This Week in Startups - Meta's VR plans with The Information's Sylvia Varnham O'Regan + SEC strengthens its crypto enforcement team | E1450

Episode Date: May 3, 2022

First, we speak with The Information’s Sylvia Varnham O’Regan about Meta's plan to double its VR headsets by 2024 (02:06), VR adoption (13:14), and more. We wrap by discussing the SEC’s Crypto Assets and Cyber Unit adding 20 new agents (39:52). 00:00 Jason and Molly tee up today’s show 02:06 Speaking with The Information’s Sylvia Varnham O’Regan on her article about Meta doubling its VR headsets by 2024 12:01 Vanta - Get $1,000 off automating your SOC 2 at https://vanta.com/twist 13:14 What will be the tipping point in adoption for Meta’s VR headsets? 22:10 Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST 23:25 What does the timeline look like for Meta’s VR headsets? 35:40 Meta’s Burlingame Oculus store 38:38 Embroker - Get an extra 10% off insurance for your business at https://Embroker.com/twist 39:52 The SEC’s Crypto Assets and Cyber Unit, formally known just as Cyber Unit, will be adding 20 new positions Check out Sylvia's Reporting: https://www.theinformation.com/articles/meta-plots-ambitious-vr-release-schedule-of-four-headsets-by-2024 FOLLOW Sylvia: https://twitter.com/SylviaVarnham FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody. It is Tuesday this weekend startup. We have another really interesting guest for you today. That's right. Another information reporter just happened to happen back-to-back days that we have an information reporter on the show. Today we're going to be talking about Facebook's roadmap for their AR and VR devices. Sylvia Barnum O'Regan joins us to talk about her breaking story about Meta's new VR product roadmap. TLDR, lots of VR product.

It is a lot of headsets. It's also a very interesting interview about the entire Reality Labs division and the overarching vision and whether like work really will get us to wear these things all day. It is a huge division for Facebook. They now have taken over Burlingame Point, an area just below San Francisco here with 750,000 square feet of office space. And they're getting back to the office. And this is a major project for Facebook, obviously. And then we're going to talk a little bit about the SEC is rebranding their crypto department. apartment and making some new hires to do more enforcement in the wild west of crypto.

It's going to be a great show. Hey, stick with us. This week in Startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies to get a SOC2 report fast. Twist listeners can get $1,000 off for a limited time at vanta.com slash twist. Squarespace. Turn your idea into a new website. Go to Squarespace.com slash Twist for a free trial.

When you're ready to launch, use OfferCode Twist to save 10% off your first purchase of a website or domain. And, Embroker. Embroker's startup insurance program helps startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at Embroker.com Twist. While you're there, get an extra 10% off using offer code twist. All right, everybody. Welcome to Tuesday here at this week in startups. Molly, we got a pack show and a guest right off the top of the day here. So why you introduce our guesting and let's get to it. Our love affair with the information continues today. Great reporting from the information,

fulfilling the mission. Today, we have a great story, actually. We had the Verges, remember Alex Heathon a few weeks ago after he broke this story that Meta was going to release two virtual reality headsets by 2024. Well, today, there is an amazing update on that from the information's Sylvia Varnam O'Regan, who joins us right now, who just broke

that meta. Actually, now plans to double that number. She's doubling the scoop and release four headsets by 2024. Sylvia is currently a tech reporter at the information, like we mentioned, and previously reported at The Real Deal. It was a freelancer and

the Masters of Journalism from Columbia, which is why she's crushing it in the journalism department. What did you find out? Well, yeah, the story is based on an internal roadmap. So Facebook maps out its product releases. And these roadmaps can be stuck to or they can be more aspirational. So I think it's a time will tell whether they meet the timeline on this one. But what this roadmap shows is that they plan to release a high-end headset this year, which is publicly known, and then two more quest headsets over the coming two years.

And then another version of this high-end headset, which is known externally as Cambria, but internally it's codenamed Arcader in 2024. So that's quite an ambitious timeline because they want to essentially release a sort of high-end product followed by a more accessible, lower-cost product. and so on and so forth, and get into that cadence of regular releases in the same way that, say, an Apple does with its phones. All right. So, welcome to the program. Thanks for coming. They could be good to educate our audience a little bit on each of the headsets and the markets

and the use cases. And I think starting with the most expensive one and the most tricked out one would be a good way to, or the most ambitious one. Now, would I be correct, that's Project Cambria is the most ambitious and expensive one? Yes, that's Project Cambria. And so that one, which is due to come out in around September, according to my reporting, that one is a more high-end premium product. So at the moment you have the Quest 2, the Questline,

and that's a lower cost product. And Cambria, they haven't publicly said what the price of this device will be. According to my reporting, sources said it would be around $7.99, but a met a spokesperson said, and this is in the story, that it would be significantly higher than that. So watch the space around the price, but we know it will be more expensive than the quest line. And it looks a little different, correct?

So we're looking at an image here for people who are listening. And so it has the quest everybody knows. You can't see through it. It's the white one. It's the one you play Beat Sabre on. And it's delightful for VR. And like, what does that go for? With $300 bucks, it's incredibly affordable.

Right. You don't have to connect it to your phone. This one's going to be upwards of, did you say, $7.99? $700. We think, great, we think. We don't know the exact price, right. But it will be more than $800, according to META. Got it.

So this one looks more like ski goggles that you can see through or partially see through. Am I correct? Right. Yeah, that's right. So it has the battery at the back, according to our reporting. And that's a departure from Quest. So it's probably going to be more balanced to wear, and maybe you could wear it for longer.

But yeah, I mean, the main selling point of this device is that it has full-color pass-through. So you're able to, you know, pass-through is when you can step outside your VR environment and have a real-time view of your surroundings. So that's quite advanced technology. and this device is offering it. In terms of use case, it's being marketed or pitched by Facebook as a device for the future of work. And Mark Zuckerberg spoke about this in Earnings last week.

He talked about it being a replacement for the laptop, right? So you can use it ideally to use email, to code, to attend virtual meetings. And this idea that we will be working in a different way in the meta-futable. That's core to the sort of whole idea of the metaverse. And so my reporting showed that people inside reality labs, which is the division inside Facebook that does this work, does augmented in virtual reality, refer to this device as like a laptop for the face or a Chromebook for the face. And the Chromebook references about it being sort of a relatively low power device.

And, you know, the laptop for the face, the whole idea of it is that it's going to be used for work and could, according to Mark Zuckerberg, replace the personal laptop if there's a lot of adoption, which is what they're hoping for. Right. And you should take credit for that scoop. That was new in your reporting this idea of the kind of the Chromebook for the face. But won't it also, didn't you also report that it'll run META's own operating system

so that it won't necessarily be interoperable with all the existing apps that we use for, I don't know, work? Well, it doesn't run on a. meta operating system. It will run on Android. I did some reporting previously about meta's efforts to build its own operating system. So that's a bit of a segue, but they did have a team working on building a custom operating system and that project was actually shelved. I'm not sure if they'll pick that back up again or where that is, but most of their devices run on a customized version of Google's Android OS. And that has been something that Facebook has wanted

to to move away from or it wanted to because it wants to own more of the underlying technologies that power its devices. But I think the question, Molly, about what it will be compatible with, I think is touched on in the story and is somewhat open-ended because we don't know how it will function with, say, certain email providers. And I think I think we just have to wait and see what it can and can't do. But it will certainly be, you'll certainly be able to access workrooms, for example, which is Facebook's, which is the virtual meeting feature that you can currently use through Quest 2. Right.

Yeah. I mean, I think the Chromebook, having had an addiction to Chromebooks and obsession with it for a couple years until Zoom took over. And Zoom, it doesn't play nicely in Chrome. The delightful part about Chrome, and we moved our entire. company to it for a period of time was it was so fast and distraction-free because you didn't have to download any apps. You basically just use everything in Chrome.

So we used to use Slack and Chrome, Spotify and Chrome, everything in Chrome. And when you get off a Mac and you're no longer having iMessage and iPodos and, you know, email clients pop up and you're managing all these apps and you just manage Chrome, your life experience becomes very simple because it doesn't crash, it's fast, it's easy. but you lose a little bit of when an app is really nicely designed like Zoom I guess or resource intensive like Zoom might be better

so my guess is they have a Chrome browser in here which Android has a really good one and it just you're gonna you're gonna pop up Chrome Windows and when you look around you'll have a multi-monitor setup and if you're at a cafe you'll be sitting there looking like an idiot moving things in the air

typing a virtual keyboard that doesn't actually exist you're gonna look crazy And I can't wait for these videos next year when people are using these things on airplanes or just, yeah, people are going to be in the park with a headset on. Also, I mean, this question of ecosystem, though, does harken back to the reporting that suggested that meta is going to take a 47% cut of the apps that are sold potentially on these devices, right? I mean, there is some economic reason for them wanting to have what might end up being a closed ecosystem. Right. And I mean, the story touches on the business model of these devices briefly and speaks to the fact that meta doesn't make money that we know of on hardware on the sale of Quest devices. So the business model is around they take a cut from the app store and they might build out an advertising business, but around it, although that's, you know, very, very early stages. There's no real activity there. And so, yeah, I think there is a, there is a, there is a, question around how do they get a lot of people using these VR headsets for a start? And what are the economics around it?

What's the business model that's going to make this profitable for the business? And Mark Zuckerberg said in earnings last week that it was going to be a long time before they did contribute in a meaningful way to the business's profit because it's such a long way off that these many roadmaps come to life. He said that we're laying the foundation for an exciting 2030 to give you context about the kind of time that he's looking at for this whole suite of hardware products to actually come to life and be widely adopted. Listen, when you're a founder, it's fun to trade your craziest stories with other founders. Recently, Balloon CEO Amanda Greenberg, one of my portfolio companies told me how Vantas

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What do you think the tipping point will be an adoption for these? Because clearly on a price basis, they're somewhere in the range of a pair of, you know, nice headphones for the quest to, you know, the cost of a cheap iPhone for this Cambria. They're obviously super affordable now. People are starting to buy them, but they kind of try them. And then they sit on a shelf a whole lot. So is there a tipping point that they believe or you believe or that the industry and the back channels believes will be the tipping point where more adoption will happen or adoption could spike? It seemed like they thought Beat Sabre or some of these exercise games would be it.

And I guess to a certain extent they have. A lot of people tell me they've tried it, but it doesn't seem like people are staying in there very long. So is there some agreed upon or back channel on what will be the tipping point in terms of adopt? option here, killer app, etc. Yeah, I think it's a great question. And I will say that I've been doing more reporting around AR and VR, but I'm by no means an expert. So I'm always asking these types of questions myself, everyone I talk to, to better understand

the lay of the land. And, you know, if anyone's listening to this and they work in VR at Facebook, please reach out to me. I always want to talk to you guys about how people inside the company think about that. My DMs on Twitter are open. Call me. definitely. But Facebook doesn't release sales figures,

but an executive from Qualcomm said last year, late last year that I think it was 10 million units had shipped for Oculus. So, you know, there was apparently also a spike in interest around in the pandemic. And, you know, we're definitely seeing an upward trajectory from those figures. But at the same time, it's still pretty nascent. and I do wonder myself what will be that deal breaker or whether there will be one. I think if you look at the roadmap, that can kind of tell you a little bit about this, right? Because they want to both innovate but also access a wider market.

And so by both developing these high-end products, which allow them to experiment and innovate with the technology and make it more advanced and then releasing these products that are more accessible, it's a different way of coming at the same goal, which is getting more people engaging with the technology. And so, you know, Quest was price lower so that more people would buy these devices in the same way that Xboxes don't make money for the console

because they just want to get more people buying them, but they make money in other ways. So will an uptick in production and releasing more of these devices, will that move the needle? You know, I'm sorry to be one of those people that ask a question and answer to a question, but I think it's not even, there's sort of, there's sort of two parts of this, right? There's one, releasing more devices and maybe creating that.

But there's been a lot of dunking on Zuckerberg for this very boring vision of the metaverse. It's all about work. But it seems to me that that actually, that's what we spend the vast majority of our days doing. That is a use case that could be pretty obvious for both. both people and companies. You could see companies maybe wanting to pay for this. You build in a market if you can make it a thing that you would wear all day for work.

That might actually be the strike of boring genius or the stroke of boring genius like Microsoft style. He's been obsessed with Microsoft since he was a kid. I mean, he basically modeled his entire career on Bill Gates is dropping out of Harvard, starting a company having control over it, and then copying other people's features and never getting disrupted. That was his always obsession is to never be disrespected. disrupted like Microsoft was. So it would play that he's always wanted to have an enterprise play, right?

He had that Facebook for work. I forgot the name of it. I don't know that anybody ever really embraced it. Oh, yeah. And, you know, the Slack competitor, nobody really ever, I don't know if that even got released. Oh, Spotify uses it, I see. So that, I thought that was very weird, but I do think that it needs a killer app,

you know, because the prices to me, at this level, are all. already de minimis. So they've already reached a price, $800, $1,800 is nothing for a business per user if it gave any kind of value. People pay $1,800 for many different enterprise applications a year. So it's nothing. And then for consumers, $200 or $300, $400 for request is also nothing. They pay three, four times as much for their phones or iPads. So they've already reached this level of,

they're essentially free to American business customers and free to most of Americans in terms of like the ability to absorb the cost of it if it provided any value. So what's the use case? I got to think they have some belief that the desktop replacement, you know, where you can pop up your full big, huge desktop. And then I got to think they have a Zoom-like feature.

Because they keep showing Zuckerberg in meetings or card games or something like that. So I wonder if in business, if they make a really good app, it would be better than doing this Zoom call, you know, would be better, you know, than going to the, the office. So maybe the work from home thing becomes wind in their sales and people want to have something between the coffee room experience at work previously and a Zoom call, you know, something a little more fidelity walking around in a virtual office. It seems to stopee to me, I'll be honest. Yeah. Well, I mean, I was going to ask you guys, what do you think about the

idea of having a VR device replace your personal laptop? Would that, would that be something that appeals to you? I know that I've heard inside Facebook that people are being encouraged to take meetings virtually and to utilize that technology. But I think there is a bigger question about how much will we embrace that shift toward a very different idea of virtual work that goes beyond just what we're doing now, you know, like a video call into something more sort of embodied and I would love to be on a plane and put that headset on and have like six windows and be sitting in my seat, but I'd have, you know, my email open, my Slack code, be able to see everything and anywhere I go, my desktop just pops up in

front of me. But then I can opaque, you know, if somebody comes up and starts a conversation with me, I make eye contact with them. It just the opaqueness goes down, you know, 80 percent. And I can see through my email into the person or I'm driving, myself driving on the 280 of my email boxes in front of me and I'm, you know, just plowing through and dispatching emails while driving up the 280. And I've got it on. Autonomy. I don't know if you should hear about it. Whoa, whoa, whoa, whoa. I mean, those are pretty compelling, you know, or you're on barb or something. I mean, you have an 800-go-device on your face.

Think about the, like, devices that we use and how much they hurt our body. I'm so ready to get rid of my phone. I really am sincerely, like, get this form factor away from me. I want it on my face. Like, I'm wearing readers anyway. Put it right in here. Or the idea of being more kind of mobile and not tied to a thing in a meeting if I'm wearing an AR headset, assuming that it's light enough and comfortable, I actually can

see that bringing a lot of value and the space factor, like just having this instead of all the I'm looking at right now. Yeah. It could be really compelling. What I think really holds me back here is the fact that that meta is going to want to own this ecosystem. That meta is going to be the one potentially on the hook for designing. Like, just we don't need a new killer app.

Like, just be open to the killer apps that already exist and let them be on your platform. Yeah. And then we can all get to work maybe. Well, the other interesting part is that they're facing more competition, right? I mean, Apple is developing a rival headset. We don't know exactly when it's supposed to come out. The information, Alex Heath, actually, who you mentioned before, he previously worked at the information and reported a story last year about that headset.

And I think at the time it was anticipated to come out in 2022, but Bloomberg recently reported that it might be later. It might be next year. But I think that will be really interesting to see. see what they come up with because it's, you know, not much as known about it. But in that prior information story, it was reported that it was, there were talks internally about that costing around $3,000. So you're looking at potentially a very advanced product. And of course, we've seen Apple, you know, have such market dominance in other areas with other devices. So it will be,

it will be really, really interesting to see what they come up with and how, how these rival devices like from ByteDance or from Facebook stack up and how that market really shakes out as it does gain more interest and more users. Yeah. We've got some exciting news for this week in Startup's listeners right now. We're going to give one Twist listener $1,000 in Squarespace credits. We want to show off the best web design from all of our listeners in the This Week in Startups family.

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at squarespace.com slash twist by using the promo code twist. I mean, the prices have come down enough, the technology is getting there. The platform is, you know, you have some user base. So the idea that you would actually fund a VR startup today, you know, there was a lot being funded four or five years ago. People were losing their minds in the VC community, setting up oculus and buying

gaming PCs, and it was like, took two hours to set up. And now your quest is on your face and up and running without an iPhone, right? You can just use it with just the device. And that's up and running in 10 minutes. So it really has just, if you look at that one change, the setup time and the cost. You were talking about $4,000 or $5,000 to create a VR setup. That now, five years later, is $300.

You're looking at five hours of, like, getting it online, setting it up, and now five minutes. So if that happens one or two more times, this thing gets cheaper, faster, or better, easier to use. I could see, you know, there could be some adoption here. And it's got, if it gets lighter, that's the other great one. How do you feel about the timeline?

Our noties are saying they think that this seems really aggressive, of 2024 for a release of a device like this. But I don't feel like these devices look that far off from the price. You're talking about the AR device, Molly? No, I'm talking about the Cambria. Yeah. Cambria version 2, codename, fun since later to come out in 2024. Is that?

Yeah. I don't feel like that's so far off from Oculus. Wow, right. I didn't notice all these notes. How do I feel about the timeline? It's cool. I'm watching. I'm watching them.

You don't have to read them. This is cool. Thank you everyone for listening. I yeah like I said I mean I think the timeline is ambitious and I think we've seen from Facebook that these timelines are sometimes not met I mean they said that themselves and in a spokesperson said that and it was referenced in the story that these timelines are often shifting as they develop these devices and of course COVID and supply chain issues cropped up last year And so, yeah, I mean, I think we just need to keep an eye on it.

I don't personally have an opinion about whether they'll be able to meet it. But I do think it's very, it's very, it's an aggressive timeline. And I can see why they would want to get into that cadence. But the reality is building hardware products is extremely complicated. And I should, yeah, I should clarify too. I said 24, but they're talking about version one in the fall. This year. And then another one and then another, this year, right.

And then another another. Right. The two after that were, according to my reporting, are quests. So, yeah, it's one Cambria in 2022 and then a follow-up version in 2024. But yeah, I mean, the timelines on there are the devices, the AR glasses that Alex reported on, the smartwatch that they're developing, the Rayban glasses that I previously reported on. These products have all been delayed. The roadmaps have all been pushed out.

So I don't know what will happen with these ones. internal Facebook delays, or is it because of supply chain mostly or some combination? I think it's a combination of a lot of factors. Yeah, I do think that supply chain issues, but also, yeah, I mean, there's a whole, whole lot of layers. I don't even know if I want to hazard a go on that. Really? See, now you're making it interesting.

Okay, sorry. Well, no, but for the, I'm curious. I mean, it depends on who you, it depends on who you talk to. And perhaps I don't, perhaps I just don't have the internal insight to be able to capture the full spectrum of issues there. But yeah, I think it's very complicated. And I do think that, at least with Cambria, that COVID played a role. I'm just curious, as a reporter in dealing with Facebook versus Apple, obviously, Apple's super

secretive. People don't talk to reporters all that much. Facebook seems pretty chatty. And they seem to be releasing a lot of information and confirming stuff and, you know, responding to your questions about stuff. So is Facebook, like, actively engaging? trying to share this information, do you get the sense? And being a little bit more engaging, you know, let's say.

Well, I mean, so I'm a beat reporter covering Facebook. So I talk to people at Facebook all the time on the communication side. Every story that I do, I tell them from top to bottom what I'm going to be putting in the story. And just to be clear for the listeners, that's not, you're not reading them the story. You're just telling them the main point so that they are aware of everything that's in it, that there's no surprises and that they obviously have a chance to respond. That's so important to what I do. So they don't proactively come to me with these stories.

They're not saying, hey, write a story about the roadmap, right? Because they don't discuss internal products or, you know, unannounced products. They don't provide that level of detail. And so they would never do that. But if you go to them and you say, here's the, this is what I'm working on, they have the option to say, we are just going to not engage on this one, or they might provide a statement,

or they might provide something on background, as you saw in the story. So it's not on the record statement, but it's a, it's a, it's a, it's a paraphrased comment from a spokesperson. So they, yeah, they engage. And I, you know, I have a good relationship with a lot of people at Facebook.

Because as I said, I talk to them all the time and I have to talk to them about every story that I do. But so they engage, but I, you know, I just want to be clear that they don't proactively seek you out so that you can tell these stories. I mean, unless they are leaking it on purpose, which I guess is possible. What's the motivation of the people, you know, for the audience here who are curious? What's the motivation in your mind for the people who work at Facebook who leak stuff like this? Ooh. That is also a very good question.

I think, I mean, you're talking about a huge company for a start. You know, there's many, many, many thousands of people. so I wouldn't want to present them as a monolith. And I think everyone has different motivations. And in fact, I must say I do talk to a lot of people at Facebook, but I don't often get meta with it and say, why are you talking to me? Probably because I don't want them to go,

hang on, why am I talking to you and then flee? Now I think about it. I just like, let's just keep talking and not discuss it. I don't know. I think some people, as you saw with Francis Hagen, right, she was very public about feeling dissatisfied with the company, feeling that it put profit over people. So sometimes the motivation is clear.

Sometimes it might be more benign than that. They might just talk to you because you've built a relationship with them and you might ask them some questions and they might feel comfortable to share information. I don't think it's always about people feeling dissatisfied or I think it, I think it can sometimes be more about the relationships that you've established with those people and the level of trust that you can build because you provide them with an anonymity and you protect them. Yeah, it's interesting.

What is the vibe around reality labs? I have definitely heard of people returning to Facebook because they had the opportunity to work in this department and not on, you know, kind of the news feed. There does seem to be the sense that Mark's attention is, laser focused on this product and this division. Is that where all the juice is right now? I think there is a lot of attention on this division. It's more than 10,000 people, I believe, are working in reality labs,

which again is the part of Facebook that does the AR and VR work. They have a metaverse team. So they're constantly growing. They're investing a lot of money into this area, into this work. They're losing a lot of money too. and that's the result of all this energy. But there is buzz around it. I think people do really want to work there.

There's also some exits. You know, there's also some movement there on the other side. And I think that's across the business. I think if you look at the big picture of Facebook and where they're putting energy, I do think it's the metaverse, but I also think it's ads product or ads in general, right? because the ads business is under stress. And so you've got this tension happening where they're pushing toward the metaverse, and that's a real leap of faith because it's so expensive and the innovation

is going to take a while to really pan out. But then you've got the revenue engine sort of sputtering, right, because of what Apple implemented with the tracking restrictions. So I think there is a tension going to ads and to finding solutions or new ways to to sort of figure that out. How do we operate in a world without

targeting? That's a conundrum that they're trying to work through and they've been open about that and again that was discussed in earnings, what they're trying to do there but that's requiring a lot of energy and resources and so I think those are the two, at least from my reporting, I've been focusing a lot of my attention on ads and on the metaverse because I see

I see that as the push forward, but also the tension or the drag because they need to, they need to get growth happening for investors to feel comfortable with the degree of spending on the metaphors. And we saw that, right? Like the revenue growth was still there. It's still a growing company, but it's significantly dropped. And that's got to be a worry when you're looking out to a very exciting 2030. What's happening in between?

It is amazing how big that campus is. They, right below the San Francisco airport for people that are not familiar, it's a town called Burling Game. And they took over Burlingame Point, which is like right on the bay. And they have, you know, almost a million square feet. It's like 750,000 square feet of offices. If you just Google Burling Game Point, you'll see it.

And it's quite a interesting place. Right off of Coyote Point, there's like the whole area. where people go kite surfing and stuff. You can see why they're all in on remote work because it's also going to be underwater in like 20 years. Seriously. There's like all these projections that are like,

it's a really real issue for the back campus, like sea level rights. Yeah. Interesting. Yeah. It's a major project over there. It's going to be very interesting to see this dogfight. Who do you think is going to win?

Apple? Apple. Microsoft. Meta. Google or meta. Yeah. Well, I'm a journalist, so I'm objective. No opinions over here.

Who's got the big. Who do people in the industry think have the best chances of succeeding? Like, what's the consensus if you had to look at those four major players? On the hardware front, I mean, I think Apple is very formidable. No one's going to dispute that, right? I mean, they've done amazing stuff and they own the operating system. Yeah, I mean, I think Apple's incredible. I don't, I'm not saying that that means that Facebook will fall,

but I do think Facebook has a lot of big challenges ahead of it. And it's, you know, it's DNA as in software. Again, I don't think anyone would dispute that. So it'll be interesting to see. But yeah, the Burlingame game campus is kind of an embodiment of the whole metaverse operation, right? Big, new sprawling, going to house many, many people. And yeah. It just shows how serious they're taking this.

Like they're literally built a second campus. It's almost like they're like, here's our old business, Frank Gehry, beautiful buildings over here in East Palo Alto. And then if you go a little north in Burlingame, like here's the future. set of gorgeous buildings in campus. Yeah, it is really interesting. But I love your point about how they have to keep the core business going, like to fund it long enough for it to take off. Yeah.

I must say, I mean, I started covering this beat during COVID last year. So I haven't really had the joy of seeing a lot of the campus life around Facebook. So hopefully I can get out there. I mean, so yeah, I've never seen the main campus. What you got to do is come out here and stay at an airport hotel. It's like literally right next to it. It's pretty good. and just ride your bicycle around there,

you're going to get 20 more contacts because they're all hanging out over there. In fact, I don't know if you saw this, but they were sharing some photos of a store in Burling Games. So Burling Game is this little Tony town with like an Apple store and a Sephora and all that stuff. And I don't know where the store is. I don't know if you saw this,

but they were sharing some Facebook people were sharing it on Facebook and Instagram. This past week, they have a Burling game Oculus store. Yeah. Opening. Oh, really? Do they have any other storefronts, Oculus storefront? Is that the only one?

Oh, fascinating. No, that's the first. Yeah, and they had pictures of like their team over there. They have a Facebook store or an Oculus store. Burling game. I'm trying to find a picture of it to share with the audience, but metastore. But yeah, they were over there. And I don't know if people are, I don't know if it's open yet.

Someone commented that they opened a reality lab's office in Montreal, big team. I didn't know that. Huh. Montreal, huh. Interesting. Yeah. Thank you, James. Following the job listings and where they're finding people, there is a lot of hiring going on in Canada because you can get visas easier.

Here in the United States, we don't believe in bringing talent to the country anymore for some insane reason with 11.4 million jobs still available. So it's just easier if you had somebody from India or Europe or South America and you couldn't get them in a much of the U.S. drop them off in a waypoint in Canada and they can work in your Facebook office there. All right, listen, thanks for coming on the show. Keep us informed as you learn more and we're really monitoring this space as it heats up.

I think next time we'll be doing this in a Facebook in a meta. Periard Lats that on. Let's try it. I don't know if this name Cambria. What's the real name going to be? They've got to come up with a better name than Cambria. Terrible naming.

Well, there's a theme in the code names that the story touches on, which is California place names. Mm-hmm. You know, like Central Coast. Cardiff, Winston, Sinson. Wait a second. Did they steal that from Apple?

Wasn't that Apple's thing where like they named the OS results? Big Sur. Big Sur. Monterrey. Yosemite. Yep. Zuckerberg just keeps everybody's ideas. No, no ideas are new.

None. Not a single idea is new. No, he's literally has never had an original idea in that robotic brain of his. He just like scans other people and steals her ideas. I'm saying that. I mean, it's like, no, I love that because he's such an Android. He's like, brr.

It's like basically doing employee service for the Bay Area to be like, we're going to name this one Monterey, and we're going to name this one, you know, Yosemite. We're just like a Pixar movie. It's just like, yeah, everything in the Bay. So he's like, I'm uncomfortable. I'm a reporter. No comment from me.

I would like to go now. This is the other side of the feds where we get to have opinions. We don't have to randomly give our opinions. Great job. We'll talk to you soon. Thanks for coming of time. Thank you. I'm going to quickly explain one crucial type of insurance that all startups need.

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frauds that are going on. I mean, they do, they take select actions for egregious cases, but it's, it's been pretty slow. Yeah. They seem,

I could say. Yeah. Under-resourced, I think it would probably be the most charitable. Probably, yeah. Well, and also in classic American style, sort of like waiting to see, the tech does tend to lead regulation here.

And so I think probably federal authorities have been like, waiting to see where Bitcoin and crypto are going to go. And now they're like, uh-oh, it's going pretty bad. It's going pretty bad. Let's get in the game. And it's going a little too,

fast. So what was the announcement here in terms of enforcement from the SEC in the cryptocurrencies? So the SEC has now renamed its cyber unit, the SEC crypto assets and cyber unit, and we'll be adding 20 new positions. So the unit sits inside the division of enforcement. It'll have about 50 employees after all these positions are filled. So tiny. And those will be, I know, I mean, that really, to police, I don't know, all the business activity in America. Yeah. You would think that there would be 500?

More than. I would think it would be 500. Just the cyber part. This is just the cyber part, which isn't that big a part of American business. So you can see why 30 people is probably plenty. Well, and you think about it, like they literally named it from SEC Cyber Unit and they put the crypto first. Right. So it kind of shows like maybe the cyber crime aspect of this is not that big, but crypto is such a huge part of the economy now.

It's just such a big footprint in terms of dollars and so much at stake. And so many Americans participating, that is the key. The number of Americans participating in this is, you know, in the millions to tens of millions now. So, SEC Chair Gary Gensler stated in a press release, quote, the SEC will be better equipped to police wrongdoing in the crypto markets while continuing to identify disclosure and controls issues with respect to cybersecurity. The main objective is to make sure investors are protected, all those like retail investors who are in the crypto markets,

it will quote, focus on investigating securities law violations related to crypto asset offerings, crypto asset exchanges, lending and staking products, decentralized finance, non-fundgeable tokens, NFTs, and stable coins.

Okay. So, you know, this is really becoming acute because now there have been a lot of hacks, as we've seen, and the market is coming apart. So we're here now in the second decade of crypto.

And, you know, it's one of these situations where we had that wormhole hack, you know, the Salana Ethereum one. That was February. That was $325 million. Yeah. The Ronan X Infinity one was $540 million. And then you had the Polly Network in August of last year. That was over $600. I think the hacker returned the funds there.

It was some sort of white hat thing. Yeah. test. So what's interesting here is just reading into this, I think the stakes have gotten larger and now the market's coming apart. When the market's going up and people are winning, they don't call their local DA and say, I got scammed. Don't call the police and say, somebody took my grandma's money and made her, they talked her into buying some gold mine in, you know, the West somewhere in California. Well, here we go. This era of, you know, everything goes up, stonks go up, you know,

crypto goes up, just buy stuff and it goes up. That's over and it's rocket. Now it's the opposite. Now it's like, okay, even the great companies, even the great projects, even the ones that are building real tech are going down. And so when you see that happen, that means there's going to be a lot of enforcement

and they need more help doing it. But here's something that would solve the problem. And you would need to do less enforcement if people were more educated. So the SEC's mission is also to educate, I think, investors and have them be better at managing and avoiding these scams, managing their money, avoiding the scams.

So if you look at their SEC's feed, they do a lot of educational stuff. And so there's education going on here, and then there's enforcement going on here. Great. Educating in advance, and then you have, you know, on the back end for bad actors, taking action.

There's something in the middle, just accreditation. And people being able to get certified that they are sophisticated, enough to know what they're doing. So if we have 6% of the country or so is an accredited investor, they don't need a lot of protection here.

They're sophisticated in the minds of the SEC. They can do what they want with their money, including making bad bets on stupid things at high prices. Because they're sophisticated. Listen, if you made $200,000 or $300,000 last year and for the last two years, well, like, you can't be dumb and get to that.

I mean, it would be very hard to be dumb and to make $300,000. And not saying it's not possible. I'm sure we could come up with three or four examples off the top of our heads, but it's not probable. Possible but not probable. And it's not going to be repeatable. Yes. You know, somebody who has, you know, got that much money.

Okay, yeah, they get taken at a poker game or, you know, some bad investment. Hopefully they're smart enough to not put their entire net worth into it because they've made money before. Yeah. Okay. Now, let's go one step down. You know, people who are middle class to upper middle class, they make between 15, $60,000 a year and $150,000. They should really target that group of people next.

Yeah. And they should say, listen, we know you want to play. We know you make enough money that you can lose some, but you're maybe don't have as much money as those 6% at the top of the hill. We just want you to take this course. You can do it at home. Here's 25 different providers. If you want to do crypto, you want to do private companies,

you want to do collectibles, you know, you want to buy Nike shoes, you know, and Air Jordan, do you want to buy baseball cards? We just want you to understand diversification. We want you to understand the history of these things. And we want you to just be a little more savvy. So take this course for four hours and take this test and answer these 30 questions. Now they do that, you know, you could have half the country be chopped off from having to have enforcement action taken because they were naive.

And then we can just keep going down the line. because I suspect as you go down, the number of people who want to participate also goes down, right? And also the damage goes down, right? Yeah. So the potential for a big hole can go down because maybe we don't have as much liquid net worth to spend. I sort of feel like related to that, too,

is that the rules around what constitutes a security, the rules around what part of this industry need rules are still pretty vague. So there isn't yet, I think, a formal determination. of what is a security and when and when isn't it a security. And if that regulatory certainty, like it almost feels like they're moving to enforcement before they have moved to clarity. And if there were that clarity, then the education piece that you're talking about

would be a lot easier to accomplish. And instead you've got simultaneously an executive order being like, hey, you guys should totally figure out what's up with crypto and 20 new people to come in. And so, look, some of this is just old-fashioned schemes and frauds. So like that part of it isn't even unique. to crypto, right? Like, a pump and dump fraud is just fraud. There's nothing special about it. And so that enforcement in that case becomes easy because it's just like enforce the law. I mean, and people have been doing all those pumping dump things and, you know, all kinds of

crime and griff since, you know, money existed. Right. Money existed. People were like, hey, how do I steal more? How do you get that? Okay, let me come up with a clever way to do it. And, you know, there's been this Howie test that's been floating out there. And it was a Supreme court case for people who don't know. And it was trying to figure out if a transaction, the moving of money from one party to another qualified as an investment contract. If it's an investment contract, it's considered a security. And that means it's subject to all the disclosures and requirements of the Securities Act of

1933. And this is the quote from it. An investment contract exists if there is an, I'm quoting here, investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others. Efforts of others

is the key part there. If it wasn't the effort of others, it would be you, so it would be work. Or, you know, and you would be doing work for money. That would be the contract. Here, it's other people.

You're betting on other people to do the work, i.e. you made an angel investment in a company where you bought stock in Netflix. It's pretty clear. People buying these tokens are buying them because they want them to go up in value, and that other people are doing work, i.e. building the network.

So if you don't write code and you don't host a node, you're a security holder. Now, if you host a node and you are mining or you're somehow involved in the building of the software and you on the tokens, I guess you could, it would be a utility to you. It would be you're working in some way

for that compensation or to make it go up. And so that is going to be complicated. It's kind of like stock options for people inside a company. They're working to get them. They're your condissuer. And then here you have this other group of people. It's pretty straightforward. I just think they haven't run the test enough times on people.

And I think people should be able to ask the SEC to run the test for them, pay $10,000, $25,000, some fee, you know, depending on the scale of your project, to be certified and to actually just get clarity. Tell me if I'm a security or not. Right. Make it clear. Like, don't make me make the decision. Don't make me guess and then get arrested down the road because one of your 20 people got, like, you know, hot under the collar. Yeah, I agree. I think you can't, it's going to be very tricky.

And you can see that in the response to this move already. It's going to be very tricky to move to enforcement of rules that you have not totally figured out yet. And you see that, you know, for example, according to the Wall Street Journal, apparently the current chief of this unit, the cyber unit, which used to be the cyber unit now is this crypto unit. Littman announced internally that she plans to leave over this potentially. Tom Enner, a congressman from Minnesota tweeted, I wonder how many taxpayer dollars are being wasting Gary Gensler's personal crusade against the crypto industry, which I don't know. Great. You're a hodler.

But it does point to the fact that there's going to be a backlash against the idea of trying to enforce a thing that you have not clarified yet. Yeah. It's pretty straightforward here. you know, in terms of what needs to be to happen. The problem is, you know, there has to be rules, as you said, like some clarity on the rules. We just have to know what the rules are. Right.

Yeah. Now, here's the problem. A lot of these projects are innovative and doing things that haven't been done before. And they've, they have at their central core, you know, some levels of anonymity, anonymity, global footprint. and they're moving so fast that, you know, maybe adding the friction of the securities market would kill the projects. So if you had to know everybody, if you had to KYC everybody, as an example, if you had to file taxes, you know, if you're running a node on some crypto project and now you have to know

everybody who's doing a transaction, you have to know who they are, you know, that would slow it down. We talked yesterday about, you know, Ethereum going down or that, you know, because of the Yuga Labs print, you start to add this regulation to infrastructure. So this is what happens. You combine securities with infrastructure. Okay. Can you have that infrastructure perform at a high level of fidelity with the banking rules, with securities rules? The answer may be no. It may be too hard to run these networks. And then it takes out some of the magic,

which is I can just have a password in my head and have money and I can unlock it anywhere in the world. That's not how securities work. You know, you don't get to have like a bunch of shares of Netflix, you know, off chain and a wallet somewhere that you unlock with a sequence of words that you memorized. And, you know, I can give them to you over, you know, some direct transaction. That's not how stocks work. That's not how securities work. Maybe that's the thing we're figuring out in real time right now, which is how new is this. Does it fit into any existing model or is it so fundamentally new that it needs all new rules?

And it might be a little bit of both. I think we need new rules. And I don't know why I'm so hung up on this because I think like there's value in protecting people from fraud and there's value in protecting people from losing their shirts. But also like, you can't enforce rules that don't exist yet. You can actually have some sympathy for crypto projects where like they want to do the right thing. And it's an unclear, you know, what the right. thing is here. Yeah.

I, you know, I would actually give the majority of crypto, um, projects, the benefit of the doubt and say if it was, if there were fees to be paid or there was a bank you could, or, you know, an accounting firm or a process where you could, you know, do the requirements and the requirements were clear and you checked a box and you filed out an application, you had a license. I think the majority of them would want to do it since they're well funded and they can afford a lawyer to, to manage these things. And then if they were under a certain footprint.

as I've said a couple times here, you could have certain zones of free experimentation under $100 million, under $10 million. And those would be called experiments. And if we said, hey, this is the experimental startup rule. And just go on startups because that's what they are. The experimental, you know, startup rule, projects under $10 million in funding, there's no rules. You know, you can, you know, and anybody who participates in them signs a waiver. Lose all you want, bro.

Lose all you want. You can, you sign a waiver. Hey, listen, I'm going, this is like super speculative. And if we had that, then we can take advantage of that too. We could say, hey, you know, we're investing in this meditation app or this cab company. Nobody knows if it's going to work. You know, you can put up to $10,000 and there's a cap per person and this cap of $10 million or, you know, $100 million, whatever it is.

And okay, you know, you can only have 100,000 people and the max investments, 10,000, the average is 1,000. And we know what the size of the whole is going to be. You know, if this thing craters, it's going to be $1,000 per person and $100 million. That would make the SEC's job so easy, and it would be so easy to explain to Americans. These are called risk assets, and you can invest in a risk asset. It has to be called a risk asset in the title of the company. Uber, comma, risk asset, LLC, whatever.

Like, we already have a framework for that. It's not even, we already have a framework for that, and we could apply it. All right, we could probably do this all. all day, but we have many other shows to record to you for you in advance that you will hear later. All right. But that's where we're going to leave it today. Okay. See you soon, everybody.

Have a great Tuesday. The worst day. Tuesday. Enjoy the climb. If you get past today and tomorrow it's downhill. So just make it through today, everybody. What fresh hell is Tuesday? Tuesday.

It's like not the hum day. It's the climb day. Today's the peak day. I really like that. It's a climb. We've got a climb day. This is the hardest part of the climb.