Tech Brew Ride Home - (TWTR SPC) Are We In A Recession @noahpinion ?

Episode Date: August 13, 2022

We speak today with Bloomberg Economics columnist Noah Smith. Are we in a recession? Are we in store for an actual shooting war with China? Is bitcoin due for one more big pump? Come for all of that, and stick around for Chris and I to hit some stories that fell through the cracks this week, like Google’s ad campaign against iMessage. 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. Okay. sound normal. Thank God. Okay. What do I sound like? You sound normal too, which is also a good thing. Okay. All right. Let's, okay. Guys, let's let's let's all pretend that we're professionals and we're doing a professional show right now.

Chris, are you recording? In fact, I am. It's the only way I could hear your audience. So I'm definitely recording. Okay, I am not recording because as we've established, things are fucked over here. Yeah, you're fucked. Yeah. Okay. Then, uh, if, if Noah is good to go, Noah confirm you're good to go. I am good to go. I'm good to go.

Welcome everybody to the tech meme ride home experience for August 11th. We are joined today by Noah Smith, uh, economist, I suppose. That's really how Brian talks about you. But, um, we've got a number of interesting. topics, conversations, mostly about the economy, about where we're at, where it's going. It feels like it's been quite the roller coaster so far this year. It is somewhat the doldrums of August, and yet the news and the hits keep on coming. So, Brian, where are you at? How are you doing?

I could be doing better audio-wise, but, hey, Noah, I do think of you as an economist. Are you literally, are you literally that, or are you just an economics columnist? I self-identify as an economics blogger. Because too many people identify as economists who don't deserve it. And, you know, for example, Ben Stein, who was just an actor, identified as an economist because he had played a boring teacher for about five minutes in the movie, Ferris Bueller's Day Off. And basically, I'm trying to fight against this trend by not claiming stolen valor here. I was a finance professor for a couple of years and then left to basically explain economics to the world, which I'm doing right now. But I don't think that my expertise, that I need the title of economists to boost my credibility here.

Fair. Well, I will, I guess, what's the word? Not ascend. It's an END ending word. A seed. Okay, sure. Well, I'll take back whatever I said. Rescind, I think.

That's the word. Oh, it's an I and D. Even worse. Okay. Well, you know, continue. Listen, Noah, for our purposes, close enough, MFER. I can play an economist on TV better than Ben Steinkin. I agree. You play an economist on Substack, so that seems good enough for me. All right. Mr. Economist on TV, let's get the hardest question out of the way, the one that made us want to talk to you what I've been talking about for two weeks. are we in a recession? Yes or no, but then I have follow-ups. Well, I mean, recession, there's basically three definitions.

Does the NBER say we're in a recession, and the answer is no. Have we had two consecutive quarters of negative GDP growth, which is sort of the folk definition, which the answer is maybe we'll see when the revisions come out. And the third question is, are we producing at below? low trend level of GDP, which is probably, yes, a little bit. So the answer is maybe we might be in a recession depending on how you want to define it, but we're not in the kind of downturn that really people associate with the word recession. They think of the great recession of 2008 and nine.

They think of, you know, like other downturns like the, you know, the downturn in the early 90s and these big painful things that put a lot of people out of work. And so far, nothing like that is happening, and it may happen, but it's not happening yet. I'm going to reference pieces that you've written all night long, but I thought that was interesting. Your piece on Are We in a Recession is the trend line, which is to say that, like, when you're in a really nasty recession, lines go down, all the lines go down. And that's sort of what is perplexing folks like me right now is not all the lines are going down. So, but what you're saying is, is that if you look, if you define a recession as an economy is generally going this way, the trend is going this way, and then it's not quite going in the direction that it was, but it's still going up.

That could be a form of recession. Is that what you're saying? I'm saying, what I'm saying is that the term recession is, there's no official government definition of that term. and there is and there's no there's no alpha as they say in knowing whether we're in a recession or not the word

you know when there's a big painful downturn of the kind that we really care about you'll know it which reminds me of this French guy who said you know when everybody loved to say God is dead the Frenchman says he said when God dies you'll know it

You know, when there's a recession, when there's a recession worthy of the name, you'll know it. Whether we're in a technical recession or not, doesn't matter at all. Okay, so basically the reason folks like me are confused is, and I know this is controversial inflation, zero percent month over month, but also the consumer still seems to be spending. We added half a million jobs in July. We're basically close to full employment. And yet, for the purposes of this show, all of the biggest tech players are talking about weakness, softness.

We obviously have layoffs in some of the recent high-flying, bubbly tech players. So is it possible in the way that, you know, when COVID hit that, oh, my God, we clearly are in a recession, but all of the tech players had record earnings, I was assuming that tech is so integrated into the economy that tech would be the canary in the coal mine, et cetera, et cetera. What I'm asking is, is it possible that we are in a recession that is sector-specific where there are things happening to tech that might not be happening to the broader economy? Sure. Absolutely. There can be sectoral downturns. For example, in 2015-16, we did not have, the NBR didn't call a recession.

We didn't have two quarters of negative GDP growth. But we saw the oil industry take a big, big hit that didn't really spread to the rest of the economy. And we can see the same thing with tech here because, you know, you've seen this big tech stock decline. And we saw, you know, basically startups are having trouble raising money. You know, VCs are having trouble deploying money with any confidence. And so we've seen people are getting their salaries cut. There's hiring freezes. So I think that times are not great in the tech industry right now.

We are no longer in a boom, whether or not, it doesn't look apocalyptic. Yeah, I mean, you know, Google is not like laying a ton of people off or whatever. Like we're not, we're not seeing the tech industry go down in flames. It's not yet to the level of like late 2000, 2001, right? We're not there. 2001 being like sort of an analogy where there was a recession that was sort of led by a tech bubble, although the icing was put on the cake by 9-11 and that sort of follow-on recession, if you want to say it that way. But if tech is so integrated into the economy as we've all been assuming, and so many tech. jobs are, I think

we're approaching like maybe 200,000 by some measure tech layoffs and things like that. If this is if this is sort of like I don't know, a hiccup. I think the NASDAQ is already back

into full market territory or something like that. Should investors in the private market be paying attention anymore to what the public markets are doing? Or does everybody just need to do what sort of like I've been hearing VCs have been doing all summer?

It's like, let's just take a pause and see where we're at in the fall. Well, obviously, you know, VCs know that better than I do. You know, they know their own opportunity set much better than I know. But so the answer is that I don't know. I'd say that in terms of earnings, we've seen earnings, disappoint but not fall off a cliff like there's no certainly nothing compared to you know what what every company experienced including tech companies in 2008 and nine earnings are you know they're like somewhat disappointing I think what

it happened is that when you look at the the price to revenue multiples in the in in sort of like you know growth equity stocks like you know Shopify or Peloton or or a lot of these recently IPO medium big companies that were that people had very high expectations for when you just looked at those multiples, it was very obvious that people were pricing in a ton of growth. And I think that now that the disappointing earnings numbers don't say that these companies are not going to make money at all, that they're just going to go out of business. We haven't seen big companies go out of business. But then, but I do think they sort of put a damper on those expectations of massive growth.

So you see multiples coming down to a more reasonable level, which means that stocks drop. But that doesn't necessarily mean that companies are going to start laying people off. Or go in a business, because remember, like the 2001 example is like 90% of the tech bubble IPOs, they basically went away, right? Like using Shopify as an example, no one thinks Shopify is going to go away. The difference of Brian is like back then, first of all, you had a number of different market factors to consider.

One was just the immaturity of the overall technology and people's willingness to adopt and use it. You also had a number of really, really bad ideas that were searching for customers and users. And when you put internet kind of, you know, in front of or adjacent to or dot com in your name, suddenly investors threw money at it sort of like Web 3 or crypto more recently. So there's sort of like this speculation on what's going to happen, this hope that you're going to land on, you know, 21 or something. And it's going to like pay off for all the bad bets that you made. Whereas I think what Noah is saying is that we're kind of in a different phase of maturation when it comes to these products and these companies.

And they're not going to go away like they used to because people like there is both product market fit. There is broad usage. there is ways in which these companies are buttressing a lot of other people's businesses. However, the cheap growth that I think people thought they could buy at the start of the pandemic, both with the influx of capital from the U.S. Treasury, but also just sort of like, wow, everyone's like online. Now all those things that we thought were going to take 10 to 15 years are happening now, suddenly people are like, well, I want to buy that because that's where the growth is going to be. And now, of course, we're sort of going back to the norm.

and it seems like a lot of, like, we're sort of back to the growth trajectory that we might have been on previously, which wasn't sort of astronomical, but it's reasonable. People got ahead of their skis a little bit. No, no, no, what do you think of the idea that everybody got head-sanked by the idea, by COVID times, oh, we had a decades worth of growth in 18 months or something like that, and it turns out, no, we're just going to revert to the norm. I mean, I think that was obviously part of it, especially for companies like Zoom Wright or Peloton that really their business model is like, stay at home, don't go out. That wasn't going to last forever. Like people weren't going to hide in their homes forever. This isn't shining. So then, like, yeah, we were going to go back out again.

So I think that that was just in expectations, I mean that often the price of a stock is set by. the most optimistic investor. Unless you have a wave of short-tellers willing to come in and trade against them and drive the price back down. But then there's lots of reasons why that doesn't always happen. And so basically, if you have one person who says, I think Shopify is worth a price to revenue multiple of 80 or whatever it was, then I'll pay that. And then they pay.

And they don't pay for a lot because I think what people watching these prices don't necessarily understand is that the amount of actual trading that happens here can be really small. you can have only a few shares. You can have a few optimists come in and buy a few shares. And if you don't have a lot of pessimists around, if you're trading is just a few optimist buying a few shares, then that's going to just drive the price way up. What is a few?

Like 100 or like 100,000? Well, no, it depends on the volume, right? Like, look at that share is outstanding, volume relative to shares outstanding. Got it. I'm exaggerating here just to illustrate the principle. Obviously, a stock like Shopify is going to have lots of, you know, like thousands of people trading it or whatever. But what I'm saying is that in order to drive the price down so that the optimists don't just rule everything,

you need some short interest. You need shorts. That's why, you know, like it's a little, it's, you know, like Elon Musk is always mad at the Tesla shorts, right? But then, but the thing is that there's probably herd behavior among shorts too, because there's a, you know, there's a sort of coordination thing with the shorts where, you know, because shorts have limited liquidity. They've got to like all sort of go together and short together, you know, or else they can get broken, as happened with the,

the GameStop short break that kicked off that meme stock, blah, blah, blah. And so anyway, the point is that shorts will often clump together. So there might be no shorts watching Spotify or only a few. There might be only a few shorts watching Coinbase. There might be only a few shorts watching like Roblox or whatever, right? And so if you only have a few shorts watching it, they're like, I'm not going to trade against this mighty tide. And so nobody trades against the mighty tide. And basically then, you know, some negative growth numbers come in or some sort of numbers coming in.

It's the price on the downside on earnings, on earnings growth, right? And then the optimist's like, ah, I guess I was wrong to be so optimistic. And they walk away and it's not a lot of money. And then everyone else is like, oh, my God, the prices went down so much. and then everyone gets really non-optimistic, and then maybe the shorts come in and can push the price down even more. But the point is that a lot of the reasons

why we think that markets should be efficient all the time don't really work because of what we call limits to arbitrage, because you don't have these sort of like skeptical policemen coming in and policing every stock simultaneously. And maybe that's almost the whole point, is that there was a period where Kathy Wood and everybody in the COVID times was like, line only goes up. And so it's just a reversion to the mean not a recession.

Am I being too simplistic about it? Yeah, like I want to jump into this a little bit because what I'm wondering, and I think, you know, when Brian you started this out, like, is it a recession? One of the things that I have noticed in the reporting about the recession is like the more you talk about it, again, to Noah's framing, it sort of like sets your own expectations on what you expect to see. And so then you're looking for signs that reaffirm what you're kind of already anticipating. It's sort of like your fear kicks in. And then it's like looking for just reaffirmations of that.

My question is actually more about the way in which and I don't know the answer to this. This is actually like hopefully like no one can help us with this. Like has the economy changed in such a material way that even thinking about it or describing, you know, sort of, I don't know, the U.S. economy, if that is one thing, is going towards recessing. actually is no longer a useful way to think about our economic experience because there is no national economic experience anymore. One of the things that we talked about is how this is sort of like, we have like full employment. There's like far too many jobs, you know, and yet inflation is going up.

And yet one of the ways, I think, to think about the jobs that are available is that there's like a lot of shit jobs that no one wants where there's no career opportunity and eventually they're going to be obviated by automation and AI anyways. So when it comes to also thinking about employment, the way that we think about employment is also like not really that useful. I think economists have a way, and again, since you're not an economist, is not going to offend you, Noah, a way of reducing things down to, you know, quote unquote, like a basket of goods. Well, if one of your goods is like an iPhone, that good seems to me to be somewhat different than the other things that are in there. And so we are in a moment where I feel like we need to think about this more from like a patchwork. It's almost like global warming.

You know, like we're seeing all these different kind of environmental shocks happening at smaller levels. And a recession is such a blunt way of describing economic activity that's occurring. But it's so specific to different areas and regions. You know, maybe there is a Walmart super center or an Amazon fulfillment center or something. And in those places, maybe they are recessing. But maybe in other places, they're growing. So I understand, you know, when we're talking about this, like, is the economy overall moving

above the trend line or below the trend line. That's kind of how economics, like economists think about it. But the way in which people are really living and experiencing this, it feels like that terminology doesn't really even make sense. So I'm wondering about that. Like, is this actually a useful, like term of art to even use in an era where we're so connected and where, you know, like you were talking about like GameStop and AMC, that's like a localized economic phenomenon where people are playing a game in a very different way than the rest of the stock market might have been playing itself? Does that make sense? I think there's two points here to make.

The first point is that when we're talking about a recession, we don't mean financial markets go down. Financial market crashes can cause a recession, but they themselves are not a recession. A recession is when people lose their jobs and actual output slows down. Financial markets, in principle, can do whatever they want. In practice, financial market crashes will often, but not always, cause a recession. And then, so those are two very different things. The financial economy and the real economy, they're connected, but they're not the same.

So we should never use the word recession to describe a financial market crash unless people are actually losing their jobs, et cetera. So that's one, that's point one. Point two is, yes, there's always local economic downturns, and these downturns don't even have to be short term. They can be, you know, during many of our greatest economic years in the late 20th century, the city of Detroit was sliding into decline and decay. And so, I mean, obviously, there's stuff like that happens all the time, and there's always sort of regional, you know, downturns and things like that. So that's always happened. There's no real change in that. In fact, the national economy is probably more correlated than it used to be. It's probably more national than it used to be because we used to

just not have as much interstate commerce. You know, we used to be that California and New York, we're sort of doing their own things, and now they're pretty closely connected. So actually, I would say if anything, those sort of localized downturns are getting more, are getting rarer and less, everything's getting more correlated. I think you can see that in the data pretty clearly. But in terms of whether or not the idea of a recession is out of date, no, definitely not. And the reason is because when they're, you know, there are national economic forces. that basically cause pain to the entire nation because monetary and fiscal policy are done at the national level.

California doesn't have its own currency, and its own fiscal policy is basically it has to balance its budget, just like most states. And that means that the key policy is really done at the federal level. So what happens in modern recessions is that the Fed hits the zero lower bound. And so you have the Fed, which lowers interest rates to try to stimulate economic activity in response to like a financial crisis or something like that. And then it hits zero and it can't lower interest rates below that. And so it starts doing funky stuff like quantitative easing, et cetera. But then that's, you know, maybe that's less effective at boosting the economy. And so when you hit the zero lower bound, really that's a national thing.

and that's sort of the idea that regular monetary policy can't really help anymore. And when you have unemployment increases, they'll differ from state to state, but you see it all over the map. You see the whole map go red. So when I said, like, when there's a real recession, you'll know it. That's what I meant. You will not find people who are doing great. You wrote about how, like, we think of the 50s as, like, the greatest time in the American economy. me ever and yet there were like three recessions in the 50s so I'm you know the the downturns are

are one thing but like downturns that people remember or feel maybe is something else um let me come before we let you go I want to hit two more topics really super quickly uh oh is this only half an hour well hey listen you can stick around if you like let's go 45 let's go 45 minutes. Because I want to do chips and I want to do crypto. All right. So, okay, chips is this. If you're an apple and you have a non-zero chance that, if you have a non-zero chance that China is going to invade Taiwan in the next 18 months, or at least blockade, I know. I know. that it's not easy to change the thing that you built your entire business around for the last

20, 25 years. But like, shouldn't we be seeing more tech companies fleeing or making contingency plans or something? And I know that, again, if you couldn't signal that out in the open, but like, I feel like one of the biggest, not black swans, but like one of the biggest things that people are not paying enough attention to is that like the entire global tech industry could be brought to its knees like tomorrow if things go bad. If you were, if you were an Apple, how quickly would you be trying to have contingencies outside of Taiwan? I think there's a good reason that they don't put me, or at least there is a reason why they don't put me in charge of Apple, why Tim Cook has that got out of the instead of me, and I'm just a humble blogger, which is a good reason.

that Tim Cook has to please as shareholders, and I'm just thinking about how to explain events to the public. But, you know, yeah, so when Apple decided to go all in on Chinese manufacturing, that was a very conscious decision. They knew the risks. They knew the potential downsides, and they gambled on it. They, you know, were they greedy? Of course, companies are always greedy. Were they stupid? I would say, not necessarily. They were. were just taking risks. Back in the 2000s or the, even the early 2010s, but certainly during the reign of Hu Jantau in China, it looked like China was still on the path toward becoming more peaceful. You know, Hu Jintau had a markedly more peaceful strategy toward Taiwan than his predecessors had.

And then it looked as if China was opening up more, you know, around the 2000s Olympics. and you could make a macro bet on that. And the more you made that macro bet, the more risk you took on and the more reward, you stood to reap from that because of the China cost advantage that prevailed at that time. So Apple did that. And some companies did not go all in on China. And some companies did. Apple did.

And now it is going, you know, it's going to have to suffer the consequences. there's really no, you know, back in the days when America was the hegemon, and you could just, and America got to decide whether or not there was going to be conflict or tensions or whatever, you could just lobby America to back off. But here, if China blockades Taiwan, no amount of Apple lobbying of anybody will make any difference and no one will listen to Tim Cook. No, you know, Xi Jinping will not take Tim Cook's calls. And so, and there's nothing anyone can do to prevent that.

And so Apple's in a bind. If I were in charge of Apple, I would, of course, be scrambling to diversify, scrambling to make contingency plans like I would be in panic mode. And maybe behind the scenes, they are in panic mode, and I just can't see it. But, you know, I think that they made their bed and may now have to lie in it. How does that, sorry, I'm going to jump in. How does that advantage or disadvantage any of the other players in the space besides Apple? I don't actually know, because it depends on who else.

manufacture stuff more outside of China. So if there's, there's, you know, I guess Apple's rivals in the smartphone space would be Samsung and Google, I suppose. And so those, if those, I think those folks are a little

more diversified. There's other places you can manufacture these things. There's like Malaysia, there's Vietnam, there's, you know, places. You can even do some stuff in the U.S. We have that capability. But depending on how much they've diversified, they could come out. You know, everyone's going to take a big hit if China attacks Taiwan.

Like everyone, and not just because of the sudden closure of manufacturing supply chains, but also just because of macro variables, you know, interest rays will go through the roof. It's, I mean, this is World War III. Like, that's the big one. That's the thing we've all been like. I put in a tweet to the story from Wired, an excerpt from the 2034 novel. novel of the next world war. And it's quite good if you ever get a chance to read it.

Who wrote that? It's actually a former, I think, commander in the Navy. Is that Stavridis? Elliot Ackerman and Admiral James Stavritus. Stavardis? I think Twitter spaces just froze. Pretend like it's going to keep on going. You know, someone says, actually, we're going to make peace with Taiwan, blah, blah,

and then we have peace in our time, as the same goes. And the thing is, if that doesn't happen, then it's a question of when, not if. And now we are in that sort of dark foreboding preamble time when we can see this coming down the pipeline. We know that the crisis of the 21st century is upon us, the great power contest where we're going to decide the global order for the rest of this century. Because this would be multiples different than Russia invading Ukraine. I wouldn't say multiples. I mean, it would be, well, the key is that it would involve direct combat between China and America.

So Russia invading Ukraine, they didn't have to attack America. China invading Taiwan will have to attack America, and the reason is this, if they do a—well, sorry, China invading Taiwan would necessitate that they attack America, because if they don't attack America, preparatory to an invasion, America would have the opportunity to spoil their invasion by shooting down their landing ships from our border. bases in the area. And so in order to prevent that risk, you know, and that risk that America would, you know, just like intercede and shoot them down and stop their invasion, which is pretty high, given that Biden explicitly said that we would come to Taiwan defense before sort of half-walking it

back via surrogate. That risk is very high because suppose that China decides, we're not going to poke America, we're just going to pull a Russia, we're just going to invade Taiwan without attacking the American bases in the area first, and then invades Taiwan. And then America is like, actually, you know what? No, you can't do that. And we sink their ships because they didn't take out our bases first and we were able to sink their ships. And at that point, whoever did that is going to be hung from a gas station in China.

That's how Mussolini died. They're out. I mean, they're going to be thrown into a gulag or whatever. And then that'll be the last we see of Xi Jinping or whoever, that blunt. So that risk is way too high. And so what China will do is when it attacks Taiwan, it will attack U.S. bases in the region, similarly to the way Japan, you know, attack Pearl Harbor because, you know, in order to sort of keep our fleet away, right? The idea is if they can take out our battleships, then our fleet won't interfere as they take over Southeast Asia.

And that was the idea. And so, but they didn't get the aircraft carriers. And so we use those instead. But then, but you know, China would be a little smarter than that and maybe more effective. But the point is that we have a lot of land bases in the area. And China will attack these and destroy these preparatory to an actual all-out invasion of Taiwan. And if that happens, we are at World War III. That is, that is it. Okay. Pulling back a bit. And I'm going to, I'm going to quote you because I want to come back to the chips thing. And the way that I've been dealing with it on the show has been a lot about, like, again, strategic in terms of Silicon Valley and their business models and also even the economy.

Like, can we bring chip manufacturing back on shore so that you don't have to worry about a blockade of Taiwan, etc., etc. I'm going to quote from something you wrote because this really crystallized it to me. the reason that governments care about this is not just jobs, is not just about, like, oh, God, if China invades Taiwan, you won't have iPhones for however many years or whatever. You say that if computer chips have to be shipped from Taiwan and South Korea, they'd be vulnerable to Chinese blockade. And the reason that that's important is that precision weapons.

The damage an explosive does drops off very quickly as the explosion becomes more distant. This is a basic fact of geometry. Generally speaking, the radiative heat drops off as the inverse square of the distance, while the strength of the shockwave drops off as the inverse cube. So making a weapon 10 times more precise means that you make it somewhere between 100 and 1,000 times as destructive. So what we're saying is the reason that all countries, regions, Europe, Japan, South Korea, the United States, It's not just that we can't do without our phones and our cars and all these things. It's that in the modern era, you can't wage war effectively without these chips

because, as we're seeing in Ukraine, precision munitions have to have to have these chips, and if you don't have them, you're basically fighting in the 20th century. That is accurate. Yes. I think you just pretty much thumbed it up. Oh, well, then, okay. Chris. You wanted to ask about Cryptown. Yeah.

Last thing. Noah. You said, you had a piece recently that said something that I've heard from other people, which is that you think that there is probably, there's got to be one more bubble coming. I think you said it was specifically for Bitcoin. But you've written a lot of pieces about like, you know, we debate the use of. case for crypto and things like that. When you're thinking of crypto right now, give me the argument that you made for why you think were due for another bubble. It has to do with, in your argument,

the Supreme Court of all things? Yeah, so I'm not, you know, going to, I wouldn't bet money on my prediction. I was just speculating for fun, as I made clear in the post. But if we look at Bitcoin's history, Bitcoin has had a series of bubbles, four big ones, and

each bubble has generated a significantly lower peak-to-peak or trough-to-peak return than the previous bubble. And when I say a bubble, I'm not judging, I'm not saying like, Bitcoin is a bubble, it's useless, it's valueless, blah, blah, blah. I'm not saying that.

I'm not saying that. I am saying simply a rise and crash, all right? Just a rise and crash in the dollar price of Bitcoin. We've seen that four times. No one disputes that. That is just the graph. And so each time the return that you'd get from, you know, from holding on during that time has gone down. And so I expect that to continue to happen.

And there's a good reason for that return attenuation to continue to happen, which is adoption saturation. When you have a bunch of people who might hold Bitcoin but don't, and they buy into the system and they pay for Bitcoin, you increase demand, and you therefore increase price. And so that as more and more people have become aware of Bitcoin and as more and more people have had reason to adopt Bitcoin, you've seen more and more people have, I have Bitcoin, you know, and who doesn't these days? Who doesn't have a little Bitcoin? And so the more of that that you have, the more, the less opportunities for increased onboarding of new people that you have. And so I think that's why we've seen this return attenuation. And this isn't,

this shouldn't be that controversial, a thing to say. It's, you know, um, this is, this is pretty classic with every financial asset. Going from one to a thousand is one thing. Going from a thousand to 10,000 is one thing. But going from 20,000 to 50,000 is, yeah. That we'd have one more bubble and me predicting its size from just looking at the pattern of the previous bubble. That's goofy, right? I was just, I was just having fun. Um, Don't take that to the bank. Don't bet on that. But then the idea that

bitcoins return attenuating as adoption saturates, that I think is a serious piece of analysis. Now, is that because we're still waiting for some kind of real widespread use case or additional use cases or for something else? Or is it sort of like gold enough or it's kind of like, you know,

all right, we kind of understand the mechanics of this. And so therefore, now that it's like better understood, the speculative kind of, you know, where returns would no longer be attenuating but would actually be increasing is no longer possible because that's sort of like. Basically, I don't know what eventual use cases will be, but then I think that, you know, what everyone sort of observed is that we see a big flurry of interest every time someone comes up with a new thing they like to do with crypto, ICOs, you know, DFI, things like. like that. Right, NFTs. And so each time, and those, you know, sort of turned out to be disappointing. ICOs are mostly scams. Um, appetite for collectible NFTs was not zero, but was less than people hoped. Um, and like, it's to a rounding error, every D5 was a Ponzi. And so that those are all disappointing, right? And so, um, I think that that, uh, you know, next time we come up with our use K, with a, with a, with a, with, with, uh, the use case for crypto. Next time we come up with the next thing, we'll see it, we'll see another pump in crypto. But how big that pump will be, I don't know. And whether that use case is real or is just another bunch of scams, I don't know. My guess is that it's going to be a

bunch of scams just because, you know, crypto is unregulated finance and fine, unregulated finance always, always, always lends itself to scams no matter where you go. And no matter what era, that is just what unregulated finance is about. So, yeah, I mean, is that like the job to be done of unregulated finance? Like, it is actually like, yes. Yeah, okay. Just scams. Yeah.

Yeah. And so, right. I mean, so regulated finance will fund your railroads and your, you know, uh, silicon baths and all this shit. But then unregulated finance will scam people out of their money. And we know that sort of from history. It's one of the most painful repeated lessons of history. And, um, uh, yeah.

Anyway, um, well, but so like if, if, you know, I called you an economist before. I don't know if you're a financial historian also. But are there historical analogs where all money or anything that aspired to be money, whether it was like clamshells or gold de blooms? Are those pants? No, there's a bloomers. Or like other things that were used for pecuniary, I don't know, number tallying have always been used for sort of scams until there's sort of a system of accounting

that develops alongside the thing itself? I'm not enough of a monetary historian to be able to tell you the answer. I would ask someone like Brad DeLong would know that. And I just don't, I just can't say that categorically. I just know that booms and unregulated finance always end in big crashes and a lot of scams. And often, but see, here's the thing. Often these booms finance a real thing. So in the, in the housing boom, we did finance the creation of the excerpts, right?

In the, in the pre-depression boom, we finance the creation of a ton of like, you know, interative industries, railroads, or not railroads, sorry, the auto industry, things like that.

And railroads were before 1873, the panic of 1873. So we left behind, and even the dot-com crash, we financed all this, all the infrastructure of the internet. All the dark fiber, yeah,

yeah, exactly. And so then, yeah, so basically, the question is what might, what useful things might crypto leave behind? And I think so far it has not left anything yet.

We have not yet seen what the dark fiber, equivalent. We've not yet seen that stuff. But we may next time. And so if I, if you made me guess, I would say that people are going to start figuring out how to use crypto networks to get money to lend in real estate. And we would see a real estate boom and bust that will hurt the economy, draw a bunch of regulation, and put a true end to the crypto rainbow after a big real estate investment binge because real estate investment going bust is always like that's end-stage finance that's the last thing that happens and it's the most destructive

thing is that because that's a pattern I do know pardon is that because it's the slowest no it's got the most leveraged uh okay and I mean like so but this is just Hyman Minsky this is just uh you borrow and you borrow and you borrow and then eventually you borrow and cover your interest and then you blah and then you blah and then you blow it and And then the thing is that real estate is just more heavily leveraged. Like you didn't have to borrow that much to build all that fiber. You didn't have to borrow that much to build like Amazon or whatever. You had to borrow a lot to basically buy houses.

Even if you don't build new houses, you have to borrow a lot to buy old houses. And so real estate just involves so much leverage. That's why we have it. That's why venture capitalists don't lend to real estate. That's why banks do that, you know, because they have the deep pockets and et cetera. And when banks, when banks go bust, the real economy, economy goes bust and we have a big real recession like in 2008 to 9. And I think we had a mini version of that before in 1990 when the savings and loan crisis,

right, was sort of a preview of 2008. We had too much unregulated housing finance. If I had to guess what they will use crypto for next, I would say housing finances. They've used crypto to pretend to be investing in tech companies, which is ICOs, right? They've used crypto to pretend to be investing in various financial schemes, which was defy. I don't see them pretending to invest in bio or whatever. It's like, no, what they're going to pretend to invest in is real estate. Or actually, I mean, you know, we can see a boom in actual investment.

And so I think that people are going to, if I had to guess the next crypto use case, I would say, and you can see Pachy McCormick and some other crypto boosters talking about this. They say things like, put your house on the blockchain. Well, you're not going to put a house in the blockchain. It doesn't make any sense. It means nothing. But what you might do is use blockchains to gather a lot of money to, to sidestep regulation and lend money to people to buy houses that you couldn't lend money to through traditional banking networks.

I was just going to say if you exhaust the supply of regulated sort of money to, let's say, leverage the value of your home. And that's exhausted, right? But you still want more stuff. Then you would go to the unregulated places that are willing to offer you kind of, you know, ridiculous, you know, value for the value of your house. But then, of course, you get screwed because the regulations are there to protect you. And that's how this type of gift occurs. Yes. And then and then and when that happens, the real economy gets hurt because when you have so much leverage and bubbles. So bubbles with that leverage are not that bad actually. If you know, stock price goes up, stock price goes down, you know, like who cares? But then, but then when you have debt, then you have these chains of leverage where people, you know, have to sell because they can't, they need to pay off their debts. And then those people have to sell and blah blah. And then you have this giant overhang of debt. Everybody owes each other money. And so you have to unwind this for years. And it's, you know, just very painful. And I think, you know, I don't think it's going to be 2008, 2009 level. But I can see a savings and loan level crisis happening with this. And so maybe this will

happen. Maybe this will never happen. I hope it never happens. But given the anti-regulatory, you know, sort of climate of the new Supreme Court, given the fact that Republicans are likely to take back power and start launching a major attack on regulation in general, given all this anti-regulatory action, I think we could see crypto slip in and start doing and do a whole bunch of housing finance, which will, of course, cause Bitcoin and Ether and a lot of other coins to pump, hugely. Now, maybe it won't pump as, I don't think it'll pump as much return-wise, percentage-wise, as it did last time, but, you know, we could see massively increased demand because people would want these coins because people were using them to invest in housing. And so I think, you know,

in this scenario, we can see another bubble and crash. And this. And this. one would hurt the real economy and afterwards everyone would come in and say how did we let this happen and then you'd have you know people writing angry op-eds about how we must never let this happen again and then a year later you'd get some like kludgy sort of you know dodd-frank style uh you know sarbanes oxley style sort of like bill you know making sure that this thing that would you know will never happen again and then and then the crypto rainbow is done i think because then then unregulated finance era is done, and crypto will be regulated as normal finance. No, no, very last thing, and then you're free to go back to the rabbits.

All right. They're looking bored. You said, you kept using the word pretend. Pretend. They're going to pretend to do this. That's an interesting word to use. So what do you mean by that? Well, they pretended.

ICOs will pretend because none of these were real companies. Name me a real good company that, like, ICOed. I mean, you got to, like, a couple things in the crypto space itself that just, like, completely operate within the crypto space. And, you know, but, like, ICOs, almost all ICOs were scammed, right? Name a, name a defy project, a Web3 project that's actually worked out so far. Like, Axi Infinity blew up, helium's going to blow up, like, all these things. Nothing, nothing is really, there hasn't been a real thing that worked yet in this space. So they might not pretend to invest next time.

In fact, I think houses are real things. So if you invest in houses and somebody build new houses, you didn't pretend. You invested for real, right? That's real. But ICOs were kind of pretend and DFI was kind of pretend. So it was pretend in the past. Yeah. Well, so the worry is that the next bubble will be not so pretend.

And then there's... Yes, exactly. So I really hope we... don't allow that, but we might. We do a lot of silly things these days. Okay, Noah, we're going to let you go if you want. Chris and I are going to still talk about something else tech-related. But before we let you go, your substack is no opinion.

Is there anything else you want to plug? Thank you for coming on, et cetera, et cetera. Just tell us anything you want to tell us, and thank you so much. Oh, no, yeah, thank you guys. It's been really fun. Yeah, everybody just read my blog. It's called No Opinion without an O in the middle, which some people, but it's just no opinion.

And it's, you know, it's fun. I'm having fun blogging. All right. See you guys later. Thanks so much. Yes. Thank you, Noah. Thanks, Noah.

Thank you. Chris. Yes. You know what I want to talk about? Because it's one of those topics that I haven't gotten to talk about on the show, but you and I have talked about offline. It's the Google doing the Get the Message. Yes.

ad campaign to pressure Apple to join their RCS, SMS, M.M. Whatever RCS is. I don't even know. Yeah, who cares. Yeah, yeah, yeah, yeah. So. I just went to Google. I'm sorry, I went to Google.com.

Or actually, the new tab page, and there's literally a message. I will tweet it, and you guys can take a look at it. So they're literally putting the homepage of Google behind this campaign. So smacks a little bit of desperation. It worked out for Google Plus, so I don't see why they wouldn't do it again. Well, so what we were talking about offline, you and I, I shared Benedict Devons had a tweet talking about how, okay, if you're Google and obviously you want, well, if you're Google and you want to have some sort of a, a foothold in the messaging space. Here's your problem.

In North America, or at least the United States, iPhone and IMessage kind of wins, right? Everywhere else in the developed world, WhatsApp has won. Even Messenger. Messenger is actually pretty big. That's where too. So there's this, you know, insert joke about Google's, inability to get messaging together. But, like, this is kind of a lost cause, right?

Like, there's no way that there's any sort of wedge that RCS can get in. Because why is, why, I know that what Google's doing here is they're speaking to the regulators. Hey, look, we have this open standard or whatever. Hey, let's have Apple get on board with this too. But, like, this isn't going to work. That's what I was going to say, right? Like, I mean, we have to sort of realize that we're moving into an era where more technological innovation is, and I feign to use the word innovation, but is going to occur at the kind of, you know, other end of a regulator's stick than kind of independent developers kind of, you know, working in their little decentralized huffles and, you know, coming up with the standard themselves that then kind of like takes off and takes over the world. And, you know, I was there for a lot of those things happening.

that's how OAuth came to be. It was a bunch of developers kind of coming up with our own thing, largely for independent web platforms. And we convinced the major platforms to adopt them because they realized, well, either they realized or this was like in the nature of their business, that competing on those standards wasn't actually necessary for them. So this to me is very much the old standard Google Playbook, where RCS is a method by which Google has the ability to index your text messages.

And Facebook has their own way of indexing your WhatsApp, Messenger, Instagram, Facebook messages. And Apple, of course, who knows exactly what they're doing? But I've been saying for a long time that IMessage and the address book that's built into MacOS and iOS is the Apple Social Network. And you start to see that with iOS 16 and MacOS Ventura as they're creating features in Safari, notably one called For You, which aggregates all the links. out of iMessage into a feed of updates. So like I think that Google is starting to realize like, oh shit, like Apple is moving into sort of like the social space and the sharing space. And they also may come out with their own search engine, which then removes the

need for Google in the OS. You know, this is going to be a multi-year, multi-decade kind of thing. And when it comes to messaging, you know, having interoperability that is imposed by regulatory bodies, specifically from the EU, that is their way to prevent that possibility from occurring. I mean, this is, you know, speaking to Google Plus, the reason why Google Buzz and why I was hired at Google was because Google believed that if they just indexed all the social feeds that were being created across the web, that that would just be another form of content that could be advertised against. And so they were very excited about a lot of the standards work that I was doing back then because it meant that there would be a common format for expressing all the social data. Now, of course, Facebook, you know, wasn't really on board with that because they wanted to have their own proprietary data that they could advertise against.

And other platforms had a similar kind of interest in their own content. But that is the original strategy behind Google Buzz. And, of course, that didn't work. And so we're sort of, at least I'm seeing echoes of a similar approach in this current initiative. Is it interesting to you? And you could completely disagree with this. But like you said, you know, I message is sort of like the social network that everyone is sleeping on. Yeah.

And also, I would argue that Meta is sleeping on the fact that WhatsApp is what it is, and what they want to turn it into is something closer to God knows fucking TikTok. But they want to turn it into a shopping, like a business communication thing. But, you know, again, one of the most powerful things in the world is owning people's communications to the people that they care about. And it's interesting to me that, again, Apple seems to, and maybe to the benefit of society, sleeping on the power of what I message actually is. Facebook or meta seems to be willing to potentially ruin what is great about a WhatsApp or whatever. It's so simple to just allow people to talk to each other.

Maybe that's hard to monetize, but I don't know. I think it's a little harder for a number of reasons. You know, one, obviously, there's a competitive aspect. And so, you know, I think Apple is being pretty savvy because if regulators understood that iMessage is the equivalent of Internet Explorer, but for messages, then they would see that bundling their own messaging system with the operating system, both iOS and MacOS, is the equivalent of locking in their user base into that type of product. Now, that said, there is a lot of choice.

I mean, frankly, I use probably 10 or 12 for 15 different messengers or messaging apps on a daily basis. So it's not like you're locked out from being able to use alternative products. And especially when you want to talk about privacy and security, interoperability becomes very tricky to enforce. So the kind of predecessor for this would have been the telcos. And it is true that anybody can SMS anybody else's phone number. Now, of course, there are telco-level blocks on spam and abuse that can be put in.

This is why, for example, there's the do not call registry, and there's also, I think, a do-not-spam text registry that had to be put in place because of the openness and the interoperability of those systems. I mean, those, like the phone line systems are super basic. in comparison to today's messengers, which are often encrypted end-to-end, not always, but some of the time, where they have the ability to send rich messages also sometimes encrypted, where you have to deal with geographic restrictions, where messages maybe are kept in one country or another. So it's a lot more, I think, complex than just saying, well, let's just make this a decentralized free-for-all that anybody can message anybody else. On the other hand, And it's interesting to see that there is some movement.

I've seen, and I don't want to go down this path too far, but some movement in the Web3 sort of deep. It's not really DeFi space, but anyways, where there's Web3 messengers, you know, that are using your... Decentralized space. Yes. Yeah. Well, but it's crypto, right?

Because you're using your DNS, you know, your Ethereum name service address as a type of address that you could send to. So, for example, there's an out called Farcaster, which recently, I think raise some money. They might be in private beta. And they have this interesting format where you can mention someone by using like a username and then dot service. So I might be Chrisena dot Twitter on Farcaster or Christmas or Chris. Instagram if you want to mention my Instagram handle on Farcaster.

And so although that's not messaging per se, they're starting to develop their own internal way of referring to accounts that might be a remote account on the current context or platform. Massadnet has done this for a long time with email-style identifiers, and that's what we used a long time ago. I was going to say, like, I mean, that's where we get things like, you know, the at reply, at symbol, and, you know, God forbid the hashtag and things like that, like, baking into the overall internet, like, sort of that direct stuff that doesn't go through, you know, SMTP and like, you know, traditional sort of messaging and email stuff, I guess. but yeah it's it's really really hard for me to think about where this goes uh because like i can imagine a world in which there is interrupt and in fact there is interop between iMessage and you know sending messages to other platforms but there is this interesting and you know the wall street journal had that story about um you know teens bullying each other or something because someone was a green bubble versus like a blue hole because you know blue represented the iPhone which meant that you know you are

a more affluent you know person or a young person or something and And like, I don't know that interrupt, you know, solves or addresses that problem. That's a design problem. That's not a, you know, a security or, you know, kind of represents the integrity of the service problem. It's also not about the ability to move media content and messages between different platforms. And I don't know how you necessarily deal with that.

So, for example, you know, some platforms will have limitations on the size of the, you know, videos or files that you can share or send. You know, if you, for example, are an independent. I don't know, self-hosted messaging service, do you want to be storing, you know, gigabytes or terabytes of, you know, user videos? Do you want to deal with, you know, what happens when people use your platform for child pornography

and things like that? Like, so there are some questions about the modern use of these messaging platforms that bears some scrutiny and some questions as to how we want these things to work. And then what actually allows for competition to occur? And whether or not, you know, I can take all of my messages out of, let's say, WhatsApp and then transfer them into IMessage or transfer them into some random, shady, Android app, you know, that's going to, like, ultimately leak out to the internet.

And then all the people that I've been messaging, now, of course, their privacy has been violated by my choice. So I don't know. Like, that's where it gets, I think, a little more tricky than, you know, we've seen in the past. I met with an LP from Singapore this afternoon. And, you know, I'm doing all the things over email. Like, well, here's my cell number if you need to get in touch me, X, Y, and I forget this.

because, you know, there's, things are solved in certain ways. And he was just like, just, just what's happening? Yeah. And I was like, oh, right. And I had to download WhatsApp to my phone to make sure that I can do that. But yeah. Well, you know, here's another example, right? Like, you know, what happens, you know, there's, of course, another generation coming up on Discord, you know, or even Snap.

Yeah. You know, exactly. Exactly. If kids on Snap want to, you know, message kids on Discord, is that something that should be mandated by the European in government, you know, what does that even mean? And what are the privacy protections that happen on both ends of those platforms? You know, for example, WhatsApp has just added a number of features to support privacy. You know, so for example, they're trying to interrupt the ability for people to take a screenshot, you know, of the content. Now, that I would think would be an operating

system level, you know, concern. But nonetheless, you could notify, of course, the other person if a screenshot has taken place. But now if the platform that you're interoperating with doesn't actually support that feature that it's very vital to you understanding like the privacy exposure that you know that you're experiencing what does that mean you know and who's at fault and how do you sort of you know police that so I think this is why you know when it comes to a common set of messaging standards you know I don't I don't know the full spec of what RCS actually supports and whether it's identical with what IMessage does or if it has its own set of features or if it uses different names for things or what have you but these are I think the layers of

consideration that you need to think about, as opposed to just saying, well, everyone should be able to message everybody and it should just be, you know, open season, just like the phone networks. Right, because we have spam because email was designed in a certain way. Another good example, right? Like if Google, you know, and Google has with Gmail added their Gmail extensions that allow you to have interactive messages, and I don't know that it's an open standard that anybody can use, maybe it is, but there's very few other email providers that have adopted this format, then that begs the question of, well, of course, that's great for Gmail because it's kind of lock-in. Now Gmail or, you know, Google and Gmail, of course,

want you to use Gmail to get those additional interactive elements that is not part of the SMTP mail email standard, right? So like, it just sort of like comes down to who has the lead and why they have the lead and how they're going to protect their turf. I still like pop. Let's forget SMTP. Let's go about to pop. Let's just pine. Do you have something from the recent two weeks that is on your mind? Yeah. Well, I guess there's, well, I think we have three more topics. Yeah.

You know, so one, actually, well, we can do four, but I think we'll do three. One is actually related sort of to this is that, let's see, what is his name? It's actually on the top of tech name right now. Felix Krauss. I will share a link to this into this channel. Yeah, I talked about this today. Yeah. You know, like, so I've watched Felix for for a while.

He, I believe, built the Fastlane tools. And he discovered by essentially kind of, you know, looking at the traffic that was going on between Instagram's mobile apps and Facebook's mobile app and Instagram. That these platforms are tracking everything that you're doing if you use their in-app browsers. Now, I suppose I kind of expected this. So it wasn't that surprising to me, but it's surprising once you, I don't know, I guess, sort of realize how few other people kind of also anticipated this or just maybe like the brazeness of it. So essentially what's happening. I was going to say, Apple didn't anticipate this?

Well, it's a little bit different, though, because so it may be the system Safari, you know, WebKit browser, right? So I think Apple's approach has been to say, well, we will create a secure. rendering engine for web content. And other browser makers have to use our rendering engine. And Apple does this for security. It does it for battery and performance reasons. And so that I think might have been how they were maybe approaching it.

And so it was sort of surprising perhaps that what was going on here is that as that window is loading, you know, Instagram essentially injects some JavaScript or maybe maybe an iFram or something that is loading, more or less the Facebook advertising complex. And that is something that, you know, whether Apple was looking for that or not, I mean, it may not actually be noncompliant. And in fact, you know, if you agree to the terms of service of these platforms, that may be okay. Now, I think a really big question is whether or not this flies in the face of it, it probably does, the intention of the app tracking transparency effort that Apple, you know, made to make

these things more private. And this just goes to show, like, how powerful the, you know, the. advertising sort of industrial complex is. I mean, it's going to figure out how to track you regardless. And if you're using a browser that's built into these apps, then those apps have control over that experience. So, you know, obviously, like, one way to get around this is simply to not browse in the native browsers that are built into Facebook and Instagram. I didn't say this, but there's apparently you can go into settings and force these apps to open outside of the app. Like, it exists. It's.

hidden. Interesting. Yeah, but you can, you can do that. But, okay, you said you're not sure that this is against what ATT is doing. It's certainly against the spirit of what they wanted to do. I mean, look, the spirit of what they want to do, I think, is still up and our, or like an open question. You know, I think Apple clearly has a desire and an interest to become more of an advertising

company. How they become an advertising company has yet to be seen. and it's sort of like the way in which they under-promote iMessage as their social network, right? They're very savvy of other communications. They're very savvy to put privacy out there in front. Now, you may be able to disable these trackers inside of these apps that are provided by Facebook. But, you know, if you've ever gone to system settings and you look at all the ways in which you're sharing data with Apple, I mean, a lot of those things are on by default.

So I can't say that I understand exactly the spirit of Apple, except that I understand that there are controls, just like Facebook says there are controls, and there are controls that very, very few people are actually going to make use of. Not to derail you, but this is something, again, that I haven't done a story on yet because there's been several stories about it, and I haven't found the right hook into it to talk about on the show. But there's been a lot of people talking about how, oh, you know, the greatest trick Apple ever pulled was convincing people this was all privacy

as essentially they kneecap their rivals, and they lay the groundwork for their own advertising play. So far, there are people, to the extent that people are saying that some of the, if tech is in a recession, it is due to the fact that small businesses, you know, there was some data point that like half of the ability to target is gone. So like if you're a small business and you've lost half of your ability to get, get a return on your advertising dollar. That could seriously affect your bottom line.

What are your thoughts on that in terms of Apple? Apple certainly, by doing it as a privacy play, made it sound palatable to people. Do you buy this idea that this was actually kind of like the greatest jujitsu sort of shiv in the gut? You know, I do when I don't. And I think it's still so much more like subtle and nuance than, you know, I think we really understand because no one's going to be completely honest and transparent and forthcoming about what their ultimate ambitions and motivations are. You know, I think that Apple's been such a master storyteller for so long and shaping the narrative of what they want to talk about that it makes it very hard for us to understand.

Like to what degree Apple wants to take, you know, that space that Facebook currently occupies. and to what degree they're sort of a personal animus between Tim Cook and Mark Zuckerberg, just in terms of their personal values or their goals or, you know, whatever it is. Or just like their ambitions in terms of, you know, how they want to be in the world. I did share... Zuck says they're in a philosophical battle or something like that, yeah. Exactly. You know, like I, it's sort of, I think back to like 300.

I think it was it like the Romans and the Egyptians or something sort of like in this like, you know, huge battle? It's the Persians and the Greeks, but, yes. This is why you're the historian. and then I just watch movies. Don't come at me with history, my friend. This is why I asked you first. Anyways, yes. So that, exactly.

Like, it feels like that's the level. It's almost like a civilizational style battle, you know, of how these systems should work. And it will be interesting to see, you know, as Apple shifts more into the advertising space, how they self, you know, privilege themselves, how that comes out kind of in the wash. You know, for example, if you go into, like, so I recently upgraded my Apple Watch. Thank you, Prime Day. And when now I go into my settings in iOS, now there's a promo, of course, to get three months free of Apple Fitness Plus. Now, nobody else can do an ad like that inside of the iOS settings, right?

Peloton can't do that. You know, berries can't do that. Only Apple has access to that. It's very similar for Apple TV Plus or any of the other services that Apple wants to sell me. And so you have that juxtaposition where Apple clearly is privileging its own services and maybe wants to make the argument that that is part of the product, the hardware product that you just bought. But in terms of anybody else being on the platform, I think it makes it very, very hard for others to compete. So you asked this question about the ability for people to target ads on Facebook and get a return on their investment. I do think that there's been some hampering of that.

I don't know what the full extent of that is. You know, Google is also moving away from cookies, which to me presumes that they have. have figured out sort of a machine learning model that allows them to just sort of detect who the user is based on a number of other fingerprinting techniques and technologies that, you know, very few other companies are going to have access to. I mean, you know, the crazy thing about some of these things is that when we try to solve for one problem, you know, which seems like this thing that needs to be addressed by creating something that is more technologically sophisticated or, I don't know, complex, you actually undermine a lot of the, you kind of like take the oxygen. out of the space that would allow for new entrance into the market. So for example, I'm proud of the hashtag because it allows for anybody to actually build upon that because it's such a simple idea that no one can really take away from the marketplace. But if Google takes away cookies and says that, you know, the Chrome browser is now going to

prevent any cookies from being stored on your system, but we're still going to allow you to sign into the browser and get personalized services, that means that Google then essentially is the only one that can use cookies because it knows who you are because it's sort of set at a high level. That is a huge competitive advantage. So in terms of authentication, you don't need cookies anymore if you're authenticating the user at the operating system level or at the browser level. So suddenly now you have to go through those gatekeepers to be able to measure what people are actually doing on these systems and platforms. And so that puts them into an even greater leveraged position of power. So you've got to imagine like Facebook doing this feels a little bit

like Uber, you know, kind of creating a black geo cache, like kind of around. the Apple campus so that the Apple experience when they were testing the Uber app, you know, and I don't know personally about this, even though I worked at Uber, I just read about it in like Isaac's book, you know, it was designed to kind of circumvent the kind of platform hegemonic kind of approach to this problem because that's all they could do in the short term, right? So I guess like that's kind of how I think about this. I want you to get to the next topic, but quick observation that if the government passed the law, you know, you can't be preferential to your own products and things like that.

So then, so then as opposed to when you set up your watch and you get notifications for Apple Music, you would have five ads because they'd have to also put Spotify on there. They'd have to put sound cloud on there. That's what they did with browsers. That's, you know, when you installed Microsoft Windows, you got a choice of Firefox, Chrome, or Internet Explorer. So when it comes to that level of control over an operating system, you know, I think this is what Tim Sweeney is up arms about, you know, in terms of not being able to have multiple app stores means that you have to go through the, you know, gatekeeper in chief, you know, which is Apple. And so that really, you know, constricts and restricts the economic competition that can occur and the economic innovation that could occur by, let's say, lowering the cost of, you know, proradems, goods or in-app purchases or, or, you know, anything like that. Or the fact that, like, Apple Arcade is built into the app store. It means that nobody, like, and it's like you pay whatever, four or five dollars a month. and you get access to this whole library of games,

no one else has that level of access or integration into the app store. So those things, I think, are going to start to become pretty obvious that they are really, really big, you know, moats. Now, I mean, Apple's, I love Apple. I love Apple products. So I'm saying this from the perspective of thinking about the marketplace and the health of the marketplace and of that broader ecosystem and whether or not the difficulty of getting started in the future is going to be so much greater because just competing on the, you know, on the, turf that it's like Apple both sets the kind of rules of the NFL and also has two two teams you know playing against everyone else like of course you're going to have a huge advantage because they can rewrite the rules whenever they want to you say you say you say it from a place of love

is what you're saying I do like well I do because I've been on both sides of it you know so I'm both a customer and I'm also someone who's part of the ecosystem and I can see the tension only increasing okay so the last thing I think that I was going to bring up really which is just kind of like a fun thing where you know you mentioned on the show but i had discovered back in june that spotify was uh preparing its own ticketing service oh yes yes i talk about a different kind of uh antitrust context uh because i believe is it live nation that owns ticket master are these separate companies i forget one of them is yeah a monopoly i think it it whatever it is it's a monopoly even if it's changed hands or changed names it's still a monopoly yeah so you know

Just to provide some context, Spotify, I think, I don't know, I watch that company very closely, like I watch Apple. I have a lot of respect for their design. I know a lot of people were up in arms about Spotify adding podcasts, but it has become my podcast player, and I think it's gotten very good. The way that they are very focused and iterate constantly, you know, and learn, I think is pretty profound. And their recommendations are quite good. I mean, it's, you know, I don't really use TikTok that much. but in terms of content recommendations on Spotify, I feel like, you know, I go to Spotify and I get great stuff that I like,

even if I didn't hear about it or know about it before. So anyways, Spotify has been moving very hard towards, you know, creators, criminalization. Of course, we had Mike McNano, founder of Anchor on the show before. And, you know, Spotify's been doing a bunch of interesting things to support the creator world. Of course, they have to deal with all the different types of creators, from musicians to podcasters to soon audiobook and book authors. And the Spotify Tickets thing, which I believe you can get to, what is it,

tickets.spotify.com. I don't know, it's something like that. Yeah, tickets.spotify.com. You know, a couple weeks, months ago, they added live events. So if you search for live events in the app, you can now see shows that are in your area that might be relevant to you based on the music that you listen to, the very adjacent, you know, sort of existing expansion. And you had the ability to buy tickets back then, but for, you know, from, I guess, partners,

songkick or ticketmaster or other folks. And now with Tickets.spotify.com, you can actually go in and purchase tickets directly through Spotify itself. So Spotify becomes the ticket handler and issuer of those tickets. Right. Not an affiliate. Yeah. Correct. And this to me seems like it's a test.

It's an experiment, but it's a really good example of kind of, you know, using the position in one space. And, you know, Spotify is never going to have a native device that they get distributed on. Of course, they try that with Carthing. Car thing has now been discontinued. It's 50% off from what I know. And so they need to find other ways of, you know, getting some margin from the types of purchases that happen around the media that they distribute. So Spotify tickets, I think, is a pretty interesting move in that direction. I mean, it reminds me of folks like you and I have thought from day one, well, eventually Spotify's play is to kill the record labels and be the platform for the artists cutting out the middleman.

And in a weird way, like over the last few years, we feel like that's gone away because they made moves in that direction. And basically, we're like, yeah, this is the got to play. And so they've gone in the podcasting direction because it's like for various rights issues and margins issues. That's the easier way to go. But you finding this and them going in this direction reminds me that that doesn't mean that they don't want to do that in the end. They still might be playing the quiet, long game here. Well, you know, the thing that I was thinking about when we were talking to Noah is about where there is kind of, I don't know, fat in the system. where there's essentially kind of, you know, these middle tiers or middle layers or bureaucracy

that are human APIs. And I know that's going to sound very, you know, crass to a lot of people, but, you know, hear me out. Where, you know, record labels and the record business or the talent business or the creative business has a lot of people who are kind of curators that move people through a system or through kind of a, I don't know, you find someone who's like a gem who's like really, really talented, really good. The question is, you know, there's a lot of people who are good.

and they may not be great. So how do you filter those folks up into the right place in the, let's say, music business where they can be discovered, where they can get their music out there, where they can, you know, get the kind of management that they might need to actually, you know, be turned into someone that could be even greater and reach a broader audience. And I think there is a kind of machinery that needs to exist out there to support people like that. And my question, I guess, is if you were to reimagine what a label is and should do, in the modern era,

how much would it look like Spotify or how much would it look like something else? Didn't I do that story about how all of the artists are mad because the labels are basically pushing them to do TikTok stuff? Right. Right.

And my thought when I read that was like, so wait, what you're saying is promotion and artist discovery. It's basically A&R. And so if all the sudden in the modern world, like what is a label? I know that the label essentially signs people, gives you an advance, and that advance finances the production of your first album or single or things like that. But on the back end of that, it was always like,

and we're the people that will get you discovered. We're the people that will get you played. And so like you're saying, Spotify, has that. TikTok has that. And essentially, the artists or the labels are just they're pushing people to go to where the actual discovery is and the promotion is. And so they, look, it's, it's merchandising. You know, I think this is one of the things that is a little bit hard to sort of imagine because it's very easy to, I don't know, like, for example, there's a great show on HBO called vinyl. And it kind of like shows you this, you know, glamorous cocaine-soaked world of, you know, punk rock.

I think of the early 80s or something. And that world is very easy to imagine that that is how the music business works. And I'm sure that is how it operated before. But I think we're in a world now that is actually quite different. It's much more programmatic. It's much more formulaic. You know, there are kind of like these collabs that happen. But then there's a bunch of folks kind of around.

I mean, like, for example, if you stay to the end and watch the credits in a movie, right? We're talking like thousands of people who put these things together. I mean, it's not, I mean, it may not be exactly the same. But I imagine that there's a similar apparatus that supports, you know, bands, and musicians that, you know, tour international stage or whatever. And I don't know, maybe I'm completely off base here. But I guess I just, it feels like what Spotify does and to less a degree, Apple

music, maybe more like TikTok, maybe more like YouTube, is that they provide a mechanism by which kind of like these saplings can put their stuff out there, you know, can kind of develop an audience. And then there are those, you know, folks who are a little bit further along down the journey that can then pluck them up and then, you know, provide that, I don't know, mentoring, tutoring. It's not too dissimilar from like an angel investor that, you know, plays a similar role for startup founders who are just trying to like figure things out. They've got a good idea. They've got a perspective. They got some grit. And they want to make something, you know,

but they don't know or they don't have all the answers because they've been focused on that one thing this whole time. And there's all these, these business questions that have to be resolved. And so I think Spotify wants to sort of be a partner that is seen as being, I don't know, like, you know, the fact that that they come out of, is it Sweden? You know, like they have kind of a Swedish approach to competition. And as long as everyone is kind of a little bit unhappy with Spotify, I think that they're probably doing the right thing, you know, because everybody wants a little bit more. And they're saying, well, no, no, no, we're balancing a marketplace where there are all

these different interests. And of course, the artists want to get paid more. And of course, the labels want to get paid more. And of course, like, the fans want to pay less. But I guess it's happening in the streaming world, too. You know, we don't like going on that path. But I think it is interesting to think about that. One of the things that I'll add to this and this.

this hopefully will turn into a future guest and show. Spotify has also just announced, or I guess released, a new feature of Soundtrap. And Soundtrap, I think, is essentially their web-based version of, let's say, garage band. And so it is a tool for composing and mastering music, as well as podcasts on the go. I don't know what the relationship is between Soundtrap and Anchor. We'll have to get that resolved. But what they've added is kind of a, a, way to fork other people's music.

So essentially like GitHub. It's like an open source project. You take some music, you fork it, you make your own version of it. And then you can also add in and layer in collaboration. And so that is one major piece that garage band is lacking. So for example, you know, when I'm going to like take this recording and put it into garage band and do some cutting and editing, I don't have the ability to add you to that track and to do live collaboration.

But that's what this soundtrack new release does. So I think it's going to be very interesting to see. I mean, if I look at what I'm seeing with Figma and GitHub and other types of tools, and we talked about this with the ARC browser that assume collaboration as a first-class feature, it'll be really interesting to see this brought to audio, and especially for Spotify to do this, and then eventually if that ends up at the Spotify app itself, in other words, they distribute the ability to create and edit and produce podcasts within Spotify. And I know that they're actually doing this test in New Zealand.

That may be a real game changer in terms of the content that we start. to see showing up there. Okay, number one, mashups. Mashups, the dream of the early aughts is alive. Yes. Number two, someone tell Griffin Newman that Chris says vinyl was a great show because I don't think anyone believes that vinyl was a great show. I thought it was great.

Did you watch it? I watched the first three episodes. And listen, by the way, Griffin will tell you that it was not a great show. But by the way, great podcast, Blank Check with Griffin and David. They're starting a mini-series on, what's his name? The Shining and I can't think of his name. Oh, yeah, yeah. Okay, I forget to think of it.

2001. Why can't I think of his name? Anyway, they, Kubrick. Kubrick. They're starting, people have been asking them for a decade to do a Kubrick miniseries, and they just started one. So Blank Check with Griffin and David, great podcast. And then I forget what the number three was.

But whatever. All right. So last thing, I wanted you to ask me about my MacBook Air purchase. Yes, that was the last thing. I'm going to say something real quick, which is that the revolution in my workflow that I thought I was going to get with the Mac Studio has come with the Mac MacBook Air. Like, it is such a joy to use that I almost wish I was still a laptop first person. Fast keyboard is the greatest Mac keyboard I've ever used. I heard you say that.

Now I really want to try it. And, you know, all the usual things. Build quality is fantastic. Screen, fantastic, et cetera, et cetera. I don't regret my Mac studio. I don't regret having a 38-inch monitor in front of me right now. So I'm still hashtag desktop. life. But the point that I wanted to make, aside from the fact that the MacBook Air is fantastic, is we are really, you know, Apple screwed us for half a decade with their shitty laptops and their shitty keyboards and things like that. But they're screwing everybody right now by not going to USBC next month. Because at this point, you know, because at this point, you know,

every laptop, every computer that I have, USBC, every device, my, you know, my kids' iPads are USBC. My daughter's Kindle is USBC. Everything is USBC. And from what I understand from Mark Gurman and et cetera, et cetera, they're not going to do the USBC move for the iPhone until next year at the earliest, right? So essentially what they're going to do next month is they're going to give us the next generation AirPods, which will still be lightning. And so then... Wait, wait, wait, wait, wait, AirPods, lightning? What do you mean?

The, you know, the case. The charging case. The charging case, right. So think about this. Think about this. If you were to buy an iPhone next month when they have the event and you buy AirPods, I can't remember. I can't remember.

Anyway, both of those things you're going to want to buy next year because they're going to go to USBC. And that is shitty at this point because it is, we have crossed the threshold where the whole rest of the world is USBC. And the fact that we're going to have to endure lightning for one more cycle is, you know, my, like, on the one hand, I want to, like, I have empathy for what you're saying. On the other hand, I will also, and I suppose this is sort of, so I have a kind of relationship with Nomad. They make these great charging devices, great cables, really cool. And anyways, my point is that, and I know we're always trying to psychoanalyze like Apple and what they're doing. But one, there's like inventory. Two, there's like all the peripherals and all the connections and all the other downstream, you know, kind of partner devices like Apple certified.

devices that would need to move over to USBC, right, to get ready for that. By the end of this year, I think the majority of the iPad lineup will be USBC. Yeah, so anyway, so I'm saying like this is all a multi-year transformation. Now, I'm sure that there is some proprietary aspect to why Apple wants to stay with lightning. You know, I don't know if there's patents or whatever. I don't know if there's charging and power. I don't know if it's about the chips, whatever it is. I'm sure there's some spreadsheet that kind of like rationalizes a lot of this.

I guess my point, though, is that if they're able to know that there's enough chi and wireless charging out there, that by the time they are forced, you know, by the EU, let's say, because there's the whole e-waste role that is going to impose USBC on, you know, companies, then for the most part, people are going to be able to do wireless charging anyways. And so it won't matter as much to people who have, you know, a whole, you know, drawer of lightning-based, you know, peripherals and devices because you can just do wireless. So for example, for my AirPods, like you mentioned, like I rarely actually plug them in ever.

Mostly I do wireless charging. Same thing for my phone. So if we move to a world where I'm actually using my lightning adapter a lot less and I'm just using wireless charging, your advocacy for USBC is actually a lot less relevant to me personally. Now I know that I've got the luxury of having these devices that do wireless charging, but what I'm saying is that wireless charging might get good enough between now and the next year or something or already is good enough,

that the wire actually becomes a lot less important to this whole argument. I did a story like a year ago where there's so much energy loss. You know this from charging on wireless that a wired charge is faster. Number one, if you want to get your device charged quickly. I'm not going to argue whether it's like better or worse. Also, like data transfer speeds. I do plug in my phone plenty. Yeah.

You know, and I know the speed of USBC, so I'm not arguing that level of performance. I'm saying for the average user that has a few USB or I'm sorry, lightning chargers around, it's going to be expensive and annoying to have to change. It's going to be worse than the headphone gate, you know, when they remove the headphone jack. Oh, see, I'm completely, I'm radicalized on this. I swear. Like you, I would like to have every surface be, you know, wireless charging capable. You know, you see that in airports now where you put it down on a thing. But, but it's egregious to me that when I travel with the family and Papa is in charge of charging 12 devices.

Oh, I see. Okay. I can charge everything now at this point, including my laptops with USBC. And the two things that I have to worry about. Because even the Apple watch, you have a USBC cable that connects to the wireless trading for your watch. So my point is, it's egregious to me that the iPhone and the AirPods, air pods are still lightning. And I'm radicalized.

I won't back down on that. You can go to your grave on that one. That's all right. I'm not going to fight you that hard. I'll die on that, yes. Okay. All right. Great.

Chris. Yes. We did it. We did it. Another one. All right. Well, thank you, everybody for tuning in. Yes?

Oh, and next week. I was going to say, you're going to be here next week. I will. So in Siri, depending on how it works out, we should have an episode in person. That is the hope. And it'll probably be on Tuesday. So that might be an earlier day for people. So, yeah.

Right. Right, right. Okay. I love everybody. I love you, Chris, and see you next week. All right, love you, buddy. Talk you later. Later.

Bye, everybody.