Big Technology Podcast - Andrew Ross Sorkin on Meme Stocks, Bitcoin, SPACs, and Elon Musk

Episode Date: June 16, 2021

Andrew Ross Sorkin is the co-anchor of Squawk Box on CNBC, founder and editor of Dealbook at the New York Times, and the author of Too Big To Fail. He joins Big Technology Podcast to discuss the wild state of the market, the rise of meme stocks, the promise and drawbacks of bitcoin, SPACs, Big Tech antitrust, Elon Musk, and when the party will come to an end. Tune in for a wide-ranging interview about the world's most pressing financial and tech issues. Buy Andrew's book: https://amzn.to/3zFPTXp The Michael Lewis article Andrew references: https://www.nytimes.com/2001/02/25/magazine/jonathan-lebed-s-extracurricular-activities.html?referringSource=articleShare

Hello and welcome to the big technology podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. We are ready to talk meme stocks, Spacks, Bitcoin, and all that jazz. Because our guest today is Andrew Ross Zorkin. He's the co-anchor of Squackbox on CNBC, the founder and editor of Deal Book at the New York Times, and the author of Too Big to Fail, which might have some good lessons for our time today. He's the perfect person to help us make sense of this moment. Andrew, welcome to the show. Thank you for having me.

I am a longtime fan and listener first time on the show. So thank you. It's great to have you on and the feelings are mutual for sure. So I'd love to start open-ended, just talking about the economy in general. So it seems to me right now that the market is crazy and you watch this stuff every day. and it seems totally absurd. So what's your sense of, you know, the market's rationality or lack thereof right now? What's happening here?

Okay. So, well, we have to break apart what we're describing as the market for a second. You know, I was going to start telling you, like, I'm here to deliver a message on behalf of the meme stockers. But like that's. Okay. Okay, so wait for the second second. But you just said it. There's one part of the market that is this meme stock driven explosion.

And that is something, I think, unto itself. Then there is the market, if you, the sort of market excluding all of that. And then there is this thing we'll call the real economy over here. They're all potentially interrelated or you'd like to think. The stock market unto itself, again, meme stop excluded for a second, I think is, I don't know if it's fairly valued. Maybe it's a little bit over at skis. There's lots of excitement still about where we are. But you're even starting to see what they call the great rotations, people moving in and out of technology into travel because they think everyone's going to travel again

and all sorts of, like that seems at least rational what's happening. And we can debate about whether there's going to be more infrastructure spending or what the Federal Reserve is going to do. But what's really caught everybody's excitement are the meme stocks. You know, the AMC apes and the GameStop hysteria. And don't forget Bedbath and Beyond or some of the others that are completely and utterly divorced from reality, Alex. Yeah. You know, it's a bunch of people who have an idea, I don't think that the idea is about fundamental investing. It's about demonstrating that they can push up the price of a stock. I hate to use the word manipulation and people will get very angry if you put it in this sort of context, but I think there's a group

of people who would like to press the price of a stock up and you're seeing it in this sort of very unique social media enabled, you know, mobilized moment. And I think that's, that's what's happening. And some of those people are doing it because they actually believe in the stock. Most of them are doing it to sort of prove something. Other people are doing it hopefully just to make a lot of money because they think they can sort of ride a wave. So there's a lot of elements to this. Right. And so let's get right into the mean stock thing. So the argument that people make to say this is totally normal is that all stocks are traded on momentum and stories. And so what if a GameStop or what if an AMC is traded on a story and people just get mad when

it's, you know, the common person doing it versus, you know, traditional investors that are doing it. What do you think about that argument? I don't, I don't buy it. I just don't buy it. And it's not because I, you know, first of all, I would love the quote-unquote little guy, I even hate that phrase, to do, you know, to be wildly successful and to beat the man. I would love that. I'm not even sure that's what's even happening here. But there is, I think, a distinction between what's happening in this, in the sort of meme stock era and the sort of, frankly, blatant manipulation that happens to the extent we're going to call it manipulation that

happens in the market via institutional investors. And the biggest distinction I'd make is that one group, the professional investor, typically kind of knows what they're doing. They understand it and they understand the risks of it. If you spend enough time on Reddit, and for better or worse, I do, there are a lot of people that don't really understand what's going on at all

and there's a lot of misinformation there's a lot of disinformation there's a lot of people who don't even believe information that's factual in front of them I mean this is sort of almost financial this financial moment's almost

become politicized in certain ways and some of the things that we've seen in politics over the last four or five years, it's sort of come to the market. And so I worry about that. And I worry about the people who have, frankly, a lot to lose. And that's why we've always, as an industry in the media, but hopefully the laws and regulations that are in place have always been about trying to protect. the smaller investor. Now, what's so unique about this moment is that a lot of those smaller

investors are saying, no, no, no, those laws, you sork in the media, they don't protect us at all. In fact, you're not protecting us. You're protecting the man. You're protecting the establishment. You're protecting the big guy with all of those laws. And you're preventing us from having the opportunity to make money. And to some degree, they're probably right. They've actually hit on something. Some of those rules and laws and maybe even the way we approach it do prevent some of them from buying some of those lottery tickets and winning. But I think, or at least I want to think, unless my head is not screwed on straight and I've got this totally wrong, I think it's also about protecting them on the downside. And it's almost impossible to

believe that the downside won't come. Yeah, your mentions must be a pretty pleasant place when you speak about this stuff. Oh, goodness. Yes. I'm a suit and much worse than that. Oh, yeah. I've been on the receiving end, too. It's not pleasant. So, but it is good to actually go up there and start speaking about this stuff because it is easy to sort of get caught right in the story. And it's tough to step out and say, hey, what is this going to mean? The other counterpoint that, you know, of folks who would be the pro meme stock group would have would be that GameStop has actually stayed pretty high. I've been surprised at how high it stayed.

Who knows if AMC is going to drop, given the current levels. So maybe the joke really is on the short sellers. Well, look, maybe it is. Maybe it really is. And you're right. Look, there are people who believe that Ryan Cohen, who's now been installed as the chairman and the new team, most of whom come from Amazon, are going to reinvent the company. And maybe this is like a venture capital bet that these folks are going to somehow totally reinvent this thing

in ways that we don't even know. Whatever they would do to get to the price that we're at now would obviously have to, it would almost have to be a completely different business. It would have to be transformed into something that looks almost nothing like what it is today. And maybe that's possible. Now, historically, public market investors have not made those types of bets before. That's the place where historically venture capital has made those kinds of bets, or maybe private equity has made a sort of a turnaround bet. And maybe the argument in this case is, look, those kind of bets happen in these private areas where typically the public can't participate. We want to participate. So I get it. I get it. And there's an element of it, which I admire greatly. But there's also a piece of it that I think is at minimum nerve-wracking. And I do one other thing. I think there's a distinction between what you're seeing GameStop. Like I don't want to say I see it, but I understand it. Even on the sort of fundamental level or on a fundamental basis, not because today's fundamentals, meaning,

anything, but I could see the bet you'd make in that regard. AMC, for example, though, I think is a completely different, um, how so? Because they're not sticking it to the shorts. It's just all speculation. Well, it's, it may very well be sticking to the shorts, but I think that the, look, you look at the secular trends in the, in the, in the, in the theater business, in the film business, before we had the pandemic, and then you have to, and are we going to believe that some somehow the secular trends are going to be even, are going the opposite direction after the pandemic? I don't think anyone's making that argument. Nobody's making the argument that Adam Aaron, who's the CEO of AMC, is planning to somehow magically transform the company. He's not saying

he's going to transform the company, right? This isn't, I mean, whether Ryan Cohen. He's playing right into it. Yeah, well, whether Ryan Cohen will, will transform the company or not, he sort of represents this sort of sun god that's going to come in and do something different. Adam Aaron's not claiming he's going to do anything different. In fact, the only thing that Adam is doing is to some degree. And I also admire this, though I think that creates all sorts of questions. Yeah, he's winking at the at the, retail investors and saying, keep on going. Keep on going. And by the way, at the same time, and I don't want to say he's taking advantage to them, but if they're taking advantage, he's taking advantage by selling shares to them at prices

that I think he knows full well are vastly overvalued. And so he's taking that money. using it hopefully to pay down debt and maybe put the company in at least a better position to not fail, but is they putting it in a better position to have, you know, great shoot the moon success? I'm not, I'm not sure that's, that's his plan. Yeah, so where does this go? Does every CEO all of a sudden need to have like a meme strategy where, you know, they make, do an AMA on Wall Street bets and try to, you know, corral all these retail investors? You know, I think there's a whole world of CEOs who say, oh, my God, could this happen? How's this going to work?

In some respects, there's an argument you made this can't really happen to every company out there and especially massive, large companies. I mean, it would be very hard for a retail base of investors to move the stock of an Apple or a Walmart or an Amazon in this kind of way. What made these things attractive was both the short interest, I don't want to say the small amount of volume, but these were smaller companies. By the way, now they're big, big multi, tens of billions of dollar value companies. So it's possible at some level this can happen. I don't want to say that nobody's susceptible, but I think there's sort of a range of kind of company with a kind of valuation.

a kind of perspective around these issues around what the short interest is the like for something like this to happen and be attractive to this group. Yeah, but big stocks can also be a story company. I mean, I started to think about this and I don't think it happens unless you start to have some of the stock market unhinged from the fundamentals to begin with. Right. And that's when I start to think about Tesla, which is a real story stock. Yes.

So, but I don't, I guess Elon can do it on a scale because he's Elon, but it will be more difficult for other companies to do that. But no, and look, but that's the argument. I mean, I think a lot of people would say, look, look at Tesla. That was a story stock and people believed and look at where it is now. And so why can't that be AMC? Why can't you will, why can't you will the valuation, not just the valuation, but the success of a company into being simply by getting behind it and getting behind it.

and getting behind its stock and effectively giving them the opportunity to raise so much money that they can do these things. That is possible. By the way, there's an intersection here probably with crypto, which is to say that, you know, had people, but had people not decide, some people thought, like, would Bitcoin succeed? That was a bit of a belief system. It is a belief system. And 11 years later, people still believe. So yes, if people will decide they're going to believe an AMC for the next hundred years and they decide they want to keep giving Adam Aaron money. Maybe this can end spectacularly. Yeah.

So let's think about what's going to happen next because you've said that either this type of manipulation or whatever you want to call it is going to be regulated or they're going to prove that the whole system is broken and cause some lasting changes. Right. So what could that look like? Right. There's two possibilities, probably relatively binary. One is that Gary Gensler at the SEC decides that he's going to crack down, for lack of a better word or phrase, on this kind of trading.

Either he's going to regulate what can be said on social media platforms about stocks, whether he's going to try to prosecute some of the people that have been involved in these things. online. I don't know if that's a good case or bad case. I don't think, by the way, it would be a particularly popular case to be made. But, you know, could you find email, you know, could you subpoena some of these individuals, emails, have them talking about how they don't believe the stock is worth anything and that they're trying to manipulate the price to push it higher and they actually like say that in email? And could you bring a case against them and make an example of them? Yes, you could. And then how would that change the dynamic? Would it for Reddit and other social media sites to put in different procedures and things, maybe in

the same way that you're seeing Facebook and others try to deal with misinformation or disinformation in the world of politics. I mean, that's what could get interesting on one side of things. The other side of things is if they really succeed, they could effectively break the markets as we know them. I mean, one of the things is so interesting is if you own the Russell 2000, which is an index, passive index. It's actually doing quite well, almost spectacularly so. Why? Because AMC and GameStop are part of it. And so you could start to do things to the market that divorce it from reality. And I don't know where that ultimately goes. But again, by the way, at some point everything's not going to go to the sky. Something will go wrong. And

when things go wrong, lots of things typically go wrong. So that's when I think the divorcing of everything will come into play. Yeah. I think it would be also tough for the SEC to start cracking down on this in particular, even if there are people that are manipulating on the back end, because they will face this backlash. And they've been so ineffective elsewhere. Like the Elon Mustang, for instance, It's like when Elon can tweet SEC stands for, you know, a three-letter acronym and the E is Elon's, and they can't do anything to him. But so that's a great question, though. Well, I think there's two issues. One is Gary Gensler is a different person than Jay Clayton, who's the former chair of the SEC.

Gary's just got into this role. And I think he's going to want to put his stamp on this agency and make a mark. I do. And so I just, I don't think that we, I think it's almost impossible to believe that he would have done something already in any kind of real way. I'd also remind your listeners, and it's such a fabulous story if you can go back and Google it and find it. Michael Lewis wrote a piece probably 20 years ago.

This is after the dot-com bubble burst about an 18-year-old kid that the SEC had actually prosecuted. Or I should say sued because it's not a criminal case for effectively manipulation using chat boards and the like to push stocks. And they won. And so you should go back and find the article. It is, I mean, Michael Lewis, like everything he does is, you know, is perfect. But it's a great article, but it really gets at this issue. And so could he, could he go after some individuals? I wouldn't be surprised if he weren't. And I wouldn't be surprised if he even went after an Elon Musk.

I wouldn't be surprised if he tried to go after some of the people, some of the higher profile people involved in SPACs just to make a point. Yeah. Well, it'll be interesting. I mean, the order of operations on that is going to be important. Right. Because if you go only after like the folks involved in this retail trade, and I know there's lots of implications.

there. And you leave Elon and you leave the spec guys alone. You could have a problem on your hands. So bingo. Let's talk a little bit about another speculative asset, although I'm going to get in trouble for saying that, Bitcoin. So when I hear you talk about Bitcoin, you seem somewhat amused, pretty skeptical. Obviously, the price over the last couple of months has gone wild, you know, up to around 60,000, down to 30,000, back up again, down again. Where do you think the freight train's heading on that front. On the price, I have no idea. I mean, I think there's now a considerable group of people who believe in the idea of Bitcoin. I've been fascinated by Bitcoin probably since about 2000. I think I met, I'm trying to think I met Brian Armstrong, who I remember trying

to convince me of Bitcoin's benefits. Had I listened to him, I'd probably be in a different profession right now back then. Did you buy? I did not. I did not. I did not buy Bitcoin. You like to ask us, you know, whether they own. Do you own Bitcoin? It's a great question. I do not own Bitcoin. And I will also say, as a journalist, I was always skeptical of whether I should or could.

I don't own stocks, as you probably know, because that's a policy that we've long had. And because of the information that oftentimes I'm privy to, sometimes in the reporting process. So, you know, I own mutual funds and things like that. that, but nothing beyond that. And I always didn't know, is Bitcoin count as a currency? How would we think about it's so strange in terms of what it actually is. It's funny because my kids now, but now that it's become sort of a mainstream thing, and might even be a bit of a currency, maybe I'd feel more comfortable owning it.

I don't know. My kids, I have two 10-year-old boys and a 4-year-old. But the 10-year-olds are trying to design NFTs. and to also buy NFTs, not, I mean, for like $4. But they need a million. Right, not the people, but they need Ethereum, which would be that we, so we need to get a wallet for them so they would have a theorem. So this is all of a sudden very interesting.

Can you really own a theory? It's getting complicated quickly. Yeah. I like how you asked Francis Suarez, the mayor of Miami, a former guest at the show. whether he owns and he said yes and i thought there were two really interesting things about his answer first of all he's like the bitcoin mayor and he bought in mid to high 30s so he's probably underwater right now on bitcoin and second he flat out said the reason why he bought was because he bought it as a hedge against inflation which was so fascinating to me that an elected representative

i mean a mayor of a major u.s city was basically like our currency is going to inflate i need something else? What did you think when you heard that? I thought that was the right thing to say. If you're the mayor of Miami and you're trying to become the mayor of the crypto capital, if it becomes a crypto capital, I think that he said the words you were supposed to say, I imagine he bought it because he wanted to play with it. I think he imagined he bought it so he could say that he had bought some and believed in it in the same way that he's trying to do this for the city. I have been somewhat skeptical of the argument around inflation.

I think inflation is real, by the way, but around sort of whether Bitcoin becomes the standard. It may, it may not. To me, the whole thing is so hard to figure out, and maybe that makes me too skeptical of it. I think it could have some success. I just don't know if it's really going to turn into a currency. I don't know what happens when there is regulation.

you know, for the first time, we just learned that there's a couple of companies that are going to start working on 401K plans to allow you to put crypto into them. I think all of a sudden that's going to force the issue for regulators to figure out what they're going to do. People betting their retirement on this stuff. So, and once you get there, okay, so now are you going to say there has to be a know-your customer, what's called the KYC policy around Bitcoin, anti-money laundering implementations in the same way that banks have? If you're going to say, actually do that, then what does it do to Bitcoin? You can't have a private wallet. You can't all of the benefits of Bitcoin sort of disappear very quickly. So I think there's that. I also wonder

about the environmental piece of it. And I know there's lots of people who are now arguing that somehow it's going to be an improvement for the environment over time. The water is pretty muddy on that front. Look, I think long term, we will figure out how to mine Bitcoin and also just create electricity, of course, hopefully more cleanly. That will happen. But if you were going to create a new currency in this day and age today, you would think you would try to deal with how much electricity uses, whether it has K-Y, you know, know, know your customer information, except, but that's the virtue of it, by the way.

Some people say that's the virtue. It takes a lot of electricity. That makes it, creates value, gives it, it abuse it with value. and, of course, the fact that it's anonymous also imbues it with value. So, yeah. And, you know, talking about the inflation stuff, I don't agree with, you know, Francis Suarez that it is a good check on inflation. But I also, my perspective on why it's increased so much,

I'm curious what you think about this, is that money has become somewhat meaningless to lots of folks recently. I mean, of course, I think there's a lot of money floating around. I think it's stimulus money that's floating around. Yeah. I think the Federal Reserve being as low as it is. Look, you know, you have Michael Saylor at MicroStrategy. He's now effectively raising money from public investors in taking out loans.

This is like a, his company's turned into a leveraged, basically a leveraged Bitcoin fund is effectively what it is. And people are willing to loan him money to go buy Bitcoin. That's what's happened. It's extraordinary. So, yeah, I think it feels like a house of cards. There's a lot of money floating around. And the question is when the music stops and the music will stop, is Bitcoin somehow completely not correlated to everything else?

I have a hard time believing that. But there's clearly a lot of people who, you know, spent time in the month of June in Miami, who believe it. That's right. Yeah, I think the Bitcoin Miami emails have finally tailed off in my inbox. I don't know about yours. I'm so getting some and I A lot

Yeah When does the music stop? I mean, is it when the Fed raises the rate in some way Or how does this sort of party come to it? Not just Bitcoin, but economy overall. So the only lesson I feel like I learned Writing Too Big to Fail and

you know, reporting around that crisis And now really trying to understand financial crisis as a phenomenon is Every financial crisis is really only a function of one thing. It's too much debt. It's too much credit leverage in the system. You can have as many bad actors as you want on the stage, doing as many bad things on the stage as you could imagine.

So if you think that the SPAC people are being irresponsible and you think that the SEC is not minding the store, and you name your, you can name whatever you think is bad, it doesn't really matter. unless there's too much leverage in the system. And so the question is where that leverage is today? It's not at the banks. And so the question is, is it somehow levered into crypto?

This quote-unquote shadow banking system, is that where the leverage is? Clearly, one of the big places the leverage has moved is, you know, even the phrase too big to fail. Back in 2008, we talked about in the context of banks. Today, we talk about, you know, cities, municipalities, states, countries that are too big to fail. I mean, think about the amount of debt that we took on even during the pandemic in the United States, let alone every other country in the world. So that's what I really worry about long term. What do you think is going to be the implications of taking on all that debt?

I mean, we did, what, $6 trillion in stimulus in a year? Well, unlike, I mean, so the benefit of a government taking on that kind of debt, on like a company or a bank is you can keep printing money. But as you keep printing money, you devalue your currency and you have inflation. So that's, I think, what ultimately happens. The question is if every other country is doing the same thing at the same time, you could argue maybe it doesn't matter. And I think that's sort of the MMT theory of life.

I wish I knew the answer. Yeah. To bring it full circle, it does seem. you know, you think about the way that all this is going. And it does seem like it's the actual, you know, quote-unquote little person that ends up getting hurt. It seems like it's a great time to be in the money and in the right places. Oh, goodness.

If you can own assets, if you own property, if you own stocks, if you can just own anything right now, at least it appears that that is the winning ticket at the moment. And if you're renting, it is, it is, is probably, I mean, there may be some renting and a wage worker. Yeah. And a wage worker. It's a hard, it's a hard place to be. It's a very, very hard place to be.

We've seen that. And we've seen in the movie. It keeps, you know, the divergence keeps getting worse. Yeah. And I worry what's going to happen to the country because you will have like a very distinct, we already had a distinct set of winners and losers. And now we're going to have a much more distinct set of them. And I think it'll then play into the politics, and it's going to get very, you know, completely. Yeah.

Okay. Let's talk about something more uplifting specs. Yep. I really had just one question written down about specs. Okay. Legit or scam? What does your take on it? So these are blink check companies that investors will raise lots of money for and then invest

in a company that they want to take over just for listeners. But so go ahead. It's okay. The answer is actually it's not binary. I actually think SPACs will be around for a very, very long. time. I think there'll be a feature of the market. And by the way, they were a feature of the market for years. They were just sort of a dark sort of corner. And people did think they were somewhat shady. I think that this sort of SPAC phenomenon we're seeing is probably going to be

long term, actually a good thing for SPACs insofar as they're going to create more regulations and other policies and better practices around these things so that they're not effectively backdoor ways for companies to go public that shouldn't be public. I mean, that's the issue. Right now, it's a backdoor, it's oftentimes a backdoor way for a company that has no business being public to be public without going through the sort of rigorous process of an IPO. That's, I think, the issue. Pushed by, quote, unquote, sponsors who really have no interest in actually hanging around the hoop at all and actually investing in the company, but, you know, making a quick buck. That's the problem. I think longer term, you're going to find more SPACs with more

reputable sponsors or, and that's going to say that the current sponsors aren't reputable. There's some that are and some that aren't that will have more attractive pricing and more attractive transparency around what they're doing. And then it will become just another sort of way for companies to go public. But I don't think we will look at it as a scant as we are now. And I think we're looking askance today rightly. Yeah. It's a kind of an inside baseball question. But did you redo his story on Spax and Chamon? On Chamath? I did. I did. I thought, uh, I worked with Charles for many, many years. He's a great writer. I thought he did a great job with the piece. Um, I think Chamath's a, uh, interesting, fascinating, complicated, uh,

brilliant guy, um, who I think. think has skated, you know, but skates close to the edge, no question. And I think 20 years from now, he will get credit as the SPAC King. I think he will get credit, but the question is whether that will be good credit or bad credit. And I don't know. That's the label you want. No, no, and I'm not sure what the, I'm not sure what the answer will be. You know, I only say that because I think if you're, as we were talking about before, if you're a Gary Gensler and you're trying to make your mark, and you look at the SPAC market and you think that it is not being done above board, you know, a lot of these SPACs are presented in, you know, in the best light always.

And I'm sure that if you subpoenaed the emails, you would find lots of people of these sponsors, maybe the Chimoths of the world and people like Chimoth who are emailing each other. And clearly they have projections that are not great and projections that are great. And if you go out and make only great projections, but you don't acknowledge the other projections, you know, is that a good case to bring? Maybe it is. I don't know. But I think that that's the kind of thing that you could see.

All these things that we've talked about, meme stocks, Bitcoin, SPACs, I like the way that they work in theory. They are a way for the everyday person to get in on, for instance, the value of the IPO or, you know, a rising currency or a momentum stock before the institution. investors get in there. So I like what you're saying. I look, I love the idea of democratizing finance. What I find so strange. What I find so strange is the people who say they're trying to democratize finance seem to do such a lousy job of actually trying to protect the people that they say they're democratizing it for. So I would feel totally differently about SPACs if the SPAC sponsors were out there saying, look, we want to give you an early opportunity to get in now. But here are really all of the issues and problems and conflicts and everything else that are involved in it in a very easy to digest way.

Why don't they do that? For obvious reasons, they don't do that. Half of its drift. Yeah. Right. But I think that's it, but that's the issue. I think that there's a lot of these things. Same thing with the meme stocks.

You know, I would love if the people who were really out there promoting this stuff on Reddit didn't just explain what. they were doing, but said, here are the risks. I don't know what's going to happen here. This is a theory, and you don't see that. I think Robin Hood, by the way, has done a tremendous job of creating a product that people want to use. But most of them, unfortunately, even though they're in the terms of service, don't understand that there's this payment for order flow issue that effectively some of the money that they're uh that they could be making effectively is getting paid out to to other financial firms and that's how robin hood is getting paid so that's that's that's sort of my if i have a it's i mean i guess journalists are supposed to be

professional skeptics but that's that's where my skepticism lies yeah and i think it's all fair skepticism all the stuff's nice in theory we probably need some rulemaking in order to make sure that people can really share in the wealth and, you know, don't end up getting hammered by the downside. And look, I hope everybody does really well. That would be great outcome. Yeah. Okay, let's take a quick break and talk about big tech antitrust, one of our favorite discussion topics when we come back. Hey, everyone. Let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than two million professionals read The Hustle's daily email for its irreververbal,

and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So, search for The Hustle Daily Show and your favorite podcast app, like the one you're using right now. And we're back here for the second half of the big technology podcast. Our guest is Andrew Ross Sorkin.

Okay, we're going to talk about big tech antitrust. This is one of our favorite issues to discuss slash debate. So why don't we jump right into it? First, I want to hear your personal story. I saw you hint at it on Twitter, and I want to hear the full deal. So your father was an antitrust litigator. That's what he did. That's what he did for a living.

So you grew up talking about antitrust cases around the dinner table. Tell us more about that. All day long. So my father was an antitrust lawyer in New York City. Yeah, yeah. And that's what we talked about. We talked about whether mergers should go through or not, how to define a market. We talked about dumping cases when foreign companies were, you know, argue we dumping products in the United States at lower prices.

That's an end up trust issue. And that's it. I loved it, frankly. And we had debates on Microsoft for years. You know, should the browser be connected? Should it not be connected? Who said were you on? Oh, I went back and forth.

There was certain evidence that was presented. I was a believer at one point. I do remember thinking it was an ecosystem and actually that the ecosystem mattered. So I remember going back and forth about that with him a lot. But those were, we've, anyway, I love a great antitrust debate. So let's go for it. Right. Okay. So Apple. Yes. You don't think Apple is a monopoly. I don't think Apple is a monopoly in the way it's being argued in the construct of the epic case clearly. And probably more broadly, I don't think it's a monopoly either yet. Remember, there's two pieces. One is the other thing I remember learning as a child is,

being a monopoly unto itself is actually not illegal. It's the maintenance of a monopoly. I don't think that people really know that. Yeah. They say, oh, it's a monopoly, therefore it's illegal. It's what you did to either become a monopoly or to, quote, unquote, maintain the monopoly, as you just said. And so, you know, in the context of the Epic case, for example. Right.

And just for context, Epic is the maker, Fortnite, Fortnite sued Apple. sorry, Epic suit Apple because Apple was charging this 30% tax on top of the money that people were paying to upgrade on Fortnite and didn't like it, got kicked off the App Store. But Fortnite does exist in many different places, not just the App Store, but on computers and actually most of its businesses are, is outside the app store. So to me, the lesson I learned my father many years ago is when you think about any type of antitrust suit, you first have to think about the market. What is the market?

So in the context of Epic suing Apple, I've never thought that they had a great case. I thought that there were other companies that could probably bring a stronger case because most of Epic's market, if you will, doesn't even exist on the phone. That's not where the majority of the people are even playing Fortnite. They're playing it on consoles. They're playing it on computers. They're playing in other places. So arguing that Apple is somehow a monopoly.

It's doing some disservice to them. I think once you sort of define the market and say that they're not a monopoly in the context of Epic, everything else goes out the window. And, you know, there was lots of, look, there are lots of things that came up during that trial because I listened to it every day on YouTube. I was fascinated by it. And there were some very unattractive facts that were brought forward for Apple's purposes, not necessarily in relation to Epic, but about sort of how they keep a walled guard. and what they're trying to do, all of that. And I'm not going to, I wouldn't sit here to defend Apple in that regard. I would just say in the context of the epic case, I think it's a very tall, tall hill to climb to win that case.

I also think it's very hard, even more broadly, to claim that the app store unto itself is, monopolistic in so far as it's very hard to say that Walmart is a monopoly. You know, if you have your own store, what you sell in it, you know, you typically don't have to open up your store to others. That's a very unusual sort of thing to ask for. And I've always been surprised in a way by the resistance from, I understand why developers would like more money, lower fees, no question. But, you know, this isn't like a false inducement case. So there are, there's called, there, there are cases where a company, a store might say,

please make a product for us, and we will give you a certain percentage of the sale, or we'll take a certain percentage of the sale. And they bring you in at, you know, at 5%. And then 12 months later, they jack the price. on you, right? That would be a problem because you've built a product for a specific thing and then they've changed the terms on you. In fact, at Apple, the terms have actually only gotten better, right? They've, first of all, they've either been in 30 percent or in some cases they've since come down. So it's not like everybody who was developing for Apple didn't know

what the arrangement is. It's a little, and people forget that every product, every developer is developing for Apple. It's a little bit like if you were an automaker and an auto supply maker, you know, you said that we're looking for steering wheels for this car and you will make the steering wheel for this car. And then the steering wheel, the auto supply maker decides to make a steering wheel for this car and then decides they don't like the deal. But okay, it is, it is a little different than that.

I'm not so sure. Because you're talking about like the, the, I mean, the way to get to people, people using phones. Like, that's become the Internet in a lot, in a large part. So that is actually, to me, the most interesting piece of this. At some point, you can just make a public policy argument, which is a case that the government would have to bring, I think not an individual company.

The government could bring. And it really is a public policy issue, which is to say, at some point, do you decide that it's somehow bad for the economy, for a company to be of a certain size and scale. I'll give you a great, by the way, example of this. So after the baby bells, after the bells are broken up, this is in, I believe, late 70s, early 80s,

there was a fascinating case where there were third-party companies that made telephones, like the physical telephones, and they weren't allowed to connect into the baby bells networks. it was called it was an interchange business because the babybell said you have to use our physical phones on the network

and a lot of those third party companies sued and they lost individually but then the government brought a case and they won and so I think that that's to me the sort of larger piece of it

and again there is a sort of public policy question and I don't know the answer but I also don't know if you broke it up or I'm not sure what the what the solution would be because I do think that the reason why you buy an iPhone the reason I buy an iPhone is because I like it the way it is. I do actually. I don't think I'd be happy if it was the Wild West. Otherwise I'd buy an Android. True. That definitely has something to do with it. It's also they get you locked in on the ecosystem. So if you started using an iPhone before Android's were good, you're kind of stuck there. Now you're going to break all your group messages

if you go Android and it'll appear as a snot green bubble. I also think, by the way, that what people don't appreciate is, what do you think the implication would be if they won? Let's say there was now multiple app stores in the iPhone. Yeah. What happens? It just means that the hardware will get more expensive. Okay. That's a good point. That's what it'll get passed on to you. So that's why I think there's some interesting sort of dynamics that are often not thought about thoroughly in the public policy. Do you think Apple could raise the iPhone price and still sell the same amount as they are? I mean, it's pretty high right now. Could they go to $1,500 and sell the same amount? Or does that make switching become more appealing to people, given that

Android's really improved? Like, there's got to be a ceiling for them in terms of the way that they raise their prices. So I've always thought there would be a ceiling for them. And then look at us. Hasn't it surprised you? This goes back to meme stocks a little bit. Like, the world is a little bit divorced from what you might think is completely realistic. Totally. Look, maybe for, you know, the highest end phone, I think there will come up on a top, I would imagine. But I also think they could probably manage to create, not cheaper phones, but sort of more middle-tier phones and build a premium effectively into that.

Yeah, also the whole reason why they're so admin about this stuff is because they realize people are going to hang on to their phones for longer. It used to be they'd upgrade every year, every other year. Now, you could hold onto a phone for four or five years and not suffer too badly for it. So they need that Abstero revenue in order to be able to justify their $2 trillion valuation, even in our non-realistic fault. Right. But by the way, you could also decide from a public policy perspective that it doesn't matter that Apple has a $2 trillion valuation. So that shouldn't be part at the calculus. The question is, if there was a lower price, would that, you know, where would the value go? That's the other question, by the way, I think, which is to say, would that

value really get spread out? Would it just go to those other companies? Is that a better answer anyway? And I don't know the answer. Right. Let me ask you this. So, I mean, we talked a little bit about that 30% tax. Right. Do you think Apple should be able to prohibit app developers from telling people, they can go pay for services for less money on the web, for instance. So if you want to upgrade your Spotify or something or go buy upgrades, and Fortnite can, should Fortnite be able to tell you, you can go to the web and buy this upgrade for less, or is Apple in its rights to prevent people from doing that? Because that seems to be the thing that they're going to. Now you've got me in a very tough one because I'm a total free speech believer.

and you know I think that people should be able to say whatever they want. Right. Yeah. But I also recognize that the business model sort of comes undone effectively. Yeah. If everything sort of goes off-piece, if you will. So I don't know. I don't know. Yeah. Well, I'll make it easy for you because I just got to look at some of the draft bills that they're circulating in Congress. You know, you talk about, you mentioned earlier.

Maybe this is a government solution. And there's five of them. And one of them explicitly prohibits companies from telling people who are using their services that they can. Wait, basically, let me see if I can phrase it right. It explicitly prohibits companies from preventing app developers from telling their users they can get the services cheaper elsewhere, which I thought was fascinating. And I've always been, and I think we've talked about this in the past, like I've always been pretty skeptical that the U.S. government is going to do anything to these companies, because they've proven themselves so ineffective time after time. But looking at these

bills today and seeing the momentum that's come out of Cecilene's committee and the House judiciary, it seems like that might be changing. They're starting to fund the regulators. They're writing these bills that are focused. Like another one of the things that they were talking about was that companies will no longer be able to use like third party data that they get from developers and use that to privilege their own products. And up until now, that was largely like Amazon wasn't going to do that because they needed merchants, not because it was against the law. It was sort of like, you know, assumed good faith. And then when they asked Bezos about it, he was like, yeah, maybe we actually do do this a lot. And but now they're

starting to put that into legislation. And who knows if it will pass. But it does seem like the government is much more serious about doing something to these companies than it ever has before. Totally. I, I, what do you, what do you make of that? Yeah. I think they will do something. I just don't know how far it'll go and how big of an impact it will have. Do you remember? And I got to go back and look the result. There was a case against American Express because they had a terms, terms of service for merchants that were not allowed to say that you could, you couldn't offer a better price. If you accepted American Express, you could not offer a better price to, uh, to, MasterCard users or Visa users, and you could not advertise that, ostensibly the idea was there was a higher transaction fee with American Express. I believe, and I gotta go back and look at this,

American Express, I thought, originally lost the case and then maybe one afterwards on appeal. Unless my memory is not capturing that right. I have a computer in front of this and maybe we'll look while we're talking. But, you know, it's fascinating. So let me ask you this as you search for that.

Sorry. No, no worries. So can you see one company that starts to be like, I mean, I know we have cases against Facebook and Google from the FTC and DOJ. And then investigations going on with Apple and Amazon and those two regulatory agencies. What's your gut? Like, what do you think? Do you think that these companies are going to be broken up? Do you think that it's just like these laws are passed or, you know, or is it?

Well, I think it'll be company by company. I think it'll be very hard. Look, I think it'll be very hard for America Express. I think it'll be very hard for Amazon, for example. I think some of the things that we've read over the years around what's happened with some of the third-party merchants and building product on top, you know, effectively to compete with them and using some of that data. I think there's going to be rules, regulation, and enforcement around that that's going to make that kind of thing. very difficult. Do I think that Amazon unto itself is going to get broken up? I'd be very hard pressed to see that really happen. Yeah. It's tough to do also. Very tough to. Do I think Facebook will

ultimately get broken up? No, I don't. And part of that is because the other element of this, and this is the thing that I do believe, even though I know we think there's no competition, I mean, if I had said, Alex, to you, if I had just looked at you and said TikTok, yeah like three years ago you would have looked at your watch it's true right like that's what would have happened yeah and so if you go look at the top 20 largest companies in america 30 years ago and you look at the top 20 large companies in america today like they're pretty much all different they really are and then of course the question is 30 years from now will they be again and and that is the fundamental question but i am i am a believer in innovation

Yeah, I am. I think we all know that AMC and GameStop will be the top two companies in the economy. As given how much money is going to be thrown at them, and you, so Tesla is going to be number three? Is that what you're saying? Depending on if you're in jail or not. Ooh, wow. That you see, the gloves just came off at the end of the podcast. That's right.

Do you really think he's going to jail? No, probably not. But you never know with that guy. He's unpredictable. for what though I don't know I mean I don't think he's going to go to jail

for financial crimes interesting hmm I'm one of those believers and I can't claim to have made up this phrase it might have been like Jason Calcanus

or someone like who said you know betting against Elon is like betting against humanity and I kind of I kind of believe that I don't agree with everything that Elon does at all and I think he's done

lots of things that I've just frankly disagree with. But I think I marvel. I do marvel at what he's what he's yeah. Look, to do. Yeah, I give him credit. I mean, especially the stuff he's done with Tesla and SpaceX. I mean, I've been newly fascinated with this whole space race that's going on between him and Bezos. And I think the fact that both of them are in it is going to make it even more exciting because never bet against a billionaire's ego. And these two guys have egos, you know, the size of the planet and they're going to put everything they have into one up and the other. But is all of their wealth going to be taxed such that they won't be able to do this?

Oh, what do you think is going to happen? Because, I mean, I guess like that's another big thing that they're talking about this 40% capital gains tax. Well, last thing, before you answer that, I'll just say, I wouldn't bet against Elon the company, you know, the companies, but the dude is a maniac. Like, he's so unpredictable. and he's shown a total inability to grasp with, like, what the consequences of his behavior might be. So, you know, I don't think he's going to be in jail.

But would I be surprised? Not 100%. Okay, sorry. Wealth taxes. Wealth tax. I don't know if we're going to get to a wealth tax, but I do think that there is a real question about coming up with a fair tax system. And I'd like to, I mean, that's the one thing that I've cared about for a very long time.

I think it's very important in a democracy that people feel that the system is fair. I think it's actually, I think taxes are actually part of that democracy. And the fact that it isn't fair, the fact that everybody knows it isn't fair, and that it's been this unfair, I think unless it does get fixed and solved, not just for the sense of fairness. So there's the fairness issue. And then there's just the practical, like, we need. revenue issue. But it does seem that when you look at, in this ProPublica piece, really I think demonstrated it, some of the wealthiest people in the world have really managed to effectively never pay taxes. Totally. And look, some of that's because they're giving it away, and it's

a charitable contribution. And I appreciate that, but it also means effectively that everybody else, including us, effectively subsidizing their philanthropy, right? They get to choose where they're giving their money, you don't. And so, by the way, I think that actually, oddly enough, goes against people's fundamental sense of fairness. So I think that there has to be at some point, look, I'm a believer in increasing the step-up basis at the end of life. I think a lifetime of not paying taxes is enough, even if you lose the family farm. Not a popular thing to say, I know, but I think you have to pay it. I would deal with, I think, some people like Larry Ellis, who live off of effectively interest.

Basically, they take out loans against their stock and so that they never have to pay. Yeah, that was wild. Yeah. I think there should probably be a limit on the amount of interest deduction you can actually take. And I, very unpopularly,

would probably tax great philanthropy, meaning most philanthropists, including Warren Buffett or Bill Gates, effectively are transferring shares, typically founder's shares, into either their foundations or to a charity, which means that those shares,

which have created enormous value and wealth, if you will, will never be taxed, ever when they're sold by the charity. And so my view is maybe the first $5 million you give away on an annual basis should be tax-free. But after that, there probably should be some rate. Maybe there's a special philanthropy rate even. Maybe that's closer to the current capital gains rate. especially if capital gains goes to something that comes to income tax.

But that's sort of a little bit of how I'm thinking about it. I like that because essentially if you're not taxing that money, it's going to philanthropy. What the government is saying is we think you billionaires are going to do a better job at providing services than we are. Right. And by the way, there is an argument you made. I do want people giving it to philanthropy. There should be charity, but it can't be a complete substitute for government. It can't be a complete substitute.

and I think that if you took 20% of it, A, it would go towards the government and B, then would also go towards the philanthropy. I would also say, look, I mean, we can have lots of debates about Bill Gates, but I was going to say what Bill Gates has done. No, but what Bill Gates did, even during COVID, actually, to me, proved that you actually occasionally might want a billionaire out there working on some of these projects. I agree with you 100%. Now, uniquely, though, they're almost like nation states because they're competing with the government. But in a way, that competition was probably helpful. Yeah, no, I agree.

I think that Gates's work on the vaccines in particular help push everybody forward. And I'm glad to be vaccinated. So I'll say that much. But it does strike me as unfair, you know, talking about that ProPublica story, that all these billionaires are paying less tax than big technology. It just seems crazy. Yep. I'm struggling to make it.

And, you know, there should be some more fairness on that front. Well, after this podcast, you won't be struggling to make that. I know that. I mean, aren't you going to be on your like, you know, series C, series D? No, no investment. What's the cap table look like? I can't take any investment. I think taking investment in a new media company is absurd most of the time. You're just bootstrapping yourself. I like it. Bootstrap away, add supported, and, you know, cross the fingers. It'll create even more value for you when you go public through a SPAC.

That's right. We'll have to give Chimoff the call. up to this one. See how we can do that. Okay, well, I think we should wrap there. That's a great place to add. Thank you so much for coming on. It's great having a discussion with you as always. Thank you for having me. I appreciate it. This was awesome. Are you still doing? Now I'm looking at you this way, but yeah. Yeah, yeah. Are you still doing clubhouses and spaces or have you given up on that? Oh, um, I haven't done any clubhouses in quite a while. I turn the, I turn the notifications off, which might be part of it. Same here. Same here. Because they were very aggressive with the notification.

which I thought was smart for them to do, but then they just became less valuable to me over time because I haven't seen as many people like you and others on it. I've done a little bit of the space of stuff here and there. I haven't been hosting anything really myself. Occasion, I'll listen in, you know, if I happen to be around when, you know, Kara has been doing one on Thursday night that's occasionally interesting. But I haven't, I don't know, what's your take on the whole, whole audio, live audio space? Yeah, I was always a little skeptical of Clubhouse because I thought it would be tough. I remember you wrote the very controversial tweets sort of tweets. I got dunked on pretty hard for that.

But I always thought it would be tough for them to a keep the middle class of creators around. So like there were going to be a few people that were going to accrue a million followers. Right. But everybody else, you know, who might have been able to attract a larger audience elsewhere, shows up on Clubhouse and gets like 40 people and it immediately becomes a terrible experience. Right. They don't want to go back. And then I think the challenge. challenge from Twitter is pretty significant. And I think that Twitter spaces has potential

long term and as good as a feature, you know, to pop up here and there as something you'd want to jump into. But I think that Andreessen Horwood's definitely overpaid in terms of their investment in Clubhouse. And Twitter seems to be doing a lot of the right things to make this thing, something that is useful when the time calls for it, but, you know, not like a revolutionary social product. I was afraid at first that it would crush pop. podcasts. But that doesn't seem to be the case. And where are you, I don't know if we're still live or not. I mean, you can tell me when you want to call it. No, you can take whatever you want. On podcasts. Yeah. How do you think about sort of the free RSS, if you will, versus what you

see happening with the walled gardens, the Spotify kind of situation or luminary or sort of the sub-stackization of podcast? Yeah, it's really interesting. So actually, talking about taking money, when I first decided to start this, I did hear from a VC who wanted to put money into the podcast in particular because he believed that there was real opportunity there.

Right. And the way that he wanted to do it was do it subscriber-based. So like kind of a Patreon model. Yep. I think that there's like a real place for that. And I wouldn't be surprised if this show ends up doing that. maybe do one free show, one paid show a week or something like that. But like I also think that there's really something to be said, especially early on for getting your stuff in as many platforms as possible and making it accessible.

Like I remember I was late to turn on Stitcher for this show. Okay. And I was like, all right, who uses Stitcher? And I turned Stitcher on it, became an important part of the audience. So people like had been talking about like, oh, is Spotify overcasts like every single platform? people even listen on desktop. So as I'm building, you know, it's important for me to grow the biggest audience, possible I wanted to make it available to everyone.

And which network or which platform gives you the best access to be able to get directly to the consumer? Because I know obviously one of the big issues with Apple is that you don't really have a direct relationship, for example. Oh, yeah. So that's the problem. There's no direct relationship with people. Like there are listeners that will come in through third-party platforms like Spotify,

overcast Apple, but all those platforms will own the relationship with the listener. Now, like, Apple is starting to make it possible to do like a paid element of the subscription. So if you're listening with Apple and you want to pay for like bonus episodes, you can do that. But it's just one platform. So there are others out there like supercast that make that possible. But yeah, look, I mean, I wrote a story about this recently. I think podcasts are massive, massive opportunity that are just starting to hit their stride.

And you have only 107 million Americans that listen to them, leaving about 200 million plus that have yet to make it in. And over time, I think there's going to be podcasts that appeal to everyone. And they will largely replace the radio. So I would expect it to go in all different directions. What are your favorite podcasts these days? I mean, I listen to the daily pretty religiously. Okay. I listen to pivot.

So that owns a half hour of your day every day? Yeah. So I have this routine where, like, I'll go for a run and then pick up a coffee and on the way home, I'll listen to the daily. Okay. So I would say probably three out of five, three to four out of five shows I'll listen to. What do you do on the run? Music? Yeah, I also listen to a podcast, but it's not a spoken word podcast.

And I think I've admitted my EDM love on this show before. So I have no problem saying it again. It's the above and beyond mix they put on every week. It's two hours. So it gives me two good runs. And then there's another DJ I listen to. It gives me another hour. Got it.

So, yeah. So you listen, okay, you listen to Kara. What else? Kara and Scott on, on there. And then just a smattering of others. I like the realignment. I don't know if you listened to them before. Yep.

Uh, Sagar and Jetty Marshall Kosloff. They have like really interesting conversations about politics and tech. Uh, and come to it from like, I don't know, not they don't do the traditional talking points. Right. Which to me is great. Trying to think what else. Basically anything else that people suggest. You know, I've also gotten into some of these narrative podcasts.

There's one that I listened to that actually Apple produced called The Line. Have you heard of it? No. It's about the Marines in Iraq that killed that ISIS member and took a picture with the dead body. Wow. It's good. Oh, man, it's amazing. Six parts.

The guy gets access to the Marines, you know, both the guy who was in trial and the members that turned him in. And it just tells a story in a way that I think you could only do on a moment. podcast so okay yeah where do you think it's going i don't know i recently fell for i fell hard for a new podcast and i don't think it's that new though i maybe i'm just new to me i'm like smartless you know oh yeah that's fun that hilarious it's sort of like drive time radio um actually but i just that's right it's like a morning show it's like they're like a fun gang um they're pretty pretty fun guests and you know it's sort you sort of listen for the guests but not even you sort of listen for them and yeah the banters good yeah so i've enjoyed that recently trying to think what else

i've been listening to i'm a daily listener um i try to get into freakonomics radio i listen to that more and more um oh you know what's great but for the sound design actually more than anything um and it actually may give uh luminary a chance this new Chappelle podcast. Oh, yeah, I've heard about it. It is pretty extreme. Just, like, I know some people love it, some people hate it, but the, just as somebody in the business, how they did it is pretty, I mean, first

of all, he's great, but just the production of it is extraordinary for me. Now, I've also talked to people in the podcast space, you're like, oh, it's overproduced. Is this and that? Yeah, I don't have any, yeah, really. religious beliefs about the way to produce a podcast. If it sounds good, if it's compelling, I'm all for it. So I should give that Chappelle show a try. What kind of mic do you use?

This is a scarlet mic. I don't know much about the technology, but I did the Land of the Giants podcast for Recode about Google. And they shipped over a scarlet, and I shipped it back and then ordered one on Amazon. So I was watching the new Bo Burnham special, and I saw the same mic in it. So it must be okay. Okay. Is it good? The Bo Burnham Special?

Oh, the Bo Burnham Special. Yeah, you should watch it. It, like, perfectly encapsulates the madness of being inside for a year. And you see him just sort of have, like, this pretty witty kind of fun skits in the beginning. And then it's just this descent. I'd be curious to hear what you think about it. It's a wild one. Yeah.

I'll go watch it. Thank you for having me. This is fun. Thanks for being on. Great having you, Andrew. See you soon. Thank you, Nate Gwattany for doing the editing Red Circle for hosting and selling the ads. Appreciate it very much.

Thanks to you all for listening. If you like the podcast, please rate us. If you're new here for the first time, please subscribe. And we will see you all next Wednesday.