Pivot - The Fed’s Dire Warning, Apple's Legal Headache, and Guest Kevin Delaney

Episode Date: August 30, 2022

Today’s co-host is William D. Cohan! He and Kara discuss a dire warning from the Fed, and a potential antitrust case against Apple. Plus, Truth Social is struggling, and the @WhiteHouse Twitter is getting feisty. Charter's Kevin Delaney joins to discuss the future of work. You can find William on Twitter at @WilliamCohan, and Kevin at @delaney .Send us your 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 Cara Swisher. Scott Galloway is at a soccer game faking a Scottish accent. So today I'm joined by journalist and author William D. Cohen. Bill, thanks for skipping Burning Man to join us.

Well, I could still make the back end of it, Cara, if we get done with this in time. But thank you for having me. Oh, don't. Please don't. You know, I've never been to Burning Man, even though all the people I cover go there. I just can't do it. You know why? I'll tell you why. They're going to give me drugs and take pictures. That's my feeling on that. What do you think?

My brother has gone many times. It's not for me. I don't need to be in the middle of a Nevada desert or wherever the hell it is. Yeah, yeah, yeah. Anyway, so you've been really busy. There's so much to talk about for us, but let's get an update on you. You've written about like a million different things over the past couple of weeks. It's been not an unbusy summer, essentially, which is usually the quiet time for Wall Street and finance.

Well, you know, being a founding partner of Puck requires me to cough up two articles or opinion pieces or punditry pieces a week. So that's plenty busy. And the big news is my new book coming out November 15th, three years in the making, called Power Failure, The Rise and Fall of an American Icon. And that really was extremely challenging reporting and writing, but it is now done. So it's about GE. It's about GE. Why did you pick that? Obviously, it had undergone, you know, it's the rethinking of Jack Welch, essentially, probably.

That's part of it. I don't think that's, you know, necessarily what I dwell on. It's really the thinking of, whoa, there's like a dead body on the floor. How did it get here? I mean, this, GE was once, you know, Apple, Microsoft, Google kind of rolled up in one. And so if the most valuable company in the world, the most highly respected company in the world, a technology leader with quote unquote, the best management in the world, a technology leader with, quote unquote, the best management in the world can pretty much dissolve and lose 80 plus percent of its market value in a short period of time. You know, why can't that happen to Apple? Why can't that happen to Microsoft or Google? And so I think it's a cautionary tale. You know, how do you become go from being the most valuable

company in the world, the most respected company in the world, a management machine, to something that people really don't talk about much anymore? We're going to talk about the book when it comes out, but is there one thing that you point to in your conclusions when you look at this company or companies like it? Yeah, I think, Kara, the most important thing I learned through this process, which I sort of knew anyway, but it's just reinforced, was that the CEO really matters. And the choice of who a CEO successor is, is really important. And if you get it right, it can make all the difference. And if you get it wrong, you know, bad things can happen. Right. So it comes down to a single person again, once again, this idea. You know, with the right team around him and a board of directors doing their jobs. And here's a case where the board of directors kind of just abdicated after deciding, oh, my God,

I'm on the board of GE. How fabulous is this? I don't have to do my job anymore. And so this is what happened. And this is how things go. It can go rather quickly now in today's market. Very quickly. And especially, you know, when half the company was a financial services company, you go through the financial crisis in 2007 and 2008, you know, bad things can happen too. All right. Well, I'm looking forward to reading it. I heard you've seen more of Scott this month than the Pivot team has. Were you visiting with him? here last year, and we reprised it this year with Beata, his wife, who's absolutely charming, perhaps the better half. She is, really. And people should know that about her, because she really is delightful. And, you know, he's Scott, so sometimes he is, sometimes he isn't. But I just enjoyed their company immensely and met their two sons who were great. And they cooked a wonderful

meal. It was great. All right. Good. Scott's always having a good time. So there's a lot going on. As I said, I know you have to write columns, but you've had a lot of material. So we'll talk about the Fed's dire warning and what comes next. We'll also get at the brewing legal challenges against Apple. And we'll speak to Kevin Delaney about the present and future of work, which is an area you write about quite a bit too. But first, True Social. Let me start with an easy one. A layup for you. It's not doing well this week. Its trademark application was denied for being too similar to another social app. Also, the platform's SPAC merger has been indefinitely postponed over concerns about Trump's reputation. And if that weren't enough, the business is also accused of not paying a vendor, that's not a surprise, at $1.6 million in contractually obligated payments. This is

RightForge, which is one of their very critical tech vendors. So what do we think about this, Bill? Has this come as any surprise to you in any way? I think it's delightful news, Cara. I think it's delightful news, Cara. I mean, let's be honest here. If you choose Devin Nunes as your CEO, what were you possibly thinking to begin with? I mean, what good could possibly ever come out of choosing a strange congressperson as a CEO of a media company? So that was quite a startling choice to begin with. Donald Trump's stiffing his vendors. Gee, that's hardly news.

He's been doing that for decades. So that's no surprise. Why they keep doing business with him is the big surprise. And whether, you know, the SPAC, D-W-A-C, ends up completing the merger with Truth Social probably isn't that relevant. In other words, if that SPAC deal falls apart, it would be one of many SPAC deals that have fallen apart this year. And Truth Social could still exist without merging. It wouldn't be the payday that the Donald is, of course, hoping for. He wants to get his hands on that billion dollars or whatever it was.

Could he have gotten some of it? Could some of it have been funneled to him in some fashion? Probably. We don't know exactly the ownership of Truth Social. Probably it could. You know, he's expert, Cara, at getting money funneled to him, whether it's appropriate or not. He's very, Cara, at getting money funneled to him, whether it's appropriate or not. He's very, very good at that.

Sure, he would love to get his hands on that money, yes. So do you ever see it going public at all whatsoever? You know, if the SPAC deal falls apart, which I would say is like 50-50 because they've kind of extended the timeline for the deal, but they only have two years to get it done, and now they're into their second year. I mean, some other SPAC could come along, you know, with the Donald. I mean, really the question is just how relevant Donald Trump is going to end up being in the next two years.

And if he, you know, somehow isn't indicted and somehow is shown to have succeeded in the midterm elections by anointing his candidates, if some of them actually win as opposed to lose, which seems like what's going to happen, and if somehow he seems like he's going to be the Republican nominee in 2024, then suddenly he becomes very relevant again. And I'm sure there's plenty of money out there willing to, you know, connect with Truth Social to make it viable. So just give money, like even if it's a losing product, we're going to buy into this dog. Or, you know, or one of his, you know, billionaire friends, of which there are many who decide that, you know, he's going to be a viable candidate and has, you know, at that point, it's 50-50, right, whether he can win. And, you know, who knows what that whole election would be like if Donald Trump is the Republican nominee.

And so, you know, he doesn't care to put his businesses in a blind trust. So I'm sure he would try to monetize Truth Social if the SPAC thing falls apart through some other mechanism. Yeah, he's using it quite actively, even though other people aren't. It's not a particularly popular social media site. All of those social media sites have sort of gone sideways. And he doesn't really have the following. He's got like, what, 4 million followers, as opposed to the 88 that he had, 88 million. I mean, that's a material decrease in Donald Trump's popularity in social media. Yes. Yes, indeed. Indeed. So one of the things that we had talked about was, you know, on the other side is this idea of these social media

sites and what they do. Now, this week, Euphoria star Sydney Sweeney, I don't know if you watch Euphoria, but she's a hot mess like everybody else in the show, is asking people to stop making assumptions. She posted pictures of her family, which was called a surprise hoedown for her mom for her 60th birthday. And the internet, some people focused on a man wearing a Blue Lives Matter shirt

and guests wearing red hats that read, make 60 great again. I thought it was quite unfair. I have a hat, it's not red, that says, Make America Gay Again. But I'd love your sort of thoughts on where social media is going, especially things like Twitter, because on the other hand, the White House is using his Twitter account and John Fetterman in really effective ways, facing criticism in the wake of a student loan forgiveness. For example, the account started, quote, tweeting Republican criticisms of the amount of PPP loans they had received. For example, Representative Mike Kelly tweeted, asking plumbers and carpenters to pay off

the loans of Wall Street advisors and lawyers isn't just unfair, it's also bad policy. And the White House account responded via a quote tweet, Congressman Mike Kelly had $987,237 in PPP loans forgiven. So talk a little bit about the evolving nature of Twitter. Is it just a lot of noise from your perspective? It is a lot of noise, as we both know. It also can be often indispensable for journalists and people who want to know what's going on. So the potential has always been there with Twitter. It's not a particularly good business. It struggles to make a billion dollars an EBITDA a year.

As far as the White House tweeting is concerned, personally, I also wonder why we all can't just get along, okay? But since we can't, I'm very glad that the White House is fighting back. I'm, you know, for years, you know, the White House or even the Democratic Party has just been sort of mamby-pamby about letting people like Mitch McConnell roll all over them. I mean, to me, the Rubicon was crossed when Mitch McConnell prevented Merrick Garland from being the Supreme Court nominee. So ever since then, you know, we should be, the Democratic Party, we should be fighting back against this. And so this is a perfect example of a way to fight back. And I'm all for it.

I think, you know, this is, I was hearing, listening to Dan Pfeiffer on the John Heilman podcast the other day, only because, you know, there wasn't a new pivot to listen to. And, you know, Dan Pfeiffer said, yes, this is exactly what they should be doing. They should be fighting back and aggressively. And I agree. I mean, the hypocrisy of not wanting people to get some relief from student loans while you get a million dollars relief on your PPP loan. Why did you even get a PPP loan to begin with? So I'm all for that. And, you know, Sydney Sweeney, she was great in White Lotus. I'm not a Euphoria watcher, but, I mean, can we just all get along? I don't understand why people want to post on Instagram. I don't understand that.

I don't do it. I don't understand why people want to give their data away for free. I've never understood the Facebook business plan. Facebook business plan, you know, somebody's going to come along and figure out a way to share, either through stock warrants or financial rewards to people for their data. And that will supplant Facebook, I think, relatively quickly if somebody can figure out how to do that. But I mean, if you're going to post this stuff on social media of your family having a birthday party, you know, can't we just leave them alone? That's true. I agree with you. I'm curious, one thing I've noticed of all the people, because Holly was very involved with all these social media networks, others, TikTok, whatever

it is, Wall Street isn't very much so. They tend to stay out of it. Why is that? so. They tend to stay out of it. Why is that? Danger, Will Robinson, danger. You know, nothing good can come out of a person who works on Wall Street having a large social media presence. You're going to screw up, and you're going to lose your job, and they're going to be able to easily explain to you why you've lost your job. There's just nothing good that can come of it. And so don't even bother. I was trying to think of a social media star in finance when you were coming and I was like, there isn't really one.

There isn't someone who posts very much at all of all of them. I mean, there are Wall Street, you know, observation websites. Yeah, sure. Yeah, sure. But, I mean, I would say maybe David Solomon at Goldman Sachs in his E.J. DeSalle persona is about as close as you get. And that's, you know, that's controversial, frankly, and debatable. Yeah, yeah. You know, he loves it, and so he does it, and he's the CEO, frankly, and debatable. Yeah, yeah.

You know, he loves it, and so he does it, and he's the CEO, so he can do it. So there you go. That's not going to stop, is it? There's nothing you can do. Unfortunately, that's not going to stop, no. That's a sad situation. Anyway, let's get to our first big story. U.S. households could be in for more pain.

That's the word from Fed Chairman Jerome Powell, who gave a speech on Friday signaling that more rate hikes could be coming. Stocks dove on the news. The Dow shed more than 1,000 points, and the tech sector took the day's biggest hit. There was some good news Friday. So why is the reaction so severe? You've been writing about this for a while. And this economy, the good news, inflation may be cooling. Indexes that track inflation either came in below expectations or even fell slightly. Again,

tech took a big hit. Talk a little bit about where we are, because you were the first person I read, and I don't read as widely as I should, though, but signaling the party's over kind of thing. About two years ago, you started writing about this. So talk about what's happening now and what you see happening next. So yeah, the party is over is a very good phrase because it was a cheap money, low interest rate party. In fact, the Fed's policy was ZERP, zero interest rate policy. The Fed manipulated interest rates down since 2009, so for basically 12 or 13 years. And so people who make money from money had a bonanza, absolute party. I mean, and you saw that, you know, our friend Elon Musk's net worth went from $35 billion to $250 billion during the last couple of years, in large part because of the free money party. And now, you know, obviously, the Fed has changed course, is now back to trying to fight inflation, probably a year or so too late,

as our friend Larry Summers, they listened to Larry, who wanted to be Fed chairman, but was denied. Maybe we'd be in a different position now, but Jay Powell has finally decided to turn this ocean liner around. Takes a long time. People thought he was serious in the winter and spring. Suddenly, by July and August, because inflation came in slightly lower than it had been trending, people thought, oh, maybe the party's back on again. Let's bring the punch bowl back out. Let's pour some more tequila in. What is your punch bowl?

It's full of a lot of stuff. Was it easing? What was it, one thing that was particularly tasty in that bowl? Quantitative easing was the tastiest brand of tequila that the Fed had been pouring into that punch bowl for literally 12 years, which is just Fed speak for manipulating interest rates to absurdly low levels, which means that investors aren't going to get rewarded for the risks that they're taking. And, you know, one of my favorite measures, and I don't want to get too technical here, is, you know, what's the average yield on a junk bond, which is a bond that

is issued by companies with the worst credit. And last, about a year ago, it got as low as below 4% yield. So no risk, no risk. Well, no reward for a lot of risk. No reward for risk. Yes, that's what I mean. And when you don't get rewarded for the risks that you're taking, then bad things happen. And a month or so ago, the rate was up to 9%. So that means that anybody who bought when the rate was under 4% has just gotten singed on their principal amount.

You know, it can change over time. But so the Fed on Friday, you know, at his Jackson Hole speech, Jay Powell, you know, reiterated that he's very serious about fighting inflation, and he's going to continue raising interest rates. And so all those people in the market who were hoping that maybe Jay Powell was just kidding, as he had been kidding once before, he got taken to the woodshed by Trump in February of 2019 at a dinner where I'd love to know what really happened, but don't know, and then decided to back off his raising interest rates agenda, now has indicated that he's serious. And he's been re-nominated. He's been reappointed to the post for another chunk of time.

He's not going to get a third time. By Biden. And he doesn't have the same Biden. I mean, all presidents yell at the head of the Fed often. Of course. But in this case, this dinner, where he should have put the screws to everything at the time. Right. The dinner was with Trump in February of 2019. He had been raising interest rates in 2018. And basically, I'm sure Trump told him to stop or else he wouldn't get re-nominated or whatever it was, you know, Trump threatened him with.

And he reversed course. You know, the party kept going. The tequila, you know, quantitative easing tequila got poured in again. Then we had the pandemic where more tequila got, and no punch. There's no punch in this punch bowl, by the way.

It's literally pure tequila. But now it looks like, you know, the punch bowl is being taken away, which of course is the famous phrase that another Fed chairman, William McChesney Martin, used to say is the Fed's role, is the principal role of the Fed is to, quote, unquote, take the punch bowl away as the party's getting started. OK, as the party's getting started.

This party's been raging for 12 years. So tech took a big hit, as I said. Shouldn't it be more resilient? The business is good. Semiconductor manufacturers are suddenly looking at a glut of chips when there were not enough before. Intel cut $4 billion of its capital spending plans on the same day that Congress passed the CHIPS Act, by the way, which is a lot more about national security than other things. But why does tech particularly get hit? So tech gets hit because it's probably had

the largest increase in value during this period of time. You know, Apple's market value is two and a half trillion dollars. I mean, that's the GDP of more than the GDP of many countries. That's the GDP of more than the GDP of many countries. So, you know, what goes up fast also comes down fast when it looks like economic. And there's if I may use this phrase, Cara, there's been a pivot at the Fed level. In other words, the spigot is being turned off. The party is over. And that's going to mean, as Jay Powell said, pain for American families, some pain. Interest rates are going to be higher. It's going to be harder to borrow money. It's going to be harder to get

a mortgage. It's going to be harder to get a car loan. The economy, you know, they want the economy to slow. That's the whole point of this. They want the economy to chill. Now, the Google business plan, the Apple business plan, the Microsoft business plan, they seem relentless. They are so finely tuned at this point. The businesses probably will continue to do well. But that doesn't necessarily mean that they need to trade at, you know, 100 PE or whatever their PEs are. I mean, Tesla's PE has been, you know, quasi-infinite. And so it's going to come down rapidly if people don't have the money to buy Tesla cars.

Or cheap money. Or don't have cheap money. So inflation, inflation, inflation is what Powell is focused in on. Yes, yes. He's finally seen the light. Larry Summers was telling him a year and a half earlier, inflation, inflation, inflation is bad. And he termed it as transitory. Well, guess what, Jay? It's not transitory. It's real. It's here. It's going at like 9%, 8.5% annually, the highest level of inflation in 40 years. And if Jay Powell is going to wear his Paul Volcker hat, then we've got a lot more interest rate increases to come.

And that will absolutely, if he follows through, will put the brakes on the economy, which is what they need to do to get inflation back to 2%. But there's, you know, as we think back, I'm old enough to know what happened in the late 70s and early 80s when Paul Volcker raised interest rates to whatever, 18%. I mean, those are levels that basically we can't even conceive of at the moment. And then what happens from your perspective? And then what happens from your perspective? Big time recession, big time slowdown in the stock market, reversal in the stock market, reversal in corporate earnings.

But that will get inflation tamed, or we think, we hope it will. Right. And then what happens? Then we slowly come out of it, and people who bought Treasury securities that yielded 15% made a fortune. So ironically, when interest rates start getting increased, it's sort of the opposite of what I was talking about with taking risks where you're not rewarded. If interest rates get anywhere near to where they were in the Volcker era than Treasury securities, which are supposedly the safest that we have and that are out there, if they're yielding 15%, as some of them did during the Volcker era, I mean, that is an unbelievably great investment. And people should dive into Treasury securities at that point and driving their price up and their yields down.

And then the cycle, you know, then it becomes, we'll begin again. Yeah, the virtuous cycle. Yeah, and of course, of course, it all has, you know, political implications, which we'll see what happens. But right now, people are sort of amazed the recession hadn't really happened yet. Yeah, I mean, people... Or it doesn't seem. Yeah, they sit there and talk about, economists sit around and talk about, well, has the recession

happened? Have we had two negative quarters of GDP growth? I mean, what Americans don't sit around saying, they say, how much do I have to pay at the pump? How much does that hamburger cost? Can I pay my rent? Can I pay my mortgage? That's what they care about. And that's where people are already in that mode, although it's been easing off a little bit. I was in a gas station, at least four people were like, oh, the price of gas is coming down, and then they were all jolly.

And it was down. It was down at least a dollar, which was interesting. It's just people's moods shift a lot around the price of gas, which is really kind of amazing. Yeah, because... That's what matters most.

Well, and that and paying their mortgage and paying their rent and putting food on the table. And those are the important things, not whether, quote unquote, we're in a recession or not. Yep, exactly. All right. We're going to take on a quick break and we come back. The law may be coming for Apple.

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Start caring for your home with confidence. Download Thumbtack today. Okay, Bill, we're back. The antitrust train might be stopping in Cupertino next. Speaking of Apple, the DOJ is reportedly preparing an antitrust case against Apple. DOJ lawyers have been investigating the company since 2019 at issue whether Apple stifled competition in both hardware and software. Politico says the suit could come by the end of the year if the DOJ decides to proceed. It's obviously been proceeding on a Google case. Also, Apple should, and FTC is sort of doing things. Apple would join Google and Facebook in the elite club of tech giants facing antitrust suits in the U.S. Obviously,

suits in the U.S. Obviously, very slow-moving, tons of money these companies have to wait it out. Can the DOJ take on Google, Meta, and Apple at once while it's dealing with the noise of Donald Trump, for example? Probably a pretty easy case comparatively. How do you look at this and the impact on these companies? Well, I think we've had a sea change in antitrust thinking in Washington and the Biden administration. Lina Khan at the FTC has obviously been outspoken about taking a harder look at individual companies and whether they're acting too monopolistic. We have the ongoing Justice Department lawsuit now in Washington. John Cantor is there. John Cantor is there. I assume you're talking about the Simon & Schuster Penguin Random House deal,

which is a relatively small deal, but it would make the Big Five publishing houses the Big Four. As an author myself who is published by Penguin Random House, I'm not sure I buy the government's argument here that the big name authors somehow, if the Big Five becomes the Big Four,'t get as big uh advances as they had been getting uh you know superstars always get big advances and will continue whether it's five or four uh it's more sort of the middle list uh people who might suffer if the big five becomes the big four uh but this i think is you know is a clear example of the Biden administration getting tougher on what appears to be consolidating industries and oligopoly power in them. Apple, obviously,

has a huge amount of power, as any $2.5 trillion company would. The only one. The only one. You know, I think it deserves its market value given the incredible suite of products it provides and, frankly, the amazing job that Tim Cook has done after Steve Jobs' death. Many people doubted that that could be possible. They did.

He's done an amazing job. The opposite of GE, right? The opposite. The opposite. But, you know, GE was once looking like Apple, too. So, you know, what goes around comes around. Right, yeah. And, you know, I'm not sure, you know,

if the Justice Department wants to take this on. But, you know, because they're so valuable, because they're so powerful, because they have such unbelievable EBITDA margins, these companies have made themselves targets. Right, right. And also, I think it's interesting the story was coming out now. You know, I'm interviewing Tim Cook in a couple of weeks. It's largely about Steve Jobs. The interview was about his 10 years at the helm and the growth of it. But I feel like they're going to try to settle these things in some fashion. And I suspect the tech companies don't particularly want to fight them, although it's a way to win by just keep it going.

Yeah. I mean, I don't think it's not nobody likes litigation, Cara. Nobody wants to be involved in litigation. So especially corporate litigation. So I think, yes, if I were Tim Cook and this were looming, you know, again, we don't know whether it's looming. One political story does not make a lawsuit filed. story does not make a lawsuit filed, I would, you know, assess, talk to my lawyers, who of course will benefit immensely from all of this, as they always do, and try to figure out a solution that, you know, will solve everyone's concerns, which isn't necessarily an easy thing.

No, they have done that before. That's an Apple way. You know, they've given concessions before, which is interesting if Google will do the same. But if I were them, I would try to make a settlement on all these different things. They've got the golden goose that's laying the golden eggs. I mean, you know, better to just stick with that. Yep, I would agree. Another elite club in Silicon Valley, speaking of getting lawyered up, tech's top brass are getting subpoenaed

by both parties in the Twitter versus Elon Musk fight. The legal drama has brought in a who's who of business and tech leaders. I'm excited. Jack Dorsey, Marc Andreessen, Larry Ellison, Ken Griffin, and more. It's not just individuals. Musk has been granted access to some of Twitter's data

and Twitter has requested information from Tesla. They also want his group chats, which I suspect are very spicy. You know, these guys, they've been complaining. There's a story in the New York Times today, and not too happy to be dragged into this. I tweeted about it because a lot of them this summer were when the Twitter deal was first going on, when it was an all, you know, Elon's going to own the world. They were like, oh, he called me, we talked about it, we're thrilled. Like, I couldn't, I couldn't, everybody was like, I'm, you know, Elon's going to own the world. They were like, oh, he called me, we talked about it, we're thrilled. Like, I couldn't, I couldn't, everybody was like, I'm, you know, I'm advising him and this and that. What could they be looking for? Lots of PayPal mafia names like Joe Lonsdale,

David Sachs, a particularly noisy person. Peter Thiel is not in there. I don't think they're friends, so I suspect they weren't texting or anything like that. What do you make of this? Because it's Elon who's dragged them into this, and he's very chatty with everybody. Well, I think your point is a very good one about how people wanted to be chummy with the success or the perceived success of this deal and Elon taking over Twitter. There's an old saying on Wall Street, you know, success has many fathers and failure is an orphan. So, you know, we saw, you know, when it, you know, in the weeks leading up to April 25th, when he signed the merger agreement, everyone wanted to be Elon's chum. Every lawyer wanted to work for him.

Every banker wanted to be on his side of the docket or on the other side, whatever it was. This is the biggest deal of the year. This is so exciting. The fees are going to be enormous. And then now, of course, the lights are coming on. The cockroaches are running for the exits. So they're getting what they, you know, that's the downside of the bargain. What's the reason for Twitter doing this? Just to irritate his friends, correct? To get, and they might come up with something, presumably. You never know what they're going to come up with.

You know, either what's in their chat boxes, what's in their email, what's in their, you know, signal conversations, whatever it is, you never know. I'm sure something delicious will come out that journalists will gobble up. Then when it comes to deposition time, if we get that far, which I'm sure maybe we will, maybe we won't, then who knows what any of these guys could say. And that can be delicious. It's all great for journalists. And, you know, this is litigation, Cara. And it's big time corporate litigation. We've got $44 billion at stake, or the difference between 44 and 32 or whatever,

which is the market cap of Twitter today. So that's $12 billion at stake. You know, this is a big deal. So when you think about it, you and I have written and talked a lot about this, and we thought the deal would get done and then not get done. Where do you see it right now? Obviously, you've written a lot that he's going to get his head handed to him and the chance to record. Actually, within that story, there was a lot of comments, which I hadn't realized the judge had said about, essentially, Elon not has to answer a question because this is a court of law. He's acting very Trump-like in terms of, you know, treating it like it's a PR thing versus a legal issue in terms of responding. And she was, she seemed quite irritated with the Musk sign. I think this is another important crucible for accountability, Cara. You know, we've seemed to have ceded accountability in our politics, which continues to blow my mind. I just don't understand it.

It baffles me. Even, you know, ultimately, Richard Nixon at least had some accountability you know can we get some accountability for Donald Trump please someone who's responsible for holding these people accountable please do it and I think we're in a similar position with this Elon Musk Twitter deal you know just because he's the world's richest, we have to genuflect in his direction and let him get away with not performing on a contract that was heavily negotiated that he signed. I mean, if this goes away, whether we like the guy or not, he signed a merger agreement that was heavily negotiated. He's the one that started this thing. It's not like Twitter said, oh, I want to be sold.

Who wants to buy me? that started this thing. It's not like Twitter said, oh, I want to be sold. Who wants to buy me? He started this thing. Then he changed his mind because he had a hissy fit. Fine. But he still has to be held accountable for what he signed. And so I think he has to lose the court case

because if he doesn't, then all other contracts are out the window and our society crumbles further apart. So what happens then? In October, do you think he will press for a full trial? Or how do these things go very quickly in Chancery? Each side has hired every Silicon Valley and corporate lawyer around. And Twitter, of course, has hired Wachtell, perhaps the finest law firm in the country. He can't concede the point before he

loses the ruling. So, you know, he can't. His alpha male ego will not allow that to happen. So, he's going to have to go through the court case. He's going to have to wait for the ruling. through the court case. He's going to have to wait for the ruling. He's going to have to lose the ruling, which he will lose. And then the real negotiation over what happens next will start, in my opinion. Because again, he doesn't want to own this. And Twitter does not want him to own Twitter, because he will destroy Twitter. So now maybe that's a good thing. Maybe Twitter should be destroyed and maybe they deserve each other. That's another conversation we can have.

But I don't see, you know, he's not going to pay $44 billion. He's not going to follow through on, even if he loses the judgment. Maybe Twitter's going to want the difference between $44 billion and the $32 billion where Twitter is trading now. That's $12 billion. That's a lot of money.

I think they, as I've been saying, writing for weeks, that they're going to settle at $5 billion. It seems like a lot of money to Twitter. That's five years of EBITDA. They can maybe do a lot with that money instead of just, you know, furthering it away, which they might be able to do too. And, you know, $5 billion for Elon is obviously five times more than what he thought he was going to have to pay to walk away from this thing. It's not, you know, it's pocket change for him, but it's still a lot of money. So that's why I got the $5 billion. And then he still owns a big chunk. He's going to have to agree to sell it. Yeah, that has to be sold. And he'll probably make money on the sale of that because, you know, he's probably bought it at relatively low dollar values beginning in January. Yeah, that'll have to be part of the agreement that he divests himself of his 9% and he stays away for a long time.

And that's where you think it's going to end up? Yes, that's where you think it's going to end up? Yes, that's where I think it's going to end up. It will not end up with, Elon Musk will not own Twitter. And he will not be able to prove fraud here. He has to prove. Oh, God, no. No, he's way out of his league there. And his lawyers know that.

They just have to do, you know, what his client wants. Right, right. So they'll just go ahead. What's the worst case scenario for this? That he just refuses to pay the money or? I mean, he can, again, I'm not a lawyer, I'm not totally versed on what the remedies that the Chancery Court has available to him. Look, if he doesn't reach some settlement with Twitter, it's not like he doesn't have other companies that need capital, right? I believe Tesla is a company that needs capital. I believe SpaceX is a company that needs capital. I believe The Boring Company is a company

that needs capital. If he pisses off everyone on Wall Street and everyone in the Chancery Court of Delaware, then you can pretty much kiss Tesla goodbye, kiss SpaceX goodbye, kiss his fortune goodbye. So other things depend on him reaching a mutually satisfactory solution here. Yeah, we'll see what happens. All right, let's bring in our friend of Pivot. happens. All right, let's bring in our friend of Pivot. Kevin Delaney is the co-founder, CEO, and editor-in-chief of Charter, a media outlet and services company digging deep into the future of work. Good timing, Kevin. It's a world he knows well. Delaney previously co-founded the business news outlet Quartz. And also, he and I worked together at the Wall Street Journal. I think

you came after me, correct? You took over. I did. You were an important mentor to me when I arrived out in San Francisco years ago. That is true. That is true. You did take over. I was so ready to go. And you did an excellent job.

I wouldn't envy you having to deal with me because I pissed off so many people. Anyway, welcome to Pivot, Kevin Delaney. Thank you for coming on. Yeah, thanks, Karen. Hey, Bill. So this is a big area that you're talking about. And there was, again, another story, a couple stories in the journal and the Times today about people returning to work, Labor Day.

Maybe they'll finally come after Labor Day. I've had lots of discussions with CEOs, and they either have to be really tough or they don't know what to do. Mostly, it's the second, like, oh, God, I can't make anybody do anything. But some of the hottest pandemic trends are winding down. Netflix and Peloton have had layoffs. Zoom's earnings and stock price are way down. The U.S. is shuttering its free COVID test program.

And the next booster shot may be the last one the government pays for. So it feels we're coming out of the pandemic. What do you think is going to happen right now? Because most people think that people are not going to go back to work. Yeah. I mean, what we're seeing, you're totally right. And we have a lot of companies that we've been talking to who are impatient to get their workers back in the office. And there are a lot of workers who we've seen in places like Apple who are like, no, we don't want to come back in. And so things are coming to a head right now. I would say that a lot of companies have really botched this. And I think that what they've done is they've had these periods of experimentation where they say,

you can come in when you want, you can get, we'll have bananas and bagels and things like that. And what people have wound up doing, because it hasn't been structured particularly well, is that they've come in to the office during these periods of experimentation, and they've been sitting next to people who they don't particularly work with, and they're on Zoom calls all day. So the failure of actually, and actually, ultimately, I think why things are coming to a head now is they don't feel heard and they feel like the only way that they can actually wind up in a situation that they're happy with is by really digging in and saying, we don't want to come into the office. And frankly, a lot of CEOs have actually not done a particularly good job of hearing people. They're impatient to get people back into the office for reasons that seem to often come down to the fact that that's how they work.

They feel more comfortable when they see people working. And the workers have some powerful arguments. Retention is higher when you allow people to work in a hybrid situation or remotely. Productivity, Nick Bloom at Stanford has done a bunch of research on this. And productivity is probably up a little bit for people who are working remotely. Business results don't seem to have been impacted by this. So the CEOs in a lot of cases don't have a particularly good argument for insisting. That is from my perspective.

Even many years ago when I was at the Washington Post, they'd always be like, why aren't you in the office? I'm like, I'm out doing stories. And they sort of were like, you need to be seen here. And I go, why? Why do you need to see me? If I turn in the stories, I'm out doing stories. And they sort of were like, you need to be seen here. And I go, why? Why do you need to see me? If I turn in the stories, I do a great job. Would you fucking care if I'm at the movies? I'm at the movies, by the way.

It was a really interesting thing because they couldn't ever give me a good reason. Now, I do think there's good reasons to be at work at the same time where there's camaraderie, there's culture, et cetera, et cetera. But it has to be super intentional, meaning everybody comes in on Wednesday, everybody comes in on Tuesday, whatever. Now, as you go, I was at the Vox office, and they've been particularly loose, actually, and nobody was there. Zero people. One person. One person was there. No, and the research, exactly to your point, shows very clearly that hybrid arrangements are the best arrangements, where you agree that there's some number of days a week that everyone on a team comes into the office and they're together.

A lot of the failure, a lot of the crisis situation that we're in right now is that companies say, we need our employees back in the office for mentorship. And well, like, did you have a mentorship program before the pandemic? Did you have one during the pandemic? Do you have one now? And the truth is, a lot of people show up in the office, and there is no structure for mentorship or these other things. There's this notion that's been written about a lot, and researchers have really debunked of water cooler magic. And the idea is that just by being physically present in the office, you bump into people at the water cooler, and that's like the source of the world's great

inventions and creativity. There's very little, if any, research that actually supports that unstructured interaction as being something that can actually be replicated, in some cases even better, when done in a hybrid or remote situation. So, Bill, why don't you jump in? Because Wall Street's been forcing people back into work, like you're coming in to our giant office buildings that we have. Yeah, I mean, well, JPMorgan Chase, for instance, is building a brand new giant office building on Park Avenue and 48th Street. That'll be a huge waste of money if people don't come back in. I think, Kevin, I'd be interested in your thoughts about this, but it seems to me that it depends on the industry, like Wall Street is very much an apprenticeship business. I spent 17 years as an M&A banker on Wall Street. And, you know, there may not be any research about water cooler magic, you know, in the academy, but in real life, IRL, there is a lot of water cooler magic. You cannot

suck up on Zoom, I'm sorry to say, and sucking up is a big part of getting ahead on Wall Street, just sort of hanging around the hoop. Not only do you learn how to do things, because it's an apprenticeship business, but, you know, you also can get into your boss's good graces or not. And you can advance your career by just hanging out and being, you know, a decent team player and clever socially. And you just can't do that on Zoom. So my thinking is that, you know, there are people on Wall Street, and by Wall Street, I also mean like private equity, hedge funds, etc., who care about their jobs, who care about getting ahead, and those people are going to want to be back in the office. There are those people

on Wall Street who really don't care about their jobs. They're kind of like passing through, you know, collecting some money, paying off student debt, whatever it is, don't really care. And they don't want to go into the office because they don't really care about their careers. So I think it depends on how serious you are about wanting to have a career. Yes, I would say a few things. So first of all, it depends not just on the industry, but actually on the role. So you have companies, you think of food services as being a company where people need to be in person to serve you whatever your salad, but they actually have a lot of corporate employees too. So that is one distinction. Nick Bloom at Stanford, again, did some research to unpack it by industry and tech and finance were actually the two industries that were most remote or remote

compatible, interestingly. I would say that in terms of this idea of sucking up to bosses and having presence with them for promotion, there is actually research out of Harvard that shows that that specific thing can actually be done asynchronously. They paired up people with mentors in the higher ranks of the organization, and it actually allowed them to advance more quickly over time in organization. So that is something that you could actually think about doing. The other thing I would say is that there is a danger of all of this. We know that the people who most need and most want flexibility are caregivers, women,

people of color. The research is very clear on this. And if this culture of Wall Street, we know is actually not particularly good for diversity, not particularly friendly to caregivers, women and people of color over the years, and however much better it is today. And I think like the danger of what you're saying, Bill, is that, you know, if you're going to select to not have caregivers, women and people people of color because they can find other, if you're running a Wall Street firm that insists that everyone come in

because those are the people who are gonna choose other roles at other companies where they actually do have the flexibility. One last mini point, which is that people, the whole focus is on location, where you're doing work. But what the research shows is that what people really want even more than that is flexibility of time and when they work. Future Forum, which is a Slack think tank,

you know, surveyed recently, and 94% of knowledge workers want flexibility around when they work. 80% want flexibility where they work. So if they want to not work in the morning or whatever, one of the things, where do you imagine this zeroing out? Because it still feels like it's bumping along on this hybrid idea that seems unspecific. Managing remotely seems like it's going to go on forever now. It seems like from studying the research very closely, that a hybrid arrangement where people are in the office two or three days a week and it's structured and they actually have one-on-one meetings with their manager in person. And the type of work that should be done in person is done in person. There's a culture more of asynchronous work and management. We know there are too many meetings and information can be better shared, etc. work and management, we know there are too many meetings and information can be better shared, et cetera, is, you know, that is the ideal scenario that companies get on top of this,

that they do actually listen to their employees. They look around what are employees doing when they actually come into the office and getting on top of that. There is a scenario where in a year or two years, we're just back where we were pre-pandemic. We saw this IBM and Best Buy are two companies that actually had very progressive, advanced hybrid work arrangements, you know, years, years ago, and they ultimately abandoned them when the top leadership of those companies changed, or there's a kind of other pressures on them, because they weren't committed to the structure around them, and they actually didn't work. So I think there's a scenario in a lot of companies

that a year from now, they're like, yeah, we tried hybrid. It was a disaster. People quit, and we're just going to go back to nine to five in your desk every day. Except this was the biggest experiment in history on that, isn't it? This was the biggest experiment of doing it. And I think a lot of people do, especially with children, it creates the idea of commuting. Now again, this I'm speaking as someone who never goes in the office for 25 years. And don't forget, you know, a lot of companies made record amount of money. That's right.

With their employees working from home. I mean, Wall Street made records profits in 2021, and everyone was at home. So where's the argument for coming into the office? It's certainly not necessarily an economic one. It's a social one. It's a learning one. It may be a mentoring one, although I agree with you, Kevin, I don't believe there's much mentoring going on on Wall Street. A couple last questions, and then Bill might have one more, is where do you imagine if you're going to be running this remote workforce, is it possible to do it well?

What are the like three things to two things to do and the two things not to do? Yeah, it's definitely is possible to do it well. And I think there are a few key things. Really, if it's possible for the type of work that you're doing, you should aim to have a hybrid work situation where you have people coming to the office two or three days a week. It's most important that people are in the office at the same time as their manager and their team members and have the same day. So that's the first thing. The second thing is look around. What are people doing when they come into the office? Are they coming in

and actually just on Zoom calls with their colleagues who are remote? I think it's really important to think about how people spend their time and coach them in using that time for things that actually benefit from being in person. It's this stuff that we've talked about. I think a big mistake that CEOs are making today is they're not actually listening to their staff. They have this reflexive, I need people on their desk, otherwise the culture is going to fall apart, we're going to be less creative, our business results are going to suffer over time. And Bill, you just said that's not an argument that's actually resonating with workers because the business results have been as good as they've ever been in a lot of cases. And actually on retention, what Nick Bloom has found is that

quit rates are actually down by a third in companies which allow their workers to work from home. So it's actually better for retention, contrary to what people say. The last thing I would say is that we've done a poor job in this country of focusing on team leaders, middle managers. And strategic consulting companies have made a lot of money over the years cutting out this frozen middle and firing middle managers. But what's clear is that the success of individuals and teams and ultimately companies is based

on actually having managers who are skilled at coaching, leading their employees of these companies. And that's true more than ever, but it actually was true to an extent that people didn't acknowledge. Our former colleague, Kara Sam Walker, has done a lot of research on sports teams. And the team captain in his analysis is really critical for success. It's this person on the field who's giving feedback in the moment, who is leading the team, not necessarily like the most popular person or the star of the team, but the person who is kind of in the action beside the player.

So I would say that like thinking about training, investing in and really valuing middle management is important. Middle management. You know, one of the things, one of the tricks I had with Recode, which is also they could come in or not, I didn't care, was I worked in the office quite a bit when I wanted to, and I refused to talk on the phone. I hate the phone. And so I was like, no, we didn't have as many Zooms and stuff. I was like, you want to see me? I'm in the office. And that's, if you don't want to, that's okay too, like whatever you want. And so people tended to coalesce in the office sometimes and then pick and choose and make appointments. It worked out rather well. Last question, Bill? I'm just curious, Kevin, what role do you think the unemployment rate plays in this debate?

Obviously, unemployment is very low right now, historical lows, but these things are cyclical. If we're heading into a recession, as the Fed seems to want to think us that we are, then unemployment is going to increase. And, you know, people's cockiness about their jobs or ability to find other jobs if they quiet quit or just leave in general will change dramatically. And therefore, you tend to do what your boss wants you to do if you lose leverage. So just curious what you think about that. Yeah, I think it's definitely a factor. I would say like the answer to that, honestly, is not really known yet. And as that would increase the employer's power and CEOs could

just insist that people come into the office because they want them to and they don't care if people have good arguments for why they should work to, and they don't care if people have good arguments for why they should work remotely. But I think that that's a very short-sighted position. You know, your workers are not going to thrive. You know, there's a lot of research around how people who don't believe in the purpose of their company are actually less productive. We know that there's this, you know, this thing people are talking about, whether it's real or not, quiet quitting, the idea of like sort of passively, aggressively not doing your job. So it might be that people—

That's nothing new. Yeah, that's nothing new. I think you should write a management book. You know what my management book would be called? If it works, it works. Here's my management book, Staff Zero. That's what I want to get. After managing, I'm like, no, never again.

I don't care about people's problems. I don't want to listen to anybody, and I don't want to say you suck. It's just, no. Staff zero. It's a short book. Staff zero. Staff zero. That's what I'm trying to get to.

Anyway, you can sign up for Charter's free newsletter at charterworks.com. Kevin, it's good to see you. Thank you so much, Karen, Bill. Thank you, Kevin. All right, Bill, one more quick break. We'll be back for predictions. Okay, Bill, let's hear a prediction. Does it have the word affidavit in it? Please, please now. My prediction is that Sheryl Sandberg, newly married, newly remarried, newly divorced from Meta slash Facebook, will join the Disney board. Whoa. She was on it. She was on the Disney board previously. Well, I think she might be going back. Why?

She's got free time. Yeah. My gut tells me that it's the perfect match between her free time and Disney's need to satisfy Dan Loeb, who is pushed for a board shakeup. I think Sheryl Sandberg would be an excellent addition. You know, Dave, Dan Loeb would want somebody like Sheryl. Explain who Dan Loeb is for those. Dan Loeb likes a lady,

like putting a famous lady on boards of things. He was the one behind Yahoo. I've known him for a long time. Marissa Mayer. He put Marissa Mayer in the CEO's job. That was a very cynical move by Dan Lowe, but go ahead. But he made a billion dollars from Yahoo. Yes, he did. Without really altering what the company was doing. Look, he's a hedge fund manager, a very successful hedge fund manager. You just wrote about him. L.A.

You know, I wrote a Vanity Fair story about him in 2013. You know, I've been writing about him for years. He's, you know, very quirky, very successful, very opportunistic. You know, he doesn't take these big macro bets and just sit on them forever like Bill Ackman and hope for the best. You know, he made money a couple years ago on Disney during the pandemic. And then he saw when Disney's stock took a dip a month or so ago, he bought in again. And now he's come up with a list of demands that he wants Bob Chapek to listen to him about. And my sense is that he and Bob talk and that Bob is willing to listen. Willing to listen to him.

And why is Bob willing to listen to him? Because he's smart. That's what you do with hedge fund guys who are activist hedge fund guys. You listen to them. You don't necessarily do what they ask, but you listen and you act like you're thinking about doing what he wants, which is for them to buy the 33% of Hulu that they don't own. Maybe think about spinning off ESPN, which of course has been talked about for a while, loading it up with debt. He seems very focused on reducing Disney's $50 billion, $50 billion of debt, which is, you know, a lot of debt,

but they also have a lot of, they have a lot of cash flow. You know, the $50 billion that Warner Brothers Discovery has is more material to Warner Brothers Discovery and is more of a danger than the $50 billion of debt is to Disney, but it's still a lot of debt. They may have overpaid dramatically for the Fox deal, $71 billion. So, you know, Bob has a lot on his plate. Things are looking better. You know, the parks are doing much better. But, you know, Disney Plus, and the whole Disney streaming universe, has a lot of subscribers. Disney streaming universe has a lot of subscribers, but Disney Plus is still losing money. Yeah, so you have to listen to Dan Loeb. All right.

So putting Cheryl on is possibly problematic, too, because she's got controversy with her, correct? Or does she get a new life now? Yeah, she's got a new husband. She's moving beyond meta. Yeah, she's got a new husband. She's moving beyond meta. Yeah, she's got a new life. She's probably, you know, third life for our friend Cheryl. I mean, she's so smart and can be so charming. And so, you know, I just think she'd be the kind of person Dan Loeb would potentially want to have Bob put on Disney board, along with another guy.

Who? Who else? I don't know who that would be. Maybe Evan Spiegel or somebody. I don't know. Someone fresh. Because they had Jack Dorsey on there, if you remember, under Bob Iger. But it's really interesting that Dan is moving now. He didn't move during the Iger era, which is interesting to me.

Now, he didn't move during the Iger era, which is interesting to me. Well, he did buy in during the pandemic when it looked like Disney was shutting down. And his bet was that the pandemic would end. And, you know, he made a lot of money. And I think, you know, he obviously, he's from L.A. You know, we were talking about just the fact that he was from L.A. influenced his desire to own Disney. And, you know, he said he wondered about that and decided that he was much more, you know, analytical than that. And just because he's an L.A. boy and he likes to surf doesn't mean he has to own Disney. It's a smart bet.

It's a smart bet. It's a smart bet. It's a great company. He'll make money. It's a great company. So Chapik's doing okay now. Bob, too. You know, he got a new three-year contract. He seems like he's, you know.

Which you thought, you and I thought he would get. Yeah, we thought he would get. They're not going to change horses. I mean, I don't know that the Iger, Kevin Mayer faction of the Disney world is, you know, talk about the importance of CEOs. I mean, what was Bob Iger's main job here is to choose a successor, and now he's kind of disappointed. It's like Jack Welch with Jeff Immelt. One of the things that Jack told me that I explore in the book is that he

believes absolutely he made a mistake in choosing Jeff Immelt to be his successor. And so these decisions are hugely important. And, you know, once you make them, and if you choose wrong, hey, Bob Iger, there goes your legacy. So, you know, I'm interviewing him in a week or so. What should I ask him? Did you make a mistake, Bob? Did I make a mistake? And aren't you supposed to be buying like a basketball team or something, too? Uh-uh. Uh-uh. I'm feeling like he'll say some things because he's like, you know.

I think he will, too. His career post. I'm very interested in his career post-Disney. It'll be interesting. Well, he's so fit and healthy looking. You know, he seems like he's 40 when he's 70. So, I mean, I'm sure he's going to do more things. Didn't he want to be president or think about running for president? He's not. No, I think he's not going to do that.

No, I know he's not. But he's a handsome man, for sure. It'll be interesting to see what he does, because he sort of had a great run there. And nobody expected as much from him when he initially got it, which was interesting. He's only the one that stuck around and took the abuse of his predecessor and then managed to really outstrip him quite a bit. Anyway, we'll see where that goes. We'll see. But Cheryl Sampson, that's a really good prediction. I really like that prediction.

I hadn't even thought about that because she had been on it along with Jack Dorsey and then not. But yeah, she needs a new act, too. I've asked her for an interview. We'll see. I said, you got to come through me for your return, your return, you know, the return of. And if you're smart, she will. She might not.

But I said, you know, if you come through me and you do okay, it's good for you. Then the world will beat a path to your door. That is correct. You need to have one. Someone beat you up for a little while, and then you can emerge unscathed. Anyway, that is a fantastic prediction, Bill. I really thought that was, I hadn't even thought about that.

We want to hear from you, by the way. Send us your questions about business tech or whatever's on your mind. Go to nymag.com slash pivot to submit a question for the show or call 855-51-PIVOT or tell us what you think of our predictions. Okay, Bill, that's the show. We'll be back on Friday for more. I'm going to read us out. Today's show was produced by Lara Naiman, Evan Engel, and Taylor Griffin. Ernie Enderdot engineered 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 Vox Media. We'll be back later this week for another breakdown of all things tech and business. Scott, free August is almost at an end. I know you're all depressed, but Bill, thank you so much. Cara, this was a pleasure. Really enjoyed it immensely. Thank you for having me.