This Week in Startups - Bezos goes to space, Robinhood IPO, USDC attestation + Flock Safety’s Garrett Langley | E1249

Episode Date: July 21, 2021

In news Jason covers Bezos reaching space (2:32), Robinhood's S-1/A (13:28), Circle's new USDC attestation (22:25), crypto crackdown in Asia (36:06), Zoom buying Five9 for almost $15B (46:00) Keith Rabois' OpenStore (47:11). Then for our Next Unicorns series, Jason interviews Flock Safety CEO Garrett Langely, about reducing crime in American cities and neighborhoods (50:18).

Today we have an amazing show for you for our next Unicorn series. I interview Flok Safety's CEO Garrett Langley about his controversial startup, which records license plates into a database to help reduce crime. Coincidentally, they just announced today $150 million series D. So they're not the next unicorn. They're today's unicorn. But before that, we've got rapid fire news for you. You've been giving me great feedback on me talking about the news.

Well, it's a packed newsday. Bezos has gone to space. Robin Hood is offering 35% of its IPO shares to retail investors and Circle. The stable coin that's going up against Tether has done their attestation and it is night and day compared to Tether. As well, the Far East crypto crackdown has continued and why that's a good thing for crypto. Finally, my boy Rowan Trollope has sold 5'9, which you talked about in a previous episode, to Zoom for almost 15. Billion. Oh yeah. And Keith Rubei's Open Star went live. Stick with us. Season three of the next unicorns is brought to you by Enbroker's Startup Insurance Program helps startup secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off traditional insurance today at Embroker.com slash twist. And while you're there, get an extra 10% off using offer code twist. LinkedIn jobs. A business is only as strong as its people, and every hire matters. Post your first job free at LinkedIn.com slash unicorn. Odo is a fully customizable and fully integrated suite of

business apps that lets you build and scale your stack as you build and scale your business. Your first app is free forever, and right now Odo is offering $1,000 off your first. first implementation pack at odoo.com slash twist. That's ODOO.com slash twist. And learn how your startup can build security foundations from day one. Sign up for a live jam session with Vanta co-founder and CEO Christina Casiopo on Wednesday, July 21st at 10 a.m. Pacific by going to launch.co slash vanta jam. All right. In our first story, obviously Bezos has launched himself successfully and three others into space on Blue Origins New Shepard. It just happened this morning. Some background. This is

the New Shepard's 16th launch overall. The four crew members included Bezos, his brother Mark and Mary Wallace Funk, who goes by Wally Funk. If you don't know who she is, she is an 82-year-old former pilot, who in the 60s passed the rigorous NASA astronaut criteria, but was denied the chance to go to space when the Mercury 13 program was disbanded. 60 years later, she is now the oldest person to ever fly to space and the 66th woman in space in total. Congratulations to Wally Funk. And a trust fund kid named Oliver Dameen, who is 18 years old from the Netherlands. He is the youngest person to ever go to space. So on this one flight, yeah, the youngest and the oldest, that's kind of neat. Oliver took the space of the previous $28 million

auction sale because that rich person, I guess, had a scheduling conflict and couldn't go on this one, so it's going to go on a further one. Rich people problems. As a combination, not only are they individually the youngest and oldest, but obviously in a combination, it would be the largest distance between the youngest and oldest person on a manifest. But that will change. You will have a great-grandmother, a grandfather, and a great-granddaughter or grandson. At some point, you can, if this keeps up.

Jeff Bezos, he's had dreams of going to space for decades. He even spoke about in June 2000 in this interview with Charlie Rose, and he has hair on this clip. I'll talk to you on the other side of this 60-second clip. If you weren't the CEO of Amazon.com today, what would you like to do or be? Well, so if I could do anything, and it turns out this is a very hard technical problem. So I don't actually hold out great hopes. But if I could do anything, I would like to go help explore space. Tell me more.

I mean, what would you do? How would you go about it if you weren't doing this? Well, you know, the picture I have is that I would get in a rocket ship, go up into space and, like, you know, go check out a few things. Now, this is why I mentioned at the beginning, this is a very hard technical problem. Yeah, it is. But I would think if you put your mind to it, you could probably figure out a way that we could do this. Well, it's very hard.

Your Board of Directors and your stockholders might not be heavy. It's very hard. It's really, I mean, so, you know, who knows what 20 years from now, if there's some significant changes in the technology, maybe such things will get easier. But we haven't made significant improvements in, you know, space transportation systems, really since the Apollo program. All right. There you have, folks.

And Charlie Rose, accurately pointing out, like shareholders might have a problem with this. And, of course, he gave up the CEO slot and just a week or two later wound up going to space. He founded Blue Origin in 2000 and basically nailed everything he said in that clip 20 years from now. Maybe things will get easier. And of course, that is exactly what happened. And if you're watching on YouTube, check out this 75. And we have a YouTube channel, by the way, if you listen to us on the podcast. Or we actually have a video podcast on iTunes. You can get video. Although we don't have that synced on Spotify yet. Something we're going to work on with the Spotify team. I know with Joe Rogan you can listen or watch. We need to get in on that as well and

sync our podcasts on Spotify, but you can watch the video on iTunes right now. And here's a clip of the four-person team, you know, going into the capsule, very exciting. A few minutes later after takeoff, the rocket reaches a top speed of over 2,200 miles per hour. I think that's four times what you would experience on an airplane. Yeah, typically going 500, 600 miles per hour. And the maximum height was over 351,000 feet, more than 65 miles above Earth, this peasant. the Carmen line, which is 62 miles above Earth, which is one group of individuals, or maybe the majority group of individuals' definition of reaching space. The rocket and capsule separated at about 250,000 feet for the descent. So the rocket landed first.

Fun fact, out of the 16 New Shepard rides, the booster rocket has landed safely 15 times. Obviously, this was SpaceX's big innovation. Being able to make the rockets reusable really is a great way to make space travel. more affordable, as Elon always points out, like, imagine you took a 747 or some, you know, airplane across the Atlantic and then when you got on the other side, you threw it away. It would make the tickets pretty expensive, wouldn't it? Now here, the capsule lands safely with all the passengers and the party starts, Bezos, high-fiving, hugging, loved ones, popping champagne, all of that, obviously, in comparison to what

happened last week when Virgin Galactic Spaceship 2 launched, Richard Branson's flight, reached an altitude of 282,000 feet or 53 miles above the earth. And so Branson's rocket spaceship two surpassed NASA's designation of the Earth space boundary of 50 miles, but fell short of the Carmen line, which is 62 miles. Who cares? And Branson said after he landed the flight last week, I've said this many times. It really wasn't a race. We're just alighted that everything went so fantastically well. We wish Jeff the absolute best and the people who are going up with him during this fight. So that's just completely ridiculous.

It obviously was a race for the two of them. They're both going to be transporting passengers. That is the business model, I think, of both companies, because neither company competes with SpaceX and their delivery rockets, which are just not even comparable. Branson tweeted congratulations and was classy after the Blue Origins flight landed today. Well done. Very impressive, best to the crew from being the team at Virgin Galactic.

Of course, Elon sent many people up to the International Space Station, is really, you know, orbital space is really what it's about. And what's going to be really interesting is SpaceX is going to be putting four passengers in orbit, not for three or four minutes, but for three days in the fall. And so once again, these things are not comparable. One is low orbit, you know, like a fun, simple, you know, a dip into space, still an extraordinary accomplishment. The other one is like being a true astronaut and, you know, I'm thinking SpaceX will be sending people for trips around the moon shortly. I think Elon's talked about that publicly a whole bunch.

During the three-day journey, the ship will orbit Earth every 90 minutes along a customized flight path. So I don't know what that ticket's going to cost compared to the tickets on Virgin or Blue Origin. But this is amazing. What a great time to be alive. How inspiring. Who, in their right mind, could be against this type of human success as a species. being able to put civilians in space

is an extraordinary moment. Oh, wait, Sharon Straron, a freelance writer published an article in The Atlantic this morning titled Space Billionaires, please read the room. Oh, my God. So much. I mean, I would click on the bio, but I'm sure there's pronouns in her bio

unnecessarily. And she is going to dunk on all the great progress we've made in science and developing the human species. Here's her quote, could there be a worst time for two Uber-rich rocket owners to take a quick jaunt toward the dark, especially in the United States.

The climate crisis is now actually starting to feel like a crisis, which is so ridiculous and stupid and virtue signaling that this writer who has contributed nothing to science, I'm assuming, you know, she can sit there and be a critic and throw rocks at people actually doing the real work, But she might have missed the fact that the two billionaires have done huge things to help the environment. Number one, Bezos pledged $10 billion to climate efforts. And number two, Elon created Tesla, which has more electric vehicles on the road than anybody, as well as solar power and the power walls. How deranged and cynical are you that you literally, say, read the room.

when the people you're criticizing who are taking us to space to make the species multi-planetary are also deeply involved in solving climate. In fact, the largest donation in the history of climate comes from one and the other has had the biggest objective impact when it comes to transportation, solar panels, and battery packs. Oh, my lord, how clueless are you? She followed this up, obviously. To their credit, the two billionaires aren't totally oblivious.

In recent years, Branson has proposed a. climate dividend, a Bezos is pledged $10 billion on climate efforts, though we still don't know where all that money will go. Oh my God, these hall monitors, they're just so complaining. But given what humanity has been through the past year and a half, I can't help but wonder, what are they thinking? What are they thinking? They're thinking about using science and technology to advance the human species, as opposed to what you're doing, which is complaining in the Atlantic, that science is progressing and that these two individuals

are, all three of these individuals are giving billions of dollars to climate change and changing climate change by creating electric vehicles. Oh my lord. But, you know, in fairness, it's a great link baiting, clickbaiting headline that probably got a lot of page views.

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in their seed round. So Robin Hood just released this forum with the SEC and it projects the company's valuation to be 31.8 to $35 billion if you count their restricted stock units, RSUs. That puts the valuation at 38 to 40 billion, as calculated by Alex Wilhelm at TechCrunch, our friend of the show. This builds on their S1. We broke down the S1 in episode 1240, if you want to go back and read that. This is just an amendment. That's what the A stands for when you do an S1A. It gives a little more details to the SEC and everybody else who might consider investing. They're going to sell 52 million shares in their IPO, which amounts to about 6% of the company. So far, the companies raised $5.8 billion.

So this is bringing the total amount raised to $7.8 billion. But what's really unique here is obviously that Robin Hood is giving 35% of their shares to retail investors on the platform. That's me and you and everybody else using the platform. I think they have 18 million active users. So if you start a Robin Hood account, you will, I guess, have access to this. and it's a new feature they call IPO access, which is going to let retail investors as opposed to friends and families and rich people who have bank accounts

with the banks that are doing traditional IPOs. And it's kind of an insider's game, which I found out over time as I moved up my station in life and people wanted to curry some level of influence with me, they would offer me friends and family IPO shares. And all of a sudden, you're like,

oh, I get to buy it the IPO price, maybe I can flip it. The employees, you know, can't flip it. The early investors can't flip that stock. So this is great. We want to democratize the stock market. We want to make the world a little bit more fair. And equities are the quick way to grow your wealth, as anybody who's played in the stock market and had a lot of time in market knows. And so this is just another stepping stone in Robin Hood's mission to democratize the financial world. They're using Goldman Sachs and JP Morgan. And I guess for those firms, they, you know,

don't control those 35% of shares. It is the job, obviously, of an investment bank to come up with evaluation that the market's going to accept and allocate the shares to all the institutional investors. There are direct listings, which this is not where you don't sell any additional shares. You just put the company public and everybody can trade it. This obviously spacts. When retail users buy, they're usually buying the stock after all those allocations have happened, and they're usually the ones who are being flipped. So some rich person who's got a hundred million account with Goldman Sachs or whoever gets a $5 million allocation, it becomes worth $12 million, they flip it the same day, and the retail investors in the public buy and give that

gain and that quick win to the rich folks. So they're basically flipping the script on this. And so IPO access is going to be for other companies as well. I think Duolingo is going to use it, the language company, language learning company. The Robin Hood fact explains it pretty simply. We partner with investment banks to help distribute IPO shares to the public. We are not an underwriter. So we don't work with the issuing company.

Instead, investment banks allocate shares to us, and then we give our customers a chance to buy the shares we receive. So Robin Hood is pioneering this new feature. Congratulations to them, and they're dog-fooding it themselves. Here's Robin Hood's quote on how IPO access will work. If you've requested IPO shares, we'll let you know how many you can buy on the IPO. We allocate shares after the market opens, but before the IPO share is trading on the open exchange. If you are watching, here is what the IPO access eligibility screen looks like.

Confirm your eligibility is what it says at the top. This is what you would see if you open your app and you do it. I'm not a restricted person is the first question. FINRA restrict certain people and their family members from receiving allocations and IPOs. Second, I'm aware of the flipping policy. Investors selling or flipping shares within the first 30. days may be restricted from future IPO. So they can't, I guess, require you to not flip, but they cannot let you into the next one. I understand the risk. It's the third point.

investing in IPO may be riskier than other investments due to the lack of data and other factors. And then you agree, and you're in, I guess. In related news, the Reddit group, Wall Street bets brought up shorting Robin Hood's IPO after the GameStop trading chaos that happened in February. So users are calling this the great shortening of Robin Hood and the big Robin Hood. short. So things could get crazy. Maybe some people want to get some revenge after Robin Hood had to shut down trading. Some Reddit users are now posting to rethink, shorting, and instead just shun the stock market debut. In other words, just don't participate in it. A user under the name, the only tape posted in Superstank. Just forget Robin Hood all together. Let them go down on lawsuits

and loss of customer base. This post has more than 7,000 upfotes. But the truth is, And Robin Hood users are as active as ever, according to their S-1, and there's 18 million of them. So another Reddit user posted about the choice to not short for a myriad of reasons from fears of being margin called and forced to sell other stocks to speculations that it may be a trap by the hedges. So my best advice to everybody listening is unless you're an insider and you really have a lot of information and you do this professionally, I would stay out of all of these stonks where people are trading them based on anything other than the quality of the revenues of the company, the quality of the product of the company.

When you're involved in AMC or Bitcoin or Dogecoin or GameStop and you're really working with things that might have disconnected from the reality of their core offering, like, what does Bitcoin and what does Dogecoin or Ethereum actually do in the world? or what does AMC or GameStop actually provide to customers and how much those customers spend and how profitable is it? Anything where you have a disconnect between the core product and the valuation and the trading of that asset, you probably want to get out of that

and just focus on a company where the assets and the product they provide correlate in some way with the price of the asset. In other words, go by Netflix or Amazon or Disney or Airbnb or something like that. Something where you actually use the product and you understand the revenue and the quality of it. You know, if you're Hindenberg research and you've got a team of people and you're writing a 50-page report on EVs, you know, and like we talked about with Lortstown last week, sure. You could maybe, you know, you got that information on fake orders you've done your research.

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And I really appreciate your feedback on how I'm doing with this rapid news format where I try to keep you informed in the podcast of what's going on and maybe give you a little bit of my opinion or my take on it. Circle led by Jeremy Aller, who I've known for 20 years. I wouldn't exactly call us friends. I don't think we've ever gone to dinner or anything like that. And I don't know if he's got kids or if he's married. So I wouldn't consider him a friend.

But somebody I've known in the industry for a long time because he did Coal Fusion. And Brian Alvey and I used Coal Fusion to build. locksmith, I believe, in the first version for Weblogs Inc. So we know him, and he did Breitkove after that, a video company, and now he's doing Circle. They did an attestation. A testation is some quarter of report that's not exactly like an audit, but it's more than just a review.

Some auditor looks and make sure that what you're saying about your assets is in your bank account. And Circle obviously has USDC, a stable coin. If you don't know what a stablecoin is, we can look that up. But basically, it's a cryptocurrency that is pegged to another currency, like a fiat, like in this case, the U.S. dollar, one for one. And the most popular stablecoin has been tether. We've been doing an investigation. You can follow the hashtag tether or tether investigation on Twitter and see that or go back to our previous episodes.

But Circle is going public this year. And they did this right as the U.S. Treasury is increasing their focus on stablecoins. So the regulatory environment for stable coins is getting more intense. Circle is going public and Tether is under massive scrutiny. So yesterday, Secretary of the Treasury Janet Yellen gathered with Jerome Powell and other high-ranking officials to discuss stablecoins. So this is somehow in the zeitgeist in a major way, which I think means there could be something funky going on with Tether like people are saying and that there might be government

action coming. And here we go. the government's meeting, and according to the Treasury officials press release, they discussed, and I'm going to quote here, the rapid growth of stable coins, potential uses of stable coins as a means of payment, okay, so far so good, and potential risk to end users. Okay, uh-oh, the financial system and national security. Our government consider stable coins as a potential risk to users, citizens of the United States, the financial system itself, and wait for it, the national security of the United States of America. People do not put out a press release like this, lest that be accurate

and they have some specific agenda coming. So if they're going to say this is a national security risk, a financial risk, and a risk for you, the consumers, that means actions coming in my mind. That's how I read it. They're preparing the market through the press. That's something big is coming. So we're going to get some regulation, I'm sure. Here's the quote, the president's working group on financial markets expects to issue recommendations in the coming month. Recommendations are essentially a chance for the public and other participants to give comments on what will become law. Some quick background on Circle. They issue this USDC, which is the second largest stable coin in crypto with 26.5 billion tokens in circulation.

Tether is number one with 62 billion in circulation via Coin Gecko, a website that tracks these things. The total USDC in circulation has grown more than 2,600% since the beginning of 2021. Obviously, Tether is either flat or declining in terms of its usage. It's very hard to know. But I think flat is what most people are saying on Twitter, so I'll go with that. Here's the interesting thing. Circle is increasing the amount of transparency in what they're doing at the same time that Tether is, you know, attacking people questioning them. So that's a very interesting trend. And Circle's going to go public via SPAC at a $4.5 billion valuation.

That was just announced two weeks ago on July 8th. They're going to merge with Concord Acquisition Corporation. That's the name of the SPAC. And the CEO and co-founder, Jeremy O'Lear, went on CNBC Squawk Box to announce a SPAC on July 8th. He's also agreed to come on this program, and we've traded back and forth, and we're just scheduling it now. Here's a 45 second clip where he explains his reasoning for going public, very

interesting reasoning, too. And we've seen the adoption of USD coin, which is the digital, the digital currency, the dollar digital currency that we principally operate skyrocket. It's grown 55x over the last 12 months. The amount of USDC in circulation has grown to almost 26 billion, and it's driving incredible growth as a company. And as we look at what we're building, building a platform and a set of services for major corporations, financial institutions, and others to build on, we just see an incredible opportunity to grow, to grow rapidly and grow around the world. And we think that, you know, this set of transactions and becoming a public company, I think really sets us up to be, you know, a trusted platform in this,

in this digital currency industry. All right. So they have it. Jeremy Lear, very clear. And the money quote, course being, becoming a public company really sets us up to be a trusted platform in this digital currency industry, like Coinbase. The fact that Coinbase and Circle will both be public entities means the public can trust those companies more. If Madoff or Theranos had been public companies, they would not have been able to be so opaque. They wouldn't have been able to be opaque at all. They would have had to do a lot of disclosures and had professional auditors, professional accountants, etc. And Tether has sketchy books, lawsuits, commercial paper, the BitFinex connections, and their executive team is MIA, where's the CEO? Despite all that, Tether did say they are going to go on

CNBC this Wednesday. We'll see if they cancel and we'll see how good a job Deirdre does questioning them. I wish they had Jim Kramer come on because, and maybe help Deirdre with the questioning because that Jim Kramer's been on top of this as well and has, I think, some inside information on the commercial paper space. So I think Circle can become the Stabilist of all the stable coins. I don't have a horse in the race. I don't own any of the stable coins. I don't own insurance. shares in any of these companies. And my crypto exposure is limited to some Bitcoin that we own. So just this morning circle released this attestation done by Grant Thornton, which is, I've seen them all over the industry. They've been around since 1986. They have had over $1 billion

in revenue last year. This is a legitimate firm here in the United States. The attestation was dated on May 28th, and it took the firm over 50 days to complete it, which, seems actually an appropriate amount of days. I shouldn't say over 50. It took them 50 days to do it. At the time, there were 22 billion in USC in circulation today. There's slightly more at 26.5. And here's some excerpts. I'll quote, our examination was conducted in accordance with the attestation standards

established by the American Institute of Certified Public Accountants. The total fair value of the U.S. dollar denominated assets held in segregated accounts are at least equal to the U.S.D.C. in circulation at the report date. So it's at least equal. I guess they're leaving room that it could have increased in value because they have some assets that could throw off interest, I'm sure. And the segregated accounts means you're not blending. And this was something Tether was I think accused of. And I think the U.S. Attorney General actually settled with them over this was that they were mixing accounts, right? They're operating account with the account holding these assets. So you could have Tether and Bipfinex somehow sharing accounts. And that is a big no-no. That's actually, I believe, what took down full-tilt poker, which was they had the players' accounts, their money players had, and their operating budget, you know, what they were using to run the business. They had commingled those accounts. That's a big no-no. That would be like Charles Schwab taking your assets and what you own for your retirement and putting in the

same banking account. They play the Charles Schwab employees out of. And that co-mingling is really, really against the rules, at least here in the United States, for those people who, you know, operate in the United States, which is why I think a lot of these regulations exist, because we've been through many frauds in the United States, so we have a nice regulatory environment. And that's why some people like crypto and offshore accounts is because you get rid of all that regulation. If you get rid of that regulation, things move faster, and also things can go off the rails quicker. So let's look at the breakdown here. Sixty-one percent cash and cash equivalents. So, can Cash includes deposits at banks and government obligation money market funds.

Cash equivalents are defined as securities with an original maturity date less than or equal to 90 days in accordance with general accepted accounting principles. So that is a much different number than Tethers. 13% Yankee CDs have never heard of these. They're defined as U.S.D. denominated certificates of deposit issued in the U.S. by branches of foreign banking organizations. 12% U.S. Treasuries. We all know what that is. 9% commercial paper. Commercial paper are loans.

to other corporations. These are considered risky or can be very risky and they're very opaque. I think anybody can just print these up. And so that was one of the big issues that the financial times and others pointed out with Tethers. 5% corporate bonds, that makes sense. Point two percent municipal bonds totally make sense. Those are pretty solid assets. You compare that to Tether. They had only 2% of their total assets in cash compared to 61% for Circle, if I'm reading this correct. Tether also combined commercial paper into cash and cash equivalence, while CERCRA separated the two in different categories. I think Circle obviously did that, seeing all the FUD Fear and Certainty and Doubt associated with that move by Tether. And we'll find out over time

if that was fear uncertainty and doubt or, you know, an accurate assessment of the risk associated with Tether. Tether also had over 40% of its assets in commercial paper versus 9% for USDC. My question in all of this is, who gets the float on the commercial paper and the Yankee CDs? So is the business of having a stable coin that you have, let's say you had 26 billion or 60 billion, and you make 1% on that or 2% on that because some of these assets that are off interest? The people who have the stable coins, they don't get that. Tether and you and Circle get those, which means if you have 60 billion and you're making one or 2% a year, do you get $600 million or $1.2 billion that you get to make?

In other words, the float, that's a pretty great business. Is that how they make money? Is that the business here? And then if that was the business, that would incent people to go after more and more risky categories of capital allocation because they get 100% of the returns over the dollar peg. That could be a reason why people would be more interested in commercial paper because it throws more money off.

And companies are not going to go for the safest return. they're going to go for the biggest return, or humans tend to go for the biggest return, not the safest return, at least in the financial space, at least in my experience. So this is where I think regulation will come in as maybe they'll just say,

listen, if you want to have a stable coin in the United States, you want to operate here, it has to be 75% cash-cash equivalence or something like that. Or you're going to be graded as a tier one, tier two, tier three, and we're going to tax you

or create some regulatory framework here. My bet is, that tether is their mix of and their auditing is not going to be enough to operate in the United States for much longer or other jurisdictions. And I think USDA is going to overtake tether very quickly. I think that'll happen in under a year or two because, you know, what's going to happen is everybody who believes in crypto, who wants crypto to be a real trusted part of the financial system, I think any good actors or anybody who's long crypto is going to want to, get rid of the tethers and get rid of the Bitfinex and these other, you know,

binances, people who are operating in the shadows in like a dark way, people are going to want those out of the system and they're going to want to have more coin bases and circles and public companies and regulations so that this whole space can be a little more stable. And in fact, getting out of China is a big part of that. If you get, if you don't have the service in China, as I said, when China banned all the Bitcoin mining and we saw the whole scale of the Bitcoin network constrict. That's actually, I thought, short-term paying for a lot of long-term gain. And nobody wants to be involved in this currency if they think China has the ability to

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in a very theatrical way. They alleged that the miners had stole $2 million worth of electricity from power lines. We know that this is a trend with people stealing power from different places and then trying to do the arbitrage with mining for Bitcoin. And they did it with a bulldozer.

Here's the video. If you're watching, got to be heartbreaking if you were the person who set up all those rigs and paid for them to watch a literal bulldozer bulldozer drive over them and crush them. This is a serious message they're sending to the crypto community with a visual, right? Obviously, if you want to persuade people to take something seriously, you use a visual,

and here we go. Here's a visualization of what will happen to your 1,000 rigs, which must cost $1,000 or $2,000 each with all the memory and GPUs in them. We're talking about millions of dollars worth of machines just being crushed here. That, to me, was a bit of a bummer. I would have rather seen the government confiscate those and set them up on the government network and let the government profit from those and pay back the electricity or have them auction them off.

So that would have been a much better use, but clearly they wanted to send a message to people who are stealing. Okay, and remember back in June, Chinese authorities arrested over 1,100 people for allegedly using crypto to launder money, according to the Wall Street Journal. If you just compare that to other mass arrests, like we had... You know, 13,000 people arrested over three days, according to the Wikipedia for the May Day protest in 1971. But we really have not had that many people arrested in a drag net.

Sometimes you'll get some people arrested like in a Mafia Rico case of a hundred. But China has made it clear Bitcoin cryptocurrency no longer welcome. It's pretty obvious they're going to have their own cryptocurrency. They're going to control it. And it's going to be amazing for an authoritarian government to control every citizen's money and how they spend it. And if you are convicted of a crime, you could literally,

or you know, it could be an abuse by an authoritarian government, you can just explode somebody's money. So you said something about the government they didn't like. Let's say you're Jack Ma. They could literally just press a button and Jack Ma's money either goes away or is literally taken from him.

Without a court case, without even having to go and seize it from a bank. Just, boom, press a money, digital one, we now have your money. Or if they want to tax people, imagine in an authoritarian government, they can just press a button and say, we're taking 10% of everybody's money. It's a one-time tax for the, you know, to help the government of China. And this is, I think, what some of the crypto people have right about money, which is, why should the government be able to do this? Why should they be able to just take our money at any time or tax us? And it goes

back to taxation without representation or other sort of moments in history. And I think that was like kind of the positive, non-toxic, interesting take. But as I told you all, you are not going to fight the Chinese government. You're not going to fight the North Korean government, the Iranian government, any authoritarian government. And all these Bitcoin maximalists kept telling me I was wrong that you couldn't stop Bitcoin. It was unstoppable. Cryptocurrency is unstoppable. China can't stop it. You know, for the for the, for the, for the, for the, The Bitcoin Ultras, I hate to say, I told you so, but here is a 60-second clip from episode 1219. In December of 2019, I did the following tweet.

BTC Ultras have lost their minds if they think the Chinese government can't control track and ultimately ban Bitcoin usage at any time. They put you in jail for running a VPN in China, a virtual private network, you know, when you obscureify your IP address. Think what they would do if you ran an underground Bitcoin network. I can tell you what they would do. They put you in re-education camp. you'd be tortured, murdered, and then you would, or if you were lucky enough to survive,

you would come out and give a public statement about how horrible you were to the country and how much you appreciate China. That's what would happen to you. So in 2019, a man was, in fact, sentenced to five years in jail for running a VPN. So again, Bitcoin Maximilist. My Twitter handles at Jason, please come at me and explain to me why they would put somebody in jail for five years for a VPN, which just allows you to trade information privately when they wouldn't do that for somebody who has a Bitcoin position or is challenging the sovereignty of the

Juan. Are you crazy? So, I mean, I hate to say I told you so because it's so obvious. You would have to be a child and naive and just not understand communism and authoritarian regimes to understand that they can arrest people and do whatever they want. They can torture people, put, you know, three million Uyghurs in a re-education camp and force them to pick cotton in a few. are you so dumb and delusional about this technology that you think that an authoritarian government all of a sudden is going to just let it run amok? You might be able to do that in the United States for a period of time, but, you know, this is a country that ran over their own citizens with tanks in Tiananmen Square.

So if you fast forward to 2021, just last week, a lot of popular crypto exchanges, including Binance, were no longer appearing on Baidu, Chinese Google, or Weibo. Chinese Twitter equivalent. So China can censor whatever they want on their internet. You cannot search for Tiananmen Square. You cannot search for Tankman. And as of April 2020, China was responsible for 65% of the world's Bitcoin mining nine times more than the U.S. in second place, according to the University of Cambridge.

And that chart's going to look really different very soon as China and other countries have kicked out the crypto miners and they're going to just keep tightening the noose. And other countries will do that as well. So the approach China's taking is going to be, you know, top down, turn it off. In the United States, it will be a different approach. It'll be regulation. It'll be taxation. And it will be selective enforcement like we saw with Tether and the New York Attorney General's

Office. So in the United States, we kind of have a process when we want something to be regulated. It includes some enforcement. It doesn't just happen like imminent domain. In China, if they want to build a highway. and your house is in the middle of the road, your house is getting moved, you're moving the end,

the road's getting built. In the United States, you've seen the Pixar movie up, one of the great Pixar movies. It's not my favorite, Ratatatoui is. But putting that aside, you know,

there's a longstanding tradition of people holding out and fighting the system. So we will see that in the United States. People will have a grand debate in our democracy over crypto and how it should be regulated. Ultimately, this is great for crypto.

And so for all of my laser-eyed friends, with their have fun being poor, memes and their toxicity. Let's take a pause here. I'm giving you a win. Regulation, tether, getting deprecated, China being removed from the picture,

and Coinbase and Circle going, both being public entities, and increased regulation and taxation will ultimately be good for crypto. A regulatory environment will be better for crypto. It won't be the Wild West. You might not see as many swings, up or down, things might become more stable. And you'll have government offerings and you'll have

private sector offerings. And it will just not be the Wild West. And then 100% of people will feel comfortable playing in this field. And that's kind of what happened with the internet. We watched the internet be something that people were very scared of. It's really dangerous. Stay on AOL, stay on prodigy, compi serve, protect your kids, protect your family, protect your credit cards. Don't use the internet. Was literally, I watched it over three, four, five years. or switch from the internet can never be a safe commercial place. You'd never want to put your credit card into it from people who are putting their entire lives in the cloud over the internet, the end.

And that's what's going to happen with cryptocurrency. And that's something going to be good for everybody. All right. There is a group in Israel called NSO Group. They have spyware that is used to basically compromise people's phones and gives you the ability to download all the photos, get all the messages, and turn on the microphone. It turns out that this is being abused. There you go. This is Israeli tech firm, NSO Group Technologies, created spyware called Pegasus that enables the remote surveillance of smartphones. It was officially

marketed for surveillance of serious criminals and terrorists. You're not going to believe it, but people used it to spy on journalists and other individuals. Really, you made spying technology and it was abused. Shocking. There is something called the Pegasus Project, which is 17 media organizations have put this together,

and over several months, more than 80 journalists investigated all these spying abuses. The Pegasus technology was found on more than half of the 50,000 phones inspected by the consortium. This is nothing new.

We've seen it with WhatsApp and other things, but the scale of this is pretty crazy. The NSO group says it only sells spyware to vetted government bodies. that really doesn't fly because those government bodies can obviously abuse it.

And yeah, I feel really terrible for all these journalists who have had this compromised. And this is a rogue organization. And I think the fact that they're able to do this to your phone is just incredible. And iPhones, I really am interested to see what Apple's counter to this is. Apple really needs to get this under control because the whole idea of using an iPhone was that you were going to protect us. So Tim Cook, you're on the clock. All right, Zoom announced they're going to acquire $5.9 for $4.20.7 billion. It's Zoom's largest acquisition to date. Zoom is sitting at about $105 billion, and this is an all-stock acquisition. It represents about

15% of the company. So this is a WhatsApp like bet. Remember when Facebook spent all that money on WhatsApp, or it might be similar to Salesforce buying Slack. It's a big bet. Zoom's first acquisition over a billion dollars. If you don't know $5.9, it helps companies run contact centers remotely and provides tools that automate tasks, distribute work, and report on effectiveness. Zoom founder Eric Wan noted they made this investment because, I'm going to paraphrase here. Five-nine provides a really simple platform. If you're a customer support agent, you can work from home and you can do all that remote. Obviously, Zoom helps people work remote. So this is, you know, kind of adjacent to them. This should accelerate Zoom's phone system. They have a cloud phone

system. And the CEO, Rowan Trollope, actually was on this week in Startups episode 917 and April 19. So congratulations to Rowan, a friend of mine. And we'd love to have Rowan back on the pod. I think he's going to come on after all this. And hopefully we'll have Eric on at some point. Okay, Keith Rubeois open.org store just went live as we were taping this show. Pretty brilliant idea. I asked Keith if I could invest and the round was closed. Hopefully he can sneak me into a future round. to think it's a brilliant idea. But basically, this is being set up open.com store to acquire a bunch of e-commerce companies. There has been a massive boom in people starting Shopify stores or becoming third-party

sellers on Amazon. So the brilliant idea that Keith has here is, what if you bought all of these and put them together under one roof and entrepreneurs just fill out a form? They link their Shopify accounts and OpenStore will give them an offer for their business within one business day. So the key there is that they link their Shopify account so they can see the quality of the revenue, make an offer, and the transaction according to OpenStore will close in days, not months, without a broker.

So this is like an M&A roll-up play. IAC did something like this, you know, buying all of the different assets they have, Barry Diller. We had on our program, actually, Josh Silberstein, he was on episode 1094 back in August, of 2020 in the middle of the pandemic. And he is pursuing something similar. They were the fastest unicorn ever created from founding to unicorn, according to most people's take on it. And they just bought a bunch of businesses that were third-party sellers.

And then you let them operate independently, but you maybe get some scale because you take the marketing practices or you have cross-marketing or common accounting, common growth techniques. Maybe you have some databases of users, so you get some lift there. if you have two brands, you know, maybe you can't create a database of, you know, more than a million people. But if you have 200 brands, maybe you can get a database of 100 million customers and then understand them, cross-selling, advertise to them. So with scale comes all of those economies of scale. So congratulations to them.

All right, and just while we wrap up here, and before we get to my interview, this came across my screen. Jeff Bezos thanking Amazon employees for making his dream come true. I also, I want to thank every Amazon employee and every Amazon customer, because you guys paid for all of this. So seriously, for every Amazon customer out there and every Amazon employee, thank you from the bottom of my heart very much. It's very appreciated. All right, that's kind of interesting. I guess that could be maybe a read the room moment. Not that I think about it, he's thanking employees and customers for making his dream possible.

You guys paid for all this. It is true. I mean, in a way, Bezos paid for it because he made the money. He made the company. But sure, the employees and the customers gave him the ability to make that money. And you guys paid for all this. That's pretty hilarious. All right.

Now my interview with Garrett Langley of Flock Safety. Another startup I missed investing in. Crime is a big topic in the world today. We've seen San Francisco. York and other places, Los Angeles take a different approach to maybe law and order, allowing property crimes. And we have this crazy proposition that we approved here in California where crimes under $950 are allowed. And because of this, criminal gangs are now knocking off department stores and Walgreens and they're closing targets and closing the hours of them.

And people are generally feeling not safe. And as a 50-year-old man, who's lived in New York, Los Angeles, and the Bay Area, those three cities, I've watched different versions of crime escalate and go down and all kinds of different criminal policing theories. It's pretty clear to anybody who's out there that cameras can help in deterring crime and data can help in avoiding crime in the future, prosecuting crimes that have occurred, deterring crimes, and studying them. That's why companies like Ring and others have done so well.

So I was thinking about license plates. And the reason I was thinking about this a couple of years ago is I thought, wow, they'd be incredible if a startup could take my Nest cam, my outdoor nest cam, and record the license plates of cars that drove by. And we had invested in a company called Butterfly that essentially shut down or got sold. And I was thinking, wow, I wonder, because they started doing computer vision on those cameras, and now Nest has the same feature, where you, can, in fact, do facial recognition.

And when you recognize a face, you could say, okay, I'm going to send an alert or you recognize a dog. Hey, your dog just went through the front door. He's out in the front yard or the backyard, whatever it is. So I started thinking about license plates, and I found an open source project on GitHub where people had actually made this software. And I was like, wow, the internet's amazing. Developers are amazing.

Then I find an API. And then I found today's company, which is called flock safety. Now, I missed investing in this company. but they have built an amazing product and that product is basically $2,500 a year. You can plant it outside of your door and let's say you live on a road and you live on, you know,

Mulberry Lane. You can put it on your property of Mulberry Lane. Every car that drives by, you get their license plate, puts it in a database, and then you can see all the data in some sort of enterprise solution. So a community can pay for these

or individuals can pay for it. and the CEO of that company is Garrett Langley, and the name of that company is Flock Safety, which you can see at FlockSafty.com. They were founded in 2017. And like I said, I missed investing in the company, but they've raised over $230 million. Welcome to the show, Garrett. Thanks for having me. Excited to be here. Okay, you heard my introduction. What did I get right about your company? And maybe you could tell us a little bit about why you started the company. I think you hit the nail on the head on the macro problem, which is like crime is here. And it's been here for a long time and it impacts everyone, whether you live in a coastal town like L.A. or New York or you live in Wichita or Indianapolis.

Everyone is equally impacted by crime. And it's really unfortunate. And so that you hit the nail on the head. I think product, you got like 95% right. Okay. Well, let's get into that. Tell us what is the product today. I'm basically. what I know about the product from your website and the fact that I've been talking to yourselves team and I see CCHO in the last email. Which is awesome. I was like, oh gosh, we're secret shopping. Do a good job team.

But yeah, no. So, you know, at a high level, our mission as a company is to eliminate crime. I'm an engineer. I took a look at this problem from an engineering perspective of why does crime exist? It exists because it's easy to get away with, right? Only one in 10 nonviolent crimes actually leads in an arrest.

And that's what's reported. That doesn't take out all of the crime that might have happened to you that you never even called 911 because maybe you weren't going to file an insurance claim. And so. And certainly in San Francisco, people have given up. They've been very explicit that they're no longer even calling it in. Which is sad, in my opinion, because if you look at the primary research, and this is not, you know, Garrett's opinion or Fox opinion, this is, you know, federally funded research on the topic. The only way to reduce crime is to solve more of it.

If you increase the opportunity cost of being a criminal to a certain point where you know you're going to get arrested, you go get a real job. These people could go get real jobs, but they choose to be a criminal because they know they can get away with it. So our point of view out of the gate was, let's go build really cool technology that actually drives the likelihood of an arrest occurring. And in doing that, we believe long term we'll see crime reductions. And that's what we're seeing today. So that was four years ago when we started the company. You fast forward to today, you know, we typically serve two types of customers, municipalities, and then the constituents inside of those municipalities.

And a pretty cool stat for you. I was shocked when I heard this. One out of every 100 arrests that will happen this year will be due to a flock camera. One out of every hundred arrests in the United States will happen because of a flock camera. How many just ballpark cameras are out there? How many communities are covered

if we were to think about a percentage of the United States or percentage of major cities, give us an idea of what your footprint is today, four years into your company. Yeah, so we're at almost about a 10% coverage of cities in the country. That's where the actual city is a customer. That ranges from smaller towns like a Danville or San Marino or La Habra. It's a bigger city is like a Memphis, Tennessee or Indianapolis or Fort Worth. And everyone in between.

Wow. So 10%, and you have put a price point on these that is extremely low. I was looking into these prior to you existing, and they were all custom solutions that would have cost hundreds of thousands of dollars to implement in a neighborhood. If a neighborhood was going to spend a half million dollars on security guards and camera systems, you could essentially do a better job with your big data, license plate recognition than those guards could.

for 10% of the price? How do you pitch it when you're talking to those local communities? Yeah, I mean, so that was me. I was you, Jason, just a few years ago, and my neighborhood was a massive victim of crime, an organized gang came in, broken into every single car. It was a pretty terrible weekend.

And when the police department showed up, they said, look, we don't have any evidence. You need a license plate reader. So we went to go procure them. A quarter of a million dollars later, I was like, this doesn't compute. I have this $300, $400, $400 device, an iPhone in my pocket, it's got an incredible camera, it's got an LCE modem, it's got a CPU that

can do computer vision. Why does this camera cost $40,000? And so a buddy of mine and I put our heads together and said, great, well, I'm an electrical engineer. Let's go grab some of these old phones off of, you know, the internet, tear them apart, put them in a waterproof box, put a solar panel on top and like, lo and behold, with some good software and some good computer vision, you've built a license by your reader at a couple hundred dollar bomb. And that really hasn't fundamentally changed. If you look at their product today, it's gotten a lot better. We're much smarter engineers than me working on it now, but it is still, really,

that's a year or two behind the best in class smartphone, and we can take off that supply chain, put it in our own custom package with a managed service behind it. And to your point, whether you live in a $100,000 home or a $10 million home, your community can afford this. And that's, I think, I know you're a fan of Uber. I think that's something similar, which is like, they made black service type cars affordable for anybody. Right.

And I think that's the goal of technology. And I think that's our same pitch. Everybody's private driver was the original tagline. So you build this. People start going crazy for it. For people who don't know, bomb is build of materials. So essentially, you've taken a smartphone, put it in a box, got a solar panel. Obviously, it's not a smartphone, but is literally built off the components that are in there.

So you literally can install this in 10 minutes at any home anywhere that has, I'm assuming, a 4 or 5 GK. connection and it's $200 bucks a month. Now, when I open up the interface, what do I see? And then, I guess, how specific can I get in tracking? So tell us what we see in the display when you open up this web-based tool. Because I've seen some screenshots of it on your website, but I couldn't find an actual demo of it on YouTube or anywhere. Yeah.

So there's really two primary use cases. There's a proactive kind of solution and then a reactive solution. So proactive is strictly for law enforcement. So the cameras are integrated into the FBI's national database of wanted vehicles. So it's about a quarter million cars that are stolen, outstanding warrants, amber alerts, silver alerts. Like, if you're objectively a car that needs to be pulled over, we know. And so if you, Jason, put a camera in your front yard and car drives by, and it is on that list, within a few seconds, we've notified the nearest patrol vehicle. That to me is like, that's why I have one of my friends. Wow. I have two kids in my house.

I want to make sure that if a stolen car drives by, like, they're not up to any good. Yeah, let me, let me sure I understand this. Okay, so a stolen car goes by. My camera picks it up. Do I as the homeowner who pay for this 2,500 get the alert as well? Or do you just do a, you know, hey, this camera that we have on the network, and then you send it to, you know the local authorities and you have their email address or you do a phone, you mechanical turkid? How do you actually get that information to the local, you know, community? So for the 13 plus hundred cities where we contract with them, it goes directly into the patrol vehicle.

So our software also runs in all the patrol vehicles. So if you lived in, you know, San Ramon and you steal a car and you drive by one of the hundreds of cameras we have in San Ramon, whether it's owned by an individual, a neighborhood, a small business owner or the police department. What does it show them? They're all federated together. They're all federated together. Does it actually give them a video clip with a GIF or something?

Full video. The license plate zoomed in. It's very important. You talk about some of the things that we take seriously. Like one is the objectivity and actionability of the product. And so we want to make sure that that's human verified because we think our ML is great, but it's not perfect. And so we pull up a nice zoomed in image and say, hey, we believe this is the state.

This is the OCR. This is the exact license plate. It matches what the FBI says. And then they, rerun that in their own because we don't we see warrant right hey there's an outstanding warrant

we don't know if that's a violent warrant or nonviolent and so they'll pull it up and then what's pretty incredible is most police officers work really hard and so when you give them a powerful tool like this they're on it they get pretty excited they're all over it so that's like the number

one use case optical character recognition and so what you're pointing out there I think if I can interpret for you hey maybe you know you think this is a California plate, but it's got mud on it, or it's a one or an L and, you know, it's a dirty plate. Or you could have, I would think, fake plates as well. Or there could be bad data in the system. There's so many things that can go wrong. And the worst case scenario for you

would be to misidentify, you know, mom coming home with her kids from, you know, pizza. And it's a stolen vehicle and cops then, you know, surround the vehicle. And God forbid something bad, where it happen. So you have to be very careful and say, we suspect this is a car. You should go do your diligence. And that's what the ML team we have is like world caliber. And unlike, you know, a traditional use case where it's like, hey, if you're 85% right, it's kind of fine. It's like we recognize the responsibility we've been given, which is when we say this is what it is, it's going to lead to an arrest. You know, it's a 99.9.9% confidence interval. You know, it's got to be the right stuff. Do you take pictures of the faces in the car?

No. So we are big believers. It's about creating objectivity and like we don't care who's in the car. We just know the car is stolen. Wait a second. We just know the car is announced to a warrant. You don't care, but the police certainly would. If they knew that the person who was in there and they saw the picture and they could match

that picture to the owner of the car and they saw there were three other passengers and maybe they saw a firearm in the car or an open canister of beer or who. Who knows what else. That would be very important for them to see. Why not give them that data? I don't understand. Yeah, I mean, I think it gets down to, you know, we have what feels like a moral responsibility to draw lines

where the government hasn't progressed as fast as the technology has in terms of like what do we want to automate? What do we want to leave to human perceptive? And so for us, it's like our job is to provide the most actionable evidence. We give that to law enforcement. And then they've got to go do the human part. The human part is, hey, go pull that person over. go talk to them, go figure out

are they the person you're looking for, right? Do they have drugs? Do they have a weapon? You could tell them you'd think there's two people in the vehicle, three people in the vehicle. So you could actually... There's definitely some inference. There's some inference you could do. So it's kind of like the metadata on a phone call.

Somebody could get a subpoena and get the metadata. And I guess this then takes us to the privacy portion of this discussion, which is, okay, if I'm a home user and I put this out there, do I get access to all the license plates that go by or not? You do. So the second use case we were talking about is, okay, it's not a stolen car that drove by. It's just any car. So we retain that data on your behalf for 30 days.

And as the payer of said product, you can go in and say, hey, show me every black SUV manufactured by Ford with a roof rack. And we would show you over the last 30 days, every car that matches that description. So we get down to what we call the vehicle fingerprint. But only 30 days. So you've decided that it would be too much. because this is where people are going to start feeling this is creepy, and you must get this question all the time. So I'll just ask it on behalf of people who have privacy concerns.

Okay, what keeps me as the nosy neighbor from then knowing my neighbor's whereabouts, every time they leave their house, every time they come home, oh, my neighbor comes home at two or three or three or three or four different people in the car, whatever it is. What would your answer to that valid concern be? there's a few things. The first is around data retention. To your point, we think 30 days is a good compromise. If they're superseding local legislation, we follow that.

So some states have seven days. Some states have much longer and we still stick to 30. The second is, like, the fact of the matter is, like, your license weight is actually not your property. It's the property of the state in which the car is registered. So it's not personal property we're covering. And then more on a subjective note, you know, I think the tracking that happens, and thinks to Apple, it's a bit harder now. The tracking that happens on your phone

is a whole lot more invasive than, oh, it looks like Jason might have left the neighborhood at this time. Additionally, there's no expectation of privacy on a public road. Correct. Correct. Yet the thing that does become, that would be the way I would answer it, is, hey, there's no expectation on a public road.

And we know that this person has this data. So if they were to use it in some defarious kind of way, we would be able to trace it back to the person who did it. So there's a little more ownership of it. And is it not true that I can put a drop cam or rather a NECAM or any commodity cam and use one of the API services? I found there's another company that provides a similar service to what you do, but you just hit their API with video and they tell you the license playback.

So I could do this without the controls you have in place. And certainly people today, the nosy neighbors are pointing cameras onto other people's property into the roads and already tracking their neighbors. Or you could do what we did when we were building their product and just pay an intern, you know, 15 bucks an hour to go sit on the road and track cars. Wow. Oh, is that really what you did in the first? We had to figure out.

We had to make sure the camera was working, right? You got to make sure we're reading every pay perfectly. And it's like, how do you do that? Well, we can be better than the human eye or at least as good as the human eye. We're doing pretty good. Pretty amazing. Have they been, your approach of doing bottom up, I think is brilliant. because you can get a concerned citizen who $2,500, if you've been robbed, is, you know, not a lot of money.

Or if you live in a whatever, multi-million dollar home, you know, you're already putting in a $10,000 or $5,000 camera system. So $2,500 for this doesn't seem too expensive. And then that gives you a bottom-up SaaS-like approach. Once you have it, everybody else's community goes, oh, look, this is on this road. I want it on my road. I want to protect it. So is that a deliberate bottom-up sast kind of sales approach? Yeah, I mean, I would say for sake of clarity, we have probably less than 10 individuals who actually pay for the product.

Oh, really? Oh, okay. So it's not significant. Yeah, so 50% of our customers are homeowners associations and apartment complexes, their communities. That's kind of the genesis of the name of the company is like as an individual, Jason, if your neighbor gets broken into, you're going to still feel pretty violated, not as violated if it's your home, but you're still going to be frightened. And so I felt that way and said, well, how do we do? this, we've got to move the line of defense farther out to the egress of the community. Let's protect ourselves. And then so about 50% of our revenue comes from from those types of groups and the other 50% comes from the municipalities themselves. Got it. And tell me a little bit about the massive drop in crime you saw. I have a slide here, 215-15 beat stats after March

through August. And it shows a five-year average of robbery of 29. 2018, 23, 2019, 11. So the 18 to 19 change in robbery went down 52%. What market is this in? And what does 215 beat stats mean? Yeah. So that's a suburb here of Atlanta, a place called Cobb County. And most cities break up their kind of areas into zones or beats.

And that's where a certain, quote, beat cop, where the term comes from. So that's a certain beat. We did one of our kind of early early pilots. with them. We said, hey, look, let's just, I want to make sure this thing actually achieves the mission. I know we're making a rest. I can track that every day, every hour. I can tell you how many arrests we've made. But I want to know are we actually leading to a reduction. And so we tried our best to do as an objective of a study and said, hey, we're not going to put cameras in this beat. We're going to put cameras in this beat. And we're going to look at year over year.

And it was like, holy smokes, it worked. Like the quality of life for this community has fundamentally changed. Non-residential burglary, non-residential burglar lease down, 33%, entering an auto down 64%, theft down 6% vehicle theft down 13%, residential burglary down 21%. So this massive drop, double digit in almost every case here, is, am I reading this correct, that this might be partially deterrence because when you put these cameras up, I think it has a sign that says we're tracking. Big sign, big red sign. So I wonder if you could attribute the big red sign versus... A lot of crime is serial offenders.

And so if there were, you know, 138 entering autos in this neighborhood and it went down to 50, it could be that you caught the two people who were doing 40 or 50 each. Is that come out in the statistics yet? Yeah. So here's the data we see when you like pull the onion off another layer. There's kind of two waves that occur. The first wave is a massive uptick in what's called the clearance rate. That's the rate at which a crimes actually get solved and arrest is made.

So you go to a place like Fort Worth and I just got an update from their chief. Since installing flock six months ago, they've doubled their clearance rate. Wow. There's twice as likelihood that if you commit a crime now in Fort Worth, you're going to get arrested. And so that actually creates an interesting opposite effect that they want, which now it looks like there's a lot more crime in the city because they're making all these arrests. But then what happened in that though, they can explain it. They can explain it.

It's like, look, we're actually catching these people. And so then what happens is after that first wave, criminals use social media just like we do. And so when word gets out, they're like, oh, wow, yeah, like that guy got arrested and that guy got arrested and like that guy got arrested, people just stop committing crime. And I know it sounds overly simplistic, but the social media component of this is actually quite real where they're on Instagram, their own Twitter and they're talking about this. And typically a police department will try to follow them, you know, in the ghosts or in the shadows. and they'll see them start talking about the cameras that have been added. Crime just goes down.

And we do also track like, well, does it just move to a different city? And that actually doesn't happen. Normally, these people do just wind up getting a real job. I think that was the most polarizing thing you said here in terms of your hot take so far. You know, and to say it in plain English, listen, crime is bad and we should arrest criminals is not like a super hot take. It's pretty obvious that that is what you should. occur, but we live in a very interesting moment in time that has gotten more and more polarized since you launched your company. And I would assume you've gotten some pushback on your premise

that people who are committing crimes can easily find another job. So let's unpack that for a second here. You said people who are committing these crimes are doing so because reading in here, it's profitable and it's an easy thing to do and they can do it right now. And there are jobs available to them, they choose not to take those because committing a crime is faster, easier than getting the job. That's literally your position. Yeah. I mean, if you if you break it down, it's an opportunity cost thing, right? If I, if I'm looking at, you know, what it takes to go steal a catalytic converter and go pull in a couple hundred bucks, it's 15 minutes and I have in some cities, zero chance of getting arrested. Yeah. And now there are all types of societal issues

criminal justice issues that flock is not trying to solve, that definitely do need to get solved because I think there's a fundamental issue of why that even crosses your mind. And what I believe our job as a company is to do is to increase the opportunity costs so high because it's now a 99% chance you're going to get arrested that even though you might have grown up in an environment or live in an environment where that is considered okay, we remove that option. We make it too expensive. So this is completely logical.

If you make it too expensive to steal, you know, from a car, the catalytic converter, a person would say, okay, yeah, I might be able to make $500 still in that catalytic converter, but I'm going to go to jail for a week. Even if I get out after a week, it's going to keep increasing the number of times I go to jail. And the chance of me getting caught are no longer one in 100. It's one in two. therefore maybe, you know, if I go work at Starbucks or drive, you know, for DoorDash, I can make that money easier. That's a pretty simple premise here. That being said, we have in our city here in the Bay Area, San Francisco, and in California in general, this prop, I think it was 37, where we said anything under $950 is not a crime and we're seeing massive crime. I'm curious what your thoughts are and what's happening specifically in San Francisco

with criminal justice and in the Bay Area and in California because I'm thinking you're getting phone calls from a ton of citizens. But I'm wondering what the cities are doing because the cities seem to be run by people who believe that crime is being committed because of income inequity. Yeah. So we're proud partners with dozens of citizens of citizens. cities in the Bay Area. And I know a lot of those chiefs and lieutenants and patrol officers on a first-name basis. And the same reason why they joined this industry, you know, 20 years ago

or 30 years ago hasn't changed. Like, they want to make safer communities. And they know that the way to do that is to do their job. Like, all of the primary research shows that a more active, more present police force leads to a reduction in crime in a safer community. They have their own problems they need to address, you know, which are pretty out there and open. And I think for at least the cities that we do work with, and San Francisco is not one of them. So I can definitely pontificate on my personal opinion of how San Francisco could fix. And that might be a pretty fun topic. Let's do it.

But for the places like Milpitas, the places like San Mateo, they have pushed like, hey, we need a police department. This is a logical conclusion in this society. And we should also give them modern tools. You know, one of the reasons why Andresen led our recent round is they looked across all of the industries in America and they're like, wait a second, why hasn't anyone done anything for public safety? Almost every other industry has been flipped upside down by modern technology. And somehow we've left our police departments completely empty handed. And so people who are, you know, in San Francisco who are into social justice and who care about reforming the justice system and sometimes the justice system is obviously.

not blind and certain people get certain sentences and other people don't. It's all been proven. That is independent of should we try to reduce crime in your mind. Yeah. I mean, my perspective is like the country that I choose to live in, which I think is incredible, America. We have a law and order. There's a law. And if you break it, I believe that you should be punished. Like that's kind of the society that we, it's an unspoken shanna, or very spoken handshake that, you know, there are some that we don't incriminate against, like, j-walking. Yeah.

But personally, if someone breaks into my home or steals my car, like, I believe there's too far, you know? It's like, come on, guys. Like, that's my property. So I think that's a, I think it's a, I think it's a really slippery slope. What do you think of this proposition 47? I mean, certainly you're up on this and the, and the impact it's had. I mean, we've done, we tried something similar in Atlanta a while ago.

where certain crimes weren't going to be dispatched. And it just led to more of that type of crime because the criminals read the newspaper too. So it's like, great. So as long as I keep it below $1,000, no big deal. And I think that's, it's really unfortunate because I know a lot of men and women who are in law enforcement and they want to just go do their job, which is they want to protect citizens. It does seem to me that this type of solution also builds a nice case and gets rid of the, the serial offenders, and if you did do this because you were a first-time offender and you got caught, a first-time offender who gets caught is going to get a lenient sentence, that

the justice system is going to be reasonable, I think, in almost all cases. And then they know how quickly they got caught. I would think having it be so easy to get caught would then lead to less people trying that second and third time. Yeah, the data that I see, you know, let's remove Garrett's opinion and talk about just the primary research is the punitive nature of the justice system has zero correlation to the likelihood of someone committing a crime. So whether you have a five-year punishment, a one-year punishment, a one-year punishment, a one-year punishment, has nothing to do with the likelihood you're going to go to do it. It's all correlated to the clearance rate because most people, you're not acting rationally, right? You're going to commit a crime.

That's an irrational behavior. So you've jumped past that. So I think there's a really misconstrued connection with like, we've got to be harder. And it's like, actually, being harder isn't this solution. We should be deliberate about punishment. But harder is not necessarily better. Actually, just being more effective will be much better. So to restate that, it's better to catch everybody who commits a crime and maybe not give

them the longest sentence, but let them know, you're just going to get caught. And each time it gets worse. If you go to Walgreens and you do a snatch and grab, you're going to. to get caught. And if you get caught or if you break into somebody's house, you're going to get caught, you break into a car, you're going to get caught. The first time you're going to get a week in jail, the next time you're going to get a month, the next time you're going to get a quarter, that would actually, a staged system would make it so clear to criminals who are thinking irrationally, I'm going to get caught. And that's actually, I'm going to get caught,

is better than if I get caught, it's a five-year sentence. Because criminals are always going to be thinking, I'm not going to get caught. I'm too smart. get caught. I'm going to get away with it. I'm going to run. I'm going to hop the fence. I'll never catch me. I'm too stealthy. I'm an above average criminal, so why would I get caught? Everyone's above average. So I think that that is proven to be a better system. And we just need to get more cities to buy into it. I know San Francisco, of great ironies of ironies in Oakland, I believe, we're talking about banning cameras before we even implemented them. And I'm forget about license play reading, but just in general, the place with the worst crime is now deciding

we shouldn't have cameras, which just shows how insane, I think, you know, not to make this a left or right issue, but this certain group of people who I think are very polarizing to the left think about criminal justice, which is we should just not prosecute any crimes that are minor in their mind under $1,000 or whatever the benchmark is. So have you run up against communities where they say not in our community, no way we're going to block you? We have.

I know those groups only in the areas you just described. So the Bay Area, San Francisco and Oakland have tried to stop you from putting these in. Yeah, and what we find is that the majority of elected There are groups, you can imagine

who they are. Like community groups or? No, no, just like non-profit organizations who are fighting that good fight. Would that be like the ACLU or the EFF? The ACLU or the EFF, yeah. And we know those, we have very cordial conversations with them. They're really nice people.

I think they're misguided. What's their position on it, the automated license plate readers, ALPR? Their position is that it's an invasion of privacy. Okay. And that it perpetuates an increased, I guess, injustice against under representative minorities. And I think that's really hard to make an argument when we're talking about cars.

Because I made the point earlier to you, like, I don't know who's in the car, and I don't care who's in the car. I showed that car was stolen. It's like, let's get it off the streets. And I also think what we find is that most elected officials have a much better pulse of what their community wants.

And I've never met an individual in their community that says, I want less police presence. Everyone wants to be safer. What is the valid part of their argument? if you looked at the ACLU's argument, what do you think is the most valid that you have taken to heart

or you agree with them on? Because there must be some common ground. There is. There's two things I agree with deeply with them. One is that there's a high risk of data abuse, which is why we care so deeply about how long the data is retained. Because when you get to about,

the industry has a track record of having this data stored for perpetuity. And I think that's crazy. Like, that's not worth it. Data now is a liability, not an asset when you store it forever in this type of fashion. So are the incumbents in this industry store data forever? They share it very freely and they sell it. And I think that's really bad. I think that's like unethical. I think you have a tight data retention. You monitor, you audit and you make it transparent of who has access to what data and how they're using it. So like Piedmont, California is a great example. The chief there is leading the way in terms of how to run a police department. He's a customer of our transparency portal. And so every search on the cameras that Piedmont PD owns is visible to the public. They're not doing anything in hiding. Like, you want to see every search, every hit.

Everything they do is right there. Because they're not, they know what they're doing is right for their community. And I think their community has responded in return. So data retention is the, I'm sorry, continue. Finish. Yeah. So data retention, I agree with. And then I think the second was.

You put it at 30 days. We put it at 30 days. And if a city says they want it for 15, that's fine too. We just think 30 is a good baseline. So nobody using flock is allowed to set it at over 30 days. You can if your elected officials voted into law. So there are some cities where, you know, I don't want to represent every community in the country. Got it.

I have an opinion. Let's say you live in the Bay Area, not in San Francisco. And that elected, those elected officials say. No longer in San Francisco, yeah. Yeah. Those people say, we think 45 days is the best retention policy. We talked with our chief. We've talked about it as a community.

Got it. Then we say, great. We're so glad you had that conversation. Would you let people set it at indefinitely? Or have you let them set it at? No. What's the longest somebody has set it at? I think 90 days.

90 days. So is there an upper limit to where you would let people put it? I would imagine a year, because then you start to also just get into like storage costs. It gets pretty expensive for both sides to do it much longer than that. Unless you're selling the data. The reason I ask those questions is because people hearing you talk would say, oh, maybe you are letting them run amok and you're not actually watching the story. But in fact, you are.

The longest is 90 days to the best of your knowledge. And you wouldn't let somebody set it over a year. So you actually do have a cap in mind. We do. Now, you also do not allow the pictures of who's in the car as part of this. You're just giving them the license plate. There is no facial recognition. You must be getting asked all the time to put facial recognition on this.

And in fact, the police already have this technology. at all of the bridges and tunnels that have easy pass in our community, and they take a picture of who's driving and they send it to you, or when you get a speeding ticket, they already have that. So you've set your license plate reading to take out photos when in fact traffic cameras already have faces plus license plates being done. Yeah. I mean, I think you are correct.

And to that same point, AT&T and Apple. you know, Apple know where your phone is at all times, right? And if they need to get to you, they can. And that's, but it gets used appropriately at times. So I think for us, it's about drawing our own lines. You know, I have a very diverse company in terms of politics, religion, or everything, everything we have covered. And we have to set our own boundaries that we get comfortable with because there's a right way to solve crime and there's a wrong way. And we're trying to do the right way. So

Facebook has had an issue with their employees stalking and looking at private messages, location data, etc., all down the line over the years. Multiple cases of engineers doing this, basically stalking

ex-girlfriends or and it's 100% men doing it so far to the best of my knowledge in the cases I've seen. You are now the owner of a set of data that is ginormous, how do you ensure that your employees do not

stock their X's or otherwise compromise your data? Yeah, so there's both a legal component and then an operational component. So the legal component is all, I'll make one minor modification to your statement. We're actually not the owner. So from a legal perspective, it's not our data.

We are the custodian of it, you know, from a hosting perspective, but legally myself, my engineers, anyone have no legal right to go look at the data. Okay, but you technically can. Because you would have to tweak the algorithm at times and look at it. So we're in the sort of Alexa category where...

So it is encrypted, though, at rest. So an engineer would have to go incredibly rogue, and I'm not even sure technically how they would pull this off, would have to then go unencrypt that image, which I don't think they could actually do. Got it. And then go pull it, and they're now pulling a random image. So you can't even if one of your customers, you know, in the same... San Ramon said, hey, we think something's not working here.

The license plates are doing ones for L's. You can't even go look at their data set. So here's the operational piece. So there's a legal piece of like, we can't go access it in bulk. An operational component is we do provide customer support. And so the only thing anyone of my staff can see is the last image captured. So that if someone does call and say, hey, you know, there was a hurricane down in Florida. And our camera's really foggy.

It's like, really? So we can pull up that last image and say like, it is foggy. So they can't then go find their ex-girlfriend or ex-wife's, you know, ex-spouse's. Exactly. Yeah, yeah. Track it. So you've really thought this through. Like other companies have unfortunately built at times and had to undo. Because the, in looking at the EFF's position and they tend to take a pretty all or nothing,

they believe there should be no license plate reading services. is their position because just looking at their site, location, I'll just read from their site, location-based information like license plate data can be very revealing by matching your car to a particular time, date, location, and then building a database of that information

over time, law enforcement can learn where you work and live, what doctor you go to, which religious services you attend, and who your friends are. But in this statement of how they're framing the discussion, the over time is a key component.

it here and the overtime is 90 days at best and you're not, you do have location, but you don't have pictures of the driver. So you've really thought through their objection, haven't you? Well, I just think, look, like, I like you, I'm a normal person that's a citizen in America

that wants to continue living in a country that has these same ideals. And I think we also want to live in a place that's safe. And so there's got to be a world where we can have both of these. And I think the part where I tend to disagree with the EFF and the ACLU is like they're talking about a world where literally our police departments can't do their job. We're going to give them no tools, no technology. We're going to

give them a, you know, a rabbit's foot and say, good luck out there. And I just think that's a bit misguided when there are ways to enforce transparency and accountability and give tools. So yeah, I agree. I think my team and myself put a lot of energy into how to build this so that every city, regardless of politics or wealth level, can be safe. Got it. And there are other services, vigilance, solutions, learn system that includes billions of license plates and they are selling that service. Maybe you could speak to, you know, their approach versus yours. Yeah. I mean, they are the incumbents that, in my opinion, kind of took a wrong turn. They sell their data. They store it forever. The majority of their revenue comes from data sales, not from solving crime. And so they actually take all that aggregated data and sell. it to anyone who has the right price. And I think that's a really slippery slope.

Yeah. Vigilant Solutions is your competitor, I guess. Yep. That's our largest competitor. Do they make the like real-time license plate scanning stuff as well? Or are they just the database more? Their primary focus is the database. They have a camera, but you know, the biggest difference is you and I are talking about.

We obviously read the license plate, but what we really pick up is what we call vehicle fingerprint. So some criminals are smart enough to take off their license plate. Yep. We're still going to pick up your make, your model. Perfect. What kind of stickers you have? Do you have damage? Do you have a roof rack? Do you have an aftermarket tires? Like, we're looking across exactly how a detective would. And so we can provide that same type of search experience. So there was a recent case where it was a drive-by shooting in a town. The criminal was smart, had no license plate, but wasn't that smart because he drove that exact same car through the neighborhood two days earlier to case it. And so,

with our system, they could easily do a lookalike search and say, hey, I'm looking for that exact same car. Have we seen it? Oh, yes, we have. And there it is with a license plate on the exact same road. So with a traditional system, you can't do something like that. And yeah, so you don't want to be in vigilance business. And vigilance business is truly scary. I would be with the ACLU on going after Vigilant. And I think the ACLU should be actually pro what you're doing. Vigilant has, according to the Wall Street Journal, more than 30 license plate scans for every registered vehicle

on the nation's roads today. So they have 30 moments in time for everybody's car. That seems like master of arrogance and a private company should not be allowed to do it. What you're doing seems amazing and people should be able to do it.

Obviously, Clearview AI, scraped social media for a billion faces. We had them on the program. I also think the tracking of who uses this because you have, I'm certain, a log of every time law enforcement looks up license plates and they can't turn their logs off. That's correct. The audit is required in whether you're a city council person or you are the mayor or the chief or regular citizen, you can get access to that log.

It's public record information. Wow. See, that was the thing I couldn't get out of Clearview AI's CEO. they seem to be like we're making enterprise software, you set up the settings, i.e. how many days do you want to do it? Or do you want to log? And he was kind of like, yeah, I don't know.

I guess people log. I guess they can log. I think it needs to be like a really detailed audit log. So when you do a search, it says, Jason Calicanis is searching for a black Tesla Model X, you know, in this zip code. And it's like, it says, please confirm that Jason, you are Jason Kalkats, you want to do it.

It should be a camera on the computer that takes my picture and I use a biometric or whatever or my password to do it. So I can't claim that I didn't know that I was searching for that. Because remember, there was always this thing in every mafia show. Oh, I'm going to get this guy to run these plates for me. I'm going to get this guy to run the plates for me. It's every Sopranos episode or something. Yeah.

And for us, we take another step as well, which is we do require a case code, you know, or kind of an open code before you perform a. search. So it's like you've got to be actually working a real case. Like if you're just checking stuff out and I found that, you know, when you introduce those kind of small speed bumps in a product that maybe if someone was going to take a wrong turn and you say, well, wait, what case are you working on? They're like, fuck I'm going to cancel. Yeah. I'm not going to, that's exactly my point is like just give them that moment to really think through like, are you going to search for your ex-wives or your friends, ex-girlfriend's license plate? Because your picture is going to be

on it. Really appreciate your thoughtfulness about this. I think what you're doing is really amazing in the world and appreciate you answering the hard questions. I think this is one of these spaces that we really need to ask the hard questions and we really need leaders in these companies to be thoughtful about it and you've turned out to be even more thoughtful than I thought you are. And yes, I did go to your sales team first and ask them a bunch of questions and they passed. Well, that's good. Secret Shopper approval, so I appreciate it. I'm sure you do it yourself, right?

You sent somebody in there to talk to your sales team. Yeah, I was trying to figure it out. I mean, and let's be honest here. For every good player putting out a very affordable product, that means the rogue players who anybody could build right now with maybe two weeks of hacking, I would say maybe two weeks you could take any video stream and then pump it to the APIs

that are out there, do the license play recognition, dump it into a database. I'm not saying they could rebuild the whole thing, but... But you could do this rogue right now, and I'm certain there are people who have done it rogue already. I was wondering also, like, could somebody just take their phone

and put it on their dashboard and have a license play reader on their dashboard and then track every car on every road? If you were an Uber driver, you would be able to build a database of every car on the road. Are there any software or companies doing that? I don't think there's any companies.

I know I saw a hacker news post of a guy who modified his Tesla to turn it into an automatic license for a reader. And so he was picking up every single car he drove by, which to me is like, yeah, it's not, to your point, like, when I see the groups like the ACLU or the FF push out, like, this shouldn't exist. I'm like, it already exists and the cat's out of the bag. Like, it's never going to go back. So let's actually just talk about how to implement it in a way that makes us all comfortable.

But yeah, I mean, that guy did it in a weekend, right? and now it's not a scalable product that you could sell, but technology's there. I mean, the Tesla has a good enough camera to get this done. I mean, not only does a Tesla have a good camera, your last iPhone or your Android from three... Like four generations ago. Yeah.

Yeah, four durations ago, you could literally put on your dash, you put on your dash and be able to make a video that uploads it to the cloud. And this is not rocket science anymore, folks. And that one could actually... you know, make a video clip and who's in the car, and you could put it in reverse and get every single person's face

and then take their face to a license plate. So, and there is somebody out there doing this right now. We need more good actors with great prices so that those bad actors don't have their products in market. Garrett, thanks for coming on the pod, and we'll see you all next time. Bye-bye.