Tech Brew Ride Home - Fri. 05/13 – Elon Puts Twitter Bid On “Hold,” But Is “Still Committed”

Starting point is 00:00:00 On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme ride home for Friday the 13th of May 2022. I'm Brian McCullough today. Okay, are you sitting down?

Starting point is 00:00:43 Would you believe me if I told you Elon Musk is giving signals that the Twitter deal might be off? Could we fix the whole stable coin mess if we just turn it off and turn it back on again? The refugees from Meta's failed crypto project have a new startup to call home. And of course, the weekend long read suggestions. Here's what you missed today in the world of tech. From the Who Could Have Expected this in a Million Years, parentheses, everyone file, Elon Musk tweeted this morning his Twitter deal is temporarily on hold. Specifically, at 5.44 a.m., he tweeted, quote,

Starting point is 00:01:21 Twitter deal temporarily on hold pending details supporting calculation that spam slash fake accounts do indeed represent less than 5% of users, end quote. He then linked to a Reuters article from May 2nd going into that. And then at 7.50 a.m. Eastern, he followed up by tweeting, quote, still committed to acquisition, end quote. Yeah, but meanwhile, Twitter's stock dropped as much as 20 percent. As the street was taking this as further confirmation, the deal might not actually happen, which, again, who could have predicted that? In fact, I'm kicking myself. We should have been taking wagers in terms of how many days it would be before Elon himself would throw the deal into doubt. Quoting the verge. Below is the relevant section of Twitter's filing. It notes that its calculations about the number of false or spam accounts are an

Starting point is 00:02:11 estimate and that the real number, quote, could be higher than we have estimated, end quote. This is quoting directly from that filing quote. We have performed an internal review of a sample of accounts and estimate that the average of false or spam accounts during the first quarter of 2022 represented fewer than 5% of our monetizable daily active use. during the quarter. The false or spam accounts for a period represents the average of false or spam accounts in the samples during each monthly analysis period during the quarter. In making this determination, we applied significant judgment. So our estimation of false or spam accounts may not accurately represent the actual number of such accounts, and the actual number of false or spam accounts

Starting point is 00:02:49 could be higher than we have estimated, end quote. Now back to quoting from the verge. Twitter has had problems with math in the past. A few weeks ago, it said in an earnings report that it had overcounted its daily users for three straight years. The company said a technical error had led it to counting multiple accounts as active, despite them being tied to a single user and that this had led to it miscounting its user numbers by as much as 1.9 million each quarter. Musk has made cutting down on the amount of spam and scam bots and bot armies on Twitter a key part of his pitch for improving the service alongside prioritizing free speech and open sourcing the platform's ranking algorithms, end quote. But here's what I don't get. Am I reading Elon's tweets

Starting point is 00:03:33 correctly? Elon says he's concerned that Twitter might be right, that the bot counts are less than 5%, so maybe Twitter isn't as broken as he thought, or is he saying Twitter is more broken than he thought, or is he just concerned that there's uncertainty here? I mean, am I wrong about this? if the amount of spam accounts on Twitter was even in the ballpark of 5%, doesn't that seem pretty good, all things considered? Like Elon specifically says, one of the main reasons he wants to buy Twitter is to fix the spam problem. So is he now saying, I'm concerned there's too much spam on Twitter, so I might not buy it? Or is he saying, I guess there wasn't as big of a spam problem as I thought, so I don't need to buy it? Now, the speculation online is rampant,

Starting point is 00:04:20 as you would imagine. And it sort of breaks down like this. A, Elon is laying the groundwork to get out of the deal since he overpaid, clearly, given the market's recent downturn. Also, Tesla stock is down by a third over the past few weeks. And since Elon has to sell Tesla shares to do this deal, he doesn't want this misadventure to take down his main business. There are signs that Musk has been trying to bring even more buyers into the deal so he doesn't have to do that margin loan. Jason Calacanis has been going around saying he is, quote, collecting interest to invest in Twitter as part of Elon's buyout. But what if that's not being successful? B, some folks are saying, Cepheus, that panel that OKs deals that involve foreign money would be looking so long and hard at Elon's Chinese and Middle Eastern money partners in this deal that it might not happen.

Starting point is 00:05:11 And Elon has been told that. C, I've seen some people suggest that he just wants to end. anyone else out, that you could prevent any other competitive bids for Twitter by casting doubt yourself about the intrinsic value of the company you yourself are trying to buy, or D, he's merely trying to lay the groundwork for lowering his bid so he can try to acquire Twitter for less money. Do you want to know the wildest conspiracy theory that I've heard since this whole thing began? It's that Elon knows Tesla stock has been overvalued, wildly overvalued, and so he wanted to cash out as much of his Tesla stock as he could without tanking the price

Starting point is 00:05:51 overly. So he jinned up this whole acquisition as an excuse or a smokescreen to plausibly unload a ton of Tesla shares. Then, now, he can back out of the deal and get to keep his cashed out billions. I've seen Tesla shareholders even tweeting to the effect that if the Twitter deal fails, they want Elon to commit to buying back into Tesla. Who knows? But note that chaos continues to reign at Twitter. Twitter product chief Kavon Bakepur tweeted yesterday that he is leaving Twitter at the request of CEO Parag Agarwal, who wants to, quote, take the team in a different direction, unquote. So Kavon was fired, essentially, which is chaotic since he was leading the team behind spaces, Twitter Blue, all of the other efforts that Twitter has been doing recently that have been behind

Starting point is 00:06:43 their product renaissance of late. This is sad, and not just because Kavana has been on stage in our Twitter spaces several times now, so he's a friend of the show. Bloomberg has also seen a memo from Twitter CEO Parag Agarwal, where he announced to Twitter employees a hiring freeze and other cost-cutting efforts. VP of Product J. Sullivan will reportedly take over as head of product at Twitter. Meanwhile, the collapse continues. Terra's Luna coin dropped to less than one penny. A greater than 99% decline in value in just 24 hours down from $60 a coin earlier this

Starting point is 00:07:23 week and $120 a coin back in mid-April. This comes, of course, after Terra's UST stable coin lost its dollar peg and Terraform Labs halted Terra block production twice in the last 24 hours to come up with a plan to reconstit the entire blockchain. Quoting Bloomberg. On Friday, a tweet from a Terra developer that was reposted by Terra's verified account said the community was weighing several options to recover the ecosystem. Those options include restoring the Terra blockchain to where it was before TerraUSD crashed in an apparent attempt to swiftly undo the damage caused by the event. Another proposal the developer tweeted was, quote, fully collateralizing TerraUSD or UST and drafting new mechanisms for how to redeem it against

Starting point is 00:08:05 sister token Luna. The tweet didn't include any details on how the proposals would be accomplished. The developer also appeared to suggest that ending Terraform Labs' control of the Terra ecosystem was under consideration. We must salvage the remaining value in the ecosystem and community and rebuild the right way, they wrote, end quote. Yes, not to sound like I'm piling on or trolling here, but wasn't the entire point of this project that this was financial engineering designed to prevent major interventions even being necessary? Haven't you basically proven that the whole promise of algorithmic stablecoins that they can function autonomously without middlemen or interventions? Haven't we decisively proven that this team can't actually make that work? Or in a broader sense,

Starting point is 00:08:48 is it really a decentralized blockchain if someone has the ability to reboot it, to essentially turn it off and turn it back on again? Interesting raise, mainly because of who is behind the startup in question, an ex-Facebook crypto chief, David Marcus, has launched LightSpark, a payment startup building on Bitcoin's Lightning Network, backed by A16Z and a bunch of other folks, quoting TechCrunch. After his departure from Facebook in November, many crypto industry insiders speculated where longtime executive David Marcus would land. Today, the former Messenger boss and PayPal executive offered some early details on his next

Starting point is 00:09:29 company, LightSpark, which will be building on Bitcoin's Lightning Network. Marcus will serve as CEO with a number of X meta-Crypto team members, serving in executive positions. Details are scant on what exactly the startup is doing. A short press release notes that the startup is aiming to, quote, explore, build and extend the capabilities and utility of Bitcoin, end quote, Bitcoin's Lightning Network allows for cheaper and faster transactions than the base level network allows, making it a more ideal platform to leverage for payments and decentralized apps. The firm did not disclose funding amounts oddly, but is sharing that their first round is co-led by A16C crypto and paradigm with participation from Thrived

Starting point is 00:10:06 Capital, Kootoo, Felix Capital, Ribbett Capital, Matrix Partners, and Zeev Ventures. The timing for the reveal could have been better as Bitcoin and the broader crypto market have sustained massive losses in recent days. A prolonged crypto bear market could mean reduced investor interest and a smaller potential hiring pool, end quote. Time for the weekend long read suggestions. First up, two big takes on the Terra and Luna collapse. The first piece, basically outlines in great depth and detail, how this stable coin was supposed to work and what might have gone wrong. It's from Not Boring, quote. That's why we have the FDIC, a centralized entity that commits to guarantee deposits and bailout

Starting point is 00:10:53 banks in case of mass panic, socializing the losses to U.S. taxpayers. As a society, we've collectively decided that having a stable, unified monetary system is worth underwriting the risk of a mass panic bank run. Luna Foundation Guard and Du Kwan, by extension, was that central entity hoping to backstop U.S.T. It may be that systems dependent on faith ultimately need the most trusted institutions possible to enforce that faith, and it may also explain why Duquan was a near-religious figure in the Luna community. TLDR, U.S.T.R. U.S.T. is 100 magic dollars, backed by 20 bitcoins and 80 magic beans, but some people don't think it's worth 100 real dollars, so they sold some bitcoins to buy more magic dollars to convince people they're worth 100 real dollars, but they ran out

Starting point is 00:11:38 Bitcorns and the magic dollars are only worth 60 real dollars now, so the magic bean holders are sad, end quote. Actually, that's way outdated, because, you know, if you could get $60 for Luna right now, you'd still be doing quite good. Then this one, from the blind spot, makes the case that crypto, which was designed to counter the financial engineering disaster of the big banks in the great financial crisis, has basically and ironically come full circle, has become the thing it was designed to fight. Quote, what the global financial crisis showed us was that even licensed banks could not be trusted to operate these models in a prudent manner. The vulnerability in the system was always the fact that networked banks could create money out of thin air by creating loans funded by their own

Starting point is 00:12:21 ledger entries. What this generated was a market practice where banks would lend first, creating balances out of thin air, and fund those balances later. By this, I mean, banks would seek to find funds that could cover the risk that those liabilities they had just created might be redeemed and taken out of their closed systems, very much like crypto. The more the equity value of banks went up, the easier it was for banks to take funding risk, as in theory, but rarely in practice, they could always sell more equity to cover any mismatches. Bank equity, and the banker bonuses that went with it, were the crypto number go up of its day, end quote. Rest of world asks a question that, frankly, I'm embarrassed, never occurred to me. Is tech

Starting point is 00:13:00 development worldwide being held back because coding is still so fundamentally English-centric. Quote, Primitivo Ramon Montero has always been drawn to coding. When he attended the Superior Technological Institute of Tapakia in Mexico, though, he struggled to learn programming languages because of their reliance on English. The logic of most prominent programming languages, such as Python, is based on English vocabulary and syntax using terms like while or if not to trigger certain actions, which makes it that much more difficult to learn for non-native speakers. Furthermore, many of the most popular educational resources for learning to code, including Stack Exchange, are also in English.

Starting point is 00:13:42 When I started, everything was in English, he told rest of the world. It was very difficult to have to constantly translate and understand it in my language, end quote. The English language remains the predominant foundation for coding and an in-demand skill required by tech companies in South America, creating a major barrier to bringing more people into the industry. According to a recent study by the Spain-based IT services firm Everest, 55% of companies in Latin America said that finding the right employee was difficult, while experts estimate that the region will see 10 million new IT jobs opening by 2025. As the region sees a torrent of venture funding and interest from tech companies, there is a growing momentum to address the labor shortage among the region's tech

Starting point is 00:14:22 community by empowering workers to operate in Spanish. Software developers like Roman, coding boot camps and meetup organizations have started their own initiatives from providing translations of educational materials to the creation of a programming language based on Spanish, end quote. I've said before how much I love rest of world as a great venue, giving us a perspective of the tech industry outside of North America, at least. And I've said before, I aspire to write as clearly and as incisively as, as Ryan Broderick does at his great substack garbage day. Finally today, his recent essay titled, The Thing That Makes It Work means it Doesn't Work, is the best summation of the business model

Starting point is 00:15:05 of the internet that I've ever read. Quote, the majority of the major social apps we've been using for a decade were not designed to be good businesses. Some became massive ones by doing one or all of the five things that WhatsApp didn't want Facebook to do to it. But many more platforms are still stuck in a perpetual state of being terrible and thus good. Twitter and Tumblr are both fantastic examples of this bizarre tension, with user bases that are valuable in vastly different ways, but drawn to the apps because of the features that make them unmonetizable. Tumblr is essentially the greatest archive of possible copyright infringement ever created, which has led to an inscrutable and dense remix culture that, conversely,

Starting point is 00:15:47 also drives a lot of what's cool online. Meanwhile, Twitter is a poorly incentivized battleroy for rich people, artists, and furries that only works because the barrier of entry for logging on and threatening to kill a columnist you don't like is low enough that you can do it while still enraged from something you read while on the toilet. Web 2.0 apps don't even know what they're actually being used for half the time. Do you think TikTok knows that its strength is not from its recommendation algorithms, but because it's a free Adobe Premiere for your phone? Does YouTube know that it's no longer a video app but actually the main hub for cultural criticism on the internet. And this contradiction, this feeling of things being not quite right, is everywhere you look

Starting point is 00:16:30 on the web 2.0 internet. A fantastic example of this is the years-long devolution of Facebook video. When it first launched, its algorithm emphasized quick snackable video clips, which resulted in an influx of 30-second-long audio-free PowerPoint slideshows of animals and 46-minute plus live-streams of car chases, and every iteration of it since has felt similarly hacky and grotesque, eventually giving us 30-minute live streams of women eating out of toilets. When we switched from the first version of the web, which was static and linear to web 2.0, which was real-time and non-linear, we let a few companies settle on a halfway point between working and not working and let them consolidate enough power and influence to never really get past that point, which means you can't make

Starting point is 00:17:14 Web 2.0 better because Web 2.0 can't be made better. We've spent the last 15.5. We've spent the last 15 years, not realizing that we were in a transitionary period. What are we transitioning to? Well, I don't want to get too preachy here, but it feels like this contradiction, this hackiness, this fundamental misunderstanding between how platforms think they work versus how users actually use them is really just about the relationship between commerce and the internet. The internet is better than any technology that's ever existed in human history before now because it's largely free and open and infinite. But we have only figured out ways to make money with it if it's not that. And it feels as if the entire Web 2.0 era was built on the very

Starting point is 00:17:54 mistaken belief that you could continue being online and making things for a digital world without ever reconciling that contradiction. And so, in my opinion, it seems clear that something has to give, which means the next phase of the internet might not be able to maintain that uneasy tension, and I'm getting a little scared about which side will win, end quote. All right, the Twitter space we did this week is maybe my favorite. one that we've done in a long time, a deep dive on the techpocalypse these last few weeks, with Eric Newcomer of the Newcomer Substack, with Alex Conrad of Forbes, and with Logan Bartlett, VC at Redpoint. Come for a very in-depth discussion of how we got here, how bad it may or may not

Starting point is 00:18:45 be, and how it will affect anyone involved in the tech industry. Come for that, but stay for some Google I.O. analysis from me, TLDR. Google has made me bullish on AR technology. once again. And at the end, Chris and I pour one out for the iPod. Enjoy that on Saturday afternoon. Talk to you on Monday.

Tech Brew Ride Home - Fri. 05/13 – Elon Puts Twitter Bid On “Hold,” But Is “Still Committed”

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