Pivot - Just the SPACs, Ma'am

Episode Date: May 24, 2022

Apple pulls up roots in China, Facebook gives researchers access to some treasured data, and the SPAC market falters. Also, the S&P moves Tesla from the Nice to the Naughty list. Scott and Kara are joined by Pulitzer prize-winning author Matt Richtel for a conversation on creativity and a not-so-prize-winning song about sex. Matt Richtel's INSPIRED: Understanding Creativity: a Journey Through Art, Science, and the Soul is on sale now. Send us your Listener Mail questions by calling us at 855-51-PIVOT, or via Yappa, at nymag.com/pivot. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Just go to Indeed.com slash podcast right now and say you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. Need to hire? You need Indeed. Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher.

And I'm Scott Galloway. How you doing? I'm back from my European travels. No, I think the question on everyone's mind is how are you and Maverick doing? How was the premiere? I got to say, it was fantastic. Really? It was really well done.

You know, some people call it dad cinema, and I guess it is. It's very traditional. I think a lot of people are going to be surprised by it's updated and everything but it looks a lot like the old one just a better looking version of it.

I think people were people loved it in the movie theater. Tom Cruise did the whole movie star thing. They did the red carpet. I watched it in I think it's Leicester Square

in Britain or Leicester Square in Britain and where a lot of the premieres are. He had some of the royals there. He had Kate and William there. But the movie was excellent. It was, like, you know, look, whatever you think of Tom Cruise, every movie he makes is well done. He's a movie star.

Just well done. He's a movie star. But he also has quality. Like, there is not, it's hard to find a shitty Tom Cruise movie. It really is. You know, they're really well done, beautifully shot. Everybody, you know, they didn't, they used very little special effects. They filmed a lot in the planes themselves.

You know, he had all the principals in planes shooting. So, you could see them getting the G-forces and this and that. And, you know, it's still like a big ad for the Navy aviators, but that's fine. I'm down with that. I think that's fine. Yeah, and it was very, you know, it's still like a big ad for the Navy aviators, but that's fine. I'm down with that. I think that's fine. Yeah, and it was very, you know, they had a woman. They had a woman aviator who was terrific. It was Jennifer Connelly was gorgeous.

Yeah, she's beautiful. She's the love interest. And smart. She had a lot of smart parts in it. And he was great. He was great. It was the one thing that was when you were at Leicester Square, every single picture was of Tom Cruise. There was no other cast members

in any of the, you know, they had huge posters and this and that. And I gotta tell you, he looks frigging fantastic. They had a plane in the square. You know, I think it was an F-18, I don't know, F-14. So it was good. I think you will like it. I think as dad cinema goes,

and what's interesting is a lot of the reviews are, surprisingly, this is a very good movie. And I'm like, surprisingly, the original movie was a very good movie. So I think it'll do very well. We'll see how it does in the theaters. Oh, it's going to be huge. Only movie that's going to be in theaters longer than 45 days is this movie. He has insisted that it stay and it does not move to streaming for 145 days, which is unprecedented. So we'll see. We'll see. I don't know. What do you think?

I think Tom Cruise is the best actor. And I'm sure people will remind me of other ones. But I think in golf, they always say, you know, the best player not to win a major championship. I think he's the best actor. I don't think he's ever won best actor. Now that Brad Pitt has won, I think he's most deserving. You know, Rain Man, Dustin Hoffman got it. Born on the 4th of July, I thought he was outstanding. A movie that not a lot of people saw, but I thought he was incredible in was a movie called Magnolia.

Yeah, he was great in Magnolia. I think his Mission Impossible action stuff, some of his weirdness off camera, and quite frankly, just his good looks, make it, he's not taken as seriously as an actor. Wow. I think he's a great actor. He certainly makes the dough. He's a movie star. He certainly makes the dough.

And by the way, a Mission Impossible trailer leaked this weekend, and then they put it out because it had already leaked. And boy, is it good. It looks so good. In any case, fantastic. I give it two thumbs up. Oh, by the way, may I just say one more thing? At the movie, I sat next to... We have a lot of fans, FYI, in Europe. Everybody kept coming in. You've said that before, and you say it again. And I still... I like enjoying hearing it. I don't know if our fans need to hear it over and over. This woman, Megan, sat down next to me. The reason

I'm remembering everyone's name is because they're named after either ex-wives or wives of mine. So Megan was sitting next to me and she's like, oh my God, I'm sitting next to Kara Swisher. Where's Scott? She was a huge fan of Pivot. And then her friend Amanda,

who wasn't there, I had to take a picture with her. She texted with Amanda. And so Megan and Amanda are our biggest fans. And I just want to put a shout out to them because I said I would. And I wished you were,

everyone wants you to be with me. And they were really good fans. They asked about everything about your dog and my kids and this and that. It was very nice. I had a sense. So I'll share, you know, as our favorite topic, talking about us. I did. I spoke to private equity conference last Friday in Miami. They had time for one question, and the question from the audience is like, tell us something about Kara Swisher that we don't know. That was the one question I got. What did you say? Well, I'm desperately trying to find something snarky.

I said that thing I learned most from you is I think you're a wonderful parent. And you thread the needle between letting your kids fail but also being very involved in their lives. I have a tough time with that. I'm a little too much of an enabler. I think I'm spoiling my kids. And I like your balance between letting them flail around a little bit, which I think is good for them. I love how you said, well, that's a problem.

You're going to have to figure it out. Like in our household, we don't say that. We're like, we can hire a specialist to figure it out. But no, I said that. We're like, we can hire a specialist to figure it out. Yeah, yeah. But no, I said that. But I helped them. I mean, like, Louie's got to find a place in New York in the coming year because he's coming back to NYU. And I was like, yeah, you should find one. And I gave him links and everything else.

And so I'm going to go with him to look at him. But he's doing it himself. He's doing it himself. But anyways, that's the question they asked. Tell us something that we don't know. Oh, I thought you were going to say, like, she's secretly straight or something like that. I thought you'd say something. I get some text from someone.

Anyway. I don't know. I told them about the time. I did tell them about the time I offered you a horse to touch my rocket, and you said no. Sorry. You knew that was going to work that day. Oh, good God. Okay.

You know what? I don't know what he's doing. All I want, I'll touch anyone's rocket for a little horse. This is about Elon and the horse and the massage and allegedly. First off, massage on a plane? That's the real world. We will not talk about it. Allegedly.

Allegedly. Let's use it as inspiration. I'd like to sit in front of my house with one of those miniature Scottish ponies and maybe like Richard Simmons like dolphin, and have a sign that says, free photos on my pony. And just see what happens. Just see what happens. Like, see what the chatter is at the school, where my kids go to school. I want you to stay away from ponies and Richard Simmons shorts. I think that's the best for the both of us.

He's an idol of mine, Richard Simmons. I love Richard Simmons. In any case, today today we'll talk about Apple's trouble in China. Also, the market cools on SPACs, as we said it was going to happen. We'll speak with author Matt Richtel, who's an old friend of mine about creativity, where it comes from, how to harness it, and how the pandemic has helped people embrace their creative sides. Matt is very creative. But first, in Meta news, the company's finally let researchers access data about political

ad targeting on its platform. Meta previously argued that sharing the data would be a violation of user privacy and even shut down the ad transparency project at NYU, which was dumb on their part. There will also be more information on political ads available in the ads library, which anyone can access. Meta is also drawing attention for reminding employees last week that discussions of abortion are not allowed in the internal chat system. That was interesting. Rules include not being able to share personal experience with abortion. Employees are allowed to discuss other controversial topics like immigration, gun control, and vaccines. I'm

not really sure what that's about. But let's talk about the first one because that's, this is a meta struggling as a workplace like other workplaces. So I'm not sure this is any different than any other workplace. But talk about this letting people in. What do you think about that? When you say letting people in, you mean providing data? Yeah, data. Yeah, that's right. Yeah, look.

And not using their excuse that they use. The thing I took from this, and I find it a scary trend, is that there's so much power. So I've had several of my companies be acquired. I've had several of my companies be acquired. And the first thing that happened when one of my companies was acquired was the company immediately started making noises that if I ever as possible saying, we're going to sue you into oblivion if you ever even think about starting a competitor. And there's a chill around, and this is continuing, and that is companies now have so much money that rather than compete or rather than let, you know, and the people who typically are the biggest

intimidators are the ones that advocate for free speech. I'm taking over a platform, I believe, in free speech, but I'm also going to tweet to 82 or 92 million people that I'm assembling a hardcore litigation department. That is meant to scare people who are engaging in free speech. And then you have META, which has an unlimited budget for lawyers to go after academics and send them cease and desist letters. And I don't know the veracity or the legal substance of these cease and desist letters, but I do know the quality of research that comes out of NYU. I have NYU profs call me when I've said stuff and say, you shouldn't say that. I've done research and it's – I mean, they take peer review and the veracity of their research very seriously. There was a group of people at NYU making statements around the data and elections. It's likely there was a lot of there there.

And the fact that it got shut down after Facebook said, hey, guess what? We have billions of dollars and thousands of lawyers. We are headed in the wrong direction around this stuff. And then we have another billionaire who was able basically to sue a media company into oblivion. billionaire who was able basically to sue a media company into oblivion, but at the same time pretends they're libertarians and that it should be about free speech. So most of these cases get dismissed outright. But what happens is, as happened to me, I called my lawyers and said, how could they sue me for violating my non-compete? I haven't done anything. I'm going to start a business, but I don't know what. Like, I'm going to start a business, but I don't know what it's going to be. And they're like, oh, they'll lose, but they'll create a ton of nuisance and costs for you, and they know that. And so, this is yet another example.

I think it's very frightening, especially with academic institutions. Now, they've let them in. They've let them use the system, meaning they didn't shut them down. Now, they're trying to say, come in and look at, and okay, so let me see the glass is half full. Good for them. If they want to start their hat white, give them data, see what they find. Maybe they figured out, maybe they've decided, you know what we're doing isn't malicious. Here's our data. Open it up.

What do you think? I'm a bit of a woman. I think they were on the, they used dumb excuses to say why about privacy. This is their first... I could see a bunch of lawyers saying, we can't give out this. Lawyers are there to tell you what information you can't have, like, and why, and how dangerous it is.

I think in this case, things had become so... These are academics asking for them, and I think it's always good to allow academics access to all of this stuff. And I think everybody is better off to understand it. Obviously, when you let, I mean, I can see that room where they go, let's not give them information to use, right? Because they'll twist it against us or this and that. But I think one of the things that's important is to allow people to study all

these social media sites. I think all of them should open up. I think they should say, you know, as best as they can to protect, they can protect privacy. That was just a canard. I know what they think it's not, but it is. And to give people insight into, even around the teen girls thing, I think probably it's not as bad as was reported, right? We don't know.

Let's see it. Let's see it. Even if it's inconclusive, let's see it. Let's have a look at it. And so I think they're better off showing the stuff unless it's just so bad that someone's going to get it anyway. Someone's going to leak it anyway. And then it's going to be twisted. And I think, for example, even Frances Haugen said the teen girl story was overblown compared to this over here in foreign elections where it's a real mess. And so, you know, it's the thing that draws attention and possibly is not quite true and

deserves more study. And so I think it's always good to open up. I don't, if I was the CEO, I'd like just open it up for them, just open it up. Well, you're, this is a basic, a basic tenant of crisis management and trying to inoculate or vaccinate yourself against crisis, and that is, it's never the thing. It's the cover-up that gets you in trouble. So, if Facebook had said— Or just a tiny bit of information, not enough information, for example. Well, dribbing and drabbing it out. So, if they had released all of the studies on youth and said, and then they'd said, these three things we find most troubling and we've assigned task forces

and we're trying to address this and we're working with regulators. Because also what they found in some of that data is there's just no getting around it. There's some positives on youth's interaction with social media. And especially in a time of COVID where they had trouble,

we let, maybe this is wrong, we let our youngest go on his phone at night and talk with his friends. He likes to catch up with his friends, and I think it's a good thing. We limit it. But instead, when they kind of hide it, it creates the notion there's something sinister going on. Yeah, I would agree. So you get it out there there. You just vomit it out as much as possible. You do show what Facebook has not done, some actual. I mean, my favorite lie or mischaracterization of data is when they have Nick Clegg say, we spend billions of dollars on moderation. Well, actually, you're a $150 or $200 billion firm.

And the fact that you spent $2 billion on moderation slash content means you're spending about 1% to 2%. Right. Well, that's an old Facebook thing. They always give some giant number and then you don't understand what the denominator is. That's right. That's their favorite thing.

We're spending 1.5% of our budget on content. Or they give some number that seems like a lot, but it isn't a lot. Anyway, I think it's better that they open this up. They should open up lots of stuff. and people should be able to study this stuff. This is important stuff for our society. And I understand there's certain things that, you know, the head of YouTube was saying, you know, why should I have to give stuff out if TikTok doesn't? That's an excellent question. Like, you know, some of it is for doing your

business better, but some of it certainly can be used to help society, all kinds of things. These are real-time experiments on the human race, and so it should be out there. Anyway, what do you think about that? I'm not reminding employees last week that discussions of abortion are not allowed. I'm sort of, eh, not a bad idea given how crazy things are. not a bad idea given how crazy things are. At the same time, I don't know how you get people not to talk about it after you've invited them to share everything about their lives as your business. I think these guys made a mistake saying, bring your full self to work. I think it was politically expedient for them to pose for the cameras and be really woke or pretend that they cared about their employees' views on social stands.

They just sort of invited in this monster, and they were shocked when the monster showed up. And I do think there's something to the notion that there are certain topics that—I think if you want to show up at a Marjorie Taylor Greene protest, if you want to be a January 6th but be one of the peaceful protesters, I don't think that should impact your standing at work. At the same time, I don't think you should bring that shit into work. And so this is a tough line. I get it. But I kind of, I guess I empathize with them saying, look, this probably just isn't the place for these types of discussions. They're going to do more harm than good.

The thing is, how do you pick and choose? Because they're allowed to discuss their stuff. I think the difficulty is— And when does it violate people's rights or silence it? That's correct. It's a tough one. By the way, it's what their business does. They want people to talk about abortion on the website.

100%. That's a great point. So a very difficult thing for all. I've been talking to a lot of managers lately, a whole bunch in Europe, and they're like, oh, managing now. I forget who I was talking to, but it was a pretty big person. I was like, what is managing now? And they're like, it's just, you just don't know what to do now. Like, you honestly don't know what to do because no move is good in the workplace at this moment,

especially including bringing people back. So we'll see. We'll see how it goes. Okay, let's get to our first big story. SPACs could be looking for an easy A as an acquisition. Many SPACs are running out of time to find companies to take public. And some private companies are opting out of SPAC deals altogether. The company behind the investing app Acorns previously said it would merge with the SPAC. Now it's called off the deal. About 90% of the companies that merged

with SPACs, they're called de-SPACed since the 2020 boom have lost value, according to SPAC research. So talk a little bit, Scott. Are you in any SPACs? Are you still in SPACs that are looking for marriages and stuff like that? So my experience with the SPAC was the following. Two, one close friend and another what I'll call business associate, both run hugely successful. One is a credit hedge fund. The other is an activist, not an activist hedge fund, a growth hedge fund. And they said the three of us should do a SPAC, and we're going to look for European consumer tech companies. We had the two premier investment banks lined up to take us out, raised between $300 and $500 million. We were ready to go, all the paperwork together.

And then, to his credit, one of my partners, a friend of mine called and said, real quick, let's jump on the phone before we press go on this. And we spent a few hundred thousand dollars on legal fees, ready to go. This was like Q2 last year, Q1, Q2. And he asked a really interesting question. He said, we're all on boards. How many calls have you received from SPACs looking to de-SPAC? And we went around the table. And I'd received like five calls in the last two weeks as a board member of two unicorns. And he thought, and one guy said, I've gotten seven. And the other guy's like, I've gotten 11. And it's like, do we want to be one of these people calling every CEO we've ever met and trying to de-SPAC? And you could just hear the silence on the line. And right at that moment, we knew we shouldn't do

it. And we called the banks back and said, we're not doing this. Can you imagine if I were sitting on a 12-month-old SPAC right now, the amount of shit posting I would be getting trying to de-SPAC, trying to find – find a mediocre to hopefully a mediocre company that you would have to promise a ridiculous valuation to, find people to market to, and then watch that thing go down 40 to 80 percent in the first 30 days. Yeah, just for people to know, in February 2021, the value of announced SPAC mergers was over $100 billion. A year later, it was less than $5. So you got out of it, but many people didn't. What happens when you don't? Because would SPACs have to merge with low-quality companies to get the deal done, or how do they have to give the money back? Well, here's the thing. Basically, every good company that has any desire to be a public company has either been taken public by the premier investment banks to do the best job marketing, and it is a better good house keeping stamp of approval.

You'd much rather go out with J.P. Morgan or Goldman than go out with a SPAC. It says that you're premier if you can go out with one of these firms through a traditional and running process. The folks that did SPAC, when the markets were crazy frothy and there was insatiable demand for public equities and growth, the companies did really well. Because what investment banks do is they find a company. They say, we can raise you capital. We're going to market it, position it, get all the legal work done.

And then we're going to go out and market it to institutional investors. Then we're going to take our 7% and God be with you. They make money no matter what. They're not operating. They're not sticking around. And that's what Schmott did. He was the most innovative investment banker

in 2020 and 2021. And my guess is he's already sold the majority like investment banks do. He's out. He doesn't have equity positions. So if you can't find a company, and no one's, I think, been able to find, there are very few companies that are good, that want to go public that haven't been able to in the last two years. So you find a mediocre company, try and take a public, and then what happens, a couple things happen. One, the people who bought into the initial SPAC, the blank check, have the opportunity to redeem. And what you're seeing is a lot of people, these shareholders go, no, I don't want to own

the SPAC of rent the run or whatever it was. I don't want to own the SPAC. I forget the one that had like 90% redemption. And they can get their money back. No harm, no foul. They get their full money back. Now, who doesn't get their money back if you're unable to de-SPAC is the principals that have to put up 2% to 3% of the principal. So in my case, the three of us were going to have to come up with $10 million. And we'd get it back and more if it's SPACed because we'd own somewhere between 10% and 20% of the equity. But if you don't de-SPAC, you lose that $10 million. And where does it go? You have to pay it back to the original?

Well, there's underwriting fees. The banks made money regardless. And you paid for the legal fees. You basically paid for the investment bank to take you public. You paid for all the legal fees. And the investors get all of their proceeds back. So the cost of raising the capital, the cost of the legal administration, the cost of the compliance are all borne by the principles. By the principles. And what was interesting, a lot of the legal administration, the cost of the compliance,

are all borne by the principles. By the principles. And what was interesting, a lot of the money that they raised, they put it into low-yield bonds or whatever. It was interesting. There's a really long story I read from The Economist, is the money that is waiting to be despacked usually sits in very low-risk areas, correct? And then you just have to return that money. Well, the last thing you want to do

is say to your investors, we were poor fiduciaries and we put this in risky assets and now the capital before we've invested it. So they put it in, as they should, low-risk items. But you're going to see a ton of money returned to investors. And what you're also going to see

is a lot of Hail Marys where a company says, oh, we found Joey Bag of Donuts, you know, donuts, fried donuts chain to take public. And the investors are going to go, no, that's just stupid. And we had to promise them a ridiculous valuation and they're going to redeem and they'll probably have to cancel the SPAC or find a pipe that will take out, give them the money to go public. But SPACs right now, hype that will take out, give them the money to go public. But SPACs right now, it's an innovation.

It has gone through incredible mania, and the fall here is dramatic. It's just dramatic. Yeah. And the ones, the companies that have SPACed are really not doing well, many of which might go private again. Grindr is still planning to go public via SPAC, but- That's a great company. Grindr's a great company. Yeah. If you look at the economics- Why couldn't they just go public? It's a great company. Quite frankly, that's a perfect analogy for where SPACs are an innovation. I don't think JP Morgan wants their name next to Grindr. Oh, okay. All right. Now, Bill Gurley was pushing SPACs as a way to get control away

from investment bankers. So it looks like investment bankers are still in control. bankers are still in control? It's a control. It's same dogs, different fleas. It's a group of, it's different marketing and you get to just add water and it's a faster process. You get less looked at. It's people that have a harder time going public. The principles of a SPAC will position themselves as operators. We were trying to position ourselves as thoughtful people that could help add value to a company. That's mostly bullshit. What SPAC principles are is investment bankers that do all of the legwork up front, all the compliance, get the documents ready, and are ready to press go and take you public faster than you would with an investment bank who, by the way— And with less scrutiny. And with less—you can do forward-leaning revenues, correct?

Something like that. You can be a little more frothy about yourself. Well, and not only that, the investment banks just have a higher bar. They get the best of the best, and that's the right positioning. I think from a regulatory... You don't have to say as much,

but that's all going to be reformed. You don't have to say as much, and you can make future projections that are more not so. If the SEC was now gone and had the staffing that its position requires, and it's coming, there would be more regulation. Because the reality is it's very unusual to find a SPAC that is not only well below its offering, but is – I have two friends, one took two SPACs out, another that you and I both know took a SPAC out. They're each 70 to 90% below their offering. And when you have that sort of destruction in value across an entire asset class,

the SEC needs to say, well, what investor protections were not put in place here? the SEC needs to say, well, what investor protections were not put in place here? There is a, call it paternalistic, call it whatever you want. But, I mean, SPACs have just been, it's just so funny. It's like we all saw this coming. Yeah. And yet for a while. And Paul Ryan had one.

I was like, and we're done. Remember? I don't know what happened to his SPAC. Remember he had a SPAC? I doubt it de-SPACed. I probably did not. It's probably one of those that will happened to his SPAC. Remember he had a SPAC? I doubt it de-SPACed. I probably did not. It's probably one of those that will have to return its money. Probably. Oh, I feel bad for Paul Ryan. No, I don't. And by the way, I think if you're sitting on top, I've gotten calls from several people

looking for a thing in the consumer space. I'm like, return the money. It's not as bad to return the money as it is to convince people that it's a good idea and have a shitty company that's public. And everyone's upset and they lose money. There's no – I get it. There's no shame. There's no – it's like – They all thought – listen, a lot of the people we know that were doing it thought they were going to make a killing. They did.

Well, and some did. The ones that got out early. Yeah. The ones that got out early. Then the middle group was like, oh, I'm into it. Everyone was like, you should do a SPAC here. I'm like, no, it feels dirty. I don't know what else to say.

It feels dirty. I felt dirty when I saw the original ones going. Felt dirty the whole thing. The whole thing. Yeah. But it is an innovation. It'll still be around for a while. It's still a way to get out.

Yeah. It's still be around for a while. It's still a way to get out. Yeah. It's appropriate for some things. I'm an investor in a company that's SPACing with SoftBank or de-SPACing with SoftBank. De-SPACing. But this, it's a— I wonder why it's de-SPACing versus SPACing, but okay. Well, you create a special purpose acquisition core, which is a blank check, and then you turn it into a public company. You de-SPAC.

Yeah, you de-SPAC. It just feels wrong. You know, next week, we don't have enough time. We're going to talk about crypto, too, because I went back and forth with someone who said that we shouldn't be doing ads for crypto, which we'll talk about on Thursday. Yeah, I saw that, too. Yeah, but you know what? I read the ad. Yeah, yes, you did.

But we were talking about people able to buy crypto, and that was what the ad had in it. It wasn't like crypto's the best thing. In the retirement fund. And I got to be honest, when was, that was what the ad had in it. It wasn't like in the retirement fund. And I, I gotta be honest when I read the ad, I felt funny about it. I'm like, it's all just felt awkward,

but your points were good. Your points were good too. My point was like, we don't know what's going to happen, but there's a lot of people who are, we're going to invite one of these people on, not the guy who yelled at me like ridiculously and then wondered why I was irritated.

But, but, but we should talk. We should, we have, what I noted was we're very tough on crypto in the show. And it's fine to let people, if they want to get into crypto, they're adults and say it's speculative. And that is what we have said over and over and over and over again. Nobody's forced

to do these things. But nonetheless, crypto's undergoing a really pressured time. Some people think it's completely a scam. Some people think it's completely a scam. Some people think it's not a scam at all. And some people think, let's wait and see, which is where we are, I think, in a lot of ways. But it's definitely a speculative thing. Let me talk about some of my— I spent a lot of time lecturing to young men about the algebra of wealth. And a lot of that is about diversification, living below your means, letting time take over.

And for me to be reading an ad in an asset class where a lot of players I think have been preying on young men's boredom and instincts to take outsized risks and hope that they can get rich fast. When I read it, like his point, he basically went after me and said, Scott, you lectured young men on being responsible financially, and then you're pushing this shit on them. And you know what? When he said it, it really upset me because I think some of it's true. Yeah. And I've been thinking a lot about

what kind of financial services ads we should read because I'm not sure I would put my four. Like, at the same time, you don't want to be the boomer. If you look at, I'll give you an example, Bitcoin. Everyone's saying, oh, Bitcoin's crashed 50%. If you bought it two years ago, you're up 60%. That's correct. And I mean, there's saying, oh, Bitcoin's crashed 50%. If you bought it two years ago, you're up 60%. That's correct.

And I mean, there's just too much innovation here not to believe some of this isn't going to be enduring. Exactly. That was my point. My only point was making, I get this guy's point, his name's Alan Graham. He's like, you shouldn't be testing. I'm like, well, you're just like saying the whole thing is just a scam. The whole thing is a scam? Come on. Like, let's have a more, let's have a more measured discussion. I get it. And then he was like,

experts who really know, know the whole thing's a scam. I'm like, all right. I thought his pushback was pretty, hey, given most of the pushback, I can't care, that was fairly civil. Okay.

It was, well, I, my point being is that the only point I have is we're very tough on them in the show. Yeah. We also say it's very speculative. And if you have extra money, and we've had people on talking about this, and we've talked about the decline and that you better be careful of these numbers. But in the end, people are adults.

And if they want to put $20 or $200 of their money in something and understand the speculativeness of it, I am not their mama. I wouldn't do it. I didn't do it't do it so you know that's my only thing but wouldn't it be nice and this is like wouldn't it be nice we we have a lot of ads like for investments i believe you're best off take 20 30 and have some fun invest in companies you like that you enjoy enjoy. Weird things. And asymmetric upside. And it's fun and you learn. And there's nothing wrong with fun. But take the majority of your wealth and put it in low-cost diversified ETFs. It just, that's what the smartest people I know in the world around money and finance all do the same thing. They take about a third of it and put it in exotic crazy shit where they convince themselves they can beat the market. And two-thirds they put in Vanguard ETFs. Low cost, diversified for them, smart people trying.

I don't even do the second part. I just, because I'm too busy. Nonetheless, I also have a mattress full of gold, of course. Do you? No, I don't. I remember that Billions where they had, remember they had that safe full of gold? Yeah, that was kind of nutty. I don't want to live a life where I have a go bag. That's how I felt when I looked at that. I agree. I was like, how sad. Let's spend all our time trying to figure out ways we don't need a go bag. Yeah, I know.

Someone was talking about it. That's what happens when you get super. Someone was talking about money to me. I have known several people that when they get super rich, they start buying places in New Zealand and planning their escape. Like down to like how they get to Teterboro and leave the nuclear, the radioactive cloud. I'm like, Jesus, that's nihilistic. Right. Yeah, it is.

When Trump's Civil War thing comes, they're coming for me. That's the way it's come. There's no escape for Kara Swisher. In any case, that was repulsive what he did, tweeted Civil War thing. Anyway, whatever. He doesn't give a fuck. Anyhow, we will discuss more. And Alan, we will have someone on to talk about this. Let's go on a quick break. When we come back, Apple weighs

its options in China. We'll speak with a friend of Pivot, Matt Richtel, about creativity. Fox Creative. This is advertiser content from Zelle. Fox Creative. This is advertiser content from Zelle. When you picture an online scammer, what do you see? For the longest time, we have these images of somebody sitting crouched over their computer with a hoodie on, just kind of typing away in the middle of the night. And honestly, that's not what it is anymore. That's Ian Mitchell, a banker turned fraud fighter.

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Thumbtack presents the ins and outs of caring for your home. Out. Uncertainty. Self-doubt. Stressing about not knowing where to start. In. Plans and guides that make it easy to get home projects done. Out. Word art. Sorry, we have laugh lovers. In. Knowing what to do, when to do it, and who to hire. Start caring for your home with confidence. Download Thumbtack today. Scott, we're back. Apple could uproot its China operation. COVID lockdowns and tech crackdowns have Apple reportedly looking for some to move some of

its production out of China into Vietnam and other places. Currently, more than 90% of Apple products are manufactured there. Now the company is eyeing India, Vietnam, other Southeast Asian nations as possible manufacturing bases. And Apple's not alone. One of China's own homegrown billionaires seems to be venting online. Tencent founder Pony Ma shared a viral op-ed by a Chinese author who decried the economic impact of lockdowns. This is something everybody in Europe was talking about,

by the way, which is really interesting. Is Apple serious? You're just trying to get a better deal with Chinese regulators? I think they're quite exposed there. In 2016, Tim Cook signed a secret $275 billion deal with China that's set to expire this year. What do you think about this? I think they're quite exposed here, as are many companies. This lockdown that China's doing seems— everyone was talking about it last week in all the different business places I went. There's so much here.

The rights—I think the Chinese got it right. Initially with COVID, when you had something that was more lethal and less infectious, a total lockdown, there was some logic to it. Now that it appears, it appears that the virus, if you will, may be less lethal, but more infectious, a lockdown doesn't make sense. And they haven't adapted to their strategy to what I would argue is the current reality. adapted to their strategy to what I would argue is the current reality and what has happened to all of us. So supply chain used to be this cost center where the whole point of your chief supply chain officer was to get shit to the factory or get it to the consumer for the lowest cost possible. And then Amazon said, wait, it could be a profit center. If you differentiate on supply chain and

get things to people within 48 hours, you can actually charge more. If you have uninterrupted supply chains like Tesla and you make your own chips and you have more control over your own supply chain, you can charge more money. And what we have all dealt with, and this happened, I was on the board of a specialty retail apparel company that had 550 stores, 5 billion in sales. apparel company that had 550 stores, 5 billion in sales. And we woke up in COVID and said, oh, wait, 93% of our tops are manufactured in like a 50-mile radius in Shenzhen, China. And this thing has totally gone into lockdown. So supply chain heterogeneity has become a huge topic for people. And that is, it doesn't make sense to be reliant on any one supplier for a critical... What every assembler, home builder, manufacturer is realizing right now, and it's fascinating but frustrating, is where does exactly does everything come from? And like,

oh, did you realize that winch comes from Turkey? Even Ukraine is slowing down automobile manufacturing because they make certain materials. And the supply chain, the global supply chain, hasn't come to a grinding halt, but it has slowed down dramatically. So I think everybody is rethinking their supply chain. And I would argue that the big winner is going to be, in my view, is going to be Mexico because it's lower cost, but it doesn't have the geopolitical strains. Proximity, Pankaj Jemawa, my colleague at NYU, has done great research showing that as much as we talk about globalization and we have globalized, there's still proximity matters that almost every country's biggest trading partner is usually the ones they share

borders with. And we're having sort of a deglobalization of the supply chain because of proximity and also just geopolitical relationship. But I would argue most of it or two-thirds of it is positioning to say, look, China, you got it. We made a huge investment here, and we are willing to diversify. But I also think they will do a little bit of diversification. Have you heard anything? You know these people. Yeah, I think that Pony Moss said this. He's been sort of a good soldier, so to speak.

He's not spoken out like this. The economic impact of lockdowns is they've got to make a choice here. What they did, the big mistake they made, I was talking to a lot of pretty well-known medical people at some of these events I went to, is they did not vaccinate their older population. And so they've kept deaths very low, but they're so exposed with their older population. Our older population is really vaccinated, and our deaths are down now because a lot of people either had it or gotten the vaccine. I think we're at 79%, 76%, something like that. But nonetheless, we're seeing more and more iterations of this stuff. But it's not fatal.

They have made a very fatal mistake not taking that time, not using the right vaccines, not using Pfizer and others that are more effective, developing their own vaccines. And so they're really in a jam here. And so that's going to cause everybody else to say, we're going to go to, I think India probably is the one country that will probably benefit the most, despite some of the political issues there.

Apple announced that it's manufacturing the iPhone 13 in India, mainly for the Indian domestic market. But if you're watching Apple as the company you've got to watch here, because they've been very close to China, much to much criticism in many times. And they will be watching what they do is where you want to watch everybody else. And I think it's very hard to move a lot of this global manufacturing, given, you know, whether it's Shenzhen or Shanghai or other parts of China. This is where everything is made. Everything is made.

And so it'll be a big move to move it elsewhere. We'll see. We'll see. It's certainly not moving to the U.S., though, I'll tell you that. So interestingly, in China, online searches for emigration increased 440% last month, meaning people want to leave. President Biden said last week, by the way, this week, that U.S. would defend Taiwan in a military conflict with China, which was a big thing to say. Usually we have strategic ambiguity with respect to Taiwan, but obviously he was putting a lot, that's the line in the sand, as they say, which is, I think, a pretty good line to have, but very dangerous in lots of ways. I can't imagine the Chinese will do that, but you never know. But anyway, it'll be interesting to watch where this is going in terms of, do you think

there'll be any manufacturing brought to the U.S.? They have advanced manufacturing here for Apple, but not a significant amount. I actually do think there's going to be a lot of on-shoring. The dollar, look, I think that wages in the U.S. and robotics and supply chain concerns and proximity are actually – I'm on the board of a consumer company that's actually pulled manufacturing out of China and is on – or reshoring it. I don't know what the term is. Onshoring it. We're bringing it back to the U.S. De-spacking is the word. De-spacking.

That's right. But the thing that struck me about all of this, when I read that stat about China, about people wanting out, for a long time, supposedly, two-thirds of people who have more than a million dollars in China qualify for one of two groups. They either have left or they're planning to leave. tend to focus on is how do we create the infrastructure and the investments such that you can make money here? But what people, I think, sometimes fall short is the right long-term strategy is not just where's the best place to make money, but where's the best place to spend it? And that is the reason why I believe New York and London and essentially the U.S. and Europe will have more robust economies and will never experience the same level of brain drain. Is there wonderful places to live? And we constantly reinvest in the arts. We appreciate people who get degrees in weird things and then go on to do art installations and do the Museum of Ice Cream. We appreciate art and culture and joy. And I think that is underrated as an economic attribute, that at the end of the day, the moment all these

oligarchs make their billions by stealing from the Russian economy, they don't want to spend it in Russia. The Chinese don't want to spend their money in China. They want to spend it in Milan and Los Angeles. And because these are places that have such an appreciation for art and the arts, and it feels like we should be subsidizing our culinary academies and our film schools and entrepreneurs that if they go into the arts, I mean, it's just an unbelievable boom to our economy. People want to come live their lives once they have money in the West. It's a huge asset for us.

Well, they can make it nice there. They can make this beautiful in lots of parts. But nonetheless, we'll see what happens there. This is a big story. It's going to continue what's going to go on with China. But now, speaking of creativity, let's bring in our friend of Pivot. Matt Richtel is a Pulitzer Prize-winning science reporter for The New York Times and author of Inspired, Understanding Creativity, A Journey Through Art, Science, and Soul, in which he looks at the science behind creativity and the effects

of the pandemic on creative lives. Welcome, Matt Richtel. Hi, Karen. And for those, Scott, you don't know this, but Matt and I go way back. We're old friends from San Francisco, et cetera. And it's good to see you. It's good to see you. I'm excited to talk about this topic because we were just talking about creativity and

how the pandemic affected people's creativity and where people are moving and going and stuff. Wait, hold on. Can I interrupt already? Sure. Yes, please. Because I have a Kara story. Oh, no. All right, go ahead. It's about creativity.

All right. Okay, then. Perfect. Okay. So when I realized that I was a madcap creator, I wrote a book. And then Kara graciously, first book, there had been like 10.

So we thought at the time it was special. It turned out it wasn't going to be special at all. And you invited me to your house and we had a book party. You remember this? Yes, I do. And then you say, Matt, you got to go thank people. And I stood on the top of those spiral stairs and I give my whole thank you. And I think I'm killing it.

And then Kara, I start to like, there's a little applause. And then Kara says, hey, dumbass, you forgot to thank your wife. Yes, that wasn't very creative of you. Well, you should be thanking your wife. All right. Thank you for that lovely Kara Swisher story. But in any case, I was correct. But let's talk about the idea of pandemic effect and creativity.

Because I think one of the things, you know, there are a lot of jokes that people had time to learn to bake sourdough, et cetera. Talk a little bit about the impact of the pandemic on creativity, and then I want to get to the broader story. This is something Scott writes about a lot, too. So talk a little bit about what's happened. Well, first of all, I'm going to say broadly, and I am connecting this to creativity, I mean, to COVID.

I consider this to be the most creative moment in human history. I can cite stats to back that up. The number of patents applied for across international borders in 2018 was about 200,000, which was astronomical compared to prior. That was before pandemic. Then you bring pandemic in and you add in a couple of factors. One, you create necessity. So an immense amount of need to collaborate, cooperate, compete. Two, you have technology blossoming. And if you look at the history of creativity, there's a reason it happened in Jerusalem. It's where I start this book. It's because you had a population of 500,000. It's where I start this book. It's because you had a population of 500,000. Florence, Harlem, Rome, go down the list. These are population centers. And with technology, things are population centric. And finally, Kara, at the risk of being, and Scott, with what we have inside our bodies to become a mass market success as evil as it was. Interesting. That's an interesting calling. It is creative. It was certainly good at what it did, let's just say. But talk about that idea of creativity as learned and innate because a lot of people don't tap into their creativity, right?

Or it's not a skill that's taught. Yeah, they don't. And it's too bad because in point of fact, we're just filled with misconceptions. One, intellect is not the same as creativity. The research will bear out. First of all, IQ, not the same as intellect, but just for the purposes of research, that's where a lot of it is. IQ between 100 and 120 seems to be sufficient to be wildly creative. Over 145, 147, it actually seems to go down. What does that suggest? That creativity isn't about finding the right answer. In some ways, the way I describe it is a creator isn't someone who answers the question. It's the person who comes up with the question in the first place, then answers it. Nice to meet you, Matt. So, I love this topic. I think a lot about it. And I'm curious. So,

I always look to Wallace, one of the great theorists around this, kind of the four stages, preparation, incubation, illumination, and verification. And I've tried to disarticulate those in terms of my own creative process. Do you have any sort of process that you can articulate for how people who think, well, I want to just get better at this. And to say, I want to be more creative, isn't that useful? Do you have any steps that you can share around trying to become a more creative professional? I will, and I'm going to package them in a homily first. I think that what you hear is necessity is the mother invention. I don't agree with that. I think authenticity is the grandparent of invention, and necessity is a subset of that. And I think that

where a lot of people run into trouble, and I've actually had this conversation across Silicon Valley with people who are included in this book, when you set out to solve a problem, you in effect are within the confines of that question. And when you talk about preparation, Scott, I think I think about it a little differently than you do. I'm actually thinking of the preparation of understanding your subject and then letting it go and giving yourself permission to participate in a kind of nonjudgmental mind wandering that doesn't happen in the active

pursuit of the idea. And may I cite some science to back that up? Please. Out of the University of California, Santa Barbara, researchers look at a bunch of wildly creative physicists and writers and artists and ask them, when that aha moment came, what were you doing? And determine that 20% of the time they're having their big discovery, it is when they're focused on something mundane or entirely other than the thing they're focused on. Here's the neurobiology. I just want to stop, Scott, because I'm not sure I'm answering your question enough. So I'll push back a little bit. I think that there's a strong basis in evolutionary anthropology around creativity that the most adaptable societies are the ones that – they use the word adaptability, right?

The seals are dying, so we're going to move to this, to say, take the conventional thinking and park it and say, give yourself permission to take the exact, to zag when everyone's zigging mentally and go with it and see. And because I find people are drawn to those people. People want to have sex with creative people because it serves an evolutionary purpose, that the most creative people are good for the species. I I agree on all fronts with this nuance. I don't think this is an act of will specifically. And we may be saying the same thing, but when you say park the conventional thinking, that sounds a lot to me like I'm going to think differently.

I'm talking about a raw emotional experience. I think the aha moments, and this is the neurobiology I'll cite to back this up. I think those aha moments come from allowing your subconscious to roam without judgment. And you often don't wind up with a solution to the problem you were seeking. You wind up with a solution and then you realize there was, you wind up with a solution, and then you realize there was a problem that that was referring to. And so, the distinction I draw is the permission to think and wander, not even think, to wander without judgment. The prepared mind is one who understands the field, but the permission I'm talking about is not an act of willpower. And I think those aha

moments are a function of subconscious dots collecting and you recognizing them. And then secondarily, you run those ideas over the analytical part of your brain, the prefrontal cortex, and they get assessed based on their validity. So I love this. I love this stuff. So Matt, and as always, and you've probably figured this out, I use these interviews as just a vehicle to talk about me. But when I'm writing, I find— Everybody realizes that. Just let's—

I thought we understood that. Does that now have to be disclosed? Yeah, that's a given. That's a legal disclosure now. Legal disclosure. Okay. Thanks. Thank you both.

Anyway, so the content I write that resonates the most with people is when I talk about relationships in my family. And I have an easier time doing it when it's really late at night and I have a couple drinks and my filters around what is acceptable, what might be embarrassing, might reduce the perception of my masculinity, go away because of the oxygen that's denied to my brain from alcohol. And this is a long-winded way of saying, what is the role that flow and substances play in the creative process? Well, I went to the mountaintop on this, Scott. I went to the mountaintop, Carlos Santana. Scott, I went to the mountaintop, Carlos Santana. And I'm going to back up with science what I'm about to tell you. He told me that weed works and substances work, but meditation works better.

And that he gave up weed for a period. And the science bears out that substances actually are not affiliated. And I can tell you as someone who gets into that flow state a lot, it's not necessary. It is a short-term crutch, but there are better ways at it. Yeah, I agree. And what I most appreciate, Scott, about what you said is we were talking about your masculinity. That's the kind of authenticity that if the audience wants to understand what we mean here, that's the kind of authenticity. Can I give you, can I give the audience and you guys an exercise that might happen, that might explain what Scott and I are talking about? And just understand when I talk

about an exercise, I'm only talking about Scott. We are, Karen and I are talking about Scott. All right. Okay. All right. Go ahead. Go for it. So when I was a kid, I used to go to sleep and for probably two years, I'd have this fantasy where I was in a sporting goods store and I had a shopping cart and I would fill it with stuff that I couldn't afford.

And I would go down the aisles and have this flow state fantasy. And then before I met Meredith, the woman I forgot to thank at Kara's party, I would have fantasies where I would be in a bookstore and I'd meet a woman buying a book. Okay. Now I want to ask you guys each, if you have a fantasy or thought before bed that sort of carries you through that you don't judge yourself at all, you just flow with it. Does any come to mind? They can be as filthy as you like. Scott, go ahead on that one. It's strange. My fantasies are physical. I imagine playing a sport and having real flow in terms of physicality and strength and grace physically.

Interesting. The things I think about are I'm running at a certain speed. I all of a sudden have the ability to be a great diver, a great gymnast, and I have flow physically between my coordination and my physicality. That's kind of like my fantasies before I go to sleep. All right, see, now I fall asleep in 14 seconds every night. I can sleep with coffee. I can sleep with coffee.

I can sleep with everything. I never fail. I don't have a minute to think before I fall asleep. Where I do get creative is when I clean. I clean obsessively, or I just, I love cleaning, and I'm quiet, and I think. And that's, I don't think at all. I just, things come to me, big ideas come to me

when I'm cleaning, 100%. So, I want to seize on both those things. I'll tackle Scott's and then come to Kara's in a second and hit you with a little science to back up what each of you is describing. The reason I go through this exercise is I think for many people, when we talk about like mind wandering without judgment, Kara, as you're doing, people don't really know what that means. The one time I find people do that is before sleep, they feel no need to be productive. They don't censor themselves. One of the things the mind-wandering research will bear out is that when people's mind wanders, they either worry or they feel non-productive,

is that when people's mind wanders, they either worry or they feel nonproductive, so they stop letting it happen. And what's happening before you go to bed is it's like borrowed time. You're with the house's money right then. So to the extent you can get in that state, I know when I'm in it, when I start to have all kinds of stories pop into my head and ideas, and I let them go without judgment. They're the kind of things that sometimes would seem immoral or things you wouldn't want to think like, I really don't like that person. I'm going to imagine hitting that person or I really like that person or what if I want a bunch of money? And sometimes we censor ourselves around those things because we don't want to acknowledge that it suggests wanting in our lives or pain or longing, but that's where

truth comes from. Wandering, wandering. Interesting. So one of the things that's interesting about that is sometimes you are creative around other people, right? And supporters of going back to the office say that in-person groups help creativity. What does the science say? about why we're so creative right now, there's a big misunderstanding that there's this isolated creative genius. I blame Hollywood for that. And I specifically blame Hollywood writers for making up,

I think they secretly want to be that person. And so they've created this icon. It doesn't really exist for a couple of reasons. One, almost every invention we know about came from the shoulders of giants. In fact, it might've been Galileo who first said, this came on the shoulders of giants. All those little creations along the way led to the isolated genius. Number two, population leads to more creativity. Why? Collaboration, competition, cooperation.

collaboration, competition, cooperation. Cities, full stop. It's got full stop. And there's a great guy from the Santa Fe Institute who can show this algorithmically and he's in the book. This was interesting what Judd Apatow told me, and it's not science, Kara, which I've just given you, but it's an interesting anecdote. He talked about writer's rooms and he gave me the example of two writer's rooms. One was the Larry Sanders show. Great show. And great show, but it had a problem. Everyone was so, so the way a writer's room works in Hollywood, if it's good, is people sit down and almost like the subconscious that we were talking about earlier, they start throwing out ideas and there's no filter. And then along comes the head writer who acts like

the prefrontal cortex and says, not so good. Let's follow that one. It's like the analytical part of the brain. Interestingly, Judd said in the Larry Sanders show, people are so intimidated by Larry and trying to mimic him that the subconscious part didn't work. And the show was very tense as a result, even though the results were good because Larry pulled it off, the writer's room didn't have the flow state. And then he compared that to, there's a show, I'm terrible with these things,

about a standup comedian in New York who's always sleeping on people's couches. Crashing, it's called Crashing. Crashing. He said the head writer of that, the main guy, is so embracing, so open. And he said people would start to share the most humiliating stories, the most authentic ideas, and a beautiful show came out of it. People will say,

greatness is in the agency of others. I agree with you. Creativity is in the agency of others. And that is, you might have the germ of a thought late night. And I do believe, and I'm curious, I have a couple of questions. One, I've always found morning people are more productive professionals, but creatives are more nocturnal. I don't know if there's any truth to that, but most of my creative thinking comes at night. In the morning, that's all I can do just to get shit done. But also where I think most creatives find real inspiration is they get on the phone with a bunch of interesting people who have permission to push back and shape and craft things. And you've got to surround yourself with muses.

You've got to surround yourself with people who, you know, it's, I mean, the movie Queen, right? When Freddie Mercury went solo, his creativity went away because what he found was no one was pushing back on him, no one was inspiring him. Well, look, our time is a little tight, I recognize, but there's a whole section of creativity that we didn't get into about broadened perspective. And the other value of having those voices there, it may not be creative in that moment, but as you learn more from other people, it plants the dots that you ultimately connect in your subconscious. My favorite study in this book is that that winds up yielding people who physically see more through their eyes. Eye tracking software on creative people will show that they see more things and spend more time on them. And that is an act in part of training your perceptions to bring in more information.

The more rigid the worldview, the more you put stuff outside your scope and say that's not allowed, the less you're going to be able to tap into. Interesting. All right. We got to go in a second, but very last question. What can people do to help creativity in everyday lives? One thing. One thing is to give yourself permission not to judge and to do that outside the scope of your day job. It is very hard in a world with rules that you must participate in to do this. Allow yourself to do it on the margins and it will squeeze its way into the rest of your life. Matt, please sing your song about sex. So here's the thing.

I write a lot of music, okay? You do. I recall this. Go ahead. Oh my God, that's so mocking. Sing your dirty song. This is a song. I'm only going to sing the first two verses and the chorus. But the reason I was saying this is this is one of those ideas that hits, you know how everybody talks about friends with benefits? Yeah. I think the real marriages survive and I got a good one, because we have sex with benefits.

Sex with friendship. This is called benefits. Okay. Don't you laugh yet. I haven't even gotten to it. I'm laughing already. Go ahead. God, even I'm turning red.

I know Casanova, but I started to smolder when you walked over and by. I know I'm getting older and I am selling the shit. Sex with benefits. Sex without is the pits. Sex with benefits. That's not the whole song. What do you think? Oh, God. Wow, well done, Matt.

Don't quit your day job is my... I'm in, baby. Don't quit your day job. Very creative. In any case. That was inspiring yet uncomfortable. That was very... Exactly, awkward.

That's usually true. All right. The book is called Inspired But Uncomfortable, Understanding Creativity Journey Through Art, Science, and the Soul. It's out now. Thank you, Matt Richtel. We appreciate it. Thanks, man. Oh, man. White guys who sing. I always love it. Wow. That puts a new spin on the carob ball. So, are you sure you don't smoke a lot of pot? I don't smoke any.

How do you be friends with that guy and not do edibles? I don't know. Someone handed me mushrooms in Germany and not the good kind that I like to eat, the druggy kind. And how did it go for you? I didn't take them. I just left them there in the hotel. I actually think that would be good for all of us if you had a little shroom. I don't think so. It's not a little shroom.

Okay. One more quick break. We'll be back for predictions. As a Fizz member, you can look forward to free data, big savings on plans, and having your unused data roll over to the following month. Every month at Fizz, you always get more for your money. Terms and conditions for our different programs and policies apply. Details at Fizz.ca. Okay, Scott, I want to hear some predictions, but I actually asked you to talk about this layoffs thing this week. So one of the things you had talked about was more and more layoffs among the fleece collar people. And you've done some layoffs at L2.

So I want you to illuminate me on that prediction a little bit more and explain what you guys went through and where you think it's headed. Actually, I sold L2 five years ago, but I'm glad you're so invested in my career. No, section four. Section four. Well, you have these names. Yeah. So I'll tell you what, I think we got wrong and we got right. I've made the same rookie mistake over and over. And I'm not in management here. I'm just on the board and I teach on the platform. But I'm in a position where I've had a few wins, so I can raise capital easily. I think we probably raised too much capital. And I'd made the same, I won't say I, the board and management made a mistake that management makes a lot. And that is, mistake that management makes a lot. And that is we conflated macro conditions for our own talent. And that is an online ed firm in COVID had unnatural gale force wins in our sales. Last year,

we had like 13,000 students. We just kind of flipped the on switch. And overnight, I mean, to give you an example, Kara, we were charging people a thousand bucks in the beginning, and I would do a class with 1400 people. So $1.4 million for an online class that went three weeks. So the margins were crazy, raised a bunch of money, and the general viewpoint was you can't hire fast enough, so just hire everybody. COVID begins to wane, demand falls, people don't want to be behind their computer. And we just found – and also, I think one thing I've noticed about remote learning, if you have a team that's worked together before, you can maintain 90% of productivity remotely and give people time back. It's a wonderful thing. I think going from 30 to 120 people, which is what we did over 12 months, it is difficult to maintain a culture and productivity in person, much less remotely. And we found we had diseconomies of scale.

And that is we quadrupled the workforce not to get a commensurate increase in productivity. I think what we got right was we started seeing this six months ago and said the sooner we do lay off some more, the better. I've always thought – I've always said on any board when they're thinking about cuts, I'm like, go deeper than you think you need to, because you don't want to do this more than once. But yeah, we had, we laid off about 30 people, which is always really painful and difficult, especially for the people who've been laid off. I believe, and I'm seeing this across everywhere, I think it's just getting started. Yeah, this is what, this is dovetailed into your prediction. So I wanted you to explain that. Yeah, so the reality is we screwed up.

I've made the mistake over and over, which is the difference between making a mistake and being stupid. I've been stupid. I keep finding firms, finding reasons why we're just awesome and probably overhiring and as opposed to measured growth. But you're seeing across, basically across all the, the winds from the pandemic in businesses, anything remote, have really subsided. Zoom, Peloton, yeah. And then you have companies, we look modest.

The majority of the feedback we've gotten from people is you were ahead of the curve. Because we did start thinking about this a few months ago. I'm like, we're just overhired here. We're not getting the same. So how does that dovetail into your prediction? Because a lot of people took notice of your fleece, you know, the fleece layoffs, essentially, if you're wearing a Patagonia vest and this and that. How do you, it's going through this process yourself. Where does it go from here? While people not returning to the workplace may be returning

to the workplace, it's still, we're still in this sort of weird nether period, I think. I think you're going to see a lot of layoffs. I mean, if you're if you're an engineer, you're pretty safe because those skills are just the demand is so extraordinary for engineers. But the reality is 80, 90 percent of a tech company is not engineers. It's people doing other stuff. And I think there's going to be a lot of layoffs. I think it's going to be the biggest layoff we've had across what I'll call information-age companies since probably 2008. I think over the medium and the long term, it's really good.

I think that tightening, sending signals to people who are good that if you're not good – I believe in strategic firing. And I know that's not aspirational, but I think people need to look left and right at a company and say, I get it. Maybe I don't like this person, but I understand why they're here. And I think that the hallmark version of companies that everyone has a role and it's not the person's fault. It's the organization's fault. I think that's bullshit. That's not capitalist. And also people who get fired, I've been fired, need to recognize that that's okay, that your human capital is going to be better served somewhere else.

Now, having said that, it's easy to say when you're economically secure. So I've always said do it sooner rather than later and try and err on the side of being generous. But you're not doing anyone any favors wallpapering over a shitty business and keeping people employed when you know eventually you're going to have to let them go. Right, as things change. But I think we're going to see just – I think we're going to see a lot of this over the next six or 12 months. And then in 18 to 24 months, I think the entire tech ecosystem is going to be stronger. I think occasionally you've got to – it's like intermittent fasting. I don't know what the term is, but I think it's healthy.

I think this recession is going to be healthy for us as long as it's not a depression. Right, a depression. So now I'll let you make a regular prediction. I thought it was just important to illuminate on a prediction you made last week. Yeah. So my prediction, it was going to be a story. I didn't have a prediction, but I think ESG is going to be, I don't know what the term, I think it's just total bullshit. I think these metrics have been weaponized by people to try and use it as some sort of marketing technique to pretend that somehow they should tap into these ESG-focused funds. I think Elon Musk was actually

correct in calling out- Correct. Just for people who don't know, Tesla was kicked out of the S&P 500 ESG index. This is environment, social, and governance. I'm sorry. It's the do-gooders, essentially. ESG index, because it environment, social and governance. I'm sorry. It's the do-gooders, essentially. ESG index because it doesn't have a climate plan. Tesla's, quote, lack of low-carbon strategy codes of business conduct and accusations of racism and poor working conditions were also to blame. Amazon, Apple, and ExxonMobil still made the list. Naturally, Elon tweeted that the S&P had lost their integrity.

I don't think they ever had it. It's like some of these dumb awards that you get for, I hate awards in general. I think Elon was correct here. He acted like a big baby about it, but nonetheless, he's correct. So go ahead, ESG, go ahead. Well, it's basically someone sitting back and saying, I'm going to decide whether I like you or I think you're good based on my criteria. And I can shove any criteria into three letters, ESG. And what they need to be is, they need to be, okay, environmental and very straightforward, non-emotional metrics,

whether it's carbon emissions or carbon emissions per economic growth, because there is a trade-off. Carbon emissions are worth it in some instances. But this has become just so, ESG has been so weaponized as a marketing vehicle for non-ESG firms. I think it's become meaningless and it's almost become damaging. And I think you're going to see a lot of warranted scrutiny of firms claiming to be ESG and we're going to realize it's all bullshit. It was nothing but marketing to try and create another weapon of mass distraction from shitty businesses because they're quote-unquote ESG. And I think Elon got it right here. I think this whole ESG thing has become, it's going to become a useless, weird term.

But there's got to be a way to do, I read a really good story on carbon trade-offs, buybacks and stuff like that on the plane, again, in The Economist, which is such a good publication. I've forgotten most of the article, but the whole area is still not – there should be companies that are thinking about their carbon footprint and how they can become better. And I think that getting rewarded with a little plaque seems to be the stupidest. It should just be at the heart of these companies rather than to be on a list. I can't stand it. I'm the same way about journalistic awards or Oscars or things like that. I find them exhausting and tend not to show up at most of them. But I agree with you on this one. This is a great thing to think about. But how do you

get metrics where companies just stick to them because it's the right thing to do for the society and for their business? I think that's how how you force them without giving them a plaque or something. Yeah, but there's basically, I mean, there were some, you know, households trying to be carbon benign, right? Or carbon neutral. Your emissions relative to your shareholder value or relative to the employment or whatever it might be.

There's got to be third parties who don't have a for-profit motive coming up or governmental agencies coming up with real metrics. The problem with metrics, there's been a lot of studies now on metrics. And that is the moment you start studying to the test, the metric not only becomes useless, but it becomes damaging. And the metric I always use is I think one of the worst things that's happened to higher ed in the U.S. is these rankings.

Because we all started studying to the test and we figured out if we reduced admissions rates, we'd go up in the rankings and it ended up being anti-American to become rejectionist. But this is so important. This field is so important that some sort of agreed upon metrics around how environmentally damaging or, you know, I mean, one of the nice things about these tech companies is they are relative to their economic output, they are not harmful to the environment. But there's different types of environmental damage, right? So, this is an interesting field. But ESG, God, it's been weaponized and perverted. Yeah, I would agree.

I think we're in agreement. I was going to note we were in agreement with Elon on this. But it still goes. These things go on all the time. Anyway, that's the very long show. We'll be back on Friday for more. That was a long show. That's okay.

It was full of interesting things. And Scott, read us out. Today's show is produced by Lara Naiman, Evan Engel, and Taylor Griffin. Ernie Andretat, engineer in this episode. Thanks also to Drew Burrows and Mia Silverio. Make sure you subscribe to the show wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Box Media. We'll be back later this week for another breakdown of all things tech and business.

Cara, have a great week. Thanks. You too, Scott.