Big Technology Podcast - Tech’s Frothy Days Are Over. Now What? — With Eliot Brown

Episode Date: January 4, 2023

Eliot Brown is a reporter for the Wall Street Journal and co-author of The Cult of We. Brown joins us to check in on how the tech industry is adapting after years of zero-interest-rate-driven froth fades away. Tune in for a discussion of how real 'the end of froth' is, whether it was productive or not, and a company-by-company look at Softbank, Tiger Global, Andreessen Horowitz, Palantir, Tesla, and Twitter. If you like Big Technology Podcast, please rate it five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ You can find The Cult of We here.

LinkedIn Presents. Welcome to Big Technology podcast, a show for cool-headed, nuanced conversation, of the tech world and beyond. Elliot Brown is our guest today. He's a reporter at the Wall Street Journal. He's also the co-author of a great book about WeWorks Downfall called The Cult of We, and he's also a friend of mine. And let me tell you, Elliot is the king of saying, excuse me, everyone,

what exactly is going on here when it comes to really crazy stories in the tech and the investment world? He said it early on in the WeWorks saga where the math and plenty more about that company and its founder, Adam Newman, just didn't add up. And he's also been there for many more similar stories, including the SPAC boom,

that really never materialized into what the dreamers imagined it was going to be. Now, an interesting thing has happened. as the Fed has raised its rates, a lot of that froth has seemingly started to go away. We're not hearing as much about SPACs or about crazy investments in the crypto space, except for maybe their downfall, but it doesn't seem like they're being made as much as they were before. So Elliott is going to come on and talk to us about tech and crypto after the froth. How does that change?

How does it change things that we've been seeing for so long? So as you listen, I'd say keep an ear up for some of the questions we try to answer. including was that froth good? Did it lead to innovation? And are you going to see some more productivity from people who start to turn to more productive uses of their human capital than the stuff they were doing when we were in the froth itself? And of course, how does that change the tech world and our economy and our investment world for that matter? I think it's going to be a really fun discussion. And with that, Elliot, welcome to the show. Hey, good to be back. Great to have you back. So for years you've talked about this kind of wild

the economy that we were living in. And I feel like you've been like the patron saint of calling it out. We obviously said we work was a bunch of froth. And you've talked a lot about in our conversations and on Twitter and in your stories about specs and crypto and investments in nothing like car companies that, electric car companies that don't make cars. I just want to hear your perspective on what the reality is like. Is the reality that a lot of this froth has gone away now that interest rates are rising?

or are we still seeing a lot of that persist? Yeah, I think that basically in 2022 and now into 2023, we have seen a return to reality or a sort of mirror reality. Like if you sort of, you know, there's a lot of caveats to that. And I don't think it's broad. I still think there's a lot of sort of like the world that doesn't quite realize how much the floor has fallen beneath them. But if you look at the stock market and a lot of these companies that were startups in the mid-2010s and were disrupting the world and industries left and right and all the venture firms were piling money on to them and Forbes was writing gauzy cover stories about them, they're sort of like, you know, have gone from really, really high valuations to things that seem like they make a little more sense.

So, you know, my favorite hobby, I guess, for work was talking about WeWork and how they were valued like a tech company when they were supposed to be a real estate company. And you could sort of apply that across the venture capital world. And if you look like scooter companies, oat milk companies, car dealer companies, those are now valued like scooter oatmeal and car companies, not. more or less, not like, you know, really profitable software companies. And I want to ask the question underlying all this, which is, is this good? I mean, there's been, you know, obviously investors have been hurt by some of the wacky valuations out there. But overall, for our economy, there are some that argue that the fact that there was all

this money flowing into, quote unquote, innovative spaces meant that we were getting more innovation, which was ultimately betters the world. what do you think if that dries up isn't that an issue yeah i think it's a really complicated question i think that that is like what what good does a bubble do and um and i think it's at this point you know undeniable to use the word bubble even though some in bc probably still would cringe um but uh like i think you always do get some sort of things created in bubbles that you would not have otherwise, that actually are useful. So, you know, like in England in the 1840s or something like that, maybe 1860s,

they built so many rail tracks that, like, it was like 7% of GDP in the UK was going to like railroads for a year, something like that. And, you know, the result was they built a lot of extra rail tracks that go places. And same with, like, in 1929 in New York. where everyone was just thinking a great idea was to invest in office skyscrapers that hadn't been built yet. And so they built some really cool architecture that in the end didn't really have many tenants at first, but is there for 100 years plus now, I guess 90 years plus now. And, you know, looks really nice on the skyline.

So what is the corollary today? you know we've gotten a huge amount of investment in electric vehicles that we wouldn't have gotten and we probably got some some you know drone technology and maybe even flying taxi technology we'll see that that probably wouldn't have come otherwise and probably a bunch of other things maybe even like sped up um RNA vaccine technology artificial intelligence I would throw in as well we say that again AI I would draw AI yeah um like I mean yeah Open AI got a ton of money out of this sort of hypey world. But look, I mean, is the general idea of being ignorant to reality something that's good? No, in my humble opinion, I mean, you want to know what was actually real in this world and not just hype. And like, it's sort of an important part of living. and society. And, you know, add on to that that you have a lot of pension funds and retirement funds and foundations that are going to get pretty subpar returns having

invest in this stuff. But you can't have perfect markets, right? There's never going to be a situation where only the stuff that's merited is funded and the stuff that's not merited is not funded. I wonder what's going to happen with, you know, when we think about what's going to happen after the froth, right? Startups, for instance, are going to really struggle to raise funding or some of them will shut down. And we're going to actually, we're going to go through like some of more public companies, but we should talk about startups at the start here. Is that, what do you think happens there?

I mean, is that a concern? I mean, historically, we're still seeing just extraordinary amounts of money that like are going into a startup land. I mean, it's a lot less than, you know, one, 22 was a lot less. but it's, you know, many, many, I forget the stat. It's, I think, like, well above historic norms for how much we're going in startups, I presume to a certain extent that'll continue into 2023. So, you know, I don't, you know, I don't see it as some sort of enormous market failure

that we aren't going to have 2021 levels of frothy, you know, bubbly money being thrown at startup land right what do you think we got out of this i mean we guess you talked about some of the these electric vehicles but let me ask you specifically about this in regard to like because so much of the speculation and the froth was around financial stuff it was around specs it was around crypto um probably some others i'm not thinking of did any good come out of that yeah i i think that actually if if you know we need more time before you can look back at this with a historic lens, especially to see what's come out of the past couple years when funding levels were at their highest, and it takes a while for companies to really

be created. But, you know, if you look at the past 15 years and what was really created that's paradigm changing out of the venture world, yeah, I mean, there's some pretty obvious stuff, again, like Moderna was venture-backed, so that seems like it did a lot of good. And it changed a lot of lives. You know, the way we get around with the apps, essentially, on our phone that aren't owned by Google and Facebook, some of those have changed our lives pretty dramatic. I think like Uber did change the way we get around cities. But is there some extraordinary other breakthrough in the same way that, you know, like when the car was invented or the spinning job? Jenny or the cotton gen, like, no, I don't, you know, I haven't given this an extraordinary

amount of profit, but I think that there's just an extraordinary amount of capital that went to basically like ads on Facebook, ads on Google, to restarting coal power plants to mine Bitcoin and, you know, in other energy related to like crypto. And then, yeah, I mean, the whole crypto world is like it's just like an extraordinary amount of investment from venture capital when in and humans went into this world that uh you know was was very much just a speculation like um same thing with specs yeah and i think that's like the positive is that the human capital side of it where like you're going to have people spending their precious brain power you know not on things like spaks and not on things like you know crypto exchanges

but on actual products that people can use. I hope that's the case. That would be good. Yeah, yeah, that's a good point. I mean, you know, speculation, right? Like, that doesn't, that's not too high calorie for society. And the other thing that, the thing that, like, really is negative consequence of the froth is, it's kind of like a sentence you've written many times in your stories where you end up having

charismatic founders who sell vaporware, convince and, investors to spend record amounts of money with them to support products that never really go anywhere. And that's been an all too common feature, I think, of the froth. You look at the Adam Neumans, you look at the SBFs, when a venture company can write, I'm talking about Sequoia here, not going to even be coy about it, can write a glowing profile of a founder, SBF, and laud the fact that he was playing a league of legends in the pitch meeting. and that's part of the reason why they have to give him all this money. Something has gone wrong there.

And obviously, that has cost in terms of productivity in the economy and, you know, for investor money and all the people that follow these leaders, right? That's the thing. It's like, well, you see Sequoia back desk, you know, FTX, okay, maybe it's worth taking a job there. And that's sort of a negative consequence of the froth that we might be getting past. Yeah, no, I completely. They agree. And I had sort of the same thought about that Sequoia profile. Like, not only does it show like kind of the craziness of the firm or, you know, the VC world at the time. But the fact that they thought that that was appropriate to publicize, it just shows how out of time. And that they, yeah, they gave a hundred plus million kind of like with a snap of the fingers. It just shows how sort of out of touch, I think VC had become with.

how crazy it is that they're writing $100 million checks with with basically no due diligence. But that was at the time, VCs would talk about that openly, because within the industry, that was the reality. And so, yeah, I think when you tell that to somebody outside the industry, when it turned into a bus, their jaw drops of the floor. What are they doing with this money? Right.

I mean, like, what was that mark injury syntax to Elon Musk? Like, our firm is in for, what was it? It was like $250 million or whatever the number was with no additional work required. It was like this is before Elon even said he was taking outside money. It's like maybe his plan is to burn it to the ground. Yeah. No, it is interesting. I mean, the one thing that we can say for sure is we're living and change times.

And a lot of that stuff will go away. And hopefully it ends up going away and having a positive impact because of some of the reasons. that we've listed. And I do note your point that we do need to live in reality. Yeah, but who knows? Maybe the cure for cancer and eternal happiness will have been founded in the past three years. But they probably could have raised some money for all the time. You would hope. If V.C. works the way that it should. And I'm not saying it does. But if EC works at all, then the cure for cancer and the cell for eternal happiness should have been something that was funded. Here's one I think we should check back at

in 10 years. I wrote about this once in one of the market is really hot stories. Colossal, which basically wants to recreate Jurassic Park but with woolly mammoths. And so they're trying to genetically engineer a woolly mammoth. And we got to hold one of their pitch decks and it had a slide that basically looked like Jurassic Park. They said they were thinking, like maybe we can monetize with amusement parks. And you buying or selling? I'm merely here to say, let's check back. Okay. Well, you know me.

If Willie Mammoth Park opens, I'm first in line getting a ticket. I'm going to pet it. So I mean, that's loud. But I would. I would pet it. I'm sure they can engineer them to enjoy being pet. Yeah. So let's spend the rest of the time we have together continuing on this line,

but actually like using some real examples of, I mean, we've used some examples. But you know what I mean? Let's actually look at some concrete reporting that you've done and spend time talking about some of the companies that were responsible, you know, big, big players in this froth. Where do they stand today? What's going to happen to them next? First one, the most obvious one is SoftBink. SoftBink has posted some unbelievable losses, $35 billion in the first half of last year.

I believe, according to your reporting. and they're trying to raise a third fund, but they were the ones that were, you know, they were big funders in WeWork. You have some great reporting in your book, Cult of We, about their synergy with Adam Newman and how they out-crazyed each other to the point where things became unsustainable.

But one interesting detail you have in a recent story is that Masayoshi's son, he's stepping back from their big earnings event where he would, you know, put wild, memes up and really celebrate the earnings, and now he's going to basically turn it over to their CFO. So that to me is a sign that, you know, one of the big players in this, you know, fraughty era is now taking a more measured approach. What, what should we know about SoftBank? Give us like a quick little check-in on what's going on there. Yeah, I mean, SoftBank's just this continually

fascinating company because this, you know, guy, it's really run by one guy and who has at various point's been, but by his count, the richest man in the world. He says he was, had said he was that for about four days in the dot-com boom. And then he lost more money than anyone else had ever lost in the world at the time, because stock bank's stock went down by, I think, 99%. And then he rebuilt, made two really good investments that have basically carried the firm. And one of those was an early investment in Alibaba in 2000. And the other was the buyout of Vodafone's Japanese arm that has just given soft bank billions on billions to play with.

So what he's managed to do in the past seven years, six years, since the launch of the Vision Fund, is spend more than anyone had ever spent but by many, many, many, many magnitudes on startups. And it has gone, I mean, it's just, it's hard to say how poorly it's gone. How poorly has it gone? So, you know, take it, the first vision fund at this point is marked at like a very slight gain. So it took like $90 billion and turned it into, yeah, you're going to catch me getting these numbers wrong.

Anyway, the point is he's taken basically $140, $50 billion and turned it into over a six-year period or so, five and a half year period, and turned it into less than that, which is very impressive if you look at. Well, given the way the economy is fine. Yeah, I mean, even with the recent drop, like go back to the NASDAQ in 2017 and put $100 billion and see what happened. Like, that way you'd be up. And so it's, the first vision fund, it kind of continues to impress with how crazily bad some of these investments went. I mean, a couple went pretty well.

But, but in general, it was doing these really big bets on the companies that were losing the most money out there because who else would take a $2 billion check other than a company that is losing money. If you're profitable, you don't need $2 billion. So, you know, we work. Uber-D-D-D-D. I think they may have made a slight amount of money on Uber. D-D-D-D-D-D-D-S down, at one point it was down like $8 billion. Zoom, the Pizza Delivery Robot Company, I think that went to basically zero.

View, they put a billion dollars into this smart window company that turns out like it was just actually a money-losing window company. And so that's down 90% since they went public. Yeah, I could go on for a while, but wag the dog walking app. It's a fun one. What do you think we learned about their thesis? I mean, that is an interesting thesis. You know, sometimes you need stuff to grow fast. And maybe there isn't another investor that will put that money in.

Was that fundamentally wrong? Or was it just the ones they pick? So, yeah, I think they did two things. Vision Fund one was the one where they basically went after the companies losing the most money. That wasn't the way they looked at it. They looked at it as the companies that could absorb the most money and had the biggest total addressable markets. And, I mean, that was flawed because, I mean, I think of what I said, like, because

they were losing the most money, that's pretty risky. And then when you give a company that's losing $2 billion, even more money. They're going to lose more. Yeah. What they did for the second Vision Fund was at least theoretically better if they had done it in 2017, which was basically been on the entire market. So they spread, they sprayed month as opposed to surgically dropping $2 billion checks. And the problem with that was that that was when the market was like the time that they stepped on the gas the most.

was when the market was by far the most overvalued. And so, I mean, there's a strong school of thought that Masa, from, you know, analysts and others that follow SoftBank, that this chief of SoftBank, Masayoshi Son, is just sort of like the classic momentum investor. And when times are good, when essentially presidents are overvalued is when he wants to invest the most, and when they're undervalued is when he wants to invest the least. And so he's definitely been following that pattern. I guess we'll see what happens.

He's kind of pulled back to near zero. Where was all that money coming from? So, I mean, a huge amount of it at first was the Arab, you know, the Gulf Saudi monarchies, or Sunni monarchies, so the Saudis and the UAE wealth funds. But then for the second vision fund, it really was just soft banks money. And that was coming from basically Alibaba and the Vodafone buyout that were just essentially spitting out billions to, instead of going to shareholders, went to VC-backed companies. Interesting. So that's going to dry up, you would imagine.

Yeah, I mean, the vision fund two is not looking good. That one's way down from the amount that they invested. And, you know, they're taking a while to sort of mark down. the private assets, which I think everyone's doing, like Tiger Global, too. Yeah, yeah. So talk about Tiger Global. They're the other one that's been, basically, if you were a decent startup, you could effectively get a massive term sheet with them with, again, like very little

due diligence. I mean, I'm oversimplifying it a bit, but that was the sense. You could speak to VCs, and they would go against Tiger Global and be like, all right, this is no competition I tap out. Yeah, I found it amazing. How open, you know, looking into it some and about how open the Tiger Global Partners were with startups about how essentially lacks they were. And so, you know, their line to founders was essentially like, we've done some research

on you, we hired Bain, like we know lots about your company so that they would hire a consultant sort of like learn about the company and do customer calls. And then they're like, we don't want a board seat, like that's not our thing, we don't want to mess with the terms. We just want to give you money. And it was many conversations like that that they would have. And they like they were in this sort of money deploying business at the time. And so they too like soft bank, precisely like soft bank, saw the, you know, frenzy and decided that was a good time to really step on the gas. And so they raised the essentially like I think it was the second largest venture capital fund, maybe the third, ever, at the absolute peak.

And, you know, it was something, many times the size of their funds a couple of years earlier. So, you know, bubbles are fascinating that they do, they have this effect that the more overvalued things get, sort of the more people want to bet on them. And, you know, this cycle, those are the two companies that, that on startups, those are the two companies that really stand out. Where was Tiger Global's money coming from? And are they going to still have that source of funding? Theirs was more broad base. So they did have a lot from, you know, Scott Schleifer, Schleifer, who's, who's the partner there and runs the private business. So he put in, I mean, he told others, he put in over a billion dollars in their last fund. So it's not a con it's not one of these funds where the the partners of the investment fund just had 2% of the fund yet he had a lot.

That said, most of the money was from limited partners and we know some, but not many, where it's like some retirement funds, some foundations, some sovereign wealth funds, sort of, yeah, and then some undetermined number. of other rich people. Like they were, they, they tapped the investment banks, this is kind of unusual. They, they tapped the investment banks to go to their high net worth clients and be like, hey, try to get into Thai Global. And so they would get sort of like hundreds of people to put in.

It's a smart strategy. Yeah. I mean, these are rich people, but not super rich people. Whereas a lot of times the venture firms are usually just going for foundations, endowments, and that super rich. Right. But so Tiger expanded that. democratized it to be merely rich.

And they had a lot of money to, you know, to boot. So where do the LPs now put their money? Like, are they moving to bonds? Like, where on the risk ladder are they going? Because if they're not in startups, right? Well, they all have less money. Oh, they have less. Yeah.

Yeah, I mean, that's a bit of a complicated question. But, but yeah, I think, like, at a really broad level, like, what's happening is that, you know, for a decade plus, you were. getting basically nothing if you put money in a U.S. Treasury bond. And now you're getting something. And so some number of people out there are shifting their funds. We're like, oh, well, 3% is good enough or, you know, 4% or you go to a fix, another type of fixing in product and get 11%. And so, you know, you go with this thing that's like a little more, it does give you 8% as opposed to zero. And then you have less money to spend on sort of risky things to try to

get up to like a 7% return, which is what a lot of these pension funds and money managers are trying to hit on average. So, yeah, at the broad level, like, yeah, there's money being shifted out of these things into fixed income. I think I'm sort of like more applied level. It's like people are just not really allocating much, at least to alternative assets right now generally. And they're just sort of like, let's see what happens where the floor goes. at least that's my sense but but um i'm talking to some people in the world but uh that's less scientific okay now there's always an exception to the rule right when these companies pull back there is maybe an opportunity for another to come in and sort of make some smarter bets in the

same echelon but also um not make the mistakes um is andriesen horowitz that that firm uh you know they are sort of feeling the shoes in some ways. We talked about what they did with Twitter. It seems like they are going to be in on a big round from SpaceX, right? Which is, let's see, we were planning to talk about this in the second half, but we probably will. But, you know, they're trying to raise a good amount of money. And then, you know, they mean, they put 350 million. in flow, which is Adam Newman's new company, which, you know, they, I think they, I feel like they sub-tweeted you in the announcement saying they don't care about the media. They're there for the founders. What do you make of what they're doing? Um, yeah, I think it's, it's a little hard

to discern too many trends, uh, with them because there's not a huge amount of sample sizes of, or the sample size isn't huge for, for the number of, like, high-profile investments that cut against, you know, the broad trends. Um, but yeah, between the, like, Adam Newman investment and the Elon Twitter investment. I mean, those, and there's one other that people often mention. I mean, it seems like they're trying to, particularly with the Adam thing, say like, we're going to be different. We're going to keep spending money.

We're going to back founders, even if they're controversial. Maybe it's a sort of, yeah, sub-tweet of the media. That's kind of what it seemed like. with, that was certainly a popular read with the Adam Newman investment. I mean, it was their biggest investment ever, right? $350 million. From their flagship funded, at least like they said. That's what someone wrote.

Yeah, I mean, that, you know, that surprised me. Like, I always expected him to raise again. I wouldn't have expected it to be such a big check. It's such a big valuation. I mean, that new company is worth over a billion. And it's basically the same valuation as WeWork. And it hasn't even launched yet. Right?

So, like, WeWork is worth about a billion dollars right now. $1.1 by the day. And Flow is worth, you know, that exactly worth you even know it, but it's over a billion. And, you know, it has some real estate assets in it, but not a billion dollars worth. So, yeah, I don't, Mark Andresen has done a lot to make clear he does not seem to like the

broad media like mainstream media which is funny given how much he coordinated it earlier in his venture career but you know to the extent that's actually what drove this I don't I don't know otherwise with them I don't really know I mean they've raised a huge

crypto fund right after and like really just bet huge on this Web 3 thing and they're going to have more money to spend out of that because they didn't spend that much of the biggest fund. So they have more dollars just to spend and you don't really. Do they're going to spend on Web 3? Well, you're paid to, when people give you this money over for 10 years, like your job is to spend it. And even if they have, have virus remorse, I haven't heard of people getting their money back. So, you know, and that's the way these things are written.

I expect we'll be hearing more from them. And then, you know, you can see, like with Tiger Global and maybe Andreessen, we'll see what happens. But these funds like to keep raising more funds, probably for a lot of reasons, but like Tiger's trying to raise a $6 billion fund right now. Right. Okay. We could talk about Andreessen's approach to the media all day long. Maybe we'll get to it at the end. But for now, I'm just going to tease what we're going to talk about in a second.

and there's a really interesting story that you have out in the journal, co-author on about Palantir invested in 20 startups, and they spacked. And what happened to those SPAC investments that Palantir made? It's an interesting question. We'll discuss it after the break. Elliot Brown is here. He's a reporter for the Wall Street Journal, co-author of The Cult of We, Big Technology is actually number one book for 2021.

It was one of the best reads on tech and investing that I've ever gotten my hands on. And I admit, Elliot's a friend. But even then, it's not really coming from a place of bias. I thought it was so good. Crushed it, cover to cover. All right, we'll be back in the second half. We'll talk about Palantiers, SPAC, Betts. We'll talk a little bit about SpaceX, Twitter, and Tesla.

And then we'll see if Elliot's optimistic about anything. It's always a question I like to ask him because he tends not to be. Back right after this. 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 2 million professionals read The Hustle's daily email for its irreverent 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 right now. And we're back here on big technology podcast with Elliot Brown. He is the co-author of Cult of Weak, great book about WeWork, also a reporter at the Wall Street Journal. So before the break, I promise we talk about Palantir Spacks.

I think it's so interesting that a public company would actually also make its own investments in startups. It's definitely untraditional. it has made 20 start-up investments according to a new story that you co-wrote recently in the journal they are down more than 80% on average once gone bankrupt another is delisted from the new york stock exchange and more than half are warning that they're going to go bust holy moly could go bust could go bust what what's going on there um it's actually really complicated and fascinating i mean basically what Palantir did at the beginning of

of sort of SPAC mania in 2021 was decide to really bet on the sector which is very strange for a company that that is very unprofitable for one to be plunging a bunch of money into speculative companies that were by many accounts extremely overvalued and then you know

that's one part of it and I think the way they were sort of the bullish way to look at it is that what they were doing is they were both betting on new companies but but as a way of also tying them into the Palantir world and basically their software so they were sound smart for each of these companies what they would do is agree to invest in the SPAC deal and so give them a chunk of investment which is what those companies were looking for at the time And then they would turn around and also say, like, hey, let's sign a contract where you buy our software. And these are not small contracts.

I mean, you know, they were usually the same amount of size than the investments. I'd be like, we'll give you $20 million. And then you commit to a $20 million software contract over, you know, three to five years. It's a nice way to show revenue growth. Right. So the critique here from, you know, analysts. short sellers, probably some long sellers, a lot of observers, is that this was buying revenue. And, you know, I mean, these things weren't, you actually look at the contracts.

Some of them were pretty explicit that they were very much tied together. So there wasn't an effort to really deny that they were untied. It's like they did 20 SPAC investments and they got 20 contracts. So I think what the part that that got a little concerning with was when they then would tell their, Palantir would tell its own investors, hey, look at all our revenue growth. And that's what was behind their really high valuation at the time. So investors were really excited about how fast this company was growing revenue.

But then if you really look under the hood, you're like, well, this commercial unit that seems. to be showing all the growth that a lot of that is is coming from these these companies that you're paying to be your customer yeah so what are the consequences of that the consequences are the Palantiers lost a lot of money on that so I mean they put in over 400 million they got some back in the form of contracts but you know so a lot of that could go away that that's sort of the worry from analysts that, like, a lot of, literally, like, many of these companies could go bankrupt or otherwise in Solomon. And, I mean, a lot of them don't even have a product, right? Like,

what's the one? Lillian. It's a flying taxi company that's planned to use these jet-like engines that aren't really in existence anywhere, it's my knowledge. And, you know, they say they're going to be ready up and flying by 2024, I think. It's like, well, this is, this, product doesn't even exist, like maybe, but who knows? And there were a bunch of electric vehicle-related companies that they put stuff into, some direct-to-consumer or e-commerce companies. And some of them was very strange. It was like you'd commit $20 million to this company boxed.

And then on the same, you know, within days, usually within 30, they had to give back a huge amount of money as a prepayment for this contract. So Box gave $15 million of the $20 million, it got Palantir, right back to them. It's crazy. I mean, that's pretty blatant. Anyway, Palantir says they regret it. And here we are. And their stock is down.

I mean, there are, like many of these companies we were talking about earlier, I mean, that was a company that was valued at $20 billion in something like 2015 or 14. and is today worth like 15? Yeah, their market cap is actually $13 billion. 13, wow. And they're down about 30% from their IPO or from going public, right? I think they specced also. They did a direct listing.

Yeah, direct listing. And from their peak where they were around $35 a share, they're now $6.40 or 40-something cents, which is a decline of 80%. Where rooted? Yeah. So it's not where you want to be. So I guess, you know, that's the end of that. I'm kind of curious what you think, speaking of financial games and stuff like that.

What's going to happen with Twitter and Elon Musk's investment? I mean, we're talking on Monday where Tesla is down like 13% already on the day. And it's not anywhere close to over. And Elon has this like $13 billion, so Twitter has a $13 billion debt that it needs to pay. And I guess there was always this belief that maybe Elon could continue putting his personal money into it. Obviously, Morgan Stanley has a role in that $13 billion. And, you know, it has to make about a $1 billion interest payment every year. What are the likely scenarios here?

Does Elon's decrease in net worth actually make it more difficult to sustain Twitter? It certainly does. I mean, you know, I don't know. Like, to be clear, I haven't been covering this. I've been, you know, I know how to read a couple numbers, but not many in the 10K, which they no longer produce at Twitter. So this is all idle speculation. But yeah, I mean, like the way margin loans work and sort of one of the things that was

appealing, I think, to the other investors in Twitter is like, well, Elon's got all the money, like, you know, he's put in some huge amount of the equity in this investment. And so if things run into problems where he can't pay the debt, he can just take more money out of his Tesla stake by borrowing against his shares and then put that toward repaying the debt. So basically, like a mortgage, if you aren't generating enough money to pay the mortgage and you have a bunch of cash somewhere else lying around, you can just pay off the mortgage. right? And then you don't have to worry about interest payment. If Tesla stock goes down by 80%, Elon can't raise money from that by borrowing, which was a kind of easy way for him to raise money. He would either have to sell Tesla shares, which he's done some of, but you have to sell more of them when the price is down a lot.

But also at a certain point, that gives him a lot less ownership of Tesla. And that's something he clearly seems to want, he needs to think. And then if they keep going down, then selling Tesla share doesn't even bring that much. So I think that it will be a, if trends continue, the question of what happens with the debt at Twitter is a huge question. And like that is an extraordinary fixed cost that they have until the death's Do you think Musk has a chance of being ousted at Tesla?

I mean, I share this on Twitter earlier, but it's down 71% over the past year, 51% in the past six months. Tesla is the world, Tesla produces, you know, I used to know this off the top of my head. They are basically 2x more valuable than Toyota. Toyota produces something like, VW produces like 9 million cars a year, and Tesla is five times more valuable than VW, four to five times.

Tesla produced like 1.2 million cars last year. So, you know, this is a, that company is still, by any normal measure of car companies, extremely valuable. It's valued like a tech company. And that is because Elon is the CEO. So getting rid of him as CEO, I don't know, maybe you could find someone else to convince the market to value that high. But it seems just from the cheap seats, like it seems he is a big part of that valuation and you take him out and it's worth less. We actually always said the same thing about Adam Newman and WeWork.

Like the only reason that was a $47 million company was because of him. And so if you changed him when it was worth, you know, when its valuation was falling or it was. weren't raising as much money, that would really make it hard for that company to be worth very much. They did oust him when they were near their own insolvency. But that was when they were near their own insolvency. And, well, then they put a real estate CEO in and now it's worth a billion dollars. Okay. So he's probably safe at Tesla. What do you think the year ahead looks like for him at, you know, at Twitter? I am just bad at predicting anything with that man. I have no idea.

I just hope we spend less time reading about it. But it really has this magnetic quality where, like, journalists, myself including, you're just like, I don't want to read about this, but I can't look away. Right. So, yeah, I don't know, is the short answer.

And just praying, we don't spend the entire year talking about it. Oh, I think we will. I mean, you know, the thing about someone, like Elon is, he's done a lot of impressive stuff, you know, in his life. And I think the media has written pretty glowingly about all the impressive stuff that he's done. And just as a media story, you know, you're always looking for something new. And it seems like, you know, reporters are now like going bananas trying to find problems. And of course, he's creating a lot of them as well.

And each little bit of his on the way down, like it becomes a big story. And I actually, I think, unfortunately, this is sort of what society does, is it builds people up and then it breaks them down. And it happened with, I mean, it sort of reminds me a little bit of the, like, the Britney Spears story and the Kanye story where, like, it just, there's so much attention placed. There's so much, like, because, yeah, there's so much buildup when it comes to a generational talent and then all the cameras flock, and they wait for you to, to mess up.

And then it becomes this thing where it's very tough for an individual to handle. Yeah, I mean, this is a much more both psychological and philosophical question than I'm good at analyzing, but like how much of that is also a result of like, how much does the megaphone and magnifying lens change them? And certainly with some of the CEOs that I've covered,

like you can see, the more magazine covers they're on, kind of like the more their ego goes crazy. And kind of like you're really reinforced, And I think this stuff with SBF, too. Like, you're really reinforced, how to put this coherently. If you're selling a dream and you haven't gotten there yet, and then people give you a billion dollars or whatever, and then you go get on all these magazine covers,

essentially because people gave you a billion dollars, it's not because you've actually achieved the dream. And they say how you are achieving this dream, like you think you've done it. And then you think even bigger because selling that vision got you got you all this money in fame. And I think that there is this tendency by that type of person, which a lot of startup entrepreneurs, to not remember reality and not remember that they're running a car company that's losing $4 billion a year. They aren't running a successful Amazon of transportation. Yeah.

And I think that's ultimately what happened with Elon Musk and Twitter, where the market was telling him anything he did was working. investors were telling him that and the media was telling him that and then he just became obsessed with Twitter and said, well, I could do this too. And I think it's just as simple as that with the Twitter story. Yeah. I mean, you know, I cannot possibly imagine to get into his head, but that seems plausible. Yeah. Okay, let's round this out with the ultimate question for you. Anything you're optimistic about or are you feeling optimistic, you know, in 20, I feel like the beginning of the year is always, always a start to, you always start with high hopes. I was really optimistic about how quickly I could do a mini home renovation, you know, project.

And man, was wrong about that. So that was a very recent flawed, optimistic view. I, you know, I wouldn't say put it in the optimism camp, but I am I am super impressed by the chat GPT thing. It's pretty cool. Like, yeah, I normally am, like, gizmos don't impress me that much. But, like, the limericks that thing can spit back at you when you have a question and you want it to answer in limerick form are all day. Or ask it to give you, like, you know, food recipes that it makes up in delivered in

Shakespearean form. I mean, it's, it's, like, it's pretty cool. It's super cool. Like, clearly, we, it's hard. there's a lot of people paid to do this, then I'm sure a lot of people are thinking hard and have ideas that are better than me. But one can sort of imagine

that that opens up some huge, the sort of demonstration of this technology opens up some huge array of sort of other uses that are a lot more complicated than just like replacing journalists or cookbook authors. Yeah. Which I'm sure it'll do some of at some point. It's not a great writer.

You know, yet. Yeah, it's true. Neither am I. Yeah. Yeah, I mean, same here. And what else? I don't know. At some point, like, driverless technology is going to happen.

Like, it seems to be getting closer. I don't think it'll be the sort of, like, 2015, when everyone thought, oh, in three months, we'll have this, and the entire economy is going to change it as a result. And everyone will be paying three cents to drive across the country. Like, that's obviously not going to happen. But, you know, transportation is a really big. be part of our lives. Well, thank you, Elliot Brown, for appearing on the podcast.

Your insights and expertise were greatly appreciated and added value to the discussion. I'm grateful for your time and willingness to share your thoughts with our listeners. Thank you again for being part of the show. Best podcast in town. Happy to be here. Yeah, chat GPT wrote that, by the way. I'm not kidding. Really?

I just had it right a notch. I said, thank you. Thank Elliot Brown for appearing on the podcast. Next time in Limerick. Crush. Okay. Should we do it? Let's just do it. Then I'll let you go. Yeah, yeah, yeah. Do it in themric form. Oh my God, this is amazing.

Elliot Brown, we must confess. Your impurens on our podcast was a huge success. Your insights and expertise, they shown like a star. Thanks for being part of our show near or far. We're grateful for your time and your kind words too. You really made the episode something brand new. so here's a limerick just to say to you for being a guest on our podcast it's true all right that's it I'm outsourced I'm outsourced this thing is amazing more of a poem than a limerick I think that you know they have specific rules about the standards you know it's really good once was a boy named Alex yeah all right next version all right it's been fun Elliot thanks for joining what a blast great having you appreciate especially on the short notice this was awesome sure

And that will do it for us here on Big Technology Podcast. Thank you so much, Elliot Brown, for joining. What a great conversation, as always. Thank you, Nate Gwattany for handling the audio on a short notice. Really appreciate you, Nate. Thank you for doing this, as always. Thank you, LinkedIn, for having me as part of your podcast network. Holy moly, we're into year two of this partnership.

That's awesome. And thanks to all of you, the listeners. So we're actually going to have a new show, a new episode, a week starting Friday. I'm going to tell you more about it when we come on air next Friday, but Ron John Roy is going to come on and be a permanent, permanent perma guest, really, where we're going to have a show once a week with him. We're going to stream it live on LinkedIn, and we're going to talk about all the news that happened in the week prior. And I'm saying this because it was clear to me over time that there was so much news breaking in the tech world. We couldn't really get to it completely in our Wednesday show. And so now we're going to do it on a Friday show.

Ron John every Friday and our regular scheduled show, as usual, on Wednesdays. More on that to come on Friday. But for now, I just wanted to say thank you so much for listening. Thank you for being here with us year and year out. We started in 2020. We did 2020, 2020, 2021, 2022. And now we're in 2023, the fourth year of the show, or at least the fourth year that the show exists. That's pretty cool.

And it wouldn't happen without you. Okay, thanks again for listening. We'll see you next time on Big Technology Podcast. Thank you.