Tech Brew Ride Home - Fri. 08/04 – HUGE Show News

Episode Date: August 4, 2023

Apple and Amazon earnings make me wonder if the law of large numbers is dead. Coinbase is willing to argue over what the definition of is is. Threads continues its precipitous decline. The Weekend Longreads Suggestions. And be sure to listen to the end of the show for some big, big show news. Biggest news in a while. Among other things, why haven’t there been bonus episodes for a while? Where has Chris been? Listen to the end! All will be revealed. Links: Apple reports third quarter results (BusinessWire) Amazon.com Announces Second Quarter Results (BusinessWire) Coinbase argues it doesn’t trade securities, so the SEC’s lawsuit should be dismissed (The Verge) Bitcoin launderer pleads guilty, admits to massive Bitfinex hack (CNBC) Threads user count falls to new lows, highlighting retention challenges (CNN) Weekend Longreads Suggestions: The Chip Titan Whose Life’s Work Is at the Center of a Tech Cold War (NYTimes) When AI Is Trained on AI-Generated Data, Strange Things Start to Happen (Futurism) How “windfall profits” from AI companies could fund a universal basic income (Vox) How Modelo became America’s new favorite beer (Vox) Learn more about your ad choices. Visit megaphone.fm/adchoices

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 Tech meme right home for Friday, August 4th, 2023. I'm Brian McCullough today. Apple and Amazon earnings make me wonder if the law of large numbers is dead. Coinbase is willing to argue over what the definition of is. Threads

continues its precipitous decline, the weekend long read suggestions, of course, and be sure to listen to the end of this show for some big, big show news. Biggest news in a while, among other things? Why haven't there been bonus episodes for a while? Where has Chris been? Listen to the end of this show. All will be revealed. Apple earnings report. Revenue came in largely in line with estimates, but it's worth noting that this is the third quarter in a row now, where Apple has seen their revenue actually decline. It was down 1.4% year over year this quarter. One bright spot for Apple, revenue grew 7.9% in China, with iPhone sales up double digits there. And from the various product lines, iPhone revenue was down 2.4%. Mac revenue down 7.3%. iPad revenue down 19.8%. But wearables, home and accessories was up 2.5% also up the services segment, which includes Apple TV Plus and Apple Music, which grew 8.2% year-over-year to a record $21.2 billion in revenue, driven by more than $1 billion paid subscriptions.

Amazon Q2 revenue was up 11% year-over-year to $134 billion. They scored $6.7 billion in net income versus a $2 billion net loss. In Q2 of 2022, the AWS segment sales were up 12% year-over-year to $22.1 billion. But here's the thing, and this kind of ties into the Apple conversation as well, quite frankly. In Q2, Amazon's ad revenue, their ads business, was up 22% year-over-year to $10.68 billion. And their subscription revenues were up 14% to $9.89 billion. So that's roughly $20 billion of just add-on stuff for Amazon. Here's the thing. I'm old enough to remember when people, including me,

were concerned that the law of large numbers would catch up to the major tech platforms eventually. They just never have. And maybe they never will. When you're operating at the scale these companies are, you can be like, you know, maybe we should add this business line or that one. Amazon can be like, hey, what if we threw up some ads? Boom, $10 billion a quarter in revenue.

No wonder why Uber is trying to do the same. everyone's trying to do the same. Like most of the physical things, as you just heard, that Apple sells, were all down. But they've got so many customers, such a large install base, they can just be like, what if you paid us every month to do more with those devices you have? Scale, man, it's a hell of a drug. Apple could be like, hey, we're going to turn on a lawn mowing and yard maintenance service, and boom, probably a billion dollar line of business overnight. I'm joking, but you get my point. Ready for some wild semantics, though I suppose arguing over semantics is the whole of the law in truth. Coinbase has asked a judge to dismiss the SEC's lawsuit against it, arguing that the case falls outside the agency's authority as Coinbase doesn't trade securities.

Quoting the Verge. The SEC sued Coinbase in June, alleging that the crypto exchange broke securities laws by operating an unregistered broker exchange and clearing agency. It also accused the company of selling unregistered securities through its staking as a service program, which rewards users with crypto by participating in the proof-of-stake process on the blockchain. However, Coinbase rejects the SEC's arguments, claiming that the case, quote, falls outside the agency delegated authority because the platform doesn't actually offer securities. Coinbase has long held this argument with Paul Grwall, the company's chief legal officer writing last year, quote, Coinbase does not list securities, end of story, end quote.

in a post-announcing Coinbase's motion to dismiss Growall claims that, quote, the SEC has violated due process, abused its discretion, and abandoned its own earlier interpretations of the securities laws, adding that the, quote, SEC has trampled the strict boundaries on its basic authority set by Congress, end quote. Those arguments still haven't stopped the SEC from suing Binance, crypto influencer Richard Hart and Tron founder Justin Sun, for allegedly selling unregistered securities as well, end quote. Remember that crazy crypto couple, remember the aspiring rapper known as Rosal Khan. Quick update on those crazy kids. Ilya Lichtenstein, who earlier pleaded guilty to laundering billions in cryptocurrency from the 2016 BitFinex hack, has now admitted to being the original Bitfinex hacker. Quoting CNBC, a New York man on Thursday admitted to being the original hacker of Bitcoin in the 2016 cyber attack on Bitfinex, a theft that ended up being worth $4.5 billion. Illia Dutch Lichtenstein, 35, made that bombshell admission while pleading guilty to laundering the stolen Bitcoin in

Washington, D.C. federal court. The plea came before his wife, 33-year-old Heather Riannon Morgan, who was in the audience, stepped up to enter her own guilty plea to two charges, money laundering conspiracy and conspiracy to defraud the United States government. Until Thursday's admission in court by Lichtenstein, it was not publicly known who had hacked the Bitcoin from the cryptocurrency exchange BitFINX. The couple was not charged in the hack itself. Lichtenstein faces a maximum possible sentence of 20 years in prison for one count of conspiracy to commit money laundering. The Russian emigre has been held without bond since his arrest after a judge ruled that he is a flight risk, will remain jailed until his sentencing and has agreed to cooperate with federal investigators.

Morgan, an aspiring rapper known as Razokan and the Crocodile of Wall Street, faces a maximum possible sentence of five years in prison. She was in the courtroom for her husband's plea hearing. Morgan has been free on a $3 million bond since, her arrest. Lichtenstein smiled at her and blew her a kiss during their moment of eye contact the first time they had seen each other in more than a year. When they were arrested in February 22, the Department of Justice said officials had seized more than 94,000 Bitcoin of the more than 119,000 hacked Bitcoin. The seized cryptocurrency at the time was worth about $3.6 billion, making it the largest seizure

in Department of Justice history. When the Bitcoin was stolen, it was worth just $70 million, but its value soared over the years to $4.5 billion, end quote. apparently the plea hearings for this crypto couple were moved up due to the arraignment of former president Donald Trump at the same Washington, D.C. courthouse. And another quick check-in here, according to Censor Tower, Threads, daily active user number fell to $8 million on July 31st, down 82% from its launch. The daily average time spent on threads fell from 19 minutes per day at launch to 2.9 minutes on August 1st, quoting CNN. On its launch day, Threads users opened the app an average of 14 times

and spent an average of 19 minutes scrolling through it, the company reported. By the end of the month, however, those figures have fallen sharply. As of August 1st, Thread's daily average time spent fell to just 2.9 minutes per day, and people spent only 2.6 sessions per day using the app, said Abe Yusef, a senior insights analyst at Censor Tower. Findings from similar web showed the same pattern of decline. Threads user count peaked at roughly 4.5. 49 million on July 7th the day after launch and fell steadily to just over 11 million by July 29th, said David Carr, a senior insights manager at Similar Web. The steepest drop-off occurred in the two weeks immediately following threads launch, but the new data shows how the decline has continued and is

ongoing. According to Censor Tower, Thread's daily active user count is still falling at a rate of roughly 1% per day, end quote. Again, anecdotally, I'm back on Twitter, mostly full-time. I took threads off my iPhone home screen and put Twitter, sorry, X, back in its place. Again, all the people I follow for this show are on threads. They're just not posting there. Something something, desktop version, web version. And all those people are still mostly posting on Twitter. X. Time for the weekend long-reach suggestions. First up, a profile of 92-year-old Morris Chang, the founder of TSM, otherwise known as Taiwan Semiconductor manufacturing Even 20 years ago, few of us would know his name, but people have belatedly come to the realization that his is one of the great entrepreneurial stories of our age. The name Chang deserves to be in the same conversation as the name's grove, jobs, gates, musk.

Quoting the Times. In a wood-paneled office overlooking Taipei and the jungle-covered mountains that surround the Taiwanese capital, Morris Chang recently pulled out an old book stamped with technicolor patterns. It was titled Introduction to VLSI Systems, a graduate-level textbook describing the intricacies of computer chip design. Mr. Chang, 92, held it up with reverence. I want to show you the date of this book, 1980, he said. The timing was important, he added, as it was the earliest piece in a puzzle that came together for him, altering not only his career, but also the course of the global electronics industry. The insight that Mr. Chang gained from the textbook was deceptively simple. The idea that microchips, which act as the brains of computers, could be designed in one place but manufactured somewhere else. The notion went against the semiconductor industry's standard practice at the time.

So at the age of 54, when many people begin thinking more about retirement, Mr. Chang instead put himself on a path to turn his insight into a reality. The engineer left his adopted country, the United States, and moved to Taiwan, where he founded Taiwan Semiconductor Manufacturing Company or TSMC. The company does not design chips but has become the world's biggest manufacturer of cutting-edge microprocessors for customers including Apple and Nvidia. Today, the company that partially exists because of a textbook is a first of a first of a $500 billion juggernaut that has put most of the advanced chips into iPhones, cars, supercomputers,

and fighter jets, end quote. Then we mentioned this a couple times, but what happens when you use AI-generated data to train AI? Well, Futurism has taken a deep dive, and it's interesting, quote, it's a problem that looms large. AI builders are continuously hungry to feed their models, more data, which is generally being scraped from an internet that is increasingly laden with synthetic content. If there's too much destructive inbreeding, could everything just fall apart? To understand this phenomenon better, we spoke to machine learning researchers, Sina, Alahemodod, and Jose Casco Rodriguez, both PhD students in Rice University's Electrical and Computer Engineering Department, and their supervising professor, Richard G.

Baranuck. In collaboration with researchers at Stanford, they recently published a fascinating, though yet to be peer-reviewed paper on the subject titled Cross-consuming Generative Models Go Mad. Mad, which stands for Model Autography Disorder, is the term they've coined for AI's apparent self-allergy. In their research, it only took five cycles of training on synthetic data for an AI model's outputs to, in the words of Baranick, blow up. It's a fascinating glimpse at what might just end up being the generative AI's Achilles' heel. If so, what does that all mean for regular people? the burgeoning AI industry and the internet itself, end quote. From Vox, you know how some folks in tech have been talking about universal basic income

as something that society will need to adopt someday. The rationale has always been that it would be artificial intelligence that would come along and make such windfall advances in terms of efficiency and profit that you'd have to share the pie, otherwise the economy would break down. So if we are at the beginning of this AI moment, does this mean it's time to start thinking about UBI? I, quoting Vox, if AI really is a transformative technology and there are companies with profits on the order of one percent or more of the world's economy, then the cat will be far out of the

bag already. That company would presumably fight like hell against any proposals to distribute its windfall equitably across the world and would have the resources and influence to win. But right now, when such benefits are purely speculative, they'd be giving up little. And if AI isn't that big a deal, then at worst, those of us advocating these measures will look foolish. That seems like a small price to pay. My suggestion for distribution would not be to attempt to find hyper-specific high-impact opportunities like donating malaria bed nets or giving money to anti-factory farming measures. We don't know enough about the world in which

transformative AI develops for those to reliably make sense. Maybe we'll have cured malaria already, I certainly hope so, nor would I suggest outsourcing the task to a handful of foundation managers appointed by the AI firm. That's too much power in the hands of an unaccountable group, too tied to the source of the profits. Instead, let's keep it simple. The windfall should be distributed to as many individuals on earth as possible as a universal basic income every month. The company should be committed to working with host country governments to supply funds for that express purpose, and commit to audits to ensure the money is actually used that way. If there's need to triage and only fund measures in certain places, start with the poorest countries possible that still

have decent financial infrastructure, direct cash contributions to individuals, reduce the risk of fraud and abuse by local governments and avoids intractable disputes about the values at the level of the AI company making the donations. They also have an attractive quality relative to taxes by rich countries. If Congress were to pass a law imposing a corporate profits surtax along the lines laid out above, the share of the proceeds going to people in poverty abroad would be vanishingly small, at most 1% of the money. A global UBI program would be a huge win for people in developing countries relative to that option, end quote. Finally, Also from Vox, did you know that Modello recently became America's favorite beer? It did. Here's how and why, quote. Modello Especial is now the top-selling beer in the United States, having taken the crown from the beleaguered Bud Light. Modelo surpassed Bud and sales through retail stores in both May and June of this year. For those not paying close attention to the beer industry, Modello, which is owned by Constellation Brands, becoming America's favorite beer may seem a bit surprising. It shouldn't be. The brand's growth is part of some ongoing shifts in the sector overall.

The recent backlash against Bud Light over its marketing deal with a transgender influencer and general anger at the beers going woke may have sped things up a little bit, but experts say this was likely to happen sooner or later, regardless. Well before the Bud Light boycott, the brand had been experiencing multi-year declines. Meanwhile, Modello was posting consistent growth. Eventually, it was able to catch up to and surpass Bud Light and store retail sales. A decade ago, Modela wasn't even a top 10 beer, but it has climbed up the ranks. In 2018, Modela was America's seventh top beer in chain retail by dollars. By the beginning of this year, it was second. Combination of factors have propelled Modela forward in recent years, said Garrett Nelson, Vice President and Senior Equity Analysts at CFRA Research in an email,

including, quote, the growing popularity of imported beer brands, demographic changes, Constellation's capacity, growth to meet the demand, and most recently, the demise of Bud Light, end quote. As more Latino and Hispanic drinkers have reached legal drinking age, their preferences have shifted the overall mix of beer that's selling in the United States. The country's growing Hispanic population has boosted Modello's growth. The Modela brand over indexes to unacculturated Hispanic consumers, said Vivian Azer, a senior research analyst at Cohen, noting that in 2016, the company said three points of its revenue algorithm just comes from growth in the Hispanic population in the U.S. The Wall Street Journal points out that 70% of Modela's

consumers were Hispanic in its 2019 fiscal year. It's also taken off with non-Hisperian. Hispanic consumers, though, which consolation told the Wall Street Journal now represents 45% of its base. The website Good Beer Hunting points out that more non-Hispanic households purchase Modelo than Hispanic households, but Hispanics consume more Modelo by volume than non-Hispanics. Modela is the top brand in California and in the Chicago, Dallas, and Baltimore metropolitan areas. Mexican import beers specifically have done well in recent years, while imports from other countries have not. As the New York Times notes, Mexican beer imports to the U.S. doubled from 2013 to 2022, while imports from everywhere else has declined. For whatever reason,

American drinkers really associate Mexican import lagers with the beach season, with a sort of affordable luxury, with an attractive, active lifestyle, so they get a little bit of a halo there, said Dave Infante, a beer columnist for Vine Pair, and the publisher of the drinks newsletter Fingers. There's some powerful, broad, multi-decade-long trends that are wind at the back of a brand like Modello, and Constellation has, for the most part, done a good job of making sure they don't mess it up and let it continue to cook and mount in popularity, end quote. Corona, which is owned by Grupo Modello, was bigger in the U.S. for much longer and has less novelty with drinkers in the U.S., Infante said.

Modello also plays better in cans, which consumers prefer when they're picking up from a store, end quote. All righty, here's the news. Announcing the Ride Home AI Fund. This will be a traditional closed-end venture capital fund investing in pre-seed through Series A, companies in this new AI space. I'm the GP of this new fund, and so is Chris Messina. We're 50-50 co-GPs on this new fund. It's a traditional fund, not a rolling fund, like the Ryan Home Fund has been, so there is an ending date when we will stop taking on new LPs to participate in the fund. That date, by the way, is October 31st. But we are already cutting checks, because this is a 506C fund,

like the Ride Home Rolling Fund is technically. So any accredited investors can invest in this new AI fund until we close it. And that's also why I can tell you about it. And that's also why we're already writing checks. And that's why I can tell you that our anchor LPs include a who's who of Silicon Valley names. Mark Andreessen, Chris Dixon, Dennis Crowley are all investors in this fund investing personally. There's also a long list of other big names from Silicon Valley names you know. people I quote from on the show all the time,

but who have decided that they didn't want us to necessarily share their name and fundraising, but are still great LPs excited to be joining us on this journey. The bottom line is, I want this AI fund to be sort of full of smart money, just like the ride home fund has been for the last two years now. So if you are a smart plugged in person, which you clearly are by being a listener to the show, and you've been having AI FOMO, you don't want to miss this generational moment,

with this AI excitement, but you can't get into an A16Z fund or a Tiger fund or whatever. This, the Ride Home AI Fund, is a fund you can invest in and give yourself exposure to this AI moment. You do have to be an accredited investor. I need to stress that, and the minimum investment in this new AI fund is $100,000. But if you want to join the super-connected pool of investors, you can do so any time, as I say, before October 31st, by going to ridehomefund.com. Learn more, sign up there. But Brian, what about the rolling fund?

What about the ride home fund original flavor? Well, it's not going anywhere. I'm still running the ride home fund parallel to the ride home AI fund, because, funny enough, the ride home fund will benefit from the right home AI fund. Here's why. There are anti-cherry picking statutes out there, so any deal the ride home AI fund invest in the rolling fund, the original ride home fund has to invest in as well.

The AI fund will be writing the larger checks, and the rolling fund will still be making non-AI investments as well. But all this means, since Chris and I intend to deploy all of our capital for the AI fund fast, basically we want to write all of our checks in the next 18 to 24 months. For the next two years or so, if you invest in the ride home rolling fund, you get exposure to all of the investments in the ride home. AI fund and also the non-AI deals that the original fund will still continue to do. And remember, the minimum investment for the original ride-at-home fund is just $20,000

versus the $100,000 for the AI fund itself. So if you're AI curious and you can afford the AI fund, please join us there if you're AI curious and you've even ever slightly considered investing in the Rolling Fund. Now is the time to do so because over the next two years, the Rolling Fund will see a piece of every investment the AI fund makes. We've already started writing checks to AI companies, as I say. So if you went in on every deal, you have until August 31st to invest in the rolling fund. And you have until October 31st to invest in the AI fund.

All information and the ability to invest right away can be found at ridehomefund.com. And we're going to tell you more about this this weekend. On a bonus episode, we went on Alex Cantowitz's podcast to announce the fund and also to talk philosophically about the whole AI moment. as we see it and why we think there's a smart investing angle here now. So this weekend, you'll hear that episode. Chris and I also recorded a short conversation to put before that as well, just about how and why we decided to do this now. Hope you enjoy listening to that. Talk to you on Monday.