This Week in Startups - Best of This Week in Startups: Week of October 26th, 2020

Episode Date: October 31, 2020

E1130 featuring Billion Dollar Loser author Reeves Wiedeman: https://rb.gy/o9oplx E1131 featuring Squire's Songe LaRon: https://rb.gy/vzyrwc E1132's News Roundtable featuring Acquired FM: https://rb.gy/ryvuvd Follow Jason: https://linktr.ee/calacanis

Hey, everybody. Welcome back to the streak of startups. The story gets crazy, and it's only going to get crazier from this point on because we are reaching the point in billion dollar loser. A great book must read from Rees Weiderman, Reves Weidman, sorry. That comes out today or maybe when you're watching this yesterday. Well, worth getting. It's a great listen, too, by the way, if you're into listening to audiobooks and it moves pretty quickly. And as we talked about earlier, you basically basically, made the strategic decision to let the facts speak for themselves. And really the fact is, it was a good business, maybe not a great business, not a tech business with a founder who was, you know, effervescent, mercurial, but then quickly, who I'll use the word, became deranged and disconnected from reality. And as far as you estimate, this happened when that $4 billion dollar infusion comes in. And to set the stage here, Masay Yoshi-san, I've met with him, actually when I went to Tokyo, I met with him two hours, two times back-to-back,

three hours each time. I mean, he is an intense guy. And he loves ideas and he loves whiteboarding. But am I correct that Adam showed up late for his meeting with Masayoshi-san? And do you know if this happened in New York or in Tokyo? The other way around, actually, Masa was late. Masa was late. Masa was late. He had an interesting day in New York. This was December of 2016,

which, if we can go back to that moment almost four years ago, Donald Trump had just been elected president. And the reason Masa was in New York was to meet with Donald Trump, basically in hopes of currying favor with the Trump administration for a variety of things that saw things. Well, was this the whole lobby thing where everybody during that like two-month period before the inauguration was going to kiss the ring and the law? Bobby and Masayoshi. Oh God, that was so brutal to watch everybody go kiss the ring. And then I think Masayoshi's song comes out with like some like piece of the PowerPoint and holds it up and Trump had signed it or something.

I can't remember. Yeah, it was like it was a. Yeah, it was a piece of paper saying I'm, I may butcher these numbers, but something to the effect of we want to invest $50 billion to create X amount of jobs. And we're going to do it in the next four years in the United States, convenient. tied to the term of at least one presidential term. Interesting. I wonder actually if you go back and look at how much he invested if it actually turned out to be $50 billion.

I think it's definitely tens of billions, that's for sure. If there's an interesting, among all the things I had to do for this book, one question I wanted to look back on and haven't yet. So if there's any enterprising journalists out there or anyone who wants to tally up how much SoftBank actually invested in the United States, how many jobs were created because that was the promise. And I'd be curious to see what the answer actually is. Yeah, it's definitely not, it might be half. It's not small. Yeah. It's not small. So that was the crazy day. So he gets, yeah. So he, he, he meets, he meets, he meets Trump and, and, and, and then he has this meeting with

Adam. And, and they had met very briefly at a, at a conference in India, um, earlier in the year, a startup conference where Adam spoke. But this was really the first time that Mossa had even been in a WeWork. He kind of knew about the business, but it wasn't something that SoftBank thought about. They were a tech company. The Vision Fund, which they had just started, was focused on artificial intelligence. It was not focused on real estate. And so, yeah, Masa came for this quick tour.

Adam took him to WeWork's R&D Lab to kind of show the techy side of the company. and, you know, these were things like a smart phone booth that, you know, change temperatures or a desk that automatically went up and down. I mean, we're going back a couple years. These were mild innovations, but this was not moving us toward the singularity or anything like that. I mean, come on. It's a little bit laughable that, like, your technology is like phone booth based and, like, standing desk.

I mean, I'm here at a standing desk. Like, having the standing desk stand when I get in front of it is not innovational. all. I mean, this is the truth is, I wouldn't say Adam was a Luddite, but he was not like a tech driven guy. He was a sales guy. He was a hype man. Yeah, it's actually sort of safe to say. I mean, he didn't really use a computer at all. Adam is dyslexic. He's pretty severely dyslexic, and it's something he's talked openly about. And so he's not the guy to sit there and send a bunch of emails. And so, you know, for better or worse, he was, he was not your typical kind of tech CEO. He was the guy who was going to, and, and to his credit, I think, he figured out what he was good at.

And what he was good at was getting in a room and pitching whatever he's pitching to, to a group of people. Now, is this the moment where Masayoshi-san takes out his stylist and iPad or something and draws a term sheet and signs it with him in the car? Yeah, sort of digital cocktail napkin agreement on this deal. And, and, you know, of course, these, you know, it's a story Adam and Masa love to tell because it, especially on the way up, it's, it sounds like just this big bet that we're making that, of course, is great. Of course, after that, there were months and months of diligence from SoftBank and a lot of skepticism from sort of the sort of middle to upper ranks at SoftBank about why are we investing in this real estate company, a lot of

pushback on it. But ultimately, as at WeWork, you know, as people told me, Adam got what he wanted when there was something he had his mindset on. That's the same case at SoftBank and Moss is pretty open about that. When he has a feeling about something, that's what's going to happen. And in the book, you were, I was trying to see, I was trying to guess your politics. And you seem to be a little judgmental about, is the only part I felt you were a little bit judgmental about the strategy of a lot of misses are okay if you hit a home run. Do you think that that is a bad aspect of capitalism or a good aspect or are you indifferent about it? Are you a socialist? Are you a socialist? How would you describe yourself when you look at capitalism

and especially high growth startups? I think it's an okay model. It's a risky model, right? Like it, going for home runs every time, you know, you have a tendency. And I think sometimes the home, you know, sports metaphor is going to fall apart. But sort of the home runs, the ones that are successes can have kind of these unintended consequences. I mean, we work for years was a home run. And now we're looking at kind of a situation where it has sort of like almost warped the sort of real estate world in the way that, you know, soft bank dumping all of

this money into various industries has kind of warped these industries. Like, how much are we actually willing to pay for a cab ride or our burrito to be delivered or office space? We don't totally know because all of these services have been subsidized. I mean, you might not call it socialism, but it's not capitalism, at least at its sort of rawest form. And I think to think about sort of the dangers of this, I mean, I remember there's a guy I quote in the book who was sort of competitor of Adams. And just talking about seeing him on the way up, this person was sort of, you know, an avowed capitalist.

And he, but he kind of said, you know, if Adam is successful sort of the way we work played the game of kind of playing fast and loose, growth at all costs, that's all that matters. Is this system actually like good? Is the system, as we've set it up, like, good for the broader society? And I don't have an easy answer to that. I think clearly I'm a user of a lot of these services, but I do think we have to grapple with exactly what all this money that sort of started sloshing around, particularly from the Vision Fund and what that actually did to various industries.

So we're starting to see how software can take away friction and make the world more delightful through enterprise SaaS solutions. Today will be no different. Song, LeRan is the co-founder and CEO of Squire, which is getsquire.com. Welcome to the program. Thank you. Thanks for having you. So Squire allows you, I guess you guys were like the Uber of barbershops in the beginning,

but I think you quickly evolved into providing a full POS point of sale, scheduling, and app development platform for all barbershops, correct? Exactly. We were sort of talking about this sort of

mini entrepreneurial nature of it of, you know, hair cutters, barbers, hair stylists, etc. They all have their own little businesses. They are an entrepreneurial bunch where they move from one salon

to another. They might change and say, I got a better deal here, or they might then start their own barbershop. you do see that path, right, in these employees or these freelancers who then become owners of businesses? All the time. That's kind of the natural trajectory for a successful career in this industry is that eventually many of them, they want to open a shop. That's the main

way that they can build more wealth and make more money outside of just the number of care crusts they're providing each day. So I absolutely receive that. And so if they were not 1099 employees, they wouldn't be as portable or flexible. They wouldn't be able to leave and go to work for another one to start their own. They would just be hourly workers who had to work specific shifts and that would be less,

they would give them less mobility. It would give them probably less mobility. And also it would, I think that's a type of model that could work for some barbershops that have the resources. But, you know, like we said before, a barbershop is a pretty easy business

to start, you know, and the overhead and the amount of assets required is really low. And that's part of the one of the appealing reasons of why there's so many shops and why this is interesting for these business owners. If we were required all the barbers of employees, it'd be a really heavy lift, I think, to starting a barber shop and getting it off the ground. So, you know, we see that model more like in the franchises that have, you know, 30, 40, 50, you know. Oh, the super cuts of the world.

They pay people an hourly wage. Yeah. people hourly. But for the one-off mom's mom and path. You have to be a shift worker. You got to work eight-hour shifts when they tell you. Yeah. And you got to do X number of hours per week and you're not allowed to work at another salon.

Yeah. Yeah. They basically dictate your entire work. Yeah. Typically, yeah. See, I think this is the important discussion that people don't understand is that once you add all these regulations, it becomes impossible for somebody if they had to hire everybody full time and take on that risk to pop up a barbershop. right?

Yeah, I mean, I think it would be. I mean, we can think of, I'm sure there's room to think of how it can be improved and how we can provide some more safeguards for barbers outside of the current situation. But I definitely think it would be heavy-handed to require all barbers and the employees. We would see a lot of stuff shutting down, most likely. Yeah. This is the thing I think there's good intention, I think, when people think they're trying to protect workers. but I don't think that this class of worker wants to be forced to be an hourly worker.

They, what do you see amongst that group in terms of do they want to be hourly workers or do they just want to be freelancers the way they are? If you were to ask 10 of them, how many would say I want the current system, how many would say they want to just make the same amount of money but be hourly? To be fair, I haven't polled this, so I don't know for sure. But anecdotally, I would guess that they like the current system. They want to be able to charge as much as possible, make as much as possible for the services they're providing and have the kind of flexibility. And they also like to build their own book of business, many barbers. So they like to think that these are their customers that they've been building. So when they do go to another shop, they can bring those customers.

How do you do that with the software? I'm curious. How do you manage that with people booking? Do they split the ownership of that lead? Does the individual barber get a copy of the contact information and the store? Or does the individual person have to like build it up and build up their own phone book on their iPhone? A various case by case. And it depends on who, how the shop is set up. So if they're, if they're booth rental and each barber is really just an independent business owner doing doing their own thing, generally they'll have access to the customer data and they can take it with them. When it's a commission shop and the relationship is with the owner of the shop and Squire,

then in that case, we kind of default to the owner and how they want to run it. A lot of times the owners invests a lot of money in marketing and branding and branding into acquiring these customers. So it's not really fair to them to then have the barbers, you know, take all that information. Take the book of business and leave within startup competitor. Yeah, across the street. you know, which we've seen a lot of times, actually. Oh, really?

Yeah, there's a little competition going there. Yeah. Talk to me about the culture of barbershops and what they represent sort of in society and then how you'd think about that in terms of building the software for these barbershops. Obviously, building a dedicated app is part of that, right? People want to have the look and feel. Talk to me a little bit about that culture and what they represent in terms of community building. and then what do these barbershops make in terms of what's their tam for all the barbershops or individual barbershops?

What can they expect to make? Yeah. So in terms of the culture, it's a subculture, really. And the people in this industry are some of the most passionate people I've ever worked with. They don't look at being a barber as like a job or even a profession. Most of them, they look at it as their life calling. And, you know, they'll tell you, you know, being a barber saved my life. You know, I was doing this before, I was doing that before.

And this is the one thing that really has given them meaning. So it's really inspiring to be working with them. And they're also very proud, very proud of what they do. That's like the fact that we are so specialized and so focused on this vertical really gives us an advantage relative to competitors who are trying to go horizontally after a lot of different verticals. They know that Squire is frankly, it's the only. company that is dedicated exclusively to them and to solving their needs and to providing value.

So that's something that we're really proud of as well. Hey, everybody, welcome to this weekend startups. I'm your host, Jason Kalakana, and back on the pod. That's right, the Acquired FM Boys are here. David Rosenthal and Ben Gilbert, welcome back to the podcast. After two very strong appearances in 2020, the audience loves when you come do the news roundtable, boys. How are we doing?

Very strong. I've always wanted to be very strong in the eyes of Jason Calacana, so I appreciate that. This was an interesting moment, I think. I want to get your guys take on Ted Cruz, who I'm no fan of. I'll be totally honest. I find him to be a blowhard and just like most politicians, just incredibly annoying to even listen to. But boy, you don't want to be on the other side of this guy because sometimes he does get it right. And I thought he was putting up a pretty good, a couple of swings at Jack.

Let's listen to this and come back in a minute after Ted. Hits Harda, Jack. Mr. Dorsey, does Twitter have the ability to influence elections? No. You don't believe Twitter has any ability to influence elections? No, we are one part of a spectrum of communication channels that people have. So you're testified to this committee right now that Twitter, when it silences people, when it censors people, when it blocks people, when it blocks political speech that has no impact on elections?

People have choice of other communication channels with which... Not if they don't hear information. If you don't think you have the power to influence elections, why do you block anything? Well, we have policies that are focused on making sure that more voices on the platform are possible. We see a lot of abuse and harassment, which ends up silencing people and having them leave from the platform. Mr. Dorsey, who the hell elected? you and put you in charge of what the media are allowed to report and what the American people are allowed to hear and why do you persist in behaving as a democratic super PAC

silencing views to the contrary of your political beliefs? Let's give Mr. Dorsey a few seconds to answer that and then we'll have to conclude this segment. Well, we're not doing that. And this is why I opened this hearing with calls for more transparency. We realize we need to earn trust more. We realize that more accountability is needed to show our intentions and to show the outcomes. So I hear the concerns and acknowledge them, but we want to fix it with more transparency.

All right. So what's your guys take on that one? I mean, this is the mix up. This is the battle of who has the better 2020 beard. Yeah. Yeah. Can we talk about those beards for a minute? I mean, it does require a pause.

You know, Jack's got such a strong beard game now. He's like Zizi top territory, for sure. Yeah, remember Brian Wilson, the Giants Reliever, back in like the 2010 World Series? Yeah, I mean, this is hitting a level of pandemic supremacy that was rarely been seen in the beard game. I mean, this is more than like mustache, what are they called, like the facial hair in November or something? Yeah, you have Movember. Movember. This is like, this is, he's not even up to Movember.

I mean, this is October and he's already coming into November like this. All right. I apologize for getting us on to this. Yeah. I'm giving you both an off ramp here. And I'm apologizing. Who wins this slug fest here? So, look, like, they're both wrong.

Like, it's ludicrous to take the statement at face value that no, we can't impact elections. Like, a hundred percent you can. and that's what you're worried about and what we're worried about and why you're, you know, like, that's why we're here. And the other thing is like, you could see that setup coming a mile away. It's like, literally. You could see Ted Cruz like rehearsing with his friends and family, like that line about who elected you.

And I, you know, it's just such a, I, it's kind of like a sork in script at this point, you know. Totally. And I wish I could credit. The sovereign state of Mississippi will not withstand. I mean, I felt like I was in the insider or something. Yeah, I mean, I forget who had this take. It may have been Nilai Patel at the verge. But the point that I think is really interesting here is the strategy is create these clips and these soundbites of you hitting Jack, you being Ted Cruz, and then distributing them on Jack's platform.

It's this like crazy irony of the whole situation of like you're trying to earn the love from your base for doing this to this guy who created the. way that you communicate to your base. It's wild. Yes. That is like an inception type moment. AOC also incredibly good at this at this point of, you know, setting people up for these, you know, tweet clips. Yeah. The clip game. It's basically politics is coming up to these like these hearings and how strong is your clip game. So I think we all agree that these platforms actually impact elections, which is why they're having this and why the Russians interfering and creating bot farms is a whole issue. So Jack loses that part of it. But then Jack kind of turns out and says, hey, listen, we're just, we're here to, we're here to help. We want to make it transparent.

We're asking you for solutions. Did this kung fu move and flipping the energy here work, David, or not? Where does it not even matter? I mean, I think from like a politics standpoint, it just depends what your goal is. Like, no, I don't think it landed well in the moment here. But I mean, I think it gets back to what the goal is. Like, the goal here is, is clips for Ted Cruz. Like, I think the real question is, like, what could consequences of all of this be for the platforms? Um, interestingly, I think, you know, kind of along the lines I was saying earlier about Twitter trying to be orthogonal here. Any consequences are probably good for Twitter, I think.

Like anything that we can, as long as it also weakens Facebook and then opens up seams for Twitter. If it, on the other hand, if it just creates more opportunity for regulatory capture for Facebook, which actually thinking about it now, that's probably the more likely outcome here, then that could be bad. So, yeah, I don't know. I like the way they're saying, hey, what is your suggestion? Please, you give us clarity.

You all are so smart. Go ahead. I mean, I think everybody can agree what happens when another person threatens somebody or uses violence or hates speech or doxes. Like, these are low-hanging fruit. Super easy to say, we kick that person off our platform, just like somebody came into our restaurant and took a leak in the corner. We're going to kick them out of the restaurant.

There's no discussion here. But somebody comes in and says, hey, you know what? I have stolen material or I'm reporting on stolen material about Hunter Biden, which apparently like the information is correct. And then the question is, how did they acquire this information? And then that leads to a whole other can of worms, which is, is the New York Post not, and I sound like I'm red-pilled here, but I don't believe in censorship. Is the New York Post not allowed to do investigative journalism in the way of the Washington

post is? Well, here's another lowbrow? Or here's another way to phrase that question is, uh, and yours is loaded and mine's going to be loaded too. If you don't have the editor, the managing editor or whatever the title is at the newspaper doing their job, is it

Twitter's responsibility to do the job of the editor? Like should... I like that framing. What if, what if, uh, not the New York post, but any other publication just turns into uh, a loosely edited

a whole bunch of bundled substacks. And then that brand becomes very popular. And so people trust it. And then people are putting out their own basically unedited, you know, journalist. Here's something. Obtains Source. And then straight to the public, if the editor is abdicating their responsibility, at what point is it the responsibility of the platform to do that in our, you know,

in our republic? And like, that's the thorny issue. There's a value chain here of information to synthesizing it into content, editing content, and then doing distribution. And as long as all of the actors before distribution are doing the job as they have for the last few hundred years in our society, then it shouldn't be an issue. However, there's lots of business incentives to not do those jobs exactly to the same level of rigor that we used to. and therefore it's putting pressure on the platforms to play that role in society. I think it's just an amazing point, Ben, you're basically saying, you know, the post is going to be like, hey, we'll just publish this and then, yeah, you guys amplify it and we get the benefit,

we get the page use, everybody wins. The incentives are so misaligned in terms of truthiness. Like if we want to get to the truth, really link baiting and amplification on these platforms is just a wicked combination. And listen, it takes two to tango. The publications and the platforms are. in cahoots to do link baiting to capture our attention, which is why poor David had to delete Twitter off of his phone because his anxiety was going off the charts.

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