The Vergecast - 324: Instagram chaos, Photokina 2018, and Elon Musk gets sued

Episode Date: September 28, 2018

This week, we saw the two founders of Instagram abruptly leave, so Casey Newton comes on the show to talk about all that drama and what it might mean for Facebook’s prized possession. Then, Dan Seifert joins us to talk about all of the cameras that were announced at Photokina this year, plus all the models that were announced before the show even started. Finally, Liz Lopatto comes on for an impromptu This Week In Elon to discuss the fact that the SEC has filed a lawsuit against Mr. Musk, which happened just before we started recording the show. 1:28 - Instagram founders resign from Facebook 5:00 - 5 times Facebook messed with Instagram 20:43 - Whats App co-founder Forbes interview 22:32 - Former boss of Facebook Messenger calls Brian Acton “low class” 32:31 - Photokina 2018 recap 38:39 - Zeiss camera with built-in Adobe Lightroom 51:16 - Paul’s weekly segment “Space Egg” 56:07 - This week in Elon Musk: Live Edition™ with Liz Lopatto 1:09:52 - Oculus Quest Also, in case you missed it, Nilay talked to Google AMP’s Malte Ubl about how he’s trying to make the mobile web better. You can listen to that in the Vergecast feed. Learn more about your ad choices. Visit podcastchoices.com/adchoices

This episode of Vurchast is brought to you by Microsoft Azure. Your business is built on bold ideas. Bring them to life faster, push them farther, and scale them worldwide without skipping a beat using Microsoft Azure. Stay productive with familiar tools, develop and deploy where you want with a consistent hybrid environment and build engaging apps with intelligent features. Join the startups, governments, and 90% of Fortune 500 businesses running on Microsoft Cloud by starting your free account at Azure.com slash trial. That's AZ-U-R-E-D-com slash trial. Hello, and welcome to Vurchase. the flagship podcast of Vox Media, which we have successfully trolled this company

into officially saying that we're the flagship. No, I read the press release. I believe we've been called A flagship, one of two. It's not my fault that whoever wrote that press release is not aware of how Navy's work. There's only one. It's obviously us. But it's true. This is the Verchast.

I'm your friend, Nelai. Dieter Bone is here. Hello. Paul Miller is here. Hello. We're going to have a lot of people on this show today. I'm just going to be straight up with everybody. Casey Newton is going to join us, talk about Instagram.

Dan Siebert's going to talk about all the cameras that came out at Photokina. And we have to have an emergency this week in Elon with Liz. Because right as we went to tape the show, Elon Musk was sued by the SEC. So that's going to happen a little bit later. She's filing away right now. We're going to bring on when she's done. But let's start with Instagram, which was the news of the week in my mind. Instagram's founders quit in a huff.

And to help us understand what's going on, we're going to talk to Casey. How are you doing, Casey? Well, I'm recovering from all this drama. You know me, Neely. I'm not one for drama. And yet every time I open Twitter, I read the headline,

something is happening on the Facebook senior executive team this week. It's true. I will say usually, Casey, we bring you on, I'm like, how's democracy doing? And you're like, it's horrible. And yet this feels more dramatic than that previous conversation

about democracy in general. Because it is legitimately crazy. No one is behaving. Walk us through some of the drama. Sure. So if you are just catching up to the news this week after six years of working at Facebook, which, of course, Facebook acquired their company in 2012 for a billion dollars, Kevin Sistram and Mike Krieger said, we're leaving.

And they did this so abruptly that Facebook was caught flat-footed. They did not have a plan to communicate this. They did not have a succession plan as we're recording this. We still don't know who will lead Instagram into the future. And as best as I and others have been able to tell through our reporting, there was just a sense that Mark Zuckerberg was consolidating power and no longer wanted Instagram to operate with much autonomy whatsoever. And so the founders who have been responsible for, you know, one of the few bright spots at Facebook over the past two years, walked out the door and all but promised that they would be back with another. company maybe soon. Wow. What do you mean by consolidating power? He's the CEO of Facebook. What is there left to consolidate? So he went out and acquired what he thought would be the next

generation of social networks. He spent a lot of money on WhatsApp, on Instagram, on Oculus. And he sort of put a time limit on all those acquisitions and said, we're going to let y'all play around for three, four, five years, do your thing. And then eventually we're going to kind of come in and do things our way. I actually don't think he said that latter part, but there was sort of a promise made of autonomy that would last for four or five years. And that clock ran out. So Zuckerberg did keep his word, but think of all that's happened in those past four or five years. Facebook has started to stagnate. It's sort of reached its saturation point in North America. There's some evidence that it's actually declining in North America. People are sharing less to Facebook. And so that,

That has made Instagram look like a very shiny object. Arguably, it's the crown jewel in his lineup. And so it was sort of inevitable that he would turn his attentions there as he seeks to sort of find new avenues for growth for the company. Frankly, there aren't that many that he can choose. And so this does seem in some ways inevitable. What even by growth? Do you mean revenue growth?

Do you mean user growth? Do you mean good feelings growth? Sort of all three. I mean, he wants all three, I think, because it's a publicly traded company in America, his mandate to shareholders is that he makes more money every quarter than he did the year before. And so I do think that this is driven out of a sense of revenue. The company is sort of de-emphasizing time spent on the site because some of the other criticism that they've gotten. So, yeah, I think this is sort of a money move and sort of trying to find a new level of stability

for Facebook as it enters this era where the flagship app isn't thought of as highly as it once was. And so what you're looking at, Chris Welch wrote a post for us. It's like all the ways Facebook has messed with Instagram recently. And it's like frictionless sharing to Facebook is no longer tagged with the word Instagram, which is apparently a very dramatic problem for the founders. There's a hamburger menu. And Mike Krieger, the CTO, said, I'm so proud we don't have a hamburger menu. And now they have a hamburger menu and you click it and all it says is open Facebook,

which is like so rude. So like move into someone's house and install like a shitty extra door. And all that door does is like take you into some other house. Is that the stuff that's made these people leave? Or is that just like the price of being a billionaire? Broadly speaking, yes, I absolutely believe it. I've had a chance to speak with Mike Krieger and Kevin Sestrum on multiple occasions. And I believe these are two individuals who care massively about their product.

They feel like their product is a reflection on them. They were incredibly involved in the day-to-day at Instagram. They sweated the details. They were very deliberate about everything they. did. So yeah, when all of a sudden, you know, you think about how many photos are shared from Instagram to Facebook, particularly in North America, particularly among Facebook employees who are probably using Instagram as their main way of connecting to the Facebook service at all. And all of a sudden, all of those photos just appear as if they were natively posted on Facebook, I can absolutely

see why that would be a major sticking point for them. Now, what we don't know, though, is what was the the trigger, right? Like, like most people, everyone who's reported this story has said, there was no one thing, there was no straw that broke the camel's back. And yet, given how passionate these two were about their company, the idea they would just sort of leave it and throw their hands up without even being able to say who the successor was, I kind of don't believe it. I kind of believe that there was some sort of ask that was made where the two of them looked at each other and went into a conference room and said, all right, this is our red line. We're out. And, you know, One, that's speculation, so I don't know that.

But man, I just look at all of the evidence and it feels that way. So I'm trying to learn more. So I've characterized this to Casey as a whiskey decision. Because if you just look at how the story played out, Mike Isaac, New York Times just had a story. The story just went up out of the blue. No one was prepared for it and said they're considering leaving. And then everyone freaked out. Facebook PR didn't have a statement.

Instagram PR didn't have a statement. a sisterman Krieger appeared to have disappeared. But Casey, you said to me, that first version of the Times story didn't have any details in it. It just said they're going to go. And then everyone else started doing their reporting and filling in Kara at Recode and Kurt had a story that was basically like, they're really mad.

NBC had a story that was like, he hates Mark Zucker with all of his heart. And it's amazing. That stuff just started to fill in because people started to talk. Is that what is leading you to think like this was like flip the table and leave decision? Yes, because, and I wrote about this in my newsletter this week, which you can find at theverse.com slash interface. Wow.

I really wish I hadn't stumbled over it, too. I'm going to start charging you a tax every time you plug yourself. Your website gets paid when I plug this website. That's true. Yeah. Well, my plan for secondary revenue on the Vergecast just fell apart, Casey. Darn it. We'll come up with something else.

But I wrote about this. And when there are these high-level moves, which have a high potential to be interpreted negatively, and, of course, everyone has interpreted Sistram and Krieger leaving Facebook negatively, the company wants to get out ahead of it. They want to frame the narrative. They want to offer a positive way of looking at the story. And so when they know that these things are coming, they work very hard. And also, by the way, can work very quickly to make sure that that happens.

I believe that if Facebook had even, let's say, 12 hours of notice, they would have been able to get up a rudimentary blog post, you know, brief one or two reporters, come up with a successor or at least sort of say something about what the succession plan is, have Mark Zuckerberg do one of his posts on his timeline where he talks about all the good times that he had with Mike and Kevin over the years, right?

These are all things we've seen them do before. Recently, for example, when Yan Kuhm, the WhatsApp founder left, Jan Kum also somebody who sort of has no love loss for Facebook at this point, but they were still sort of able to go through the dog and pony show of we're all one big happy family. And they didn't do it this time. So it seems like it happened in a hurry. And to me, that indicates some level of hostility. Like something, like even if they decided this three weeks ago, they sprang it on Facebook. And who knows sort of what happened after that, right?

For like the insider media game is sort of like, how did Mike Isaac get this story? right? Why did this person give them that story? Is it possible that someone at Facebook wanted to make sure that the first version of this story wasn't the story that Kevin Sistram, you know, posted on Twitter? So there's, you know, lots of interesting things to pick apart there. Is there anything to do with this coincidence of timing with WhatsApp and Instagram? Like, is there any reason to link these timings? Well, are you talking about the story that came out the next day about WhatsApp? Well, the WhatsApp founder leaving, close to the time of Instagram founders leaving, You mentioned there's three big social network plays that Mark Zuckerberg has.

One of them is not nearly as exciting as WhatsApp and Instagram as far as current market share. So is there anything to that coincidence? I think it is basically a timing thing. You know, as I said a bit earlier, these companies were acquired somewhere between, what, six and four years ago. Most founders, when they're acquired, the options that they get for joining the company Vest over a four-year period, which is why it's very rare to see founders stay on much before four years. And in fact, many will leave long before four years because they realize they don't like working inside a giant company.

So it's less of a coincidence and more just kind of the statistical likelihood of how long you stay at a company after it gets acquired. But I do think that the fact that all these things are clustered together is significant in that, you know, Mark Zuckerberg really now just sort of has a series of product families. He doesn't have any autonomous divisions that are going to be doing experiments around the future of the future of social networking. And I think one of the things that was interesting about Instagram was that it was a little laboratory of democracy. And yes, it stole a lot of its most successful ideas from Snapchat, particularly in later years. But then it also iterated on top of those.

And I think you can argue that Instagram has been much more creative than any other Facebook property over the past three years. And so the question is, what happens to? all of that, right? Are the good and talented people who are still at Instagram, by the way, they are, there are a lot of really good folks there? You know, are they going to sort of rally around the new leader, whoever that is, probably a guy named Adam Messeri, but we still don't know that for sure.

Or are some of them going to say, you know what, I'm out of this company, or I'm going to go see what Mike and Kevin are going to, you know, are up to in their garage. And I just think that really bears watching. Yeah, this is a bunch of people who all got really rich, right? They don't have to do anything. And so you got a couple

billionaires being like, we're going to make a new app. Of course, they just pay some engineers to hang out, right? Like, and you don't have to be... And by the way, by the way, I just want to say, the thing that surprised me the most about when I interviewed Kevin Sistram was how competitive he was. He is not thought of generally as a competitive person. And I think it's because he works from Mark Zuckerberg,

who is probably one of the most competitive people in the entire world. But as much as Kevin loved polishing his product, and he did and he does, the thing that he liked the most is winning. He just walked away from his baby, you know, maybe the biggest thing he'll ever do. I think he's going to be highly motivated to have a very successful next act. Yeah.

Well, one, I have to disclose my wife works for Oculus, which is part of Facebook. Two, my favorite part of the resignation was the word again. Yes. We want to be creative again. We're going to go be creative again.

Yeah. So, you know, some people read that as suggesting they had not been able to be creative at Instagram. The reason I resist that interpretation is based on my own interviews with Kevin in particular. I think he was really proud of what they were doing there.

Like, it isn't as if Sister has, you know, spent the past three years railing against every decision they made. I think he was really excited about all of them. But he had also kind of come to work within a lot of constraints, many of which were put on him by the parent organization. And so, you know, now that Kevin has learned, all that he's learned about social networking, what does he do when the handcuffs come off? I mean, if you're meat, like, this is the most irresistible story of the year, right? Yeah. It's worth noting when some of those handcuffs were, right? Penn Thompson wrote a great piece about Instagram and Facebook and sort of the fallout. And what he noted was they'd created a

product. Facebook bolted on its revenue engine to that product. And they had never solved the other part of it. Like, how would have Instagram been monetized if they hadn't just like bolted on Facebook tracking, targeting to that thing? Like, I don't know. But if you look at the stuff you have been covering out of Instagram recently, yes, there's stories. Yes, it's cool. But they were about to add shopping, which I'm going to go ahead and just let everybody listening to know. I've been workshopping in my head or a review series called dumb shit I bought on Instagram for about six months. Because there's just a pile of dumb shit in my house that I bought on Instagram. Never buy one of the wireless car charging clips that you see in Instagram.

I have them all. All of them are disappointing. So, like, they were adding shopping to the mix. They were, you just broke the story of, like, native retweets for influencers and brands, which just looks ridiculous. like conceptually, like, that's why Instagram is Instagram because it doesn't have that. So if the first class of people you extend that to is like the worst actors on your platform. That seems like a horrible idea.

So their innovation was starting to become revenue innovation, right? It was not user experience innovation outside of stories. And, you know, that split between sort of the feed and the story list was getting bigger and bigger and bigger. there are days to go by where I never scroll through the feed, which is where the money is, right? Right, and this has become a question. I actually asked Kevin Sistram that this summer in a piece you can read on the verge about,

hey, why aren't these things making more money? And his answer at the time was, well, you know, it's still early and we need to train a generation of advertisers. You know, but to go to your point, Neely, is like Instagram hasn't been innovative. Anyone can make that argument, and that's fine. But I do think it's notable that it was just a couple months ago that they launched IGTV,

which is a very big bet that the future of video can on mobile is going to be vertical, that it deserves a standalone app, that it can be sort of driven by a new generation of creators. This was really a sort of bet the brand moment for Instagram, and it's two months old, and that's when Kevin Sistram,

who championed it internally against a lot of opposition, this is when he walks out the door. Like, I just, I hope you see what I mean when I say, like, this is insane that they left when they did, because he had everything riding on IGTV. Like, IGTV, you know, you could argue it was going to be like one of the big pieces of

his legacy. And now, like, I would not be surprised if they killed it in a year. When's the last time you opened it? I mean, I probably opened it two weeks ago. Yeah. Yeah. No one's using it. So let's make the list of flip the table moments that caused them to quit. Here's mine. Just the potential things I would see. And just based on what you're saying, Mark Zuckerberg demands that IGTV go 90, right? And he's like, this is stupid. Portrait video is not the thing. Make IGTV horizontal. And Kevin Sistram says, no, you don't

understand my vision, then he quits. I'll just put that on the list. I think more likely is he demands that IGTV and what is it, Facebook watch? Like merge. Yeah, a merger. Okay. I'm imagining that like you open Instagram and the first thing you see is the Facebook logo and it says Instagram, presented by Facebook. Yeah. That's three. I would put native regramming on that list. They have been religiously against it the entire time. And so Facebook- Someone explain the argument of why regramming would be bad for Instagram? So, yeah. Have you ever used Twitter?

I mean, the idea is that when you let people sort of mindlessly reshare things, you wind up incentivizing a lot of the bad behavior that we see on Facebook proper, that we see on Twitter, that it sort of makes everything more emotional. All of a sudden, the stuff that you're seeing in your feed isn't the stuff that you control. It's stuff that's been put there by their people. That makes it more of an attack surface if you're a hacker or, you're meddling in an election, you know, and I should say, because, you know, as I love to do. Yeah. Well, so Instagram denied that they're building this. What I reported was based on some

screenshots I had seen and a source who was familiar with this thing's development. And as I reported at the time, it was extremely rough. It was like sort of barely a prototype. But, you know, just the fact that Instagram is considering it, like we believe is newsworthy, given that they have resisted it for so long. And so sort of where did that product come from? And how did the, the Instagram founders feel about it. That, again, is like a very interesting question to me. Okay, so it's four things. What's the fifth one? What are the categories of things? There's not many more. Well, so another one, and again, it's hard to know, but it used to be that Kevin Sistram and Mark Zuckerberg worked together very closely. And Kevin Sistram would describe Zuckerberg as a member of Instagram's

board, which sort of implies the kind of relationship where this person is checking in once a month and offering you advice and consent. During the big reshuffle that happened in the story, spring, Chris Cox became Kevin Sistram's boss, and all of a sudden, the system was getting a lot less FaceTime from Zuckerberg, and I imagine was probably getting a lot more requests and suggestions from Chris Cox. And so I think just sort of changing up that dynamic where you used to feel like the CEO of your own company, and now you just feel like middle management, I think could have very easily made him say the hell with it. Yeah, but that's not a flip the table, right? That's what I'm saying. Yeah, that's true. That's a slow burn.

Well, but maybe the email comes in from Chris Cox and with a big request, but I'm interrupted Dieter, so. What if we go full conspiracy, and it wasn't about Sistram flipping the table, it was him preemptively quitting on his own terms before he was fired. Oh. What if, I don't know, like, what if, like, Mark Zuckerberg is like, no, but I want to be as cool as you have to invite me to all the cool

Instagram parties because everybody likes Instagram better than Facebook, and he said no, and then Mark Zuckerberg got really mad, and so he had to get out before Mark Zuckerberg, you know. It's like the Rod Rosenstein theory of Kevin's sister and leaving Instagram, right? Can I add a theory? Because this is so much fun. This is full conspiracy, by the way. I don't think this is true.

What if they had an idea for a new company? This seemed like a good time to start it. And they were just like, we're out. Yeah. It's like, well, you know, we have, we've compiled a list. There's not a heavy enough list to tip a table. But, you know, this is good timing for our hot new idea called Peach 2. You know, Paul, I sort of like that as a theory.

I actually, I can't remember exactly what Mike Krieger's background was, but Kevin used to work at Google and quit his job there to go build a thing, right? So he has sort of been through that once before where he had an idea for a company and went out and did it. And, you know, it's not crazy that he would do it again. But again, you just look at everything that they were working on in the moment and the idea that he walks away, there has to be a flip-the-table moment. Right. That moment comes with IGTV, like, succeeding or failing. Either they shut down IGTV and he's like, all right, like I'm out, I'm walking away. Or it's like the world's biggest success.

Samsung starts selling vertical televisions, right? Like, he's like legacy secured. I'm moving on. I don't know. So, Casey, that was but one half of the Facebook executive drama this week. Oh, indeed. Indeed. The other half.

The other half. Well, so, you know, among us Facebook watchers, one of the most delicious live for drama stories of the year was when Brian Ackton, the former co-founder, or I guess still co-founder of WhatsApp, quit Facebook around the beginning of the year, and then a couple of months later tweeted, it is time, hashtag delete Facebook. And that was all he said. And he refused all interview requests. And, you know, we wrote a story and everyone wrote a story. And so for all this time, we've wondered, why did Brian Aston tell everyone to delete Facebook? And on Wednesday, he gave an interview to Forbes,

in which he gave his answer. And it was basically two things. One is he had promised users that they would never commingle WhatsApp data with Facebook data, and Facebook did indeed do that. And they had to pay a fight of $122 million. And he felt like that made him look like a liar.

The second thing that made Brian Acton Mad was that when WhatsApp was acquired, they promised users that they would never monetize through advertising because they felt like there was a better way to make money. And Facebook had begun. done to explore the possibility of introducing ads into WhatsApp. Again, sort of felt like he had been made to look like a liar.

And so for those two reasons, he walked out of the company after apparently a very chilly meeting with Mark Zuckerberg in which Zuckerberg said, this is probably the last time you'll ever talk to me. Wow. And then he disappeared. And he took $50 million and he gave it to the signal folks and turned that into a nonprofit foundation. And now he gets to go live out his principles of.

end-to-end encryption on a non-advertising-supported app. So that was sort of drama piece one was why did Brian Acton quit? And then the accelerant to the fuel for that fire was David Marcus, who used to run Facebook Messenger and presumably sat in a lot of meetings with Brian Acton over the past few years. He's now running Facebook's experimental blockchain division. He put up a post on Facebook that said, I can't take it anymore. I have to tell you the other side of the story. And his side of the story was basically the WhatsApp guys slow-rolled every single effort to try to monetize their app that they had an obligation to try to figure out a sustainable path forward for it, and they basically wouldn't do it.

And he said that Brian Acton was a whole new standard of low class for criticizing the company that made him a billionaire several times over. And he said, in a sort of very digressive part of the post that I'm probably going to go into into more detail today at my newsletter at theverse.com slash interface, is that Facebook is sort of a net good for the world, that the good far outweighs the bad, and that it's a unique company among all companies

because it is about people, and that while other companies are about selling things or entertaining you, Facebook is uniquely about people, and that's what makes it sort of unique and noble in the world. At that point, alarm bells started going off in people's heads, like what sort of messianic cult is sort of being organized in Menlo Park? Can I read the actual thing to you? Please read it.

All those words are in there. But just imagine that you work at a company and you write this paragraph. This is David Marcus on Facebook. I'll close by saying that as far as I'm concerned, and as a former lifelong entrepreneur and founder, there's no other large company I'd work at and no other leader I'd work for. I want to work on hard problems to possibly impact the lives of billions of people around the world. And Facebook is truly the only company that's singularly about people, not about selling devices, which is a shot at Apple,

not about delivering goods with less friction, which is a shot at Amazon, not about entertaining you, which is a shot at every entertainment company in the world, not about helping you... Netflix, not about helping you find information, which is Google. Just about people. It makes it hard sometimes

because people don't always behave in predictable ways. Parentheses, algorithms do, which is not true. But it's so worth it because connecting people is a noble mission and the bad is far outweighed by the good. It's like Facebook is hoping to soon propose an I-Triple-E standard for how humans are. It's just crazy because they're a business.

They make money, right? So all of these other things are about helping people, right? You sell them devices. They give you money, you give them a device. Only Facebook people. They give you money. They give you money. You give them goods with less fiction.

You want to know the difference between us, Nilai? All the things you said are true and I agree with you, but I can't get there because I'm still stuck on the fact that it's impossible to be a former lifelong anything. Yes. Is he dead? Yes. I mean, that's a good point. Another good point. It's very interesting to say that your company doesn't make money selling devices on the day that you introduce a $400 virtual reality headset at a public device. developer conference. It's just so much. And then the parentheses, algorithms behave in predictable ways after this entire fake news experience that we've all been forced to go on.

I read this statement and it's like, is Facebook a cult first of all? But most of all, why don't the most important people at Facebook have the self-awareness to know that they sound like cartoons, right? Like, this is the speech in Dave Eggers, the circle, before everyone in the world has a camera implanted on their forehead. Right? And it's like, you should know that that's what you sound like. They just don't have it. It's so confusing.

Well, and like, this has been one of the, I think, very fair criticisms of Facebook over the past year is that it is an incredibly insular environment. And until very recently, there have been almost no shakeups at the top of Mark Zuckerberg's organization for the better part of a decade. Like, his closest advisors have been with him since the start of Facebook. And so I do think that there is a group think that develops. And when you consider how successful Facebook has been in most aspects of growing and taking a business public, you can understand why they would become, like, less sensitive to external criticism. But also, this idea that Facebook is good for the world is the reason that they're working there. And it's very much under attack. And so I think what you're starting to see is some defensiveness come out because I think people are starting to say to Facebook employees, oh God, like you work there, like you're hurting the world, right?

I'm not saying I feel that way necessarily, but I do believe that Facebook employees are hearing this when they're out at parties or at soccer games, you're any other kids' baseball game, whatever. And so I think you're actually going to see more of this defensiveness as Facebook executives try to make the case that this thing that they're building is something other than just a soulless advertising machine. Yeah, and I just have too many poorly constructed wireless car charging mounts to believe anything otherwise. I've got to start this series. All right, we've done this. What's your big takeaway, Casey? What's the thing people need to know? Well, I'm giving away what, at least right now, would be my sort of year-end piece about Facebook.

But, like, this was the year that Mark Zuckerberg got rid of all of the high-ranking executives that had different ideas about what Facebook should be than he did. Like he had people in their Jan Coon, Brian Acton, Mike Krieger, Kevin Sistram, these are people who thought very differently about the way to build and profit from social networks, and they are all gone now. And so whatever Facebook looks like in the future, it was always going to be Mark Zuckerberg's call,

but to the extent that he had any internal resistance or alternative ideas, if they're there, I don't know about them. We don't know who's going to run it next, but... Yeah, Chris Cox is sort of everyone's pick for who would be the next CEO of Facebook. He's been there forever. He's very well-liked. He's very charismatic. He's good on stage. He still does the orientation for all the new employees. So it would probably be him. But as far as public speeches go, he's basically been in hiding since F8. And he had very little to say before then about all of Facebook's various crises.

Oh, I meant Instagram. Oh, sorry. Instagram will be run by, well, in a way, I mean, Instagram will be run by Chris Cox, right? Because he's the head of all product. The person who will be running it day to day will probably be Adam Masseri, who came over during the big reshuffling in the middle of the year. He was previously running the news feed. His background is in design. Really smart guy, really thoughtful, very well-liked. But man, he's just been handed a bag of crap. And it is very notable to me that, again, like, we're recording late in the day on Thursday.

Three days after this all happened, and Instagram still hasn't just confirmed that he's running it. Yeah. What a mess. Thank you, Casey. I'm going to read an ad. And then we're going to bring on Dan Sefer to talk about some cameras, which are far as traumatic. This episode of Virtcast brought to you by Microsoft Azure.

On the Vurchase, we cover the ever-changing world of consumer tech. Coming up next, we're going to hear an advertiser segment from Microsoft Azure about another ever-changing field. Big data. Listen this. In a city, everything we do from swiping a ticket at the subway turnstile to checking into the public Wi-Fi is a piece of data. In just the last two years, we've produced more data in the world than the rest of the years combined.

We're getting into multiple petabytes, even exabytes of data. That's Rohan Kumar. He's vice president of Azure Data at Microsoft. And that's exabytes, as in one megabyte with 12 zeros at the end. It's a lot of data. And with this volume of data comes a lot of potential for intelligence. When we say how do you make the data intelligent, it's really about getting into a single place

where you can run machine learning models which derive artificial intelligence from that data. to make it more meaningful. One application is making our city smarter. Ayal Federer Levy is the CEO of ZenCity, a startup that's trying to make the data-driven city a bit more intelligent by adding people to the mix. ZenCity takes a pulse of what's on the city's mind

through social media, and then they analyze that data for insights using Azure services. Posts, comments, 311 calls to the call center. We use machine learning to turn all of that huge mess of unstructured data, into actionable, quantifiable scores and measures that can actually support decisions in the local government.

Those millions of data points can help city governments understand what their citizens need. When we had big snowstorms in the US this winter, we saw some of our cities actually use our platform to recognize areas where more people are talking about being stuck into snow and prioritized snow removal. There's so much data being created around every action that we take in life. The real question becomes what we actually do with it. Learn more about the tools you can use to make sense of the world and your business with Azure.

Start free at Azure.com slash trial, A-Z-U-R-E dot com slash trial. We're back. I want to thank Microsoft for supporting the Vergecast, the flagship podcast of the Vox Media Podcast Network. I don't know if they know they're supporting the flagship, but they are now. All right, Dan Seaford is here. Hello, Dan. Hi. So last week on the show, we had iPhone reviews.

so much camera nerdery. I went on the talk show at John Gruber. It was another two hours of camera nerdery. And it's funny because the real camera nerdery is yet to come. Oh, get ready for it. The real camera nerdery. Actually, you mentioned this earlier at the top of the show that this week was the Photokina trade show out in Germany,

which is like the big trade show for the camera world every year. It used to be every two years. Now it's every year. So there's a bunch of stuff that came out of that. but really the past month has seen more action in the camera world than I can remember in like the past five years. Yes. It's been crazy. And like it's all happening on the extreme high end of like the pro extreme enthusiast level because that's where all the interesting stuff with cameras happens now because consumers aren't buying them anymore and they just use their phones like the iPhone.

But what is happening are like some seriously big shifts that are like super interesting, especially if you are into cameras or you're into cameras or you're into. photography, which if you're into gadgets at all, I feel like the camera is such a gadget at this point. It's really cool. So just a rundown since like the end of August, we've seen new camera systems from Canon, new camera systems from Nikon. Say what you mean by a camera system. Okay.

Because these are monumental shifts. These are big shifts, yeah. So the big things that we saw at the end of August and into early September were new mirrorless cameras from Canon and Nikon that are pro-level. They're called full frames. so they got big image sensors in them. They're expensive. They start at $2,000 and up for the camera,

and then you're going to spend hundreds or thousands of dollars for lenses for these things. Because you can't use your old lenses on these without an adapter. Yes, you can adapt the old lenses to them. The thing is that the shift, this is a big shift for Canon and Nikon. So the mirrorless camera movement has been happening for over a decade now. And what that has brought has brought a lot of smaller cameras, more portable designs, more digital technology.

into these digital cameras, kind of a shift away from the film designs that were prior to it. But Canon and Nikon have bucked this. They've stayed the ground with their pro DSLRs, which have had basically the same designs for decades now because they just took their film camera designs and adapted them to digital. This step that they're making now is they are finally embracing mirrorless cameras on the pro level. And so Canon has its new EOSR camera, which is the new, like the flagship of the EOSR system, which means cameras and lens. is. And then Nikon has their new Z7 and Z6 cameras, which are their new Z system type cameras. So that's just two things. And it's already huge. That's two things. That happened before

Photokina even happened. Yeah. That happened like three weeks ago. They were huge. They're huge in the camera world. These haven't actually hit shells yet. So there's still a lot of excitement for them because, you know, the influencers and partners have been able to get their hands on them. So there's been a lot of press about them. We're still waiting to get our hands on them to really evaluate final production level quality stuff. we're excited about it, and they're coming really soon. So that happens before Photokina even happens. And now Photokina has happened, and you've got companies like Fujifil and Panasonic and

Lika and Carl Zeiss just announced a camera today, which is crazy. Yeah. But they've also released new high-end cameras. So Panasonic has announced that it is also getting into the full-frame camera game. Panasonic is really interesting because it's coming from the other direction of Canon and icon. Panasonic and Olympus were the first ones to release mirrorless cameras back years ago. and they didn't have it attached to a legacy film system.

But now they are pushing into the full frame world with their new LUMIXS series cameras. They're coming next year. And so they're attacking from the other end, but they're still pro-level stuff, high-end big sensors, high megapixels. They're not going to be cheap. So that's that.

And then Fuji film is saying, full frame is too small for us. We're doing medium format. Yeah. We're just like... Preach it. Even bigger sensors. And, you know, just to like,

clarify. In photography, the bigger the sensor is, generally the better the image quality. That's kind of like a general rule. So Apple talked a lot about how the iPhone 10S has a bigger image sensor than the iPhone 10, and that's what's contributed to its leap forward in camera quality. The same thing happens on the big camera level. It just happens at a bigger scale. So Fujifilm released a medium format mirrorless camera two years ago called the GFX 50s. And it's still, it's a big camera, like not super portable, kind of stays. in the studio. It's great for studio work,

maybe great for slow portraiture work. But now they have the GFX 50R, which is basically the same camera in a smaller body. So you could like take this out on the street. It is like the size of a Canon Rebel DSLR, which is a small camera. And that gives you a huge sensor, which gives you better image quality,

better dynamic range, and better control over your depth of fields. You can really have a great control over the actual blur that a lens creates as opposed to like the fake blur that your smartphone might try to create. So that's super exciting. And I'm going to say the price, and it's going to sound really expensive. But compared to other medium format cameras, it's actually really cheap.

It's $4,500 for the body of this camera. And that's coming in November. How much is a regular medium format camera? Well, the other players in the medium format space are like Haseablad and Lika and Phase 1. Haseoblod cameras start at $10,000 and go up to $35,000, I believe. Lika just announced their new S3 medium format camera, which has 63 megapixels. Vlad got his hands on it over in Photokina. He described it as frustratingly awesome.

There's no price tag on it, but you can expect it to be north of 20 grand for just the camera. Wow. So these are like serious pro-level stuff. Like, I don't even think pros by these cameras. I think rental houses buy these cameras and rent them to pros. That's basically the business model for this. But the Fuji film is something that, you know, $4,500 is about what you're going to pay for a new Nikon Z-7 with a lens or can an EOSR with a few lenses. So it's not out of the range of what pros spend on cameras that they use to

shoot weddings or shoot portraits or, you know, shoot senior pictures or, you know, what you can use to hype up your Instagram profile before Facebook kills it. So, like, it's super exciting in how much is happening in this space. And like I said earlier, it's all on the high end because frankly, consumers just aren't buying cameras anymore. So here's the one that I want the most of all of these, because it is the craziest thing in the world. You said Zeiss put out a camera. It's a ZX1. It has an Android tablet on the back that runs the mobile version of Lightroom.

It is bonkers. It is, okay, so this is... I want it so bad. They're calling it a concept, but in the same press release, they're saying that stores will have it next year. So it's hard to read what this exactly is. But it's a, what they're calling a fixed lens, full frame camera. So you can't change a lens on it.

It is fixed in place, and it's one field. the view, but it's a 35 millimeter equivalent lens. It's got an F2 aperture. It's a Carl Zeiss lens, which is a really high-quality lens. But the crazy part is that they're saying it runs Lightroom, CC right on the camera. You can shoot your photos, edit them right on the camera, and then it's got Wi-Fi, so you can upload them right there. So it's like a whole computer and camera built into one, which seems wildly ambitious.

And I'm hugely skeptical, but also super, super curious about it. This is one of those things where, like, Lightroom on a phone is. great. So what if my phone was just a huge, a huge camera? Like, just have this thing make phone calls and I'll just, I'll just use this. So Samsung released that a couple of years ago. But the camera was shitty. So yeah, that was the problem was like they were putting like basically the equivalent of like a three or $400 point shoot camera on a phone and having a phone back. And of course it was like a Samsung phone from a few years ago. So it was like a Galaxy S4 style phones. That was like a real part spin experiment. Oh, total part day. They walked in the factory like,

oh man we got to clean out this room. What if we just glue this crappy camera onto this crappy phone and be like, it's the future. No, this is like a real camera. This is a real high-end camera. So in terms of specs, this is like similar to Sony's RX-1 Mark 2 or Lika's Q, both of which are north of $4,000 cameras.

So this is going to be a four, maybe five, maybe six. It's hard to say exactly the price, but it's going to be way up there in terms of thousands of dollars. And then it's got a 4.3-inch touchscreen on the back that you can use Lightroom with. But here's what I don't understand.

Cameras with built-in editing features have existed for a long time. It's not a surprise. I bet if you're Zice, you're like, well, we don't have any built-it. We don't have any software engineers to build us built-in editing features. And even if we hired the team from Nikon, we've looked at their work, and that sucks. So we're just going to call Adobe and have them do it for us. But then they've got this Android. Like, why doesn't it run a sharing service?

It's really weird that they're like, you know what? just we're going to put Lightroom on the back. Like, it's a very strange approach. Especially, like, Lightroom is not super fun to use on a computer. It's even less fun to use on a tablet. Oh, you're talking about Lightroom classic. Lightroom CC, which is what this is. Yeah.

I'm skeptical about it's great. I love it. But, yeah, the traditional way is, like, modern cameras now all have Bluetooth and Wi-Fi built-in. So you can transfer your photos wirelessly to your phone, and then you can edit them on your phone and share them to Instagram or whatever right there. This is, like, saying, don't bother with your phone. do all the work here, and upload them to the internet directly. It's a flicker?

Where are you uploading? No, it's in the Lightroom Cloud. Yeah. So here's the V question now. It's like a $4,000 camera. At least, yeah. Lightroom CC has a monthly service fee. So is this a $4,000 camera that costs $10 a month?

You know, I think if you're paying $4,000 plus for a camera that you can't change the lens on, you're not too worried about the $10 a month for Lightroom. Just a hunch. I will say that I enjoy it. You probably already are paying for Lightroom to use with your other cameras. Okay, that's fair. I hope when your subscription runs out, they put a little like a demo version of Lightroom. It puts a watermark on your images.

I pay the $10 a month for Lightroom CC. I think it is a thing that makes having a lot of cameras worth it. I need to write this piece. Deeter has assigned me this piece like 10 times. Yeah, where is it? I just keep writing a headline Lightroom is as new. I photo, and then I'm sad about I photo, and it goes away. Oh, yeah.

Because photos the Mac is guard. Yeah. Yeah. Well, I think, you know, if you're building, if you're using Lightroom, you are serious about either cameras or you're serious about photography, and you're not a casual user at all. And all of the casual stuff that's happening with cameras and with photography now is all happening on the phone. And it's all happening.

You either editing directly in the iPhone Photos app or you're editing in Google Photos, which is really actually quite great for editing really quickly. Or you're doing it in Instagram. And you're not interested in managing a library on your computer. And actually, to push back on that just a little bit, it is theoretically possible that they could bring back a little bit of consumer interest in bigger cameras. But because Nikon and Canon in particular have been avoiding this new trend for so long and stuck with the big, big DSLRs, people are like, yeah, I don't care, don't want to deal with it. When do you think that some of this stuff, especially from Nikon and Canon, might trickle down to like a more reasonable consumer level? That's the thing I'm waiting for.

I think it's going to be a while. And part of that reason is because of the way the camera market is at this point. The only cameras that are actually selling and camera section that's growing is the enthusiast camera level, which means you're spending north of $1,000 for a camera, you're buying a few lenses at a few hundred dollars a piece or more. So that's the only cameras that are selling right now and the pro level, which is where Canon and Icon are entering with these new mirrorless cameras. So I think it's going to take a long.

time for Canon and Nikon to bring their stuff down. Canon is the world's biggest, you know, outside of like, unless you consider Apple the biggest seller of cameras, which is probably accurate, but like in the camera world, Canon is the biggest company there is. And they sell more EOS rebels, which are their entry-level DSLRs than anything else still. But it's a shrinking market. And I think it's going to take a long time for them to bring down these mirrorless cameras down to that level.

Canon and Nikon actually have had consumer-level mirrorless efforts in the past. There's the Canon EOSM system. You probably never heard of it because nobody buys it. Nobody owns it. It's not great. They don't put a lot of effort and resources into them because they don't want to cannibalize rebel sales. And so they've not been very well received and they don't sell a ton of them. Nikon had, the name is escaping me now.

I honestly think it was called the Z-1. A very weird mirrorless camera system for a while was, again, didn't. have a lot of support put into it from Nikon, was kind of ignored and wasn't super well received by the market. And that has opened up the window for companies like Sony to waltz-in. Sony started by selling cameras that were kind of consumer level under $1,000. And now Sony has really, really grown its pro-level business so much that it sells more full-frame cameras or high-end mirrorless cameras than Nikon does in the U.S., which is kind of crazy. It's nipping at Cannon's heels.

And so Canon and Nikon are seeing Sony as the threat on the high end. And so this is kind of a protectionist type of move for them, that they're being like dragged into this kicking and screaming, but they have to because Sony is eating their lunch. And people love those Sony cameras. Yeah, especially, you know, the new creator class, right? So like the YouTubers and the people who are using these cameras, not just for photography, but mostly for video. And that's one thing that's really interesting with these new cameras, especially from Canon and Nikon, is that they're going to be great for photography. but there's a lot of things left on the table for video features. Like the Canon doesn't shoot 4K video.

It doesn't shoot 120 frames per second at 1080, which is like where you get all the sick B roll from the slow motion. The Nikon has only one card slot, and it doesn't use the SD cards. It uses a much more expensive card format that is way less common that people don't really have. And so it's a lot of these weird things that they seem like no-brainers that they could have added.

Like Panasonic has a great business selling mirrorless cameras that shoot great video. And if you want to step up from Panasonic, you go to Sony. And that's what all the YouTubers are using. Like, we've talked to Serratiichi a bunch and had her on. And that's what she's using to shoot all of her videos. And, you know, we know a lot of YouTubers that are using these rigs. Sarah literally saw me at the Apple event, the iPhone event.

And I posted a photo that I took there. And she literally tweeted at me. I always give you shit for using Nikon because Nikon is, like, silly. But I'll admit that photo looks pretty good. Because she's like, to her, she thinks Nikon is like the stupidest. company because they won't make a product that she wants to buy. Right. Well, it's like, not even a little bit.

It's not even like that she wants. They don't make a product that does what she needs it to do. Right, right. That's what I mean. So, like, they've taken so long to do this. And these are the first steps. And I'm sure that, like, you know, the next camera in the EOS R line will add 4K video and some of these other features and the next Nikon Z7.

But those might be a couple years out. These companies don't move that fast, obviously. So it's frustrating, but it's also exciting at the same time because they're finally seeing that they have to address this. market and Canon had had a great business selling EOS 5Ds for years. I think they were probably really protectionist about that. And maybe now they need to shift it over to the art line. I am very excited to see this many full frame mirrorless cameras.

Because that to me feels like there was like some sort of breakthrough in the production process that made this easier for more companies to accomplish, which means I hope in the long run, it could get a lot cheaper. because the image off of a full frame versus a micro four-thirds is just so obviously better, but it is always kind of, it's like, you have to have a lot more than $2,000 to get into that, especially for video.

Yeah, because you've got a factor in the cost of lenses as well, and these lenses are all pro-level lenses, which some of them might cost as much as the camera or more. And then they're also big. They're big and heavy. Even though I'm saying that they're smaller than DSLRs, they're still a lot bigger than what a lot of people think of as a mirrorless camera. I'm so.

So I'm stoked. I'm hoping, I hope to get a good mirrorless for like $1,000 in a few years. That would be nice. Yeah, I mean, you can get a great mirrorless camera for the $1,000 price at this point. Sorry, full frame. But you're going to give up a little bit in the image quality, or excuse me, I should say the image sensor size, which gives you, you know, as I mentioned earlier, some limitations on the creative things that you can do with them. But it is very exciting. I'm looking at used Sony A7S is right now, Paul.

right in the strike range. Where are they at? They're like, I'll have $1,100. I went through months of consternation, save up for like a full frame or get the smaller. I forget which Sony I have, but it's not a full frame sensor. And I was very sad to not be rich.

And you can use A7R for $7.99 on eBay. Yeah, because Sony's got a five-star rating. The reason is because Sony's been doing this for so many years now. I think that first A-7 line came out in 2012 or 2013. So there are three generations into their cameras, whereas Nikon and Canon are just entering now. The thing that strikes me is the thing you're saying about the sort of creator class.

Like, I always think the whole point of the verge is we cover the tools and then we cover the culture that tools makes. And the place where I see it the most and I have since the day we started the verge is cameras. Right? You give people cheap cameras,

they're going to make videos with them. Now there is YouTube and Instagram and now you see the camera companies knowing, oh, this is a market. for us. This is a whole generation of young people wants to be YouTubers and people like Marquez and Sarah and everyone are saying

buy an RX100, buy an A7R2, right? These are the cameras you want and they're picking Sony every time and you have to know these other companies or that's just money that's left on the table. Yeah. And these other companies are like, especially Canon and Nikon are very traditional

camera companies. They're very proud of what they have and what they've built over the past century. Their old company They've been around a long time. They've had many great accomplishments over the years. And so I'm sure there's a ton of hubris built into that that has caused them to drag their feet. But like I said, it's very exciting that they're entering this market now. And the most exciting part may be actually the lenses that they're bringing in.

Canon is coming in strong with some really awesome lenses that they don't necessarily offer on their DSLRs. So there's actual a reason for someone to move from a DSLRs. solar to these mirrorless cameras because you can get these really sweet lenses. All right. Well, Virchcast listeners, Paul and I are starting a GoFund me to the series of medium format mirrorless cameras. It's going to be great. Dan, thank you so much.

My pleasure. Appreciate it. There's all kinds of photochino news on the site, so just go check it out. So Paul, man, every week you do a segment. By Dan. What's it called? It is, as you know, Neelai, always been called and always will be called space. Space Egg, which I got to say, you know, when I first started the series that is called Space Egg.

Paul, who's Space Egg sponsored by? Oh, I'm so glad you asked. Today's Space Egg segment of the Vergecast is brought to you by darn tough Vermont socks, who has not abandoned me for some reason as an advertiser. The flagship Marino experience for your feet, and I think it's clear here that this is not a plural. This is the flagship, or, you know, experience for your feet. It's made in the USA and unconditionally guaranteed for life. Visit darntuff.com slash verge for 20% off your first order. That's darn tough.com slash verge.

It's socks. They make socks. Okay. Spaceag. I was like, you know, a lot of the other series that I do are unique creations. But this one has been completely ripped off. of a product from Alibaba called SpaceX. Alibaba is making a hotel robot,

which is a very fun genre. I met with Savioke at CES this year. They had a hotel robot. And so the hotel robot is pretty simple. Typically, they bring stuff to your room. So a good hotel robot can get on the elevator, ride to your room, not run over any little children on the way, and then it'll, like, show up at your room

with like a toothbrush or the meal you ordered or something like that. Alibaba has a nice little twist because they have their own voice assistant. So you can, instead of calling the hotel reception and they send the robot, apparently somehow you can communicate directly with these robots. But what is really exciting to me about this whole genre, the space egg genre, is you're getting used to having robots that aren't Roombas that kind of co-mingle with you, right? So these robots are designed to like identify crowds and like steer around them and like stop if they think they're doing anything dangerous and obviously not run over people.

They sometimes have kind of some way to interact with somebody who's like right in front of them or touches them or something like that. So I think it's just like it's a really strong step one because, you know, these robots typically, they don't have arms or anything. They're very passive. But, you know, over time, you know, maybe we'll have a robot waiter. we'll have a robot this and we'll have a robot that. But I think where the first time a lot of us will co-mingle with a robot will be in like a hotel lobby. That's SpaceX. Space egg.

I like it. I'm very excited. I will say the sort of increase in chatter about how we live with robots is very real lately. You feeling it? Yeah. I mean, we had the CEO of Anki on the show a few weeks ago and that was this whole thing. And I talked to a friend of mine who just a good job at another company. It's like building a robot.

And the first one's very simple. but their whole vision is all of your daily life will be, like, enhanced by robots. There's just, like, activity in that zone. So here's my real question, though. Like, the Anki Vector doesn't do much. It's like you can ask an assistant questions, but it's like a thing you hang out with. And the Rumba does something. It vacuums your floor.

The hotel robots, I guess, like, some of them will deliver room service to you. But what is the first really big I'm hanging out with robots, and they're just sort of a round thing that they're going to do. Like, what are they going to do that can't be done by, I don't know, a kiosk? Is it food delivery? Bringing stuff is it? I mean, there already are some robots working on that, like with the, I mean, people are making the robots of robots. So far not self-sufficient in this way.

But, you know, there are food delivery robots. I mean, it makes a lot of sense. If you're going to dispatch a person to do a rote task, then you want. a robot to do it if they can. And I don't see any stop to that. So yeah, we'll probably interact with robots delivering us stuff first. You think that'll be the first thing, robots delivering us stuff. Yes. Well, because household tasks, I mean, have you ever tried to wash the dishes with your hands? It's pretty complicated. And when you think of it through a lens of robotics, it's just clearly impossible. You know, like there's times when you're trying to use the, like, the scratchy part of the

sponge and the stuff won't come off so you have to use your fingernail. Like, we'll robots have fingernails, you know? Do you know what I mean? Well, and there's a judgment call of how gross the sponge can get before you, like, throw it away and get a better one and get a clean one. Absolutely.

It's like I never know what to do there. All right. We're down the dishwashing rabbit hole, but Elizabeth is here. Hello, Liz. Hey, how's it going? It's going. So Liz, every week, you actually do a thing with the same name called This Week in Elon.

Yeah. By my estimation, this is now the third week where you have been ready to go with a recap of this week in Elon, and then Elon has Eloned. Listen, I don't want to be too dramatic about it, but Elon Musk has kind of been ruining my life for the last several months. All right, but I would say this is the most, this is the only time when we've said, oh, we got to hit pause and start over because of the scale of the Eloning. So Liz has already recorded this week in Elon for the Vergecast that we're tossing. At 9 o'clock in the morning this morning. I'm on Pacific time. It's currently 2 o'clock.

It's Thursday. And like, I cannot believe that I am already out of date. And it has not even been 12 hours. What happened was I had like this great thing about like labor unions and Tesla and this NLRB board hearing that's been going on this week. And then the SEC was like, what's up? We're filing charges. is. So the SEC has sued Elon Musk for securities fraud after he attempted to take the company private earlier this summer. Longtime listeners know, a recurring theme in this week in Elon is that

one should never tweet. And right now in the SEC complaint, we have some evidence for why. Not only because of the take private tweets that are the basis of the complaint, though those are pretty significant, but also because a bunch of the evidence cited in the complaint is Elon Musk's shortseller tweets. So for those of you who might not know, short sellers are people who basically bet that a stock is going to decline. And those of you who have been watching Elon closely know that he has been saying all sorts of wild things about short sellers. There are two that are cited in the complaint. One of them is from May. Short burn of the century coming soon.

Flamethrers should arrive just in time. And another one in June, they have about three weeks before their short position explodes. Although obviously there are plenty of other taunts for short sellers. to choose from. Anyway, the SEC just gave a press conference where they basically dragged Elon. I called up a couple of corporate governance folks. But what the SEC is seeking to do is to remove Elon Musk from being the CEO or a board member of a public company. Any public company, not just Tesla. The claim is that his tweet, in particular, about taking Tesla private, $420 a share, quote, funding secure, was so reckless that not only should he be removed as

the CEO of Tesla, but he should never serve in one of those positions at a public company again, which is wild, correct? Listen, all of this is wild. I'm just going to read you some choice quotes from the complaint. In truth and in fact, Musk had not discussed much less confirmed key deal terms, including price, with any potential funding source. And then they go on to say that the funding secured tweet was false and misleading, and subsequent statements were false and misleading too. And then I'm going to quote again, Musk knew or was reckless in not knowing. that each of these statements was false and or misleading because he did not have an adequate basis in fact for his assertions.

Musk knew that he had never discussed a going private transaction at 420 a share with any potential funding source. He had done nothing to investigate whether it would be possible for all current investors to remain with Tesla as a private company via a special purpose fund and had not confirmed support of Tesla's investors for a going private transaction. That's a lot. Yeah, never tweet, I think. So when the SEC says we don't think you should be an officer in any public company ever again, is that the sort of thing like the SEC says that to a lot of people, but they don't really mean it. And by the time it gets through trial, it's like, yeah, we just, that's our opening position, but like, that's not really going to go there. Or is this a thing that they don't really do and this is like super serious because they're real mad? It's super serious because they're real mad and also because they filed immediately.

You got to keep in mind. And usually it takes longer for the SEC to, like, do these things, which means that either, like, according to the corporate governance experts I spoke to, either this is basically open and shut and totally vanilla or they're real mad. And so, like, I talked to Charles Elson, who's the director of the Weinberg Center for Corporate Governance at the University of Delaware. And he was like, I'm just going to quote him, his actions were for a public company CEO way out of line. Everything the last couple of months has been very disturbing for investors. The rules don't seem to apply. the SEC believes they did or should. So there's that. The other person I spoke to was Chester Spatt, who's a former chief economist for the SEC. And he, you know, one of the things in the complaint is

there's discussion of the shorts, of course. And the reason it's there, Spat told me was that it reinforces the idea that maybe he was trying to manipulate the price in order to burn the shorts. So there's that too. But yeah, cases like this typically take a long time. And often people reach settlements with the SEC rather than going all the way through. That usually involves the payment of a fine. But again, we're dealing with Elon Musk. Yeah. So who knows? He might decide to fight this the whole way through. Right now, I think one of the things that we should be watching is Tesla's board, because this is just filed against Elon. It's not Tesla. Against Tesla. Okay. And so, you know, there could potentially be something coming for Tesla, maybe. I don't know. But if I'm a Tesla board

member, I'm starting to think very seriously about succession planning. Yeah. You'd think they were doing that before. Okay. There's a quote from the complaint that I would like to read briefly. He rounded the price up to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend, quote, would find it funny, which is admittedly not a great reason to pick a price.

You pick $420 to make Grimes laugh. Okay, okay. I beg to differ. That's a great reason to pick. Yeah, I'm just saying, 420 LOL is the best reason to pick a price for your public company. I can think of. Here's the thing. And like I've written about this a little in the newsletter. There is like a world in which both Grimes and Azealia Banks are deposed to testify. Yes. Because as you may remember, Azealia Banks was brought to Elon's home to record something with Grimes. And then she put up a bunch of really embarrassing Instagram posts about Musk and Grimes, suggesting that she saw him trying to get funding to cover his ass, basically. So there's a world where that happens.

I think we're all hoping for that world. I think in the grand history of verge trial coverage, this is the one. But most cases settle, right? Yes. Most cases settle. 70, 80 percent of cases settle. This one, if it is indeed as open and shut, as it seems. like it might be because the tweet was not true. How does it settle? Does he say, okay, I can't,

you don't want me to be the CEO or director of a public company anymore. I'm going to step down. I'm going to run Tesla product development. We'll just get some car industry suit to come run Tesla as a CEO. Is that acceptable? Is that like an outcome that can happen? I mean, it's certainly possible. Like, I don't want to speak for the SEC. I don't understand it, frankly, and I am a little afraid of it. But it's totally possible that he pays a huge fine. It's totally possible that the ban on being involved in public companies is for a limited period of time. So one example is Michael Milliken, who went to jail for bond trading. That's a long story. But he basically came back in the finance industry and is now well respected

again, even though he did jail time for junk bonds. So there are a lot of possibilities where, you know, this is not the end of the world for Tesla, but investors have been taking this very poorly. The last time I checked, Tesla shares were down 10% in aftermarket trading, which is a lot. So there's that. If I seem a little punch drunk, it's because I feel a little punch drunk, to be perfectly honest. It's just, it's a lot going on, especially at the end of the day. One of the things that I guess I think that could potentially be possible is that we're going to be seeing more, because you may remember that the DOJ is also looking into this as a criminal matter.

Wow. I actually didn't know that. There might be criminal charges. There's too much Elon. Yeah. This is a thing that's been reported on, but the DOJ is apparently checking this out as well as a criminal matter. Wow. The short sellers must be just like opening those bottles of champagne today, right?

Like, after all of that, this is the most resounding victory over must they could possibly have, right? If you want, I can open up my list of Tesla shorts and take a look at what they're saying. because bless them, they, I imagine, have some things to say. Let's see here. It looks like they're saying it's done, integrity, get some. Wow. Integrity get some is the nerdiest, like, Xbox Live exclamation that has ever occurred. I think, I'm pretty sure this person means get some integrity, not integrity, get some.

Oh, okay. Yeah. I heard a totally different way. Well, it sounds like everyone is horrible. But never tweet truly the message of This Week and Elon this week, I think. Every week. That's the message of This Week and Elon every week. And none of us, including Elon, ever learn it.

All right. So presumably he's not going to be tweeting about this. What happens next? That's a good question. And I'm not sure. I imagine there's going to be an emergency board meeting because that seems like the natural response to this kind of thing. And if I'm a Tesla board member, at this point, I'm thinking, okay, how do I respond so that Tesla doesn't also get involved in this particular mess? Because right now, again, it's just Elon.

The other thing is that Elon is now potentially conflicted. So at minimum, you're thinking about succession planning. At maximum, you're thinking about removing your CEO before the SEC does it. Though I'm not totally sure why you would necessarily do that if you're a Tesla board member, since that's the relief the SEC is seeking. Right. So it might mean. that they're having this meeting about, like, strategizing what their next moves are. Like, one can respond.

And there's any of a number of possible things that could come out of that response. So wait and see, I guess. So I just, on top of all of this, he's still, like, sleeping on the floor of the factory trying to get Model 3s at the door, right? Well, so they've moved on to delivery hell where, like, they're producing cars, but they're having a hard time getting them to the people who own them. why why is that hard they they literally make things that move look if i if i understood Tesla I feel like I would be at a better paying job okay okay I mean the thing that he tweeted this weekend was like that they were having a hard time with like the delivery trucks that you put the the cars on and then drive across the country with and so they were thinking of

building their own which seems weird and also again like the kind of thing that like, again, I don't know the SEC or how they live, but I might be thinking about like, huh, is that true? And like, if you're a Tesla shareholder, is it better that they're having a hard time getting adequate delivery trucks or is it better to

wait for Elon Musk to put his own delivery trucks together? Neither of those seem good. No. Yeah, so the tweet was, he's tweeting at somebody. Apologies, we're upgrading our logistics system, but running into an extreme shortage of car carrier trailers started building

our own car carriers this weekend to alleviate load. So, I don't know, man. Like, this is not a problem the GM has. Like, the CEO Ford is not like, I'm so sorry Explorer owners. I was unable to ship this year's 500,000 Ford Explorers to the world, right? Right. Elon runs into problems that big companies have solved for 100 years. Also, while I'm at it, the LA Times ran a piece on Wednesday that, you know, auto haulers are pretty dubious about this shortage. And so I'm just going to read to quickly from that piece. There's no shortage that I know of, said Guy Young. As general manager of Auto Hollers Association of America, he would know.

There's a general shortage of drivers, but we've got a lot of members with drivers and car carriers who could supply what they need. And Anita Lindstrom, a trucking analyst for IHS market, is Flumex 2. I've never heard of a situation like that, he said. In my experience, there's always some available capacity that can be harvested, especially, he said, for a well-known company with a $50 billion market value. It's confusing. It doesn't sound real to me. Yeah.

That is a very, very kind way of saying bullshit. Yeah. Yeah. If a newspaper can call like the head of the car haulers association, why can't anyone at Tesla? I don't know, man. I don't know. But I will say that there was like just an SEC press conference, again, where they mostly

dragged Elon. but they didn't comment on a question about any further actions, which, you know, like, a no comment is a no comment. It doesn't say anything, but it does in its way say something. Does it not? Yeah. Yeah. All right. Well, thank you, Liz.

I'm so sorry that this week in Elon was once again upended by Elon. But I appreciate the fuck it. Let's do it live nature of this week's segment. We have to wrap up. But real quick at the end, we really really. did not talk enough about the Oculus Quest, which is the new headset from Oculus. I will say people on our staff are very excited about it. They're not shipping until next year, so we've got a lot of time to talk about in the future. But it's all on the site. Go check it out. It's a fancy

new headset. We'll get one when we get one, and we'll keep covering what's going on in that world. That's it. You can listen to this week in Elon with Liz every week on the site. You can subscribe to it as a newsletter. I trust that newsletter is about to get very exciting. We actually sent an emergency newsletter when this broke. Of course. There's also a bunch of events coming up. There's a Microsoft event coming up. There's a Google event coming up.

That stuff is leaking all over the place. The Pixel 3 in particular is leaking everywhere. Casey is on the show. You can go listen to the first season of Converge on Apple Podcasts. We are hard at work on season three of Why Did You Push That Button? It's coming out very, very soon. So go catch up on seasons one and two of why did you push that button. You can listen to podcasts from Recode.

There's Recode Decode with Carrey Swisher. There's Recode Media with Peter Kafka, one of my very faves. And you can tweet at us. I'm at Reckless on Twitter. Paul is at Future Paul. Liz is MS. Lepado. Deeter is at Backlorn. We love hearing from you. And we will see you next week. That's the Vergecast, Rock and Roll. Paul. Promocode. This episode of the Vergecast brought to you by Microsoft Azure. Keeping up with your competition is important. Taking a lead with unmatched innovation, that's impressive. Set yourself up to achieve more by running your apps on Microsoft Azure. Clear the way for unparalleled productivity with end-to-end development and management tools, fearlessly integrate cloud capabilities across your environment with the only consistent hybrid crowd. Build a little. the next generation of smart apps, discover transforming insights through artificial intelligence and real-time data,

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