Pivot - Instagram co-founders, "tech bias" and why Amazon will buy Snapchat

Episode Date: September 28, 2018

Kara and Scott talk about the dramatic departure of Instagram co-founders Kevin Systrom and Mike Krieger, Attorney General Jeff Sessions' war on "tech bias," and the future of Snap. In this episode: (01:44) The big story: Why did Instagram’s co-founders leave?; (07:13) Attorney General Jeff Sessions and “tech bias”; (12:39) Will Amazon buy Snapchat?; (17:44) GOATs of the week: Craig Newmark and Margrethe Vestager; (20:08) Absurd quotes of the week; (21:27) Scott’s prediction on the future of Facebook stock Learn more about your ad choices. Visit podcastchoices.com/adchoices

Every week on Pivot, we take a sharp, unfiltered look at the technology and media industries and highlight examples of winning leadership. And when it comes to leading a successful business, time and again, entrepreneurs and executives from across industries share this incredibly simple secret. Turn to the experts for help. That's why small and medium-sized businesses rely on Trinet for human resource solutions. No matter what industry you're in, Trinet tailors strategies for your organization to grow with confidence. Learn more about how Trinet's industry-tailored HR can work with your business at Trinet.com. That's T-R-I-N-E-T dot com.

Hi, everyone. Welcome to Pivot from the Vox Media Podcast Network. I'm Cara Swisher, founder of Recode Decode. And I'm joined by my No Mercy, No Malice co-host, Scott Galloway. Hey, Scott, how's it going? Where are you this morning? I'm in New York. Cara, the Vox Studios downtown. Where is Cara Swisher? I'm at the Vox Studios in D.C., in the District of Columbia in Washington.

So this is our first show. Everyone's looking forward to it. They think we're going to do bad things, which is really interesting from the reaction on Twitter. Let's hope so. Let's hope so. We're going to do bad things. And which of the, you know, I polled people to say,

what does our photo look like? And I don't know which one you thought was best, but I thought my favorite one was Cagney and Lacey is really going to be lit this season. Yeah, but am I the first or the second Lacey? I was about to weigh in, but— You're totally Cagney. Hello.

Hello. It's so obvious, right? I thought we were literally the new sitcom on Bravo where you're the tough but lovable cop and to be—I'm the wacky neighbor that just discovered meth. Yes. What do you think? That sounds good. That sounds great.

That sounds perfect. What do you think? All right. Well, let's get into discussions this week. We've got a lot to talk about. And we're going to start first with our first segment, which is a big story breakdown. I think the big story this week is Instagram. Yeah.

And I've been spending a lot of time talking to people at Facebook about what happened here. I have a very good sense of what happened. But I just sort of like your thoughts out of the gate, and then I will give my thoughts on that. Well, you're the insider here. My sense is that when founders – so my company was recently acquired 18 months ago by Gartner. And when a company is acquired, it's not if but when the founders are going to leave. I think the clock starts right away. Control is a very addictive substance, and founders are used to control.

So the fact that they're six years, I actually think is pretty impressive. The question I would throw back to you is it seems like a lot of these departures are coming at the same time. Is there something wrong in Mudville? Well, yes. I think, actually, I don't think it's too long. I think they wanted to stay. I don't think they wanted to go. I think they liked working there. They were hoping to work there their whole lives. I think not their whole lives, but a long time, as long as they could be creative and be in charge of things. But I think what happened is after Cambridge Analytica, after all kinds of stuff, Mark Zuckerberg asserted himself, especially because Instagram was sort of the engine and Facebook was not anymore. And so

I think this was a story, a situation with, just let's say what it is, Kevin Systrom and Mike Krieger, who created Instagram, left the company suddenly on Monday without telling, they just did it all of a sudden. I think they were pushed really hard by a lot of changes in Facebook that they thought ruined their product, essentially. So I don't think this was a, oh, we'll just go. I think they didn't want to go and left under duress from my perspective. The press release kind of validates that because if you read the press release, clearly

Facebook did not approve it because it says we're looking forward to exploring our creativity again. It's basically sort of we're going to start something else and we – We couldn't do it. Yeah, we couldn't find it here. That was not brought to you by Facebook press release. But what are some of the points of tension? Do you have any sense for what actually pissed them off? Yeah, we wrote about them a lot on Recode.

Yeah, everything. They would tweak things. For example, a stupid thing, but it was important to these people, is the imposition of ads, the way they were going to impose ads. I think they always resisted. I think when they're sharing things to Facebook and back and forth, one of the great drivers of growth was being shared back and forth, essentially, for both sides. And so when you shared things from Instagram to Facebook, it used to say it was from Instagram, and then there'd be a link back, and it created lots of referrals back to Instagram. But you create it on Instagram, and Facebook removed that. So it looks like you posted it on Facebook. It looks like you're using Facebook. I found that

incredibly deceptive, and I think they did too. Like, I think they're more, both Mike and Kevin, whom I know really well, are very much more in the consumer camp than they are in the let's help advertising camp. And what about the, what was the, what is the general mood at Facebook after, you know, I described it as here are the last three thanksgivings for a Facebook executive. It's great to see you. You're awesome. It's great to see you. You're amazing. It's good to see you. You're ruining America. I mean, isn't there a ton of tension right now among senior executives? Well, there's executives who are close to Zuckerberg and there are ones that aren't. You know what I mean?

Like I think they're very – one of the things that I kept getting from a lot of people on the Zuckerberg side here, and it was very clearly Mark Zuckerberg pushing this whole thing, these changes at Instagram that the founders did not like and the more control he was trying to take. I think the ones that are inside with him are – I don't want to say culty, but they agree with him. And they kept saying, you know, Mike and especially Kevin are team players. And I'm like, you need fewer team players and more people that disagree with you. You know what I mean?

Like, it was an interesting thing. So I think there's a tension within the company of people who are in with the current administration and not in with the current administration. And there's people on both sides. And this was the most potent example. And what I think was worst about it is it affects product. Like, you can talk all you want about ruining democracy and the Russians and this and that, but this actually affects product.

And when product starts to get affected, I think that's when companies go downhill. It's funny you say that. It's Silicon Valley. It's through the kind of lens of Silicon Valley. And that is, you know, our democracy and Russians, yeah, that's a concern. No, of course. But the product, watch out. No, but that's how they're going to go down. I'm like, you think they're going to go down over the Russians?

They're not going down over the Russians. They're going down when their product is shitty. That's it. You know what I mean? Like, that's all I'm saying is, of course, that what they've done is gross mismanagement and use of their platform. But what's really going to kill them is something much different. That's just what I'm—and I think it bears out. When products go, that's when companies go.

Yeah, the consumer has the final say here. And who wins here? Whenever there's senior-level departures, there's a sucking sound upward. Who's the new man or woman at Instagram? Probably a man named Adam Aseri who was brought in. He's very close to Mark Zuckerberg. He's a very competent person, but he didn't found the company. You know what I mean?

Like he didn't found the company. And so, you know, these are two really smart entrepreneurs at their peak. And I'm not sure. They weren't like laying around. They weren't like resting investing in any way. And so I think that's always a mistake to remove creative, interesting founders. And that's, I think it's a mistake. I think this is a big mistake.

What happened? It's so interesting because pre-jobs founders, I've been starting companies since I was 25. Pre-jobs, we were considered a crazy liability that our shelf life was once the company got a CFO and then VCs brought in gray hair management. Post-jobs, especially after his successful return to Apple, now we're seen as invaluable to the DNA and should be kept at all costs. It's literally the pendulum that's swung the other way. Well, if they're helpful, like look at Travis Callen, look at some others. I don't know. All right, next thing.

We are going to talk about these. Attorney General Jeff Sessions is meeting with state attorney generals about tech industry biases. Put on your tinfoil hats, everyone. Attorney General Jeff Sessions is talking about the power of the tech industry with a group of state attorneys general or attorney, whatever, about bias on social media against conservative viewpoints. Scott, is this real? What can the state AGs actually do about this?

Or is it just a lot of— Well, actually, the red state AG play is how sort of tobacco was taken down. So there is something here, and I've always felt that the war against big tech will be waged out of Brussels or from a red state AG who sees a blue line path from the AG's mansion to the governor's mansion as a populist argument against big tech. So the AG army is an effective fighting force against big tech. The problem is that what you're going to see with Sessions and the administration continue a pattern of snatching defeat from the jaws of victory. And that is there is real

anti-competitive concern here. These companies have just become too influential, bad for the economy, a host of reasons, anti-competitive practices. But they're going through the wrong door here. This notion that there's a bias against conservatives is just so ridiculous. You know these guys. Well, I'll tell you what I think. And I know these people, I don't know them as well as you. They don't lean left at work. They don't lean right. They lean down. And anything that gets them more engagement and more Nissan ads is cool with them, regardless of the political standpoint. And the notion that conservatives have somehow, their voices have been squelched. I mean, Lester Holt is not giving a platform to Alex Jones. Trump has a direct pipeline to 54 million users

despite violating the terms of use every goddamn day on Twitter. So the notion that this has been anything but amazing for the far left and the far right is just ridiculous. I agree. I think they really are. I sit there. I'm like, that's not what you should, you should be focusing over here. Like over here, they're actually doing bad things. Here they're not. And it's just, it's just, it's one of these things where it's gotten

politicized, obviously, as everything has. And then it's a waste of time. And this is an opportunity missed to do actual focus on things that matter, such as anti-competitive, you know, anti-competition, all kinds of things that are really of concern and the growing power of these different companies on our country. And instead, they're sitting around here saying that, you know, Diamond and Silk can't talk. They can talk. They never stop talking. And it's really interesting that they fixate on this. It's like, it reminds me a lot of when conservatives fixated on gay rights, if you remember. They just went on and on and on,

and I think they lost so much ground on that one because they were never going to win that one. They were never, you know, it was just, I don't know. You had a great line in one of your articles that said that the people who complained about being silenced are the ones who never shut up. Yeah, yeah, that's right. They don't.

And there's plenty of places to talk online here. You just can't talk on some of these platforms. And I just don't know what they, what could they actually do? What could these state attorneys actually do? Force them into what? I mean, it's a legal quagmire of loss. Like you cannot, I don't think you can enforce any of these things. They're just blowing it because this could have been a bipartisan issue.

You have the far left and the far right concerned about these companies growing influence. But instead, they're going to turn it into you're bad for conservatives, which means they're going to lose the far left in terms of any attempt to sort of rein these guys in. It's reminiscent of the Amazon Washington Post, the ham-handed attack from Trump, where he basically undercut legitimate concerns about Amazon. Yeah, and so why did they do it? What's the—is it just press? I don't—I just—you know, I have such a terrible time predicting this administration. I don't understand 95 percent of what they do. So it feels just very political, and it's, unfortunately, there's real harm here.

This could have been a bipartisan effort. And what's going to happen is big tech is going to respond thoughtfully in a measured way with data. Big tech, one of them, big tech is going to act presidential. The other is president. And you're going to see, you're going to see, it's see – I don't know what the analogy is. It's like complaining about minimum wage because you want young people to smoke more. It's just, okay, we should raise minimum wage, but that's not why. And you end up contaminating the whole argument. Anyway, that's the whole thing.

I think they're going to slip right out of it. I think they're going to slip right out of it. 100 percent. And by the way, they should slip right out of this. This is insane. This is just a waste of it. I think they're going to slip right out of it. And they should. And by the way, they should slip right out of this. This is insane. This is just a waste of time. And, you know, again, focusing on things. And then we'll get like 60 tweets from Trump about the silliest of things when we should

be focused on bigger things. OK, we're going to take a quick break and then we're going to pivot to Snapchat and Amazon. Every week on Pivot, we take a sharp, unfiltered look at the technology and media industries and highlight examples of winning leadership. When it comes to leading a successful business, time and again, entrepreneurs and executives from across industries share this incredibly simple secret, turn to the experts for help. That's why small and medium-sized businesses rely on Trinet for human resource solutions.

No matter what industry you're in, Trinet tail going to talk about Snap and Amazon. Explain for the people the situation. So Amazon and Snapchat announced a partnership earlier in the week where you'll be able to use Snapchat to zero in on a product. And it'll be recognized, kind of visual search, and you'll be cued or prompted with that product page on Amazon. So the link between social and commerce. It's a, you know, it caused a lot. It got, rightfully, it got a lot of interest because one, Snap needs something.

I mean, this is a company care. I believe this company is going out of business. I do not believe it'll be a prediction. Snap will not be an independent company by the end of 2019. Independent, you mean sale or not? It'll get sold, it'll get 100%. To who?

Well, that's the correct question. So first off, 10 to 100,000 kids every week say, hey, have you tried this new version of Snap called Instagram Stories? And they switch. And so the metrics— But they might have caught a break here with Devin and Mike gone, by the way, at Instagram. But go ahead. We'll see. I think the bench is probably deep enough to be fine.

But anyways, you have a situation where I think there are a limited number of buyers. So Snap, even though people talk about how its stock has gotten crushed, it's still got a market cap of $13 billion. So I believe the stock gets cut in half again, but any acquisition is sort of an $8 or $10 billion check. And there's a limited number of companies that can buy a company that's not making a lot of money for $8 to $10 billion. So the universe gets very, very narrow fast. So who? Come on. It's either Google or Amazon.

And you said to me, and I had not thought about this a month ago, that the only guy that Evan Spiegel would want to work for is Bezos. I mean, I know who it won't be. It won't be Facebook. Or Apple. Or Apple. He'd work for Tim Cook. But Apple is not that acquisitive.

Oh, they're not getting near it. They're not that acquisitive. And I think Bezos says, all right, you have a core constituency that buys stuff and buys stuff irrationally. High-margin coffee, flying knit tennis shoes. You know, they're crazy, right? We love teenagers because they're stupid because they spend all their money. I bought high-margin coffee yesterday. You are Yeezys?

Did you get your kids a pair of those? Anyways. I don't want to show you my shoes. Go ahead. Yeezys? Did you get your kids a pair of those? Anyways. I don't want to show you my shoes. Go ahead.

But so the other real, I think, interesting piece of information here is the former VP of Finance from Amazon is now the CFO of Snap. And basically the CEO and his top finance people become like twins that can communicate non-verbally because it's very important. The CFO and the VP of Finance are what I call the CEO's source of truth. So I can see this guy, the CFO calling Jeff and saying, look, this is a deal with our company. This is why it makes sense for you.

And then literally short-circuiting an acquisition. Yeah, that makes sense. And this might be. And what about Google? Make the Google argument. I don't think I have a good argument for Google. I don't either. They've tried to be in social.

It hasn't worked. I don't know if they need to be. I just don't know. They don't know if they need to be. I just don't know. They don't need to be. And they're robots. They just can't even. Remember when they were doing Google Plus or whatever the hell it was?

I was like, oh, stop. It's painful to watch. Yeah, that was rough. And they had one of the original ones with Orkut, if you remember. I do not remember Orkut. Orkut was this little guy named Orkut that worked there

and he created one of the earliest social networks, right on par with Facebook and others. And it got very popular in, like, Brazil and some other countries, some strange countries, remember? It was the big social network in Brazil. That's what I remember. Brazil and a few other small countries. And I remember a Google executive saying, you know, we're really big in Brazil.

And I go, way to lose it. Like, Brazil as compared to the United States. Like, Facebook was killing it in the United States and bigger in bigger markets and it was just he was a great guy oh he still is around but he's i don't i think they killed the thing off but they're they just can't do social they can't they just shouldn't it's it's painful to watch and so who does that leave no traditional media company can afford that check and why and losing money but amazon if they if they think they can pick this thing up for 10 billion which would be a 1% dilution on a trillion-dollar market cap, and capture a core constituency that gets them traction among high-margin products,

maybe gives them another entry point, gets more people on their app. Goes with entertainment. Maybe they stream stuff from Amazon Prime Video. There might be a pony in there somewhere. I like it. I like somewhere. I like it. I like it. I like it. I'm going with it.

I agree with you on this one. I don't think there's any other buyers, except for an Asian company, one of the Chinese companies. Yeah, WeChat. And then Jeff Sessions says it's a security risk, right? Yes. Oh, yeah, because what goes on on Snapchat is high security. They're going to weaponize our youth, Kara. They're coming for us.

They are going to weaponize. The robot army of our 15-year-old boys is coming for us. Yeah, yeah. Although I have to say, I have two kids. They still use Snapchat. Yeah, you said they love it. They use it as a communications tool. That's what they use it as, 100%.

And Instagram stories, have they tried it or don't know about it? They, you know, they do. But I think it actually goes along gender lines. I think more girls use Instagram stories. It's interesting. They use it sometimes, but just the other day I was like, how do you like Instagram? And one of my sons goes, oh, the museum. And I was like, what?

And they go, you put up pretty pictures there, that's all. It was not fun or useful or utilitarian. It was just a museum. That's what they call it. I thought it was very smart, actually. Goat, greatest of all time this week. What inspired you? I think Craig Newmark for funding the markup.

It's being done by Julie Angwin, who I actually went to school with, and some others who are getting together to look at big tech, to look at issues around big tech. And I think that Craig has – I did a great podcast with Craig Newmark. He started Craig's List, obviously. And he's been giving a lot of money to journalism efforts. He gave one to a school recently, a big school, $20 million increments, essentially. Made a lot of money from tech, and he's using it to support journalism.

I think it's a great thing. He's an unusual and sort of an odd character in Silicon Valley. And I think he's really enjoying his media mogulhood in this way. And it's a very different way from others like Mark Benioff at one time and Lorraine Powell Jobs and Jeff Bezos. It's really trying to really support traditional journalists into doing what they do. Well done, Craig. He wins it. Well done, Craig. Nice. And so I had a moment of inspiration. Carrie, yesterday, I met one of my heroes,

legitimately one of my heroes. Who? EU Commissioner Marguerite Vestager. Vestager. Yes, she's great. Marguerite's great. I'm on the train back from Acela, and I see this woman outlining an analyst report. No, I stalked her on the train.

An analyst report. Right. And you know what she was doing? Oh, she was highlighting this report. She was knitting. What? How awesome is that? She's a knitter.

I got off the train. I introduced myself, took a picture with her. But this is a woman who is fearless, fighting for the EU middle class, and is fiercely intelligent. Just really excited. She's amazing. They did a whole series about her. Yeah, she's incredible. In Denmark. Yeah. She's, Marguerite Vestager is the EU commissioner who has been sort of making every tech company's life a living hell. And it's great to watch. I've interviewed her twice, and I think she's really quite something.

She's like a superhero. And they hate her in tech. They're polite about it, but they're not. I would argue she's the only public official in the world right now whose testicles have descended when it comes to dealing with big tech. You don't need testicles. You don't need testicles, Scott, to be difficult. You get it.

You understand it. No, I don't. I'm not using a testicle. No, we're not using any. We. You understand it. No, I don't. I'm not using a testicle. We're taking back the inappropriate for the left, Kara. We're not using balls. We're not using testicles. We're not going to be using man up. We are taking the irreverent back for the left, Kara. Why does the right get to own the inappropriate?

You and I are taking it back. No, that's not words I like using. We'll come up with new metaphors. All right. I'm not trying to be politically correct, but there are other metaphors we can use. All right. Absurd quote of the week. Anything comes to mind?

Right back to you. I'm sure you have several. So much is so absurd. I think the stuff around Instagram, the fact that Facebook had no response to this because they were obviously taken unawares. These guys just came in and, you know, they had been dropping bombs all over these guys for months and doing different things and messing with the thing.

And even though they did sell it, I get that. They still had given them enormous autonomy and then just changed the rules of the game. And so these guys just left. I dropped the mic and left. I thought that was kind of fantastic. And by the way, from a seller standpoint, worst trade in history, best trade on the buyer side. Yes, it is. Although they did get a lot of stock. Oh, they did as well. I think they're going to walk away with

hundreds of millions of dollars. Yes, a lot of them was in stock. Oh, and my worst quote, and I'm piling on here, but your favorite person said, she said she was drunk. Oh. Right? Oh, okay. Okay. Then all bets bet her off she was drunk. Anyways. You know what's interesting about Trump? He doesn't drink at all, like myself. He doesn't drink at all. You don't drink at all?

No, I don't. Not really. Oh, Kara Stark. Every now and again. It's wonderful. No. I do it every now and again. I trust my miss.

As Winston Churchill said, I've gotten more out of alcohol than it's gotten out of me. Trust me. All right. Okay. More TV, more alcohol. Boom. I'm out of your life. I like television.

All right. thank you. All right, so last segment are predictions because you have to make a prediction every week now, just so you know. And you have to be right. So what is your prediction? One, we've already made one, and that is by the end of 19, Snap is no longer an independent company. All right, that's a good one. Okay, do you have any others? 2019, Snap is no longer an independent company.

All right. That's a good one. Okay. Do you have any others? I think Facebook, and I'm talking about Booker because I own all of Big Tech, but I think Facebook is, I think the stock is remarkably undervalued. And to be clear, bad for America, bad for the planet, but I just think the stock is going to scream when people realize that probably they're going to get through this

and they're going to start posting just enormous numbers. It's going to turn into Apple three years ago, where it just looks just incredibly cheap. All right. And Mark Zuckerberg is still at the helm. Oh, yeah. Why do you say that? How could he not be at the helm? What do you think? He clings to power like he makes an African dictator look charming. How on earth does Mark Zuckerberg leave? Two classes of stock. How can he leave? I just think this one was bad. This was not a good look.

I'm sorry. The Russia thing. When you start to—no, the Russia thing. Of course, the Russia thing. But I think he flew out of that one. I think this one he's not going to fly out of. Kevin Systrom and Mark— You think that's how Mark Zuckerberg goes down?

I'm just telling you. You just trust me. Oh, my gosh. Just trust me. It's like Al Mark Zuckerberg goes down? I'm just telling you. You just trust me. Oh, my gosh. Just trust me. It's like Al Capone in Taxes. I'm just telling you. It's, this is, it's not, it does not leave him beloved among people. In 10 days, no one remembers their name.

They're like Trotsky being erased from photos. Oh, my God. Well, just, you know, Brian Acton, who was one of the founders of What's Up, just gave a long interview about how Facebook, he just, that stuff starts. That stuff starts as this is a sucky place to work, and then you get hated, and then, I don't know. It's just, it's got bad juju all around. That's all I'm saying.

Good stuff. Good stuff. Anyway, all right, Scott, we have to get out of here. You have to get out of here. I am embarrassingly available. No, are you? I have to get out of here. I'm going to New. No, are you? I have to get out of here. I'm going to New York for a New York Times conference that I have agreed to appear at.

I'm talking to some lovely top women executives about how Silicon Valley is doing. And then I'm doing an interview with Samantha Bee about all kinds of things, including an app she's doing, which I helped her with a little bit. I'm so curious what she is like in person. She's lovely. She's shy. She's Canadian, right? Well, Canadian, that says it all. I think she's Canadian. By the way, that's lovely. She's shy. She's Canadian, right? So, yeah, she's very Canadian. Well, Canadian, that says it all. I think she's Canadian.

Yeah. By the way, that's back to that inappropriate thing. That is technically a racist stereotype, but I'm going out. How do you get a hundred drunk fraternity guys out of your pool in Canada? Oh, my God. Hey, guys, could you please get out of the pool? We're taking back the inappropriate care of— You are not.

No, you're not. Canadians is as far as I go on that issue. Okay, good stuff. And I love Canada, by the way. Good stuff. I love Canada. I love Canada so much. I'm going to Canada.

Wait, Scott. Wait, I'm going to Toronto. Oh, all right. Well, enjoy yourself. Why don't you tell that joke there and see how it goes over. There we go. There we go. All right.

Anyway, thank you for joining, Scott. Looking forward to talking every week. Thanks for listening to Pivot from Vox Media on our first show. Join us next week for more breakdown of all things tech and business. If you like what you heard, please subscribe on Apple Podcasts or wherever you're listening. Every week on Pivot, we take a sharp, unfiltered look at the technology and media industries and highlight examples of winning leadership. And when it comes to leading a successful business time and time again, entrepreneurs and executives from across industries share this incredibly simple secret. Turn to the experts for help.

That's why small and medium-sized businesses rely on TriNet for human resource solutions. That's why small and medium-sized businesses rely on Trinet for human resource solutions. No matter what industry you're in, Trinet tailors strategies for your organization to grow with confidence. Learn more about Trinet's industry-tailored HR and how they can work with your business at Trinet.com. At Trinet.com. That's T-R-I-N-E-T dot com. Incredible starts here.