This Week in Startups - $NFLX stops sharing, $SNAP Q2 earnings, $COIN alleged insider trading with Alex Wilhelm | E1517

Episode Date: July 25, 2022

We have a big news show with a very special guest! TechCrunch's Alex Wilhelm fills in for Jason to break down the news with Molly. They cover Netflix cracking down on password sharing (2:12), Snap's rough Q2 earnings (6:45), Coinbase's alleged insider trading (21:28), the 3AC Bloomberg interview (36:37), and more! (0:00) Molly tees up today's news with Alex Wilhelm, who is filling in for Jason! (2:12) Molly and Alex share thoughts on Netflix cutting password sharing in some Central/South American countries (6:45) $SNAP Q2 earnings: stock drops ~40% on slowing revenue growth and growing losses (11:15) Embroker - Use code TWIST to get an extra 10% off insurance at https://Embroker.com/twist (12:27) Jason's almost-Jay Trade, $SNAP's debt situation, most interesting implications from the week ahead of big tech earnings (20:12) Odoo - Get your first app free and a $1000 credit at https://odoo.com/twist (21:28) $COIN's alleged insider trading, Jay Carney getting hired by Airbnb away from Amazon (35:23) Vanta - Get $1,000 off automating your SOC 2 at https://vanta.com/twist (36:37) Reacting to the 3AC founders' interview with Bloomberg, crypto contagion due to intermingling (45:09) Man who lost ~8000+ Bitcoin in a landfill is trying to raise capital to uncover the hard drive

All right, everybody, welcome to this week in Startups. Happy Monday. We have a really fun show today. Jason's out on vacation. So we have one of our favorites, TechCrunch's Alex Wilhelm, joining us today. And he is not only incredibly well-informed, but he brings the heat. He is not holding back. We cover a bunch of topics starting with Netflix, stopping password sharing,

Snapchats, tanking stock, chaos in crypto. It is an absolutely awesome news roundup. Stick with us. This Week in Startups is brought to you by Embroker's startup insurance program helps startup secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today atembroker.com slash twist. And while you're there, get an extra 10% off using offer code twist.

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report fast. Twist listeners can get $1,000 off at vanta.com slash twist. Welcome, everybody. Welcome back to this weekend. Happy Monday. It is going to be a big week. Jason is on vacation. And so are we just kidding, boss. Don't, don't, I did not say that. We're not a vacation at all. We're holding down the fort. And to kick off the week, I'm super excited because Alex Wilhelm from TechCrunch is back. Indeed. For tech earnings week, ongoing crypto meltdown, drama galore, and then Netflix cracking down on password sharing. Plus, honestly, just whatever else comes up in the course of this rollicking hangout. Yeah.

The Netflix thing, I know we're going to get to that, but like, can you, if you've ever seen a company you turn quite this much from like the cool kid company to being like essentially your parents, it's so lame. I mean, let's literally jump ahead. Okay. To the Netflix thing. Let's just start with this. There's a lot of outstanding news to report today, but honestly, over the weekend, Netflix added this, tested to added this like add a home option to crack down on the password sharing.

And they're going to make you, they're going to like spy on you and make sure, presumably, that you're at your house, which to be fair, Hulu already does and won't let you stream sometimes outside of the house. But if you want to use your account in a different home, you will have to pay an additional $3. Netflix, of course, has claimed that there are 100 million households globally sharing user accounts, and over 30 million of those are in the U.S. and Canada. And so they have decided they've seen their foot and they're going to take aim and fire.

Yes. That's my only read of this, because they're going to make the service harder for me to use as a paying customer. Like, I mean, Molly, I don't know how much I pay for Netflix right now. It's some amount of money. Yeah. And that's fine because I use it. But if they start telling me that if I change houses, that I have to constantly do this

little dance of logging back in and checking my, email to get a code and all that kind of BS, I'm going to decide that whatever dollar amount it is, I don't want to spend it anymore and go away. So to me, this is just backwards thinking McKinsey level BS. Which is so funny because that is almost exactly the conversation we had last week where Jason was just like, the CFOs are in charge here. Right. It's just this like financialization, slicing and dicing as opposed to in this case, literally the opposite of delighting customers. Like the second that I am told by Netflix, which I barely watch ever, I did recently go online and lower my account from the $20 a month to $15. And even that, I was like, seriously, $15 for the crap?

Like, really? And one of the only reasons that I keep it is because my fixed income mom uses it to watch the Great British Baking Show and she loves it. So the second that I have to pay that extra $3, I'm going to call a friend named Amazon and be like, I sent you every. every season on DVD or whatever it takes, right? I'm just like, no, mom. Like, that's, that's ridiculous. Streaming services need to realize that the reason why piracy died wasn't because we stamped out piracy.

It's because they were options put into the market that were easy to pay for and high quality. And Netflix is not making them more expensive and lower quality. And then they're going to offer an ad-based tier. Wee. You know what I really want is Netflix with ads said literally no one in the history of time, except for board GEICO executives who somehow still have ad budget, they need to shove somewhere deeper into our cranium.

Is GEICO? Do we think that by volume, Geico is the world's largest advertiser? Because it does feel that way. So there's the dumb lizard. There's the dumb emu. There's the weird all-state chaos idiot. State Farm has the new dude.

I just don't understand why we've decided that we should all pay 30% more for insurance to finance large ad budgets that then prop up fading cases. cable channels because I would like to reverse all the economics, drop the cable channels, drop the advertising and pay less for insurance. Like, it's a waste. It's so inefficient. That I'm almost never going to use. Don't forget about flow.

I was wondering where flow is. And also, Joanne points out in the chat. You also have that 480P option for $9.99. And then the other thing that's so insane is that they are rolling out Operation Nickel and dime in like Central America. Like at least roll out nickel and dime to the Bay Area where rich people aren't going to notice it. Like, it's just kind of everything about this is wrongheaded.

And you know what it reminds me of the Steve Balmer era of Microsoft? Suddenly, a sales guy was in charge, not a technologist, and you could tell as the company really slowed down its ability to be open, to innovate. And then once they put a technologist back in front, they became more open and they made better stuff. And to me, this is the awkward adolescence of the Netflix experiment. And I say that as someone whose parents still have the DVD service, that might be the laughed people on the planet, but they still get Netflix DVDs as far as I know.

I have a friend my own age who gets the DVDs. True story. What 33-year-old's getting DVDs? Thanks, boss. Thanks. Appreciate you. Gotcha. All right.

Well, now that we have dispensed with that, and I am so deeply curious about how much extra I am paying an insurance premiums for all of that advertising, which is a whole separate story that I'm going to call somebody a marketplace about, this is going to be a big tech earning. week. Oh, yeah. It has arguably already kicked off with some bad news. That bad news being Snap. Snap's earnings were even for Snapchat, very Snapchaty, because this is a company that has a long history of having really... As in the earnings disappeared. Heyo. Well, sometimes they've done the opposite, though. I mean, Snap really had a moment in the last, you know, 12, 18 months. Their value appreciated,

their growth kicked back up. They reached, uh, you know, gap net-end. income. They had positive free cash flow for a bit. The company was really kind of back on the up and up and investors really warm to that. And then I think as we've seen, the correction kind of came in late 21, early 2022. And things have changed. What blows my mind is Q2 wasn't that bad at Snap. It was really the guidance portion, Molly, that threw me for a loop when I read the numbers. Yeah. Tell us more about that. Because like you said, Q2 was okay. The revenue was actually up 13% year over year. A billion dollars in revenue for Q2. Slowing revenue growth was an issue. But what happened in the guidance to cause this to just fall off a cliff? Well, if you grow from growing

100% a year to growing 13% investors are going to be very unhappy. But then when you say, looking forward, we're so unclear on what's going on in our business and the economy that we're not going to provide guidance. And the only thing will tell you is that we're flat thus far year over a year, they drop your stock like the proverbial hot rock because they don't want to hold it anymore. The company's back to GapNet losses. Its free cash flow results are worse. It had $7 million in adjusted EBITDA last quarter, which is like a joke. It's making like $7 million in fake profit off of over a billion in revenue because their expense base is now too high. It's just kind of, um, it's kind of a mess. And I want to say it says a lot about the ad

market in general, Molly, but I'm not sure it does. I wonder if it just says that SNAP is still it's sufficiently small that it can't really navigate changes to the macroeconomy on its own. Yeah, I think we're going to find out more this week, probably, about the ad market and what it really is doing. Certainly in media, you're hearing people report that the ad market is, in fact, a bloodbath. But I think it is that growth number that you point to that suggests that it is not at all advertising. It is, in fact, that if you were able to use COVID headwinds to grow by 116% in Q2 of last year, and there it is, 116% growth

that then just falls all the way to 13%. Like you didn't pick up a single other person effectively. You know, over an entire year, nobody else jumped on this bandwagon because they all went to TikTok. Then the problem might not be ads at all. You know, it's interesting because every time a new thing comes up,

Facebook tries it for 20 minutes. Like they had that newsletter push. They had a podcast, phase for a minute. They're kind of like a middle schooler trying on new fashion trends. They're like, I'm a goth this week. Now I'm a jog. Facebook's business strategy. Snap, though, has kind of stuck true to its guns, even as TikTok has taken off. And to their credit, they have, oh, this is from memory of like 342 million MAUs. So a big chunk of people out there, they're big. But I think you're right. In the conversation

of what's driving culture and therefore what's relevant to advertisers, it's TikTok over Snap 100 to 1. Right. 347 million daily active users up 18% year over year. But critically, though. It's bigger than Twitter. Okay, but I'm pretty sure my book club in Providence is bigger than Twitter. Snaps, user growth did miss expectations. So that was critical. They missed on profit. They missed on revenue and they missed on user growth, didn't forecast and said they were flat. And that, I mean, like we talk about a top and bottom line beat. That's a five way miss, essentially, which is. about as bad as you can bring home as an earnings report goes. I feel for them. They're trying to do something different.

They're trying to bring that LA vibe the tech. They're still working on hardware. And frankly, I wish them the best because they haven't ended up being component to a larger platform company. And that's cool. Yeah. It is super cool. And I actually also really appreciate the fact that Snap has tried to be like a good

actor in the social media universe, right? It is sort of said, we don't want to sell a bunch of user data, which I'm sure has not helped it with selling more ads. unfortunately and has tried to create a product that is, you know, arguably not destructive. I'm going to be very quick today. You need to understand what cyber insurance is. Obviously, this covers hacks, which happen more than you think, especially in these crazy times. You want to be protected so you want to have your cyber insurance set up. If you don't have business insurance, you've failed one of the first steps of being a founder and having investors. You need to

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The other thing that we have to point out when it comes to the financials is, so Jason, you haven't been here for this, but he has decided that he would like to use this dip to dabble in equities. Okay. So he's becoming a public investor, an equity investor before our very eyes, and he's calling him J-trades. And he had considered over the weekend, at least on Twitter, should I do a J-trade on Snap? Should I buy it? Right? He's like, hey, man, maybe this isn't so bad.

The users are still growing. Revenue is still growing. They got $5 billion in cash, $4.5 billion in yearly revenue, $16 billion market cap, $2.4 price of sales ratio if you net out the cash. And he's like, you know, maybe it's an acquisition target. Maybe you get in now. and then you cash out when Google scoops him up. And then, and this is what happens when you j-trade in real time, the follow-up tweet.

Some important information someone just told me. Snap also has $4.2 billion in debt. Yep. So adjusted cash is more like $500 to $700 million. That does change everything, I think. And then that was the end of the J-trade. Well, the debt thing's very interesting. because people forget about that.

But if I recall the terms of that debt, it was actually pretty favorable to the company because it was raised back when interest rates were lower. And if you recall, Coinbase did something similar. They added quite a lot of cash to their balance sheet at relatively low cost of capital, which is smart. I mean, that's what you want to do. That's what you want to see people.

Take the free money, man. Take the free money. So to me, I think from an equity's trading position, I understand why the debt is a worrisome thing. But frankly, from a business perspective, I'm really glad they raised it back then versus now because it would be much more expensive today. Can you imagine with a $10 per share share price? Brutal.

Yeah. No way. However, let's take a look at another breakdown. Anirban Mahanti was apparently the tweet that helped Jason back away from the ledge here. So a little more analysis. Snap convertible debt might be the canary in the coal mine, according to this tweet. $850 million notes due 2025, which have a conversion price of, $22.

Uh-huh. One billion dollars due in 2027 have a conversion price of $89. And $1.3 billion notes during due in 2028 convert at $56. I'd be a reminder that the share price was $12 at the time of this tweet. I think it's more like nine today, right?

It was nine or 10 last time I checked. So my question about this is, if the share price is lower than the conversion price, I presume there are provisions to make whole at the equivalent dollar amount, right? So do they get twice as many shares if the debt's priced at 22 and the stocks at 11? Because if so, the dilution is going to be absolutely punishing. And that may be why Snap in their latest earnings discussed at $500 million share buyback to reduce the impact of dilution.

Right. But that's not going to make a dent. No. I mean, they're staring down the barrel of a cannon. The Canada is entitled, prior obligation. It's like, oh, no. It really is. So, yeah.

It's probably, this is not an investment advice in any way whatsoever, but I think we can assume it was a no buy for Jason. Well, it turns out it was no buy for everybody, given the fact that its stock price went from like 1650 a share to 10 or 9 in the course of a week, which again, even for Snapchat is pretty Snapchaty. I just like weirdly don't want to give up on them. I don't know why. it's because they just they they've had a conviction since before they were in public and they've had

this belief that they were right and they've been kind of right and kind of wrong and they've stuck to it and points for that I mean do you recall them while you when they went public and they offered shares that had zero votes per share like that was such an aggressive thing to do and we all made fun of them and then they just didn't care you know they're like off in the corner doing their own thing you hope for the weird kid you know yeah yeah yeah yeah you really That's exactly it. They just seem kind of nice. Talk about what, let's briefly, we don't have to go in depth, but there are other big tech earnings coming up.

What are you looking for? I know we're going to see meta, right? And Apple. So I think each of the major tech companies is going to be interesting this week. We should see, I think, all five of the American big tech companies report. And what's kind of amazing is each one of them has an ads business. the Apple App Store advertising business is huge. Amazon's ad business does, I think, like tens of billions of dollars a year in revenue.

Microsoft has Bing and search tech that's going to power Netflix's new ad-supported tier, as mentioned earlier. Meta, of course, is ads. And then Google has ads on networks, search, and its own YouTube properties. So essentially, the ad warning from Snap is my question mark for each of these companies. What will show up in that revenue line item? And then, of course, Molly, we're going to learn enterprise software health for Microsoft, Cloud Health from Amazon, you know, general search traffic from Google. And we'll get lots of other kind of like details.

But there is an ad theme to this entire week's earnings. And Snap really did set the tone for it. So you hope for people that work there that Snap is the outlier. Definitely do. Otherwise, it's going to be yet another ugly week. Just put it all down. Put it, just back away from the 401K. Oh, I haven't checked my Fidelity account or my Vanguard account in some time.

time. No one wants to know. Yeah. We're also, I just look this up while we're talking, going to get Spotify and Shopify, which I think could be pretty interesting as well. Just as a side note. Like what's happening with shopping and what is going on at Spotify? Well, Shopify and big commerce are the two major kind of like SMB focused econ platforms. One's headless, one isn't. And so there's kind of a distinction there. So I'm tracking those two companies to see which model works out better. long term. But I really feel like the emphasis on those companies has come off because we're no longer seeing this enormous expansion in e-commerce growth. In fact, going back to the big five earnings,

you know, if Amazon and Shopify don't put up at least respectable numbers, does that mean that e-com is kind of hosed for the rest of the year? And if so, what startups are impacted? A lot of people were working in logistics, shipping, and they were hot as hell 12 months ago. But if their market's slowing, what kind of growth numbers can you actually put up? I think more about just the startups. So I try to bring the big tech back down. But I'm so high excited for this week. And I know it makes me a huge nerd. But like we're going to learn so much, Molly.

It's going to be so intriguing to kind of get all this data and parse it and kind of figure out where we actually sit. Because the economy is so strange these days. It really is. Speaking of nerd, what is headless? One headless, one not. Yeah. So like a headless CMS would be a content management system like WordPress, but with no graphics on top of it. So it's just like that holds the data.

and then you build the UI on top. And so Big Commerce is more of an agnostic platform where you bring in other stuff you want to use, payments, et cetera. Whereas on Shopify, they have shop pay and more in-house stuff. And so Shopify's grown much more quickly because essentially payments are a big revenue driver. But I've spent a lot of time talking to Brent over at Big Commerce and he thinks that his model will work better, longer term.

So it'll be fun to see when that kind of shakes out this year. Interesting. All right. We are probably going to talk a little more about the environment for investing. But before that, what do you like to do some crypto drama? With the caveat that we'll do our best, yes. Before we get into the ad, everybody, it makes our team so happy to see our partners celebrate big wins. And I'm thrilled to hear about the huge funding round our partner, O'Doo, just had. Really great stuff from Julian and the team over there, especially in this crazy venture market. So congratulations. And speaking of the market, right now being capital efficient is more important than ever and one easy way to cut costs is to run all your SaaS apps on one platform so please check out Odu's suite of business apps

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for $1,000 off. That is, once again, od-o-o-com slash twist. This actually was just a fascinating thing that broke last week. Coinbase is now home to arguably the first crypto insider trading scandal of its kind. According to an SEC press release that dropped actually Thursday, an ex-coinbase product manager and two others were charged with insider trading. A product manager, Ashon Wahi, gave insider tips to his brother, Nikiel and their friends,

Samir Romani. All three were charged with wire fraud conspiracy and wire fraud. the three evidently collected about a million and a half dollars in profits and at least 25 different crypto assets. Are you making that like that is so little? Why did you ruin your whole life over that? Yeah. Like, hand gesture. For those who can't see you. Oh, I'm sorry. I'm on video on, I'm raising my hands in annoyance. Like, if you're going to run a scam and become an international pariah and ruin your life and you do it for like three board ape NFTs worth of value, you're a moron. Like, cheat better at least. Like, you know,

Congress is like gets bought off like a 10K donation from like the oil lobby. And I'm like, how cheap are you guys? Have some self-respect. Sell out for like 10 million, not 10K. At least in the case of Congress, I read this interesting analysis one time by a former spy that was like it's not the amount that matters. It's the ownership, right? Like if you can get them to take 10K, it's a small amount and they don't think it's that big a deal and it's not a huge hurdle to get over. But then you have them.

Then they are compromised forever. And I was like, oh, interesting. In this case, though, it's just like, man, you guys really sold. your entire life's cheap. In plain English, what they did is pretty straightforward, right? Ashon would tell the other two about coins that were about to be listed on Coinbase before they were publicly announced. These guys, then the other two idiots would go by big quantities of said coin and then

dump them when they went live. They were just front running the coin drops. But that's not even the like super interesting part, I think, right? The super interesting part is that the SEC in a separate complaint, said it considered at least nine out of the 25 tokens trading in that scheme to be securities. Yes. That is that that's the bomb in this. The fact that a couple of morons tried to make some money is just a tale of human greed

and perhaps insufficiently stern internal controls at Coinbase. I mean, I've been seeing tweets and Reddit threads about unnatural trading activity before coins are listed on various exchanges since they started to be listed on various exchanges. So like at least the suspicion in the community about people acting poorly has been around for a long time. This is the first thing people have been caught and charged. Cool, good step, but like it of modest importance. If a lot of tokens, Molly, are securities, how much securities fraud has gone on in the last five or 10 years? How many major investing houses, venture capital firms, RIAs, individuals, founders, friends have committed epic amounts of securities fraud either by

accident or by not wanting to know if they were playing in that sandbox. Yeah. I mean, how bonkers would it be? Producer Nick calls it almost like an SNL skit. If these three ding-dongs effectively brought down the entire crypto industry. Because the implications of saying, you know, more than a third of the coins that are being traded on Coinbase just as one example are securities. is like, that's it.

That's sort of game over for the free will in hoodily do. Oh, yeah. Yeah. And a lot more lawsuits all of a sudden one assumes would be enabled, right? If they were just like, yep, nope, we just backed or declared because the SEC has been dodging this question for however many years now. But if the SEC just backed or declared a whole bunch of things, securities, like lawyers just backed up the Brinks trucks, didn't they? Oh, I mean, no, they just bought the gold mine. I mean, forget the truck.

Just go straight to the source in that case. Just mine it yourself. I struggle to see, and I know this is not going to be popular with our friends, but like I really struggle to see how something like ETH on the Ethereum blockchain isn't a security. It's something that I buy in hopes of it appreciating value off the labor of others, aka developers and other stuff, which is the definition of a security. And certainly it is on the blockchain, but does that matter if it's an Excel spreadsheet

or a freaking online decentralized database? If it's a security, it's a security. And I guess I wish we hadn't gotten this far without a set of, the question, and I do blame the government for that. But I also think that there's been a lot of wishful thinking out there and a lot of chest beating that these are not securities, these are something else, when in reality, they're just the same stuff in a different rapper. So grow up.

There have been all of the years of, it's funny because I have Jay Carney on the brain today because I just read, so he's Amazon's head of public affairs and I just read that he's leaving to go to Airbnb. Jay Carney for years was the guy who would go. on TV, would go in front of Congress, would defend, you know, for example, Amazon not paying any taxes, or unionization or whatever it is. And he would say, we're operating within the bounds of the law. If you don't like it, changed the law. Right. And he was one of the few, I think, high-level executives who was extremely blunt in that way. But I don't think it was wishful thinking at all

for these people to continue to insist that, for example, Eath was not a security, because why you're not going to say the opposite if you're making the money. Well, it wasn't wishful thinking. Like, I just think it's 100% in SEC fail. Oh, well. A hundred percent. Like, if you can, money flows downhill, right, to where the opportunity is. Like, what are you going to do, not take the opportunity?

Well, if I was a professional investor, I wouldn't engage in things that may be retroactively considered to be securities trading. And therefore, I wouldn't open myself up to potential litigation. I mean, and Dresen Horowitz just raised a four and a half billion dollar crypto fund. And they've raised billions before. put it to work. Bought and sold tokens with insider information because they're investors on the board of these companies.

And if those are securities, I'm not a lawyer. Isn't that something that's a little bit sketchy by securities rules? And so I think a lot of these people put their greed ahead of their caution. And yes, the government was slow to react. Welcome to government. That doesn't mean if I find a gray area in the law and I shoot somebody because I think I can get away with it. And then it turns out I can't.

Is it my fault or the government's fault? Probably mine. So the wishful thinking was that the government would ever wake up. The wishful thinking was that they were going to be able to essentially buy Congress, I think. The goal was to increase lobbying dollars until they could talk this in enough circles that it would be declared something that it wasn't. Because if you put enough babble around it, why not? But to me, there's securities.

So get ready for regulation. And let's do that soon. So people stop getting ripped off in catastrophes like Celsius and Voyager and on down the chain. Right. On that note, we should probably say that Paul Griewell, Coinbase's chief legal officer, posted a blog post after this securities, the SEC complaint, and said, quote, Coinbase does not list securities, end of story and denied these various claims. Well, that does it then.

Well, salt. There you go. We don't need the SEC anymore. We have Paul Gruel. Thanks, Paul. You really did car need that one. I read that blog post by Coinbase and it was bad. It was one of their worst, I think, pieces of literature.

And I've read a lot of Coinbase stuff over the years. I've talked to Brian once or twice and covered the country. somebody through their IPO and direct listing and so forth. And I mean, you could tell by the tone of that piece that they're worried. And I think they should be. And I think a lot of folks out there. And Coinbase, I actually view as a relatively good actor in the crypto space compared to everyone else. And so I don't think they should even be that concerned, except from a business model perspective. But I think there's a lot of folks out there who should be concerned for other reasons as well. And if that does make the price of your ape, JPEG go down, I don't care. Get a job.

Okay, boomer. Speaking of bad. So bring it on. I know. I love it. It's going to be, I mean, I cannot disagree with Jason here who has been basically saying, like, cue the lawsuits, right? There was the decade of free willing money making. Congrats to everybody who got out in time.

And now is going to be the decade of accountability and accounting. and it is unquestionably going to get ugly. And speaking of bad responses that I think are indicative, actually, of the kind of wishful thinking that you're talking about. There was a really interesting Bloomberg interview with three Aeros Capital founders, Soushu and Kyle Davies, which I am assuming you also read. Yeah, when they were trying to defend the $50 million yacht purchase by saying they had done it a year before, I'm like, that does not help your case.

They're like, these are just the headlines that people. like to run, but actually we had already bought the yacht. With probably customer funds because they were leveraged. Molly African, can we swear on the show? Yeah, hit it. Leveraged to the just like, come on. Can we before we go. That was a really funny swear.

Well, I've been censoring the whole show and I just got tired of it. I thought I'd ask. Can we go back to Jay Carney though? Because he was this Obama era spokesperson, right? I'm so into this story. Everybody just a little. audience alert, this is going to be some journalism insider for a minute, right? Because this is like, yeah.

So he ends up being this Obama era flack, right? And it does a medium job. Somehow becomes a household name because that's what happens to press secretaries. Fine, whatever. Then he goes to Amazon and acts like an anarcho-capitalist in defense of this company, just flinging himself in front of reasonable complaints. Just defending it, just hook, lying, teeth, nails, the whole thing. and just abases himself as this absolute corporate student with absolutely zero backbone, spine,

or ethics. And it just makes me wonder, what were we seen during the Obama era? Was that just his version of himself that was going to get on TV then? Because the man apparently has no ethics. It's pathetic. I would not do that job if you offered me the same amount of money, or more, because I have morals. And I'm not going to defend a corporation like Amazon that literally turns bodies and warehouses into an injury list and tries to stamp out unionization so that way they can pay their engineers slightly more in Seattle. You. And I think the man is just pathetic.

And I think Airbnb should fire him. See, this is what everything that you said, uh-huh. And this is why actually when I read this news say two things. One, the Bloomberg story was like, he's going there. He had some, what was it? It was like he was the subject of some scrutiny. And then it named like two things that he said that weren't very nice, like on Twitter. And I was like, no, I don't think that.

that's actually the subject of the scrutiny. I think it was the, like, defending the thing where they fired that union organizer and kind of raciously called him, was it unintelligible or inarticulate? And he wouldn't be very sympathetic. Classic racist trope. Like, there was that. There was defending all the warehouse injuries. There was constantly going on TV and saying it was not a problem that Amazon paid zero corporate taxes, federal income taxes and saying, like, if you don't. don't like the rules you should change them. There was all of that. And the fact, what I find

actually astonishing is that Airbnb did hire him. Like that actually to me was the big story. It's like, okay, whoa, whoa, whoa, who is Airbnb about to become? That to me was a very big signal that Airbnb itself is starting to be extremely concerned about these conversations that are happening out in the zeit guys. Like, maybe Airbnb is a net negative with respect to housing policy and communities. Yeah. And they went out and got themselves the meanest they could find to counter that. Yeah. I think this is a lot more about Airbnb than it says about Jay Carney or Amazon that he's going there. Right. Yeah. That was my read of it. Yeah. I think I think it's a move based on fair. And given the conversation around Airbnbs that I've seen from consumers and activists,

it makes sense because Airbnbs are now seemingly more annoying and expensive than hotels and you to do the laundry. So I wonder how that model holds up. And I say this as an Airbnb customer and fan. Like I like Airbnb's. My spouse used Airbnb the other week, like literally last week. So I just, I hope this is, I hope we're misreading this, Molly. I hope we have this one wrong. And that Jay Carney has been this moral person merely under the boot of the great Amazon machine. And now he's going to come back to his senses and lead Amazon, sorry, Airbnb into a consulate future. Yeah, for sure. For sure. That's 100% good. happen. And actually, I would argue that to the contrary, everybody should just probably take a closer look at the Obama administration with a clearer eye.

Are you trying to, with respect to its approach to capitalism? Just saying. I mean, I never. Speaking of wishful thinking. Yeah. I just, I never got people who are like, Obama hates business. I'm like, did you watch that administration? And I say this as a capitalist. You know, like, yeah. Yeah. No, but it broke the global economy. Right? These big bankers, no one went to jail. knowing with the gym. That's all you will ever need to know. That and Jay Carney are all you will ever need to know to have an honest assessment of that administration. Oh, okay.

To be clear, though, like compared to, and I'm going to be delicate here with phrasing the last seven years or whatever, I'd take it back. Right. Right.

It's hard to like, it's really, it's a hard compare. It's going to take the fullness of history to be able to say that in a, in a SPAC kind of way like I just did, realistically. but like get real people. No one went to jail up in 2008.

Like I think one person did. Yeah. Because that, because definitely only one person broke the law back. Right. Yeah, because Philly. Yeah, only for sure.

Mortgage applications with crayon was definitely totally legit. It's really important for founders to understand what SOC2 compliance is. Basically, if you're a SaaS company or a services company that stores customer data on the cloud, then you need to be SOC2 verified from a third party to close major customers. It's really simple. If you're not SOC2 compliant, you can't close the big deals. But SOC2 verification is brutal.

The process is tedious, time-consuming, and expensive. But now there's Vanta. Vanta software makes it much easier to get and renew your SOC2. On average, Vanta customers are SOC2 compliant in just two to four weeks. Compare that with three to five months without Vanta. And they partner with over two dozen audit firms who have been trained to file SOC2 reports directly within Vanta. And congratulations to Christina and the Vanta team for raising a $110 million Series B. What an amazing company. I loved it so much. I thought it was such a

great opportunity. I invested in that round. So here is the best part. Vanda's going to give you $1,000 off. I kid you not. They're going to give you $1,000 off at vanta.com slash twist. That's Vanta.com slash TWIST for $1,000 off your sock, too. Anyways, back to legit things like 3AC because those people were totally a love for it. Definitely. Actually, they could benefit from some Jay Carney as a spokesperson instead of speaking for themselves because this interview was remarkable. The founders, among other things, did in fact defend the purchase of the yacht because

it wasn't, they didn't buy it when you think they did. Near as I could tell, the entire interview and the entire defense that these two offered was It's like, we've never seen a downfall before, so there was no reason for us to think that it would happen. And also, everyone was doing it. Which is the thing that all children try, which is, why did you throw a rock at the cat? Well, all my friends did. Turns out, when you're four, you learn that that defense doesn't work. And it also doesn't work in the pages of Bloomberg when you're discussing the loss of billions of dollars of other people's money.

Yeah, billions of dollars. The three AC collapse, of course, was, you may recall, triggered by. the fall of Terra and its sister token Luna. And among the things that they said in this interview was, who could have predicted that these algorithmic stable coins would turn out to be the fiction that they always were? Well, I mean, there's two ways to have an asset backed to a single peg, like the US dollar or something. One is you can have a basket of backing currency or value that is equivalent to the floating value of that token. and the other way is to just make it up

and wave your hands a bunch and claim that you sort it out financial mechanics, which turns out isn't true. So you can either believe in wishful thinking in magic, which is apparently they did or not.

Here's the thing that blows my mind. If I wanted to go out and borrow, let's say I wanted to go buy another house, right? Let's say I need to go out and get a million dollars and buy, I have to show income and, you know, assets and list like my pets probably

and all sorts of stuff. And it would be a struggle to get it because, you know, people would have what really vet me. They would want to make sure that I'm stable. And these jokers got billions of dollars. I'm starting to wonder that there may be a lack of due diligence in the crypto world. Stop it.

I just, I want to float it as a possibility. Hmm. Let me think about it. Yeah, take your time. Nah. Nah. Totally legit. To be fair, they speak in very financial terms, right?

They've got all the, like, the lingo down. But every, but, but what this unwinded. and the contagion seemed to suggest to me is that it wasn't just that there was a lack of due diligence, it's that it was a coven, if you will, a circle, a sorcerer's circle of wishful thinking.

Because these companies appear to have all been each other's customers, lenders, and borrowers. It's a circle. Yes, absolutely. Where everybody believes in the same outcome. A circle of mutual gratification.

Yeah, yeah, that, yeah. I'm just, I'm realizing now that I'm a, I recently went from me to IC to back to me a manager. Individual contributor. Yeah, well, I was that. And it was great. Now I'm in charge of a team. So I have to be, um, I should probably clean out the rest of this.

I'm going to be slightly politer. Hey, did you see the news with Voyager and FtX from Friday and this morning? No. So Voyager had exposure to 3AC. They are in bankruptcy, FTX, which is a crypto exchange owned by Sam Bankman-Fried, sent them essentially an offer on Friday, that would be the mechanics of a partial bailout for customers, essentially. This morning, Voyager responded saying, go screw yourself, essentially.

We think your offer sucks. And it says in the reason it's like, because some people have said that FTCS is getting a good deal because they are both our customer, our competitor, and our like investor. And I'm like, ah, how are you guys all this intermingle? Didn't you think there was some risks to all holding on to the same plank? I mean, clearly not. They all believe, and you can sort of see this in the way that crypto people talk. They all believe that the key to this is community.

And so if you have enough, I mean, you can sort of see how it would all start to go sideways, right? It's a community based on trust. We have enabled trust technologically with the blockchain. And we have some transparency, but increasingly less, the more financialized these products get. And as long as everyone believes. like literally that's what it all comes down to. As long as everyone believes that Luna has value, then Tara will be okay.

So it makes perfect sense as an evolution that they would all be each other's customers and lenders and investors because they're the believers. Yeah. But pretty soon you have this circle of believers and no one else. And it's like as soon as one crack appears in the dam,

that's it. the water comes rushing through. Well, you can't have at the same time community, trust, and toxic positivity. You can have any two. You can have community and trust, but not toxic positivity. You can have toxic positivity and trust, but not community, et cetera. And they want to have all three at the same time. And this whole, we are going to make it, you know, who did the cover song of that?

Zuckerberg's sister? It was terrible. Randy Zuckerberg. Oh, yeah. Proof that money doesn't buy taste. But the toxic positivity. is, I think something that must be addressed by the crypto-vaithful because it's killing them. Define toxic positivity.

You mean just the relentless boosterism combined with the extremely negative? Like, the toxic part is the half-fund staying poor, right? Toxic positivity to me is the absolute demand that everyone is sunny all the time regardless of what's going on. Right, right, right. And so then nobody ever hears a hard truth. Yeah, no one can hear the hard truth because you're not supposed to bring it up. You're supposed to be positive.

So you can have community and trust, but not bad. Or you can have toxic positivity and either community or trust, but you can't have all three. It just doesn't work. And I think that sobriety and some good old fashioned pessimism would do crypto well. And I say that as someone who's been covering this since 2013, I think crypto's kind of cool. I thought it was neat back then. I still do. But I'm very bored with the last 18 months of play to earn and NFTs and stuff because it's just, it's the,

creation of, you know, like dynastore vending machines inside the internet. I don't care. Mm-hmm. Yeah. I love this phrase toxic positivity, because there was the Bitcoin toxicity with some backers actually explicitly encouraged, which was pile on, mob on to anybody who is opposed to this. And at the end of the day, it's like, I don't know why this has to be discovered a new over and over and over and over, but truth creates trust. Yep. pretty good t-shirt. Also, trust is not something you can spin up like you can't a Discord server, right? Nor can you bully it into existence.

No. And especially you can't just claim that you didn't understand counterparty risk and the fact that things go down sometimes as an excuse for why you spent everyone's money and lost it. Like, if you over-leave for yourself, well, at least, why can't people just own up to and say, you know what? We took a gamble. It didn't pay off. We're really sorry. Like, I would kind of respect that, because at least that would be honest, but trying to find somebody that it's not their fault. I mean, like, if you crash your car, because you weren't looking at the road, don't blame the markings on the sidewalk, you know?

Right. For example, let me offer an example of the kind of statements that do not help from co-founder's shoe. We were never seen in any clubs spending lots of money. We were never seen, you know, kind of driving Ferraris and Lamborghinis around. this kind of smearing of us, I feel, is just from a classic playbook of, you know, when this stuff happens, when funds blow up, then, you know, these are the kind of headlines that people like to play. This was in relation to the yacht. They claimed that actually they were not living high on the hog at all. They only own two homes. His family only has two homes in Singapore, which isn't that like one of the most expensive markets in the world? I only own two houses in Pacific Heights of San Francisco. I'm hardly leaving high on the hog. I'm basically paycheck to paycheck here. Just say, everybody. involved here knew it was a risk. Things got out of hand. Yes. Right? Like, we're sorry, but of course we bought yachts. Yeah, of course. I mean, but it was a year ago, Bali. Calmed out. It was a year ago. What am I so stressed about? I would like to now talk about decks that I would

like to see. I would like to request that if someone has a copy of the deck related to the story we're about to bring up next, that they please send it to me. Because those of us who have been following Bitcoin for a really long time are well aware of this. poor Scottish gentleman, James Howell, who accidentally sent what is now, even at today's prices, $181 million worth of Bitcoin to the dump almost a decade ago, the actual dump. But he's never given up, right? Like, he's been begging for years for the city to let him excavate the dump and try to go and find this hard drive full of Bitcoin.

This is, I don't think, maybe he's not Scottish. He's Welsh. He's from the city of Newport in southern Wales, and he threw this out. And so now, though, and this is amazing, according to Business Insider, he is trying to raise $11 million from the town, but has support from venture capital. This is the deck part, to spin up this banana's plan to use like autonomous technology. and AI, guarded by Boston Dynamics robot dogs, to create a giant conveyor belt to sort the entire landfill's worth of trash and recover the Bitcoin and presumably sell the film rates.

So why do we think the hard drive is still okay? That's my question with this. Is it a super strong hard drive that isn't going to get rained on and hurt? Like, I mean, it's been in there for a while. Because I've heard this story over the years, and there's always this sad picture of him, like, staring out at the dump, you know, with like sad eyes. And you want to give him a hug. But like, James, maybe it's gone, you know? They talked to some experts.

Among the people he has brought on as a part of this team are the people who recovered the data from the black box of the Columbia shuttle. Evidently, according to his experts, as long as the platter in the hard disk isn't quite. cracked, there's an 80 to 90% chance the data will be retrievable. So there's a 0% chance if it's cracked, which we don't know. But if it isn't cracked, there's also a chance it won't work. And he wants $11 million to buy Boston Dynamics dogs. I mean, again, I feel for the guy. He threw out a life-changing amount of money.

And the problem is, as Bitcoin has appreciated, he's felt dumber, but he shouldn't because he would have sold it at a much lower price. Like, I covered Bitcoin back in 2012-13s, and it was like $100 a Bitcoin. And I wrote this headline, like, you know, Bitcoin crashes to like 50. And people were like, you know, don't you wish you would just bought a bunch of Bitcoin at 50, then you'd be, you know, rich for life. I would have sold it at 125 or I would have sold it at 1,000 or, you know, I would have like paid off my student debt earlier.

And because that's what you do with assets that appreciate, I don't know. James should go easy on himself and let it go. hugs. Yeah. Let it go, man. Yeah, it's kind of sad. I mean, it's not sad in the pathetic way. I get it.

It must keep him up at night still, but I don't think this is going to solve it. I don't think if it works, you're right. It's a movie. He's a genius. But like, what's the actual chance that this bears out the way he wants? The city is having none of it. They won't even have a meeting with him. They're like, oh, you'd like to release all of the stored methane of the landfill and

God knows what other ecological disaster by digging this thing up. Like, nope. Like, it's going to spill. toxic chemicals. You know, I mean, they're just straight up like, absolutely not. Well, climate change, pollution, water damage, ecological disruption, etc. Or magic internet money. It's a really compelling argument, I think. Oh, man. Alex, as always, it is such an absolute treat to have you on. It's fun to just like dive into that good old journalism cynicism. Well, I, you know, I don't get I mostly edit and manage these days.

So I don't get, rarely. It's not fun at all. To just pop off. You know what I made? And so coming out here is like, let's just have some fun. And let's get some emails for some folks who are annoyed with us. Let's do it. If you are annoyed at Molly or myself, send your emails to Jason at launch.com.

There we go. And he will get right back to you. He will. That's true. He will definitely be like, I can't believe they said those inflammatory things on the show. Yeah. Because famously, Jason. very mild mannered.

Yeah. Oh, yeah. Modicum of manners. Yes. Absolutely. And moderation. And he is fueled by hate mail. It's like Monsters Inc.

Up in here. And I don't bring up Solana once. So I get five points. All right. Well, you're going to have to come back next week then. Let's do it. Alex, thanks a lot. Stay tuned, everybody.

The week is going to go on and on. We also have DeBosa coming up later this week as a fill in while Jason is rafting. And you never know, Jason just or Alex might just. have to pop on. Nick has my cell phone number, so. Pop on to pop off again, you just never know.