The Vergecast - Amazon, Google, and crypto are on trial

Episode Date: October 4, 2023

Today on the flagship podcast of The Sherman Antitrust Act of 1890:  01:43 - The Verge’s David Pierce chats with policy editor Adi Robertson and reporter Makena Kelly about US v. Google, and what we’ve learned so far. They also talk about the FTC’s lawsuit against Amazon, which could be the next big tech trial.  US v. Google antitrust trial: updates  Amazon reportedly used a secret algorithm to jack up prices Satya Nadella tells a court that Bing is worse than Google — and Apple could fix it Why the US is suing Amazon 28:46 - Later, senior correspondent Liz Lopatto joins the show to preview the trial of Sam Bankman-Fried, the former CEO of FTX. FTX’s Sam Bankman-Fried is on trial for fraud and conspiracy 52:36 - Keep listening for this week’s Vergecast hotline question with Alex Cranz. Email us at [e-mail] or call us at 866-VERGE11, we love hearing from you. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Welcome to the Vergecast, the flagship podcast of the Sherman Antitrust Act of 1890. I'm your friend David Pierce, and I am currently in the hallway outside of courtroom 10 at the E. Barrett-Pretteutemann United States Courthouse in Washington, D.C. Inside courtroom 10 is where USV Google, one of the most important tech trials in the last two decades, and probably the biggest antitrust trial since the Microsoft trial in the late 90s, is currently going on. I'm here in the building today because Satya Nadella, the CEO of Microsoft, is taking the stand to talk about search engines, Bing, AI, Apple, chat, GPT, and who knows what else. There's a lot to talk to that guy about. This trial has been weird and complex and important, and today should be more of the same.

And that actually is a big part of what we're going to talk about on the show today. Yes, there are tons of gadgets coming out and lots of news to cover, and we're going to get to all of that. Don't you worry. But we also have three very different lawsuits happening that could all change the way the tech industry works. So we're going to talk about USB Google and what we've learned so far about the future of search. We're also going to talk about the FTC's lawsuit against Amazon, which could be the next big tech trial. And we're going to talk about the trial of Sam Bankman-Fried, the former CEO of FTX, and for a long time the golden bully of the whole crypto world. And now he's on trial in New York.

And in some ways, honestly, it feels like the whole crypto industry is on trial with him. So there's a lot to dig into there as well. All that is coming in just a sec, but the proceedings here are just about to start. And if there's one thing I've learned about the U.S. District Court these last few weeks, it's that they are sticklers for punctuality. That and they never seem to be able to get the screens in the courtroom to work. But I digress. Got to run.

This is the Vergecast. See in a sec. Support for the show comes from Retool. Too many companies run critical operations on duct taped spreadsheets, Slack workflows, and whatever else they could cobble together. Not because they want to, but because building internal tools means weeks of waiting on someone else's backlog. That's where Retool comes in.

Build custom internal tools just by describing what you need. Prompt something like, build me a revenue dashboard on our Salesforce data. And Retool actually builds it on your company's data in your cloud with enterprise security built in. Go to retool.com slash Verchcast. We all need to retool how we build software. What's up, y'all. I'm Skyler Diggins, seven-time WMBA All-Star, Olympic gold medalist, and mom. And I'm Cassidy Hubbard, host and reporter for.

for nearly 20 years covering the biggest names and stories in sports and mom. And this is Am Mom, a community for athletes, game changers, and moms of all kinds. Dropping May 14th. Tap in with us. Welcome back. All right. I'm home. Satina Della's testimony is over.

He said some really wild stuff about why Bing can't compete with Google and why it's kind of Apple's fault. It was a lot, and I have a lot of thoughts. So actually, let's just start there today. Like I mentioned, we have two big antitrust trials in progress now, one at the very beginning of the process, which is the government's case against Amazon, and one very much in the middle, U.S. versus Google. These two cases are very different in some ways, but I think they also have a lot in common, and the combination of them is going to tell us a lot about the future of the tech industry. So I called up the Verges, Addy Robertson, and McKenna Kelly to help me dig into the differences and similarities and where we go from here. Addy, hello. Hi.

McKenna, hello. Hi. So, okay, we have basically two big trials to talk about in very different versions of the process. And I want to talk about the ways in which they are the same. But let's just sort of catch up on both of them first. And let's start with USV Google because I've been in the courtroom a bunch. And Adi and I have been talking about this nonstop for like two weeks. So it is like deep in my mind.

Adi, where are we in this trial right now? Like, what's your sense? We've talked a bunch about kind of the stakes of the start. search engine and what it means to be a default, we're now, what, three weeks in, almost four weeks in? Where do you feel like we are? So pragmatically, in the course of this trial, we're at the part where the Justice Department is getting close to having made its argument for why Google is an unlawful monopoly, which gives us kind of a skewed view of it, that right now we're hearing all of the bad stuff about Google. And after this, there's going to be some state's attorney general making

their case for why its ad business is also a monopoly. And then we're going to get Google's rebuttal. And I think that's going to probably bring out some details that cast the current case in a new light. Right. Yeah, I kind of don't care about the advertising part of this. Is that okay? Am I allowed to just not be interested in the advertising piece of this case? I get that it's relevant.

I just cannot make myself care about it. I think, yeah, well, in one sense, this is all about ads because ads is how search makes money. And ads is also, if you're going to treat this as, there are consumers and they are harmed maybe through raised prices. This is where you get the prices. But a lot of it is, I think, less juicy. Yeah. And so to your point about the sort of side of it that we've seen so far, what's your

sense of how much of a preview of Google's argument we've actually gotten? Because you're right that Google has spent most of its time responding to different allegations from the DOJ. And John Schmidt-Line, Google's lead counsel, is like, spectacularly good at his job and has done a very good job of, like, being mad at various people for lots of reasons. But Google's defense always seem to be, you know, Google is very good and that's not illegal. And that's definitely been the case so far. Do you think there's going to be sort of a different turn once Google actually starts to take the stand here?

It seems like what we're probably going to get is more people testifying in more detail about how Google is good. And the flip side of this is how Bing does the same things in Google's estimation as Google, but Bing is bad and therefore does not succeed. Yeah, Bing being bad is like we've been saying, the crux of this entire case. It also seems like this is maybe when Google tries to poke holes in some of the more sort of embarrassing things that the Justice Department has brought up. What's your sense of how the DOJ's side of this is going? I was in court on Monday for Satya and Della. and before they got to Satya, they spent a bunch of time on scheduling stuff. And it came up a couple of times that Google's stance on how the DOJ is doing is that the DOJ is taking a long time, not moving its case forward, and just sort of mucking around without actually proving its point.

Of course, Google is going to say that loudly and on the record as many times as it can. But what's your sense now a few weeks in? Does it feel like the DOJ is doing a good job of making the case it's trying to make? Yeah, Google's case is sort of just that the DOJ is wasting a bunch of time throwing Google's dirty laundry out. Right. But it's also not necessarily clear to me that this case is not partly about Google's dirty laundry and that Judge Meta is not interested in potentially embarrassing things that Google executives have said. But it's also, I think it's often pretty hard to tell how judges are going to rule and you should probably not read too much into them. And I also, I don't think that meta has said a lot of incredibly pointed things.

He's asked questions, but I think it's a little bit hard to tell. And there was a hot mic moment where he was talking about how frustrating this all is with another judge because it's so complicated. And there's not like a, there's not DNA evidence. Oh, interesting. I didn't know that. That was not his words. That was the other judge, I believe. But it seems like he's a little bit frustrated with a lot of this case.

but it's hard for me to tell how that translates into a ruling. Do you think that's because of the way the case is going or because of the actual sort of stakes of the case? Like, we've been talking from the beginning that it's not even necessarily super obvious what the boundaries of the fight are here. Everybody's kind of arguing these nebulous things that are good or bad, right? Yeah, you have to argue, okay, so if there's consumer harm, who are the consumers, what does harm mean?

Is it enough to say that Google just, isn't as good as it could be, even if it's the best thing on the market? Or is that unfair? And then there's been this whole sort of meta layer to the trial about how much can be fairly disclosed. And so there have been a lot of arguments about how much of any of this is vital to the DOJ's argument. And I think that has been its own source of frustration for a lot of people. Very much so. That got better. Hooray. That has gotten better. McKenna, my first question for you, if I'm remembering this correctly, we've been waiting for this case for what feels like hundreds of thousands of years. What actually made this case happen?

Like, how did we finally get to the point where we have like words on paper about what the FTC is mad about at Amazon? Yeah, so the investigation into Amazon on antitrust grounds has actually been going on since the Trump administration. The former FTC chair, Joe Simons, kicked it off. Of course, a lot happened in tech under the Trump administration as well. Cambridge Analytica, a bunch of other FTC stuff with that company. And so instead of pursuing the Amazon case, Simon's kind of designated the FTC's very meager resources. They've gotten more in recent years towards like Facebook and meta.

But of course, in 2021, President Biden nominated Lena Khan to be the chair of the FTC. Lena Khan, of course, is famous for a somewhat viral legal paper on Amazon. The only one ever. Yeah, the only one ever called the Amazon antitrust paradox. And in it, she kind of talks about basically how common American antitrust doctrine, the way that we've approached antitrust law for decades doesn't really apply too well to big tech companies. So Khan gets into office. She's confirmed.

And then she designates, you know, more of the FTC resources to that case. And so it's been, you know, probably about five years that the company has been under investigation for anti-competitive behavior. The thing that strikes me about this case, and I want you to kind of lay out the basics of what the FTC actually thinks that Amazon is doing wrong. But one of the things that it strikes me big picture is that, like you said, LenaCon knows better than most that it's very hard to bring an antitrust case against a company like Amazon, right? We talk a lot about how do you prove consumer harm? We typically, these things are like monopoly plus raise prices equals bad is like the legal framework for a lot of this stuff. and that's very hard to do when products get cheaper and when in many cases they're free like Google Search.

What it seems like they tried very, very, very hard to do in this case is make a case about how Amazon has raised prices. And part of me wonders if that case, which is very different from like the big sort of heady argument about Amazon being too powerful that Lena Khan was making a bunch of years ago, now we're in this place where she's like, I get the sense she tasked a bunch of people with saying, we have to make an argument about Amazon being bad for customers

because things are getting more expensive. Is that a fair way to look at what's happening here? Yeah, I mean, that's how the U.S. antitrust divorcers have long approached antitrust law is whether or not a company, the behavior that it's engaging in is driving up prices, lowering them. And I'm sure people on this podcast have heard, you know, for so many years the consumer welfare standard. So she has been losing a lot. We've talked about the Microsoft. Activision merger, not so hot there. The FTC didn't win. Of course, like a meta in the within

acquisition. They didn't really win there. And so with a case so monumental, like this Amazon case, the FTC really needs to show that it can take these companies on. Because for the first, you know, a couple of years of her tenure, it hasn't quite been working out. And so trying to make those arguments, you know, about whether Amazon is raising prices, might just be the only winning argument that the FTC can find under current antitrust doctrine. Right. Yeah. So walk me through that case a little bit. Like what, what are the sort of specific accusations that the government is making against Amazon? Sure. So I don't want to make it seem like the FTC isn't looking at structural parts of Amazon as well. Because really,

the heart of the case is saying that Amazon for as long as it's been around, has been making sizable investments in its company, creating Amazon Prime, Prime Video. It's basically a fashion designer, has logistics and fulfillment. Amazon is a behemoth. And by reinvesting all of this, you know, would-be profit back into the company, it's been able to grow immensely and have a lot of control over individual sellers and then also being very competitive against other, you know, big box stores like Walmart, Target, and other companies like that.

And so because of that structural, you know, power that Amazon has created over decades, the FTC is making the argument that it has a lot of control over requesting, you know, that some third-party sellers put their products on Amazon at a significantly lower price than they would on other platforms, also requiring, basically requiring third-party sellers to buy ads on Amazon's, you know, search when you go into type of product in order for that product to even be seen, while Amazon is selling its own, you know, Amazon basics products, which are competitors. It has that control over the infrastructure in order to create a better system for its own products and services compared to those of its competitors, which, yeah, sounds a lot

like the case Addie is talking about in a little bit. Yeah, I mean, that's the thing, right, that we're in this weird place where just the overarching question is like, are these companies too powerful? And it feels like the Amazon version of that cycle, at least the way the government describes it, is kind of unusually tight and succinct, where it's like, I, I, you know, you can actually explain the whole cycle of how things get more expensive because of Amazon. I don't know whether that's true. Amazon obviously like vociferously denies that it is responsible for prices going up all over the internet. But it's like the government sort of lays out this case where it's like, okay, Amazon forces sellers to use the fulfilled by Amazon things.

Those fees are super high. And also Amazon prevents them from offering cheaper prices anywhere else because it has these mechanisms to figure out what you're pricing around the internet. and then they either like bury you in search results or they get rid of the buybox. I've like learned so much about how the Amazon website works through this case, which is really fascinating. But Amazon has all these little knobs it can turn to just wreck your business on Amazon if it feels like it. And so what you do is you raise all your other prices elsewhere in order to not run a foul of Amazon's increasingly expensive process.

And that is like an actual case of consumer harm. Like if that's true, that is the most. like straightforward, this is bad for consumers, anti-just argument against a tech company, I feel like I've heard in a long time. Yeah, there were a lot of figures in the lawsuit that were redacted. So much.

I would have loved to see. Like the percentage of, you know, how many people subscribe to Prime, how many people over other websites, order stuff through Amazon because of Prime, I think those figures would really, really say a lot. and help us to drive that point home if we had them. But of course, we don't. Yeah, that complaint was very redacted. Like, there was one thing that kept coming up,

this thing called Project Nessi, which you can tell is this, like, very exciting internal program at Amazon that does something. And every time it's about to reveal anything, there's just like two full lines redacted. Do we know anything about Project Nessie? What is the story here? It is just as elusive as the Lochness monster that it's named after. I have not been able to find too much information on it. And I bet, you know, I hope that when this case, if this case, right, because Amazon could still settle, if that will happen, not entirely sure. It's very hard to predict right now. But in a couple of years, you know, if this case actually goes to court, I'd be really excited to see what else, you know, comes out of that complaint, those pieces of data, more info on Nessie, you know, and all these things that we haven't really seen, but kind of vaguely know about because of, you know, the text.

And I'm assuming if I remember right, Addy, the first version of the Google case was super redacted, just like the Amazon case was. And then we got another version of it that was much less redacted, which is when we learned all the actual information about the case. Am I remembering that right? Yeah, I think that we've gotten – this is kind of typical in a lot of these cases that you'll get very heavily redacted versions and then they slowly get exposed as the trial gets closer. Okay. So we might get Nessie information at some point here in the near future. I just want to know about Project Nessie. That's all I want to know in the whole world.

I don't care about anything else. I just want to know what Project Nessie is. If you know, please email me, David at theverge.com. That's all I want to know. Adi, my question for you is like these two cases sort of rhyme to me in the sense that they are like, they're happening at roughly the same time, which is either really interesting or a total coincidence. I'm curious if you guys see it one way or the other. But it also feels like if you sort of boil it all the way down, the question of like,

is it illegal to be wildly successful? feels like the question of both of these things. And where does being wildly successful in protecting all of that success tip into monopolistic practices? Like, do you see similarities between these two cases, Addy? Or are they more different that I'm giving them credit for? It's definitely not a coincidence

that this kind of aggressive enforcement is happening under the Biden administration, which is nominated people who are very strongly pro-being antitrust watchdogs. So on that side, like the big, tech investigations have been going on for years. This is sort of just this finally coming to fruition. On the other hand, I actually think that there are some levels of difference in the case, at least the allegations, that Google's case so far, the trial has been all about, look,

Google is legitimately good. There are downsides that we haven't gotten into the really the arguments for like privacy, but Google really, it knows what you want. It uses its data to produce a product that's actually genuinely good. The Amazon case, at least from the part, that we've seen, the allegations are basically Amazon's terrible. Amazon forces prices up. It throws ads all over everything and forces sellers to buy them, which is part of the Google case, too, but has not really come up as much yet. That there are all of these cases where their argument is, look, people don't even necessarily want to be signed up for Prime as part of a separate case. They're just getting signed up accidentally. That it really feels like the argument in the FTC case is

that Amazon sucks and there's no alternative. The DOJ case against Google, at least so far in court, has been Google's really good, but it's bad that no one else can be that good. McKenna, is that your read too? Do you think the Amazon is bad case is part of this? I have gone back and forth on this because on the one hand, some of the things they're talking about, like, it's super easy to buy stuff and you get things really fast is like, those are good things.

And those are things people like, right? Like, lots of people did sign up for Prime on purpose. And really fast shipping is one of the things that people really like about Amazon. I do think it's true that the Amazon shopping experience has been on a pretty fast decline for a pretty long time. And I wonder if now is the moment where it's like the case is Amazon used to be good and then got really big and has gotten worse for everyone involved. And there's nothing you can do about it. I mean, to be clear, people make that case about Google too all the time outside the court. Fair.

Like this isn't necessarily about the reality of the actual platforms right now, but it's sort of. the cases that both sides are making. Yeah, I think that's totally fair. I think when it comes to similarities between the two, it really becomes, it really comes down to like the consumer experience and how that feels for the consumer. So when I buy cat food, right, I normally buy my cat food from Amazon, I have to wade through so many listings. And often it's not the same seller that I'm buying the same cat food from. And it's really confusing. It's a different price. Oftentimes it's like, it sucks. But like my cat needs food. And I know it's going to be here in two days because I have prime right. So, you know, you weigh the cons, you know, the benefits and the

cons over that. And then also, you know, similarly with Google, it's using that service, using that search bar and how the company controls that search bar that plays a really key role in the case. Yeah, I'm very curious to see, especially in the Amazon case, it doesn't seem like in the Google case we're going to have the Google has gotten worse argument. It would be interesting if we did, but it just doesn't seem like we're going to get there. Google search. certainly not is not going to argue that Google is a worst product than it once was. But it does seem like Amazon worked for a long time because it was good and now it's bad and there's nothing you can do about it. It's like that's part of how you win this. Everything is getting

worse and more expensive case. Like if you're Lena Khan, you kind of have to make that argument. Yeah. I think that's really the argument that the case looks at the most. And I mean, when you look at also like it comes down to like what does the FTC want as well. Now Lena Khan has been very very tight-lipped about the exact remedies that they're looking for. But in the press release, it says, like, structural remedy. That is a breakup, right? What gets broken off, what goes where, who buys what? I'm not entirely sure.

But it'll be interesting to see, you know, how that pans out over the next, you know, months and years. Yeah, Adi, do you have a theory? If you were going to break up Amazon, how would you, if you're Lena Khan and you have to figure out how to split up that company, what would you do? Well, the really cheap answer is that you split up Amazon. the, it's not always called Amazon basics now, but the equivalent of Amazon's white label products. Right. It's many, many, many, many, many in-house brands that you don't realize are Amazon brands in many cases.

Especially because there are specific antitrust allegations around that. There's the argument that they use all of their consumer data to see what's selling well and then they clone it. I don't know if that's necessarily where the FTC thinks it would be most useful to split up Amazon, but that's just the obvious cleavage point. Yeah, personally for me, I think the place where it would be most beneficial for the case to break up Amazon would be the logistics and fulfillment side. Because that really is what adds that additional competitiveness. Like we're saying that knowing that the product is going to come in two days, right, to you. So instead of like Amazon having, you know, its own fulfillment services having to operate with like a UPS or FedEx more often than not, I think would really if not, if that's not the only thing that gets broken up, I imagine that would be a really intimate focus. of the FTC as well. Yeah, and that would obviously be a huge, huge, huge blow to Amazon.

I think realistically you could get rid of the in-house brands, and like a bunch of people at Amazon would be like, oh, shucks, and they'd all move on. If you split off the logistics side of Amazon, you have like fundamentally changed that company. Right. Which I suppose is if you're the FTC, the goal. So it'll be interesting to see how big that swing turns out to be.

Last thing, before that you guys go, I have been trained over the years that if we're going to talk about tech antitrust, we have to argue about market size. because all they argue about is market size. And I've been sitting in the courtroom at Google where everybody is arguing about what a general search engine is and no one seems to know and it's very complicated and there's vertical search engines and there's general search engines

and TikTok is neither of those but it's something else. And everybody just sort of spins out of control about whether Google just competes with Bing or competes with like every other site that exists on the internet. Amazon, I feel like he's about to go through exactly the same thing, right? Amazon's case has been we compete with every store on planet Earth and we're actually like a pretty tiny minority of the internet. retail market, the FTC is going to have to make a different and much harder case now, right? Yeah. So in the case of Amazon, the FTC basically defines the market as the online marketplace

industry, which is a really interesting way to define it, which I think, honestly, I don't think Amazon would really even like that because it wants you to think that it competes with the big box stores, with Target and Walmart and all the antitrust hearings and all this stuff that we paid attention to over the last couple years. You always have the Amazon reps pointing to, you know, the way that it arranges products in search to the way that a Walmart or Target arranges products on a shelf. So in order to define it as an online marketplace, I don't think Amazon would be really happy with that. And I imagine they're going to challenge that in court. Just looking at like the way that it's defined, it really has to do with like online storefronts.

And I imagine that will get kind of shaken out a bit more as time goes on. kind of even more complicated because stores like Walmart have gotten more like Amazon than if you go to Walmart.com now you can get a bunch of third-party storefront items. But even that, well, so this is where it gets really heady for me, right? Because I think like if Amazon has its way, the competition is everyone who sells anything in any way anywhere in the world, right? I would argue that is a reach. But also if the FTC has its way, it's like companies that allow other companies to set up

storefronts inside of your storefront on the internet, which is a much, much smaller thing that Amazon and to like a lesser extent Walmart because Walmart was a third party stuff, but you can't really have a store on Walmart.com in the same way that you can kind of have your own store on Amazon.com. So it's like that teeny tiny thing is probably too small because I don't know that like if you're a real person on the internet, you're not thinking like, oh, I'm going to go to the storefront on Amazon.com. You're just like shopping for things on Amazon. The answer seems to be, I mean, it's somewhere in the middle there. But it does feel like even where, like if you go 60, 40 on one side or the other, that's.

going to end up being really important in this case. Yeah, what are the competitors? Because the thing that I'm thinking of is Etsy, for example, very small company in comparison. Like Shopify, sort of, but it's a slightly different thing. Alibaba. Alibaba's a good one. Yeah. Instagram is setting up a bunch of ways to buy products in like storefronts, which I guess are essentially people's accounts now. And then also like TikTok shop maybe, but that's like really, really new. So, you know, other than like to think about like competitors, it's mostly, you know, these. kind of smaller companies compared to like, I guess, like meta stuff and like TikTok stuff, which is really still very nascent and not people. I'm not going to Instagram to buy things.

And also then you add the whole distribution logistics chain that you mentioned too, that really none of these competitors have that. That it's fairly unique. None of the small like meta and TikTok don't have that at this point. Right. The only company doing Amazon things is Amazon, which is, I suppose, a strength of the argument here, but also going to make it a challenge to figure out, like, who are we, who else are we arguing about here is going to be weird in this case, whereas, like, at least Google has one real honest to God, like, apples to apples competitor, which is why the Google trial has become so much about Bing, because, like, why isn't Bing good is, like, a central question. But in a way, you can't quite ask the same question about Walmart and get answers about Amazon. it's going to be very strange to see how we talk about this because there just isn't any company out there remotely like Amazon anymore. And we are also not even touching Amazon's media business, the fact that it runs Prime,

which is its own very powerful player in its market. Yeah. Like Prime movies. It has Lord of the Rings now, right? Yeah, there's like, although that show sucks. So I suspect that will not come up on anybody's side in this argument. Well, there's the MGM acquisition. Yeah, all these things to bolster Prime.

Like in a lot of ways, it does seem like, and this goes back to like, is this raising prices, things? Like, is the is the ongoing push and existence of prime good or bad for consumers is a big part of the question here? And Amazon has spent a long time being like, it's cheap. We keep giving you reasons to make it better. And the FTC is going to be like, no, actually what it's doing is like building ever higher walled gardens through which it can screw both sellers and customers. A solution to a problem. It created it essentially. Yeah, right.

Right. And has made more and more expensive to solve over time. Do we have any sense of the timeline on the Amazon trial? Like the Google thing took, what, almost three years to actually go to trial from that first complaint? Is that a roughly good guide for the Amazon one, do we think? Yeah, I think that's probably fair. Justice moves very slowly in this country on all fronts. But I do imagine it's going to be quite a bit of time.

And while people interested, I think we just have to continue following it before we have like a gauge of one. arguments could take place when things start right now. It's just, it could be anyone's guess. We also don't really know what's going to end up going to trial. Like even the Google case that went to trial is somewhat subtly different than the one that was filed. Yeah, that's very true. Well, listen, as long as Project Nessie doesn't go away in this process, I'll be okay. Okay, which is a cooler name, Project Nessie or Jedi Blue? They're both very good. But Project Nessi for something that is heavily redacted is perfect. Yeah. Like, it's the Sasquatch. Like, they should just have secret names for everything and then just redact them all.

Like, that's what I would do. They all have cryptid names. All right. Thank you both very much for being here. We got to take a break. And then we're going to come back and talk about a very different trial, about a very different industry with very different stakes. It's crypto time, y'all. We'll be right back.

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Join the 2.7 million small businesses using LinkedIn to hire. Get started by posting your job for free at LinkedIn.com slash track. Terms and conditions apply. Welcome back. As you're hearing this on Wednesday, it's day two of the trial against Sam Bankman-Fried, who's better known as SBF and is also known as the former founder and CTO of FTX, which was for a while one of the hottest companies in crypto. It was huge.

Now, of course, crypto has taken a dive, and so have SBF's fortunes. And the two things have a lot to do with each other, actually. There are a lot of folks out there who think this trial, which is ostensibly just about SBF, is going to have huge ramifications for the whole crypto universe as new information comes out about how the industry actually works. It's a complicated trial and an important one. The Verges Liz Lapato is covering it for us, and I suspect right this second she's probably in a courtroom, So we caught up a couple of days ago before things really got going.

Hi, Liz. Hey, David. How's it going? Okay, so I realized I was prepping for this. And, like, you and I have both been following this pretty closely for a long time. You mercifully more closely than I. You've hired Harlins for this nonsense than I do, I think. But I realized after all of, like, the chaos of the last however many months it's been,

I've sort of lost track of what Sam Bankman-Fried is actually on trial for. So in a weird way, let's just start at like absolute ground level here. I think there are a lot of layers and a lot of things to talk about. But like, what is this man actually being accused of and on trial for? Well, conveniently, David, I brought something to the recording. And it is a copy of the superseding indictment. So this is what he's on trial for. I love it.

And there are seven counts in it. And they are wire fraud and conspiracy to convit wire fraud mostly. Okay. So count one is wire fraud on the customers of FTX. Count two is conspiracy to commit wire fraud on the customers of FTX. Sure. This is pretty straightforward. And I just want to pause here and talk about how you prove this because this is part of what's exciting. Part of it for wire fraud, you have to show the bank transfer happened. That's boring. But then you have to prove that people were defrauded, that Sam Bankman-Fried, knew he was lying to the customers of FTX. And so this is something where we might hear testimony from actual customers. You know, who are talking about what he told them. It's where we might talk about what he was saying in front of Congress. It's where we might talk about what he's, you know, what the Super Bowl ad said.

Those kinds of things are where this all comes into play. Right. And this sort of base underlying thing is that he used customers money, basically funneled it to this, his investment arm called Alameda. Was it Alameda Capital? Alameda Research. Alameda Research. But also used it to buy himself real estate and to make some investments. It's a straightforward.

the accusations are straightforward. It's embezzlement. It's very old fashioned. See, this is why this is useful, because I feel like this is all, it all spins in so many directions about like the crypto industry and tax fraud and all this stuff. But ultimately it is just like he used money that wasn't his to do things you're not allowed to do with money that isn't yours. It's like it's pretty simple. Okay. All right. So that's the first two. What else we got? So we have count three, wire fraud on lenders to Alameda research. So this is his crypto trading arm and they had borrowed money. And now the allegation is that he defrauded the people he borrowed money from. And then count four is conspiracy to commit wire fraud.

Again, you see where this is going. You want to do it and then you do it. Yeah. Yeah. And then count five is conspiracy to commit securities fraud on investors of FTX. So that's different. And that's the one where we might see VC testimony. So the people who were investing were given bad information.

Sam Beckman-Fried had reason to know it was bad information. That's the allegation. So you might see somebody step up on the stand and say, hey, this is what the documents that I got said. Here is what Sam said. And here's the due diligence we did. Here are our due diligence documents. And again, you have to prove that he knew what he was saying is wrong because being an idiot isn't illegal. Right.

So that's count five. And then we have count six, which is conspiracy to commit commodity fraud on customers of FDX. I'm seeing a trend here, Liz. Yeah. Well, we're going to get to the conspirator. in a minute. And then count seven is conspiracy to commit money laundering. Okay. So that's what, that's what we're going to be hearing from. And part of the reason I wanted to go through those things specifically is that there's a bunch of other stuff that's going on around this. There are so

many things going on. There's like an SEC lawsuit. There's a CFDC lawsuit. There's another trial actually that's going to be happening. It's scheduled for next March. For a number of counts, we aren't going to be hearing here. So I wanted to make sure we knew which counts we're dealing with because some of the allegations around like campaign finance stuff, for instance, while they might show up in this trial, they are not the charges that are being brought against him here. Yeah. And you've kind of alluded to this. But one of the things I think is important and sort of complicated to understand is what's different about what happened in FTX versus what has happened in some of these other crypto messes we've talked about on this show over the years. And I think about like everything from, you know, the Luna debacle where a bunch of people lost. a lot of money to like what happened with Axi Infinity where a bunch of people lost a lot of money. It seems like there's one thing that is like crypto gone bad. And that seems to have all gone, it kind of gone one direction.

And this has gone a slightly different direction. Like how do you explain the difference between what all those things are where a lot of people lose a lot of money and what this has become? Oh, boy. So Tara Luna was a project that I think was badly conceived from the jump. and there were a number of people who predicted that that death spiral would happen in exactly the way that it did. And now there are, you know, also some allegations that are being brought against Doe Kwan about, you know, the last I saw was that he might have been falsifying some trading. Okay.

But as far as I know, and I'm saying this now, we may see something else in the future. As far as I know, Do Kwan did not tip his hand into the till and actually take money. Okay. Right. And when you talk about like the various crypto failures of things like, Three Arrow's Capital. Again, they had loans that went bad and they couldn't make good on them. Sure. There's a difference between making bad bets and actually taking people's money. So, like, that's kind of what we're looking at. And there are people within the crypto industry, by the way,

who are very happy to see Sam Bankman-Fried go down because they want the fraudsters out of the industry. They really do think that this is something that's big and real and important. So clearing out all of the villains, if you will, is a positive for crypto. I think that they are a little confused about what the general public understands about crypto. Because I think once you're in it, like there's a lot of stuff that there are a lot of subtleties and nuances. It's kind of like an onion, right? Like there's just always more down there. Yeah.

But Sam Bankman-Fried was really, really, really successful at marketing and really, really successful at promoting himself and really, really successful at making himself synonymous with crypto in the United States. He was the good guy. Like, not only was he not the villain, he was like the disheveled good guy of crypto. who like wasn't trying to sell you a bunch of nonsense, he was the other one. Right. And so that makes it a lot harder for anybody who says, hey, we want to be regulated because you know who else said that with Sam Bankman-Fried. Right. Right. So there's like sort of a lot of a taint here, I think, for people who are not directly involved in crypto. And one of the sort of long-term goals of crypto is, I think, to get a lot of people involved. And I think potentially,

you know, this kind of trial and the associations with Sam Bankman-Fried as a very public face of crypto could be bad for the entire industry as far as recruiting new customers goes. Yeah, I was thinking about this. I rewatch the big short movie relatively recently. I love it very much. But there's this character in it, Michael Burry, who was like one of the first people to see that the housing crisis is coming and that the way we've propped up mortgage bonds is a disaster. And he is like the voice of reason. He's also like a maniac. And I had this moment of reading about Sam Bankman-Fried in the run-up to this trial thinking he's both trying to be like the CEO of Goldman Sachs setting up these systems that

are a disaster and the Michael Burry saying this is all a mess and is all going to come crashing down. He like tried to do both of those things simultaneously and sort of play all sides depending on who he's in a room talking to and did it really well for a surprisingly long period of time. He was like, this is the future. Also, we need to be regulated. Also, it might be nothing, but it's possibly everything. And like it worked until it. didn't. Well, I have a couple thoughts about this. And then there's, there's something that I've

noticed when I explain crypto to people, which is, I'll explain it to them and they'll say, oh, is that it? Is that all? And it's like, yeah, that's all. That is it. You know, and they think it must be much more complicated than it actually is. And there, you know, there are like a bunch of, there's a bunch of complicated math in there, you know, but conceptually, it's actually not that difficult to understand. And so as soon as you explain like an NFT to people, they're like, But I thought this was supposed to be sophisticated. And it's like, well, the math is sophisticated. The programming is sophisticated.

But like the concept pretty simple. And I think one of the things that people like Sam Beckman-Fried really benefit from is this assumption of technical complexity and that if you think it sounds half-baked, maybe it's just that you don't understand it. Maybe you're just not smart enough to understand it. And Bankman-Fried's background as somebody who went to MIT work. on Jane Street, you know, MathWiz, makes it easy to sell something like that. Part of what's really striking to me about all of this is actually running the casino is a pretty profitable business. And if he had just run FTX and like let Alameda fail, I think he would be fine. The problem here is that he wanted to prop up Alameda research, which was the reason

he founded FTX in the first place. Like if you go back to that profile from Sequoia Capital that they like deleted because it was so embarrassing. But don't worry. It's on the internet archive. You can go read it. He talks about, you know, other exchanges being rickety and Alameda having losses because the exchanges weren't good enough. And so he wanted to build an exchange that was good enough for what he wanted to do. And again, you know, there are moments in that profile where the VCs were like, well, we assumed he wouldn't need money, but here he is. And it's like, that's an alarm bell for me right there. You know, there might be a good reason to go get VC money even if you don't need it, just because it lets you expand faster, for instance,

lets you do more things. But in retrospect, that does seem like a striking thing in the profile where they're like, oh, we assumed he was just minting money, hand over a fist, but here he is asking us for some. And, you know, if you read the SEC complaint, they say FTC was a fraud from the jump. Like from the very beginning, you know, customer funds were being misallocated.

And so I'm partially curious to know sort of like the timeline of all of this. because the way that FTX was exposed was particularly chaotic. Yes. And we found out about the misappropriated customer funds after a different kind of chaos that is not on trial. Explain that really quickly. And then let's, again, there are many more tentacles of this story that are going to come out over time. But I do think that part is important because you're right. It's not on trial, but it is like central to what happened to FTCS.

So just explain that chaos real fast. Sure. So CoinDesk gets a hold of Alameda Research's balance sheet. and the balance sheet is weird. It's the easiest way to put it. There's an awful lot of this token, FTT, that's minted by FTX, that's propping up the balance sheet and backing up their loans. That's like if Sephora were to go out and get loans based on the beauty insider points,

which they determine the value of, okay? That's a good example. I like that, yeah. And so there's something like weird happening here. And Sam Bank, Midfreet, has a long-running rivalry. with the head of Binance, CZ. And CZ happens to have a lot of FTT tokens because CZ was an early investor in FDX and Sam bought him out and gave him FTT tokens to do it. And so CZ essentially announced he's going to dump his tokens. And at that point, the market panics. And so people, there's a run.

People are trying to get their money out. They're, you know, dumping tokens, left, right and center. FtX is like, we're up for sale. Binance is like, oh, we'll buy you. And then Binance, like, after a day is like, just kidding, we're not buying this. And then after that, there's bankruptcy. And it's in this period of time post bankruptcy that these details start to emerge that get weirder. You know, like the sort of like funky accounting of valuing yourself by a token that you get to assign the value of yourself. Like, that's not great in and of itself. But the customer fund stuff that comes up afterwards where it's like there's this hideous balance. of terrors that the financial times gets a hold of.

It's still up there. Like if you want to go look at that terrible spreadsheet, like it gives me panic attacks. But like, go look. There's, you know, just like a hole. There's an $8 billion hole. Billion with a B. That's when everybody was sort of like, okay, well, where's the money? Where's the money, Lobowski?

Well, and so this is where the FTX trial and this sort of relatively specific set of allegations against Sam, Bankingfandfried, becomes. the trial about crypto, right? And you wrote a sort of run up to the trial, getting at a lot of this, that there is a, there is a sense in the industry that actually what's about to happen is a lot of evidence is going to be introduced and a lot of testimony is going to be given not just about Sam, but about the crypto world. And this is both a, it seems like both a prosecution tactic and a defense tactic is to basically make the whole crypto world look really, really, really, really bad. Yeah, that's right.

I think there is a lot of danger here. Without knowing the specifics of what's going to be said, we're going to find out during opening arguments. What we've got is an offshore exchange that is doing something that would be illegal in the United States. You can't run both your own trading firm and your own exchange. Like that's an obvious conflict of interest. Right. We have laws about that. It turns out.

Yeah. And it's in the Bahamas. So, you know, as we ran through the charges, I think it's worth thinking about what kind of evidence it takes to prove. each one of these charges. Like, there's the boring part where you show the wire transfer happened. Like, that's going to happen. Sure. There's, like, some chain of custody stuff about, like, text messages, also boring, but that has to go in the record. But then it's like, you have to demonstrate what was actually said by Sam Bankman-Fried and what Sam Bankman-Fried knew. And those might be two entirely different things. And so you think about, like, okay, what kinds of text

messages were there? What was going on in Slack? What conversations were happening? We know that there are a couple of his co-conspirators who pled guilty and are cooperating will most likely testify, including his ex-girlfriend, Carolyn Ellison, who was one of the CEOs of Alameda Research, you know. Who was in a position to know everything about what happened here. Exactly. And there is a recording of her contemporaneously explaining what happened. Like, you can say, you can make an argument maybe to try to take her down, oh, well, you know, she's trying to pin it all on Sam because she wants an easier sentence. But like, if you have that contemporaneous evidence of her explaining what happened, that's a much harder thing to make.

You can't make it stick if she said it before she thought she was going to get caught, you know? So there's a lot of stuff that is going on that I think we could potentially hear about. But one of the things that I want everybody to sort of remember because there are so many moving parts in this case that it's easy to get lost is that right before Sam Bankman-Fried was arrested in the Bahamas, he was going to testify before Congress. And we had his prepared testimony, which included group chat of crypto exchanges where he was being, you know, sort of scolded by CZ. And I wonder, one, if we're going to see more of those exchanges, especially brought in by the defense. And two, what they will say. Because, you know, this is the sort of thing where like, I don't think it's unusual for crypto exchanges to have conversations with each other. I'm sure that happens all the time.

Sure. If only because, you know, everybody's trying to be like, okay, so what's the SEC going to do next? But like, I am interested in, you know, what kinds of evidence might be brought forward potentially, either to try to get the not guilty verdict or to try to get Sam a later sentence. Because you have to keep in mind the defense is doing about three things at once. First and foremost, they want him not guilty. Sure. But should that fail?

They, second, want to make sure that sentencing is relatively light. And third, want grounds for appeals. So that means there's a bunch of evidence that they're going to be stuffing the record with that may not necessarily be directly relevant to the verdict itself, but might, for instance, be helpful for those other two goals. Okay. And it seems like if you're his defense, the only two moves I can think of are you either have to make the case that he didn't know what was going on. Like you said, that being an idiot is not illegal. And so they either have to make the, he's just sort of a dumb figurehead case or make the everybody in crypto is a con man. Sam's not worse than everybody else case.

Is there a third version of the defense that you've heard about? Yeah. So one of the things that sort of a joke in white collar crime is either you're too small to be responsible or you're too big to be responsible. Yeah, there you go. You're too far down the food chain to be responsible for the crime. or you're so high up the food chain, you had no idea it happened. Right. He's like, I'm hobnobbing with Democratic hopefuls. How could I possibly have known what was going on?

That's right. Yeah. So I expect that we're going to get the, he was too far up the food chain to know the specifics of what happened. But I also think that based on the reporting I've seen, there is going to be an advice of counsel defense. He's basically going to say that he's going to throw his lawyers under the bus. He's going to say the lawyers told me that this was the best way to do things.

So I did it their way. I don't know how much water that's going to hold. I'm very curious about what kind of evidence you might present in order to make that defense, particularly because there seems to be a lot, just like a mountain of evidence here, in terms of like chats and recordings and press, you know, moments in the press, all of these things. Just a mountain of stuff that he said. So I'm very curious about what could possibly be brought forward in order to show that he was acting at the advice of counsel, that he was doing what his lawyers told him to do, and it wasn't his fault.

Just from a trial perspective itself, how do you think this is going to compare to say the Elizabeth Holmes trial, which you also covered very closely? That one was just like a nonstop spectacle, right? There were people cosplaying as Elizabeth Holmes outside of the courthouse. Do you think this one's going to be sort of a show in the same way? I honestly have no idea. I think there are going to be a lot of people from the crypto industry who are going to pop by to watch. I've certainly spoken to. with people who've expressed an interest in doing so, just out of curiosity in the same way that, like, you know, I think a lot of us are very curious about this. Certainly I am curious.

That's why I'm going. One of the things that I'm interested in is, you know, with a lot of the sort of like crypto bankruptcy proceedings, there are investors who show up. And so I'm curious if we're going to see people who are FTCs customers who are going to show up to see what happens. And, you know, the other thing that's like worth keeping in mind here is we've been talking about the sort of boring financial side of all of this. But there is this. But there is this salacious human element that I am now going to talk about because I think that's one of the things that people are really interested in. You know, questions about recreational drug use. A lot of the people within FTX were dating each other. I mean, Carolyn Ellison is Sam Beckman-Fried's ex-girlfriend, you know, and like someone who is likely to testify and who has already pled guilty is his childhood friend from Map Camp. Like there's some operatic stuff going on. So I think that there's like, I don't know if we're going to see necessarily people showing. up dressed as Sam Bankman-Fried or in FTCX gear, although we might, who knows. But I do think that there is a very, very high likelihood of like real fireworks. Because if you think about like,

David, you've worked at a startup too. If you think about what people are like when you're working at startups, like especially because you're working these long hours and everybody's in their 20s and like you don't know what you're doing. It's just just the case. There are shenanigans. And these are shenanigans that are now going to be in the courtroom. And so like you can imagine in an attempt to discredit a witness, you might bring up some dumb stuff they did in the office. Yeah. Or in an effort to discredit the defendant,

you might bring up a lot of their own personal shenanigans. And I do, I think you're right that there were a lot. There are a lot of shenanigans we know about because especially like since the man went on house arrest, he had the most public house arrest of all time and just happily told anyone who asked about all the shenanigans going on at FTX. And yeah, I have a feeling there is a lot more. to come. How long is this trial supposed to be? It's scheduled for about five weeks. It may run a little

longer or a little shorter, but I will be in New York City for all of October in the first couple weeks in November. I'm actually turning 40 while in there. Oh, happy almost birthday. Thank you. Tell Sam that he hosts you. This is how I'm celebrating. Yeah, it's, it's, it feels very fitting for you as actually is how to celebrate your birthday. This feels right. But yeah, you know, I think that there's, there's a lot to come. And I really can't wait to find out what kind of of evidence I'm going to see because, you know, there's a lot of stuff that as a reporter, I just love being in other people's business. I'm a huge gossip. Like, that's just the truth of the matter. Like, I was that before I was a reporter. I grew up in a small town. Gossip was a

contact sport. Like, this is like a game I love. And the government can get a hold of so much more juicy info than I can. Like, I would love to see the due diligence that Sequoia did. Like, I would love it. I never get to see that stuff. So this is the kind of thing that I'm really hype for. It is a really underrated thing. I had this experience being in the courtroom for USV Google for a couple of the sort of bigger named people. The people who, A, never meet with reporters most of the time. Sam Bankrupt Fried is sort of unusual in that he loved talking to reporters, but most of the time these people either never tell the truth or never meet with reporters in general. But just watching them sit there and it's like, oh, they have to tell the truth now and they have to say it out

loud and I get to just sit here and listen to it, it's the best. It rules. Sometimes it's very boring and procedural and it takes a long time, but eventually they have to answer the question and it's kind of great. All right. Well, we're going to check in a bunch over the course of this trial. Like you said, it's long. I suspect if I had to guess, I would say it's going to kind of ebb and flow.

There's going to be a lot of really wonky talk about how money moves around, but then we're going to get a lot of shenanigans. And we're going to check in on both of those things. I'll tell you what, David, because I don't know how. many of our listeners are aware of like the sort of the reporting that goes on, but because there's a limited amount of people that, just a limited physical number of bodies that can fit in that courtroom. I'm usually like for something like this, I'm going to be standing outside at like an unholy hour in the morning. And so if there are shenanigans, I have some time where I'm doing nothing standing on the streets of New York City. And so, yes, I will be calling in. You'll get to hear the cell phone report.

This is what I like to hear. All right. Thanks, Liz. We'll talk again soon. All right. Bye, David. All right, we've got to take one more break and then we're going to get to the Virchcast hotline. We'll be right back. Support for the show comes from LinkedIn. If you're a small business owner, you know that every hire counts,

but time and resources are limited. Finding, connecting with, and screening the right candidates takes up valuable time you could be giving to your customers. That's where LinkedIn Hiring Pro comes in. It's built to be your hiring partner, helping you find the right candidates faster.

That way you can hire with confidence without turning it into another full-time job. Hiring Pro streamlines the entire process from drafting your job to shortlisting candidates and conducting AI-powered interviews for initial screenings. Its updated conversational interface lets you describe what you need in plain language. Nearly 60% of hirers find a candidate to interview within a week. With Hiring Pro, you spend less time searching and more time connecting with the right talent. And instead of getting buried in resumes, you get a focus shortlist that actually moves your hiring forward. Join the 2.7 million small businesses using LinkedIn to hire.

Get started by posting your job for free at LinkedIn.com slash track. Terms and conditions apply. Support for the show comes from MongoDB. If you're tired of database limitations and architectures that break when you scale, it's time to think outside of rows and columns. Because let's be honest, you didn't get into tech to babysit a broken database. You got into it to actually build something. MongoDB lets you do that.

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Let's answer a question from the Vergecast hotline, as we do on this show every week. As a reminder, the hotline number is 866 Verge 1-1. Call and ask us all of your best tech questions. No question too big, no question too weird. The weirder, the better, if I'm being honest with you. We've gotten some amazing questions recently. Thank you for all of your most bonkers thoughts about all things technology. Oh, and if you don't want to call or can't, you can always email us, Vergecast at theverge.com.

That works just as well. Today's question comes from Zach. Hi, this is Zach. I'm in Milwaukee, Wisconsin. My daughter is a voracious reader. Very proud that it also means she just goes through tons of library books. Basically, anytime we go to a bookstore, she's picking up something. I kind of don't know where to go.

as far as a electronic reader. This feels like a really natural holiday gift, but do I just go for the iPad because it's got the most access to apps, especially things like Hoopla, things that work with the local library system. I don't want to really get super locked into an ecosystem. But on the other hand, like if you go with the E-ink,

it's not going to use for anything else. It's just going to be for reading, but then it doesn't have access to those library apps. And we're kind of back to square one, spending, you know, $10 to $15 for every single book, especially books you will read once. I don't know what the correct answer is. So light up the crayon signal and get me the best information you've got. Thanks.

Bye. Ask and you shall receive. We let up the crayon signal. Alex Kranz is here. Hi, Alex. Hi. Oh, my God. This is a great question.

Right? There are so many layers to this question in ways that I find so very interesting. So let me just try and, like, lay the land for you here. and see if you think about this the way that I do. Okay. There's like a hardware and a software question here. I think we can immediately rule out buying a Kindle. Yes.

Because we don't want to be tethered to one ecosystem. Right? Fair? Yeah. Good on that. Okay. So I think we're basically in one of three places now. We can either tell our buddies act to buy an iPad. We can tell our friends act to buy a different E-ink e-book reader,

which is I know you're going to have several thoughts about certain brands that may or may not exist in America, but are possible to find. Or you can buy a different Android tablet. Those seem like the three categories. Am I missing anything? I think that's exactly right. Because the Kindle, Kindle can work with some libraries,

but it only works with Libby and an overdrive. And that's not like the only library ecosystem out there. And it's also kind of wacky and complicated. And yeah, they just haven't done a good job of that. For a kid, like it's very involved. And Kobo is kind of build itself as like, oh, you can use it for your library books and all these other kinds of reading. I think it's got pocket built in or used to.

It's also not really great because, again, it's really limited to overdrive. And otherwise you're going to be like teaching your daughter how to sideload stuff. And that is a great skill she should have. Like, I highly encourage you doing that. I don't know if this is the time you want to do that. Yeah. So I don't want to get into your parenting. Like you teach your kids to sideload whenever feels right to you.

Yeah. That's a very personal moment for you and your daughter. So yeah, it really is like, okay, do you want to go iPad? And, you know, it's more likely to she can crack it and break it and make it more difficult to use a lot easier than a lot of other devices. But it is very, very flexible, but also like you could catch your plane Roblox on it or watching YouTube. Like, there's a lot of things that can happen there. Or you can go with something like probably the best brand. And I've mentioned it a bunch of times on the show. And David already knows what I'm going to say, which is books.

B-O-O-O-X, we should say. Yeah, B-O-O-X. And they're probably the best at, like, Android E-I-I-Nc tablets. I'm a little hesitant to say go that route just because she is a child. And, like, it can be a little complicated. And so you will probably still have to teach her the side-loading situation, but also a whole bunch of other things. And, like, if you want your daughter to be really, really understanding of how technology works, the books is the best way to go. if you don't want to also be participating in that educational activity, the iPad or like an Android tablet, like a traditional Android tablet feels right.

Yeah. My heart wants books to be the answer. Because in theory, that combination of it's almost exclusively a reading device, but I also need all the other apps because there are lots of places you read, not just in the one ebook system. Right. Like, yes. What an incredibly common use case that no one has fixed. I want to. books to be the answer. But I do agree. I think for most people, the book's version of Android is just like somewhere between one and five ticks too complicated to really work. I'm using like the most recent color one and it's got the most recent software on it. Night and day difference in onboarding versus yeah, like the Google Play Store is built in now. So you can just start using the Google Play Store whereas before you had you would have had to teach your daughter about patience and and waiting for 24 hours for Google to register the device after you register it. Now you can just start using it. So it has improved

a lot. And there's some pretty affordable ones. There's some, I think like the Pokey 3 is like, $150 maybe. It's a little more affordable. I definitely would look into it and have a serious conversation with yourself on how much you are willing to troubleshoot things because I think it's still going to require it. Even with a software update, there's still going to be more hand holding them with an iPad, but it's probably going to get you closer to that experience you're looking for. So, yeah, it just depends on, like, how often do you want to have to answer tech questions for your daughter? Fair. Can I throw one wrench in here that I am not 100% sure I think is a good idea, but I think might be a good idea, which is one of Amazon's tablets. My hesitation with all

tablets, whether they run Android or iOS, is that they have all the apps, that's true, but buying stuff on those devices is a gigantic pain in the ass. Because of the way that Google and Apple run those platforms, you can't buy Kindle books in the Kindle app. You know where you can buy Kindle books in the Kindle app and buy other things in other apps is on the Fire tablets. And those tablets aren't like amazing hardware, but like the Fire HD Plus 8 inch has a decent screen. It's pretty rough and tumble. You're not really going to break it if you beat it up. They make a kid's version that's even more rugged. And it's $70. Like I, I, I, cannot explain enough how much more expensive every other tablet is. This one is not a great tablet,

but if truly all you want is a reading device, this feels like it might be enough. It might be. I think you'd have to double check on what apps will work with it because it's still like Amazon's thing and they want you to buy their books. They don't want, like they might make it difficult. I don't know the state of like the Libby app on on a fire tablet or the hoopla or whatever. So you probably would need to do just a touch of research there because I haven't used one in a little bit. It's definitely significantly more open than the Kindle, but significantly less open than like full Android. You're still getting Amazon spin on Android. That's definitely true.

Yeah. But if it's got the apps, it's probably like the most affordable and like easiest to use of it. It just requires like quadruple checking that the app is available for it. Also, it's like a hundred bucks and easy to return. So if you get it and it doesn't work, return it, buy books. buy an iPad and you'll be happy. Yeah, I will say, I think we're probably aligned on this one that like if money is no object and you're not worried about like breaking the thing, the iPad Mini is the correct answer, right?

It is like objectively the best device of all these devices. Yeah, I try to switch between my, my E-reader and my iPad Mini a lot. And I oftentimes will find my, like my iPad Mini just does more stuff. So I use it more. But I love having my, my E-reader. I love being able to read it outside. I love it for just focus. And I think for a kid, that might actually be a good thing in some cases, right?

Like, they got to focus on the reading and not just go off on a tear being like, I wonder. Like when you read a chapter in a book and you're like, oh, that's interesting. And you immediately go Google it on your iPad. That's easy. On your e-reader, you have to wait and do it later. And that's kind of nice because then you just keep reading. Right. Yeah, it's either a feature or a bug depending on how you look at it.

And I think that has a lot to do with it. So I think we're relying on that. I would say, if you're feeling ambitious, Zach, buy a books device. See how it feels. My sense would be, it will immediately be obvious to you if it's more and more work than you want, right? Like you're going to take the thing out of the box, turn it on, and immediately just be like, nope. Or you're going to be like, oh, this solves all my problems, right? That seems it will not be unclear, I wouldn't think.

Yeah, it will not be unclear. You're going to know really, really quickly. And generally speaking, the new operating system, the new version, they've rolled. out has been really, really good. They're very good about, like, getting the latest version of Android on things. You just can't use 70% of Android because it's not meant for a black and white tablet. So, like, you can watch YouTube on it. Don't. Yeah, it's a specific kind of torture trying to watch YouTube on a device like that. So my other question for you is, where do you buy your e-books? I realized in prepping for this that I accidentally just became sort of Amazon

exclusive, like a million years ago. I loved the Kindle. had a bunch of Kindle books. And now that's where all my books are, so I have kept buying Kindlebooks. And like, am I here to tell you that the Calibur app exists and does a really good job of stripping DRM from your Kindlebooks

so that you can use them on other devices? No, that's not what I'm here to tell you. It's true, and the app is free and open source, and it strips DRM from all your ebooks so you can use them on other devices. But that's not the point. My question for you is, where do you get your e-books, if not from Amazon?

I originally started with Nook, and then I found Calibur and made the switch to Amazon and took my whole Nook library with me, which was really, really nice. And then I was in Amazon for a while. And then I was like, I feel weird being in this one ecosystem. So I switched back to Nook and brought all my books back via Calibur. And so now I'm usually like, I tend to go Nook, but I've got a couple of like there's ebooks.com. There's a couple of other ones.

And I'll kind of look around because sometimes the story's the selection is different. And honestly, Amazon has a ton of books. It's gotten so big with self-publishing that a lot of like self-publishing that a lot of like self-publish. books, somebody will say, oh, you got to read this. It's really good. It's only available at Amazon, which is super frustrating. And also, sometimes I'll just buy it directly from the publisher, and the author gets more money that way. So that's, if you really are supporting an author, buying it directly from their publisher if available, best way to buy the books. Yeah. And you can usually, if you know what you want to buy, if you just Google the title

and e-book, you can pretty quickly find that publisher website usually and get the book that way. That's a good trick. What I wish existed, like bookshop.org, which is this amazing website for buying physical books from like actual bookstores that are better citizens of the publishing world than your Amazon's, I love that website. And I wish something like it existed for ebooks. It feels like ebooks.com is like kind of that, but not quite. Ebooks.com is kind of doing that. Libro FM does that, but it's almost exclusively audiobooks. It's been like $15 a month there and it gives me one book credit. And that's not. And I know I'm supporting an author and I'm supporting my local bookstore. Like, feels great. You can also find your local bookstores. A lot of them actually will have partnerships with booksellers online and be like, oh, yeah, you can go here and buy any ebook from us at this.

They often will have garbage websites. But if you want to support your local bookstore, that's the way to do it. It just unfortunately requires more work than logging into Amazon. The only thing I would add to your list of websites, which is very good. and I just am going to go sign up for Libro FM right now, is there's this website called Bookbub, B-O-O-O-K-B-U-B-B-com, and its whole thing is just spectacular deals on e-books from around the internet. And so it's like not a place to go if you're like,

I want to read this specific brand-new book, but if you're just like, I like spy novels, let me know when I can get a spy novel for $1.99 as an e-book. They send emails, and it has become my most quickly clicked email every week because it's just nonstop ebook deals. And it's great. And I use it all the time. So highly recommend.

I'm doing that as soon as we're done with this podcast. I think we've helped, right? This feels, Zach, let us know what you end up doing. I think your instincts are good. And if you buy a book and you love it, it will warm Alex's heart. So let us know. It will. Alex, thank you.

Appreciate it as always. Always. All right. That's it for the Vergecast today. Thanks to everybody who came on the show today. And thank you, as always, for listening. As ever, there is lots more from everything we talked about at the verge. We're covering all of these trials pretty closely, so we'll put some links in the show notes,

but also we're posting all over theverge.com as everything happens. So keep an eye on the website. Also, if you have thoughts, questions, feelings, or tips on how to improve my handwriting, because I'm not allowed to have electronics in the courtroom, you can always email us at Vergecast at theverge.com. Or keep calling the hotline. 866 Verge11. We love hearing from you. Send us all your thoughts and questions and ideas for what we should do on the show. We do at least one hotline question every week, so please keep him coming. This show is produced by Andrew Marino and Liam James. Brooke Minters is our editorial director of audio.

The Vergecast is Verge production and part of the Vox Media Podcast Network. Nelai, Alex, and I will be back on Friday to talk about the pixel event, the sphere in Vegas, the sad fate of the $17,000 Apple Watch and all the rest of this week's tech news. We'll see you then. Rock and roll.