Chit Chat Stocks - Investing Power Hour #24: $ADBE Acquires Figma, Twilions get laid off, Coinbase Manipulates Users

Episode Date: September 18, 2022

The CCM Power Hour is a live-streamed show every Thursday at 3:00 pm EST. On the show, Ryan, Brett, and a rotating list of guests have an unscripted discussion on a variety of investing topics. You can watch the show on our YouTube channel here: https://www.youtube.com/c/ChitChatMoney Follow the show on Twitter: https://twitter.com/chitchatmoney ***************************** This episode is sponsored by Quartr, the new way of doing company research. Access conference calls, presentations, transcripts, and more for FREE on your mobile device. Download Quartr on the App Store here: https://apps.apple.com/us/app/quartr-investor-relations/id1552412128 Download Quartr on the Google Play Store here: https://play.google.com/store/apps/details?id=se.quartr.android ***************************** This episode is sponsored by Stream by AlphaSense, the highest quality expert network library. Sign-up here and get a 14-day free trial:  https://streamrg.co/CCM ****************************** Access our “Not So Deep Dive” episodes by signing up for CCM+. Sign-up directly through Spotify or Apple Podcasts. If you listen on another podcast player, use this link and create a private RSS feed: https://anchor.fm/chitchatmoney/subscribe Need more information? Check-out our launch newsletter: Here ****************************** Learn more about your ad choices. Visit megaphone.fm/adchoices

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Anything discussed on Chit Chat Money by Ryan or Brett or any other podcast guest is not formal advice or a recommendation. Now please enjoy this episode. This is the Chit Chat Money Investing Power Hour. Today is Thursday. What's the date? Anyway, it's 12 o'clock on the Pacific Coast here, 3 o'clock Eastern time. We do this every Thursday at 3 o'clock Eastern time. I know that's pretty much right in the middle of the workday, so inconvenient for everyone, but we go live on YouTube where people can ask us questions if they so please, or you can listen to this after the fact on the

podcast. I think we do it. What? It's three days delayed. Typically it comes out on Sundays. Sunday morning. Yes. And you can also watch the old on YouTube. You can watch it an hour or a day later or a week later, all the old streams will be up there as well. But for anyone that doesn't know, this is basically an hour of riffing on the financial markets. So we can talk about anything we don't come prepared with anything in particular uh but there's been news out lots of news this week actually kind of a jam-packed week one in particular quite a large acquisition this morning you want to talk about it yeah the well i gotta say i'm getting all my information from twitter because i don't actually own the company so if anything is wrong uh correct us in the

comments or let us know. But Adobe is buying Figma for $20 billion. I think it was a mix of cash and stock, but I can check to confirm. And the rumor is that that's around 50 times sales for Figma. So the market is not happy. Adobe is down 17%. And yeah, I mean, I don't know what are your thoughts on that when you saw it? Were you scared for all the other software companies we own that might still overpay for something. I thought people I thought we were supposed to get discounts in a bear market.

Well, you know, I mean, there is some advantage to they can just make it a part of their creative cloud. But so I think they have and then it's easier to upsell it.

Oh, the synergies. Yes. Yeah. All right. All right. I mean, they could pay more for it than someone who wants to buy it and just let it run on its own. Yeah, sure. But yeah, it's still a ridiculous price. I think, maybe, I saw some takes, some people said that this will be Adobe's Instagram moment. Well, okay.

Yeah, it's going to be the best acquisition possibly ever. yeah yeah all right okay well i mean what would you have what would you have said when when facebook first bought instagram uh well news came out today yeah revenue at that point yeah but i would have known that every girl and at my high school was on it I also would have known social media is a fad whatever no no no no

I said I would have you know like look I think at the time meta Facebook had a market cap of probably

100 billion dollars or at least you know 50 to 100 billion can't remember exactly although it's got to be right around there

and they bought Instagram for 1 billion I mean this is a 20 billion dollar acquisition pay it for quality uh yeah 50 times sales look here here's what the rumor is they have what like 400 million in sales

is that what i'm doing the math right i am seeing 50 yeah i'm seeing the number 50 times sales getting thrown out um figma also wants to leverage adobe's expertise in 3d video vector imaging and fonts to greatly improve product design on the web yeah i get i bet they wrote a great press release. I'm not, you know, that's not shocking. Congrats to all the investment bankers that have been assigned to this job. Congrats to the Figma. Number one, congrats to the Figma employees. If you know a Figma employee, I mean, you should talk to them about going to Las Vegas or something because those stock options, I mean, wow, that's going to be some just amazing stuff congrats to the venture capitalists i saw some of the numbers on there

getting some 30 40 beggars victory laps made this morning by vcs yeah is there really so look you gotta trust management i think that's just the big thing here get into a more serious discussion you gotta trust management like if i buy something exceptional i know no i'm not saying this is a bad thing i'm just like if i saw this deal i didn't know anything about adobe's management oh i would be like uh geez like what are we doing here i mean the base rate on 50 times arr i mean the likelihood this deal is bad is high just because of the price they're paying I mean, most acquisitions result in a poor ending. Well, regardless of that, the price they're paying matters.

And I think if you haven't vetted management, if you don't trust the team there, whatever you need to get to, you're going to be really upset here. And I think that's just kind of, it's an example of how you have to trust management. If you're going to be a, you know, buy and hold compound or whatever you want to call it, long-term stockholder of a company, because they're going to make decisions that you disagree with. And yeah, unless you, if you don't trust management, that it's just going to, you know, push is going to come to shove and you're likely going to sell. Figma was first founded 10 years ago by Dylan Field and Evan Wallace, and the collaborative design platform has become key for many businesses in recent years. Thousands of designers and developers at Microsoft rely on Figma every day to build Office, Windows, and more. It's used so heavily at Microsoft that it has been testing the company's relationship with Adobe, a close partnership that will only get closer now. Yeah, yeah.

Yeah, you know, you know, you could have an IQ of 50. It always sounds good initially. Oh, the center. I mean, come on. All acquisitions are great in theory, in estimates, rarely. Let me, for the people that, yes, for the people that are optimistic here, lest we remember the Afterpay acquisition and the Twitter threads and the blog posts and all the investors talking up the synergies.

The ecosystems are colliding. Exactly. We're a two ecosystem, whatever they were saying. It was so galaxy brain. And just remember that. And they paid probably the same multiple, right? I'd say a similar multiple for a slightly larger business. Look at that. I'm just so surprised at the price they had to pay here. I mean, I thought this was a bear market. It's probably a testament to the business, to be honest. That means they were probably not struggling at a time when every other business was struggling. I'm guessing. I don't think this company had declining sales. Well, that's true. I thought about it 50 times. I did see, did you read the short report on Latch? Looks kind of interesting.

uh i liked it i saved it for later on the old twitter uh i didn't read it yet following the company as to be honest a potential long a few about a year ago i can understand why it could be a great short candidate because basically everything has gone wrong uh i think it's been on the watch list i provided a nice checks and balances system for you there yeah i almost took a flyer on it but you know i mean i don't think i would have bought but it was pretty darn close pretty darn close i think uh that's just that's another example of the the old cliche of don't buy something until it's been public for a couple of years is is true like you know that's you always think your company no matter who you are

what company is you always think your company is going to be the outlier and it really is it's it is good to have like some strict principles in investing. Probably the only reason, probably the only way that reason or not reason thing that saved me from losing money in latch. So, yeah, I think I'm going to stick with that rule.

The Patagonia errors. That was interesting as well. We all like Patagonia. I saw some commentary from the CEO, I guess for context, I don't want to botch this, but the CEO basically gave the company away to charity. Am I getting that right?

Essentially $3 billion company. He gave away. Yes. And I think, well, he gave away his stake, his family stake. And I think it was essentially the whole thing.

So, yeah, this is what he said. He, this, the Patagonia CEO said, I don't respect the stock market at all. Once you're public,

you've lost control over the company and you have to maximize profits for the shareholder. And then you become one of these irresponsible companies. companies. Say that quote again. You said it a little fast. I don't respect the stock market at all. He said, once you're public, you've lost control over the company and you have to maximize profits for the shareholder. And then you become one of these irresponsible companies. I kind of agree. Yeah. I mean, I think we're stock market investors. So you might say, what he's insulting you know you but the analyst community is pretty toxic for building long-term

stakeholder value because i see i just read an investing conference today where someone was like like the company the cfo was saying well gross margin should climb higher and then like the analyst three times just kept repeating well what is it gonna be next year they're like give me a number of what the it's gonna be and he's like i don't know but it's gonna go higher over time And I think that's kind of another way of saying the analysts are focused on the short-termism. Good comment here from Matt. I wonder if the CEO knows ESG is a scam. I think we need a clarification there.

ESG is not a scam if you're doing something like he just did. However, ESG investing for high fees is where I think Brian and I would agree is a scam. There's kind of a fine line there, right? I think there's three reasons you include ESG in your company in some way. Either you generate fees on it, i.e. the investment banks or investors who are selling out ESG funds. You lower your cost of capital, which is what most of the companies do, which it is your fiduciary obligation to do so. the green the green bonds getting those cheaper rates i love the green bonds yeah or because you genuinely care about the principles and you're actually backing it up with some something

substantive i just find it hilarious that companies who clearly although they may be beneficial to society companies that clearly don't benefit the environment have esg reports and it's not about it's not about your impact it's about your improvement yeah the uh i um there was a funny joke from someone on twitter that did like when i get it was like when i get to your esg section of your annual report and it was the 50 cent laughing in the car and then driving away uh gif yeah that is exactly i i find that hilarious because that is exactly what uh i do because as an investor frankly i could care less about your esg initiatives especially if you're a software company

um or what do we see the other day recently with our ubisoft a gaming company um And for the people that think Brett's just some anti-Earth, anti-innovation, he's a big Earth guy. I am a big Earth guy. That's, I guess, a good way to describe it. Yeah, we got to get another good copy here. You know, companies that have a solar company that uses truckloads of coal to create the panels, onshore wind that isn't remotely efficient. as long as the end result looks good you're in the esg club even if you use weaker labor over in china yeah i mean there is the brand value to that i think this patagonian guy is probably walking the walk from what i've read about him i don't know him perfectly but a lot of the companies

yes like i wouldn't describe you're still selling hundred dollar sweaters yeah yeah well you know they have uh yeah i mean maybe there's no no it's not it's not about his company being esg because i think they do i think they do some really good stuff from what i remember i don't know the company that well um but he this specific the specific thing you know obviously is good but there's a lot of companies that brand themselves as esg like this comment said that is not like it's just such a that part of this game it doesn't mean esg itself is a scam But so much of what brands itself as ESG is just a complete scam right now, which honestly is so frustrating. I've read on stream, I feel like I've gained a much more intimate understanding of the companies

that I cover. And at this point it has become an integral piece of my research process. So if you want to check out some of their transcripts for yourself, you can go to streamrg.co slash CCM and sign up for a free 14 day trial using the promo code CCM. Again, that's streamrg.co slash ccm s-t-r-e-a-m-r-g dot c-o slash ccm yeah i started reading a book this week i'm blanking on the name but i think it's called the it's like the way the world works or something like that and space uh yep i read it the uh yeah about because he's a bit i think i mentioned yeah i think i mentioned it he's a bit uh what do you think of this author he's a bit um he's a bit yeah he's a bit condescending

but he seems really smart I think it'd be hard not to be condescending or cynical I mean yeah it definitely comes out in his writing but to be he's a bit of a hater I think that's a good way to describe it too

but it's good there's a lot of good facts in there yeah I think he probably has to listen to misinformation and ESG crap on a regular basis. That's just not reality. Yeah. Yeah. I guess if you're listening to that all day, maybe you become a little frustrated and angered and annoyed. What company is the true, should be the true poster boy for ESG? What company actually benefits or implements good?

let's focus on let's focus on the E and not the S and G right I mean governance is there's some good ones out there but no one cares about the G honestly well they should they should I think they should social

I don't know anything about social stuff I kind of just ignore that in my life sorry but it's just a shorter way to say environmentally climate change yeah it's I mean oh what's that nuclear company that went public new scale power i think that's a public let me

just confirm this is not a stock recommendation because i have no idea about the company but new scale power you know they're trying to get uh nuclear back i don't know that seems like a good one that's doing my advice to the nuclear industry is to rebrand yourself be it be the exact same thing but just put a new name on it because people cringe at the the word nuclear frankly and then it's like this reluctance among people to adopt it as an energy source i feel like or to put money or resources into it yeah it's gonna be tough though it's pretty high uh that brand you know the brands and the brands and power new power no elemental power i've heard a lot of stuff elemental power atomic power

elemental i think that brand name would do all right yeah i think i stole that from someone i saw online um because that's really what it is but yeah i mean i think uh a nuclear company is good I mean, the solar companies are interesting because it's just the input costs are so carbon intensive so it's a bit defeating the purpose and you have to use so much land.

What did you think of the Nintendo Direct this week? Pretty standard. Pretty standard. No real surprises there. There's been a lot of video game showcases

the way I think this I guess this is just time period for doing that thought it was fine but the more interesting thing made

maybe the fact that the Splatoon 3 game this new kind of a newish brand from Nintendo from I think the first game was 2015 the third

game in the series just came out and broke records in Japan for sales so yeah i don't know that's one of the best new brands what the point of that game is well it's just shooter game for kids because it's like paint you're shooting with paint it's like almost paintball and it's like four on four or whatever it would be with you know a lot of the shooter

style stuff style stuff that works really well except it's more animation and it's more you know it's like paintball almost but it's paint um it's not paintballs it's like shooting liquid um i don't know there's probably more backstory to the whole universe but extremely popular game that has really grown in popularity the last you know since it started in 2015 i guess it rode the momentum of the switch and it's interesting to see a new franchise take hold like that um personally don't think nintendo gets the respect it deserves for building brands like that. We are shareholders.

Yeah, to be honest, we know this well because we are shareholders, but the... And it's gotten less share of what it did. It's gotten less credit over recent years as well

as evidenced by the performance. Over the last two years. Yeah, over the last two years with the stock down. The, I mean, the direct... It's fine. It seems like they're just biding their time until the new one comes out, until the new Mario Kart comes out.

That's kind of what I think. They have the new Zelda game, which we already knew was going to sell 20 to 30 million copies. That's not really a big surprise. I mean, yeah, the big thing is just waiting for the new Mario. Well, I guess there's the Mario movie, but that's different than the Direct. From a games perspective, I honestly think waiting until Mario Kart 9.

It's similar to Take-Two Interactive, where you're waiting for GTA 6. Nintendo's a bit different because it has the hardware take rate on all the games sold on its platform. But I kind of think that the big event you're waiting for is the new Mario Kart and the new console.

Yeah. But they keep putting out a solid amount of games. Wouldn't be surprised. It's almost always first party. Although we are studying someone who has succeeded in third-party games probably the most successfully on the Switch

outside of Minecraft, which is just such a juggernaut, but Capcom, which is Monster Hunter series, has done extremely well on the Switch, and we're studying them for the Not-So-Deep-Dive next week to continue

the gaming theme. That is a series I do not understand. i i understand but i don't understand how it does so well i don't i'm not the target audience i suppose i think they're hunting monsters no i know how the game works i just don't see i've watched like videos on that series i'm just not i don't get the excitement to play it But other developments, Swedish match, the saga continues between them and Philip Morris. Yeah, less people, more hedge funds are taking stakes, huh?

Do you remember the terms? Do you remember how many shareholders, what percentage of shareholder approval they had to get? They were looking for 90%, but I think they lowered it to 50%. I haven't followed it closely since we sold. I'm surprised they didn't mention us as the 0.0002% shareholder. Yeah. That's got to... We were outmatched. We were.

You know, for the Swedish match shareholders that are sticking around, I really hope you get a better deal because I think you deserve it. It's a bit of a tough situation because it's weird. We were validated that we were correct on the thesis, but we're not going to make as much money as we thought we could. It's just a bit weird. Yeah, I think I'd rather take the money. Well, yeah, obviously. But it's like with this situation, you don't know.

There's just so much uncertainty and it all comes down to if you're one of the funds that can control it. But if you're not, it's a bit of a, I wouldn't say a coin flip, but kind of a coin flip where it just could be dead money at the current price or something happens and it bumps up to $120, $130, something like that. We'll see, though. it shocks me oh I never mind I was going to say it surprises me on a day that when Adobe makes that bid

for Figma Autodesk trades down I would think people flock from Adobe to Autodesk investors would

Yeah, I think to me, I know there's a lot of Adobe lovers out there and the stock has been an absolute, I don't know, thousand beggar since the 80s. I think that's correct. So obviously a great company, but I kind of think it's this spending $20 billion on Figma indicates to me that the moat may have been slightly weaker than people thought. Why else spend the money? well now it's better but you had to spend 20 billion dollars now

maybe Autodesk is going to spend the same amount on a company but I just don't see the same sort of threat to that business so I

I think it might be right because you have to feel threatened if you buy a company at that sort of price yeah

at that multiple and I think that little bit from the article that Microsoft was considering switching from Adobe that's a big customer

yeah true Microsoft should just buy Adobe now okay so was Adobe really there's no way Adobe

all-time soft charge I think it's a thousand bagger i believe so i don't want adobe stock photos uh let me just pull it up on coif and real quick free advertisement yeah 128 000 oh my gosh wow i think that's a 10 000 beggar yeah i mean it's here's your question for the episode what do you think's the next 10 000 beggar i'm not looking for 100 beggars 100 beggars are easy i'm looking for 10 000 beggars

10 000 beggar let's say you had to you had to put your marbles in one basket for a 10 000 beggar okay you don't have to put all your money in but let's what company obviously this this isn't just like a fluke of one product doing well this is like a culture of what it has been strong capital allocation I mean it's been a monopoly yeah not really is there any company that if you had to go galaxy brain and extrapolate out you could

see you were holding blindly for 40 years latch no just kidding it has to be small though so maybe I would say

I'm just looking at my watch list so you know you can call me crazy but this one was hyped up a lot it turned into a bubble stock in late 2021 but matterport they're trying to map the world that's an interesting one training at a billion dollar market cap right now so i think there's that potential but if it's a 10 000 beggar you know probably gonna have to be at least a few trillion dollars in market cap so I don't know maybe that what about Ethereum

after the merge yeah well what's Ethereum's market cap right now a 500 billion I mean 10,000 beggars just out of the question it's harder to do it's much easier to do something that's already

fairly large that has a decent you know and we'll hit that potentially hit that 10,000 beggar but I think it's just extremely Swedish match rest in peace that let's look at what they were all time let's pull up the chart

what's the greatest performing stock of all time do you know I think it's probably Microsoft I would guess I guess it's Microsoft or Berkshire or

Apple just a hunch though Swedish match 11 000 since the 90s i think that's when it got recapitalized don't remember exactly so not bad although it's ending it might be berkshire since that's been publicly traded for a long time and then he kind of just hopped on the buffett bandwagon in the 60s true it would be great

it would have been so cool to be a Berkshire shareholder pre-Buffett and hold through like blindly you didn't know what happened it would actually be better to be a blind

shareholder than follow closely because if you follow closely the stock would have done terrible in the early 70s and you had no idea what he was doing you didn't start publishing the letters till i believe sometime in the 70s and the stock did terrible yeah i don't know like you would have no information on them and you would have seen like what they were trying to do with the um all the remember the complicated organizational

structure i feel like a lot of people would have sold it's interesting to me that i looked at best performing stock of all time there's no there is no one answer that i can there's not a uniform answer across all these different websites. Oh, yeah. Yeah. Well, most of those are wrong. Yeah. Hard to track a lot of these.

I think a good resource on that, though, is that 100 Beggars book by Chris Meyer or Mayer, forget how to say his name, but that had a lot of good information on the best performing stocks of all time. And even though it's a value investor, whatever, if you're that type of bench, you might scoff at that title. It is a fantastic book with a lot of good data in it. It's not just magical hunter-beggars. It's the formula for existing case studies and what makes a stock a hunter-beggar.

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to help uh those in the armed services like keep enough energy to like fight wars i don't i'm pretty sure it's like that that was the actual it wasn't like some i hope i'm not getting scammed by some random piece of twitter data but uh i'm pretty sure that's actually what the uh rationale was for starting it that's good that's healthier than the uh cocaine and meth they used to feed the nazi soldiers so we're taking you know a little better step forward probably a bit probably a bit better although whenever i see someone drinking a monster i do not think, and this might be ironic, I do not think high energy. Sorry if you're a monster drinker, but isn't that right? Or am I just stereotyping the people that drink monster

energy? What do you think? I think low energy when I see someone drinking a monster. You think needs energy? Yeah. Maybe that's why they're drinking it, but I would think that they would already have it. Maybe that might be mean. I don't think it's as mean as I've never seen whatever the the famous uh trump tweet that i've never seen a skinny person drinking diet coke alzheimer of just ridiculous steak but um uh yeah i don't know i just kind of thought of that like you know you see someone drinking a monster or energy drinks in general and you always think man that person's person's tired but it's probably why they're getting the energy drink Layoffs at Twilio

More news Oh that was did you see Go ahead you tell the story Twilio Apparently announced plans to cut 11% Of its staff Twilions Sorry

Yeah I did see that they referred to them as Twilions Lawrence Hamptons said Imagine getting laid off by a letter referring to you As a Twilion yeah that wouldn't feel great There is so much just like Tone deafness Out of tech Out of the CEOs

They do not know how to do a layoff Properly First off I don't think anyone's gotten it right I don't know if there is a right way to do it No don't You don't pull The what is it Lord Farquaad

From Shrek where it's like Yeah this is many of you will die but it's a risk I'm willing to take it's kind of like that I didn't want to have to fire you but it's come to this unfortunately

for me honestly don't bring it up unless someone asks about it on a conference call and then you can say we're not hiring people I mean maybe there's some stuff that's like has to be for an 8k that you have to release but unless you have to release an 8k

or an sec filing just i would say just keep it quiet because they never or keep it internal i mean maybe you know a large company stuff will leak but you know who i think did it well honestly dropbox dropbox they did it at literally while adoption was high for their product like during covid a lot of companies were they had a little bit of an increase in terms of adoption and they They got rid of their real estate, right? So they didn't need some of those in-office workers, janitors, and stuff like that. Yeah, they said, we're going remote, and we don't think we require as large of a staff anymore. Sorry, you'll get good benefits.

Yeah, I know. When they give out the excuses of why they're firing on people, and it should just be the reason, which is almost always, we don't need you anymore. just say that and then go from there yeah I don't no matter what you don't say

we are right sizing our cost structure I thought I had a good name the other day or yesterday that I don't know if you saw that I thought that was going to get more likes than it did he literally opens the letter with Twilions comma

over the years we've made lots of changes to the way Twilio operates dude just yeah all right all right there's more on this type of actually it's sort of I have something else that is really I don't know if it's interesting

or nefarious but besides that I saw that Google was getting rid of or totally downsizing its let me find that tweet experimental departments yeah what's it called because then people can look it up if they're interested uh come on walter bloomberg where are your shots or something like that no let me find

it let me find it did i not like that yeah that was yesterday all right let me find it on the old internet google on oh area 120 they are canceling half its projects and area 120 is the place where they would do like the 20 thing you know where like 20 of the time you're working on whatever you want um thoughts on that and companies in general kind of doing this buckling down on maybe worker efficiency? Does it kind of show weakness

or do you think it's good? Because I kind of think it might show weakness in, I don't know, a bit, you know what I mean? But it might be good because it may be companies were kind of

taking it easy with the bull market demand for some of the products and Google could be less efficient and still look good to shareholders, but now they can maybe become more efficient

over the long run. if you were an employee at uh let's say one of these big tech companies do you think you would be more motivated to work when things are going really well you see your stock price continue to shoot up day after day and you feel like and you're being let's say let's say you're taking stock options as part of your uh compensation most people are and so you feel like wow i'm really actually helping? Do you think you'd be more motivated then? Or do you think you'd be more motivated after you saw 15% of your friends get fired? That could be me if I don't step on it. Yeah. I think layoffs can be a good motivator for the people that are still around.

I would be. I would be. I'm sure, but. I would. No, I'm thinking if I was not the manager, if I was the worker, I would be motivated for sure to work a little bit harder. Now, if you're at one of those giant bull markets. More motivated than during the bull market? I think so. In the bull markets or when, I mean, when you're fat and happy, you get lazy.

It's just how things go. It's a cycle. Existentialism brings out the best in people. Yeah. Or the hardest workers. You know, maybe that's not the best in them, but the hardest workers for hitting their earnings targets. because I know we have the investor hat on.

Yeah, I think it's a good thing in the long run. Honestly, if you're kind of a short-term analyst, it might be kind of a red flag just for... Obviously, layoffs are a huge red flag if it's a 10% plus of a workforce. But for the long term, I think it can be beneficial these time periods. We've seen it with Airbnb,

be, who had that... They were one of the total... During the beginning of the pandemic, they had the just terrible, terrible stop in demand. And I know Chesky won't stop talking about the story, but they basically had to stop all spending, stop all expenses, lay off a bunch of people. And they realized that there was a lot of expenses they didn't need, a lot of search marketing they didn't need and it's helped them with their margins a ton so i think that could be very helpful for some other companies if they go through something maybe a little bit less stressful than seeing all of your demand to go to zero overnight but do you see sorry yeah no i i think i i do think chesky's maybe talked one too many times about

cutting the marketing budget to zero but it's a good story i don't think every company has the the brand for that the ability to do that with their brand I think Airbnb probably gets a lot of organic searches but I'm just like reading through the rest of this Twilio

letter and did you see this it says in bold am I impacted in the US comma impacted Twilions will get an email within the next 60 minutes letting them know whether or not their role has been impacted could you imagine just waiting there for the next hour just staring refreshing your email inbox yeah what a horrible way to do

that i know you gotta like sit next to your friends you hear like the the chime from the email yeah i don't know it's never a good way to do it never a good way to do it what about this let me find it from coinbase did you see this from coinbase you might have not because their CEO does threads every day, it seems like. Okay. All right. Here's something that seems benign, but feels extremely manipulative to me. I'm not going to read the whole thread, just the first tweet. Starting today, and this is the Coinbase CEO, Brian Armstrong. I saw this. Starting today, Coinbase will begin integrating our crypto policy efforts right into our app.

These will help our 103 million verified users get educated on the crypto positions held by political leaders where they live. Isn't that? Call me crazy. That's a total scumbag move. Call me crazy. Why do you think it's a scumbag move? You're not letting people form opinions with unbiased information. The information Coinbase is presenting to you is clearly what they're trying to lobby to these representatives to get crypto regulation in their favor.

I mean, is it illegal? No, but it feels a bit. I think if they would have done this a year ago, it would have been maybe a little more impactful. I still think it could be impactful. Maybe. be i mean doesn't matter because all this stuff is just magic beans whatever but the i still think it's kind of manipulative because we could see a lot more representatives think oh wow a lot of my constituents really like this stuff i just don't want to do that oh it's i know exactly yeah it's

exactly why that's exactly why coinbase did this is to get people to get on their side but i just don't it just doesn't seem like it's kind of let me see if it's an example here it's like if if for anyone that doesn't know do you want to maybe give a little clearer of a picture about what exactly this is yeah it's exactly it's what the tweet said i mean i'll repeat it kind of it's just telling them through the app what Coinbase's policy efforts are for

I don't know, United States regulation. So they're going to tell all their 103 million users which I guess were counted as users probably because we've had registered accounts so I don't know how many of those are active but

what positions are held by the political leaders and giving them basically direct contact to say your representative in this California county. And it gives them a crypto sentiment score. Oh, really? They give them the score?

I didn't see that. You know, the Democrat for your state, let's say, has a bad crypto score, has a bad crypto sentiment score. You're not going to want to vote for him. That's the gist of what's going on here, frankly.

That's even worse. That part's even worse. The... i think it's very nice let's see the quote tweets i think it's pretty i honestly think it's really really poor taste it's like okay here's the example i was trying to say it's like if amazon through their app or website kept nudging people about their policy efforts about antitrust for their online marketplace how much that's just not it's just not no one with any ethics would do that no i think it's really dumb it's a bummer it's a bummer that so much time we talk about it we talk about it so much time effort money resources are spent on absolute unequivocal bs

it's a shame i think bucco capital had the best quote tweet for it he says weaponizing your user base to apply political pressure for regulatory capture is so on brand for brian armstrong and crypto but it doesn't make it any less dumb that is true that i agree wholeheartedly um also if you're well i don't think you should vote purely based on uh your representatives crypto sentiment score just for everyone's what are your what are your take on any advice i was gonna vote for blank but i wanted to hear his take on magic beans what's his take on the ethereum but he doesn't own enough dogecoin for me to uh

i feel compelled to to vote for him yeah that's a pity really have you been looking at as a little tease for next we're gonna be looking at capcom yet or recording tomorrow so a little bit i've been uh i kind of like with the video game companies i like to go through youtube videos of all the video game franchises that they own yeah and there's always a grasp on like what the video games what the gameplay actually looks like and sort of the plot and stuff like that it's I don't know I guess it's fascinating but

I wasn't really enamored by any of the IP yeah it's not from a gamers perspective I'm not really much of a gamer but I wasn't that excited to play any of the games yeah what did you think management seemed

strong but yeah I liked what management had to say you just tell reading their shareholder letter that of... I don't know. Founder's been there for 38 years. It seemed like the culture was strong, but yeah, the... Don't want to spoil

our takes, but brands aren't... I was just kind of like, eh. But their execution has been strong on a long-term time horizon. So... Hard to tell.

They're Japanese and like nintendo a little bit more slower moving they're more patient so it's kind of hard to get a read on them but yeah pretty interesting though good one to study all right i got what 13 minutes left yeah uh speaking of gaming and then i'm just going to use this as an example for just the strategy as a whole ea electronic arts is making the sims for free to play starting October 18th. Now, that doesn't

mean in-game purchases are free, but anyone can download it. What do you think of the move and that Tortoise strategy in general? Is making Sims free-to-play? Sorry, I was a little distracted. The Sims 4 free-to-play? I'm not familiar with the Sims brand, honestly.

I don't know the game that well. and you're a shareholder yeah i mean it's they don't talk about it very often but it's actually been really it's been really strong it's a billion dollar bookings brand um i think whenever i see this i kind of think it's a company or it's a franchise whenever they're able to go free to play it's an indicator to me that they're coming from a position of strength yeah i mean it's basically what second life is essentially uh i don't know what you're yeah i don't know why everyone uses second life as an example because that was like but yes sims

i mean kind of it's just like yeah virtual person you can you know meet people talk about the metaverse really what it is um what's it been historically what like 60 to play i think at launch yeah but it's fairly old uh and they've had a lot of add-on content so it was down to those discounted $20 range, but now they're making it free-to-play for everyone across all the systems and PC.

What do you think about this? After studying Xbox, which, again, another tease came out this week for CCM Plus subscribers. We did a whole show on Xbox. Do you think it seems like supply chains for the consoles

are making the game industry I know mobile is such a large part but it's really under I think that's really the reason the game industry is down this year is because of the supply chain issues because it seems like people would be buying many more consoles

especially last holiday season either PS5s or whatever they're calling the new Xbox than they have given historical numbers i mean yeah you can't get you cannot get one at a store and that i think that's got i mean it sounds obvious but that has to be impacting uh a software demand or you know the actual games demand yeah i think it's a little more muted than it would have been last console cycle because

backwards compatibility is more prominent with a lot of the software as opposed to like discs fair yeah but yeah so there's still a lot of house but i think there's probably less people being introduced to the ecosystem than there would be i think right now it's probably a lot of upgrades so people that would have bought the games anyways whereas the the incremental sales of like the new customers being introduced to the ecosystem i think a lot of those probably come from in-store sales, which are non-existent. Oh, of the

in-store sales of the hardware? Yeah. Yeah, because you're not the one waiting for the drop online and oh, we're going to get this right at this time when it comes. We're going to rush to my computer. Yeah. And I think I honestly think people are putting up buying games until they get this new

console, but that might be speaking optimistically as... No, I think it's right. Why I pay for the game with slightly lower graphic quality if you're going to get it anyways six months later and have it be much better so you don't have to repay 60 bucks again.

I think that's probably still right. I think, yeah. This holiday season will be a big event. The Black Friday through holiday season. Or not just event. It'll just be a big time. I think a big time period for hardware sales for these consoles.

it'll kind of show like are we in almost a permanent state of undersupply or are we going to finally fix the semiconductor shortage um but we'll see we'll see could be interesting we i think maybe some of the gaming earnings xbox whoever playstation and then some of the publishers could be unders people could be underestimating them if console uh shortages abate what do you think about that thesis i know we don't invest with that short-term time horizon but what do you think sorry repeat the question i just saw that uh bear cave had uh a coinbase short report oh what yeah they're gonna lose all their users all right that's uh yeah that'll be a fun read though oh it's pretty yes premium well i'm sure uh all right yeah sorry repeat the question

the uh yeah you're getting distracted on us the i gotta remember what i said okay if the console shortages abate do you think uh analysts or investors in general might be understating the earnings potential of some of the gaming companies both hardware and software yeah i think you kind of answered your own question with the question but yeah well it just seems like that's not priced in at all because i think a lot of people are struggling to look past the next year honestly well i look at a lot of yeah that's true i look get a lot of um publishers or whoever and they basically get a lot of them get the same sort of

analyst estimates like five to ten percent revenue growth and that's because recently it's kind of been muted especially if you're console heavy but i don't know if we get a lot more consoles into people's hands i think that could accelerate it shocks me that the console business is flat over the last decade yeah some of that was timing i it should get much larger within the next few years but i guess i don't know it depends what you classify cloud gaming as but i think that could be a driver as well unless that's this whole other category logitech and tencent just announced a partnership to develop uh cloud gaming compatible

handheld device. Not probably going to be that meaningful, I would imagine, but... That smells... I only know what you just told me. That smells like flop because we already have a cloud compatible gaming device

and that's called the smartphone. I really think the only... I think cloud is just going to be really prevalent on... No one's going to... I don't think people are going to want to play with their controller being, if you can buy like a $30 cloud compatible controller to play with Xbox on your smart TV, I think that is a better game experience than just using your phone.

Yeah. That is that, that is the cloud opportunity and PC. That's what Logitech's doing is they're just, Oh, they're not building out like their own, like, gotcha, gotcha. It's not a full stack device. I believe it's just like cloud compatible device. a cloud you mean controller yeah it's just oh controller okay okay that makes sense so they glorified it a little more than controller but yeah uh all right that's interesting don't know why partner with tencent though everyone partners with tencent i think for like the software compatibility i don't know

apparently they said tencent gaming they needed their software for something gotcha in china you have to go through tencent yeah yeah interesting it was just one of those press releases that felt a little spammy but whatever yeah the you realize yeah some

some of the companies love to pump the press release all right anything else it's been busy gaming week we already hit the figba acquisition but besides that earning season is kind of over so

not much not much else I was listening to that gaming analyst that you mentioned the guy that went on invest like the best

he talked about like finding gaming brands that are actually durable he confirmed all our biases right yeah that's exactly what I wanted to hear but the

if you had to bet on one gaming brand to still be as popular if not more popular in 10 to 20 years

let's go let's go let's go 15 years what brand do you think would be this is a great question 15 years is probably the best yeah that's a long enough I would go

either I'm just going kind of Lindy here I'm going to exclude sports because that's cheating although that might tell you something but I'll go Grand Theft Auto and Call of Duty

just going with the Juggernauts yeah aren't there Dungeons and Dragons in there but it's kind of hybrid that's like board so that has a lot of that has a ton of staying power yeah

League of Legends I don't know that well League of Legends is a bit new too although it's done extremely well what's your choice well i think probably the sporting franchises would probably be the first ones i'd go with because the durability of the sports themselves and they've just amassed enough scale that it's hard to like disrupt that but aside from that i think call of duty is going to be yeah gta GTA is more idiosyncratic

than Call of Duty though eh I'll take Mario well you gotta say Mario's more than I mean Mario Kart I think you'd have to go I think that's cause there's so many Mario franchises

Mario Kart Mario Kart's that's gotta be a good choice yeah I think I might put that actually higher I think I might put that higher but grand theft auto has been around for a long time grand theft auto i don't know uh let's see let me actually look it up i don't know when was the first gta to acquired it like i want to say in 2001 well uh yeah but i'm looking up when the first game was made and

that was in 1997 so the first game wasn't that successful though i know i'm i'm aware i'm just trying to look at how long the franchises lasted you know 25 years it sounds like and still relevant how many games can you say let's see when the first call of duty was made i mean mario i mean some of the mario ones is kind of the most impressive there when was the first cod made can you guess earlier unless you've been looking it up i have earlier before after gta the first gta give a guess god after you're right 2003 i don't know it's that late i would have guessed 01 Xbox really started

what PlayStation 2 came out 2000 2000 Xbox 2001 to PS2 is really the I mean PS2 outsold Xbox by a ton best-selling console of all time still although the switch

might beat it soon with a couple years one o'clock Pacific time that is I think gonna do it thank you everyone for tuning in. Thanks, Matt, for the questions. Always appreciate having those. If you guys want to watch these live, as opposed to listening to them on the podcast, as always, I know I say this all the time, look up Chit Chat Money on YouTube on Thursdays at three o'clock Eastern time. And you can ask questions in the chat. I think the live video is pinned on our profile typically.

So go ahead, check it out. I'm going to hit a disclosure. Brett and I are not financial advisors. Anything we say or discuss is not formal advice or recommendation. We are general partners at Arch Capital, so clients may have positions in the securities discussed in this podcast. Thank you all for listening. Thank you all for tuning in. We'll see you next time.