Sharp Tech with Ben Thompson - Mailbag: How to Read an Earnings Report, TikTok's ATT Challenges, The Net Impact of Social Media, Lessons of a Young Tech Employee

Episode Date: October 31, 2022

How Ben reads an earnings report, the various challenges that might unsettle TikTok investors, an extended debate on whether Twitter and Facebook have been good for society, and Andrew is profiled by a major news outlet while Ben shares lessons from his early years.

Hello and welcome back to another episode of Sharp Tech. I'm your host, Andrew Sharp, and on the other line, Ben Thompson. Ben, how you doing? I'm doing well. I'm doing well. It is brainy constantly here. Other than that, I'm doing fine. Is Halloween a thing over there? Am I the first person to wish you happy Halloween today?

It is definitely a thing, actually. That's one of the things that makes it a little annoying. I'm in the sort of traditional foreigner neighborhood here in Taipei, which is Halloween Central. And so, which is all fine and good unless your son has like a basketball game over the weekend. And then you have to drive back to here. And there's like one road in. And it's backed up for for a while. But we made it.

Everything's fine. So it's all good. Okay. Well, I wish you look. Yeah, too much information. No, no. Look, my co-host on the other podcast, greatest of all talk, Ben Goliver, he suggested that I addressed. up as Elon Musk this year and make it sort of a topical, sharp tech themed Halloween in DC.

He wanted me to get like a fake sink that I could carry around my neighborhood. I don't think I'm going to take him up on the offer, but it's an interesting sort of guerrilla marketing approach that I liked. Yeah, you also don't look anything like who on Musk. I think it'd be tough. Yeah, you're right. But I'm going to take that. Well, no shots at Elon Musk.

He's a perfectly fine looking guy. But listen, we have a lot of mail to get to today. We also... That's right. Mailbag is beginning of the week now. We also launched a new beta last week, Sharp China. And we're still figuring out what the show will look like, but there was so much news surrounding China and the relationship between China and the United States that we decided to launch early and let Stratory subscribers follow along. as Bill and I get rolling here, Bill Bishop.

And I'm very excited about it. I mean, Bill has been a phenomenal resource. And I started reading cynicism early this year. And it quickly became something I was checking every day. So he's got a ton of knowledge. No, I think the challenge of cynicism is he does all this translation of all these new sources, including a lot in Chinese from China. But what you always wanted from cynicism is more like,

No, what does Bill actually think about this news? Right? And so it's very exciting to have a podcast where you can actually ask him that. Okay, what does this actually mean? Can you actually explain it? The first two episodes were amazing. But yes, right now it is for subscribers only. This actually gets to, I think we've had a few questions in the mailbag about bed,

your bundle strategy. Seems very stupid because it's all you, which is it was an accurate statement. It is now the longer, not just. me. It's still mostly me, but this podcast, to be clear, is you and Bill. And I think that's great because the, you know what is called Sharp China,

just like this is called Sharp Tech. That's obviously not an accident. The idea is to have a enjoyable, engaging, conversational podcast that's good to listen to, but is also like super deep and really gets into the subject at question.

And as I've noted, lots of times, Jeffrey, people have asked me, why don't you cover China more? I'm like, I'm not a China expert. Like I know more about it than the average person for sure, just by virtue of sort of where I live and having paid attention to it and reading people like Bill for years. But I think the thing you pick up from the first two episodes for sure is like, holy crap, Bill has a lot of knowledge about the situation. It's almost kind of overwhelming in the best possible way. And so, yeah, super excited to have that out there. If you go to your show notes, there will be a link.

you can just add Sharp China right to your podcast player. But yeah, I'm very excited to have it out the door. Well, what's great about Bill is he's a real expert and living in Washington, D.C. There are a lot of fake China experts that have emerged over the last two to three years. So I'm excited to talk to somebody who actually knows what he's talking about. So look forward to more Sharp China later in the week. It's going to be fun to get rolling. Everyone please bear with me as I learn how to talk about Chinese politics.

over the next couple of months, but I'm very, very excited for what's to come. Oh, you're fighting in the Chinese politics. It's the Chinese names that I'll you. Pronunciation. Pronunciation, always an adventure for both of us. As for the mailbag, though, first of all, we have the obligatory reminder.

Everyone can reach us at email at sharptech.fm. We'd love to hear from you. And second of all, I want to start with Adam because he correctly guessed that the next edition, to the Straterey family was going to be a Bill Bishop podcast after you teased it on our most recent episode. Did you see that last week? I didn't, but I think that Bill has been a popular guest for a while, particularly ever since we mentioned sort of Citechree Plus.

So, I mean, just to go a little bit more, like the Sharp China logo is very similar to the Sharp Tech logo. It has our porcupine friend. and when we were developing the logo for Sharp Tech, we wanted to have something that was sort of extendable to other brands and other subject areas. And so as a stand-in, every logo we did were like, imagine this was done for Sharp China. And it was such an obvious sort of next step. So Adam is on the same boat with me.

I think a lot of listeners. And it just makes it just sort of reiterate how excited we are to sort of have Bill on board. And, yeah, Sharp China with Sanos. This is Bill Bishop, Sharp Tech with Ben Thompson. Here we go. A whole new era. And Adam, there was like a 12-hour window where you could have listened to the podcast, listen all the way through to Ben's tease in the final 60 seconds of the podcast,

and correctly guessed the post-crow Bishop before it went live. So that's a true sign of dedication. Anyways, he continued on in his email to say, Ben and Andrew, I'm currently a student at the University of Wisconsin-Madison, and I spend a lot of time reading and thinking about strategy decisions on a micro-level, as I previously helped run a small business. But when I listen to earnings calls or spend time going through 10Ks, I find that I get lost relatively quickly.

Ben, do you have any advice for learning how to digest the information in these calls, or are there secondary sources that provide analysis I should be seen? out as I try to make sense of all of it. Ben, what do you think? Well, obviously, your secondary source to be protected. So I think he's already got to that regard. I think this gets into a broader question. I can't remember we've answered on this podcast previously. It's definitely a question I get a lot, which is how do you sort of write so much? And the answer is I already have a view of the world and how these tech companies work and how the general sort of macro environment of tech works. Now, I'm not going to say I'm an expert of the macro environment

of the economy that there's a lot of people that struggle with that for sure. I don't cast myself as an expert there. But the advantage of this is that if you sort of have a sense of how things work and what your expectations are, then you know how to interpret what you're hearing. And you know, of course, that executives are going to be spinning things a particular direction. You also know what numbers to sort of look for and look at. And so I think actually these recent calls are a great example. It's going to be a great test. Now, if I'm right or not, because as I mentioned on the last podcast, I completely don't agree

with the market freak out over Facebook, for example. Like I kind of said this on the last call. I'm looking at this call. My expectations are I want to see that meta is beating their guide, which they did. I want to see good growth in their secondary businesses, which we're seeing. I mean, we'll get to this in a little bit in the context of TikTok, but like Facebook makes more money from Messenger or WhatsApp, their messaging businesses than TikTok does as a business. Like this is a strong, solid business heavily impaired by ATT, which we can get to, but the fundamentals are still very strong. And then I have an ongoing thesis that AI is.

actually going to make Facebook's moat deeper and wider because other companies aren't going to be to match that. And AI is going to be fundamentally more important for advertising in a post-ATT world. And so when it comes out, Facebook's increasing their spending on AI. And so their capital costs going up. Everyone freaks out. It's like, oh, my God, their costs are going up in, they're like prime for this for the meta stuff. I'm looking at this. Look, the costs are going up as I expected. I think they're building a moat, which you can see sort of coming. And so that's how I'm interpreting the results. Now, you can see the risk there, which is that was my expectation. Of course, I'm primed to look for things that match my expectation. And so an ongoing battle with the way of

the world is always being aware of confirmation bias, looking for information that sort of fits, fits my thesis. And so that's just a fact that's just a fact of life. I have to be aware of that, be careful of that. When I make mistakes, it's usually because of confirmation bias. And that's why I come back when I make mistakes and I write an

article or an update saying, look, I got this wrong and almost, I try to always explain why I got it wrong. It almost always is like, look, I assume this would happen. I saw this data that seemed like it would happen. I missed this other bit that shows that something was wrong. And so that's sort of an ongoing thing.

I think the importance in reading these 10Ks and listening to Ernie's calls is you have to come at it with a ton of context about what is going on with the business broadly. And that's just something that's a matter of time, right? Like I've been reading about and obsessing about tech, particularly the business side of tech since like I was in seventh grade. So, you know, I have a sort of, you know, 30 year head start on Adam here in doing this. and not to say it's going to take 30 years or anything on those lines, but there's just a matter of practice makes perfect. There was a, what was the podcast I was listed? Oh, Ethan Strauss had Tyler Cowan on.

They were talking about practice in the context of it. And, you know, it was funny because, you know, Tyler was emphasizing how the best, like one of the qualities of the best sort of performers is a will and ability to practice well. And they were talking in the context, like one of Tyler's takes is that Steph Curry is one of the best practices in NBA history. In that, like, he just has the ability and drive and focus to continually get better at different things that sort of impact his career.

And it's funny because Ethan was like, well, I don't know if that really applies to writing. I look at someone like Ethan, who was on like the Warriors beat for years and then ran a blog before that. He's been writing like crazy constantly, right? And I think that that's definitely a advantage that I feel where I've been writing daily updates and articles four to five times a week or seven times a week when I first started for almost 10 years. And so there's an aspect where not just am I in the habit of writing quickly and consistently and putting myself out there and having to have accountability

for my takes, but also I every day I have to dive deep into this stuff. And so that just builds up a context and a knowledge that you can draw on as you're reading this sort of stuff. So that's, again, this isn't that particular bit doesn't necessarily be special. It does give me an advantage, just a sort of time advantage. But that's, that's an important part because, like, the companies obviously have a point of view. There's a certain thing they want to push. And, like, for Facebook, I'd be particularly careful because my point of view on Facebook is very aligned with the message the company wants to send. So in this case, I have to read their earnings super closely.

Look at the numbers very, very carefully because I know the risk of confirmation bias is very high, but I know that going in. You know, that made me a little bit of a long answer to Adam's question. But I think that that's the context. Context is the context. Well, and the challenge is you also have time to refine your thinking in between earnings reports. So you have a really clear idea of what exactly you believe and a clear idea of what confirmation bias to be careful of as you're reading those reports. And so. Right.

But confirmation bias is so strong that I still succumb to it sometimes. And look, I mean, like, I'm. I'm open to the possibility that you're coming to it with meta because I read more of their earnings report and their projections for the next few years. The fact that reality labs operating losses are expected to grow significantly over the next couple of years is not a great. This is what I don't give up the market reaction. They said that last year. They said it's going to be $10 billion and it's going to increase. So actually, this is another takeaway, which is.

the idea of the market having perfect information, that's a useful construct for modeling. It's not at all true. And you know it's not true because there's things that companies literally say on their earnings that the market doesn't incorporate. So by definition, there's more stuff beyond that that's also sort of not incorporated for sure. I guess so. But when you step back a year ago, if they're saying that, you think, all right, well,

let's wait and see. Mark Zuckerberg must really believe in this and there must be something real there. And we're now a year later and after the latest Meta Connect keynote and everything else, I think the market is saying we don't see anything real there. And you guys are burning all this money and there hasn't been that much progress. And that may be part of the reaction, which you said on the last episode, like if you do not believe in the long-term potential of the metaverse and the spend, then it's reasonable to be skeptical.

The reason why I think that I don't think you can throw away the metaverse. You can assume the metaverse will be nothing and that it's just an ongoing waste of profit. And I still think the reaction is dramatically overstated. This reaction isn't just about the metaverse. It's about all the other aspects of their business. Like I think one of the big drivers is that their costs are going up for this spending in infrastructure costs. And people are interpreting that as the entire business is becoming, you know, more expensive. Horrally inefficient.

I think that's just wrong. And it's not just that it's going to be an ongoing advantage, but this is sort of a one-time buildup that's going to happen. Of course, they're going to have to replace servers over time. But I think that, I just think, this is sentiment makes a huge difference. The market as a whole, in the long run it will get it right but in the short run the fevered sort of eagerness for you know you have jim kramer sort of crying on set like we're not dealing in the land of like rational dispassionate

analysis of a company here oh yeah i mean look we're in the the era of wild pendulum swings on every netflix subscriber number that's reported each quarter well here's an example as we saw this with like Nvidia is now way up. Why? Because Facebook's like we're going to buy a lot of AI hardware. No shit. Like we, of course they're buying a lot of AI hardware. Of course that's going to benefit Nvidia. So was it rational for Nvidia to take the plunge that it did? We set it on this podcast. They are going through a short term big problem. They have an inventory problem. They have this crypto problem. All these things are happening at once. The market is not precise. Like the market will get it right directionally in the short term.

Of course, Nvidia stocks should be down. Meta stock should be down. Also, I've been making this point. There is a structural change in social media. So, yes, the terminal value of these companies has declined. But it usually goes too far and then comes back and it has to sort of calibrate itself. And that's where I definitely feel we're at. Yeah.

Well, and I do think the metaverse investment has distorted the conversation to sub-degree. Like, I was with friends on Friday night, and they were talking about how much money Meta's losing on the Metaverse bet. And I had to remind them how much profit there was for them to play with as they explore. They still had a $5 billion profit last quarter. Exactly. Right. I mean, so this is a company that would have a $15 billion profit. And this is after ATT's impact. I think people don't appreciate how massively profitable like Meta's core business. Well, and speaking of the AI investment, Mandar says, given Meta's investment in AI hardware and software, what are the odds of meta launching and succeeding with a verticalized AI cloud? Not sure if data handling concerns would be an impediment, but I don't think anyone would doubt their AI chops.

What do you think of that idea? I think on a theoretical basis it makes sense. I'm not sure. Actually, I don't think it makes sense for meta. Just because a cloud that you're sort of selling like services, it's a very different business. It's a customer service business. It's a, you know, you're seeing Google is taking years and years.

Like, this is kind of underappreciated, but Google has lost billions and billions and billions of dollars trying to keep with AWS and Azure. Now, in this case, it's sort of a known market, and it looks like it's going to pay off. Like, their growth is still high and their margins are decreasing. Sorry, by margins decrease, I mean, their losses are decreasing. Their margins are getting better. There's still like minus 10% last quarter, but that's much better than the minus 40% of a couple years ago, for example. So that is an example where they're losing tons and tons of money.

They're probably going to pull it off. but it's been a multi-year sort of investment and effort, and Google has had to spend so much in part because they're trying to catch up and all the low-hanging fruit sort of already harvested by WS, but also because they had to completely build basically an entirely new company internally, which is like this Salesforce support, entire infrastructure to support these companies that are going to run on the Google Cloud. That's a lot of work and a lot of effort.

And it's something Facebook theoretically, meta could do, but they're not going to do that in addition to the Metaverse for one. And number two, there's just a, there's a real big difference to be in a product company and a platform company. And it's hard to develop those chops and abilities when you're a product company. And one of the advantages of Facebook building out their own software and their own hardware is because they're building it exactly for their product. So they can be really sort of tightly integrated there to build it as.

as a general purpose actually decreases some of the efficiencies and efficacies you get from doing it yourself. Now, it's worth noting they want to build a platform for the Metaverse. And it's like, well, good luck. Good luck is the theme of our reaction. I have lots of, yeah, I have lots of issues with Facebook's Metaverse issue. John Carmack, for example, who was recently heavily involved, he sort of pulled back to more of a one day a week sort of position.

He thinks they should be going much lower costs, getting much more widely accessible. I think that makes a ton of sense. My whole point about meta is throw the entire metaverse away. I still think this, I think this reaction is overdone. And so a lot of the concerns I have for the metaverse would apply to them trying to build a vertical cloud business. Okay, but along those same lines, I do think that this is why people are frustrated with Zuckerberg spending so much time and money on the metaverse because there are other ways that meta and Facebook could grow its business and do creative things and start. new businesses as offshoots to what they already have, and they're not really exploring any of that

while they bet on the metaverse. Is that, is that right? Yeah, I think, I think that's a fair point. I mean, at the end of the day, it's worth remembering that if Zuckerberg is right, the, like, the payoff here is, is, is potentially astronomical. So even on an expected value basis, you could make the argument that the metaverse bet is better than a cloud bet, for example. I'm not sure I would make that just because I think the expected, I do think it's very likely that Google's cloud platform strategy does flip to being accretive to margins. Yeah. And so, but it's at least a reasonable argument to make.

I mean, I think the better argument is, look, this money should be going to shareholders who can invest in companies that want to sort of build the metaverse or whatever it might be, but it's fair to wonder if that is basically just, you know, handing it to Apple, for example. I think as a industry observer, I have a lot of skepticism, but I'm grateful in a way that meta is doing this, just in part because the only other company that's really in a place to do it is Apple. And I think that Apple control of spaces is very problematic. And so more competition, the better.

We'll see. And speaking of competition, let's move on to Ben, who says, Ben Thompson may have covered this in past episodes or Onstrategory. So apologies if he has. But don't the same Apple ATT problems befall TikTok as they have with meta properties when it comes to targeting an attribution. Another way of asking this is, is the terminal value of a social network that much lower post-ATT? What do you think, Ben? I mean, I would not want to be a TikTok shareholder. I think TikTok is really bad for meta. And again, because they're taking that attention away, and that is ultimately the biggest threat to meta by far. But at the same time, TikTok does have to also figure out how to make money, and they have to make money in the same environment that meta is operating, except that meta has a massive head start on them.

They already have huge relationships with users. they have more data, and they are sort of are making these investments in AI that is going to be the way to work around ATT sort of in the long run. TikTok has to do all the same stuff, and they have to do it in an environment where the other thing to be bullish about meta is the, I thought there are comments, again, with the appropriate size grain of salt about Reels usage were very encouraging on the last call, which is not that it's growing rapidly. that's one thing. The other concern is are people watching reels instead of looking at the other stuff on Instagram? And that's a problem because the other parts of Instagram monetize much better, right? Like, and they claim that the vast majority of Reels usage is accretive or incremental to Instagram usage. So people are going on Instagram.

They're looking through their stories. And then they're kind of diving into Reels for a while and sort of wasting time, which means Facebook's getting more inventory to show to them. And one of the biggest mistakes people make in analyzing both Google and Facebook is, and this was a huge problem for Facebook in the early years. People would always say, their price per ads going down. And that was a reason to be bearish on Google. And that was fundamentally mistaken. If you're like on linear TV, you have a limited amount of time or a newspaper. You have a limited number of ads.

If your price per ad is going down, that's a big problem. You're making less money. The difference in digital is you have a limited amount. an effectively infinite amount of inventory, right? And so if you have more ads and more advertisers, you can be making more money even as your price per ad goes down because you're showing more ads. Now, that was sort of initially, in the long run, though, this happened to Facebook. They ran out of inventory. They're like, look, we can't put any more ads in the feed. Our users will dislike it. It'll be a bad experience. And so what happened? Their price per ads started creeping up because

this pricing is all auction based. Like, they're not selling, they're not, setting the price. It's whatever people are willing to pay. And so their price per ad started creeping up. This was a great opportunity for Snap and all this sort of other social networks because suddenly advertisers are being priced out of Facebook. And so they were going, let's try out these other networks, see what's going on. And the reason why stories for Instagram or the Facebook properties generally was so bad for Snap, the most important reason was it stopped people from even trying Snap, right? Because like, well, I already have this cool experience with my networks or my Instagram. I'll stay here. That's number one.

But number two, this new format gave a ton more inventory to Facebook, which dropped Facebook's prices, which meant if you're an advertiser, why go with Snap and they're relatively crappy tools and bad measurements? And I'm not even sure if they know how their business works. When I can go with Facebook, which runs a great business, I know exactly, you know, I have a much better idea of how it's performing, all the sort of feedback things. And so that was sort of a great option. So Reels now is being layered on top of that. So if that engagement's increasing and you're an advertiser, it's like, well, on one hand, TikTok does have way more usage. It has this sort of young people so I can reach them. And that will be good for TikTok.

They definitely sell a lot of ads today. But it's going to be that much more challenging when, because investment is ROI, return on investment. And the investment part matters. Investing for an ad on Facebook is very, very low because you're already on the platform. you already use it. Facebook builds really great tools for you to make it easy to make ads. And so I was like, well, my return's not going to be as good on reels. But it's going to be super cheap for me to do and trial. So I'll just stick over here versus TikTok.

Yeah, my return can be higher because they have more of the audience that I want. But it's hard to measure. The tools are difficult. Isn't it also difficult to build the ads themselves right now? Like that aspect of the advertising business is still in its infancy, at least as far as videos are concerned. Like it's easier to put a picture on Instagram and a link to buy a product than it is to come up with a compelling seven second video or something. That's right. It's a huge challenge. And every time it gets harder to make, especially for these companies where a lot of their advertising is sort of the long tail,

like mom and pop shops, you know, small advertisers, et cetera, that the more difficult formats become harder. And so number one, that is going to be a challenge for TikTok. But number two, we have a demonstrated history of meta building out tools and making it as easy as possible for advertisers sort of make ads. And so, you know, I anticipate them being better at that than TikTok just because they have more resources. They have more experience. They have people that have done this before, et cetera. And then number three, TikTok has this existential risk, which is, it's a Chinese company operating in, you know, in the West, in an environment that is increasingly, hostile to that reality. So like

said, all the respect to TikTok, I want them to continue being an ongoing entity because they've been kicking Facebook's rear end, fair and square. But I would not feel very good if I were an investor. I mean, who knows whether we even make it through 2023 without TikTok

being banned. But along those lines, in the course of our TikTok discussions last week, Nibo says last week Sharp made a statement of fact that I'd like you guys to review. Is Facebook a net negative for the world? We got a couple different responses to that. And another was from Michael. He said, one, society is never one thing. There's no monolith. We reduce it

to an abstract concept to talk about it. But in reality, it's just a bunch of individuals. Various apps and platforms can be very negative for some people and really positive for others. And then two, who decides what gets banned? Would you be? comfortable with your enemies and people you strongly disagree with having that power, it reminds me of Tipper Gore trying to get rap and metal music band for the quote unquote bad influence on kids in society and the same for violent video games. Wait, wait, wait, these are questions directed at you. I know, I'm not, you're the one that wants to ban everyone.

Listen, I was going to cede the floor if you have any general thoughts. I, for my part, I don't want to be too sanctimonious about any of this stuff. But first and foremost, the context matters, okay? I was responding to Ben's discomfort with the government intervening with TikTok's rights in the private market. And I remember, because he said that early in the week, and then I came back and responded. And the reason I did is because after the episode where we expressed misgivings about banning TikTok or you expressed misgivings about banning TikTok, I was listening back. thinking to myself, who really gives a shit if TikTok ceases to exist in the United States? Like, if it's a matter of principle and precedent that we're worried about, I totally get the

hesitation and the concerns are 100% valid. But strictly in a practical sense, it's not like TikTok is some grand human experiment that's, you know, elevating culture all over the country. it's the social media equivalent of like an e-cigarette company and I just do not care if it gets banned. The world will move on and survive just fine. Please, go for it. I just I really fundamentally disagree with that. And the reason I disagree is definitely, this is, let me put my biases right on the table. I sit here today, you sit here today as people.

who, I think there's a question later on to ask about my like my corporate experience at Microsoft, things on those lines. And, you know, why could I succeed despite the fact that I had a terrible attitude and I couldn't tolerate people being dumb and I was just being, you know, a general jerk about things? Well, because the internet was out there and I could go out and I could put my flag in the ground and I could build a site that what I had total control of, I could say what I wanted to, I could do and was able to build up a career doing something sort of new to the world that I think, I hope, and certainly to the extent that people are voting with their wallets was beneficial to a lot of people, made their lives better, made their lives more interesting. And sure, it's easy to sit here and say, okay, well, that's a good example on the other side. You're writing about, you know, business strategy, XYZ.

But I think there is a serial undervaluing and underappreciation of the importance of entertainment, of the importance of culture. And, yeah, is TikTok necessarily a phenomenal use of your time? Well, I don't know. I'll tell you what. The other night, I was super worn out last week, had a bunch of crazy stuff going on here in Taiwan, and they had to get Sharp China watched. like I sat down and I Because I feel guilty But I was like TikTok

I watch recycled TikTok content On Instagram And I watched it for like two You know what? It was great. I enjoyed it And I now have tapped into the The auditions on the talent shows

Where you always have like the person Come out of nowhere And then they they they So it's like triple recycled content That was originally on like network TV Realted and I love it It's like the human spirit is amazing And I enjoy seeing it

And I am extremely reticent to sit here and dump on and say any platform that creates new opportunities and possibilities for the exposure and exploration of human possibility and spirit is inherently bad. In my mind, it's inherently good. And that's not to deny that there's problems, but it's very easy to sit here as an old man and dump on the kids, which we've seen over time. And so my fundamentally biases, I think, are the opposite of yours when it comes to this stuff.

Well, listen, I don't want to be the old man dumping on the kids. Of course you do. Lean into it. I am going to lean away from the TikTok side of the conversation because my take on TikTok is informed almost entirely by what I've seen from Facebook and Twitter over the last 15 years. and there have obviously been benefits to the emergence of Facebook and Twitter. But both of those platforms have a tendency to polarize both sides of any debate. And when you look at their impact on society, like they were supposed to democratize the distribution of information and lead to this wonderful new world.

But it turns out, like anybody who thinks back to that and says, yep, that's exactly. what happened and that's the end of the story. No, it turns out that democratizing information led to a lot of people having their own version of truth and a lack of a shared reality anymore. And that hasn't been healthy. And I think, look, right now people are asking like, how do you make Twitter a better platform? How do you fix Facebook? In reality, a hundred years from now, people are going to look back at what happened in the first 20 years of this century and be like, wow, people just did not know how to handle democratized information and the internet writ large. And, you know, is it fair to say that Cambridge Analytica and the political ads on Facebook gave rise to Donald Trump? No, it's not. I've said that on a couple of previous episodes.

But I don't think it's crazy to say that like the conditions that allowed someone like Donald Trump to rise to the presidency were mass polarization on both sides where Democrats were in sort of their own echo chamber and lost touch with their base a little bit. And then Republicans became more tolerant of just totally disregarding political norms. And all of that to me is a byproduct of Twitter and Facebook kind of flattening. reality in some really unhelpful ways. And I don't know. I mean, you're free to disagree. But I think like when you take, when you add up all the credits and debits at the end of the day, both of these have been more bad than good.

You just stick that in at the end. I mean, do you, would we have the same level of polarization if we only had talk radio in cable news. I mean, there is a lot of evidence that those are actually bigger contributors. They're definitely on the same continuum of democratized information to your point where part of the issue with democratized information is you get to choose what you want. And you also get to ignore what doesn't conform to your worldview. Right.

But there is also a fair bit of research out there that, number one, people. People on social media are actually more exposed to the other side of an issue than they are otherwise. And number two, that exposure to the other side actually further polarizes people. And I was going to say, it's different because when it's online, this is what I mean when I say it flattens reality. When you're interacting with someone who disagrees with you online, there are none of the human buffers that exist to make us sort of nod our head and try to find common. ground, it just becomes, well, fuck this person. He's obviously what's wrong with society. And it goes back and forth like that on dozens of issues every day. And that is a function of the platform, not necessarily human nature. Because if a lot of these conversations were happening in public,

they would not be so acerbic on both sides. Well, I think it's worth noting that U.S. political history in general is not nearly the sanitized conversion that people want to pretend it is. Like there's been multiple bombings at the Capitol, for example, right? Like, which no one seems to know. There's been multiple assassinations of political leaders. There have been multiple violent protests. I mean, I went to Wisconsin. There was a bombing of Sterling Hall where a teaching assistant died during the Vietnam War.

I mean, like, like, there, you know, you go back even the revolutionary war like the people complain about misinformation like the whole entire history of journalism particularly the united states is basically massive polarization and that's how you sold so papers and there is a bit where the what we have in our mind of journalism of both sidesism and trying to toe the line was a function of their 50 years of an advertising model that made sense in a world of massive corporations that were sort of part of, you know, the burgeoning sort of American empire post-World War II. And, yes, the internet broke up that reality.

But there is definitely an argument to be made that the internet is, in some sense, returning us to a more sort of typical norms and typical nature. And the effect that the internet has had on this breakup of reality, as you argue, is basically by, it's one thing to operate a business as a man. monopoly, right? You can sort of afford to dictate to say what you want to do. And people have no choice because that's the place that they have to go for news or for information or the classified ads or whatever it might be. And the impact that, so this goes back to like the Facebook and Trump question. I think the idea that Facebook directly contributed to the election of Donald Trump is ridiculous. The Cambridge Analytical scandal was a joke. It wasn't a real thing at all. It was a huge deal in that it fundamentally changed perceptions of Facebook, which is kind of. interesting because the actual impact. Whether it made an impact is immaterial because people thought it made an impact. I mean, the UK government released this huge release about it.

And they're like, yeah, this actually wasn't anything at all. But of course, no one knows or cares. The impact that Facebook had that was underappreciated. And I wrote this article when it was clear that Donald Trump was going to win the Republican primary. It's called the voters decide. And my argument is that, look, Facebook and social media and the internet is absolutely responsible for Donald Trump's rise, but not in the way everyone is understanding it. What they did was the internet came along and it destroyed those monopolies.

It made it so that newspapers and TV and everything else had to compete for viewer attention. They didn't get it by default. And so how do you, if you're competing for viewer attention, you can't dictate to the viewer what they're going to get. You have to give them what they want. And so people are like, why is CNN televising every single time? Trump rally in like, you know, for a year ahead of time because it got crazy ratings. That's why they did it.

Why did they care about getting crazy ratings? Because CNN was in a terrible place as a business because they were, the internet was coming along and pulling away attention, pulling away advertisers. And so that is how the internet apps like like with the traditional media is what elected Donald Trump. Like you televise this guy very charismatic, very entertaining, even if you disagree with them, right? I mean, arguably the people. that hate Donald Trump pay more attention to him than the people that love him, right?

It's gripping television. What was the quote from the like the CBS head? You know, I feel terrible for America, but this is great content. One of the truest things that's ever been said. And the motivation for these entities was great content. So they televised Donald Trump nonstop. He's in the news constantly. He's inescapable. No other Republican can sort of get air. And so, you know, so they're like, again, this is not too. dismiss any sort of takes or whatever might be your responsibilities. But that was the impact the internet had, was basically unleashing traditional media to prop up Donald Trump.

And here we are. Correct me if I'm wrong. What I'm hearing you argue is that in addition to banning TikTok, Facebook, and Twitter, we should also ban for-profit cable news. Are you cool with that? No, I think, no, I, this is. just a I don't think that and I recognize and certainly to a large part agree with a lot of the

consternation and concern about our political climate and the impact the internet has had on that and all those sorts of things it's all all very fair points and you get this really negative feedback loop where each side is radicalizing each other and validating the worst suspicions of the other and then the loudest people in the room you know sort of sort of dominate and, you know, I think we're both and people broadly are in this rapidly expanding middle area, which is like, can we not have crazy people, period, right? Like, that, that would be, that, that, that would be a nice outcome. But I think it's important to recognize that this is where we are. There's no going back. Sure. I think that if we were recording this

podcast in the 1600s, we'd be like, man, the printing press really screwed things up, right? Like, we had like we had one source of truth it was the catholic church everyone broadly agreed with these constraints like can we can we figure this out and obviously that would not be realistic then and it's not realistic today so the big question is how do we figure this stuff out sort of going forward and i won't get into the points because i think we'll probably get to it over time and i also i think to your point you were making this twitter would be what twitter is probably regardless it's a function of the friction list of the platform and the humans that are on it. And it's the same thing with Facebook.

I think actually I think Facebook, I'm going to sell like the worst Facebook apologists on here, but the people who love to blame Facebook for all the troubles in society don't use Facebook. And they don't use Facebook not because they're like taking a principled stand. It's because they're Twitter addicts who want text, who want the just mainline of information. and they also hate their friends and family. And so I think the vast majority of people on Facebook are just, they like, they like to see pictures and they want to see friends and family. I mean, I don't know, I go on Facebook.

I come from a very conservative sort of background. I see very little politics on Facebook. Like that's been the case for years. It's mostly people right now going on like harvesting pumpkins and going on like, like, like slay rides, right, or whatever might be. And I think I'm with you on Twitter though. I mean, Twitter is like that's where. the polarization and the absurdity.

Well, and Twitter has like an agenda setting function. And also I love Twitter. Exactly. I'm on Twitter constantly. I say this as someone that that is very textually oriented, that wants mainlining information that cannot quit the app even if I wanted to, and I don't. Well, I think they're both pretty bad depending on where you look. And I think they're also sort of akin to Reddit where they are, you know, there's some good stuff.

there's some bad stuff, there's some truly crazy stuff, and there's some truly awful stuff. And treating it as a monolith is probably not a good idea. But if you're looking at systemic issues, that's what you have to do. And you have to sort of take society as a whole. And I agree with you 100% that you can't put the toothpaste back in the tube on this one. Like, we are where we are and we need to figure out how best to manage it going forward. Yeah, and the two things was coming out of the tube regardless. Like, it's not like we can even blame people to my.

I mean, you can definitely question decisions that were made by executives and companies over time. But if you actually think through the structural forces, like this, all this was going to happen. And it's worth pointing out, by the way, two more points. Number one, polarization is way worse in the U.S. than it is anywhere else in the world. So there is something uniquely American about this. stuff that's not necessarily happening in other countries, which all have social media to the same extent that the U.S. does. So that by itself shows it's not just social media that's sort of driving this.

And number two is, and this is, I don't stand by this at all. This is just throwing it out there as an idea, something I've been thinking about. You make the point that in person is not at all like online. And one does wonder if that's almost like a saving. race and actually a benefit of the internet where there's so much energy and vigor and vitriol wasted online that it actually preserves real life being relatively normal and relatively people get along and people live together and they go to trick-or-treating at each other's houses and and people want to mock that they're like oh how can you get together with the person XYZ when you're online and doing you know ABC and maybe that's actually it's it's it's not

ideal, but it's better than like bombing buildings, right? So I mean, I don't know, just sort of throwing that out there. Well, yeah, listen, you raised a lot of great devil's advocate arguments throughout the last 15 minutes. Unfortunately, you did not persuade me. I think any honest accounting of what these platforms have done is not favorable. But at the same time, I'm not advocating to ban Twitter or ban Facebook. I just think it is important. important to keep that in mind in the course of all these discussions about how to improve things and whatever. You can take a step back and be like, all this has not been great for society. And as to the specific question about who decides what to ban.

Well, just like your position is admirable because you're basically saying my current job should not exist and my current social life should not exist and all the things that actually are great for me. I don't know if that's what I'm saying at all. No. I think no, these massive centralized platforms where everyone has access to every other person's opinion at any given time of day have not been good for society as a whole. There was hope in 2010. Right. But this is like aggregation theory in a nutshell. If you have a frictionless environment, these centralized entities are going to form.

It's a structural driver to this. And we as a society have not yet come to the realization that when these centralized communities form and that's how everyone gets their news, they need to be regulated really, really closely in order to balance the impact on society and sort of moderate what it's doing to distort people's perception of their neighbors or whoever else. Right, but would you say that you sort of self-regulated to a point? I mean, speaking for me personally, I've long since retreated from public social media. I see it primarily as a way to broadcast links and whatever. And I have all my discussions in primarily group chats and private messages, which has been remarkably additive to my life. It's a real treat to sort of get to hang out with my friends 24-7, no matter where I am in the world. And I don't think I'm alone in that.

I mean, I think you're seeing a widespread shift. to actual conversations that matter being in these private places. And that's one of the reasons why good luck buying Twitter now, because I think more and more people are realizing if you're trying to actually have conversations and persuade people on Twitter, yeah, good luck with that. It's a terrible place to do that. And it goes back to the question earlier in the episode, is the terminal value of a social network just much lower now?

The answer might be yes, as everyone sort of migrates to these messages, platforms that are much harder to monetize. Yeah. I mean, because Facebook's good in that regard because IG messaging, Facebook messaging, and especially WhatsApp are massive beneficiaries of this trend, but there are a lot harder to monetize. Right. Well, there are a lot of issues baked into this conversation.

It would be impossible to resolve even 10% of it on this podcast. I will say at the end, Tipper Gore's efforts failed. So democracy and the First Amendment work. on that one. And I think in general, that's all a really good thing. Like the constitutional protections afforded to private enterprise like Facebook and Twitter are really important. And long term, the benefits to that system will outweigh the costs. But at the same time. Yeah, it would just, I do, just a double down on Michael, for sure I have a huge problem with who decides to get banned. And actually, this fits in the broader thesis.

here, which is, I think the mistake Twitter made, like, with having a very real abuse problem was they failed to give people tools to have a good experience, right? It's unbelievable to me. I mean, there's so many things about Twitter that are unbelievable to me. Number one is the fact that their direct message product still sucks. Like, direct messaging is so clear. I wrote an article saying messaging is the future in 2014 before Facebook about WhatsApp, literally the day before.

Like, we're eight years on and Twitter still has a terrible messaging product where, the last message in thread after thread in DMs is us exchanging phone numbers so we can actually use a real platform. That actually is good for messaging. It's arguably the worst, like, strategy mishap product fail in tech history. Like it was unbelievably valuable. They should have kept everyone on the platform. It blows my mind. It's still as bad as it is.

That's number one. But number two, give the user more control over what they see. How was it not possible, like verify everyone, for example, and say, I only want to see tweets from verified users, right? Right. Not this verifying where it's like this magic pixie dust we give to people who we like. No, do it widespread. Like, they do have stuff now where you only see messages from people who follow you or who you follow, I should say, which, thank you.

It was 10 years too late. But, and then give me all your content moderation, top down content moderation, but I can choose to have it. which I can say, look, that's going to give you a better experience, and I can choose to not have it. I think this is the answer to the Internet in general is you have to empower individuals because it's fully distributed, because it's so hard to walk down absent a China style firewall and intimidation and censorship, which for all the reasons we've discussed, I think, would be a terrible idea, not just in isolation, but also in a great power competition with China. You have to empower individuals. You need to give them more tools and more

capabilities and this entire mindset that distrust individuals that thinks they're stupid, that thinks they need to be led around by the hand is, I think, just a fundamental mistake. Yeah. Well, and I think when you look at TikTok, when there's a compelling government interest to balance against the constitutional protections that are afforded private enterprise, that compelling interest prevails. And the national security concern is why to ban TikTok or why I think we should ban TikTok. You're just happy to get all the other stuff. Well, totally. And I'm also like, I'm not going to shed a tear if that's the direction we end up going. It is what it is. Again,

the youth of America will find a way to survive. But, all right. Well, we just, we just, we just pulled off a, I think a 35 minute answer to a single question. So I do, I do hope we can jump to the end because I think there is an important important point to be raised here. Actually, I'll lead into it. You had the first feature written about you. Oh, God. Which is very exciting. Just, you know, just getting started.

Obviously, you've been doing great. I'll talk for a while and open forward before that. Now Sharp Tech, Sharp China. You get a feature written about you. I just want to congratulate you. The takeout treatment. Sean says, did you guys see that the onion profiled Andrew Sharp over the weekend. the headline of the article that he links to,

man scared of committing to AirPods just because he's afraid to someday lose them. Listen, Ben, I'm not... Were you interview for this? Did you turn down an interview? There's a photo shoot. Walk me through the process. Yeah, I'm curious.

No, I was misquoted. I'm not scared of committing to AirPods. I'm not afraid that all someday lose them. I won't commit to AirPods. No, I know that I'll someday lose them. I know that this is just a scheme to bilk me out of $200 at a time every time I need to replace my headphones. And frankly, even beyond that, I don't trust people who aren't losing their headphones every three months. I think anybody who's not losing their AirPods, those tiny little AirPods, is too organized to be trusted.

And so for me, I feel no guilt or shame about say to myself, listen, the marginal utility gains of AirPods are not worth the extra $200 that I'm going to light on fire every time I need to replace these things. That's the basic calculus. And I was vilified in a group chat of ours last week over this opinion. And all I'm going to say is there are a lot of people. who agree with me. Unfortunately, there are a lot of nerds in the group chat and unfortunately, none of them, none of them email us. Well, exactly. I don't know where this. I mean, this is classic like the, you know, the silent majority agrees with me and they're silent because they may not exist. Well, they may not be nerdy enough to listen to a tech podcast also.

So we're going to have to make this public and hope we can, we can reach more normies with this particular episode. I just don't understand how this isn't quote to you because you say that the, you say that the benefits don't outweigh the costs, but you refuse to even explore what the benefits might be because you know deep down inside they're going to be great. And so you're actually scared of how good they might be for you. So I think fear is the exact accurate sort of. You know, it's not fear. It's just a dispassionate cost benefit analysis.

I do know that they're going to be so good that going. that going back to regular headphones will be totally unacceptable to me. And so at that point, I'll just be destined to lose my AirPods every three months in perpetuity. And again, this isn't a fear. This is something I know,

and I'm making decisions based on what I know. This is framing, the onion profile of me frames me as this little weakling who's too scared to go down to the Apple store and buy some AirPods. No, I'm an adult who's making a considered decision

on all of this. And Ben is going to mock me for it for the rest of my life. And it is what it is. I've accepted that. I will defend you. It's true. Your true fear in life is not understanding TikTok and hearing that it's going to actually be important. Well, listen, I want to close out with one note we got and you can answer it in 90 seconds. Aaron says, I remember last week that Ben touched upon his own frustrations working within Microsoft and not being able to communicate some of his ideas internally as much as he'd have liked. He said he knew he was right about a lot of things and was just involved in so many other things at work. I feel a lot of resonance with this as a young tech worker myself, and I'm sure a lot of other young tech workers feel the same. And I'd love to

hear more about Ben's evolution and how he learned to deal with all of this himself. What do you think? This is not a 90-second question is a little unfair. I would say a couple things. Number one, you never know as much as you think you do. Number two, what is true in a corporation is very different than what is true or right. Maybe right is a better word to use for a site like trajectory, right? Like I have the luxury of just being able to get on there. So it's trajectory, like right after it was great.

I left Microsoft on June 30th. And so I hadn't written about Microsoft at all because I was working there. And then Steve Balmer was very kind to me and immediately reorganized the company in a way that I thought was assinine and stupid that put like Windows at the center of everything. And so I immediately got three big articles out of that. And I could come out and say, this is stupid. You should actually be focusing on services, not devices. Windows is actually the problem here. I understand that Windows drove your strategy for a long time, but that's no longer viable.

You need to accept reality. Now, I was 100% right. And it's very gratifying that Microsoft has gone down that course over time. But what was actually essential for doing that was not seeing that was the way to do it. It's how do you take 100,000 employees who have been conditioned and raised in a culture where Windows is the center. And it's the center not just because that's what we did first, but everything of our business is built on top of that layer on top of that. And we have this whole sort of thing. That's the real skill.

That's the real capability. And that's why I have such admiration for Satchanadella. It's not because he knew the right strategy. It's because he was able to navigate and change the company's culture to make it even viable and possible to pursue that strategy in the long run. And I wrote an article called The End of Windows. I sort of traced how it was a three to four year process that had fits and starts and going back and forth. And I questioned at times on trajectory whether it was doing the right thing. And he did it.

He pulled it off and he really shifted the company. And that's so much more, like all those skills that go into that to, like, people want to mock navigating internal politics, right? I just want to do, I just want to do work. If you want to do work, then go start your own company. Because the reality is that the capabilities that are possible with that large entity are massive. You go to work at a company at Microsoft because you really do impact the lives of billions of people. incredible sort of level of responsibility. But as part of that, with any large entity, of course there's politics because it's a people issue. It's a people problem. And I was bad

at managing people. I was never going to be good at that. And so the right answer for me in Microsoft was to leave and to do my own thing. And I did that. And I sit here fully cognizant that it's really easy for me to sit on the side and pontificate about strategy, knowing that I'm not the one that has to pull it off and to recognize and admire the people that do. And I think actually one of the advantages in my analysis was being aware of this and understanding that almost every time a company fill with smart people does the wrong thing, there are people in there, including often the CEO that knows it's the wrong thing. But there's larger forces, whether it be inertia or momentum or political things, that drive them

in a direction. and it's really interesting to think through where did those forces come from? Like meta, for example, I think it's a real cultural thing, which is meta has been doubted and their stocks been down in the dumps multiple times over their history. And every time they were right and their sort of critics were wrong. And they succeeded by doubling down on what they believed. And so at some point, culture is your biggest asset until it becomes your biggest liability. and arguably with the metaverse, Zuckerberg is wrong,

but you can understand why he has such self-confidence in his vision because every other time people have told him he was wrong, he was actually right. And that is what makes meta possible to keep going. You sit there like, wow, how can employees like stand the dropping stock price and all the criticism? It's because especially that core that's been there for a long time, their culture is everyone hates us,

they always say we're wrong and they're always wrong. And so, again, that's why the way in which Facebook's going to implode has always been very obvious. It's going to be because they made a stupid bet that they doubled down on and no, I got it. So, like, so that's part of it. As far as, like, day-to-day stuff, I mean, I'm very proud, like, you know, one thing that an output of politics at Microsoft was we had this pitch deck for app developers to join Windows 8. And it was terrible. It was so clearly the product of committee and different people who were contributing to different slides and XYZ. it was you couldn't even present it it.

It was so disjointed and all over the place. So I was flying out to New York. So I had a long flight and I'm like, this is terrible. I'm going to make a new one. And so I sat down. I just made a completely new, that had all the same information, but it actually flowed.

The slides looked much better. It was much more interesting. And then I pushed it back with my manager. And within like a week, that was the slide deck that was used by thousands of people around the world to sort of present the sort of thing. And that was a situation where by taking the initiative and being at sort of the right place, right time, that had a really, a really solid impact.

And so that's like a way I could make a difference internally by sort of seizing the moment, but seizing the moment with a product and a context where I could allow my manager to navigate it internally. Like he'd already made all the compromises. And then he could sort of, it was actually to his benefit to say, hey, I got this young guy in my team that passed this up. You know, I know we already discussed this, but why don't you take a look, see if this makes sort of sense to you.

And he could handle the politics, and I could sort of, you know, contribute that bit. That was probably my, my biggest accomplishment well there. I mean, I also had, like, when we watched,

there were the two biggest name apps were ones that I had brought in. So that was, like, that was probably the other thing. But at the end of day, it was a, you know, the writing was on the wall, I think, very early.

But I treasure that experience. I mean, number one, to understand what a big company is like, the internal forces have been an integral part of my analysis going forward, right, that I think I never would have had since gotten there. But you also need to know yourself. You need to know what you're good at, what you're not.

I think people spend too much time trying to fix their weaknesses instead of doubling down on their strengths. And I was able to leverage Microsoft to learn a ton in a way that I think has been generalizable to other companies. and then watch myself into a position where I could double down on my strengths, which were sort of big picture analysis, the ability to write, to produce a lot of content very quickly. And so if you're in a place that just doesn't work for you, like, that's a you problem, right? Like the great thing about tech is there is much less of a bias against being young.

There is the whole startup world where you can be in a small company and the quality of your contributions is not just welcome, but expect. And if you're in a big company, you're in a big company and accept that. Don't try to pipe it. Well, listen, Ben, that was so much longer than 90 seconds. So you flunked that test. But that was an excellent answer, which is why I wanted to fit that question in right before the end. And to circle back to something you said earlier in the podcast, I want to congratulate you on graduating from the seven day a week schedule with Stratory as you were starting out. I never. No, no, seven, seven artists. I had five daily updates, two articles and a podcast. In five days. Not in seven days. Oh my God. Okay. Well, this has been fun. And we will come back later in the week with another

episode. And we'll probably hit some of the questions on here that were crowded out by our 20 minute debate over the future of the internet. But yes, until then, Ben, good luck with Halloween later in Taiwan. I look forward to hearing about your costume later in the week. Oh, there will be no costume. Come on. Not even an Elon costume? Just go find a sink somewhere.

It's easy. No, no way. All right. I hate Halloween. I am on the Thanksgiving side of the Thanksgiving Halloween debate for sure. Oh, boy. Well, me too. But I'm going to do my best to have fun with Halloween.

No Elon costume for me either. In any event, we will be back later in the week. Look forward to it. Later.