The Munk Debates Podcast - Friday Focus: Chief Twit – Crypto Carnage

Episode Date: November 11, 2022

Friday Focus provides listeners with a focused, half-hour masterclass on the big issues, events and trends driving the news and current events. The show features Janice Gross Stein, the founding director of the Munk School of Global Affairs and bestselling author, in conversation with Rudyard Griffiths, Chair and moderator of the Munk Debates.  The following is a sample of the Munk Debates’ weekly current affairs podcast, Friday Focus.   On this week’s edition of the Friday Focus podcast, Janice and Rudyard dig into the two big tech stories in the news over the last seven days. First up, what is happening to Twitter as Elon Musk moves forward with mass layoffs? Will his warnings of the potential bankruptcy of the company come true? The donors only second half of the program explores the lessons learned from the collapse of one of the world’s two big cryptocurrency exchanges, FTX. Is it time to pull the plug on deregulated cryptocurrencies and move toward state backed digital assets? What are the risks and rewards involved in creating a central bank issued “stable” coin?  To access the full-length editions of the Friday Focus podcast consider becoming a donor to the Munk Debates for as little as $25 annually, or $.50 per episode. Canadian donors receive a charitable tax receipt. This podcast is a project of the Munk Debates, a Canadian charitable organization dedicated to fostering civil and substantive public dialogue. More information at www.munkdebates.com.Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

The following is a complimentary excerpt of this week's edition of the Friday Focus podcast by The Monk Debates. To access full-length editions of each and every episode, along with all kinds of great additional benefits and perks, become a donor to the Monk debates. You can do that for as little as $25 a year, and you'll receive each and every year 50 Friday Focus episodes at full length. It's all available right now on our website. in just a few simple clicks. Triple W. The Monk Debates.com. Look for the Friday Focus option in our navigation bar, the top right of the website. Make your donation, and we will send you each and every Friday a link to listen to the

full-length edition of this program. Thanks in advance for your generous contribution. Hello, Monk members. Regis here, your host and moderator. Welcome to this, the Friday Focus podcast here at the Monk Debates. We're each and every week diving into the big issues and ideas, shaping the news. We do that with Janice Gross Stein, the founding director, the Monk School of Global Affairs, an international acclaimed author and scholar.

Janice, great to be in conversation with you. What is it today? The 11th, Remembrance Day, the 11th of November. How will you be marking Removered Stay this year? Remembering State really matters to me, Redyard. So I always stop at 11, no matter what I'm doing. And think about these hundreds of thousands of Canadians who have died in our wars. What a difference these wars made to our history, how much we owe them.

And every year I try to read one personal story about. a Canadian and a family who lost somebody in a war that is so difficult for people to think about that you lose your son or your daughter in a war for some abstract big purpose, but this child is gone. So the mothers who come and participate in the Remembrance Day ceremony, I always pay a lot of attention to them. Great, great sentiment. I think about a grandfather I never knew who tragically served the entire war,

first Canadian to win the Distinguished Flying Cross at the outset of the war and died in a car accident on VE Day as he was going through Belgium into then liberated Germany to assist in the debriefing of Nazi and other scientists involved in. in their atomic weapons program. My father lost his father. He was orphaned at a young age. My grandmother, his mother, was widowed in her 20s, and just irrevocably changed the course of their life.

And I think that's what these things are. They're kind of depth charges that get blown up decades ago, and they reverberate down to the present. I also think, Jess, maybe I wonder if you do too, about the six million Jews who died in the Second World War. You know, we don't have a day per se that we commemorate and acknowledge that horrible atrocity. And to me, that is part of Remembrance Day. It is very much for me. It's interesting that November the 10th, one day before Remembrance Day, every year is the anniversary, November 10th, 1930.

was night and day when Nazi soldiers smashed Jewish synagogues, bookstores, burnt books, some hundred thousand people were sent to concentration camps. It was the first visible demonstration of the horror that was about to come. And those two days, I remember both every year. They're juxtaposed one with the other. Yeah. And I think, again, I would just urge everybody. If you have a grandchild, a son, a daughter, don't necessarily assume that the current school and education systems in this country are really doing much of anything of a job in terms of educating children about the realities of that horrible decade and what happened within it. And it kind of behooves all of us, I think, to spend a little time of our own, providing sharing stories, talking about history. You can't outsource this to your schools.

Curriculums really have dialed back in a substantial way of Canadian history over the last generation. I think it shows up, unfortunately, I think, in a growing kind of historical amnesia that affects far too many Canadians today. Well, let's jump, Janice, from what for many is the ancient past, the virtual Peloponnesian War for some Canadians through to high tech because I want to spend the first section of this show talking about a crazy week in technology. And I want to begin with

Twitter because many of us either on Twitter or used Twitter, Elon Musk into his second, I guess, week now as the kind of chaos monkey firing half of the staff renouncing. previous pledges of, you know, hybrid work. Everyone has to be in the office every day, 80 hours a week. He seems to, seems to- 80 hours. That one was stuck with me, Richard. 80 hours a week. Advertisers are bailing and he's trying to monetize the blue check marks.

I just wonder, Janice, your thoughts, is this Elon Musk's done Kirk to start using, some World War II analogy, his undoing here, because his behavior seems genuinely erratic and irrational and against his own interests, which are serious here. He's made a major investment in a 50-odd billion-dollar company that has huge debts, that's bleeding revenue, and that arguably has lost half its value compared to its peers in the stock market since he went ahead with the acquisition. You know, this, this is a big deal, Roger. But I don't think it's Dunkirk. It's a big deal because all the chattering classes hang out on Twitter. So it's much smaller

than many of the other social media companies. But boy, did the chattering classes pay attention when Twitter goes off course. And so we're going to hear a lot. about this over the next couple of months, I think. People are addicted to Twitter. They cannot get off it. It is really an addiction problem. They get off it for a day or two, and that's about as much as they can stand,

and they go right back. So you're right to describe this as a period of orchestrated chaos, no strategic plan. But if you look at Elon Musk as a businessman, that's always way he's done things. always the way he's done things. He doesn't have any of the normal team that surrounds a high value company. There's no executive functioning there. It's all concentrated at the top. So you think this is the recipe for failure, except he hasn't really failed into big, risky things that he

started, which Tesla and SpaceX, which in many ways revolutionized their sex. And he's sectors in both cases. So I'm not too focused on the chaos right now. I think there's under, I think from what you can glean from the musings, there's a vision of a very different Twitter. And believe it or not, it's modeled on the Chinese platforms. Completely integrated platform all the way. You, it's going to be, it sounds like it's going to be, you're going to have digital payments right on the platform, you're going to be able to seamlessly move from either hearing about something you want or watching it on a video to paying for it. It's a notion, frankly, of a completely vertically integrated platform that's going to meet all your needs.

Now, if that's what is going to. But, Janice, if that was a viable business path forward, then why has the market failed to create the equivalent of WeChat? There must be. must be a reason. I would presume there's a market hypothesis working here that that maybe that's not something that people want. And I think if you scratch the surface here, Elon Musk is even using about the possible bankruptcy of Twitter, you look at what he's doing. He's cannibalizing, maybe in desperation, maybe this is a sign of just how serious it is. He's cannibalizing the goodwill, the social equity, the social capital that the platform has, specifically around these blue checks.

because the blue checks were a way of authorizing, verifying people's identities, people primarily who were in the media. And therefore, it increased, frankly, for me as a user, it increased the civic value, the civic function of Twitter because it aggregated probably more accurate information from more inaccurate information. So now he's, I guess, in just a desperate scramble for revenue. he's selling these blue checks for $8 a month. Are you going to buy red here? No, 30% he's going to have to give to Apple. Tim Cook is going to collect as gatekeeper on everything. So the irony of that, you know, that in the name of free speech and supporting Elon Musk,

you know, the crypto bros and Trump supporters will be filling Tim Cook's pockets with money to run Foxcon factories in China to give Xi his cut. I mean, you can just go down the rabbit hole in this, the absurdity of it. But the serious point, Janice, is that he is, it's a tragedy of the comments. He's destroying the civic value of Twitter by allowing it to become, once again, just a myasma of disinformation where you have no ability to discern what information is verified what ranking or order you should give a certain tweet versus another one. I think this blue check decision of his is really an indicator. The only rational explanation would be an indicator

just how acute and how dire the financial situation is right now inside Twitter. So here's where I agree with you, Roger. It is definitely a revenue play. And one thing, we haven't mentioned is in order to finance this purchase, he put up a significant amount of collateral in Tesla. So if Twitter goes up in flames, he's putting up, he's putting at risk because of the debt, the scope of the debt, it's the largest buyout as you say of any social media company in history. You know, Tesla could be compromised as he, is it bleeds out in order to finance the ownership of Twitter. So for sure, you're right.

The Blue Check decision, it was a revenue play. But you're much more enthusiastic with Twitter as a civic plaza and a civic culture of Twitter than I ever have been. Yeah, it's sometimes a neat way to get information that I otherwise wouldn't get in a really quick way. but is a platform for civic debate or civic engagement. But, Janice, I can push back on that. I mean, you know that there are people that you would like to follow on Twitter.

I don't know who they would be. Larry Summers, maybe because you're interested in inflation. There's a value to me in going on and being able to curate and say, okay, I want to follow, you know, Larry Summers, Muhammad Alarian, Neil Ferguson, Dembeza, Moyal. I don't know. And select a little group of people to help me understand or get some thinking on economics and inflation. You can do that. You can curate that beautifully in Twitter.

And then because of those verified checks, I actually know that that's Larry Sutter's and not, you know, some deep thing. Larry, Larry Dummers. And Musk has blown that all up. There are people running parodies now of the real George W. Bush. You know, there are people running about, you know, how many Iraqis he, he caused to. There are people running parodies of Elon Musk on the foot. It's complete chaos. So the signal, I agree, the fragile signal that Twitter emitted through the cacophony and noise of the platform is gone. Yeah. It is, it is a mess.

And I think, again, it shows either that he's lost it and he's, you know, simply desperately trying to cobble together something that, as you say, protects his Tesla shares. but there are also these banks, investment banks, most notably Morgan Stanley, who underwrote $13 billion worth of short-term debt on Twitter that's now selling in the marketplace at discounts of 60 to 70 percent, which normally in secondary debt markets would suggest that this is a company headed towards bankruptcy, or there's a really significant risk that that could happen. So let's talk about that for a second, Richard. I mean, if, and again, if you look back at his career with all, with the, the two other big things that he succeeded on. We had the same discussion. Electric batteries,

no charging stations. This is a crazy idea. If you think back to the early dates of Tesla in California, very, very similar conversation. This company will fail for sure. Let's assume for a second that it does head toward bankruptcy, which is a real possibility. I'd be the last person to deny that. Let's talk about the fallout. There is fallout because there won't be Twitter. for people. Where do they migrate? Does this community fragment? Do we have, in fact, some migration out to the hard, right, deep dark web?

Where does everybody else go? That's a big part of it. Because this was the place where the hottest political issues and trends got debated. There's no question about it. But more than that, what happens to the investors? How big a hit is this? if it does go bankrupt to an already fragile tech economy. I don't think people are paying enough attention to that problem.

It's not only about Elon Musk. Yeah. No, I agree with that. And I think you're right about fragmentation, and that's dangerous. Take it or leave it, but I think Jack Dorsey, the original founder of Twitter, and the people around him, a bit like the guys at Google, they didn't always get it right, but they were trying to do it right. And again, there were all kinds of conflicting motives around profit and power.

But at the end of the day, they were still somehow they felt maybe as owners as public figures, some kind of pressure or compulsion to deal with disinformation, to address. Well, he has a curation council. He did not get rid of that. That's so interesting. No, but he's fine. The reason advertisers are bailing, Janus, is he's fired 50% of the workforce. So the whole ability to moderate the website or the web, the presence, the feed of Twitter is because there literally are thousands of people that are looking and verifying and watching content and pulling down content that is outright disinformation.

In some cases, very serious political interference by, as you know, better than most, third party state actors who are using bots and the platform to, let's say, manipulative. manipulate American politics. This is, this is serious. And, and, and I think, you know, I'm not going to shed a tear if, if Twitter goes bankrupt and goes away. But I, I do find maybe a certain carmic justice here. If this is Musk's, you know, Dunkirk, because he kind of deserves it. You know, he, he has been this kind of Willy Wonka of 21st century capitalism, a fantastic salesman, a fantastic hyper. No, but also in the end of the day. But an innovator, Richard. Well, in our next segment, we're going to talk about another innovation, which is, you know,

cryptocurrencies and a certain currency called a company FTT and its token FTCS that just basically blew out $25 billion of personal wealth of its owner. So I'm just saying there's a lot of innovation out there, Janice, and I get it. You have to go for moonshots. But let's be also honest to ourselves. There's a valorization that's often not deserved. of these people, there's a remancing of who they are and what they stand for. And the reality is they're just human, like everyone else. They're filled with ego and faults and misperception.

And I think this is maybe finally the end of Musk's kind of free ride. And I, for one, would be glad to see him brought back to ground as an Icarus who falls, you know, in the face of his own kind of your reverse. Okay, I'm going to push back just a little bit here, but it is great metaphor here that, you know, the founder of SpaceX is going to be brought back to Earth. I just can't resist that on reddit before I move on. We've certainly talked about, you know, how the path to Twitter going bankrupt here, it's not hard. Let's look at the other path now. Let's assume that through all this chaos and noise, Twitter becomes something completely different from what it is now. You say, well, American consumers don't want a single payment platform.

Well, let me just quote Steve Jobs here. They don't know what they want until you provide it. There are literally hundreds of millions of Chinese who can do, who can go on the platform. It's seamless. They get their groceries. They pay on the platform. Lots of other people already in that space.

Jack Dorsey has square. And you use it all the time when you go into stores. There's buys out of the UK and other places. There's lots of global payment platforms. Yeah. But this has, but there's nothing, by the way, no major company in the West has rivaled the scale and the mass of Chinese platforms. And in fact, they're way ahead of us. It's different, but they're way ahead of us.

And that's because visa and the banks from a regulatory perspective will never allow that type of competition to happen in North America. Okay. Now, let's assume this is for a moment. This is a disruptive moment. where he puts all his weight and his energy, and he disrupts that. That's what he did with Tesla, frankly. You could have said the big car manufacturers would never allow this to happen.

So all I'm saying is there's two stories here. There's huge upside risk. There's huge downside risk. Both are possible, and I would not be an investor myself, no way. But I think to write this off at this point, as pure chaos, it sees only the downside, not the possibility of disruptive upside. Well, maybe it's my innate conservatism, but again, I just find this relentless valorization of disruptors in our society and the extent to which they are provided with social license that other people don't get. They're often provided in the case of Elon Musk with massive government subsidies that fund. all kinds of aspects of their business and allow them to privatize, in a sense, social investments

because they happen to be really good marketing people, great, great salespersons. You know, let's hope in this whole new world of higher inflation and a real cost of capital, we can finally understand what true wealth creation is, what the importance of, you know, creating productivity growth over the long term, as opposed to, I think, a culture we've all gotten ourselves into that everything's a moonshot, everything should be disrupted, throw money at it, often public dollars. Let's talk about that in the next segment, Ontario teachers potentially losing tens of millions of dollars in this speculative Bitcoin cryptocurrency exchange. Janice, it just, I don't know, it's a wake-up call. We had a show a number of months ago,

which I think was very prophetic. We called it regime change. I do believe we're in a new world. there's no coincidence that Tesla stock is also down 50% year to date. We're leaving behind that kind of magical kingdom that these disruptors operated in, which was zero cost of capital, known requirement to be profitable, loved for their bold wizard-like visions of a future that all of us could have within our grasp before we only trusted them with our data, with large public subsidies, and, you know, all kinds of perks.

You're making me laugh. You're making me laugh, Reddy, you really are. Because this is kind of a character of the culture that you're describing, which has a lot of truth in it. But let me just say this. This passionate description you just gave, somebody could have written as the dot-com balloon was exploding in 2000. 2001, 2002, and companies were going bankrupt and were returning to normalcy and some business

practices. Well, look, but the next 20 years were like, frankly. So I think an argument that innovation and disruption, given the speed at which is everything is moving and the science behind a lot of it, frankly, I'm not, you and I have to agree to disagree on this one. Yeah, I would just say don't valorize it. Look at it with eyes wide open and higher interest rates will take care of a lot of this. Well, you know, if you look at the layoffs in the broad tech sector, leave aside Elon Musk who fired half of Twitter. Look at what Mark Zuckerberg did this week, the biggest layoffs in matter. And it's really interesting that as we've moved through this rising interest rates, wages are going up in parts of the economy, as you well know,

but the tech sector has taken a huge disproportionately large hit. And the layoffs there dwarf proportionally what's going on in other parts of the economy. So there's a volatility built into this part of the economy, which has always been there. And Twitter is just the most extreme example of that, frankly. There's a boom and bust quality to that cycle. Okay. We're going to say goodbye to our complimentary listeners. Reconvene on the other side of the break with our monk donors.

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