Tech Brew Ride Home - Fri. 10/28 – It Actually Happened

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 TechMexam. right home for Friday, October 28th, 2022. I'm Brian McCullough today. Area Man completes acquisition of social media platform. And now the fun begins. Amazon had bad earnings, but Apple mostly didn't.

Starting point is 00:00:48 YouTube is trying to be like TikTok too, but they're giving their users options. And of course, the weekend long read suggestions. Here's what you miss today in the world of tech. It's done. Elon owns Twitter. Just kidding, because of course there was no way news wouldn't happen around this. Elon Musk marked his first day in charge of Twitter by firing several top executives, including CEO Parag Agrawal, CFO Ned Siegel, and policy head Vijaya Gaddi. Now, before you feel too bad for them, Bloomberg says that Agrawal is eligible to receive around $50 million in sort of a parachute payment. Seagel around $37 million and Gadi $17 million on their way out the door. As several people have pointed out of

Starting point is 00:01:46 on Twitter. Agrawal is probably also on his way to the shareholder Hall of Fame, at least the shareholder value Hall of Fame for getting this deal done. Again, imagine what Twitter's stock price would be right now if this deal had never happened. I checked my brokerage account this morning, and it looks like Elon Musk is about to pay me $883.483, which is why I've been holding on to the stock. I just kind of went to the thrill of knowing Elon Musk is paying me. tell him I paid $1,000 for those shares, so I'm down. But hey, the reason Agrawal deserves his place in the Hall of Fame is because around the same time, I paid $1,000 to buy some Billy-Billy shares, and they are now worth $86 and $54 all in. So, you know, $883 is

Starting point is 00:02:35 better than $86. Again, Musk has taken Twitter private, merging the company with his X Holdings, delisting the company from the New York Stock Exchange, dissolving the board and moving to cash-based employee compensation going forward. The New York Times has these details. X is buying out all of Twitter's stock and will control the service and Mr. Musk will control the holding company. With the deal's completion, Twitter's board of directors will dissolve and its nine members will no longer preside over the company's operations. Mr. Musk will most likely appoint a new board made up of friends and investors who helped fund the acquisition, the new board will be responsible for plotting Twitter's trajectory as a private

Starting point is 00:03:17 company. It will still be required by law to have a board of directors, and that would probably include Elon Musk and some of the other big equity investors in the company, said Eric Talley, a professor at Columbia Law School. I expect Mr. Musk will run it as a somewhat friendly dictatorship, end quote. Twitter has about 7,500 employees. Some of them have been jittery for months about the company's sale to Mr. Musk. Many could face layoffs or job changes as their new owner takes over. Their compensation is also set to change. Employees typically receive stock options in the company, but with the delisting of Twitter stock, employees are set to be cashed out for shares they already have and to be paid with cash bonuses going forward instead of the

Starting point is 00:03:57 stock options they were scheduled to receive, according to the merger agreement. Some employees have worried that Mr. Musk may not honor the agreement. Most of these employees have been in a public company and are used to public option grants, which are liquid, Mr. Quinn said. They will have to come up with some other Silicon Valley-friendly method of keeping people around, end quote. Elon is formerly the Twitter CEO, but there is some speculation as to for how long. A lot of people think he will pick a new CEO in the near future, but what everyone is waiting for, and what might have already happened by the time you hear these words, is that Elon is expected to reverse the lifetime bands and various other bands for various high-profile

Starting point is 00:04:42 accounts. Earnings continue to be bad. Amazon reported Q3 revenue was up 15% year over year. AWS revenue was up 27%, but net income was down 9%. The stock is down 11% this morning on week Q4 guidance. Amazon was able to say that their advertising business continues to grow by 25%. But I think the story here is that their numbers weren't bad, but their projections going forward are getting pretty scary.

Starting point is 00:05:16 WS's 27% growth rate is the slowest, I believe Amazon has ever reported. So is that business maturing, if you will? And their caution about the all-important holiday quarter for their commerce business is also concerning. So this has been a bad earnings season for tech. Net profit reported by Amazon, as I just said, was down 9%. Net profit at Microsoft was down 14%. Alphabet, down 27% and meta, down 52%. As for Apple, well, Apple reported record Q4 revenue up 8% year-over-year to $90.1 billion and net income, as we were just talking about, up 1% year-over year-year to $20.7 billion. So net revenue was up, not down, but only just barely, sort of break-even. Apple did have to project some caution going forward, saying they expected revenue growth to fall

Starting point is 00:06:15 below 8% next quarter, and iPhone sales were a bit under analyst's expectations, but given what I said at the end of the last segment, Apple definitely feels like a bit of a safe haven inside broader tech at the moment. One thing to note, Apple reported a record $11.5 billion in Mac revenue for Q4, up 25% year-over-year, and set a quarterly record for upgraders. That was their term for it, but also said they expect a year-over-year decline for Mac revenue in Q4. Q1 of 2023. People were all over the place talking about this. iPad revenue has been down, so is the Mac eating into those iPad sales? But say it quietly with me, what if this year's Mac sales have always and only been about having usable laptops again? Sure, the Apple Silicon

Starting point is 00:07:04 chips, the Macs with ports again, but also the Macs with usable keyboards at long last. I personally think there were a lot of us holding back on upgrading our Macs until Apple made them you know, user-friendly again. As we discussed yesterday vis-a-vis meta and Facebook and especially Instagram, maybe you can't shove a TikTok transformation down everybody's throats. Responding to user feedback, YouTube has split video content into three tabs on channel pages. The tabs will be videos, shorts, and live, quoting TechCrunch. The changes will allow users to more easily access the types of YouTube videos they want to watch. A move YouTube says it made based on user feedback. In an announcement, the company said it heard for many viewers that

Starting point is 00:07:55 they wanted to be able to navigate to the kinds of content they were most interested in when exploring a creator's channel page leading to this makeover. The update also means that shorts, content, and live streams will no longer be found in the main videos tab on the channel page, something that could appeal to longtime YouTube viewers who haven't appreciated the infiltration of YouTube's short form content into their favorite channel's video feeds in recent months. However, for those who do like watching shorts, the redesign gives YouTube a way to direct them to more short-form videos, end quote. Time for the weekend long-read suggestions. First up, Bloomberg examines what might be a big new battlefield for smartphone makers, your phone's

Starting point is 00:08:40 storage. Quote, Japanese game publisher Gree Incorporated expects an impending reckoning over escalating costs and ballooning file sizes as developers pack their games with increasingly intricate graphics, voice acting, and larger storylines all to get players spending. That's creating a winner-takes-all situation that could winnow out smaller studios in coming years, Gree, senior vice president Yudah Mehta said in an interview. The situation will only get worse as console veteran Sony, no stranger to spacehugging hits, prepares to invade the mobile arena. Production of mobile games can't avoid becoming more complex, time-consuming and larger scale, which will inevitably result in bigger app sizes, Mehta said. Companies that survive in the market will only be the

Starting point is 00:09:20 ones that can keep up with that trend. Even if gamers show interest in our games, we have found some of them are giving up on installing the apps because their phones are already full, said Gris Yoshihide Koizumi, who leads marketing for the company's latest game, Heaven Burns Red. The typical flagship smartphone today starts with 128 gigabytes of storage, but many devices already in people's hands have far less. Necessary operating system files also take up a significant chunk of the basic allowance, leaving even less room for large games. memory upgrades are costly. As smartphone prices have come up significantly over the years, users tend to buy the cheapest versions of the latest devices which have lower storage, said Francisco

Starting point is 00:10:00 Geronimo, a vice president of analytics at IDC. Devices with more storage can cost up to 50% more, and most users don't realize that apps require a lot more space and that they will be downloading a lot more apps, end quote. Yes, Genshin Impact takes up, I believe, 20 gigabytes on my phone, Hey, it's worth it. In the Atlantic, Ian Bogost takes a look at another frustration with phones that lordy, lordy, can I identify with? Quote, during the worst days of the pandemic, we all use Zoom for better and worse. It had its quirks. You're still muted, Kathy, and so forth, but it offered a necessary human connection. The rise of video chat also amplified the decline in telephony. Already spoiled by robocalls, phone calls receded, save for spammers and moms. Then we got zoomed out and became

Starting point is 00:10:53 desperate for phone calls again. The telephone is back and thank goodness, but something seems to have broken in the interim. In my experience, it's no longer possible to answer the phone successfully. Instead, it's a lot of this. Hello? Wait, hello? Can you hear me? Okay, hold on. Okay, just a second. I have to get my earphones to connect. Damn it. Okay, never mind. I'll just hold it up to my head. Hi, sorry about that. The reasons for this are many. Often it's the wireless earbuds, which won't reconnect or are connected to the wrong device. Sometimes it's the connection to the car speakers via car player, Android Auto. At other times, I answer the call on my watch, but it doesn't transfer to my earbuds, and there I am talking at my watch like some dim dick Tracy. At still

Starting point is 00:11:37 others, the call connects but puts itself on speakerphone. Why? Ravaging my eardrum. Sometimes just pulling the phone out of a pocket hangs up on the collar. Sometimes the phone doesn't even ring, but not for lack of service. Instead, because I somehow set it to one of Apple's new complex focus modes. I've effectively silenced the ringer. Then a callback is necessary, returning us to the beginning. I'm sure you have your own versions, but the result is the same. The first few minutes of a telephone call are a nightmare. As I've written before, the telephone used to be one of the most reliable communication technologies around. Once wired into homes and businesses, the public switch telephone network facilitated calls with resilience, even in the event of power failure. But when phone networks went

Starting point is 00:12:19 digital and then cellular, a combination of factors made calls less reliable. Digital sampling, captured voices poorly, environmental noise, made calls hard to hear. Wireless networks offered a signal in some places, but not others. The speakers and earpieces were smaller and designed for looks rather than acoustics, making already tenuous calls even more unintelligible. And so, as digital mobile telephony overtook copper wire analog calls, telephony, graded forever, end quote. Then if you heard about that whole try guys controversy, and didn't even know who the try guys were, and then even further didn't understand what the controversy even was all about, the New York Times Magazine has got you covered, quote, the try guys are four dudes who make

Starting point is 00:13:00 a goofy, mild-mannered web series in which they test out different experiences like wearing corsets, doing stand-up comedy, or eating really spicy noodles. In a 2020 interview, Cornfield shared that the group's audience was between 70 and 80 percent female and very, young, with the 13 to 18 and 18 to 25 demographics in the lead. Over the years, that audience has developed an oddly codependent relationship with YouTube. According to Google's research, the platform is especially popular for young people seeking to de-stress. Some 69% of Gen Z say they often return to comfort channels that they find soothing. The tri-guies, like everyone making a living online, were inevitably shaped by their audience's desires. They and their fans all had

Starting point is 00:13:38 their hands on the Ouija board, and together they conjured a non-toxic brand of masculinity. until Fulmer flicked the lights on, exposing the fantasy. Maybe that's why the whole thing felt a bit like a hostage video, as if there were people just off-screen with rifles and high expectations. There sort of were. They just weren't in the same room. They were on the other side of a camera and miles of fiber optic cable scattered across the planet watching through millions of one-way mirrors seeking something more than entertainment. And the tri-guies had found themselves in a position where, however shocked and betrayed their audience felt, their own livelihoods depended on appearing equally distressed, end quote. Of course, you might have heard of this. If you haven't read

Starting point is 00:14:19 the, what is it, 50,000 word Matt Levine piece about crypto. I guess you could call it his magnum opus. It's the entire issue of Bloomberg Business Week this week. You really should. I'm kind of trudging my way through it myself, but it's not treachery. It's amazing. Like everything Matt writes, it's encyclopedic and written in the brilliant Matt Levine explainer way. So if you, you never bothered to figure out what hashing is. If you don't know how staking or defy work on a very basic level, Matt will explain it all to you if you have the time, and he'll do it in the really intelligent way that Matt always does it. Then we've been talking about all these AI tools like Dolly and Mid Journey. How many of those have you tried out? Which one is the easiest

Starting point is 00:15:04 to use? Which one is the cheapest? Which one gets the best results for certain kinds of images? Well, PC mag put them all up against each other for various use cases and figured out which ones came out on top. Then, remember when I kept saying last year, when things like GoPuff were raising huge rounds and Friginomor was sending me coupons every other hour, I kept saying, well, I guess they finally cracked the nut on this 15-minute delivery thing. I guessed. Well, Bloomberg has a piece up on GoPuff that reveals surprise.

Starting point is 00:15:36 They never really did. But here's a summary of the original 15-minute delivery story, and I guess the bottom line really is, no, the unit economics still don't make sense to do this 20 years later. Back before the turn of the millennium, Joseph Park thought he had the math figured out. He and a college roommate started Cosmo.com in 1998, expanded it to 11 cities, and raised around $300 million, a serious haul in those days from the likes of Amazon, Starbucks, and of course SoftBank, back when it was a holding company known primarily for, for bringing Yahoo to Japan. Park's calculus was no different from that of your average 7-Eleven manager.

Starting point is 00:16:13 Cosmo, like GoPuff today, bought most of its inventory at wholesale and sold it with a retail markup, capturing the 30 to 40 percent gross margin of the typical convenience store. Leasing pricey warehouse space in urban neighborhoods and delivering products for free made the economics more challenging, but Park thought that building dense pockets of customers and allowing workers to make multiple deliveries on every route would keep expenses down. There were a few problems with this. Customers tended to exploit free shipping to make relatively small purchases, say cookie dough ice cream and a pack of smokes, which wasn't enough for the company to recoup delivery costs. But the fatal flaw then and now was the belief that online

Starting point is 00:16:50 delivery services could command the same veneration and stock multiples of pure technology companies. Cosmo rode the wave of dot-com exuberance and raised capital to finance a breakneck expansion in route to going public until it all fell apart in the year 2000. We just assumed we would get the IPO done, so we had already signed up all these long-term fixed leases on warehouse space, Park says, from South Korea, where he's now a vice president at Samsung Electronics. When we couldn't get out of them, we were stuck holding the bag. That's what killed us, end quote.

Starting point is 00:17:21 And finally today, the final link in the show notes is a Twitter thread, maybe the greatest Twitter thread in existence. Do you know the comedian Ben Schwartz, voice of Sonic the Hedgehog? also Jean Ralphio from Parks and Recreation. Well, apparently, he had never watched Game of Thrones. So when he got COVID a few weeks back, he decided that this was an opportunity to sit down and watch the whole thing for the first time to catch up on what he had missed this whole time.

Starting point is 00:17:48 He's been live tweeting his experience. And as I said, the last link in the show notes is to this monster Twitter thread. And trust me, it is glorious. So this weekend, we've got a portfolio profile episode coming your way, maybe one of the most expansive investments the Ride Home Fund has made yet in this week of Elon buying Twitter. I'll introduce you to Readocracy, a startup that aims to do nothing short of making the Internet itself better, to fulfill the original promise of the Internet along the way, which is helping people learn, helping people get smarter, helping humanity get smarter.

Starting point is 00:18:33 It's all about popping our bias bubbles. It's about combating misinformation. It's about challenging the expensive and exclusive monopoly of higher education. It wants to do all the things. If you want to hear how it wants to do this, listen up for a fascinating entrepreneurial story. And this is another one where, hey, investors, listen up. If you want to invest in this alongside me, the round is still open for a limited time. So enjoy that.

Starting point is 00:18:58 Talk to you on Monday.

Tech Brew Ride Home - Fri. 10/28 – It Actually Happened

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