This Week in Startups - News! Robinhood/Duolingo IPOs, Big Tech earnings, China & more with TechCrunch’s Alex Wilhelm | E1257

Episode Date: July 30, 2021

Alex Wilhelm from TechCrunch joins Jason to chop up this week's news. They cover Robinhood & Duolingo's IPOs (3:40), consumer subscription businesses (25:09), Google's growth (28:25), the startup funding landscape (38:51), Amazon (42:46), China's actions against tech (47:35), Apple (1:04:19) & more!

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allowing investors exposure into the blue chip artwork asset class. Twist listeners can skip the 30,000 person wait list by going to masterworks.io and using promo code Twist. All right, everybody, welcome to this weekend startups. I've got a treat for you. You know, I've been doing the news program. And somebody said, hey, why don't you have somebody come on and chop up the news with you? And I thought, you know what, Alex Wilhelm is the best person to do that.

He's a senior editor at TechCrunch. And he is part of the first name. Club on Twitter at Alex. You can follow him right now. And he hosts their equity podcasts. Formerly blah, blah, blah, blah, blah, next web, tech crunch, matter mark, crunch base, whatever.

He's been around the block and he now lives in the northeast. Still in Providence or wherever? Yeah, yeah, I'm still in Providence. But when you start looking at my resume and going blah, blah, blah, blah, it makes my 30 second birthday land a little harder than it did last week. So thank you for making me feel ancient. You're not ancient. I mean, you still got some energy.

How's your energy level now in year two of this goddamn pandemic? You know, I'm actually doing okay. We've adapted to having a third dog who's actually racing around my office right now. Fantastic. Yeah, but dogs wake up at like five. And so I've been waking up at like five. And so I've learned how to just be kind of chronically exhausted, Jason. You know what?

It's interesting. You say that. We got a pandemic dog. We got another bulldog. So we have a 15-year-old bulldog fondue. And then we have a new one, Maximus, as in Gladiator Max. and he's like nine months old now. And yeah, Max loves at 5.30 in the morning to walk in a circle and do the pee-pee dance,

which is, if you don't wake up, I'm going to pee. And, you know, that is a great motivation to jump out of bed in Terra that you're about to be peed on. That's literally in my life now. I'm just very lucky. My wife is studying for her boards right now. So she has to wake up early early and study before work. And so that means I can usually pass off the three dogs to her. But it didn't work this morning.

And so at 5 a.m., there I was picking up dogcraft in the backyard. Just a really great way to spend a morning. I mean, it used to be so nice to go to an office and be an adult and live in a society. It was a really interesting society. Do you remember society? I remember a lot of public transit in San Francisco waiting for buses that were full when it was raining, standing on the sidewalk, and then drinking bad coffee in an office when everyone had a cold. So, like, I dismiss your romanticism and I love working from home, which I know we'll get to in a little bit. it's interesting when you think about it

like was there anything that you enjoyed about going to the office? Oh gosh, I love I love working less it was great. Like, because at the office there's so much stuff that looks like work. Oh, so true. Yeah. Yeah.

Right. Like a meeting for a walk and talk. Yeah. Or getting lunch with your colleagues, team building, all that stuff. Now I just pretty. The old 90 minute lunch with the 15 minute walk on either end, you get 2.25 hours out of the seven and a half hour day. Fantastic. Jason, I never worked for Google. That's not how my life was.

Hoolie on the roof. All right, listen, it is a crazy news week. Where to begin? There's so much that was interesting this week. I want to ask you, what to you was the most interesting part of the week, not the most important, but most interesting to you, Alex. The discrepancy in how Duolingo traded versus how Robin Hood traded. Because if you had said the FinTech company will perform less well than the ed tech company, I would have been like. Like, every VC has lied to me if that's going to be true. And yet, here we are. Ed Tech's looking great and FinTech took kind of a hit.

So I'm still digesting this kind of like post-unicorn IPO liquidity. It's strange to me. Yeah. And so obviously I'm an interested party. Was an angel investor in Robin Hood. They are trading today, thank you, $36 and $11. They went out at $38. I think they hit $40 at one point.

Yeah, I'm looking at right now. 40.25 is the $50.285. but some amount of this is I think due to the fact that they gave a third of the shares or something like that to their actual rabid user base in their direct IPO product. Do you think that had some sort of impact here or the summer? What do you think is going on here? I think there's a lot of things that went into this, but that's the most interesting one because when Robin Hood announced they were going to open up IPO access for their users, people were stoked. Like, oh my gosh, we finally get to have kind of similar footing to these large, large investing groups. But suddenly, if you take away a big chunk of an early retail demand, you really change up the supply demand curve.

And I think, you know, frankly, traders on platforms like Robin Hood probably were pretty active in trading IPOs in general. So if they have shares at the IPO price, it probably reduces the frenzy around first trades and makes it maybe harder to have an expensive pop. Now, you know, Jason, Bill Gurley is going to love this, you know, because all of a sudden doesn't seem to whine about on Twitter. But Robin Hood probably expected a little bit more after pricing at the bottom end of its range. There does seem to be a big disjoint, a big disconnect between what the press is reporting and what we as the investment community, and we have both represented here, and to a certain extent I represent both, having been a former journalist, there's this big gap between, oh my God, the IPO pop and that being the definition of success.

And then what we all experience as investors, which is, I invest in the company where it's like, I think, $30 million. So 30 million to 30 billion. Don't take a genius to do the math. A little bit of dilution. You know, this is a 500 X or whatever. Pretty great return even with dilution because I didn't continue investing in my pro rata because I didn't do that back then.

Yeah. You could have bought like another two houses. Exactly. That's a costly bit of financial conservatives. Well, you know, it's one of the things about investing is you can learn from your mistakes. When I started, I was putting 2550K checks into companies like this and then just, you know, I'll see you in 10 years. Now, we just did, we had two companies in our portfolio that were raising at 300 and 600 million.

We own 10% of the company. They're raising 30 million. So our pro rata is 10%, you know, ballpark of that 30 million. Sure. And we actually filled with our syndicate and our LPs with SPVs, special purpose vehicles, those $3 million dollars bets to keep our 10% ownership in, you know, companies that were worth $300 and $600 million. We had 5% to 10% ownership. So we're actually maintaining ownership at those big numbers now. So hopefully that pays off.

But what do you think that disconnect is about where, you know, on CNBC, they're just like, oh, my God, it didn't pop? And it's like, aren't we supposed to price these things so they don't pop? Like, what does it say that it does pop? Yeah. So I talk to a lot of CEOs on IPO days. So I've done just over the years, dozens of these calls with people that are literally sitting there in the room watching their stock begin to trade.

And I managed to kind of learn around the edges how they think about pops. Every CEO, taking a company public, wants to see 10 to 15 percent. gains in the first day. It makes them look really good. It gives their employees them to be proud about. All the investors, they should have to lock in for the long term during their road show they sold shares to, have a great first day. It really just like smooths butter over the entire piece of bread. And I don't mind that. I don't mind the mechanism. Yeah, IPOs are anachronistic to some degree given how they're done. But the media and cable news, I would not conflate because

I don't watch cable news at all because I don't have time to waste on that and I would not say that you know tracking the views of different CNN anchors or CNBC anchors is the way to gauge media sentiment because Jim Kramer is what?

Very loud and I don't think he's indicative of what what I do or what you used to do do, Jesus. Yeah. So I do think there is something to that nuance where if you're on TV and you have the ticker, you have something to measure, the entire point of CNBC or Bloomberg is up to the minute. And if you want something up to the minute, having a data feed that you get to feel the pulse

on makes it feel more alive, just like the score in a basketball game. Absolutely. You tune in and it's on the screen. It's moving up and down. So you have a scorecard. It is one of the appeals. But I think there's this misconception that this would be a failure or a win plus or minus 10%. Actually, to the majority of people who old chairs.

it doesn't actually matter. That certainly doesn't matter to me because the way I look at this now, and I'm curious, your thoughts, the putting aside any of the trip-ups that Robinhood had with GameStop, and we could talk about those, obviously. But putting that aside,

when you look at the actual metrics of this company, it was 18 million when they filed their S-1 in terms of accounts. 17.x% were active every month or something. And then you had this incredible revelation that now they're 22 million. So maybe you could speak to the scope of or the scale of this company and what you think is possible. Yeah, I think if you look back to the start of 2020, and then if you told us where we're going to be today, we would be very confused about what changed.

But there was during the pandemic an enormous boom in savings and investing activity amongst consumers. This drove Robin Hood. It drove M1 Finance. It drove, I mean, E. Toro around the world. I mean, Coinbase got an enormous lift from this. Even Bitcoin began to trade better. People just had a lot of cash.

Like, Jason, you didn't leave your house for a while. I didn't. And I spent no money. I went grocery shopping once a week and I just ate bananas. Like, I just saved money. And so people put that to work. And so Robin Hood is enjoying this enormous boom, not just in the appreciation of the value of the stock market and crypto trading in general, but also just folks having cash. So Robin Hood is enormous.

It's so true. Just as one aside, think about all the money we save not going on vacation or business trips or conferences. I looked at those three and I was like, you know, for me, I was doing four speaking gigs a year. all of that's business class travel and really, you know, great hotels. All that money just didn't actually flow during this. You know, Verizon never put me in business class. I just want to say, and then they sold me to Apollo. Yeah.

I protest. Who do you, who owns tech crunch now? It's still Verizon Media Group until the Apollo deal closes and then we'll be owned by, it'll be called Yahoo, I think, again. Oh, you'll be, so you'll be. But am I correct that? Is this a private equity firm now owns Engadjohn. and TechCrunch?

The deal has been announced and agreed on but hasn't yet closed. So we're in that awkward period in which you broke up with someone but you still live in the same house. That's kind of where we're at. It just says we're on this tangent. Sure. What does that mean in terms of like management of your brand?

Is there some, are you guys just off on this island, just doing the best you can? Or is there somebody like, we have to hit these numbers and there's a sense of urgency? So TechCrunch's culture, this is my second time at TC. So I have two different kind of blocks of time at the organization. the ethos of T.C. has been preserved through all of the corporate Sturmundr. And so I'm optimistic that we're going to hold on to it again post-Apollo.

But, you know, private equity has a reputation for a reason. So I'm not going to promise you anything Jason. But today, I freaking love TC. I still have the independence and freedom and flexibility and support. And it's great. So, I mean, frankly, I'm happy. I'm nervous because I'm being sold. But, you know, we'll have to see how that shakes out.

I was hoping that. I mean, I made a salvo in between the AOL and Verizon. and days of like, hey, any chance I could shake off and gadget or auto plug? And they're like, yeah, we don't know who you'd even talk to about that. I'm like, okay. It's like trying to see if I could, or even tech crunch. I was like, I'll take all of these brands. Like, you know, do you have a, are they for sale? And they're like, we don't know. I'm like, who knows? Like, nobody. Well, it turns out the whole package was for sale and we're being sold and you'll love this,

Jason. If we're roughly 0.5 revenue, that's our multiple is 0.5. Not 13, not 27, 0.5. 0.5 times revenue. Yeah, so it makes $2 billion and it. We were doing $8.4 billion run rate as of Q2, Verizon Media Group, now Yahoo. And we're being sold for $5 billion. That is a perfect private equity moment because they could split these things up and then sell them in packages. And that's probably what will happen is Yahoo will go to somebody and, you know, the tech crunch and gadget brands will go to somebody. It's a smart move on their part.

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Yeah, actually, I got a question for you about this, Jason, because one thing I've been really trying to figure out is what happens next? Because forget Delta, let's just presume for the minute, we're going more outside over time compared to last year. Sure. This is going to impact a lot of stuff. Like people spending time online could go down. People's time trading could decrease. And I'm trying to figure out how to think about Robin Hood's growth in the back half of this year in light of the changing world. Because up to this point, the results have been pretty much pandemic results we've been looking at, and they've been amazing. What's your level of optimism that Robin Hood can keep up this sort of like, not just

a year of year growth, but sequential quarterly growth that has been so impressive. Yeah. So when you go public, the profile of the company becomes extraordinary and during a crisis, you know, the profile becomes extraordinary. What happens during a crisis like GME or in Uber's case when they had search pricing crises is people go, what's Uber or what's Robin Hood? Right. And so this is a paradoxical thing.

Now, I'm not saying venture capitalists or CEOs or shareholders hope to have a crisis. Of course, you don't. It actually turns out almost inevitably that the crises grows the company. And so the more the company is put under the microscope and ripped apart or savaged on Twitter by consumers or virtue signaling people or anti-capital social people or correctly by journalists or incorrectly by content creators, whatever it is. is all that does is elevate the brand. So I think the brand is now getting elevated and people are going, oh, how, it's so easy

to use. And you get this, what we call in the industry, over the shoulder virality, which is somebody is opening it and somebody sees it over their shoulder and goes, what's that? Oh, and then they give them a little tour of the product, which is how Snapchat and Uber and DoorDash group is people would just hand their phone to somebody and show them the app. So I think that that's going to be the big thing. And then you think about adding Roth's 401Ks and, you know, mortgages, all kinds of devices could be added here, which the IPO access is one.

So you don't need to have the same growth in users that you saw during that crazy GameStop stonk moment, which is like a moment in time. I don't think we're going to see again. But you can take the existing base and just keep offering them services. So if you're a young person who's never had kids and now you have a kid and you're like, oh, 529, I can put money tax free for my kid. and it says click here, 529, you're not going to go call your broker at Goldman or Alliance Bernstein or, you know, where Morgan Stanley, you're like, I don't want to talk to anybody

on the phone. I just want to take on my app and have that product. And so I think that that's going to be where you're going to see massive growth. Twenty-two million members. You open up, you know, some new product like Roth. And now you get one percent of people use it. Now you've got two million people in that product. So that to me is a really great bullish argument for Robin Hood over the next couple of years. But I'm very curious in the next couple of quarters because they said in the, uh, their last S1A filing that they're going to see a revenue decline or at least trading decline in Q3 compared to Q2. Interesting to me because, you know, I've seen a lot of companies struggle with kind of leaving the pandemic. And I wonder if that was part of why the

reason Robin Hood didn't have quite the debut it might have. Again, it reprised itself much higher, raised a much capital. The IPO is a success. But I'm curious to some of the declines where investors not wanting to buy into a company about to post a sequential. Yeah. If you're day trading and you're buying it in quarters, that could be valid, the same way buying DoorDash or, you know, a pure play food delivery at this moment in the pandemic would seem like, okay, we're all going to go back out to restaurants. So maybe is there something other than DoorDash to buy? Is there something that is part of the reopening like, I don't know, taking a Lyft or an Uber there or Airbnb is an even better example. I'm going to go for a take a couple of days off and go somewhere post-pantemic. But now that seems like that's off.

So I think in all these, the markets are so chaotic right now, this maelstrom of Delta, plus like partial reopening. It does feel like a little schizophrenic. It feels exhausting is what it feels like. I mean, I keep figuring out what's happening and then three days go by and everything's different again. And I have to call everyone back and I'm like, remember that stuff you told me last week? What's going on now? And that's getting tiring. I would like to know for like a month what was happening without having to reframe everything.

It was so clear that people were going to be going on vacation and all of this pent up energy and money was going to be spent. And now you're right. I really didn't consider that with Delta, maybe there's another three months of staying in. So that would argue that DoorDash, you know, and Robin Hood would have another boost because maybe people would stay home and spend less money. I think the ultimate trend here with all these companies is once you have a sticky product on people's phones, I always ask like, why would somebody stop using this product? What's going to replace it? What's going to displace it? You know, and you look at DoorDash or Uber or Airbnb or Robin Hood, this like recent

cohort, I don't see anybody displacing them for a decade. So I think you have a decade run when you get this kind of escape velocity in the same way Google and Facebook and Amazon got those decade long runs and then it's up to them to not screw it up in the second decade. Yeah, you know, part of me is like, well, once these Robin Hood users who are, you know, first-time investors, as they love distress with their small accounts, getting their feet wet, buying shares and companies they love, which is all good to me, to be, to be clear. Like, if I told them you should move to Fidelity or Vanguard and I showed them those websites,

they would be like, yo, is this my grandfather's website? Are you kidding me? Like, there's no confetti. The buttons suck. The UI is terrible. I had to literally Google a fidelity feature the other day to figure out how to use a feature in Fidelity. I already use because I couldn't find it. And Jason, I get paid to click my mouse. Like, I can find things. No, I literally had a similar thing with my Morgan Stanley account. And I'm like, why do I even have this? Yeah. And the reason I have a Morris Stanley account is whenever there is a stock distribution from venture funds I'm in, that's just like the easiest, lowest friction. But then I'm like, oh, now I've got to move these over to Robin Hood.

And I'm like, do I want to have this many shares in a Robin Hood account? You would be Robin Hood star user, though. You'd be like, user number one. There's a lot of shares going back into there from Robin Hood. But it does become, I think, really hard to go backwards with these paradigms. Like, it would be like, I'm trying to think of like a really, what was the worst food ordering experience? I think it was Grubhub.

if you ever used, I haven't used Grubhub in college, yeah. It was terrible. I mean, it was just so arduous to just get to checkout. And then you use DoorDash or Uber Eats and it's, you're just, like, here's her last order. You're like, yes, go. It would be like going from ride hailing on your phone back to calling a taxi company. Exactly. That is exactly what it would be like.

Okay, now Doolingo was up 36% in their IPO. Now, it's a smaller footprint. It's a $5 billion market cap. and they've been trading pretty flat since they went out, 31 times their 2020 revenue. And then they had just under 100% growth in Q1, and then they had, I think it's 45% midpoint growth in Q2 based on their current estimates.

Got it. So it's a fast-growing company. Tell me about DuLingo. Are you bullish on the company? I'm bullish on humans wanting to do better for themselves, and I'm bullish on tools that help them do that. I don't know self-improvement.

Yeah, I'm big on that because I think the world the world's so much better than we think. Like right now, thanks to Google Translate, I can read anything on the internet,

which people forget how awesome that is and how different it is. But I think these digital abilities are going to stay popular and people travel a lot, you know? And the world's smaller and flights are generally cheaper.

I think language learning's key and they have an amazing consumer brand and, in fact, your earlier point, are you going to delete it for something else? And I think the company now with more capital and it's probably ever had

after this IPO has lots of room to double down on products. So I'm bullish on the movement. I don't know what the stock's going to do tomorrow. But I will say raised its range, priced above its range, and then had a killer first day. Big success. I mean, the company put up a lot of points for ed tech, Jason. And for startups out there looking to price their next round, here is some good news,

you know, for that argument with your VCs. Yeah, EdTech has been a really difficult category historically in investing because every ed tech company saw their customer as school districts. And school districts, you know, they basically will change software, you know, like they paint, you know, the building. Like it's probably on the same cadence. Like every five years they paint it or something. So every five years. Yeah.

Okay. So maybe it's kind of like when they replace the windows, like every 20 years. Exactly. It really does not change that often. And I'm like, you're going to run out of money before they even sit for a demo. Like, it's going to take you a year to get them to demo. And all the success I'm seeing are people who are just like, you know what? Let's go direct to parents.

Let's go direct to the consumer and charge them a price that's around the price of Netflix. And when you charge somebody the price of Spotify to learn a language or a musician, which were investors in, or tone base, two music companies we invested in, or Steasy for Dance, we're invested in, Com for Meditation. You look at those companies in FitBod for CrossFit, they're all consumer subscription and they're all around the price of Netflix. And I think that this is going to be like the new cable channels. That's why we have, I think we have seven investments in consumer subscription.

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LinkedIn.com slash twist, terms and conditions apply because they're giving you something for free, yada, yada, you know how it goes. So it's interesting. One, Netflix being kind of like a price anchor or Spotify is a price anchor because I know the amount of value I get from those two products and I subscribe to both. And so to me, if you ask me for the same amount of money, I have an expectation of like what you're going to give me for it. The other thing is, it's funny to hear us be so bullish on consumer tech and subscriptions,

because if you go back like eight years ago, VCs were saying don't sell the consumers, their higher churn. It's like selling to S&Bs, but worse, your ACV is trash. And here we are with Spotify doing great. Netflix is still crushing it, dualingo showing this is a viable model. Consumers have really changed their behavior. And I think that it's good to see that model get the respect now that it didn't get back when it was unfashionable.

And you got to attribute that to Spotify, I think, in Netflix. saying, if you pay us, we'll give you something extraordinary without ads in it. And I don't know about you, but I am looking at my collection of streaming services. And I've realized I am now getting pulled out of the advertising pool. It's harder and harder for advertisers to reach me because I have the YouTube premium. Yeah, YouTube. I don't know if you pay for that. Red or something.

Yeah, it was called YouTube Red. I don't know if they call it YouTube Premium now. Wait a second. They change your logo when you have it. Yeah, they call it YouTube Premium. Now it used to be read. And so your logo changes to premium. What's really interesting are a premium, I think it's $12 a month.

You don't see ads, which then has made my YouTube consumption go through the roof because I watch Sopranos clips. I watch sports clips there. I watch all my sports shows. Instead of going to ESPN and trying to find Nix coverage, I just type the word Nix in and I can watch all my Nix coverage with no ads. Then I have Hulu. Hulu has an option for no ads.

I elected for that for whatever it was, four bucks extra a month, I think. NBA Lee pass for 40 bucks extra you can have no ads and what you see is the arena video which is really great I love it for like watching

what you want which is what you want and then Netflix and Disney and HBO Max have no ads so I think I'm kind of where do I see ads anymore I don't really I see them on social media I guess

I see them on Twitter I can't wait to pay Twitter to take my ads away But it's funny you bring this up because my spouse and I were watching Hulu the other, I think last week. And there was an ad play. And I was like, honey, what is the differential in price between no ads and ads? Because I'm 99.99% sure. We should not be saving that money because I'm about to lose my mind if I see this ad one more time.

And YouTube, to be clear, we're going to get to, I think, alphabet earnings in a little bit. But, like, YouTube's ad load is excessive. Like, if you ever use straight up YouTube, like just no ad blocking, no. It's like there's multiple pre-rolls and then mid-rolls. They have really leveraged that product. They're going for it. They are going for it. They did set.

Let's just pivot to that. Sure. I think it's really important. And you do see the mid-rolls, which are super annoying. And then the pre-rolls constantly, it feels like every video has a pre-roll on it. And I don't think you can opt out. I remember when I was in the partner program back in the day, you could opt out of having ads on your videos.

Now if you're on YouTube and they store your video, I don't think you're allowed to opt out of ads anymore. which... Oh, man. Google just gets more and more evil. I mean, like, Google's need to increase its ad density of its products over time has made them hollow out every experience they offered

to the point in which I don't like to use their stuff for that ad block. It's brutal. I use an ad blocker, and the only time I feel guilty about it is when I'm on, like, a journalist site, and I will undo it on specific news sites where I want them to get the ad revenue. Thank you. But I don't feel, well, I mean, I don't feel bad for it in other places. And it's not like I'm an ad clicker anyway.

But looking at YouTube specifically, it grew 80% year over year, $7 billion. I mean, pretty extraordinary growth. The growth is crazy. It's getting close to Netflix and revenue scale, which is simply crazy. It's exactly the same, right? $7 billion, both, this quarter. And what's really fun is if you look at the Google network revenues, so kind of like the off-site Google stuff, the ads they'd run, historically a big chunk of Google's ad business,

it's now just $600 million more in the last quarter. quarter than YouTube. So YouTube is about to kind of surpass this critical old piece of Google revenue. But the YouTube gains were very impressive. But I'm curious what you made of the Google Cloud changes because revenue did good, losses declined. I was pretty bullish about Google Cloud, but I don't know how you view it. I think that they hit a key milestone, which was the cost of providing the service was less than the revenue the service brought in. Right. I mean, I think they're still investing in it, but it's really hard to displace Amazon

Web Services because Amazon has just got this relentless march towards how little margin they can have. Now, we don't have insight into each of the product lines at Amazon, but the scale of that business is crazy, but Google's cloud

is super important for them to win as well because if Amazon just has the biggest cloud in the world, and Azure and Google Cloud fall too far behind, you know, You can't, you don't want a monopoly in public clouds. But, you know, here's a question for you, Jason, because you talked to more startup founders than I do, which is saying something.

I'm hearing tweets and I'm hearing some complaints about AWS pricing from startups and maybe even some growth stage founders. People are just a little bit dismayed at how much AWS can wind up costing them. Is that going to help Azure and Google Cloud or is that just complaints and it's not going to change much? I think this is sort of like, you know, ride sharing drivers complaining about getting paid, where it's like, it's never going to be enough. Everybody always wants to raise.

So even when it's a double the minimum wage in the country, or it's 15, or it's 25, or they give minimums, people are always going to ask for more. And in this case, they're always going to ask for a smaller cloud bill. They throw, you know, they're going to be like, this is too much. And, you know, if your startup grows, but they're not, this generation is not comparing their cloud computing costs

to buying servers and racking them. Yeah. And just 20 years ago, you know, there was a line item when you were raising your $3 million, you know, Series A, three million dollar Series A, $500,000 in servers and co-location facilities. And when I did Mahalo, we racked servers. And then at a certain point, we were like,

oh, the cloud, you know, in the cloud, we had so much traffic that the cloud charged based on the amount of traffic you used. And when you have your own fiber line, you don't get charged for usage. No. And so all of those, like kind of things that are now, competing with each other are going to ultimately drive this down. So I think it's much ado about nothing.

And it actually gives Azure and Google Cloud, you know, IBM and other people's clouds the ability to compete. Yeah. It's a great entry there. I mean, it's the other thing that's going to be interesting is, I don't know if you know about serverless, but there's this concept of like you can build these little objects that run on the internet. And when somebody goes to hit a website,

it fires it up, runs it. They run the execution, and then it shuts itself back down. And so this can cut down for some tasks in computing 90%. So with software, you're going to keep seeing the software race down the utilization on the network, which then kind of games the cloud. And the same thing with storage and other things getting cheaper. Well, the growth of usage of these public clouds is crazy. So Google Cloud grew, I think, 54% year over year in Q2.

Azure was 51%. So very, very close there. I think AWS was, I couldn't find the number and I was just looking for it. I think it was 37%. But I mean, think about how much total spend we're talking about going to the public cloud just over the last 12 months in Q2.

I mean, it's billions and billions of dollars. And, you know, thank you VCs for financing all the startups that are currently living off of it because it's going great for the majors. It definitely has changed everything in terms of the funding of startups. You literally took out 20%, 30%, percent of the cost and the time. And the time would have burned months of setup and runway.

So really, you know, you could have as much as a third or more of your startup's cost being the setting up of your office space and your cloud. You start looking at that and you're like, wow, you can just put that towards developers or you can fund many more projects, you know, a 250K check with a two developer startup can last them for two years, you know? So this just came up. I was talking to a startup actually here in Providence. There are some proud to report in my new adopt.

There'll be more. Actually, that's what this founder told me. He's like, even in the floor of the building, we have a little office and there's two more that are venture backed. I was like, okay, good news. But I asked him how long his $2 million seed round was going to get his company. Like, how much runway is this? And he didn't give me an answer in months.

He said 20 to 25 product cycles. And I was like, that's the coolest metric I've ever heard someone bring up because- probably two-week sprint or something, three-week sprint, yeah. Who knows? But, I mean, like, that to me shows that they're not thinking about just, running out of money, they're thinking about where they're going to get to in terms of what they're building. And if I was an investor, and I'm not, I think that would jazz me because it seems like playing

offense versus defense. It is pretty amazing when the clock ticking down is not making your decision making, delighting customers is. And it really, this is why when we syndicate a deal to the syndicate.com, which was like our previously was on Angelus and now we do it there. Yeah. We specifically say, we will only syndicate you if you have. have a minimum of 12 months of runway, but we're looking more for 18 to 24 months.

And the reason we do that is we tell them, like, we want you heads down thinking about the customer for at least a year, hopefully 18 months, so you don't have to pop your head back up and raise money. Now, of course, in this market, I was going to say, we literally had to change our accelerator schedule. I'll give you some numbers on this. Sure. We have over 300, I've invested in 300 companies in last decade. I'm not sure how many of them are exactly active, but let's say two out of three. So maybe 225 are still in effect. We have 65 companies currently raising money or in the process of closing. Out of the 225. Out of the 225. One and three, basically. And there were people who are

closing before that and people who are thinking about raising money. But having that many in process, I've never seen. And it has broken our internal systems because when a fundraising happens, you go to your existing investor, you have to get them to sign off on it, read the documents, agree, and then decide do they want to take their prorata. With 65, that means every business day, 20 business days a month, I've got to be making three or four decisions a day and going over three or four sets of documents. The lawyers in our industry are now saying, like, we need four days to turn around documents. We need five days to turn around documents. It used to be like, we can turn around documents in two days, you know, no problem. Just give us two

is, maybe three. And now it's like, yeah, give us a week. We got just wait. I've never seen this level of activity. Yeah, you think founders are doing well with ample secondary in the markets. Look at their lawyers because the lawyers are doing fantastically right now because everyone needs them right about now at the same time, which means they have enormous leverage, great place to be.

Well, I mean, and attorneys are not getting a summer break and a lot of VCs are not getting a summer break. I'm supposed to be going on vacation and it's like, I'm scared to death to go on vacation. I'm just like, what's going to happen with? all these deals. And we're basically, we came up with a term that we, my new term of art with founders is standing pat, which is the term in draw poker. You know, when you say, oh, I want two cards, I'll take three. I'll take two. When you do draw poker, like the old cowboy poker, not hold them. You would say, I'll take two cards. You give two cards. They give you two new cards.

Standing pat is, I don't need any new cards. We're good. We're just like, we're standing pat. We're good. We're not adding to our position. We're not, you know, going to lead this round. We're just going to stand pat. And I've had to tell companies that we may have actually participated in or led, like, we're going to stand pat because we just can't get to this deal. Are you concerned about your portfolio's performance in the near future? Well, J.P. Morgan, BlackRock, and others are projecting public equity returns of just three to five percent over the next five years. Analysts that Bank of America urged investors to consider real assets as part of an inflation strategy. So where are the major players putting their money? Endowments for Yale,

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I think it's really genius. So sign up today at masterworks.io. And if you use the code twist, you'll skip their 30,000 person wait list. See important information at masterworks.io slash disclaimer. So tell me a little bit about where things are most busy. Because I'm curious. I know that the kind of series A plus,

thanks to Tiger, is super active. Is the pre-seed and seed stage just as busy as the later stages? I would say yes. but I would say it's close. So what's happened is anybody who's got a Series B, Marketplace or SaaS companies, good question. Anybody who's a Marketplace SaaS company or Consumer Subscription, that's growing. If you're a growing company, you're going to get a valuation that is double what it was three or four years ago. So what would have been, okay, you're doing $10 million.

We'll give you five, seven times that. So we'll do a $70 million valuation, an $80 million valuation. Now all of a sudden it's 10 to 20. So you got $10 million in revenue You're going out for your Series B You know between 100 and 200 million Would be the valuation and there'll be people lining up to put in that 20 million dollar check And so what I've told them is you know if you were if you're planning on raising money at any time in the next 18 months

Do it now now do it now Yeah because if people it's like there's a party People are popping bottles if you want champagne You know like get a glass stand there. Can just stand there because someone will top you off. Yeah.

Somebody's going to top you off. Like you should go get that champagne right now and then you don't deploy it slowly. And then what's happening at the earlier stages, which is really weird that I've never seen is not quite this craziness at the series B level that was well

document with Tiger and other people participating now. What's happening is somebody will close a $1 million around. You know what for 10% of their company. And you know, maybe they would have previously, been a six, seven, or eight million dollar company, but in that zone, it doesn't really matter

all that much because the outcomes are so much bigger. So, okay, if you're an early stage investor, you kind of get comfortable with a $12 million valuation where it might have been six previously. The round fills up. People find out the round just filled up. And then another $2 million shows up and says, oh, you know, this person or that person who's notables in the round, we want to do your series A. It's like, we haven't gotten the money for half this round in. The wires haven't hit yet. The wires have a hit. The wire is the next one. Exactly.

And so what I say to folks is close that round, give everybody a hard date. Your money gets in Friday. If you don't get your money on Friday, we've now opened a note at 20. And I've had a dozen companies do this where they closed the $12 million round. Literally the next week, they opened a note for $20 million. And then they say to any other investor, we closed that round. We were massively oversubscribed. We have a $20 million cap note that we're going to keep open for the next year for,

or value-added investors, we consider you one of those. If you want to be in that round, we're happy to have you, but or we can wait until we formally start the round. And then those are starting to fill up. Wow. So there's the amount of money being slung around in the startup world really does to me kind of mirror the amount of money we're talking about with these public company earnings because the numbers are getting to be

almost out of my ability to kind of reckon with them. Like, you know, Microsoft and Apple both north of $2 trillion. I mean, at some point I begin to look at, lose it. Like, I think around $100 billion, I begin to kind of, like, lose my feet on the ground and float away. And these valuations are very similar, because I understand the math you're talking about when you say, well, if it was six and now it's 12 post, okay, exits are bigger and it's pre-seed money and, you know, okay, totally. But like when I was learning about V.C, you know, 10, 12, 13 years ago, you know, people were telling me about how they had to

have price control and all this stuff. And I feel like everything that I was taught is now just gone. Like, I learned about the stock market when Exxon was the biggest company in the world. That's a freaking different era. Like, it's an entirely brave new world. And I'm, it's fun, but my gosh. Well, I mean, if you think about the multiples, the multiples are compressed, even as big as these $2 trillion, $3 trillion companies are, their multiple is compressed because people assume it can't grow like a startup.

But Amazon or let's say YouTube, the better example, 80% year-over-year growth, that's kind of startup level growth, you know, like later stage startup growth. early stage you're trying to triple quadruple your revenue year over year from a million to three or three to nine. Once you get up to 100 million, you're trying to get to 150. When you're at 500 million, you're trying to grow to, you know, 750, 800. You may not double year over year. I mean, you can, but it's not easy. And you look at Amazon, 113 billion in revenue for the quarter. It's absolutely crazy. But Jason, you forgot the punchline to that particular joke. What happened this morning to Amazon stock? Went down. It went down. Now, now, now tell the people,

why, because this is the funest part of the show. Well, I mean, they missed their revenue number by $1 billion. I think it was a little bit more than that. But essentially they... It was 115 was the expectation. They hit $1.13. Yeah. I think, if I'm correct.

So, I mean, but just looking at the run rate of $443 billion is insane. And then you just compare that to GDP, they would be the 27th in the world. it's pretty extraordinary. They would be right by Austria and Iran. Yeah. So here's why I think Amazon took a bit of a hit. If you look at their Q2 or into report and you spend a lot of time going to pass all the bullet points

they put up top about new Kindle features they announce that you're not going to use. I love that. I don't know why they still do that. It's like really? You even produced the Kindle? When's the last time I even saw a Kindle? Okay.

Let's not erase e-books here. I own two Kindles and I'm a big fan. But like I use them to read, you know, to be clear. If you go to the financial guidance section of the Amazon Q2 report, you'll see that for Q3 of this year, compared to last year, they're expecting net sales to grow between 10 and 16%. So Amazon has kind of like reached the end of its pandemic growth surge. And I think investors added higher expectations. And critically, it was priced like it was going to grow more quickly. And so it lost some of that growth premium.

Amazon still had a great quarter. Like if I ever do $113 billion in a quarter, please put a count on my head and a separate or money. my hand. But like compared to expectations and how they were valued, it was a bit of a miss. And so I have friends who struggle with like great quarter and it's a miss. And it's, it's technical. But like it was a surprise, I think, to a lot of folks when they saw that headline number and then what happened with their stock. So. Yeah. There's also going to be this, you know, changing of the guard. Jeff is no longer in charge. So I think that makes some people nervous. And there's got to be some profit taking going on. I mean, if if this was like such a

pandemic run up and everybody was getting their, you know, you know, six, months worth of, remember that last year? Oh, yeah. Six months on your shelves and like fighting for, you know, wipes and we were wiping our food down and wearing gloves and masks to unpack our cereal. I was one level below that. Whenever level of panic that was, I was one step down. But not too far different.

I mean, I literally remember a month of wiping my groceries down and like wearing a mask. My wife is like, don't bring that into the house. I'm like, the tomato soup. don't bring it to the house. Okay, I'll wife in town. It's okay. I can top this though. So we had a friend in town from college and she was in town for like three months.

We did dinners every week outside at her house. It was lovely, actually. And she said that her family early in the pandemic were they would order food in, you know, and then they would re-microwave it to kill off, whatever. And they were actually microwaving their salads before they ate them. And I was like, there it is. Yeah, no. The peak of COVID-ness.

Peak panic, yes. Yeah. I don't think there's salad. has that. Don't you want warm salad, Jason? Lots of limp lettuce? I like, I'll tell you, the frisay salad with the warm egg and the lardon on it.

Okay, that's fine. That's fine. But that's wilted. It's not... It's not... Yeah, I don't think anybody... Microwave. Any of this.

Well, here's the quote from the CFO. Our customers are safe and healthy and ordering from us, and we know there'll be more vacations or be more mobility. There'll be things that probably people shied away from last year and that's all good. But it does tend to lead them to do other things besides shop.

So we're adjusting our run rates in the period that we see that having. I do think shopping was like, I think a pastime, as was wagering on sports or wagering on stonks or wagering on crypto. And that is all coming apart. What's your take on China banning Bitcoin? And then some of these, you know, new regulations coming in. I think was it, Binance is now deprecating their service in Europe to a certain extent. Are you watching all this and the news tightening?

And what are your thoughts? Yeah. So. Tether. Yeah. Well, look, look, let's do this in chunks. So first of all, Binance,

it turns out if you get really, really big and you're not actually following regulatory guidelines around the world, eventually catches up with you. It's like technical debt for a financial company. It's called regulatory debt. And it matters because people, eventually start doing mean things back to you. So, Binance, cleaning up its act, actually, I like.

I hope they figure this out. I've talked to the CEO. I'm generally bullish on crypto exchanges in zero. CZ. CZ is great. I mean, I've talked to him once or twice, but I liked them. So I hope it goes well. Selling derivative products in Europe, that's a lot of work.

You've got to have a big compliance team. Not a surprise. China. Holy crap, Jason. Rewind the clock to 2018. Late 17, early 18. Chinese venture capital system blowing up. Everyone's talking about how with 996 is going to take over the U.S. tech world.

The U.S. people are, you know, the tech workers are lazy, panicking. VCs were just trying to get on the next plane to China to pour money into the space. And then overnight, China decided that a huge swat, the venture back companies are now going to go non-profit, can't list, or raise capital. It's like a thunderclop that we almost missed because we're in North America versus China. But like, it was an enormous regulatory turn after they went after D.D. and Tencent music and so forth. And so to me, there has been an enormous tenor shift in the Chinese market that should,

unless I'm totally freaking stupid, slow VC investment in the country? I got to think VC investing from the West in China is over. I would think if I'm an LP, and a fund comes to me and says, hey, we got a China strategy. I would look at them and go, okay.

Jack Ma had a China strategy too. Tencent. had a China strategy. All these education companies had a strategy, and I'm sure the Bitcoin miners had a strategy. How's that strategy working out for them? Because wherever your strategy is as a VC, it's dependent on entrepreneurs to execute on the ground.

Yep. Those entrepreneurs are getting sent to re-education camps if, you know. If they can disappear Jack Ma for several weeks, kill off the anti-PO, and then make DD-Rubits apps three days after went public in the U.S. Exchange, if I remember my timelines correctly. I don't care about your China strategy. There's one China strategy, and it comes from the top, and that's not you.

So, like, in terms of risk, it's terrifying. Yeah, and if you have, this would, if you have risk capital, you're going to look at what is the spectrum of risk to return, and where can I put that money to work? If it felt like, you know, China was trending towards transparency and engagement, great. I think people made the right bet in 2010. Yes, absolutely. You know who the guy was who actually did this more than anybody was the Pat McGovern from IDG, which you and I will know.

He opened IDG in China before anybody. He was the OG in China. He created all these publications there. And then he was like, wait a second, I could create an adventure firm in China. And that's how he made all his money. People don't know this. But he, rest in peace, Pat McGovern, came to the first TechCrunch 50 slash disrupt with Mike and I were partners and sat in the first row in like a $4,000 suit. And Mike and I were like, holy shit.

It's Pat McGovern. And we're like, how did he get in here? And they're like, he bought a ticket. He bought a VIP ticket. He's going to be at the party tonight. I was like, oh, my God. So I walk over. And he's like, I'm like, oh, Mr. McGovern is great to see you.

Thanks for coming. And he's like, I follow everything. you do, Jason. That's not creepy at all. And I was like, okay, Power Govern. And it wound up because people don't remember he owned the demo conference. And Mike and I, 15

years ago, were like, we're going to kill the demo conference that charges 20 grand. We're going to sink that thing. And then what does this guy do? He's so gangster. He buys a VIP ticket and comes to the event and sits in the first row. Yeah. How's that for some reconnoitering of the opposition? By

the way, the TechWrench 50, which is the that Bing sponsored all those bars in the lobby. Was that the 40 or 50? I think that was 40. Bing, Bing, Bing. Because that's the time that you guys got me so drunk that I peaked on the side of your venue. And then I also threw up in my badge. And so when I woke up the next morning in Palo Alto, where I was supposed to be, to be clear.

My badge smelled that and I couldn't figure out why. And I was like 18 or something. Oh, my God. Childish years. Well, you know, that was when San Francisco in the industry, I think it was a little more fun and, you know, less content. It was less contentious between all the parties involved.

And the scale was still tiny, right? Like Facebook didn't exist or if it did. Yeah, Facebook didn't exist at the time. Yeah, and the things that did exist were 10 million users. There wasn't this discussion we're having today about. These things are so big. Should they be that big? Okay, so China tightening the noose, game over, we're in charge.

And Bitcoin happened right before that. So what is, explain to me your thoughts on Bitcoin getting banned? in China and the miners getting kicked out before they do this crackdown on IPOs. Because this they don't do anything without a plan. It's China. They have a hundred year plans, 200 year plans.

They're kind of like Putin in that regard. So what is the plan here if you had to guess? So the plan is to eventually roll out a digital yuan as they're currently doing. And why does that matter? Why do we care? Why not use a crypto? Well, it's all about the opposite of decentralization.

It's all about centralization. If you have a digital currency that the government controls, you can set effectively negative interest rates against it. You can have people's money go away if they don't spend it. So if you want to induce consumer spending, you don't send everyone a check like we do in the US and hopes that they'll spend it on something. You just tell them that the money's going to go away if they don't use it. And so suddenly the government has much, much more control over the local economy. Now, if you're going to have this digital demand, people have to use it. And if there's an alternative, say, I don't know, cryptocurrency like Bitcoin, maybe, they have a way out. And you can't have that.

And there has been constant saber rattling about the banning of Bitcoin in China for so long and the mining thereof that everyone in the crypto community just viewed any China news as Fudd. Just ignore it. Yeah, it's fair and certainty and doubt. You guys are haters. Have fun being poor. We're going to run sci ops on your replies because you, Alex and Jason, criticized cryptocurrency in some mild way. Yeah.

Crypto's fine. It doesn't bother me at all. But, you know, and then finally, after several months, minor things over the years, the big one happened, and now you can't mine crypto in China, and they seem to be very serious about it. Bitcoin's fine, because it is relatively decentralized. I'm more of an Ethereum fan if I had to pick one chain to rule them all. Why is that smart contracts?

Well, I think it's a programming platform, and that's very exciting to me, because platforms tend to be worth quite a lot of money. Bitcoin, it's the main argument for its existence is there's not that many of them, I don't care, and it's the oldest one, and I don't care about that, Because IBM's older than Google and I like Google. What's the guy's name Michael Saller? I don't know if it's an insult or a compliment. Michael Seller is the guy who owns micro something, micro strategy.

He took his entire company, which was providing research or something. Yeah. And then pivoted it to being basically a holding company. And he is like, when I say Bitcoin Maximist, I mean, to the nth degree. But it does seem like China. is now saying, hey, if you have our digital one, your key insight there, I think is 100% correct and astute, which is control. Control.

China wants control of everything. The data, their citizens, their monetary supply, entrepreneurship, new products and services, and critically where capital goes. If you go back and read the English language and translated versions of the Chinese government bulletins regarding the crackdown on ed tech, I know that's kind of, that's nuanced, but it was a big chunk of the stuff we're talking about. one thing that was mentioned was excessive capital flowing into the space. And the way this is being read by everyone who's a China watcher who knows much better than I do

is that China wants to take the direction of its investment away from what it's been so good at, consumer, social, fintech, all this stuff, and point it more towards hard tech, like semiconductors and so forth. I don't know if you can shift an economy by fiat like that. I don't think he can. But that seems to be the overall read of the situation. But like to me, Jason, if you think of the most impressive Chinese companies, you're thinking, you know, Maituan, bite dance, Tencent, you know, Alibaba, you know, these big names that you know. Yeah. It turns out these education ones are huge.

Well, and they were valuable until recently. If you want to get a sample of this, look at the stock chart. If you're listening to TAL education, T-A-L-S-Education, and you'll see how much ground is lost since February. It's like 90% of its value or something crazy. Yeah, it's $143 down to $3. It's just unbelievable. And that's really interesting they went after education because they also sort of indicated in their language that you shouldn't profit off of education. This is a state-run thing, which dovetails with exactly what we're saying is, you know, our education system here in the United States is broken.

We do such a terrible job on a public basis that people want to route around that and have competition of buying apps. Actually, the other one we're in is Brilliant.org, which does math and STEM. And that's an affordable subscription that people are going crazy for. So this to me seems like the central control of the currency, of education, and of communication platforms. Yeah, Gautau, Gautu Te Cedo, I think is how it's the one I'm talking about is Gautu Tecato, which is G-A-O-T-U. Tau is a separate company. Both are down 90%. But if you have the digital one, I don't know if you heard about this, but

the real cynical case with the digital one is it provides even more control than print money in China because let's say you say something about Xi Jinping like I think he could do a better job and then we're like spicy yeah I think that uh you know he could be a better listener you say that they could literally be like huh Alex Jason having that conversation on your podcast beep your money is frozen yeah They know. They know. Yeah.

They can just freeze you on the blockchain. Okay, we've got all your money. Why did you guys come down to the office and talk to us? It's like, okay, my money is turned off. Okay. Oh, yeah. By the way, we put all of your homes on the blockchain. Now we own your home.

And come talk to us and then we'll put you in a reeducation camp and your penalty is the house we just took for you in your home. And then they know every transaction you've made with every person. And if you, they'll basically move to the point where they say, you cannot use real money. You must use blockchain money. Think about, you know, we opt into using Apple Pay, but we can, if we want to do transactions anonymously using cash or whatever we want, they will know every single thing about you

on a communications platform basis and on a monetary basis. Yeah. And there is no room for dissent. And so the interesting question is, where does this take them economically and where does this take them in a technology perspective? I think, I mean, look, I'm going to. going to come out as a capitalist once again on this show, but like, as a capitalist, and someone who's in favor of liberal democracy, I don't think central parties.

Be careful, you're going to get canceled. No, no, I'm not. I just, I just don't. You're admitting it? Oh, no, I'm a vehement capitalist, but I'm a very loving one. I'm a kind of Danish capitalist, if you will. I'm a big fan of progressive tax rates. But as a capitalist and a liberal Democrat with a small and a small D, you know, to me,

this just looks like the long setup to a series of misallocation. resources. Like, I mean, Jason, why, why does Z know better than the entire combined wisdom of his economy, where this money should be deployed and so forth? And also, it's just an enormous human freedom catastrophe to arrogate to one person. Human rights catastrophe. Yeah. And it's happening in front of our eyes. Yep. And this is not the number one story in the world. We're talking about all kinds of other things. The largest country in the world with, you know, basically tied with us for the most influential economy in the world, has now shut down cryptocurrency,

public market companies, taken over Hong Kong, saber rattling at Taiwan, building more nuclear silos, building more nuclear reactors, and the God King said, I'm in charge forever, and he just took control of everything.

Like, what could go wrong here? Yeah, so actually, do you know how much seriously I'm trying to take this? I'm actually going back and rereading old Zizuping speeches from earlier in his tenure to get a better vibe for his politics. And I've added a Marx novel, a Marx novel,

a Marx book to my book club with my dad because I need to go back to my college days and figure out what some of these phrases are because I've forgotten some of my basic marks. And so I feel like that's how important this is. But Apple had earnings this week, did really well, makes them all in China or makes a lot of it in China. How do you feel, I mean, like, I'm not going to lie.

I feel kind of, I feel a little heby-jiby about that. You know, for me, yeah, I think what we're going to see is the great disengagement. We have this great engagement policy for decades. It felt like China was possibly going in the right direction on human rights, on open markets, on free trade. And I think we got lulled into thinking, hey, this is just going to be a straight train to democracy. And, you know, when they go into Hong Kong, I'm sure they'll have kid gloves and they'll be reasonable. they don't want to go into Hong Kong and just, you know, tear stuff up. And they're just like, yeah, what's the newspaper Apple?

Okay, yeah, that shut down. You're all in jail. Okay, who's selling books? You're all in jail. Great. And by the way, the court system is now not in Hong Kong. It's on mainland. So whenever you guys get a speeding ticket, you're going to cross the bridge and come to

mainland China and we're going to talk about it over there. The end. No discussion. Even more than this, Jason. Like, I forget which American clothing company was, but they decided you not buy cotton from the, I'm going to butcher this. Sorry, everybody. That John Jing,

region, where the Uyghurs are? Where the Uyghurs are, because they literally have the Uyghurs going into fields with zero sense of history, irony, or anything. They literally have 3 million people in a concentration camp walking over cotton fields to pick cotton. Yeah, well, they don't care about looking bad. But this American cotton company was then excoriated on Chinese social media by Chinese nationalists for daring to push.

quote, false narratives or whatever. So you have to be okay with being silent on cultural genocide or you're out of China. And if that's the binary, okay, cool. Thank you for making it easy for us. I mean,

Darry does the most modest of support for Hong Kong and LeBron James has nothing to say about it. And all the, and listen, I'm not just single out of the NBA, but the NBA is a very woke group of individuals who are very involved in social projects, so is Hollywood.

And you think about those two people are exporting to China and they will, for the extra 10% on their dollars, 15% on their dollars, do whatever that communist regime that has three million people in a concentration camp, just for an extra 10 or 15%? Like would you or I take an extra 10 or 15%? To sell my soul? No. Yeah. I was like, you know what?

I don't want L. I had all these LPs from China, big, you know, oh yeah, well, you know, big. we're talking big pools of capital who would give me giant pools of capital. I was like, yeah, not for me. Thanks. Don't take Chinese LPs, period. And to be clear, just to listen to this, because it's gone on for a couple of minutes now,

no beef with individuals in China, no beef with Asia as a place. Yeah, the citizens of China are great humans and yeah, they're the victims in all this. Yeah, I just wanted to make sure we threw in that caveat. They were not conflating the Chinese people with the Chinese government, very different things. I think the Chinese people would very different things.

I think the Chinese people would very much like to have a path to having a voice and some freedom. And freedom of religion, maybe freedom of speech, you know, and have some, you know, I don't know what the solution is for, the people making hardware over there, you know, Amazon basics cables or iPhones, I think that that is less of a problem for me, you know, because they're not turning people over to the, you know, authorities like, you know, Facebook would have to if they were over there. But I don't know if you knew this. They have iCloud in China.

And iCloud, the way Apple was forced to do that, because the iPhone is getting popular in China in Hong Kong. The way they were doing that is they outsource the cloud ownership to a third party. So Apple could say, we don't turn anybody over. We don't even run iCloud in China. China. That's like, you don't run iCloud. The company they told you runs iCloud runs it. So Tim Cook can say everything he wants. He can virtue signal all he wants about human rights and, you know, whatever practices. But if you're looking their backyard, if you're using

an iPhone in China and Apple is super privacy conscious here, they're handing over dissidents. They're literally handing over dissidents. Well, that's because there is no privacy in the There's no choice. Digital system, yeah. So anyways, Apple's earnings, though, fantastic. Q3 max sales were up 18% year over year to 8.2 billion. iPhone sales were up 50%, Jason, a very fantastic number to 39.5 billion. Play the music.

Dude, dude, dude. We need that music from, what is the, what's the NPR show? All things considered or fresh air? No, no, there's one for market. The one for markets. I don't listen. I don't, I don't, marketplace? Yeah.

Oh, marketplace. Okay. Anyway, they play music on, and now let's go to the numbers, and Kai Rizdahl does all the, is that your NPR voice? That's my NPR voice. Okay, the Dazdak was down. I don't know if it's accurate or a good joke. Anyways, Apple had a good quarters, what I'm saying.

What drove that? Was it people staying at home or having Stimmy checks? It feels like Stimmy checks. It was an really good iPhone cycle for the company. So that may be partially driven by Stimies. You get a Stimmy. What are you going to spend that on? Why not upgrade my phone?

It depends on how cash conscious you are. Like if a check changes your cash position by a material percentage point, it may allow you to buy something you couldn't before. And maybe that drove a lot of this. And if you were thinking about upgrading next year, maybe you just do it this year. So you're you fast forward a cycle. I also think those IMAX, I don't know if you saw those beautiful IMAX that came out. Oh. This is gorgeous.

Yeah. Oh. I thought those were beautiful. I almost bought one and I have no use for one. I have no use for one either. I mean, I have a Windows machine with a Dell with a 49-inch monitor, and then I'm using the Mac Mini here on my studio setup. And I go from the M1 Mac Mini to my Windows machine.

So I have a gaming machine, 49-inch monitor, and then I go back within the two. But I like to have large monitors. So that's a tiny monitor for me. But I bought it for my mom. She loves it. I want the red one, and I really wanted an M-1 chip. So I have this work MacBook Pro that I'm currently on,

and it's one generation before the M1. And so it's got like six chords. And one's a game changer. Yeah. I just, I wonder if I spilled water on it. I would get, I'm not going to do that.

But I'm very tempted. You just, yeah, fell off your desk. Fell off your desk. Well, now I can't do it because now I've said it on the podcast. And they'll be like,

oh yeah, we heard you. We'll beep it out. We'll beep it out. We're beep. No, I mean, I literally bought the new MacBook.

Because I had an old air. And I was like, you know what? I was going to get the Air M1 or the MacBook at one. I was like, yeah, let me get the MacBook M1. And it is unbelievable how long that goddamn battery lasts and how fast it is with your browser. Ah, yeah.

I run a lot of tabs. So that's pertinent to my interests. If you're part of the 50 plus tabs, you know, and multiple monitor club, it is so amazing. And it never heats up. You never have the fan come on, where Azure sounds like it's like a V-Tol taking off. Like it's a Joby. So literally the fan on this thing,

runs whenever I don't have the AC turned on on my office, but I can't have the AC turned on my office because it blows onto the microphone. So I have to literally just sweat it out on pods. It's terrible. It's brutal. The new one, you get zero of that. The battery lasts forever.

It's just an extraordinary. I got a question. How did this happen? Because Intel has been making chips since before I was born. Yep. Apple newer to the semiconductor space. And yet, they come out with the M1 chip. And it's like all the things you just said.

I can't recall the last time I got hype about a processor. It was the Pentium 3 when I was like 15. You know, like this is, how did Apple do this and not Intel? Okay. It's a great question. I think what happened was Apple got very interested with the A series of chips in the iPhone. We need to control our destiny. And the chips we're getting from other people are not going to get us where we need to get in terms of a competitive

advantage. And once they started realizing graphics and battery life are two of the key features of the phone. In other words, if your battery lasts longer, you can do more intensive processing. If you can do more intensive processing, you can do take better pictures, do better picture software, you can play better games. That combination of needs said purpose-driven chip. Okay, we have unlimited money. We are selling billions of these devices. and then the engine in our car is made by somebody who doesn't understand what we're building in the scale of this,

F it, we have to do it. Now, you start doing that and you start realizing, wow, the margin on these things, right? Because when you would buy a Dell computer or whatever,

you remember they would offer you an arm chip or the Pentium or whatever? It was, it was an AMD or Intel, yeah. AMD or Intel. And you're talking about, what was the different, $200 on the cost of?

of a computer? It was all this. steep to get the Intel chip. Yeah. So you're like, okay, $1,200, $900, or I can get a $1,200 to $1,200, but I can get 32 gigs of RAM versus 8 gigs of RAM. We made those tradeoffs, and I think that's why purpose-driven silicon came to the phones. And then they were just like, you know what?

What is good? How do we win laptops? Batteries. And these stupid fans going off. And then once, so I think the iPhone gave them. the dexterity in the muscle memory to do it. And then they just got emboldened. Imagine if we had one chip for the iPads and for the desktops,

then we recapture all that margin. And then we can make it specific to the use case. Well, what's the use case? They could just look at the data. People use their laptops to surf the fucking web. That's it. It's 90% of what people are doing. They're in a web browser.

All their software is in a web browser. Even the software they download that's not a web browser. It's just a rap web browser in a lot of. cases. Which is why a tweet deck runs out of RAM. Yeah. Exactly. And so I think purpose, and then I think that's why Elon put, made his own chips for, uh, the Tesla's. Like, he's got his own circuit board that they made specifically for that use case, which is real time processing of, you know, visual data across X number of cameras. So that, that seems to be the beginning and the end of it. And yeah, I mean, Intel's over. I mean, I don't know who should be really mad right now is

Satya Nadella, because he inherited Wintel, right? This, this, this union of Intel and Windows. And then Apple just came along and was like, oh, you guys are terrible at this. And they just made a much better chip on its first try. It's the M1. That's so good.

Can you imagine how dope the M3 is going to be? It's going to be incredible. Yeah, I consider the M1 like the A15 or whatever. Yeah, because they're up to, I think they're up to 14 or something with it. Oh,

has it been that many? Gosh, I'm going to go. Yeah, it's been a lot. I'm trying to look the, the A4 was March 10th to September 2023. That's the A4. in the series.

And the A14 Bionic is September 2020. So, I mean, they're doing it every year. They come up with a new A processor. And that's the soup to nuts, you know, experience that I think Elon is doing with Tesla. Like he makes every part. Not being dependent on anybody in the supply chain

is, I think Tim Cook and Elon came to that observation at the same time. Yeah. It's interesting. Actually, Tesla is working to, secure different elements for its batteries direct from mining companies now. Going back to the going direct thing. I mean, they're literally saying, look, let's just, we're buying a lot of this stuff.

We don't need to go through anyone else. I literally have talked to Elon about this many times over the years. And he's like, materials come in this side of the building. Cars come out that side of the car. And then in the middle, there's a battery pack being made that goes into the car. But basically, you know, he said something. I remember when he was building the gigafact. I usually don't talk about my conversation with Elon, but this is public knowledge now.

the gig of factory out in Nevada. He showed it to me when he was just building it and gave me a tour. And he's like, this is the company. The company is the factory. It's not what comes out. The factory itself is the product. That was like, oh, my mind is blown now. The factory is the product.

Amazon and warehouse tech. Exact analogy. Amazon, when no one was looking, was building robots for its factories and building these hyper-efficient logistics setups and everyone thought it was just like this bookseller. It turns out the warehouse is Amazon and the server. They bought that company, right? They bought that robotic company that does the couple of them.

More than one. Yeah. Yeah, they bought the one that's like the flat one that zips around and yeah. Looks like a hockey puck with. It looks like a hockey puck zipping stuff around. It does seem like this, the super cycle of tech combined with the pandemic is this like perfect, um, super storm, if you will. of adoption of this technology

because I don't know what it's like in Providence, but I'm assuming when you go to a restaurant, there's no more waiters. You just take a picture of a QR code. You order from your phone on toast or something. And then they bring you the food with a runner. It depends on where I'm going. I live in a kind of a small businessy part of town,

kind of one of those collegiate streets, but lots of little shops. So those are still pretty hands on. But even at those, now the QR scan the thing, pull up the website is happening even in those places. And a lot of restaurants are still mostly, you know, pickup. Like there's this little cafe in my house called,

it's fantastic. I eat there, like, more often than I should because it's around the corner. And, you know, they just have a whole table now set up permanently for pickup. And, like, that's just now a de facto thing. So it's all digital for me, essentially. Yeah. And I think that if you think about the economy post-pandemic, whenever post-pandemic exists, which I was, I thought we were in the post.

I'm so depressed about it. I'm frustrated. I have a lot of emotion about, like, how we screwed up the reopening. Because I thought this was the Yolo time. We start going to concerts again. I wanted to go to Broadway. I wanted to do everything this fall and summer. And I like, Lord, these selfish people who won't get vaccines,

we have to figure out a way to get them over the... Before we go to Pinterest, and we wrap up, let me just make a point about that. I haven't seen my parents since December of 2019. And if Delta blocks me from me on the fly them out here, I don't see them until this Christmas because some people won't get vaccinated. I shall be mad. I miss them.

I like them a lot. They raised me. I would like to get them a hug. But they're vaccinated, I assume. Oh, yeah, yeah. My whole family is full of rational scientists. So no worries. It's fine.

Yeah. I mean, and then people are like, oh my God, the people who are getting vaccinated, the people who are in the hospital in this town are vaccinated. It's like the town is 90% vaccinated. And you're, of course, the people who do come. Some are going to have COVID, but they're not dying. But anyway, my point. point of this all was, I think a lot of, that's one of the things that's going to stay. And the

idea that being a waiter or a server, I think we're going to just get rid of millions of jobs in this country that were hostess, server, matriety, and register or whatever, cashier. I think those are just, everybody is applying that technology. And there were restaurants who did not ever think they would let people order their own food from their smartphone, who are like, this is so much better. Oh, Jason, this is a restaurant, uh,

nearish to me. That's vague enough. So Nick doesn't have to bleep it out called Alphornaz. And it's a, it's a relatively well-known Italian restaurant. If you live in the Northeast, you've heard of it. It's,

it's fancy and lovely. And, uh, and they came up with a really amazing takeout strategy during the pandemic. Like, this is the restaurant where like, it was like only a valley of parking and like fancy people go there for like, you know, like birthdays.

You know, it was, it was, and now they're like parking slot forward will bring out your Italian food. Like, everyone adapted so quickly. across the economy. It's been a real human story

of flexibility in the last 18 months. All right. Should we add on Pinterest or going back to work in offices? Oh, let's do going back to work in offices. I read your notes about this

and I want to hear your thoughts. Well, I think we talked about this on the All InPod. You know, we predicted a couple of episodes ago. Like, of course, if you're in tech and you're going to reopen your office

or, you know, you're going to force people to be vaccinated where they can't come to your office, especially if you're doing hybrid. Why would you allow unvaccinated people in the building? And so, of course, I guess, Netflix, Google, and a group of people are now going to force you to be vaccinated

if you come to the office. And I think that's the carrot. And I think that has to make its way to sporting arenas, restaurants. In San Francisco, there's a movement to force. If you want to go to a bar, you've got to show your vaccine card at Lollapalooza. They said you have to show your vaccine.

card and if the FBI put out a notice if you make a fake card you're going to go to jail and you get a huge fine. So like there will be enforcement of people doing fake vaccine cards. So I think that this is the only choice we have to keep the economy going is to have vaccine. You know, I hate to say it, but you know, like the carrot didn't work and now there's going to be a stick. Like you're just not going to be able to participate in certain things in France, Israel, and now the United States, period. Yeah, which is which is reasonable. given that the vaccine is safe and it's free and it helps protect other people and

stopping so selfish now, to be clear, if you can't take it because you're immunosuppressed or so forth, we're not talking about you, we're talking about people who can get it and won't. Those people are the problems. Not three-year-olds who can't get it yet. I'm talking about the people who are 37 in Duluth who are refusing. I hate you. Everyone else is fine. Question, though.

So I'm, you're not at the office right now. I can tell that because I've been to your office. I've not been to your house and that looks more like a house. I'm at home and I'm feeling great. Nick running the pod with Charles here at the studio. Charles is at the office and Nick is at home. Yeah, but I mean, like, you know, I used to show up to do this with you. And now we just do it like this.

And I feel fine. And to me, to me, remote work is, has saved my life as an individual way before the pandemic. So let me do stuff, you know, and support my spouse. So, you know, to me, the whole hull of blue about companies wanting people to go back. I just think they have big leases. They don't want to fill. I can't figure out why these.

progressive companies in the work management sense, are turning into the most boomery sounding companies. Like, come back three days a week. No, I won't. I refuse. Absolutely not. I think it's a great rotation. I mean, if you were forced to come to an office, you would look at other options.

The end. Oh, instantly. Instantly. And so I think that, and I was predicting this, which is, you know, if you want to keep the most talented people and some number of them want to work from home, it's so hard to find a game-changing employee, talented team member, you're just going to have no choice.

I mean, if you're Netflix, if you're Reed Hastings, if you're Tim Cook, and you're top person in PR, in marketing, in engineering, and design, whatever it is.

Yeah, whatever. If they say, you know what, I'm working from Tahoe or I'm going to work at a startup, what are you going to do? You're going to let them work

from Tahoe and probably subsidize that they have gigabit internet because that's the most efficient thing to do. But going all the way back to the first part of our conversation. I would go to the office and I would do social things. I would, I would stand in the kitchen and I would talk to people. I'd make a couple of connections. And to be clear, those would occasionally be useful and works then. But when I was doing 50-50 SF and in Providence, I would

go to SF and do companies up for two weeks. And then I would go home and work for two weeks. Right. And like my output differential as a writer was so extremely different because here, the only distraction is my puppy when she needs to pee, two minutes and then I'm back. Which is actually kind of a nice break, take to, if you're a writer, to get that little fresh air break is actually accreative to your performance. Yeah, and she's been great for that. But I mean, like, if you told me tomorrow that I have to start driving to the train station, taking the commuter rail to Boston,

buying a small muffin somewhere along the way, and then walk across Boston to the office and then shake hands with icky people and then, like, sit down at a desk, that's like two hours of my day. You better be paying me like 100% more if you're going to take extra four hours from my day. because what? Yeah, I know, I think you can't put the genie back in the bottle. No. I think that what could be very interesting is, and I've been thinking about this,

like if I moved to Austin, if I moved to Austin, I could find an area where people could afford to live and walk to work in one of these small towns there. And I was like, you know what, that could be quite charming if I had my own event space slash, you know, there was affordable housing. I think actually people would love to go to work three days a week or for four hours for a day and get out of their house. Like if I said to you, hey,

we're going to, on Wednesdays we're going to tape the show and have lunch and we're going to do, you know, a meeting about the editorial for the week and we were working at the same company. You'd be like, dope. Get out of the house one day a week.

I get to see everybody. So it does seem like that hybrid model will become the default. Yeah. Back in the, my first stint at Tech Wrench, we had mandatory fun time, which was, I think, like, 4 p.m. on Thursdays. And everyone was supposed to come into the office at 4 p.m. on Thursdays and have a beer.

And then it was a way to, like, engender camaraderie and make sure everyone knew where their badges were. And you know what? It worked reasonably well. I have a bunch of people working for me. I've never met. And that is the thing I miss most about this. And I hope we get back to. And I do think it's a boomer thing. Like you invest in an Apple starship, $4 billion campus or your Google, I do think that those folks think great product is made in a space and that that space is going to be a competitor.

I believe they believe that. I also believe they're probably wrong. Yeah. Yeah, yeah, yeah. That it's necessary for all employees. It's probably, I'm wondering, do you think the iPhone and the design of it could have been made remote today with today's tools?

I think small physical product teams, are always going to have a different set of requirements than the information workers that we're discussing. You know what I mean? So developer different than writer. Writers and developers different than Johnny Ive and Steve Jobs. Yeah. Like if you're literally inventing a new category of device,

you're going to want to sit in a room with mockups and touch them. Yeah. Good. Johnny I can go to the office. In the meantime, I won't be. Last question for you. Middle management. And a lot of people that thrived in the office environment

feel increasingly superfluous to me in this moment of more productivity and going to work. So does this thin out the leadership ranks of companies? Two great things that people will not talk about publicly, but that is being talked about privately on boards, on walking talks between investors and management, which is dead weight, middle management that, you know,

set up the meeting, set the agenda for the meeting, and basically lured over people and made sure they were at their desk on time. All that bullshit is gone. because we're just looking at output. And it's hard with remote workers to judge output, but if you're forced to figure that out, which everybody has, just like the restaurants were forced to figure it out,

what you eventually realize is, okay, those middle managers were doing nothing. They were just really performative, and maybe they wrote great TPS reports, but you don't need a TPS report if your team is keeping track of themselves on Notion. So self-reporting is something I worked on with my teams and the investments is just have people write in Slack what they're doing at the start of the day.

And at the end of the day, reply to their own start of day with their EOD. And I wrote this whole article, which is my whole team's at inside and at launch, write SOD, closing this deal, doing this, you know, cleanup work, reviewing these legal documents. At the end of the day, they reply back to it and say what they did. Total transparency. You'd manage yourself. And then when you leave the company, we can look at your end of weeks. and what you did, and we say, okay, reviewing legal documents, we'll outsource that.

That seemed to be 30% of what this person was doing. And the other two thirds, okay, you're going to do one third and you're going to do the other third, or we're going to deprecate what we're doing. We don't need to refill that position. So it actually makes you understand exactly what everybody in the company was doing. Yeah. And that'll scale up to 100 employees.

Yeah. And that'll scale pretty well. And there'll be some other model for something else. But I mean, the idea of having like 13 layers of management between X and Y and York Chart. I mean, and thank God. Thank God. I mean, those people were annoying.

There was the people who would come by your desk and talk to you and take you out of your rhythm. No. Don't. Yeah. They're like, hey, let's go. Can we go for a walk and talk? And you're like, no, I literally, you're stealing my words. Yeah.

You got a minute? No, I don't because it's 15. And two, it means that I'll have to leave late. Yeah. Don't you have anything to do? You know, like, and then you think about the cost of the space. Then you think about the cost of reception, food, all this stuff. I mean, I think companies are going to save 30 to 40 percent on top of,

a 30 maybe 20 or 30% savings and salaries because when you are hiring I mean we know at TechCrunch writers in San Francisco and Engadgett writers

in New York were getting paid it was double or triple what people working from home were getting paid Vox's average salary is 45 to 50K

I think and there I know I think actually I was looking at Voxes because I was comparing it to insides where we're paying $75,000 for analysts

but you can work from anywhere. So I'm hiring people in Canada, in Europe from anywhere. And that 75K is pretty good for an analyst with four or five years experience to write and host events. And then if you look at Vox, they're starting salaries 52K.

So I think there are Vox riders average. That's the minimum. That's the minimum is 52. And I think the average is 65, 70. And I was like, okay, well, we're beating them. But TechCrunch riders were making 100K or whatever. Engadjet writers in New York were making 100K.

And it was, you know, I think that those salaries don't get reversed, but I think over time you'll see salaries average out from cities. And if you were forced to, you know, take a pay cut or whatever, it'd be like, take a pay cut, stay in Providence or move to a city. Oh, I mean, gun to my head. I'll take, I'll take like, I'm not going to say it all of a relatively material pay cut to to stay here because I like it here.

But like, yeah, I think you're right about the averaging of the salaries. I think we're both right about middle management. And to me, just, I actually have to go write a newsletter for TC. I think it's a better future, I think. So like, this is, it's going to be painful. You know, there's going to be repercussions and things we don't expect to happen. But I think generally speaking, we're moving towards a more healthy conversation about work and work life balance. And, you know, thank gosh.

More choice. Yeah. I think it's really about choice. There'll be a group of people who wants to go to that office and be part of that. And there'll be a group of people who prefer to stay home and a group of people in the middle. And I think it's flipped power now. It's like you don't get to lord over employees. this is how it's going to be.

It's going to be a negotiation. And you can't dictate anymore. And you have to get comfortable with that. Employees are empowered and the best ones always have been. They just didn't know it. Those top employees didn't realize that if they said, I'm working from Tahoe at the lake and I want the same salary, that Zuckerberg would have caved, you know?

And the world used to be run by VCs and middle management. And now it's run by founders and ICs. So ha, ha, ha, ha, ha. The world has come towards me. Well, it is, it is the, the virtuosos, the people with the actual skill who actually move the needle forward and get done at a company, they are now absolutely recognized and all the performative nonsense is sucked out of the system. So I think you're right. And that is ultimately healthier. And it gives everybody a path. Just work on your skill. Provide some specific, tangible benefit to the company or organization you're working for. And then you get all that time back. You get 10 more hours. is back a week. And you don't have to take a shower if you want to see your kids

or your dog during the day. Mazel Tov, go for it. You still have to take a shower. Don't listen to Jason. Shower twice a day. Don't be gross. Please shower. Come on.

Oh, please. Gosh. All right. Listen, great job. Alex. Love having you on the show. And everybody follow Alex, A, L-E-X on the Twitter.

And then for the podcast, you're doing, are you doing the podcast regularly? Yeah, yeah. Yeah, yeah. So, which, what is the name of the podcast? podcast that people should subscribe to because there's like 10 of them over at TechCrunch.

Yeah, it's called Equity. We've been doing it since 2017. It's a show. If you like startups and VC and bantering about revenue multiples, it's the show for you. Like, because it's, I've been on it forever and it's just, it's how I kind of like digest what's happened during the week. And we should have a good time. It's about 30 minutes long.

So it's not too long. Perfect. Good times. Everybody go to your podcast player and search for Equity or TechCrunch and you'll find it. And subscribe. We'll see you all next time. Bye-bye.