This Week in Startups - Dfinity’s ICP crypto complaint, Snap/Twitter earnings, China’s e-learning crackdown & more | E1252

Episode Date: July 23, 2021

In this rapid fire news episode, Jason covers a16z-backed Dfinity's crypto class action complaint (02:46), Snapchat and Twitter's massive earnings (19:33), the CCP considering turning it's ed-tech sector non-profit (34:15), Alphabet's new company (40:23), San Francisco's 17M sq. ft. of vacant office space (47:22), and then reflects on some old Disney+ predictions (58:28).

We have an amazing show for you today. We cover the following topics. DFINITY, which is one of these crypto nonprofit associations that was backed by Indrice and Horowitz. And they are in the middle of a class action complaint. They're going to get sued because their token has gone from $750 down to $30. Be really careful in crypto folks. It is the Wild West out there.

And we talk a little bit about utility tokens and what's going on with these crazy products and projects. And do they even have any customers on the other? side of their great innovations I'm using air quotes. We also break down a tremendous Q2 for Snapchat and Twitter, both companies firing on all cylinders, printing money, adding new features, delighting their customer base, and they both share something in common. Professor Galuay, Proff G predicted both would fail and both were disasters. Of course, he's the disaster, and once again, terrible predictions from Prof G. Then we cover the CCP considering turning all of their

educational public companies into nonprofits. All these EDU companies out of China have had their stocks get absolutely decimated 20, 30, 50% down because China wants to ankle their own companies. What is going on with the Chinese Communist Party? We've been talking about it a whole bunch the last two weeks. And finally, we cover San Francisco's insane amount of commercial real estate that is going to take decades to refill because San Francisco. This is a bit of a disaster. And everybody's working from home. Finally, we'll look at some old takes of me talking about Disney Plus five years ago

and years before Disney Plus ever existed. Stick with us. It's going to be a great episode. This week in startups is brought to you by Com for Business. Healthy and happy employees create successful companies. And that's a fact. Com for Business can help your employees be their best selves at work. Get a free well-being e-book.

and one month free of Com for business after you attend a free demo at com.com slash twist. Embroker'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 of traditional insurance at imbroker.com slash twist. And while you're there, get an extra 10% off using offer code twist. and snack magic. Snack magic is a stress-free way to treat your global team, clients, or sales prospects with a build- their own snack box.

Get 10% off with code twist at snackmagic.com slash twist. Okay, in our first story, we've got another crypto collapse, perhaps fraud, perhaps chaos. These crypto projects are a complete and utter disaster. It's the Wild West out there, folks. This one is DFINITY, as I think how it's pronounced, spelled D-F-I-N-I-T-Y. And they've been hit with a class action complaint, which claims they sold their tokens as an unregistered security. As you know, crypto people do not believe in securities law, apparently.

They think that you can sell tokens to people, and because they're called tokens and Chucky Cheese coins and tokens and like miles from your United Miles program. that that means it's not a security magically because you deemed it a token, not a security. The SEC feels quite differently. U.S. law feels quite differently. And candidly, I think I feel quite differently because I have to operate in the real world where we have to do certain things when we sell securities, like hire lawyers and do things on the up and up and be really careful.

Let's put that aside for a second. So this complaint is the first document obviously filed with the court. And this is, you know, before a lawsuit gets filed. lawyer, but I think that's basically how complaints work. According to this, DFINITY is a non-profit institution that creates crypto projects. They specialize in blockchain and cloud computing according to their website. And their main project is the internet computer project, or ICP. And this is a blockchain-based computing system, which they tokenized in 2018. And tokenized means you take a normal business in the world, like Amazon Web Services, and you say, instead of it being owned by one person,

Amazon or Microsoft's Azure, we're going to make it owned by nobody. It's going to be owned by the collective token holders. So those token holders are distributed. They can trade their tokens. So nobody's basically in charge. So what could go wrong if your cloud computing service was run by nobody but a collective?

It could go right. It could go wrong. So their goal for this project apparently is to challenge cloud computing services like Amazon Web Services, specifically on the reliance of centralized server farms. Why anybody would want this product? I'm kind of wondering,

if you're running a big website, like, I don't know, Amazon or Target, would you rather be on a cloud computing service that has employees, that's a public company that you can call on the phone and say, hey, my website's down, or would you rather do it on, you know, a blockchain with a decentralized server farm?

I'm not sure who this product is for or why it should exist in the world. And I always try to think very basically, I'm a pretty simple guy. Who wants this product? Why would they pick it over the existing products that are in the world? Well, you know, maybe I don't get it, but I guess somebody needs to have a decentralized network to host their WhatsApp or Uber, allowing them to run smoothly while not relying on a centralized server farms. It doesn't sound like it would be smoother.

it sounds like maybe it would be cheaper? Are they competing on price? Is that the concept here? Anyway, the ICP token is designed to be used as a governance tool. You know how this works. So, the miners get to be involved in the code and the changes to the code. So this governance tool basically means shareholders have bargaining power over the network, right? The tokens equal votes, kind of like, you know, one person, one vote in the United States and a democracy.

The governance tool here would be if you had the tokens, you have some say over how the network operates, I guess. And obviously those could be used, those tokens, I'm guessing here, for transaction fees to use the network, right? So if you have more shares, you have more control, and if you have the tokens, you can deploy your apps, I guess, on this. FACACCA crazy, decentralized computing network, which I'm not sure anybody's actually using this. That's a question I have. If you are involved this project, you tell me the number one customer and what app they're running on it because you would have to be an insane person to put your project that you're putting out into the world on this platform when you have other options that are stable and

super cheap. So I'm a fan of innovation, but I'm not sure that this is a risk people want to take with their core infrastructure. Let's get into why people are upset and why they're suing. ICP was launched on Coinbase Pro in May of 2021, the exchange, Coinbase. And at the same time, their code became open sourced, like these projects tend to be. They're open source. People can contribute to them. They can see the code.

This builds trust. And that's a tried and true way to build great software in the world. Nothing wrong with that. So the price peaks at $750 a token. According to decrypt.com, a new source, ICP didn't release a coin offering before this because they wanted to limit chances of competition taking on their code. This means the code probably wasn't tested by people outside.

the company, I'm guessing. But anyway, the token was trading between $100,250 token from March to May. And there's the chart if you're watching on YouTube. Since then, ICP's price has tanked. It felt well over 90% shortly after hitting its peak. It's now sitting at $31 a token. So, you know, if you bought him for $750, you know, 10% of $750 is $75. You've cut that in half, you know, when you're at $32 and that's kind of where the price is. So you've lost most of your money. here, 90, 95%. And, you know, when people lose their money in these crypto projects, they're going to look for recourse and they might look for recourse in the courts. When things go up and to the right, it's kind of hard to have a lawsuit because everybody made money.

And I think we're going to start to see a lot of these lawsuits pile up, especially during times when crypto is down because people feel, well, I lost my money. Is there any way I can get it back? Do I have any recourse? The courts are one of those recourses. Twitter users, are dunking on them as a coin, which is a term for coins that have no value. It seems like I'll give them the benefit of the doubt. Diffinity seems like they were able to wow some of the great investors in Silicon Valley. So I don't think that they went into this with bad intentions. I'm not saying that.

And certainly this could be a drive-by, you know, unfair class action suit. But I do wonder, like, what people are thinking when they buy into this. And I think what they're thinking is speculation. They're just gamblers. You got a bunch of gamblers on the internet who are looking to make 10 times their money, a hundred times their money, a thousand times their money in a year. And that's what crypto has brought. It's just a giant casino where people are placing insane bets on things that may or may not make sense in the world, despite what the founders of those companies

might actually be doing. There's just a big gambling nature here and a big pumping up nature, which we'll talk about, you know, we've talked about before on the show. So if you look at the complaint and what's outlined in it, Basically, they say on behalf of all investors who purchased internet computer project tokens on or after May 10th. And the lawsuit alleges that over 469 million ICB tokens were made available during this ICP Genesis launch, which is I guess what they called it, were created out of thin air. Well, of course they were. That's what tokens are. That's how they're created.

But sold in violations of the Security Act. And that is the key here. When you give these tokens, people want to believe they're Chuck E. cheese tokens, they have no value in the real world or they're like miles or coins you might have in your backgammon or chess game or your poker online zinga poker game. But the fact is the people buying it are buying it as a security because they want to see it appreciate. I guarantee you, nine out of ten people who bought these tokens have no interest in using this cloud computing platform. I would guess 95 out of 100. And so what the government is going to really start to realize

here is people are taking advantage of the gambling nature and the wild west of crypto and these exchanges that, you know, are all offshore doing crazy stuff and even some of the onshore ones and that they're really, they're buying these tokens not to use them in the network, but to speculate. Now, is that the problem of the person who sells the tokens in good faith so that people might use them in an innovative way to participate in the network, the core product? I kind of I kind of think it is if it's this one-sided. Perhaps they should sell them to people only to people who are using them on the network and not sell them even to accredited investors unless they know or have an expectation,

a reasonable expectation that they're actually going to use them. In other words, the person could say, I want to use these tokens for this. They could certify. I'm buying these tokens for this reason, right, as opposed to I'm just buying these tokens and we all know why they're buying them. Healthy and happy employees create successful companies, and that's a fact. Com for business can help your employees be their best selves at work, and you can partner with the number one mental fitness app to provide support and tools for your employees.

Com can kickstart mental well-being initiatives by empowering employees to stress less, rest better, and build resilience. Com has an entire library of content specifically designed for the workplace, which includes lo-fi music playlist to get you in flow, quick breathing breaks, guided meditations, and hundreds of soothing sleep stories. I know, sleep. We don't want you sleeping at work, but we do want you to get a great night's sleep the night before that big meeting or that big pitch or you're working on that great project.

So they even have programs tailored for mental health and productivity like their mindfulness at work series. Millions of employees at over 600 companies like Lincoln, iterable and Universal Studios use Com for business. Obviously you guys know I'm an investor in Com. I've loved the product forever and I've always wondered what are they going to get into the enterprise? Well, here they are. So right now, Com is offering a free well-being e-book for HR and benefit leaders and one month free after you attend a free demo at com.com slash twist. That's right, a free e-book and one month three after attending a free demo at com.com slash twist. Once again,

get started today. C-A-L-M-com.com slash twist. Whisk. Thanks again to come for making such great products. The targets of this complaint are interesting. They include the investors, Polychain Capital, which is a hedge fund in cryptocurrency, Andresen Horowitz, one of the up-and-coming venture firms here in the Valley, and the DFINITY founder Dominique Williams, who I'd love to have on the program. I'm sure he can't talk about the lawsuit, but I'd love to find out Dominique, how people are using your service and what the grand vision here is.

I don't understand the grand vision, but, you know, I'm just, reading news stories and maybe you have great examples of people using your product in the real world. And I think that would be actually great to hear. So we're just starting to scratch the surface on the story because of the lawsuit. And we'll definitely do a follow-up on it. We'd love to have Dominique on the program. They received grants, not investments from VC firms like Indrice and Harrah, it's, Village Global, SV Angel, and others in 2018. In total, they've raised around 200 million in these grants, quote unquote, according to Pitchbook. And according to the Wall Street Journal, I'm quoting here, unlike an initial coin offering, only accredited investors,

including Sequoia back polychain capital, took part in the token sale, which were raised $20 million for DFINITY. And according to the Wall Street Journal, A16Z, was part of a $61 million investment, not taking equity, but instead getting ICP tokens. I think this is going to be looked back on as like a crazy moment in time in venture. That venture capitalist stopped investing for equity and started taking these tokens, which are not preferred shares and then flipping them, perhaps or, you know, skirting securities law or going around securities law or reinterpreting them. I guess we could take any type of framing there. I'm not going to frame it myself. You know my framing, which is, why not just do this on the up and up? Why not just buy securities

in a company? And why do they have to have these crazy tokens that investors are buying? Investors are buying money to get a return? Why are they buying tokens instead of equity? It doesn't make sense to me. I think it's a little bit of a shell game. I'll be totally honest. That's my cynical interpretation of it. It's just a way to. get around, you know, securities law, which is there for a reason. And I think the SEC shouldn't allow it. I'll be totally honest. I think everybody should play by the rules.

And if you want to buy these tokens, because there's a use for them and you're actually a developer who's actually using them for storage or cloud computing, sure. But maybe you have to use the tokens and have an active project on the platform in order to buy the tokens. That would make more sense to me, right? Like, should you be allowed to buy the tokens if you're not actually using the service? Maybe not, right?

That would be my approach to maybe stopping this chaos. In the ICO era, we saw so many of these projects go bust and people owned, you know, the term shickling comes out of how horrible everybody, the results of the ICO movement were. In the report, Arkham identifies around $2 billion in ICP tokens that were transferred to cryptocurrency exchanges by probable insider addresses after the Genesis launch. These transfers happened around the time of the 90% drop. I guess what they're saying there is maybe insiders were selling the tokens while the suckers and bagholders who were greedy and trying

to flip currency and maybe seeing big names like Andresen Horowitz on this and that's one of the problems when an Adresen Horowitz and a Mark Andreessen with a big name comes in and invest in a company a lot of civilians will follow them and I think Andreessen Horowitz and Mark and Drison have to take ownership of this. When you invest

in a project, the public's going to follow you. This happens to me all the time. I invest in a company. It gets syndicated in fact, two or three times in the last couple of years, people have put my names on projects I'm not involved with and said I was an investor. And then people invested or were considering investing and I wasn't involved. So, you know, your name as a legitimate investor can draw other people to invest,

including civilians. So you've got to be really careful about what you put your name on in my mind. I certainly really think about that deeply every time I'm making an investment. You know, this thing fails and other people, and most of them do fail. And other people are investing. Yeah, it's their responsibility. But, you know, you do have a brand. You've got to be careful with this.

So a definitive spokesman called the Arkham Report ludicrous and said it's a very poor source of information. Huh, that's a lot of words. But it's not like a clear rebuttal of any facts. So this is another start of this. We'll see if anybody behaved poorly or if this case has any merit. But, you know, my advice to you is steer clear of this cryptocrypt. stuff, if you really want to do it, you know, 5%, 10% of your net worth that you can afford to lose,

maybe be diversified across a number of projects, but just to understand, if the project doesn't have customers, if this project or any project can't tell you, here are my top 10 customers who are using the product to solve this problem in the world, then you're buying into some kind of weird vision with hundreds of millions of dollars sloshing around. Like, why should this company have hundreds of millions of dollars if there's no customers and the project hasn't launched yet. Like, why not give them $10 million and then have this milestone-based funding? That's one of the things that crypto has short-circuited, and it's really dangerous to give the Eos Foundation or Tesos or whoever it is, you know, hundreds of millions of dollars and say,

yeah, build the future. They should get $5 million and then hit 18 months of progress and then get $10 million and then do another 12 months of progress. And then if they do well over those first 30 months or 36 months. Yeah, okay, now we give you $25 million. Go for it. You've proven yourself. You've got a product and market. One of the main issues I have with this crypto stuff is it's short-circuited and it broke Silicon Valley's and the public markets milestone-based funding. Milestone-based funding. Trudges of capital coming into your company existed for a reason. So there is an incentive system and protection for investors. There's an incentive system for the team to execute. They need to hit milestones in order to get more money, and money is allocated correctly to the people who execute the best.

If Elon Musk is better at SpaceX than some other space project or another space project is better than SpaceX, whatever it is, they have to hit the milestones, and then they get more capital. You don't give people a billion dollars or $200 million before the products, even in market. Come on, I'm not the smartest kid in the class, but this is common sense. Be careful out there, folks. Snap has added $20 billion to their market cap this week after a strong Q2 earnings report. Yesterday, Snapchat reported its Q2-2020 earnings, which exceeded analyst expectations for revenue and growth.

Their stock price almost quadrupled in the past year, quadrupled from $21 a share in July of 2020 to $79 a share today. Let that sink in. $20 billion in market cap? That's the equivalent. of adding a lift or a slack to the market cap of your company. We never see this in Silicon Valley. But let's not forget, Professor Cold Takes had an all-timer on CNBC back in July 2017, just over four years ago today. Check out Professor Galloway's Ice Cold Takes. I'll see you on the

other side. The first thing Mark Zuckerberg thinks when he wakes up in the morning is must-wipe Snapchat from the face of the planet. And I believe the last thing he thinks when he calls asleep at night is must-wipe Snapchat from the face of the planet. So you'll You have a, you have, I've said publicly, I think investing in Snapchat is like driving drunk. I think it's something no responsible person should do. You are handing your money over to a 27-year-old with no rights into stock, three classes of stock, a company that did 400 million in revenue and lost 500 million. And by the way, has the most agile company in the world spreading Snapchat-like features

across every property. What could go wrong? This is, this company is, in my view, the most overvalue. company in the world right now. Okay, there you have it, folks. Misogynist, failed entrepreneur, and Bloomberg canceled television show. Professor Galloway gives you another terrible

call. Whatever he tells you not to invest in, you probably should make a big bet, and if he says bet on something, you probably want to run for the hills. Snapchat was trading around $15 at the time and traded relatively flat. Until the pandemic hit in March 2020, in which it took off,

you never want to bet against somebody like the founder of Snapchat who came up with so many original ideas. He came up with ephemeral messaging. He came up with stories. He came up with snap goggles or spectacles. This is an incredible founder. And incredible founders who create new ideas, he also did lenses, right? So you look at Snapchat's team, they didn't give up.

They stayed really, really focused. If you had faded Prof.G. On this day, you would have five extra money. That's it. He is the worst picker of stocks. He has no hot takes. It's all cold takes. And on June 17th, Twitter user Julie Young broke down the Professor Coldtakes inverse

ETF, which outperform the S&P by 61% from October 4th, 2019 until June 17th of 2020. You can find any of these incredibly bad calls. He thought Tesla, Uber, Lyft were all going to zero. And his portfolio is just a disaster. This chart doesn't even include Amazon. Okay, so now when you look at how terrible Prof.G.'s predictions are, really, nothing compares to his coldest take of all, which is his 2015 call. The Future of Retail looks like Macy's not Amazon. Let's take a look at that.

Macy's and Amazon, five-year charts. Macy's over five years. has lost over 50% of its value. Great take there, Prof.G. The future is losing 50% of your money. At the same time, Amazon up almost 400% in the same time span. My goodness, just fade his bets and you will print money. And if you remember, just a few days ago,

Bezos got into a little bit of heat for thanking all of Amazon's customers and employees for paying for Blue Origins Flight. And he said, you paid for this. I really think he should be thanking Professor Coltakes for giving the Midas touch. Okay, back to Snapchat. They had 293 million daily active users for Q2, up 5% from the 280 million reported in Q1. Revenue was up to 982 million, which is 116% year over year. Their net loss was cut in half year over year, down to 152 million from 326 million. And their recent growth is faster than it has been since the year it went public in 2017.

incredible turnaround with Facebook headwinds coming at you just amazing evan spiegel is absolutely a product genius he is relentless he's dogged he's not part of silicon valleys like intelligentsier he doesn't play the game he just focuses on his vision and his user base and he's printing money and he didn't get crushed by facebook in the face of facebook throwing every developer they had at him pretty amazing and AR seems to be the perfect rebound after Facebook copied all these killer features. I think the spectacles and the AR development platform snaps working on is going to be a big winner. And they announced their new AR glasses at their June 2021 developer event. Box CEO, Aaron Levy, had some words of encouragement for Snapchat.

Snapchat, now worth $100 billion. Sometimes you just have to keep building. Exactly correct, Aaron Levy. Just build. The company was not impacted by the iOS 14.5. Privacy changes from Apple, as people initially thought. As you know, the new update from Apple makes it so third-party developers have to show a prompt asking users to track them across different apps. And this lack of impact from the new update was due to the fact that the update rolled out later than expected.

And users have been slow to update their devices. So Snap is observing higher opt-in rates than other apps in the community, which is kind of interesting. I guess people who are Snapchat users want to get targeted ads. They want to support Snapchat. I think that's actually what's happening on CNBC. Snap's chief business officers, Jeremy Gorman prepared remarks, were quoted saying that the higher opt-in rates are, and here's the quote,

due in part of the trust our community has in our products and our business. That's really nice to hear. Congratulations to the team at Snapchat. And to Profi for continuing his streak of horrible, horrible calls. If you don't have insurance, you failed one of the first steps of being an entrepreneur. and in broker's technology saves your time and money. Prices are up to 20% lower with better coverage than the incumbents.

And you can go from sign up to quote and purchase in just 10 minutes. When you work with imbroker instead of business insurance incumbents, you're not dealing with these large, slow corporations. And sign up only takes days, not weeks. The process is transparent with no opaque pricing. And there are four crucial types of startup insurance that they cover and that you need. Cyber insurance. This is in case you get hacked. D and O insurance. This is for directors and officers. If somebody does something dumb and you get sued, then there's E&O insurance. Some people haven't heard of this.

Other people know it all too well. It's called errors and omissions, and it helps you scale your business because any major customer will want you to have errors and omission insurance when you close a deal. And finally, and sadly, EPL, employment practices liability. This covers harassment, wrongful termination, and more. If you are running a business and you hit any kind of scale, somebody is going to do, either do something stupid or somebody is going to feel that they were wrongfully terminated. Even if they were terrible and you fired them with cause, they can go find an attorney to sue you. You need to have EPL and you need to have all four of these types of insurance if you're going to become venture backable and you're going to build a robust business. Instantly buy custom built insurance for startups.

Go to imbroker.com slash twist. E.m.B.R.org.org.org.com.com slash twist. And use my offer code twist to get 10 percent off. Twitter stock is up after they posted their fastest revenue growth since 2014. On Thursday, Twitter announced Q2 earnings that came in much stronger than expected. On Friday, the stock was up 4% and is up 10% since the beginning of the week. Their market cap is now $57 billion, nearing its all-time high of over $60 billion, which they hit back in February of 2021. Coincidentally, that's another profit you short. Q2 revenue was $1.19 billion, which was 74% year-over-year growth, the largest year-over-year growth since 2014.

Twitter's year-over-year profitability also increased dramatically as they turned a $1.38 billion loss in Q2 of 2020 to a $65 million profit in Q2 of 2021. That is the playbook in Silicon Valley, which is you invest, you invest, and people say, oh, you're money losing, your money losing. And then at a certain point, the business is so strong. The foundation is there and the growth is there. And then you flip over into profitability. And then everybody is like, whoa, now we should buy the stock. We've seen this over and over again, Amazon being the canonical example. And let's not forget, Prof G, roof, the dog.

Prof G, a grown man on testosterone shots. Who calls himself a big dog? called for Jack Dorsey's firing back in November of 2020. Check out this 50-second clip. Well, let me start with the last part. The change of role should he be, he should be fired. Any board that lets a part, I mean, this is a big company with thousands of employees that plays an important role in the discourse of society. And about 1 p.m. every day, he pieces out and he goes to another firm. I'm on the board of several or been on the board of several public companies. And I've never met an individual who can manage a company like this part-time. So unless there's some superpowers we're not aware of, I think it's just starting right there.

The fact that he's a part-time CEO and 89% of his wealth is tied up in his afternoon job renders him totally incapable of providing the attention and leadership that this company needs and distinct of the regulatory conversation. I think it's just thinking if you look at product innovation. Twitter looks scarcely 2015. So I just don't, the role for Jack Dorsey is for him to declare victory and leave and be kicked up stairs to chairmen. Okay, so there you have it.

A Prof.G call, and since then, Twitter, you guessed it, is up 80%. Thanks, Prof.G, for all the profits. If Prof.G. gives you a prediction, do yourself a favor, fade that. Take the other side of the bet, and you're going to print money. And congratulations to Twitter

on their enormous success. And everybody else who Prof.G. Dunks on. Congratulations on proving him wrong, which is pretty easy to do. And it's also worth noting that, to 2020 was the hardest hit due to the COVID advertiser panic. Since the start of 2021, Twitter has introduced spaces. Twitter blue, it's for subscription service.

That's like $3 a month. Their tip jar and they're rolling out superfollow soon, which will act as like a Patreon-onlyfans like membership where you give content just to that group of people. And obviously Patreon and OnlyFans were largely built off of people's Twitter and Instagram followings. So now it's as if those businesses are going to basically be built into Twitter. and only fans is for adult content.

So if those adult kind of folks or models, whatever you kind of put them into in terms of descriptors, they don't need to have an only fans or Patreon. They could just do it all on Twitter. It's going to be pretty interesting. So the big lesson here from both companies is product velocity gets new users, new users, increased revenue. It's really that simple, folks.

I talk to the founders I invest in all the time. Keep iterating. Keep coming up with new ideas, keep making your existing products better, keep delighting your users, the revenue will come. And Snap and Twitter were stagnant for years. They were sideways trying to figure it out. Don't give up. Go public and keep grinding.

This is why I was a little disappointed that Slack sold to Salesforce. I would have liked to see them just keep grinding it out, even if they're sideways. Just keep fighting. But, you know, sometimes people want to catch their chips in, I guess. Jack Dorsey, who is, you know, turns out, a great leader, both of his company Square and Twitter, which Prof G derided four years, are absolutely crushing it. So here's Jack's quote.

As we enter the second half of 2021, we are shipping more, learning faster, and hiring remarkable talent. For example, our increased shipping cadence contributed to reaching 206 million average, monetizable DAWs, monthly DAWs in Q2, up 11% year of a year and 3% quarter of over quarter, there's a tremendous opportunity to get the whole world to use Twitter. And I agree with him. And I think it's possible. Not counting the after hours move, Twitter shares are up more than 30% since the start of 2021, which is almost double the S&P 500, which is up 16% in the same time period. Twitter's ad business just boomed in Q2 was up 87% year over year to one billion. And total

ad engagement was up 32%. That's people clicking on the ads, commenting on them, etc. And here is Twitter's CFO, Ned Siegel. on CNBC this morning talking about Twitter's bullcase and how they're using machine learning to automate 60% of trending tweets and topics, which is one of the reasons I'm taking a Twitter break is because the product is so damn addicting. We grew our audience by 20 million people year over year, seven million from last quarter. We're delivering better ad formats, more relevance through age-based targeting, location-based targeting for advertisers, all of this against a really strong macroeconomic backdrop.

There are more events happening. people are able to go back to those events in many situations. Advertisers have more products that they're launching where they want to connect with their customers on Twitter. It's all coming together to give us a ton of momentum right now. Well, we're leveraging machine learning and AI across the company to deliver better outcomes. That means making sure we're showing the right ads to people.

It means making sure that we're sending the right notification to you to bring you back to Twitter in a moment when you really care about. That's a really important part of our work. It also means, from a health perspective, now 60% of the tweets that we action were finding through machine learning as opposed to through human needing to be involved at the very outset. I think what we're seeing here is Twitter got its groove back on the product basis and haters like Prof G who have produced nothing in the world but hate and, you know, trying to do soundbites

and be clever. They don't matter. They're just haters. What matters is the people who build and the people who build are more important in the world, then the critics, even if the critics get a little too much attention from time to time. Okay, the CCP in the continuing saga of the Chinese Communist Party and their interference with their own companies going public in the West, the CCP is now considering turning publicly traded education companies into nonprofits. And so some stocks are tanking as investors

panic, sell five different Chinese education stocks were down between 20 and 50% on Friday morning, as Bloomberg reported, the CCP's was mulling these rule changes. According to sources in the story who were familiar with the matter, the platforms will likely no longer be allowed to raise capital or go public listed firms, and there's another quote from the article, listed firms will also probably no longer be allowed to invest in or acquire education firms, teaching school subjects while foreign capital will be also barred from the sector. Bloomberg reporter, Elena Papina reported that five different Chinese education companies, most of which are public in Hong Kong

lost a ton of value on Friday morning. Dollar sign EDU, dollar sign tau, ticker symbol C-O-E, ticker symbol N-EW, BEDU down 49, 54, 36, 23, and 22% respectively. And as the day progressed,

the company share prices have fallen even further. New Oriental education is now down 59%. They provide private education services like tutoring. As you know, in Asia, education startups are doing phenomenal because people are so focused on education. Something maybe the West could take a tip from. So my worsty, Howard Linsen, had a great comment on the CCP's control of their

companies. Communism is fabulous, not sure why U.S. investors should ever buy a Chinese stock again. I mean, it's just crazy. I've been saying it on this program, what is the endgame here for China? They're literally burning their relationship with U.S. markets, U.S. investors, hedge funds, anybody who's going to buy these stocks. And aren't they also burning their relationship with their entrepreneurs in their country? Like, if you're an entrepreneur and you spent decades building your company

and then took it public and then reap the benefits of that, and then one day the CCP says, you know what, you should all be non-profits. We've decided education shouldn't be something you profit from. I think we're seeing how communist think. This is a perfect example of the communist mindset. You should not be able to make a profit off of education. It should be no competition in education.

You should all be state run. It should all be nonprofits, whatever. This is the chickens coming home to roost. I mean, how do you say it any other way? Communists started to dabble in democracy and they started to dabble in capitalism, and it's now exploded in their lap. I've said this over and over again. Maybe China isn't as stable as we think.

They've got the potential of a revolution happening there. You have people protesting, you have Hong Kong being turned over. the tension seemed very high, at least from the outside here. And what are they going to do? Their companies are not going to be able to go public? Who's going to build the next wave of companies? Are they going to put guns to people's head and just say, you make the next Uber, D,D, and, oh, now the state's going to run all these things?

Maybe that's what they'll do. Maybe they'll just take eminent domain over D.D. and every other company there, you know, Alibaba, et cetera, wipe out the shareholder base and say, we own all these things. They could do it. And then what does the United States do? Maybe we say, oh, you know what, your debt? Not worth anything.

We're not paying it back. Whatever debt you have from the United States, you don't have it. Oh, if the Chinese government or Chinese companies own anything in the United States, you're kicked out. We're kicking out, you know, all your companies. Anybody who's in school here is kicked out. I mean, this is a tension level that I don't think we've seen. And I wonder if this has something to do with the coronavirus coming out of a lab, potentially, and now the West starting to realize,

hey, that's a pretty viable scenario. Maybe it's the likely scenario in some people's minds. Maybe it was covered up. But what is the endgame here? Do you have any idea? Why would China do this is what I'm kind of wondering. And then why would anybody in the West want to engage, whether the NBA, the movie industry,

and if you're Apple, you have to be wondering, like, what is the next 10 years going to look like for a company like Apple? I mean, Google is not, you know, and Facebook and Twitter, not integrated or Amazon in the on the ground in China. They don't have customers there. But Apple has a lot of customers there. And Apple builds this up there. This seems like a big risk for Apple. They've got to be thinking, where are we going to make iPhones in the future? In business, it's important to be memorable. And sending gifts is a classy way to create a great

memory. But gifting's tough. It can take forever, where you get sent to the wrong location. and it's never scaled properly until now. Snack Magic is a stress-free, easy and customizable way to delight employees or customers. Snack Magic uses software to help recipients build their own snack box. And we're using it now for our gifting. You click on the link. It says, hey, Jason, we're this week in startups.

You have this $50, $100, $250 credit. What would you like? And then you start going through all these amazing, amazing snacks. and you get this incredible gift box. See here. And I love a bunch of different types of gourmet items. I'll take out a couple of them. You're going to hear some crinkling right now.

You can get these air-dried veggies, and I'm trying to eat more vegetables, and this seemed like a reasonable snack for me. We would have these back-and-forth discussions of what to get our customers and what they like. It's like, oh, they don't eat chocolate. Oh, they don't like cheese. Oh, this person's keto.

This person's that. This person's vegan. Just send somebody this snack magic link, and you're done. And they get what they want. Whether you want to delight one person, or a thousand, snack magic makes it easy. Send it to an employer right now.

Say, thanks for the hard work. Here's a hundy. Here's a hundred bucks. And you can get 10% off if you use my offer code twist by going to snackmagic.com slash twist. Very simple. Snackmagic.com slash twist. 10% off.

Okay, let's get back to this amazing episode. Okay, Alphabet has launched Intrinsic, another company along the lines of Waymo and DeepMind and they're moving into Amazon territory as intrinsic will focus. on software for industrial robots. This is not the first time we've seen Google branch out like this with spinouts and, you know, other bets, as they call them.

Waymo self-driving cars in deep mines with the protein folding. These are big projects that Google is able to make these outside bets and they're becoming big. And I think they're going to need to spin out into their own companies at some point. DeepMind probably not because it's so core to what they do. But Waymo should be a separate company at this point. That should be spun out and go public on it. own. Some people would argue YouTube as well, but I think the ad networks in Google. Google's

search ad network and YouTube's work so well together that I'm not sure that's a good idea because they have the same customer base. We had this debate on episode 41 of the All In Podcast, from Freeberg, explaining Deep Mind's latest breakthrough. Is it worth breaking up these companies if they're insane money printing machines give you the ability to lose billions a year on these world-changing products? It is an interesting rub that I think you do have to consider. there was a ton of money in the world. I mean, there is an argument that if DeepMind didn't sell for $600 million to Google, they might have been the Google killer, and maybe that's why Google bought them.

Maybe they would have built a better search in, better advertising networks. And I do know many people wanted DeepMind to stay independent, and maybe they would be worth $100 billion right now, and maybe they would have gotten more accomplished. Freiburg was clearly on the side of big tech making these big bets. Sax and Schmots were kind of on the first. side of breaking them up. And Freeberg's point, I think, is a valid one, which is the government's not going to get this done. Our government's incompetent. They can't manage anything. We're spending

more on education and getting less from it every year. And we can't manage homelessness or mental health issues. The private sector is the only one who's going to get this done. Look at space. We now have a race to space where prices are dropping dramatically to send people to space. Do you think the government would have been dropping the prices to go to space? would have been increasing. Obviously it would have been increasing. So for all the people complaining about the billionaire space race or private companies in a space race, let's just think big picture in humanity. If we lower the price of going to space tenfold, a hundredfold, which just seems like we're on the road to doing, that's good for humanity. We got there. It doesn't matter that a couple

people got rich at the time or that it wasn't our government. Why are we looking to the government to do that? Why not have all private sector companies getting us to space? And, you know, we can create some regulation so they don't put too much junk up there and clutter the skies. But clearly, we are living in a really interesting world. So details on this plans for intrinsic. They're still unclear according to Diverge. But Google is no stranger to robots. Obviously, they bought a robotic company Boston Dynamics in an effort internally named

Replicant, big fans of Blade Runner over there at Google. But they sold Boston Dynamics to SoftBank in 2017. and I think a lot of that had to do with Google's team does not really want to support the military. I think there's like a big anti-military thing going on inside of Google, which I find quite hypocritical. Like if you're a big tech company here, I kind of think you should support our military because, geez, like you can only build great companies like Google and have the amazing security we have here if we have a dynamic military. So I found that kind of weird. Sam Coros from Arc Investment Let Twitter know his thoughts.

Google X is launching Intrinsic, which is a company focused on industrial robotics software, super cool and important problem to solve. Google and X have had a very hard time commercializing techs and they don't have a great robotics track record after 5.5 years. In X, they are now becoming an independent

alphabet company looking to validate the technology. That's a lot of time. Having said that, I hope intrinsic crushes it and pushes the deep learning plus robotics frontier. according to CNBC, the division CEO Wendy Tan White, who I'd love to have on the program, this will unlock the creative and economic potential of industrial robotics for millions, more businesses, entrepreneurs, and developers. It'll do so by making software that enables it easier to use and cheaper and more flexible robots,

think like a platform for robotics. No news from the project has been released for some times. And this X, which Sergey was running, was kind of like a think tank and a way to incubate ideas. And when they become big enough, then I think they become one of the alphabet. And that's why they renamed the company from Google to alphabet, because they wanted to be a collection of companies, Google being the primary one. But Waymo and Nest and other bets being part of that as well. So in 2019, they announced the project Everyday Robot within Google X, Google self-titled Moonshot Factory. The Everyday Robot project was aimed at creating a general purpose learning robot.

But we haven't seen any updates on that. So who knows if they've made it? progress or if they just want to get this off their balance sheet or if the talented people there were going to leave. And this is one of the things Google always contends with, which is, you know, you're inside of a company and then somebody has to make a decision to give you more money and to what your goals are as opposed to investors, right? So the venture world, buy shares in a company, and they're aligned with the founders and the employees. If the shares go up because the value of the company increased because they delighted customers,

and made more money, et cetera, everybody wins. But when you're sort of a strategic company, then you have to answer to somebody. Maybe somebody on the board or some manager, mid-level manager, high-level manager, the founder doesn't like you, doesn't like what you're doing, or I think you should go in this direction.

And you have this layer of decision-making between you and the customers, between you and the company's ultimate success. And that becomes untenable for the most talented people in the world who, when faced with this, and a market of unlimited capital, will say eventually to those people holding them back, you know what? I think it's time for me to leave. I'm going to go pursue something else. And in California, we don't have the ability to do non-competes, and that's one of the things in the antitrust executive order that Biden is working on for a reason. We want people

to be able to leave their big companies, and you can do that in California, but you can't do it in Texas and some other countries, I think Florida, where they do enforce non-competes. Some states in the Northeast also have the ability to enforce non-competes. But you can leave Waymo, DeepMind, or indicator at any time and start your own company. As long as you don't bring the patents or any documents with you, you're free to do that. And that's what's probably happening here. The management team probably went and gave the ultimatum, or they were pushed and said, you should rise and fall on your own with your own P-N-L,

profit and loss statement, and that's probably what's happening here. All right, San Francisco, as but one example of many different cities, but probably the peak, has over 17 million square feet of vacant office space, according to the website,

socket site, S-O-C-E-T-S-E-E dot com. This is an amazing site that's been online for decades, that's, I think, run by real estate insiders, and they do this real-c-est, interesting visualization. They basically have been visualizing how much office space San Francisco has based on Salesforce Tower, the tallest building in Northern California. And it turns out right now, that 17 million square feet of vacant office space would fill almost 13 Salesforce

towers, 12.7 Salesforce towers. This is unprecedented and insane. The office space could accommodate almost 100,000 workers based on free COVID spacing and density, and we will obviously have a post-COVID world at some point, either herd immunity, people get in the vaccine, one way or the other, we're going to get through this. And in other news, because of the Delta variant, Apple, which was telling employees, we're going to come back three days a week, and they were starting petitions and fighting it. Bloomberg has reported that Apple announced they would be pushing back to the return to office from September, just a couple of weeks from now, to October at the earliest. And in July, you remember, CEO Tim Cook told employees they would be returning to the office for three days per week, starting in September.

But, you know, this Delta variant has pushed back the timeline. And for good reason, it's spreading like wildfire. And you can imagine if you had people back on campus and you had a Delta variant breakthrough and somebody died, God forbid, or went to the hospital. but there might be liability associated with this. There could be chaos. People could be saying, I told you so. The press starts dunking on you. Same with conferences.

Everybody remembers the X Prize, Peter Diamante's who I consider I'm friendly with or friends with. He's been on the program a couple times. Really great guy. He did a conference, thought he was doing the right thing by having COVID testing, but he kind of broke some laws and, I think, or broke some regulations about hosting events in Los Angeles during the

pandemic and got pretty, you know, pretty a big backlash against him. But what I really think is important to think about with this is the long term. And Socket site has a comment section with a lot of real estate brokers into commenting anonymously. So when they talk about specific homes or people doing price reductions, you know, three times, and then selling after the third one and taking the listings off each time and then they sell over asking. But the product has been on the market three different times. got taken off three times and it sells the fourth time at the reduced price for overmarket,

but it's actually a decline of 20% from it less old. They really like call out that kind of nonsense and BS in the real estate space. And they're really smart insiders. I basically love Socket site for the comments as much as the stories. And they do a great job on the stories. Dave, Seattle dude, said, and this is a really interesting point about this office space in San Francisco, the average annual net absorption for the boom decade just ended was what about 1.5 million feet it would take 11 years at that absorption pace to fill the space however going forward it's hard to see san francisco ever averaging that kind of net absorption again over a prolonged period so it could take decades to fill the 17 million feet of empty space this is the key point because of the delta variant now pushing back people going to work we have a group of individuals who have will not have have been in offices for close to two years. Think it through. If people haven't been to the offices, I think it's going to wind up being two years. Are they ever going to go back? Will they want to go back? Will they have moved out of San Francisco or other places? Will they want to commute?

I think we've reprogrammed people. If this had been six months, work from home or 12 months, maybe you could see the springing back, but two years now. So extended pandemic, fact number one. Number two, San Francisco has devolved into crime and chaos, shoplifting, car break-ins because of this crazy, insane experiment, that former defendant, public defender Chesa Boudin, as we've talked about many times. You know, he's basically created, make San Francisco the worst possible city you could live in and very dangerous, so people don't want to go back there. And I was already having a hard time convincing families or senior executives coming to San Francisco. Francisco. So if you wanted to get a senior executive, you know, think a CFO, CTO, VP level, or above to join a public company or a company that's growing office, they didn't want to come to San Francisco. Too expensive, too much crime, terrible quality of life, too many taxes.

Basically, the mirage, the vision that was once San Francisco is over. At the same time that we had all this office space, at the same time as the pandemic has trained the exact workers that would come back to offices to not come back. In other words, tech is the one group that can work from home because we work in front of keyboards all day. It's not much different to work at home than it is to go to a campus. And those employees are in great demand. This is not like running a grocery store or you know, or an arena for a sports team where you can't work at home if you're working at the Staples Center or at the Warriors Chase Center or whatever it is. You have no choice but to go into work. That's how that job function works.

So I think San Francisco would take decades. I agree with this person. The last time they had to fill this amount of office space was the greatest boom in the history of all booms. The last decade. Man, this is going to be, I think, a crazy situation. So what would you do? What's a possible solution? Very simple.

We have a housing crisis in San Francisco because they won't build more units. Start converting half of this space into lofts and let people live in them. You can be sure the landlords would love to do that. However, San Francisco is the worst possible climate of nimbism in the entire country, a place where liberal individuals who want to virtual signal will block any development of a multi-unit house in their backyards, because, and maybe it brings the wrong element. So they will virtual signal on Twitter and be super virtue signaling and woke, but they won't allow any dense housing in their backyard.

it's the most typical critical place ever. Here is what Dave continues. This does not bode well for the owners of these buildings generally. Some of the space can be converted to life sciences or residential, but most of it cannot. So he kind of nails exactly what I'm saying is they're not going to be allowed to convert this because the whole area is so nimbly. I mean, just even opening a bakery or an ice cream store is a multi-year process here, let alone building anything.

And anytime you want to build something, it's a five to ten-year process, and you're going to have everything downsized because people are going to complain about the shadow or this or that. It's just a very protectionist nimbic kind of place. Two beers said in the comments here on Saka site, this is why building booms can be such destructive events in the long term.

They shoehorn land into niches that may be obsolete for future generations. Smaller buildings are more easily repurposed or demolished to make way for new uses, but there's not a lot of versatility in an office tower. I disagree with that. We've seen office towers in New York converted all the time into residential. This is a completely wrong statement.

In New York City, Wall Street went from being packed with office space to being packed with residential. And people love living in the Woolworth building or this building or that building, the former JP Morgan headquarters, former Bear Stearns, headquarters. All this stuff is being converted. It's not that big of a deal. You just take the giant office space, you got it. And now you've got high ceilings and a beautiful place. So I disagree with this statement. And, you know, we saw Wall Street convert into an incredible, incredible location.

I don't know what the heights are on the ceilings in these office buildings, but we'll see. One easy and always needed repurposing would be art studios. Most artists just need natural life ventilation and access to a utility sink. Thousands of art studios have been destroyed in this latest wave of uncreative destruction. Maybe it's time to bring them back. This is exactly what I saw in New York. I used to live in the Star at Lehigh building illegally on 26th Street. in the West Side Highway.

I don't know if I should say that on the podcast, but I think Statual Limitations is up. And I lived in a giant loft. And we built our own bathrooms. And artists lived there and they had sinks. And then they would take showers in their sinks. I'm not kidding you. You did whatever you needed to do.

And I paid like 1,800 a month for that. $2,500 square foot loft. It was amazing. So this begs the question, if this can't be converted into apartments, what's going to happen? What is the end game here? And I don't see people in San Francisco

going back to work in offices, nor do I see people wanting to go to work in San Francisco. In fact, the overarching trend because of the chaos and crime in the city, particularly towards Asian Americans, but it's spread out for everybody. And the homeless problem has gotten just absolutely out of control during the pandemic. And it was out of control before that. People are going to leave. And with these crazy taxes, like they've now put a 1% tax on homes above 10 million

and Dean Preston doing all these oppressive taxes, the most affluent people are leaving for Austin, Miami, and low taxates. So then what happens? If the affluent people who start the companies and who pick where the office space are are picking Austin and Miami, you've now lost that. So you have to be careful. If you overtax the creators of companies, what are they going to do? They're going to go to a place they feel appreciated that has less regulation. I think San Francisco is a 10-year decline.

And I'm not sure. Listen, I don't live in the city anymore. I have some real estate there. I don't know how long I'll keep it. Probably another year or two. But who knows, I don't live in the greater Bay area. and the surrounding area of the bay, the Napa's of the world,

the East Bay, Sacramento's, Gilroy, Santa Cruz are exploding as people still want to stay in the Bay Area because it's quite beautiful and bucolic and just gorgeous in so many ways and has so much positivity around it in the tech industry.

So the homes outside of the city are now booming and the city is turning into Gotham City. It's pretty crazy. My prediction is a 10-year decline for San Francisco, at least, at least, because I think a lot

of the political maturations are going to take multiple cycles to work their way through where people decide, you know what, we hired people to run the city who were incompetent or way too far left, like communist far left, like radicals, not even socialist, but more towards the communist bent. And we need to get moderates in here or liberal moderates, something along those lines to kind of reverse and maybe manage the city better. It's total incompetent management going on as well. So a complete disaster for San Francisco and a big win for other cities that are high functioning and states that are low tax. So before we wrap, I wanted to touch base on some of my old takes and hold myself accountable. I'll start with one where I just nailed it. Disney's streaming

potential years before there was a Disney Plus. I was asked on CNBC what I thought of this potential. Now remember, we covered Netflix's slowing growth rate and Disney Plus passing 100 million subscribers in their first 16 months of operation on Wednesday show, episode 1250. So I was like, hey, I think I remember talking about this on CNBC years ago. So I pulled some clips from CNBC from 2016 and 2017, five and four years ago. And in March of 2016, I went on CNBC Squawk Alley, which is now called Tech Check, to talk about ESPN's new direct-to-consumer video offering, which eventually became ESPN Plus. And this was, you know, Disney's first foray into D-To-C direct-to-consumer video streaming.

And I was bullish on it from the start. Disney's stock was trading it around. $97 a share at that time with $160 billion market cap. It's almost double that today. I'd probably still undervalued. I'd have to think that through, but it seems undervalued to me. But anyway, check out this two-minute clip from March of 2016. You know, I hate listening to myself from back in the day, but let's have a listen here and I'll talk to you about what my thinking was at the time. What is ESPN worth, especially as they are beginning to continue to spend so much on rights? They are losing subscribers, how do you value a business like that that has always been number one,

but where the ground is shifting pretty dramatically underneath them? Who they have to convince to get money from is the big issue here, right? They were negotiating previously with DirecTV, cable vision, time water, whoever. Now they've got to actually go to the consumer and convince the consumer to give them money directly. This will be a little bit scary for them, but look at HBO, look at Netflix, look at Amazon. These companies are getting people to pay direct. It will actually be huge for them when they have a database of all these customers. and then they can slice and dice it.

Right now, they don't have a database of customers. They don't have all these credit cards on file. They're going to get tens of millions of credit cards on file, and that's going to make them very powerful. This will be huge for ESPN. Consumers are disgusted by the buffet. They want to go, and they want to have organic food and pick very specific programming.

And once you do that, you're eating healthy, the buffet looks really disgusting. But thinking back to what Iger said on February 9th at the company's earnings call, where he said, we're not going to let the disruptors disrupt us. Yeah, good luck with that. Yeah, I think Bob Eiger is doing a little bit of a show here.

He's like, oh, my God, we're going to lose control. But actually, I think he's going to love this. He's going to love going to direct consumer. And, yeah, everything is coming together. So if you look at the advertising pie, the Internet now is roughly a third, and advertising on TV is still half. The Internet just went right past outdoor, print, and radio, right? We demolish those three categories.

Now what's happening is what happens with the video, and those two things are actually merging into, And when two things merge together and you have the rights, like Bob Eiger owns everything in the world, Marvel, Star Wars, ESPN, this guy owns all the assets. He is going to crush it. Disney is a huge buy. They're going to have all the chips. And it doesn't matter what pipe they distributed to. They're going to get paid. It's just going to be this little, you know, transition that's going to be hard. But he is inside laughing and thrilled with this. All right, I have to give myself credit. I do think Bob Eiger was putting on a bit of a show there for the case of like the cable operators who they have a tenuous relationship with and they're going to go direct. And they don't want to lose the money from them paying them for their content, nor do they want to lose the Netflix money. Remember, Netflix was paying them for content at that time.

Those were big checks coming into Disney. And so this was going to be scary. But this is 3.5 years before Disney Plus launch. and it was super clear to me, like, I just look at myself and having a family and having a daughter or, you know, three daughters. At this time, yeah, I did have three daughters at this time. You know, just thinking, well, if I could get the entire Disney library and all the Star Wars library and the Pixar library and the Marvel library in one place, that would be Nirvana for me. I don't have to get DVDs or search on Netflix versus cable television where I'm going to find those movies. You know, here we are. Disney is now at over 100 millions of subs and Disney is a reformed company.

and a company that is now their North Star is Disney Plus. Literally, that's their North Star as a company. Not parks, not movies, not reselling IP. It is the subscriber base of Disney Plus that's driving it. A year and a half later in August of 2017, I went back on CNBC to talk about Disney's streaming potential after they started pulling their content off Netflix, which was a super tell that that was going to happen.

Here's the 90-second clip of me describing how Disney is going to get tens of millions of users quickly. So Disney with ESPN, with Marvel, Star Wars, Pixar, and that whole collection, including the Disney assets, of course, the original movies, they have an incredible, incredible collection. And when they go direct, it will be very easy for them to get tens of millions of people to subscribe to that service. Will it be very easy, though? Jason, I'm wondering, you've got ESPN on the one hand, but then you've also got kind of Marvel and Lucasfilm, and then you've got like Disney Jr. type stuff. It doesn't seem like all of that fits under a single subscription. So do you have to sell them each separately, and do you end up with subscription fatigue

unless there's something like a cable bundle that authenticate for all of them at once? No, I think that Disney is the one company that could produce a top three offering. So they'll be right up there with Amazon and Netflix, because if they were to just give as an example, everybody who caught the tens of millions of people who go to a theme park, If they gave each of them a free three-month or six-month subscription with their ticket purchase, they would easily get to tens of millions of users. If they took every Marvel comic book or every Star Wars action figure or every ticket sold to the next couple of Star Wars films

and included a three-month or six-month customer acquisition cost would be $0. And so I believe they can create tens of millions of subscribers with a zero acquisition cost and immediately be the number two or three-player in going direct to consumers. And that's exactly what happens. Out of the gate, they became number three, I think, behind Netflix and HBO. Now they're number two. And I actually will say right now, it's pretty clear they're going to eclipse Netflix very quickly, very quickly being like in under a decade.

They didn't do that exact strategy. Mine was like, hey, bundle it and give people a bunch of coupons. They didn't have to. They just charge $5.99 a month. They underpriced the product. That's another way to get people into a new product is to dramatically lower the price. And that's what they did. $5.99 a month when Netflix was 12 at the time, I think.

or, you know, HBO and your cable bill was probably in the $70 or $80 range. They have the greatest trove of IP ever assembled in the world, Star Wars, Marvel, Disney, Pixar, you get the idea. And, you know, they have so much money, and they have all this IP that really great people like Dave Filoni and John Favro creating the Mandalorian and the new Clone War series coming, the new Obi-Wan series, Book of Boba-Fet. I mean, this stuff is a never-ending treasure trove that makes it impossible for you to unsubscribe. Kevin Feigey doing WandaVision and Loki, my family went crazy for both of those. And this content, if you win the kids in your household, you win everybody. And a lot of this content appeals to both generations. My kids and I both love Clone Wars, The Mandalorian, my wife and I, it's just transcendent.

there really is, if you think about all the reasons they're going to win, number one, this treasure trove of IP. Number two, they have the money to hire the greatest talent. And that talent wants to work with that IP. Number three, they dominate kids. And if you win the kids, you win the household, of course. Who's going to say no other kids for, you know, $10 a month for this incredible library? Plus, Disney Plus is only part of the overall product line.

And, you know, they have this bundling potential that's amazing. I now have Hulu and ESPN as part of the Disney bundle, and it's extraordinary. Hulu is amazing. I got rid of DirecTV, AT&T, now, because they screwed up my billing, and that was a godsend. Because once I got onto Hulu, Hulu is so great on your Apple TV or on your desktop or the iPad app. I mean, it's 10 times better than any other app I've ever used for live streaming of content like CNBC or, you know, watching the NBA finals. it's just incredible. And the bundling potential is there. You know, for 20 bucks a month, you can get two or three of these services.

And then you start thinking of like the upsell potential and the crossovers, new movies, park tickets, merchandise, they haven't even had that pop up yet. But at some point, you're going to be in that Disney Plus account. You're going to watch the Mandalorian and it's going to say, would you want to buy Grogoo? And you're going to say pre-order Grogu and you're going to get that ship to your house to have your credit card on file and boom. And we did this as well with some of these premier access movies.

I can't remember which one it was. It was a movie about a dragon. Some Pixar film was really good, actually. It had a lot of great actors in it. Anyway, we watched this one film. It was about a dragon. And we loved it. We paid whatever, 30 bucks for it.

And then it was free like six weeks later. Who cares? It's just like, it's an incredible value. So these incredible premier offerings at home make it a no-brainer. So kudos to me for getting it right. I guess it was obvious. and all these things are obvious in hindsight. All right, everybody, thanks so much for tuning in.

We're doing tons of news next week. We've got a four-show week. Thanks for tuning in, give me whatever feedback you have. And I'm hiring senior analysts for Inside.com. If you are a senior analyst, which means you want to write newsletters and host events around a specific topic, we have openings. You can go to jobs. Inside.com. I'm looking for a senior analyst in cybersecurity podcasting.

Software and developers, IT, venture capital, transportation, XR, AR, that's one category, and e-commerce. So if you are a writer, journalist, analyst, and you've got expertise in a category, plus you want to host events. Imagine your day being writing a newsletter for two or three hours about a topic you care about, and then hosting events and a community in a Slack room at the same time. That's the job. It pays $75 grand a year. Pretty good job. You get to work with me every day.

What could be better? So go to jobs.inside.com.