This Week in Startups - 3AC liquidation chaos, Taibbi’s USDC deep dive, startup employee advice + more | E1506

Episode Date: July 13, 2022

First, we break down the 3AC situation where the founders were reportedly MIA for about 12 hours (1:52). It’s a complex situation, and we try and make sense of it. Then, we cover Matt Taibbi’s deep-dive article on Circle (8:10). Jason also gives his thoughts on a recent Twitter thread about how to succeed as a low-level startup employee (33:27). And we wrap with a little M&A story from Spotify (40:50)! (0:00) Jason tees up today’s topics! (1:52) Bloomberg reported that liquidators in charge of handling Three Arrow Capitals bankruptcy have NOT been able to locate the founders (8:10) Investigative reporter Matt Taibbi spent time researching the Crypto Crash, and warns against investing in Circle’s stablecoin USDC (11:51) Lemon.io - Get 15% off your first 4 weeks of developer time at https://Lemon.io/twist (13:08) Red flags Taibbi found (24:11) Embroker - Get an extra 10% off insurance for your business at https://Embroker.com/twist (25:25) Making sense of the crypto crash (32:16) Assure - To get 20% off your first Special Purpose Vehicle (SPV) visit https://Assure.co/twist (33:27) Zach Weinberg had an interesting thread about how to stand out as a low or mid-level startup employee (40:50) Spotify has acquired a Wordle-like daily game for your ears called: Heardle! (46:56) Previewing the week ahead (53:17) Outro + Plugs!

Okay, everybody, welcome to the show. We got a great show for you today. First, we're going to break down the 3AC situation where the founders were reportedly on the Lamb, MIA, for about 12 hours. They've now surfaced, and it's a really complex situation. We'll try to make sense of it. Then we cover Matt Taibi's awesome deep dive article on Circle. And I give some thoughts on a recent Twitter thread about how to succeed as a low-level, quote-unquote, startup employee. And then we talk about a very interesting M&A story from Spotify. And I'll tell you why There's really two lessons here. Why companies buy, why large companies buy very small startups? What is the thesis there? And then why screens want to move and be clicked. It's going to be a great show. Stick with us. This week in startups is brought to you by lemon.io. Need to speed up your product development without draining your budget?

Hire vetted engineers from Europe at lemon.io. Go to lemon.io slash twist. to get 15% off for the first four weeks. Embroker. Embroker's startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today

atembroker.com slash twist. While you're there, get an extra 10% off using offer code twist. And, Assure. Assure is the leading, provider of special purpose vehicles and fund administration. With over 5,000 completed transactions in $2.5 billion under administration, Twist listeners can get 20% off their first SPV at assure.co slash twist. That's assure.co slash twist. All right. What's first on the docket,

Molly. I mean, look, we have to keep talking about crypto. We don't want to, but it just keeps happening. And this is like, was a kind of bonkers 24-hour situation. Yesterday, Bloomberg reported that the liquidators who are in charge of handling this three arrows capital bankruptcy, which of course we've talked about on the show, have not been able to locate the founders. Okay. It seemed for a moment that they might be on the lamb. Their whereabouts were, as of yesterday, quote, currently unknown. And then just this morning, as we were preparing to do the show, one of the founders Zushu popped up on Twitter.

Nobody's seen his face, to be clear, but popped up on Twitter and said, because evidently there was this meeting with the liquidators where the two founders showed up on Zoom but stayed on mute the whole time and nobody turned any cameras on. So they were like, that doesn't really seem to count as being here. And then Zushu popped up and tweeted this morning, sadly. our good faith to cooperate with the liquidators was met with baiting. Bating. What is that term mean?

Bating. Like link baiting, like trying to trap you. I think it must mean entrapment. Like they were trying to entrap us in some way. And then this kind of mysterious hope that they did exercise good faith with respect to the Starkware token warrants. And then in the tweet,

she included some screenshots of emails to the liquidators. In the second email, he excused the liquidators of agreeing to exercise this starkware token offer by July 15th, a fifth rather, and then reneging on that offer without warning, which caused the losses

to three ACs creditors. It's got it. Unbelievably complicated, as always, but... Okay, so I guess, just my interpretation of this is they wanted to

invest in this crypto company, Starkware. Starkware. Okay, like Tony Stark and then software. Got it. Terrible name. Starkware. Crypto names sometimes are just horrific.

Like it was a terrible name until you made up that mnemonic device. and now it's a good name. Maybe. So it's like if Tony Stark made his Microsoft competitor to be called Starkware. It's a way cooler now. That's literally going to be,

Starkware is going to be like a documentary inside of the Marvel MCU. So that company recently raised 100 million a Series D had an $8 billion valuation. That must have been like peak crypto evaluations. And 3AC was offering the rights to the token offering. Or maybe they, yeah. They basically make an Ethereum blockchain more scalable, whatever that means.

I thought theorem was already scalable, but okay, can always be more. So I guess they wanted to do this deal in bankruptcy. I guess when you're in bankruptcy, Molly, you don't, you no longer get to call the shots because you're bankrupt.

Right. And there is a liquidator who gets to make those decisions for you. Okay? Super complicated. And we all know the background of all this. This is all part of the Terra Luna collapse, which that led to the 3AC bankruptcy, yada, yada, yada.

I mean, what it really comes down to, we don't even have to go on and on about the details because what it sounds like is it's just going to be a really messy fight to get any creditors paid, which leads me to, you know, the kind of easy and obvious prediction, which is like, hey, a lot of creditors, you're probably not getting paid.

Yeah, and these crypto folks, I think, sometimes think they're kind of, I think they have a lack of understanding of the law in some cases or they kind of flout it, or they kind of get created with it. Well, you know, I remember in the early days of crypto, people were trading crypto. And then at the end of the year, they were like, well, listen, I lost, you know, I made this amount of money or whatever. But they didn't understand the difference that there was short term capital gains. And they're like, no, no, but I sold those shares and that I bought these three other cryptos.

And it's like, yeah, you have to pay tax on that short term capital gain each time you sell whatever the profits is. And they were like, no, I don't because I still hold it. It's like, no, no, no, no. That would be if you held the original asset. So, like, there was a lot of this. And, you know, listen, I'm not dunking on anybody. Short-term versus long-term capital gains is, you know. It's really complicated.

And there is not an obvious tax regime even for, I mean, it's complicated if you don't, like, get an accountant and assume that somehow your crypto is going to involve taxes because it's money. Yes. So it always does. Yeah. Yes. And here we are. When you go belly up, you know, you, when you're in a bankruptcy, you know, a liquidation type situation. you have to work with the liquidators

to make sure you're doing the right thing for the creditors. You kind of lose a little bit of control here. Right. And it seems like they were sort of saying we still wanted to keep doing what we were doing. Yeah. And get in on the Starkware token

for whatever reason, probably to raise capital. And now it's just all falling apart. You know, it's like... I liked it when I thought they were on the lamb. That was kind of exciting, but maybe they're just back and it's part of the fight. Well, if they're not turning their cameras on,

they're not participating. So that seems to be at the crux of this is that, you know, the liquidators don't feel they're cooperating properly, which means to me it's just all red flags that there are stuff they don't want to come out. When the liquidators went to three AC's office in Singapore in late June to meet with the founders, the office quote, appeared vacant except for a number of inactive computer screens. So, yeah, you want to assume good faith, but a lot of this was done with such reckless. disregard for the rules that you you kind of automatically I don't know about you, but I kind of automatically default to these people who are running a scam.

I don't know that they were. I want to give them the benefit of the doubt, but, you know, it just reminds me of all the signaling I got with, say, Theranos. It was just kind of obvious to me from the signaling and you kind of know just based on the behavior And this behavior of just not cooperating is typically a sign that, yeah. Yeah, there are things.

If you're hiding things, there are usually things to hide. And if you're running away and not showing up and there's unopened mail, like, shoved under the door of your office, you know, these are signs. Well, it's interesting, too, because there's sort of like, there is this ongoing question of like, what starts out as a scam and what becomes a scam. And some of, and that actually leads really nicely into this other story that we've kind of been waiting to get to because there's been so much news. but Matt Taibi spent a whole bunch of time, like months. Like he was like, yes, I have been silent. And it's because I have been deep, deep, deep researching the crypto crash and specifically Circle and the stable coin USDC, which throughout the Terra and Luna collapse had, I think,

been held up in some ways as maybe a safer alternative. Clearly, it's US-based, right? There's a bunch of signals that's U.S. base. It's run by, you know, a notable entrepreneur and they're going public. So all of those things would mean playing by the rules more than tether. Right. One would think. And then Matt Taibi started digging in and wondering, you know, trying to dig into like,

what are the details of this $50 billion stable coin and published an article titled, The Financial Bubble Era comes full circle. It sounds like his experience trying to get answers from Circle about how USDC works, how it's backed. Do USDA holders bear bankruptcy risk or not? Will they be making money, lending their reserves? That kind of thing. He said, quote, I'm giving up the hunt for civilized and respectful

with respect to how he's going to talk about this company throughout. That dog lived a long life, but now it must be taken out and shot. I've dealt with many frustrating institutions from Bank of America to the press office of the FSB, but none produced such headaches. They are the mother of all black boxes. and God help anyone invested in them. Whoa. Yeah, subtle as always, Matt Taubi.

Yeah. I mean, listen, he's got a lot of scoops under his belt. So again, as we try to triangulate here on the circle. Hey, oh. You know, let's. I don't know why that pun was so funny to me, but it really was. But yes, right? It's the same thing that you were just saying.

It's a black box. You can't get information. And when he tried to ask them. And look, Matt Taibi, like, he went deeper than almost anybody. after the 2008 financial collapse. And what I think is so interesting about the piece that he published and the conclusions that he draws is that he basically is like, look, it's never any different.

A savings and loan collapse in the 70s, the 2008 financial crisis. This, it's just people figuring out increasingly clever ways to make money because it's available to them. So they do it. It ends up, you know, badly for some, great for others. And a lot of this. seems to be around this concept of the bankruptcy risk. Remember with Coinbase, we're like, hey, if they go bankrupt, do you lose your crypto? And if it's not your keys, you don't really

have it. Right. There's some expression they have, some rhyme they have in crypto about if it's not your keys, it's not your money kind of thing. Right. No wallet. No keys, no whatever. No keys. Anyway, the point is, when somebody's a custodian and they go bankrupt, what happens, I guess. And so here, he says, I reached out to Circle with simple questions. Do USDA holders bear bankruptcy risk or not? Will they be making money lending their reserves or not? The firm at first was solicitous. Solicitous. Yeah. Solicitous. And seemed anxious to educate about their company structure. Then the answer became contradictory. Then they became nuanced. So, yeah, not your keys, not your coins. Yeah, there we go.

to embrace. Bankruptcy seems to be losing your... Yeah, because Voyager, there was Voyager, obviously. And when you have somebody basically becoming a custodian, you can lose your stuff is basically what it comes down to. Right. Competition for great engineering talent is really intense. We all know that.

And a lot of startups are struggling to hire fast enough to keep up with their roadmap and the demands of their, you know, competitive space. You need to have great developers if you want to compete. And if you want to hire better developers and you want to do it faster, you need a trusted source of pre-vetted candidates. That's the key people. You want to use lemon.io. They will tell you if this person's legit and if they should be working at your company. They have a network of engineers from Europe and Latin America and every candidate has been tested and interviewed by their team.

Here is how lemon.com. I.O. can make your engineering team buy on it. No wasting time with unqualified candidates. Easy access to global talent. Plus, they can get your developer up and running within a week. And of course, it's more affordable. At launch, we know lemon.io is a great solution because our portfolio founders have used it. Okay, Drew Fabricant said lemon.io was a game changer for his startup scout. Drew was under the gun to hire a developer with a very specific skill set,

and lemon.com delivered a great candidate quickly, and he says they were a pleasure to work with. So go to lemon.com slash twist to get 15% off your first four weeks. So there was a bunch of red flags that they had. But on the other side, I've talked to Jeremy. He's been on the program, and he seems to be doing everything he can to make this, you know, trustworthy. So let's go through each of these and see if we can understand it. Yeah. Yeah, totally.

So some of the red flags that Tadhibe found is that, and I think this is kind of what kicked off his reporting, is that Circle announced that its reserve fund would belong to the company, not to its holders. Okay. Circle said, quote, shares are only available for purchase by Circle Internet Financial LLC. Taiby noted in the piece that that is like beyond unusual, highly unusual. And as a result, in the event of bankruptcy, customers would be seen as general unsecured creditors.

So someone who lends money without getting any assets as collateral, meaning that if the borrower defaults on a loan, the creditors have nothing to fall back on. Hmm. Yeah. So I am trying to figure it out if people are protected or not here. So, and what are they doing, I think, is the other part of the story. So in the story, they were talking about, well, what are they doing with the reserves? Are they all in cash? Are they all in treasuries? Are they putting them into, you know, corporate paper and stuff like that to try and get a return on it? And so that is the question where I think there needs to, be super transparency. And so, and perhaps where they started is not where they are now. Right. I think that's partly what happens is where you start. Like with these companies that, you know, probably are starting out with, with good intention. You know, they're not like, this is not circle and USDA are not a Ponzi scheme. This is not a big scam. But there are starting to be these machinations, these manipulations that are unusual to say the least, right? There's

the registration statement about shares only being. available for purchase by circle. There's this kind of large question about how also the new fund that it raised, which is $400 million, by the way, this reserve fund would be permitted to invest up to one-third of its total assets in reverse repurchase agreements. I don't even know what that is. I don't even know what that is, but it sounds kind of bad. You know, basically what Taibi writes is, the big tell always is when financial executives

start giving what one analyst described to me as nuanced answers. to yes and no questions. And so when he started to say, okay, are people protected? Then all of a sudden it's like, well, it's not a trust,

but we hold the funds in the trust. And USDC is and is not simultaneously a virtual currency. This is all from his piece. And in the unlikely event of a bankruptcy, USDC holders would be shielded from circle creditors, although nothing is bulletproof. And of course, there's risk in on it.

You know, like on and on and on. He basically was like, this is not, none of this makes sense. This is where regulation would be really helpful because what's happening is you have a company, a corporate structure that could get sued,

could go bankrupt. Then you have the creation of this new currency, and people who are buying that currency are being told it's a stable coin. It's completely backed. It's 100% backed and that it's secure. Okay, so those words, are those actually legal concepts

or are those marketing concepts, right? Right. Okay. it's a secure wallet. It's secured. To me, security could mean, it's secured by the FDIC. It's secured by some insurance. Or it's secured because we have two-factor authentication.

You know, like, or we don't allow you to create, you know, easily hackable passwords. Which secure are we talking about here? And then when you say it's 100% backed, yes, it could be backed, but what is it backed by? You know, if Tether was backed by Chinese commercial paper, okay, that's backed. You know, I could be backed by Pokemon cars. I could be backed by board apes. I could be backed by gold bouillon. I could be backed by, you know, real estate in Miami.

There are all different things that something could be backed by. And that's where regulation transparency has to come to the space, especially since people are pitching these things as new concepts, right? And there is novelty and new things here. Like, you can trade the stable coin, you know, instantly and essentially for free. So, you know, those are all powerful things to create digital money. But yeah, it's a good read. I have to be honest, like, he seems to be going all over the place and banging on every single aspect, which I think is good.

I love that Matt Taibi exists. Right. Because he's basically like this crazy stress test on these companies. So to talk specifically about the reserves, and they also have like a high yield product where you can make, you know, yields is high, you know, loans against your crypto. Now, we said, hey, listen, if you get a 20% yield, you know that doesn't. exist in the world, it should be a red flag. If you're getting a 5% yield, there's many places to get that in bonds or whatever. Okay, that seems reasonable. And then anything in between, you've got to really do some research here. So here's what he said on the reserves.

Circle discloses where some of its reserves are, but not all and not how much of what is where. Okay, that sounds like a Dr. Schistrero, that's not Circle saying that. That's my Taiibi. Circle just, I mean, he's such a beautiful writer. My Taiibi is great. I could literally, if with just some punctual, I could make this into like literally a Dr. Seuss. Which is what kind of makes it amazing, right? Because that's what they're telling him. And he's like, I'm sorry, what, you know, they're just talking in Circle.

Circle discloses where some of its reserves are, but not all and not how much of what is where. I mean, right. One fish, two fish, redfish, bluefish. Exactly. Now Circle separately features a yield program, which offers guaranteed returns. These were never as high as terrorists, preposterous, and obviously, Ponzoid. There's a good word. I mean, right.

20% guaranteed returns. Ponzoid. It sounds like a video game from the 80s. 20% guaranteed reserves returns, which quickly attracted 60 billion that vanished even more quickly. But the program exists nonetheless at one time, at one time offering 12-month yields as high as 10.75. So in the time it's taken to write this piece, the guaranteed return has dropped from 6% to 1%

to 0.05% and character is a fast. and Circles web page on the subject contains both the incorrect statement. Circle yields interest rates offer superior returns compared to traditional fixed income investments like one month CDs and eight week T bills. This is no longer true. And the correct statement in comparison to traditional fixed income investments, products like Circle Yield can offer superior returns. Products like Circle Yield.

And this is again, Matt Taibi is acting as like the compliance department at Circle and going in there for Jeremy and finding where they. made mistakes. Like, there might be like a bio on a social media site that has this old marketing information. Somebody may have put a tweet into, you know, a scheduled tweet in with the wrong information. And that's how you be is going to find it, you know? And this is where, like, this is like what journalism, just for people who didn't know, this is what journalism used to be. Yeah. It used to be a guy or a gal who just would not take a side. They would just objectively look at stuff. And then they would try to be a good writer and make, uh, and maybe

it interesting to read and tell a good story. He's not really embellishing this. He's just catching them in misstatements or, you know, just not being buttoned up, which, you know, when this happened to me when I was, you know, running businesses and never anybody said like, hey, you said this here and but you said this over here. I'm like, oh yeah, I got to fix that. Let me go fix that website. Thank you for pointing that out. I would just own it. You know, thanks. Yeah. Instead of like a 70 paragraph statement that's sort of like bleep blue, bloop, bloop, blu, blur. Blark and creates even more confusion. Bethany McLean.

One of my favorite examples of this is Bethany McLean from Fortune Magazine, who was famous for asking Enron at an earnings call, how do you guys make money? Yep. And then they gave her like a circle answer. And then she went around and asked a whole bunch of people, how does Enron make money? And no one could answer it. And she wrote this like Fortune cover story that ended up being the like unraveling of Enron. And it was just this basic question.

That's Matt Taiyby's point. He ends by saying, if every crypto company will struggle, badly to answer basic questions like, where's your money or what's your risk, then he writes, the storm hasn't even started yet. The thing is great, it's a great observation on Matt's part. We'll have Matt on the program. Matt, you know, somebody let Matt know we want to have him on the program on DM, DM him as well.

You know, these basic questions we've been asking for the last 10 years, you know, and people, the response from the crypto community is have fun staying poor. Okay, boomer, you don't get it, yada, yada. We're all going to make it, not going to make it, you know, all this like trolling and dunking. It's all fine, but if we were looking at this as an investment, Molly, and this was people's money that they were going to retire with or put their kids through school with, you know, that stuff is incredibly inappropriate. And then I think if you were looking at this as, you know, gambling and you were in an illegal casino in the back of a deli in New York, not saying I've been in one of those. but if you were, you know, playing in an illegal car game in L.A. where there was like a guy with a shotgun in a closet, you know, and two people outside, you know, with other armaments.

These details are getting more and more specific. It's so interesting. You know, like, then you might not expect to come out of that game with your money. Oh, God. You know, like maybe if you go to get your chips and there is a shotgun leaning against a chip rack, maybe you shouldn't be in that game. that's what crypto's been. I went to that poker game when I was in L.A.

And like, someone's like, hey, come play poker. I was like, sure, I'll come play poker. I'll come play poker. Literally, the guy's like, how much you want? I'll take $1,000 in chips. And he's like, great. And I'm like, is that shock on loaded? He's like, oh, it's not very useful.

It's not. If it's not, I was like, fair point. Okay. And I was like, I literally did not come back to the poker game. I played for like two or three hours. Socially, I got out of there because I'm like, I know it's a rigged game, right? You know, like, and they're raking the game,

which means they take a little bit out of every pot, Molly. But you know that there's three people in the game. They probably mark the cards. You know, there's a whole thing where you can wear contact lenses or glasses and you can put a little bit of ink on the aaces and the Kings. You put a little swipe of this liquid on the top corner for an ace and the middle for a king. Just even that basic knowledge would give you such a huge edge. You would crush everybody.

So it's a rig game. I don't think Circle is part of that. I think Circle is one of the good actors, but even the good actors need to make every edge case very clear. And this is where regulators, the press, and good actors, I believe Jeremy Miller to be one, I'm sure he is. Those three folks can sort of triangulate this industry out of this mess. I'm going to be very quick today. You need to understand what cyber insurance is.

Obviously, this covers hacks, which happen more than you think, especially in these crazy times. You want to be protected so you want to have your cyber insurance set up. If you don't have business insurance, you've failed one of the first steps of being a founder and having investors. You need to protect yourself. You need to protect the downside. And startup should look no further than inbroker. Inbroker's technology saves your time and money. Prices are up to 20% lower with better coverage than incumbents. Go from sign up to quote and purchase in just 10 minutes. When you work with in broker instead of the big incumbents, you're not dealing with these large, low corporations, and sign up with a broker takes days, not weeks.

the process is totally transparent. There's no opaque pricing. There's no annoying incumbents standing in your way of just GSD. You've got to get stuff done, okay? And let's face it, these slow incumbents, they're not going to get it done. Okay? So to instantly buy custom-built insurance for startups, go to inbroker.com slash twist, E-M-B-R-O-K-E-R.com slash twist.

And while you're there, you're going to get an extra 10% off, I kid you not, by using my code, Twist, T-W-I-S-T. So I see this as very constructive what Matt's doing, to be honest. Yeah, I mean, he's going to have to do a lot better than this, though, like immediately. Like, if he is a good actor and he's trying to make things better in the wake of this piece in which Matt, you know, draws quite the opposite conclusion, he's going to have to get a lot more straightforward really quickly. Like, I sort of feel like, you know, Nick made the note that every time on this show that

we covered a weird new crypto project, like you would go through the docs and you'd read the terms of service and it almost never made sense. And there would always be these people who were just like, you're too dumb to understand this. And that's just not, that's never the right answer. That is never the right answer. I am fine with some concepts being above my pay grade and I need to like study it for an hour or two to actually understand it and have two or three experts explain it to me. Totally. You know, reading a story or being, you know, on a podcast might not be enough for me to react in real time to understanding something. I get it, right? But that's,

very small number of things in this world. Right. Reach that level. Those things are pretty straightforward. Like, I loaned you my money. You gave it back with interest over some period of time. Like,

when you, when we had Loon on and he's trying to explain to me the, or, you know, was it Axi Infinity? Mm-hmm. You know, like both of those projects, you know, we can pull the tapes of them and we should make,

like, somebody, feel free to make a super cut and send it to us. But I'm sitting there, I'm just like, if you tell them, like, confounded, I'm like, wait,

wait, people are paying $40,000 for this game, and then how much do they make? And I'm like, how much? And they're like, well, they can loan it out too. I'm like, okay, they can loan it out so they may have to play, but how much do they make playing the game? And like, whose money are they taking? You know, like, who's losing the money? And it just, it didn't make sense to me. And the same thing with Lou and I couldn't understand,

like, okay, well, this pool of capital moves in conjunction with this other currency, but what, but why don't you just? And here, there's a very simple concept. There should be, you know, whatever is circle, circle.com, or I don't know what their domain name is. If it was circle.com, it should be circle.com slash what do they call their coin? InfaQ or oh yeah, yeah. It should just be usDC. It should just be usDC.com slash holdings or you just go to usDC.com and it just shows you the holdings on the homepage in real time.

Yeah. Or as of end of business yesterday. These are our holdings. Like I'm going to do that. I just sold $2 million worth of like index funds I had and I'm like going to start actively trading. I'm going to actively train. and like I'm going to find one of these pieces of software

that lets you show your portfolio, I'll just screenshot it. Like, if I can do that and just screenshot my Robin Hood account and share it, like, I think anybody can do it, right? Like, I don't think this is super complicated. Just put all your holdings out there. What's the big secret of what the holdings are? Who cares what the holdings are?

Unless you're trying to do something, well, it could be that you're taking risk. If you are taking risk, then you should tell people, hey, we're taking this amount of risk. Yeah. If you want to be in circle, you know, and you want to use USC, yeah, 24% of our assets

that are in a high risk category. It's possible. The potential downside is negative 20%. And so you could wind up with 80% of your dollar if we screw this up, but we need to make money somehow. So we're going to... So at least you know.

Yeah, and that's how we, by the way, pay for the, you know, this lending program. So you can lend your coins out and make money. So we have to have something in there that has upside. You can just say that to people. Right. And I think they would accept it. I think they would

but this is sort of like this is where you get back over and over to the lesson of the last financial collapse and the one before that and the one before that which is that people can't seemingly cannot help themselves

from taking more and more risk once they've got this money and they see that there's like other ways to make money with it they can't stop themselves from doing that and then they're like well it's going to be fine

but people would probably freak out if they knew so I'm just not going to tell them until I've made them back all their money which is like the classic and now you're screwed because now you didn't make back all the money

and you didn't tell people you're doing this in the first place and boom, you're sued. One thing I will tell you that's happening here. And this is not a hot tape, but it's sort of like an insider observation. A lot of times, the comms department,

you know, the CEO even, they wouldn't have complete information, right? They wouldn't know everything that everybody in the company said. They wouldn't know every webpage or every marketing statement, etc. It's impossible for them to know that. They're delegating. etc. So when somebody like Matt Taibi with his reputation comes, they start knocking,

it's like, oh my lord. And then they start asking question, question, question, question, question. Then you have to go back and figure out like, why is he asking that question? Are we at risk? Did somebody leak a document? Did we do something wrong? Did we make a mistake? Do we make an inadvertent mistake? Is there a bad actor inside our company? Whatever it is. And so that's why you don't give straight answers is because you're trying to figure it out. And so it can look like, even if you're a good actor that you're being opaque. And it might be you're just trying to get your ducks in a row. And you're like, okay, let's get our ducks in a row.

Make sure we have the right answers for here. Because this person is so good at their job, Matt Taibi, that they're going to ask follow-up questions. And if we screw up the follow-up, if we answer this stupid, the follow-up question is going to make us even stupider. We need to have our story straight. We need our ducks in a row. And then you add on top of it, well, this could be actionable and, you know,

with regulators or legal. So now you got to get a lawyer on the phone. Now you're going to get a compliance person on the phone. And you're like, okay, here's what we think we did wrong. Here's what he asked us. And so, you know, it's, that's another nuance of what can be going on here. And Matt could be experiencing, you know, oh, you know, they're not answering the questions crisply. And it could just be, you know, a little bit of incompetence.

It could be mistakes. It could be circling the wagons, dot in the eyes, and crossing the T's and making sure. you don't give Matt Taibi another opening to crack open. And with another mistake you've made. So that isn't dynamic. I see happen. It happens that, you know,

I've had weird go rounds with founders, for example, or with subjects of interviews where I'm like, no, it seems like it's this. And they're like, it's actually this more complicated. And they really may believe

that it's more complicated. But it really, I mean, I urge the audience to read the whole piece and read all of the statements that they emailed him and ask gift, you know, like, because you've got to, hopefully what they're working on now is the ducks in a row version of the answers to all of those questions.

Yeah. He's a suspicious guy, too. I mean, you know, to be fair. Oh, suspicious. Yeah. Like, you know, I mean, he's like, he's like this sounds like, this feels like this thing, the 2008 financial collapse. That's his comparison here.

For sure, for sure. But yeah, if Ronan Farrow or Matt Taibbe come for you. Yeah. Get your up together. Immediately. Get it together. If you're an accredited investor, you need to know about special purpose vehicles. So what is an SPV? Well, it's an investment vehicle that allows up to 250 investors to invest up to $10 million by one entity on a cap table. So if you're an angel investor and you've got a bunch of rich friends like I do, you could start your own syndicate and power it through an SPV. Here at launch, we love working with the team out of shore. They power all of my syndicates, which is the largest one in the world.

with over 10,000 members, and we've done hundreds of deals. Ashore is the leading providers of SPVs and fund administration with over $2.5 billion in AUA, and they've developed an innovative software program called Glassboard. This automates the entire investment experience from entity formation all the way to an IPO. Ashley and Heidi on my team, who manage the syndicate.com, love the interface and use it every single day. To get 20% off your first special purpose vehicle, SPV, I want you to visit ashore.co slash twist to get 20% off your first SPV.

All right. Next up, I wanted to talk about just a tweet storm. And this is something I've talked about many times. I talk to people about hard work pays off or you'll see me tweet, no substitute for hard work. Anytime you do these tweets, you can just count the seconds before everybody disagrees with you. Zach Weinberg is an entrepreneur, an angel investor. He recently had some clips go viral where he was dunking on crypto. he had an interesting thread and he basically said, hey, there's a lot of noise about what makes a good junior or mid-level startup higher. But in reality, it's basically three things. One,

extreme competence. Two, willingness to work hard, weekends and nights. Three, positive attitude in ambiguous and difficult situations rises to the occasion. So you can say, like you have skills, number one. I would agree with that. You have some skills, some competence at some skill. You're a hard worker, sure. And then three, positive attitude and ambitious and difficult situations rises to the occasion. Yeah, you're conscientious, you're resilient. You can use other words for that, but if I give you a project, you're going to get it done, basically, accountability.

So if you looked at this, skills, work ethic, accountability would be a way to summarize it. And you'll hear some version of this from everybody. And early stage employees also, I would say, is the ability to learn your skills or take on projects that you previously haven't done before. Because in the early days of a startup, you will have, you know, five employees doing 20 jobs,

then you'll have 10 employees doing 20 jobs, then you'll have 20 employees doing 20 jobs, and then you'll have 200 people doing 20 jobs, right? In other words, you'll have 10 people on each job, and those are then called departments. But in the beginning, one person literally in a startup will run sales, marketing, and accounting. They'll have three job functions.

Eventually those would be broken up into 10-person groups, and that's kind of the fun, and that's why going to work at a startup is so great. but he kind of pokes the tiger in the second one. You earn work-life balance, and whenever you bring up work-life balance, people are going to get triggered by working hard and learning early in your career.

Eventually, you are so effective you can accomplish things in half the time. If you want work-life balance in your 20s, that's fine and a personal choice, but your career will be capped. The more competent you get, the better your balance can be. It's a spectrum.

If you're really good at what you do, you can get things done in a few hours. It just takes time. So not too controversial. some kind of union style, you know, worker B then replied, never work more than the contract says unless you're paid equity. As a non-senior, you're not. Never work weekends nights for someone's biz.

As a junior, you could never have any kind of extreme competence. Skip anyone who expects you to. Be responsible, learn quick. That's it. So, you know, it's basically really bad advice. And I'll tell you why it's bad advice. all of the skills and the work you put into the job accrue not only to that company

sure they get the output of whatever your labor is right so you made a nice logo you did some sales calls okay great they get the result of that they own the logo and if you land them a customer you get that customer but you also have now made your six seventh eighth logo you've signed your 10th 11th 12 customer you have that relationship with that customer

when you leave and go to another company. You have that portfolio of all those logos you can point to. So it's not true that, you know, people, especially in startups and in tech work, knowledge work, are getting the short end of the stick. Like, say, somebody who is, you know, picking grapes in a field, or is, you know, digging ditches or, you know, is a bricklayer. Yeah, when you're a bricklayer, at some point you hit some level of competence and you're just, you know, putting bricks. So I'll do respect to brick layers. I love watching those kind of like amazing brick layers who go really fast on YouTube.

But the truth is they build the wall. They build whatever they're building with the bricks. They build the brick house. And it's somebody else's house and that person accrues 99.9% of the value. It's not like you are going to be able to then, you know, get some value out of having built that house. You might have made yourself of 1% better bricklayers. So the truth here is if you go to one of these early stage companies and you get all that responsibility, you take out, I would say on average, a startup employee takes out, for every year

they work, they take out four more years of work, that somebody had a big company. Because remember what I said? The person at the big company, there's 20 job functions being done by five to ten people. That means you're going to get exposure to all kinds of work that you normally wouldn't be given to you. Somebody might say like, hey, go find us an office space. It's like, well, I've never done that. It's like, yeah, yeah, and get us insurance. We need insurance. And okay, great, I'll go to a broker. I'll figure out insurance. I'll use a promo code twist. You have to go figure that stuff out.

And you figure it out for the first time. Now, if you were in a big company, they'd be like, hey, don't touch insurance. We have a person in our operations team. Their job is insurance, and they have two people who work for them in insurance. That's what this is about. And so it's always very triggering to people.

It's very entertaining. There are people who get triggered about these issues because of their childhood, right? Maybe their mom or dad worked too hard and didn't give them enough attention. Maybe they feel guilt. They're a parent now. and they feel this tremendous,

and every parent feels this, like, oh, am I working too hard for my kid and you've got it in your head? Oh, I'm working hard to provide a better future for them so they can go to a good school. I can pay for their tuition. I can pay for their college. I can leave them something maybe when I'm gone,

help them start a business. And then you're like, oh, but I should be spending time with them too. You know, there's a, I have a pretty simple rubric about this as parents. Did you do better than your parents? And if everybody in society did twice as good as their previous parents, we would have this amazing, escalation and how good people were as parents. In fact, some people would argue that parenting, some group of parents became so doting on their kids that they kind of coddled them a little bit.

And that's what we're seeing here. This is kind of like your childhood playing out in a tweet storm where people are like, I'm not getting paid for overtime. I'm not working weekends. It's triggering for some people, right? Maybe they didn't get to see their parents on the weekends or something or their parents put on business trips. So I understand that this is triggering. later in my life. But that doesn't mean I still won't post it once in a while. In fact, I'll post today. You can go see it at Twitter.com.

Sash, Jason, I'll post today. Hard work always pays off, right? Just that statement. And then you all can look at, I'll pin it. I'll literally do it live on the air right now. And this is like my go-to tweet. If I just want to entertain myself, hard work, always capital letters, pays off.

And then just for good measure, I'm going to pick a GIF. And I'm going to pick the Gladiator GIF because that is super, super triggering to people. And I'll just do the, are you not entertained? Yeah. I'll just pick a generic gladiator image of him just sitting there huffing and puffing. And you just watch Twitter.com slash Jason how triggering this is to people. Who would ever argue with this point or take the time to argue with it? Hard work always pays off.

I kind of feel like that's not a controversial statement. If you worked hard, it'll have some payoff, even knowing that you did a good job working hard. But this becomes like the raw shock test for people. Whatever issue they're going through in life, they will respond to this based on whatever emotional state they're in. It has nothing to do with the words or the tweet. In other news for startups,

Spotify has acquired a word-like daily game for your ears. It's called hurdle. Interesting quote from the press release. Further down the road, we are also planning to integrate hurdle and other interactive experiences more fully into Spotify to allow music lovers to connect more deeply with artists and challenge friends and have some fun in the process. Okay.

So whenever you see M&A of startups, you have to ask yourself, why is this company being bought? It's typically not being bought for what the company is today. It's usually not because of what it is today. It's for what the acquirer thinks it can become. So when Google but YouTube, they thought, hey, this could be something very big. And what they thought it could be is, well, this could be a place where we could have video-based advertising because search doesn't have video-based advertising and we can compete for television ad dollars. And most people, that seems obvious now. But at the time, there was really only two types of advertising in the web.

You had banner ads and then you had clickable text ads, specifically search ones. And those two type of ads, banner ads were terrible. terrible and annoying and ugly. And search ads were the best ads ever created. But we all knew that TV ads were very special. And so that's why they bought YouTube. They wanted to take a slice of that business. And oh, boy, have they done so?

And it seemed farcical that people would actually put, you know, a Marvel ad, an Obi-Wan Canobi ad, some incredible ad in front of a YouTuber. It was like, really? They're going to put that in front of these like Mr. Beast or, you know, lonely girl, whatever. And then all of a sudden, now we go. And it's like, yeah, not only are they putting ads in front of Mr. Beast, but they're integrating, you know, those brands into the experience. When you look at this, I have been consistently impressed by what Daniel's doing in Spotify.

And Daniel, come back on the program soon. I haven't talked to you in a while. What's really interesting about what Daniel's been doing is I noticed the app is moving more. What do I mean by that? Well, screens are meant to move. When you look at a screen and things aren't moving on the screen, it's kind of a missed opportunity. So on the internet, in interactive media, the ability to click on stuff and the screen moving is really critical.

And now when you open Spotify, I don't know if you notice this, but they have looped videos behind the songs. It's quite annoying. Like if I'm in driving mode, I have to, you know, like,

please stop playing this video. I'm worried I'm going to get pulled over because here I am playing, you know, some Megan the stallion and Megan is on my giant iPhone 13 twerking. And I'm just thinking at some point the other day, I was driving to Tahoe and I'm like, I'm watching some video. It wasn't Megan, unfortunately, it was somebody else.

But, you know, it was like a really big, huge giant video. I'm like, cops going to come by here and think I'm watching TV. I'm just listening to the song. And then they added lyrics, as you probably know, you could swipe them up. So the screen's moving again. And you're going to keep seeing this. With podcasting, they added their video podcast. So now if you watch this weekend startups are all in, producer Nix connects those two things together,

and you can switch from audio to video. gaming is a really good idea. Why is gaming a good idea? Well, what are most people's behavior when they're using an audio app? You go into Overcast, you go into Apple Podcasts, you go into Google Podcasts, you go into Spotify, you go into Audible, you play the track or audio book or a podcast you want to play, and then you go to Twitter or you go to Instagram and you have it playing in the background. Spotify would much rather you keep that screen open. So would Audible, and so would, you know, other podcast players. So to do that, they're going to need to have more media and more reasons for you to stick around.

Such a great idea to have you play a game and then listen to songs or maybe even play a game with your friends. So they also acquired a company called Locker Room last year. This is a sports-focused social audio app. And they renamed a Green Room. So they have Spotify Live. I don't think that's doing particularly well. This is kind of their clubhouse competitor or their Twitter spaces competitor. And I hear like the ringer team kind of pitching it.

and it seems to have fallen flat. But we'll see over time. They could have more of an opportunity than Clubhouse because they have all these artists there. And those artists were really what drove Clubhouse in the early days. When somebody famous showed up on Clubhouse, everybody left Twitter to go to Clubhouse. That could happen. And when Drake or other people do something on Instagram, right, everybody gets a notification, everybody races to Instagram.

So it doesn't seem like Spotify's done a lot. a good job with green room, if I'm being honest. I never see any high profile people there, but they should get people to do more casual stuff and figure out how to incentivize that, because if you did get Kanye or, you know, Megan or whoever to start doing instead of Instagram lives and doing green rooms, that'd be pretty powerful.

And then why not? I mean, here, like we're talking out loud, what if Spotify allowed artists to post to their artist page, you know, photos? Just that simple thing. You know, and you go to Megan the Stallion or you go to Mark Knopfler, and just like Mark Knopfler can post

to Twitter or his Facebook group and I follow him there on Instagram, why can't he post those same things to his Spotify page? I guess it would make the Spotify artist page ugly, but it would be more interesting. That's for sure. I would go back to it more often.

So those are the tradeoffs and balances. Back to this game, it's pretty simple. You get one or two seconds at the beginning of a song, and then you type your submission, see if you got it right. You get six tries. Each try gives you a few extra seconds

to listen to a song. So it's another one these like little clever. Basically these all come from I think Wheel of Fortune or Tick-Tac-Tow. You know, or the origin of these,

the genre of games. And congratulations to them. If you know of any acquisitions that are coming and you want to tip us off, producers at this week in Startups.com where you see an interesting acquisition

and you want to tell me why you think this happened. What is the reason why the acquirer bought the company? Just email me, Jason at Callaghanis.com. That'll be my email for the rest of my

life. I love getting emails from the fans. All right. And just a preview of the week ahead. Tomorrow, Wednesday, we're going to get the inflation print, as they say. Print is just a fancy word for they're going to release this number. And so we'll see if it's month over month, like 0.3% increase and then 8.x% year over year. Just one note on that. Humans are very resilient creatures. We have proven that over our evolution. And you see it all the time. I was just thinking today, like, People get used to higher prices and then they adapt. So what is the adaptation for $6, $7 gasoline? I was driving here in Lake Tahoe, which obviously is going to have high gas because it's off the grid.

It's not on like a main highway. And it's in California. But I was just thinking, you know, $6 and change gas. People are going to get used to this very easily. And the reason they're going to get used to it very easily is they have other options. You could carpool. You could take a bike. You could take a shorter trip.

You could trade in your car. and get a higher gas mileage car, you could drive slower. You drive 85 miles an hour. You're going to burn a lot more gas than if you drive 65 miles an hour. I'm not saying that those are ideal solutions, but,

and certainly we're all entitled, and we want cheap gas, and we've had $2, $3 gas for such a long time that we haven't even looked at the miles per gallon of cars. So as dire as the inflation seems, keep in mind that we do adapt really well. as but a small example. And listen, it's a stupid example, I know.

But I was buying, and I understand like I'm coming from a place of privilege and I already secured my bags, but I've been making iced coffee. Why do I make ice coffee at home? It was really twofold. Number one, I really like this, you know, chickory coffee from New Orleans.

And I just like the idea of making it myself and not the real primary reasons I don't want to order more bottles of it. but I was ordering coal brew in glass bottles. And I realized how much I was spending on it. It's buying $5 bottles, $10 bottles of it. And then I started making myself and I'm like, okay, well, this is 80% cheaper, right? Really simple stuff.

So if you're nervous about inflation, realize that people react to it. And when they react to it, they take steps that lower their spending, which then leads to the people selling goods saying, oh, okay, I got to lower the price of this if I want to get more people to buy it. And then the whole supply chain gets into a competitive marketplace and tries to lower prices to get customers back. We'll start seeing that, right? What would happen, you know, if everybody wasn't traveling the summer? Everybody was going to Europe this summer.

That's why, you know, all this yolo and I haven't been out of the house last year's COVID vaccine summer was going to be the big traveling summer. That was a bit of a head fake. And now this summer everybody went. But if people were really feeling the pinch, then I'd say, you know what, I'll do a staycation or I'll, you know, do a vacation within X, you know, drive of my home and enjoy it just as much. And so that will send all of this inflation in the other direction, I believe. I know it's more complicated than that, but when you see that number tomorrow, the ramifications of it will be if it's high and it's higher than what they expect. So if it goes up more than I think 0.3% is the consensus. Point 3, 0.2, 0.4. Those are the

three numbers I heard people say. Now, that's month over month, not year over year. If it stops going up month over month and people are saying, oh, the acceleration has stopped, right? Okay, we were speeding up. We got up to 80 miles an hour really fast and now, oh, okay, we're from 80, 82. Okay, it's not going zero to 60 in three seconds, you know, like we experienced. And year over year, we're now at a higher base. So next year, it's going to be really hard to grow at 8% year over year again. If it's lower than people think, well, then maybe the Fed will, instead of doing the 75 basis point, interest rate increase, people that do 50. And if it's higher and it blows it away. If it would go to nine or something and it would

go up 1% month over month or something crazy like that, this is for June. Number comes out in July. July's will come out in August. You'll see people freak out. And so that's something we're going to you'll see tomorrow. All right. And if you're looking for a job here working

with me and the team, we're hiring three. One, two, three, video editor producers. We're looking for video editors. You've got to be great at cutting video and making short videos, all that stuff. But then also, you know, your brain turned on and want to help produce the show. Come up with great ideas for stories, for segments, et cetera,

because we're launching two more podcasts this year. So we have All In, we have This Week in startups, and there'll be two more podcasts coming. One of them will be a roundtable, not just similar to the format that I do here when we did the Tech News roundtables, and I kind of evolved the Tech roundtable,

the news roundtables on this weekend startups into All In, and now I've got an evolution to that. And the evolution will be, you know, everybody who's in our orbit, but who's not on All In because All In has no guess. Really, maybe we'd have one every 10, 20 episodes. So this will be a rotating cast of characters, maybe seven really good folks.

And you can guess some of them because you've probably seen them on this show or All In or they're popular on Twitter. That'll be launching in September. And then I'll announce the second one. We're going to make a show at a Foundry University. So we need at least three more video editors. And then we want to have capacity because I'm working on two reality-style shows for real TV.

And so if you would like to come work with, with us. You can just email me, Jason at calicanus.com, or you can send your resume to producers at this week in Startups.com, your portfolio, whatever. Later this week, we're going to do a, we're going to go over a study that was shared over the weekend, particularly bad investments, evidence from venture capitalists. This is done by a behavioral science PhD student from the University of Chicago named Diag. I hope I'm pronouncing your name right, DIAG. Davenport, we're going to invite him on the pod, but we'll talk about his study either way. I've been reading it, And it just talks about the cost of bad investments.

And I think they use the pitchbook data to find out that 10% of investments were predictably bad. No newsflash there. But I have a lot of feelings on it. A lot of people have feelings on it as well. On Twitter, you know, saying, hey, maybe the system is rigged and venture is biased and everybody in venture capital is an idiot. And then other people are like, this is part of the system. So we're going to unpack that study later this week. All right, everybody.

I hope you enjoyed the show. Make sure you follow us Twitter.com slash Mollywood, Twitter.com slash Jason, and Twitter.com slash TWA startups. You can also follow us in our Twitter group, and you can actually talk with all the other fans. This Weekend Startups.com slash T.C. For the Twitter community.

And our Discord is this week in Startups.com slash Discord. Those are just forward you on. And just a quick shout out to our third cohort of Founder University. This is our 12-week program. This is the program that I'm going to turn into a weekly or a two-time-a-week podcast later this year. And in this 12-week interactive course, you get to build an MVP, you identify customers and figure out your business model, maybe you onboard a couple of users, you test, you iterate, you explore the next steps of company formation to fundraising. And I always say we're going to invest in one company, $25,000 at the end of the program.

It turns out I invested in like five or six in the first one. So the fourth cohort will be starting in November. And I just wanted to preview it for you. If you have an idea for a company, you can start tinkering now. And if you go to this program, we charge you $700 to reserve your spot. And if you come to all 12 weeks, we give you the $700 back. And the reason we do that is so we don't burn the spots. And so people have a reason to keep going.

Basically, every week you get 50, 60 bucks back. So it's been quite, it's a very unique penalty system. If you participate, you get all your money back. back and it's free. If you don't participate, you have to pay. This is how your gym should work. You sign up for your gym membership. They charge you $200 bucks a month. If you go three times a month, you get half your money back. That'd be pretty cool, right? It would certainly incentivize you. You'd be getting paid $35 bucks every time you went to the gym. Right, everybody. So sign up at founder. Dot University, not dot com because we got the dot university domain name. Founder.

dot university. I also teach another course, angel.com. I teach people to angel invest. And you go to Angel. You see that. If you want to invest alongside us, go to the syndicate.com. And if you're a credit investor, you can sign up. And we'll let you know about our future funds and you'll see my deal memos. And you can start investing in startups with us. Read my book, Angel.

And I'll see you all next time. Bye bye.