the heads up by Arvind was basically, we've got some deals in the pipeline that aren't going to hit, and that's affecting our business. They took, I think it was about a 25% hit on their stock on Tuesday. It was up on Wednesday this morning when I saw it last.

I haven't checked in a while. But it also rippled effect, it hit Microsoft, it hit others, right? Not as in this year, but those stocks are up today.

So I think this was a way to get the bad news out there first, and you be the one to tell it, and then when you hit earnings day, that's already baked into the process. So I think it's wise of him to do that, to let people know. So to your point about, Alan likes to say, I've seen in his writing before about the moat in SaaS isn't the software, it's the building the software that's the moat.

What it takes to build it. Did before versus what it does now, and I think that's spot on. The question though is, are we in a world we can say, "Oh, just flip it all over.

Don't buy any more software. " I think that's the same argument of, "Oh, we don't need to hire any more people to develop software. " Oops.

Maybe we need software people to build software in AI. I think it's the same kind of argument of How far can you take it today? Yes, there's a first-mover advantage in using AI with software.

You can tail right onto your competitors by using AI. Are you going to go replace NetSuite tomorrow? No, you're not going to do that.

That's a huge behemoth to try to take on. Maybe there's some things you could take on. You might want to do an inventory system, something maybe a light transaction processing system you want to take on.

I think it's a measured approach. I think you're right, though, Mike. The question is, let's first consider, could we do this in AI?

And then we'll see if we do, if we renew that contract or go look at a third party. So Alan, you have an article talking about how Starbucks basically sent the same message about how, well, we might lean into AI before we lean into the SaaS apps as well, and I guess the question I have to you is, A, do you think that this is going to become the default? And B, are organizations not going to use the agents provided by the SaaS application vendor in favor of their own AI agents?

Why would I use the one that the SaaS provider gave me? I agree with Mitch, the SaaS app isn't going anywhere, but do I really need their AI agents? I don't know.

So, the article that you referenced was about Starbucks, and they claim they're going to save about 400 million, 400 million bucks in software fees by rolling their own. Take some, it's good for you. But here's the thing, I think you can't look at the star...

And the gist of my article was how much did that reverberate through this IBM early warning and contribute to the broader loss in software stocks? The IBM one, there's a couple of things there beyond just rolling your own. Number one, one may question, is there a problem with the mainframe?

This is an IBM mainframe upgrade year, isn't it? And that's usually a great engine that they'll run every, whatever it is, three, four years and boost up earnings, right? Mm-hmm.

So is the mainframe locomotive running out of steam? I think that's something that you got to think about with IBM. Number two, if it's a SaaS apocalypse, I think we might be a little premature to say we're going to replace a lot of these SaaS applications with home rolled.

I think where really rubber meets the road with it, though, is with open source, right? The fact of the matter is 85% of the companies, the so-called open source business model companies out here, what they really are is SaaS companies. They're taking an open source piece of software and offering it as a SaaS program.

And I think those are in the crosshairs, right? Because why can't AI do that, frankly? And then the third leg of the stool I wanted to bring out is, is it really not that they're not spending on software?

They're going to spend on software. Whether they let AI roll their own or not, they're still going to have to spend on software. But the same thing we're seeing with personnel, with layoffs.

We're not laying off people to replace them with AI. We're laying off people to buy AI. And so by putting off these software expenditures, I'm taking that money and reallocating it into data centers, AI hardware, AI equipment purchases, GPUs or whatever, inference chips, whatever it may be.

But I've prioritized that over software, and that may be just a momentary blip then because once I get that, then I go back to doing the software thing. Maybe, maybe not. But that's my take on it, Mike.

All right. Drew, you've been around purchasing and IT for a while, and various roles along with your CISO experience. It seems to me a lot of these AI budgets are kind of like bills moving through Congress and people attach things to it, and as long as they can call it AI, they'll get funding for it.

So is that kind of how this is moving through the system these days? I would simply say that the economic impact of AI on the budgeting process is evolving. We're still in this massive state of flux where the prices are kind of all over the place, and what people are paying, we know is not necessarily how much it costs, and it's all going to settle down at some point, and that's when the chickens are going to come home to roost.

So I like to look at this question in terms of is this moving us closer to that plan? And I think we're still sort of in the middle, right? There's always been in the enterprise, this very complicated big verse buy decision, right?

And what a lot of enterprises learned in the last few decades is that the cost of ownership of code way outweighs the cost of creating it, right? So this idea that writing software is a valuable thing to be doing, that hasn't been true for a long time. Software is cheap.

The vendor spaces are all building their stuff on open source, right? And so really what we're talking about is just sort of like where are we shifting the funding? And I think IBM is a really interesting example here, especially with the mainframes.

So as a long time employee at Goldman Sachs, there was always this group of, I don't know, people who kind of look like us now, gray hairs, sitting with their terminals, working on the clearing business that runs on the mainframes, right? And it's something that has never been able to sort of be cracked by sort of more modern computing. AI might be the thing that finally pries that loose, because it's able to understand the highly complex nature of those programs and can provide a path forward to a new type of big iron.

And this is where I think the opportunity is for IBM, right? So they invented having huge, powerful machines in your office, and I think as the cost of the SaaS subscription models go up, the token fees go up. You're paying tokens to the SaaS provider, you're paying tokens to the model provider.

Everyone's going to want to consolidate down to their own on-prem stacks, but I don't think those exist in a sort of cost-effective place now. I think they're still out of reach for many places. Yeah.

Yeah. Go ahead, Fred. I totally agree with you, Drew, with a couple additional points.

This also, to me, looks more like the licensing model for SaaS no longer reflects the market. What we're really talking about is price pressure because, in IBM specifically, we're talking about mainframe contracts, which gets you into the legacy infrastructure conversation. I tell you, by 2030, there's going to be an alternative.

IBM's got all of the first-mover opportunity and certainly the first-ride refusal to do it. But fundamentally, I think some of the easy button traditional economics on how do you spend your software budget as a CIO, a lot of that's going towards AI. I think this is a different reflection.

I think there's a hardware pull forward, there's this notion of agentic arbitrage, which I think is real, and the focus on where these two components converge at an IBM is simply like giant companies also know how to do software, comma. A lot of other companies, like a Starbucks, they may save $400 million, but they're not going to go build a bunch of software to run all their operational technology stack. They're going to price pressure and get that.

Who does per seat licenses anymore? It doesn't even have a reflection on what agents do. So there's an economical situation developing here that the software models that SaaS have been built on don't co-align with what the market is today.

Mike, if I can jump in here, since you invoked Drew, the gray hair guys, I'll take advantage and step in for the gray hair guys. So there's a lesson I learned early, and I learned over, and over, and over in my career, because I was involved in multiple different names at different times, re-engineering, re-systemization, transformation. And what I learned is they are extremely difficult projects.

And the hard part is not writing it, not building it. It's, A, unraveling it and understanding what it does. But even harder than that is all the business and the process and all the systems of people and work that are built around how software works or in vice versa.

And unraveling that and then re-raveling it around a new way of doing it, because you're not just going to replicate how you did it today, you're going to change it and improve it. Those are massive things. Okay, so that's on one end of the spectrum.

Let me give you an example of where we are, just to kind of cherry-pick one. They just announced that the Bob, the IDE, now can manage multiple agents. Okay, that's a long ways from I can manage multiple agents to I can replace your mainframe high transaction volume processing system.

Not saying it ain't going to happen, it will, but we're so far over on in exuberance. And I agree with you, Fred, about the economics have changed, and we've seen that with the developer tools and Anthropic and Open Codex and things. I think everybody sees that future, that the future is a lot farther away than we think it really is, is my point.

Can I- Go on ... I'm going to make a quick-- Well, can I make a real quick point about this kind of historical perspective and this weird relationship between Wall Street and AI? So in a previous life, I was a reporter at Dow Jones, and I covered earnings ad nauseam to the point where I got sick of them.

And for two years, though, for two years, we were obsessed with, okay, this is the quarter where we're going to see AI's big breakthrough in terms of revenue. And now we find ourselves in a place where the IBM results and maybe Starbucks to a lesser extent underscore this structural shift where rigid enterprise IT budgets are being cannibalized by AI hardware requirements, and we're basically seeing, I'm overstating it, but this erosion of the SaaS moat. So, that's going to be the new obsession with Wall Street until the next quarter.

So they keep changing. It's like shifting gears, right? In a car too much.

So we're going to lurch from one extreme to another to another. So I think this is just an evolving overreaction on the market so far too. But I think that the macro factor here that we should be looking at is productivity.

Right? So we've had this enormous gain in productivity over the last several decades in this country, and a lot of that has been through the systemization of work, right? So putting software into place and automating a ton of stuff, traditional software, right?

To systematize business, the knee-jerk reaction was let's write a program or buy something. And now there's this second option, which is maybe we can just do it with AI. And there will be some things that just do it with AI will be more productive, but then there are going to be a lot of things where just do it with AI, well, we'll actually lose productivity.

And so finding out how you sort of continue that productivity growth, which is sort of necessary in our economy, AI is going to be a key part of that, but I don't think it replaces software. I think it shifts the classes of problems that we need software for, and so we'll have kind of an alternative solution. Right.

John, last question on this one. Is there going to be other shoes to drop here? Am I going to see all the SaaS application vendors show up and say, "Well, you know what?

" If they could, they would leave IBM on an island, because in recent history, as that usually happens with IBM. But I think they're going to get dragged into it, and there's going to be an obsession. I think despite what they announce, they're going to be inundated and bombarded in the Q&A with the analysts who might actually have enough gumption to push back and ask them what's going to be the impact.

But I'm sure they will have an excuse. They always do. And it's shocking, too, if you think of Watson and how much IBM has brought to AI this era, right?

And the fact that they're not- Well, how much they squandered. Yeah. That's such an advantage.

Yep. They're always used as kind of a-- I hate using this phrase, but they are kind of used as a whipping boy, right? Yes, they are.

They're always the excuse. " But they also benefit from on the other side of that equation, too. When things are good, it's good for Blue as well.

Right. But guys, we're at 20 minutes. Here's my tell.

You're going to see if the SaaS people get it or not. Do they change their pricing model? Does it move from per seat to some kind of flat fee or something?

But Mike, we've got to move on. There was a big going on in the EU courts there. Yeah.

This all happened while we were celebrating the 4th of July, but turns out that maybe the EU had more of our independence in mind than we did. " I don't know if that's going to play out here in the US, but Alan, this is a subject that you and I have been talking about for many years now, and it looks like maybe the courts are catching up. Well, the courts in the EU are.

Actually, in the US, there's been talk of changing. So John, you probably know. In the US, isn't it like 520 or something is the rule?

Section 230, I think. 230. Section 230, the CDA.

I couldn't get 714 out of my head. I apologize. But we've heard a lot about that recently.

That was just for the old guys out there. But anyway, 620. But the fact of the matter is almost the entire online social media world hides behind this shield, right?

Which says, "Hey, we could put up anything. It's just people putting it up, not us. We're not responsible for the malicious, the venomous, it's just bad content," right?

And defamatory and everything else. And the EU for a long time went along with that. They actually- Yeah, I was going to say, I was going to mention that, Alan.

Sorry to interrupt, but that was for more than two decades, the safe harbor framework- Yeah, no, the whole industry's been built around this shield, and the EU codified it as well. Well, now they've carved out what right now seems to be a rather narrow, you look at the big picture, a narrow exemption, and they're saying they call it algorithmic- Curation ... right.

So these are things that, and all of them are guilty of this. You log on based upon what you've seen or what they want to show you. They say, "Here's the hot stuff.

Here's stuff for you. Here's the latest thing. " Not just the fire hose based upon, let's say, who you know or who you're connected to.

Here's a curated feed. They're saying by these folks curating that feed, algorithmically or not, by curating it, they are actively deciding what you're going to see and making a preference and putting their fingers on the scale, and therefore, they cannot hide behind the shield. So at a minimum, they're complicit, right, Alan?

They're complicit in the- Well, they're more than complicit. They're putting their finger on it, on the scale. " And I think, look, this is something that people on both sides of the Atlantic have been calling for, to try to rein in, just frankly, the crap that's out on social media, right?

And so I applaud the EU again for having the political will to actually do this, and it will make its way here to the US, and I do think we're going to see legislative action around it, too. We have to. I don't think we're going to see less crap, but I think we are going to see the fact that they're going to be more liable for content that they put up, because right now they're putting up anything that goes along with an algorithm that ties into, for example, a political campaign, and if that political campaign is defaming somebody, they don't really care because they sit there and go, "Well, that's not our fault.

" Yeah. So we could have a whole session on the influence economy and how insidious it is. But I think there's an important distinction here that maybe touches on part of our earlier discussion Section 230 worked for the most part because there was this agreement that content moderation would exist and take care of the worst of the harms.

And politically, that's now over, right? So we can't do that in the United States. All of the big tech companies have stopped doing that for the most part.

And so the mitigating side of that Section 230, we're not holding them liable, but we assume they're doing content moderation, is now no longer a valid assumption, right? So it's clearly broken. But I think what gets really complicated is how social media companies now delivering AIs are delivering a fundamentally different kind of content that something like Section 230 would cover, right?

Mm-hmm. This is not user provided. This is generated by their own system.

It's a very different kind of liability, and I think we don't even know yet how far this will extend. But- So- ... there's no reason to think that if someone uses Claude to hack my computer- Right ...

I should be able to sue Claude. So I'm going to make... There is a distinction here.

From my understanding, that even though big tech's losing the safe harbor, that does not trigger automatic financial liabilities if you're- No, no ... if a judge can't approve direct harm in court. So Leon, let me...

Jon- Yeah ... legally speaking, so these companies had a shield. You couldn't even begin the suit- Couldn't even try ...

to show the damages. Absolutely. Now they've removed that shield, but you still have to make your case.

You still have to prove direct harm in court. Damages. Well, and let's- Besides that, though, this is going to fundamentally open the floodgates to global litigation around accountability for fraud, liable, extreme graphic content.

That's basically it. Well, let's face it, there's very legitimate reasons for doing this, right? Placement on shelves in the store, eye line, where in the row is a certain product.

People pay for that placement. So there are financially business driven reasons of what they want those algorithms to do. Those are, for the most part, fine, right?

We may not like what that placement looks like, but I think here we're talking about where does it violate some law? Where is there some damage besides I didn't get the can of soup that I wanted because it was on the wrong place on the shelf? And what really is substantial that you could go after somebody, and how far can they take it?

And I think it's actually hard to argue that the content itself, if it's AI generated, is actually user generated content. I don't think it would even apply to these shield laws. Right.

I think you can make a strong argument that they don't apply at all. But this is going to become a bigger issue because there's going to be more people who are taking Alan's head and putting it into an AI adult movie, and people are going to start suing over this stuff, right? Yep.

Jibjab. Alan Jibjab. And they're going to sue the makers of the technology that allowed people to do that.

And there's no protection. There's no Section 230. How do you know they're not already doing it, Mike?

Oh, they definitely are already doing this. There's a lot of active litigation in this space right now. Leon, I've been wondering why they've been looking at me funny when I go to the Publix down here, some of these women.

No, it's the change of your email pattern. Maybe that's what it is. So in the security world, we talk a lot about how agentic, the whole agentic computing has opened up this huge new security attack space.

There's now also an equally blurry legal minefield out there that we're still learning about, too. Mm-hmm. Well, I think it's important that here, while we typically say that rights and freedom and all that stuff is a fundamentally American thing, it's ironic to me how frequently we look to Europe for privacy and accountability- Always ...

for Big Tech. Well, Fred, it's a question of public will. We do not have the public will to get things done in this country.

We can't pass- Shimmy, I love you. It's not a question of public will. It's a question of who's representing the public.

It's a different problem. Theoretically, the public chooses who represents them, right? Yeah.

Theoretically, right? But for limitations, anyway, that's a whole another thing, right? As to who's bought and owned and so on and so forth.

But if we're looking to hold technical oligarchs accountable, this is a terrific way for us to do that, and also as a follow-on. There's already stuff in Congress to talk about this, right? Yeah.

The Algorithms Act, right? And the Brussels- But they can't get it passed. Yeah.

Mm-hmm. Well, there's- Well, this has been going on for years, right? The threats of- Yeah ...

US lawmakers within- So let me ask a question, though. Jon, do you think that the social media companies, when faced with these fines out of the EU, will just apply a central approach to this and just say, "We'll do this globally," or will they handle each market differently and continue to do whatever they want to do in the US while adhering to a more rigid standard in the EU? Probably.

Yeah. I think you're right. What you just outlined is probably what they're going to do.

They've done that before. I don't know any- Let me throw a wrench in that one. What about if you got EU citizens who happen to be here in the US?

They're still protected by the EU. Yeah, that's true. Interesting.

There's no way this isn't global. States are already taking action. You can't.

The internet knows no borders, my friends. Yeah. And this is also driving a lot of, we talked last week about sovereign cloud investments.

Yep. This is one of the reasons why European countries want sovereign clouds. Mm-hmm.

Yep. Yep. All right.

Hey, you know what? We're back on track here for our third and final segment of the day. Before we get into it, I think at 3:00 Eastern Time, which is a funny time for this game to start, but we have an amazing semi-final match of the Messi-led Argentina team versus England and Jude Bellingham.

And it should be a great game. But what many of you don't know is that the ball's wired. John or Mike, who's got this one?

So- I do ... I'm going to hand this to John, but the controversy is, going back to the English-Norway game, is that allegedly the ball bounced off of the camera wire, I think it was. Yes.

And at the end of the day, that gave it an odd bounce, which then led to a rebound and a goal that tilted that game in another direction. " So what's the good of having the chip then? And we're putting chips into all kinds of sports stuff, but if a chip's not going to work, what's the point?

So John, what's real? So it's the World Cup, so we expect controversy, and we expect technology to fail or the humans to fail because that's just the World Cup way. And FIFA, I'm just going to editorialize, is one of the most corrupt organizations probably in the world, and it's run by a little tyrant.

You're just saying that because they didn't give you the peace medal. That was ruining this for me. And by the way, I'm going to tell you, back in January, I was at CES, and Infantino spoke.

He was the special guest of Lenovo. You could hear a pin drop when he was introduced. People are onto this guy.

They have been. He's the villain. And so they introduced technology in the form of VAR or in the form of this Trionda ball to try to avoid controversial referee decisions because remember, again, Argentina's playing today, so expect some sort of mysterious red card to materialize or some sort of glitch to happen.

It's going to happen. So, that's my conspiracy, but it's backed up by almost the rest of the world. So there's this rechargeable ball that Frank Szard wrote about in Digital CXO, supposed to end these referee decisions, which could go haywire.

It includes a sensor to track ball acceleration and granular movements in three dimensions. And as Mike pointed out, it didn't pick up on the ball clipping an overhead wire. Now, I've watched the video, and it clearly hit the wire, and the trajectory of the ball was changed, which indirectly led to an advantageous England possession in which they scored.

Now, the FIFA said that there was absolutely no evidence that this happened, even though the rest of the world saw it. This to me is a microcosm of the way technology, in a weird way, has gone haywire in this tournament. And in a sense, the ref, the human officials, aren't getting as much heat as...

They're leaning on VAR, and it hasn't just been this game. There have been multiple incidents of red cards issued. I know Alan will go off on that one with our friends, the president who had that overturned.

But there have been multiple incidents, almost one a week, where VAR has failed. So to me, almost the story's about the failure of technology or FIFA's incompetent execution of the technology, which has led to this. Now, this is just the latest example.

So, we're still not done. We have two more matches, so I'm sure we're going to have some more problems. You know, John, I think this is a perfect example of for every action, there's an opposite and equal reaction.

Put a chip in the ball. Who wired this up? And it's all good intentions or whatever it is about that.

Mm-hmm. " That's the other part of it. Yes.

" F1 had its own in racing, the whole the season this year of it's turning people into engineers trying to manage the energy consumption and building up the batteries, and we're not driving the cars anymore, so they had to back off of that. So technology is having an impact on our sport a lot more than it did before. You think about instant replay, how long we've had that, but how controversial that was.

Mm-hmm. Now we just accept it and know it's even still imperfect as it is. So to me, it's just the evolution of- Here's my thing, though.

This is a ground rule. Look, I heard there's some team up in Boston that has a left field that's about 150 feet from home plate but is really tall, and then anyone could just hit a little pop off the wall there. Hmm.

And they let that go without everybody b******g or moaning about it. So the wire's there. When I was little, you were allowed to catch the ball playing stickball- But there are- ...

off the house ... but there are ground rules in sports, like the wire- Yeah, those are ground rules. So the soccer ball hit the wire.

It's a dead ball. That's the way- No, it's the way the ball bounces Yeah, it's a dead ball. Mike, you never caught a ball off the house?

It's not, hey, we're not playing in the street here, so A, it's a dead ball because it's professional sport. Just like when the kid leans over and touches the ball in the outfield, that's a ground-rule double. So this is a ground-rule dead ball.

Unless you're in Yankee Stadium. You have to have the same rules, right? If you have an overhead wire, it's a double, yeah.

But John, here's my question. What idiot put the camera wire in the place where the ball's going to hit it in the first place? Who's thinking what?

That's probably Fox. I probably would blame Fox on that one because they want every conceivable drone camera- They want, right ... conceivable camera angle.

They want every angle. Let me ask you a question. " I'm going to provide the sort of sports idiot perspective here because my son teaches me everything about sports.

I know nothing about football, soccer, whatever. Oh, true. Yes.

One, how do you know that guy wasn't aiming for the wire? Right? Maybe it was an amazing shot.

Two- Even Pele couldn't have made that shot ... two, it's a game. Game?

It's a game, okay? It's a game. Three, who cares?

It's really the degree to which our society revolves around the intricacies of some chip in a bouncing ball, kind of drives me crazy. But in actuality, I think it's a misapplication of the technology. That chip is supposed to make it easier to follow the ball on TV.

I don't think it's really sensitive enough to be able to precisely do what they're trying to say that it does. Yeah. But yet, you look at tag experience- What I'm hoping is that Cashy and Polymarket will ruin all the rest of sports.

Yeah, they have ruined- They are ruining it ... and then the team that has the most fun will win. That'd be nice.

All you people in Norway watching this, please direct your email to Drew, and I'll send it to Ben. Yeah. Whoa, bro.

Anyway- Active versus passive sensors. That's really the question on the table right now. Active versus passive sensors.

Passive sensors, you want to do an instant replay. Nobody's getting in the way of the actual play. Now we're just emphasizing how we can recast our decisioning matrix.

The situation- All right. Well, so ultimately, are we going to need these referees and umpires and all this stuff floating around? Because it seems to me, ultimately, the AI and the video and everything as that advances, we get to a point where that's just not- Well, we're going to try that in baseball, right?

Aren't they getting rid of the umpires next year at home plate or something? Eventually. Eventually.

I don't know if it's next year, but eventually they will do- I don't think it's next year, but I think that's their end game, I think at the end. But how often do we see today that the balls and strikes, usually the batter is the one who knows the least, the catcher knows the most, and maybe the pitcher gets it right more than the batter. But how many times you watch a game lately where, what was called a ball is a strike and vice versa.

And so, these humans are infallible, or John is infallible as part of the game now. But that was always part of the game. That was always part of the game.

Part of the game. It's part of the game. I think that's part of the charm of the game in baseball, at least.

Yeah. The umpires were larger than life back in the day. Yeah, remember when they used to kick sand at each other and stuff?

Yeah. That was great. It used to be very dramatic.

I don't want sports for expected outcomes. I watch sports for unexpected outcomes. But wait, I have this betting app in front of me here, then I bet the house on the fact that this team was going to win, and now some ball hits a wire, and I'm losing my house.

So, but that brings up just a whole another story- There it is ... though, right? Look, we always had- Too much money involved ...

betting on sports, right? You had a guy, Louie, down the street, you'd call up and ask him what, lay the line on this game or something. But the fact of the matter is that legalized gambling, Drew, to your point, has ruined for a lot of us what was the greatest games on Earth.

Right? Because when money like that is involved, you start worrying about who's throwing a game, who's betting on a game. I always had a rule.

I never bet on the teams I liked because then I couldn't root with my heart. Right? And being a fan is about your heart.

And in my humble opinion, legalized gambling on sports has ruined it for a lot of us. There you go. And perhaps has created another path to liability for institutions like FIFA.

Yeah. If people are losing bets because of bad calls, I imagine they'll sue to get that money back. So, going back to what you said, Drew, I think gambling plays a part, but it's even like big tech.

There's just so much money involved. There's so much- No, it's crazy money ... more than it ever was that it creates this- It's crazy.

And all these exotic bets and everything, and what you see on Polymarket and Cashy and all, it's just nuts. Anyway, we're about out of time, guys. We got to wrap up.

I think you should do what I'm doing, which is I'm going to watch another Minor League Baseball game on Sunday and- Yeah ... cross my get check. There wasn't a whole lot of gambling going on, but maybe there is, and I just don't know about it.

You and I used to love going up to Cape Cod in the summer, and the Cape Cod League- Yeah ... where they play with wood bats and stuff, and- Yeah. Now, I got to say, I'm a lifelong New Yorker.

My favorite New York baseball team is the Brooklyn Cyclones. Absolutely. There you go.

The most fun you can have. You fly to Coney Island. I got to go see that.

Yeah. And it's like- Next time I'm in Brooklyn, I'm going to go ... it's practically free.

And a better experience than the Mets are, that's for sure. Yeah. They let the kids run around the bases during the seventh-inning stretch.

There we go. Now this is turning into Barstool Sports. But- There we go ...

guys, I got to pull the plug here. They're going to pull the plug. I used to be a Minor League Baseball announcer, and we used to go to the games for the Potomac Nationals, and it was a fantastic experience.

It was pure. Yes. Minor League Baseball.

But they used to say that about college sports, and now these kids are making millions of dollars. But the universities were anyway. None of it's pure.

Hey. It's a game. It's a championship, no glow.

Wait till the EU asks for all games with money involved. Yeah. The EU is going to save sports.

Is that what Fred is saying? I'm with you. No safe harbors for Minor League sports.

Look out on policy. Let's go. We're done.

We'll be back tomorrow with more Techstrong, gang. But before we go, hey, thank you, gang, for participating. Thank you out there for watching.

Of course, Techstrong gang comes to you every Monday through Friday at noon Eastern Time. You can watch it on Techstrong TV or any of our Techstrong stations, including our YouTube, Techstrong TV YouTube channel, our Techstrong OTT. Actually, Techstrong OTT, you can't watch it live.

You can only watch it on demand now that I'm thinking about it. But you can watch it immediately after this on demand. As well as our Techstrong TV stream, which plays 24 hours a day just about now across our Techstrong network, so check it out there.

Until tomorrow, on behalf of Mike, John, Drew, Fred, and Mitch, have a great day, everyone. Thanks for joining us.