Tech Brew Ride Home - Fri. 11/11 – A Summary Of This Crazy Week

Starting point is 00:00:04 Welcome to the TechMame right home for Friday, November 11th, 2020. I'm Brian McCullough today. Just two big stories, as it's been all week. But instead of only giving you the latest, I want to try to sum up where I think we're at as this week ends, what I think in the end actually happened with FTX. And are we sure Elon isn't trying to tank Twitter on purpose? And of course, the week on long read suggestions. Here's what you miss today in the world of tech. All right, look, we've been caught in this new cycle where two big stories, keep happening every single day in evolving detail, in contradictory detail, and by being caught in the TikTok of incremental new events each and every day, I think it's getting a little confusing.

Starting point is 00:00:50 It's certainly getting a little annoying. So I'd like to close out this week not by going into the details of the two big stories so much as summarizing where I think we're at. Though I do have to note, first up, Sam Bankman-Fried has officially stepped down as CEO of FTX and FTCX has commenced voluntary Chapter 11 bankruptcy proceedings. So, in a way, that puts a pin in this story for us, though I'm sure there will be more wrinkles to come out about this later. FtX U.S. had told users last night to maybe consider closing out positions as it could halt trading soon. That was the official announcement after SBF had told FTX U.S. U. U.S. U. users that it was 100% liquid. Remember, it's FtX, the exchange in the Bahamas that blew up earlier

Starting point is 00:01:43 this week, the U.S. version, at least until today, had not. And the contagion does seem to be spreading just a bit BlockFi, one of the biggest DFI players, because it's huge in the crypto lending space, has paused withdrawals of its own and asked users not to deposit to its wallet or interest accounts, saying it can't operate normally amid the lack of clarity around FTCS, other people's loans blowing up, is the definition of financial contagion, as I understand it. There's more, but last night I was chatting with friend of the show, Cryptojournalist Brady Dale, and asked him to sum up this whole story for me, and this is how his somewhat tongue-in-cheek mega-simplified, but to my mind basically write summary of what happened this week, goes.

Starting point is 00:02:30 This is quoting his reply. What happened with FTCS? Step one. Launch a trading desk. make piles of money. Step two, decide you want to make more piles, so you open an exchange that prints money off retail trades paid for with Trading Desk profits. Step three, lend retail money from exchange to Trading Desk in hopes of quadrupling, all piles. Step four, Trading Desk loses the customer's money, the exchange lent to it, and step five, you know, a really deer in headlights face emoji. To which I would add, one of the big bull

Starting point is 00:03:06 cases in all of crypto for the last few years has been this idea that the big institutional money was coming into crypto at long last, the Wall Street money, the retirement savings money, the pension fund money. And you have seen some of this happening. You've heard me do stories about how this Wall Street Bank is finding ways to allow clients to trade and hold crypto, etc. Well, Sam Bankman Freed had very much set himself up as the sane face of institutional money-friendly crypto. Remember, the guy you could turn to to bail out the other crazy Ponzi guys. So, if now even he has allegedly turned out to be a Ponzi himself, don't you think this puts the brakes on that big institutional money flowing into crypto narrative and thus the biggest crypto bull case?

Starting point is 00:03:59 And Twitter. Now, we might have to go a bit deeper here, but I also want to end this segment with a summary as well. Also, a bit of a warning. If you have kids listening, there are going to be some curse words in this segment. Yesterday, Twitter reactivated that gray official badge for select high-profile accounts. Why? Oh, I don't know. Maybe because, as everyone predicted, people were paying their $8 and doing things like impersonating the brand Nestle and tweeting things like, We Steal Your Water and Sell It Back to You, L.O.L. Or impersonating the brand Chiquita, you know, Chiquita bananas, and then tweeting things like,

Starting point is 00:04:39 we've just overthrown the government of Brazil, then tweeting, we apologize to those who have been served a misleading message from a fake Chiquita account. We have not overthrown a government since 1954. Or even impersonating Silicon Valley luminaries like Paul Graham, the fake Paul Graham account that tweeted overnight, Jason Calacanis is no longer welcome at YC Demo Days, tech talks, or the yearly YC 69 under 69,

Starting point is 00:05:06 Muirwood's startup suck-and-fuck, end quote. Now, this morning word that some Twitter users are saying that the entire option to sign up for the $8 Twitter Blue account has suddenly disappeared from the iOS app. An error message seems to show up for some people saying it will be available in the future. So is this whole thing over, this whole $8 experiment? Are they just throwing in the towel? of things like I just described, or because of maybe something like this. Quoting Mike Maznick at TechDirt. By the way, is there anyone left at Twitter who remembers that the company is still under a pretty stringent FTC consent decree that has, you know, some requirements about launching new products and services and having a written plan about their security? Here's the thing.

Starting point is 00:05:57 While Elon may think he's not afraid of the FTC, he should be. The FTC is not the SEC, and the FTC does not fuck around. violating the FTC can lead to criminal penalties. I mean, it was just a month ago that Uber's former chief security officer was convicted on federal charges for obstruction against the FTC. A Verge article also notes the following, quote, Musk's new legal department is now asking engineers to self-certify compliance with FTC rules and other privacy laws according to the lawyer's note and another employee familiar with the matter who requested anonymity to speak without the company's permission. end quote. And this is back to quoting Mike again. Anyone working in Twitter needs to know that self-certifying

Starting point is 00:06:39 something that violates the FTC's consent decree might be tied to a prison sentence and huge fines. This is not how any of this should be working. Stanford's Rihanna Feffercorn, who used to be outside counsel for Twitter, has a great Twitter thread explaining the many ways in which this is fucked up. The thread notes that today Twitter violated the FTC's consent decree as it was required to file a notice with the FTC about Elon's takeover and how it relates to the compliance with the consent decrees. As for the background on all this, some of you youngsters might not remember this, but back in 2011, Twitter signed a consent decree with the FTC over its failure to safeguard user info. Now, almost every big tech company these days has a consent decree with the FTC after they royally screwed up something and effectively leaked users'

Starting point is 00:07:22 private data. Most of the consent decrees last for 20 years. That might make you think such a consent decree is meaningless, but the opposite is true. When under these consent decrees, the FTC now has tremendous power to cause a world of hurt to the company for screwing up. Indeed, remember three years ago when the FTC hit Facebook with a $5 billion fine? Most people remember that as being for the whole Cambridge Analytica thing, but it was actually for violating the consent decree that Facebook had signed years earlier, partly because of Cambridge Analytica, but also some other shoddy privacy practices. In other words, while you're under the consent decree, if you screw up, you could be in deep trouble, combined with the example of Uber's Joe Sullivan,

Starting point is 00:08:00 and you realize that fucking with the FTC doesn't end well for anyone. Anyway, Twitter's 2011 consent decree was over, misrepresenting how Twitter's privacy controls worked. Users believed they were choosing settings to keep info private, and Twitter wasn't abiding by them, mainly because Twitter wasn't very careful with its own security, allowing hackers to breach their systems and read content that users believed was private. Given that much of the problem was around Twitter's security practices,

Starting point is 00:08:24 the consent decree was focused on making sure that Twitter shaped up its security practices. All of this is kind of important right now. as Elon tries to roll out features in record speeds, because the consent decree has some requirements for rolling out new products and making sure they're secure. The original consent decree says that any new product or service must be rolled out with a written plan, end quote. Something tells me there have been no written plans made, and anyone that knew about such plans has probably been fired this week. So maybe the whole answer to the current Twitter blue mystery would be that someone in legal got to Musk and warned him this whole Twitter Blue experiment could lead to the FTC bringing down, I don't know, billions of dollars of fines that could bankrupt the company overnight.

Starting point is 00:09:11 Sources say that at an all-hands meeting yesterday, Musk told staff that Twitter might have a net negative cash flow of billions of dollars in 2023, end quote, bankruptcy is not out of the question, end quote. But when I say that someone at legal might have gotten to him, I don't know who that would be, because Twitter's head of trust and safety, Yol Roth resigned yesterday, Twitter's chief privacy officer, Twitter's CISO, and Twitter's chief compliance officer also resigned. As Erica Joy tweeted, quote, do you know what level of fuckery is required to get your CISO, chief privacy officer, and chief compliance officer all to resign at once? End quote. On their way out the door, those folks warned Twitter engineers and workers that self-certifying product that they ship

Starting point is 00:09:58 could open them to personal legal jeopardy. So maybe they shouldn't do that. And in fact, maybe they should seek whistleblower protections right now. Anyway, to try to sum all this up for this week, I think this whole Twitter story is actually going to come to an end pretty soon, because I can see a couple very plausible scenarios right now. One of the first. One of the of those is the FTC comes down hard on Twitter, finds it billions of dollars for violating the consent decree, Twitter has to declare bankruptcy, and Elon washes his hands of the whole thing, or someone swoops in and picks up Twitter for literally pennies on a dollar. Maybe Apple, maybe Microsoft. Either way, do you have any sense that Elon will still be personally messing

Starting point is 00:10:41 around with Twitter by, I don't know, the first of the year, January 1st? I don't. I don't see him doing any of this by December 1st. Which leads to my main question. Was that the plan all along? Elon was forced to buy a company he didn't want to buy, although he did want to buy it, and then he didn't, but then he finally had to. If you were really trying to save Twitter, there are a bunch of things that you would try to do. But if you wanted to run Twitter into the ground, you would do the opposite of those things. Elon's been doing the opposite each and every time. Let me run down the list. Number one, you'd want to keep advertisers on the platform. You'd want to make them feel safe, make them feel like the chaos was ending. Elon has done the opposite. Number two, you want to keep the celebrities tweeting. Half of Twitter's value proposition has been the thrill of feeling like you could chat with a famous person or debate an expert. Elon, with this confusion of fake accounts, has done the opposite. Number three, how many times do we talk about tech companies obsessing about attracting and retaining

Starting point is 00:11:46 talent? Well, Elon not only fired half the company, he's been bending over backwards to make life miserable for them. No more remote work. In fact, sleep under your desk, work weekends. Now, opening yourself up to personal legal liability. It's almost like he wants to chase everyone away. Number four, Twitter's power users, the ones who actually do the tweeting, the 10% who produce the content for the 90% who read it, they're on Twitter because of that 90%. If that distribution to that huge audience went away, why would any power user stay? If Elon's plan to put all of Twitter behind a paywall happens, the mass audience would go away, and then the power tweeters would go away too because no one would hear them anymore. Number five, if you wanted to save Twitter, you double down on security and best practices, not just to slay the bots, as you said, you wanted to do from day one, but also because you have this consent decree, sort of Damocles hanging over your head, and if it comes down, the company will be dead.

Starting point is 00:12:44 Again, it's almost like every step of the way Elon has chosen to do the thing that you would do if you were trying to kill Twitter. It's almost like every step of the way he's done the thing a sane person would do if they wanted Twitter to fail. Now, that is, of course, assuming Elon is the same person, which I know, maybe that's the problem with this analysis. But stick with me. What if that was the game plan here? Does anyone smarter than me know? Is there an here some way where Elon could take Twitter into bankruptcy and find a way to shed or default on all that debt and then walk away Scott free or maybe pick up the ashes and then turn Twitter around and look like a genius. Is there an actual financial eighth dimensional chess play here? Or is the Occam's razor answer what Michael Gartenberg tweeted last night? Quote, The final scenario is something I alluded to before. Musk would rather lose all his money and say, I could have made it work, but I got here too late, and those bastards lied to me about what shape Twitter was in. He's no longer a failure, and his legions praise his insight to shut it down,

Starting point is 00:13:55 end quote. Either way, I now see that as the likely end point to this story. Twitter bankruptcy, probably sooner than you would think, because Elon himself has gone in and wrecked all the machinery systematically, or because the FTC brings the hammer down, or let me tell you, there are strong, strong rumors going around Silicon Valley right now that a big name backed by big money, like let's say someone with enough money and credibility to actually make it happen, is about to launch an exact Twitter clone out of stealth, as soon as next week I've heard, which would give everyone an immediate and obvious lifeboat off of this sinking Titanic. Come over here, claim your exact Twitter username, reconstruct your following.

Starting point is 00:14:40 It will be exactly like Twitter was a month ago. I think there is a window in time here where that could work, and it is like the next six weeks. At this point, we really only have two possible logical scenarios here. One is that Elon just really sucks about this, isn't good at this, hasn't thought any of this through, and is wrecking things. Or Elon is smart and is wrecking things. Either way, I don't see a scenario where Twitter survives, at least not on the trajectory it's currently on. Time for the weekend long read suggestions. I actually don't have time to do the usual quoting of each story.

Starting point is 00:15:27 Otherwise, this show would be half an hour long. But first up, speaking of wrecking your product experience, over at Vox, Jason Delray has a deep dive look at how Amazon's shopping experience is now saturated with sponsored products. with ads and whatnot, and how that is impacting sellers and consumers. Did you know that Amazon's ad revenue has now surpassed the revenue it makes from Amazon Prime? Is that, as Jason implicitly asked in this piece, wise for Amazon to do, to essentially outsource product search and discovery on Amazon.com to advertisers? Sure, you make more money, but at the risk of alienating sellers on your platform and, in the end, consumers. those of us on Amazon trying to search for and buy things. Then, given the events of this week,

Starting point is 00:16:18 how about the biggest profile I could find of CZ, the man behind Binance, the man who might have shived Sam Bankman-Fried this week. It's from Bloomberg Business Week, from back in June, and it's pretty comprehensive. Then from The Verge, how about a hands-on with all the new devices adopting that new Matter smart home standard? Basically, they say Matter has a long way to go, before delivering on its promise of an interoperable and simple smart home standard, but the details are interesting. From UX Collective, an intriguing look at Mastodon, which Clive Thompson says is actually designed to be almost anti-viral, the anti-Twitter, if you will. And finally, from The Guardian, and look at what it's like to break up with someone in this modern digital age. Change the password,

Starting point is 00:17:08 so they can't mooch off your Netflix or Spotify account any longer. Do you unfollow them? Do you block them? Who gets custody of the digital items you bought together? Heck, since half of dating is done online, how do you reframe your whole online profile to let people know you're on the market again? Crazy stuff.

Starting point is 00:17:28 Glad I don't have to worry about any of this stuff anymore. No bonus episodes for you this weekend, though we'll definitely have one next week because Lord knows Chris and I have a lot of stuff to catch up on. Fun little personal note for you. This afternoon, my daughter and I are going on the overnight Amtrak train to Chicago. We leave this afternoon. We get into Chicago in the morning on Saturday.

Starting point is 00:18:01 I booked an actual sleeping berth. This is a total experiment to see if this is workable. If taking an overnight train is comfortable, mainly it's an experiment to see if I can actually sleep overnight on a train. if I can, dude, I'll never fly to Chicago again. I love the idea of doing most of your traveling while you're asleep. Plus, maybe for spring break this year, the McCullough family takes the Amtrak out to Flagstaff, Arizona,

Starting point is 00:18:29 and then hops up to the Grand Canyon. And frankly, if I like this, and if the cellular connection holds out, I could see myself booking a trip from coast to coast, I don't know, maybe once a year. As a mental health thing, I could do the shows on the train. I'll report back on Monday. and let you know how it goes. I spend most of my day in front of screens anyway, so I could do what I do every day, but the only difference being, I could be doing it while staring out the window

Starting point is 00:18:54 at the glories of the North American landscape rolling by. Talk to you on Monday.

Tech Brew Ride Home - Fri. 11/11 – A Summary Of This Crazy Week

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