NEW INC. MAGAZINE COLUMN FROM HOWARD TULLMAN

 

Microsoft’s Massive Xbox Downsizing Signals the Brutal Reality of the AI Revolution

We’re beginning to see the secondary and other follow-on impacts of AI.

EXPERT OPINION BY HOWARD TULLMAN, GENERAL MANAGING PARTNER, G2T3V AND CHICAGO HIGH TECH INVESTORS @TULLMAN

Jul 14, 2026

 

Sony’s PlayStation has been the global market leader for years, while Microsoft’s Xbox has been a distant second even after failed attempts by Microsoft to make its games a visible presence in the desktop world, where it clearly dominates the office installed base worldwide. Both Sony and Microsoft missed the migration of gamers to small mobile devices, where Nintendo prospered for a while—even before the phone revolution completely changed the video gaming space.

Now, we’re in the early innings of another sea change where the major tech players in the gaming industry are realizing that they no longer need armies of programmers, designers and developers to build and deliver the next generation of games. This is due to AI, of course, but also because the new games—mainly mobile—will be so lightweight and rapid as a result of the AI enhancements that there will be no need for any kind of bulky and costly game boxes or platform devices. Finally, as is the case across dozens of industries these days, the cost of the chips used in these boxes has been driven skyward by the adjacent and competitive demands of the AI companies for product that has cut into margins and may ultimately result in price increases at the worst possible time.

The latest salvo in this latest war of enforced attrition was last week’s announcement that Microsoft was making major changes in the Xbox video game business which entailed specifically cutting the Xbox workforce by 20 percent—about 1,600 employees now and another 1,200 plus over the next year. More importantly, the company is largely exiting the studio space, where it spent billions on expensive acquisitions not too many years ago.

The personnel growth in the MSFT games division was massive while the overall demand, player base and playtime all decreased substantially. It turns out—as with many other pre-phone and streaming activities—that millions of gamers would rather watch the play of truly talented players on YouTube than be second-rate participants in multiplayer competitions or simply play older games at home by themselves.

As far as the various studios are concerned, a few big ones like Activision Blizzard will shrink but remain, some others will simply be shut down, some are being encouraged to spin off and go off on their own with temporary support and assistance from Microsoft, and a few will remain until they too can be responsibly booted one way or another or quietly sold off to other buyers who right now seem to be few and far between.

But the most important takeaway from this highly visible and intentional effort at downsizing one lagging division to help offset enormous commitments and investments elsewhere in the enterprise—particularly in AI capabilities—is that we’re beginning to see the secondary and other follow-on impacts of the AI revolution. Thousands of Microsoft employees didn’t just lose their jobs because the AI tools could build new games, faster, cheaper and even more compelling than the former workers, they were also directly dismissed because the sales, marketing, manufacturing and promotion efforts of the entire video game division were shrinking and Xboxes were losing share and playtime as the gamers went elsewhere and the old boxes lost their sway and value.

This is only a single example, but I fully expect that we’re about to see many other industries rapidly roiled by similar advancements in process and speed or response time which will permit—in the name of speed, efficiency and massive cost savings, the wholesale elimination of entire groups and departments in businesses which will simply no longer be necessary because all of their functions in the value-creation chain will be substituted for with new AI-infused technologies. I’ll be writing shortly about a staggering combination in the advertising industry that brings together two powerful technologies and will completely upset and reorganize the ad creation business into a faster and cheaper system, which will also create more engaging and effective products.

It’s clear that a new form of M&A is already actively helping to connect and combine disparate companies with tools and services that are addressing common overarching problems in industries like advertising, and it’s also clear that these individual companies aren’t likely to build end-to-end systems by themselves in a timely fashion whether through lack of capacity or all the necessary resources or because they have been so deeply focused on solving their segment of the overall solution that they didn’t realize that a better and more robust and compelling solution could be offered by combining multiple offerings into a single comprehensive process.

 

Heather

 July 12, 2026

Heather Cox Richardson

Jul 13, 2026

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The United States is currently in the grip of an outbreak of the Cyclospora parasite, which causes severe diarrhea and has sickened more than 3,000 people across the U.S. Last August, Aria Bendix of NBC News reported that on July 1, 2025, the Centers for Disease Control and Prevention (CDC), overseen by Health and Human Services Secretary Robert F. Kennedy Jr., would no longer track infections caused by cyclospora and five other common causes of foodborne illnesses.

The CDC, the Food and Drug Administration (FDA), the U.S. Department of Agriculture (USDA), and ten state health departments covering about 54 million people have run a program called the Foodborne Diseases Active Surveillance Network, or FoodNet, since 1995. Until last July 1 it monitored eight pathogens. Now it monitors only salmonella and toxin-producing E. coli.

White House spokesperson Kush Desai said then: “The health and safety of the American people is the Administration’s utmost priority. USDA, HHS, FDA, and the CDC will continue to cooperate and maintain the highest vigilance to safeguard our food supply against pathogens.” But director of the Institute for Food Safety and Nutrition Security at George Washington University Barbara Kowalcyk called the decision to reduce FoodNet surveillance “very disappointing,” saying, “A lot of the work that I and many, many, many, many other people have put into improving food safety over the past 20 or 30 years is just going away.”

Meanwhile, the New World screwworm continues to spread in the U.S. and Central America, where Melody Schreiber of The Guardian reported today conservation cameras are showing the infestations spreading rapidly in deer, jaguars, peccaries, and even porcupines.

While Agriculture Secretary Brooke Rollins has repeatedly blamed former president Joe Biden for the arrival of the flesh-eating maggots, three former officials from the Agriculture Department, as well as another source, told Marcia Brown of Politico in June that Trump administration officials held up funding for the construction of a facility crucial to slowing the spread of the pest and also delayed funding for a $100 million research initiative to find new ways to stop the screwworm.

Trump administration cuts to staffing at the USDA meant that in 2025 the Animal and Plant Health Inspection Service staffing dropped by 25%. More than half of the area veterinarians retired or resigned.

Things aren’t going terribly well internationally, either.

Despite the repeated assertions of administration officials that the U.S. “holds all the cards” in its war with Iran, Edward Wong, Michael Crowley, and Eric Schmitt of the New York Times reported today that the memorandum of understanding Trump signed on June 17, 2026, formalized Iran’s power over the Strait of Hormuz. Former U.S. analysts and officials told the reporters that the agreement was dangerously vague and that Iran has interpreted its provision saying that Iran would “make arrangements using its best efforts for the safe passage of commercial vessels” through the strait as giving Iran control of the waterway.

As Iran has attacked ships trying to get through the strait near the Oman shoreline, Trump has ordered airstrikes on Iran. Over the weekend, Iran’s Navy said it was closing the strait “until the end of U.S. interference in the region.”

Today Tara Copp and Alex Horton of the Washington Post reported allegations from soldiers who survived the Iranian attack on Port Shuaiba in Kuwait that killed six U.S. military personnel and wounded dozens more that the generals in command ignored intelligence that Port Shuaiba was a probable target. The site was not adequately protected against drones, as scouts noted before the war when the Pentagon began to move troops off large bases onto smaller facilities to make them harder for Iran to target. Port Shuaiba’s emergency warning system wasn’t working, and the facility had no coverings to conceal personnel or hamper drones. Then troops were deployed there without weapons.

After the strikes, wounded soldiers sent to Germany’s Landstuhl Regional Medical Center discovered that they had neither been listed in the military’s database as seriously injured nor been recorded on the flight manifest as medical evacuees, so could not be admitted as patients. Doctors treated them as outpatients and sent them to barracks where they waited a week to be sent back to the U.S.

In June, Jonah Kaplan and Michael Kaplan of CBS News reported that wounded soldiers and their families say the Army downplayed their injuries. Secretary of Defense Pete Hegseth told reporters in March that almost 90% of the injuries 400 service members had sustained had been minor and that the wounded soldiers had returned to duty. One man the Army classified as “not seriously injured” sustained extensive shrapnel wounds, a concussion, hearing and vision loss, and lung damage. Another underwent multiple surgeries to remove shrapnel.

Wounded soldiers told Kaplan and Kaplan that the duty for which they had been cleared was an active order to recuperate from injuries in a specialized recovery unit.

An Army spokesperson explained that the classifications were military designations. The spokesperson explained that the Army classifies soldiers as “seriously injured” or “very seriously injured” only if they are at risk of dying from their wounds within the next 72 hours.

Tonight the U.S. military launched new strikes against Iran. In a brief interview with Reuters over the weekend, Trump said: “We’re beating them up.”

Senator Lindsey Graham (R-SC) died Saturday night at age 71, apparently from a rupture of his aorta due to cardiovascular disease. Graham had just returned from a trip to Kyiv, Ukraine, where he met with Ukraine president Volodymyr Zelensky. A former officer in the Judge Advocate General’s Corps (JAG Corps) in the U.S. Air Force, Graham was a staunch supporter of the North Atlantic Treaty Organization (NATO) and of Ukraine. In that, he stood apart from Trump.

In his earlier years in Congress, Graham was an establishment Republican who pushed for the impeachment of President Bill Clinton but was willing to work with Democrats personally. He once said of then-senator Joe Biden of Delaware: “If you can’t admire Joe Biden as a person, you’ve got a problem. He’s the nicest person I’ve ever met in politics. As good a man as God ever created.”

He objected to the takeover of the Republican Party by the MAGA Republicans. In December 2015 he called then-candidate Donald J. Trump “a race-baiting, xenophobic, religious bigot” and said: “He doesn’t represent my party. He doesn’t represent the values that the men and women who wear the uniform are fighting for.... I don’t think he has a clue about anything. He’s just trying to get his numbers up and get the biggest reaction he can.” “You know how you make America great again?” he said, “Tell Donald Trump to go to hell.”

In 2016, Graham said he voted for Independent Evan McMullin because “Voting for Hillary Clinton was always a non-starter and I couldn’t go where Donald Trump wanted to take the USA & [the Republican Party].”

But after a meeting with Trump in March 2017, Graham became a loyalist. As chair of the Senate Judiciary Committee, he ushered through Trump’s judicial nominees, and his fierce defense of Brett Kavanaugh during his confirmation hearings for a position on the Supreme Court has been credited with enabling Kavanaugh’s nomination to go through despite accusations of sexual assault.

Graham was a staunch enough Trump supporter that he urged Trump not to concede the 2020 presidential election because “[i]f Republicans don’t challenge and change the U.S. election system, there will never be another Republican president elected again.” He called Georgia secretary of state Brad Raffensperger over the votes in Georgia; Raffensperger believed Graham was suggesting he should throw out legal ballots.

Graham briefly turned against Trump after the president tried to overturn the results of the 2020 election, but then he came around to Trump again, supporting his 2024 presidential run.

Graham’s sudden death came as a surprise, but Trump was able to find Graham useful one last time. Although Graham’s top priority appears to have been working with Senator Richard Blumenthal (D-CT) to push more stringent economic sanctions on Russia, Trump told Kristen Welker of Meet the Press that he had spoken to Graham just before he died. According to Trump, Graham “said, ‘We’re all set for the SAVE America Act,’” the voter suppression act that Trump wants so badly. Trump continued: “He was pushing the SAVE America act like crazy…. And I said, ‘Well, we’re gonna get it done, Lindsey. We’re gonna get it done.’”

On May 3, 2016, Senator Lindsey Graham posted on social media: “If we nominate Trump, we will get destroyed…….and we will deserve it.”

HEATHER

 July 11, 2026

Heather Cox Richardson

Jul 12, 2026

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Last night the Department of Justice subpoenaed reporters from the New York Times over a story the newspaper published on Wednesday. Julian E. Barnes, Eric Lipton, Tyler Pager, and Eric Schmitt reported that the Secret Service had security concerns about the new Air Force One Boeing 747-8 given to the U.S. by Qatar. So, when tensions escalated with Iran while Trump was in Türkiye for the NATO summit, they asked the president to use one of the other, older, Air Force One planes for his return journey.

Trump and White House officials pushed back strongly against the idea that the new plane had any security problems after pouring what appears to have been hundreds of millions of taxpayer dollars into renovating the plane. But, according to Adam Gramegna of Military . com, U.S. officials told CBS News that the speed with which the plane was rushed into service meant that it does not have the same protections as the older planes.

According to Devlin Barrett, Glenn Thrush, and Maggie Haberman of the New York Times, the story that his prized plane was not as good as the older ones enraged Trump, and the White House called in FBI director Kash Patel to find the two anonymous sources who leaked it. Patel spent about 8 hours on Friday running an investigation from the White House, rather than FBI headquarters, before the reporters received the subpoenas.

U.S. Attorney for the Southern District of New York Jay Clayton, whom Trump has nominated to be the next director of national intelligence, issued the subpoenas. The reporters are ordered to testify before a federal grand jury in Manhattan on Wednesday “in regard to an alleged violation of federal criminal law.” The Department of Justice said the subpoenas are related to “the crime of leaking national security information.”

The Justice Department emphasized that “reporters are not the targets. Those leaking classified information are.” But issuing subpoenas to U.S. journalists, who are protected from government interference by the First Amendment, is a huge red flag. As former Time magazine editor Rick Stengel noted: “The reporting that the Times journalists have been subpoenaed for is exactly the kind of journalism the First Amendment is designed to protect: matters involving national security and taxpayer dollars. Reporting that embarrasses a president is protected speech.”

David McCraw, senior vice president and deputy general counsel for the Times, said: “The appearance of Federal law enforcement agents on the doorstep of news reporters should shock the conscience of any American who believes in the Constitution and the press freedom it protects. Our journalists report the facts and advance the American public’s right to know how their government is operating and their taxpayer dollars are being used. This brazen act should be seen as nothing more than an attempt to prevent the public from knowing what is happening in their country by intimidating journalists from doing their jobs.”

By 11:18 PM on Friday, Trump’s fury had turned back to Iran. He posted on social media that if Iran tried to assassinate him, “Locked and Loaded” missiles would begin to rain down on the country “to completely decimate and destroy all areas of Iran—PRAISE BE TO ALLAH!”

Today he turned his anger toward those questioning his mental acuity, particularly New York Times journalist Maggie Haberman, who commented on MS NOW about his reference in Türkiye to the “Islamic State of Japan.” At 12:23 PM he lashed out at “Maggot Hagerman” and then, to refute her claims, wrote that he “just finished a perfect physical at Walter Reed, I do it every six months, and I requested another Cognitive Test, the only President to do so, three times, and I aced them all—Got every question right. Few people in Washington, D.C., could do so, including Maggot and her flunky associate, Jonathan Swan. I would be willing to bet they couldn’t get 50% of the questions right.”

The White House said Trump was referring to a physical he underwent in May.

Then, at 3:16, the president’s account posted a screed of almost 450 words complaining angrily that “I win the Election IN A LANDSLIDE against the entire Dumocrat Party,…against almost 100% negative press and Fake News,…especially Maggot Hagerman, one of the most unattractive people in the News “Business,” and her lightweight assistant, Jonathan Swan…. All I do is WIN, often against all odds,” yet no one compliments him on his great successes.

Here he may have had in mind Thursday’s news story from Catherine Rampell of The Bulwark about his claim on social media on Monday that Walmart would be “dropping the price of ground beef by almost 15 percent” “at my Administration’s request.” Rampell reported that a Walmart spokesperson told her a different story: the price cuts were part of usual summer rollbacks, which had begun the week before Trump took credit for them. Rampell noted that Trump “looks for opportunities to slap his name on politically useful things that companies were already planning to do—seasonal sales, major investments, hiring, et very much cetera.”

White House spokesperson Kush Desai clarified on social media that the president’s “announcement was that the sale is extending all summer long,” adding, “The media’s obsessive need to try to undermine any good news when it affects President Trump is pathological.”

A rant about the news media took up most of Trump’s long post, as he insisted that those reporting his bad poll numbers and policy failures “have no credibility…. If the Election was held again today, I would win by even more—Actually, much more!” he posted. “The Dumocrats don’t have what it takes, their Policies are wrong, and they are, generally, stupid people. They are going COMMUNIST because they are a desperately ‘sinking ship,’ and there’s not a thing they can do about it.

“Instead of writing inaccurate, false articles, for over 10 years now, shouldn’t it be time that they say, ‘We give up, we can’t beat him, there seems nothing we can do.’ Isn’t it time they say, ‘TRUMP IS THE BEST POLITICAL ATHLETE OF ALL TIME! CONGRATULATIONS, MR. PRESIDENT. YOU HAVE BEATEN US FOR 10 YEARS, AND WE ARE NOT GOING TO WASTE OUR TIME FIGHTING YOU ANY LONGER. WE CAN’T WIN. DO A GREAT JOB, SIR, RUNNING OUR COUNTRY. MAKE AMERICA GREAT AGAIN!’”

Journalist Aaron Rupar used a common meme often used to respond to unreasonably long posts. “I ain’t reading all that,” he commented. “I’m happy for u tho. Or sorry that happened.” Conservative lawyer George Conway wrote: “A severely mentally ill man has control of the launch codes for America’s nuclear arsenal, but it doesn’t seem that many people care.”

Almost 450 words evidently weren’t enough. At 4:54 he reiterated the themes of the long post in a shorter one, then a minute later, accused “the Dumocrats” of being communists. A minute after that, he claimed: “The Radical Left Lunatics, often referred to as Dumocrats, have lost control of their Party.”

Apparently, media criticism still stung. At 5:27, Trump took on reports of the high cost of his damaging renovations in Washington, D.C. Posting photos of what he said was “the horrible front of the White House,” he continued: “The Radical Left Dumocrats criticize me for spending so much time bringing our White House back to the Glory of 100 years ago—Actually, it will be far better than that, and they will not shame us for bringing our Great and Brilliant Monuments to the past and the future back to levels never seen before. This is what we are doing all over Washington, D.C., and, in different ways, with our Country, itself!”

But his confidence that American voters will support Republicans in the 2026 elections is shaky enough that he continues to call for the Senate to rig them. At 6:07 he reposted what purported to be a poll from right-wing loyalist Senator Mike Lee (R-UT) claiming that 97.2% of supporters want the Senate to take up the voter suppression SAVE America Act when it goes back into session next week, while only 2.8% want the Senate to take up “Anything else.”

Meanwhile, on Friday a Pentagon official told Rebecca Turco of WJLA 7News in Washington, D.C., that National Guard troops will stay activated in Washington through Inauguration Day 2029 “until law and order are fully restored in our Nation’s Capital.”

“So,” Bill Kristol of The Bulwark commented. “[M]ilitary troops under the direct control of Trump and Hegseth will be on the streets of our nation’s capital for the rest of Trump’s term. The rationale—they’re here to help with a crime emergency—is laughable. But of course the real reason is ominous.”