This Week in Startups - Peter Thiel departs FB board, John Foley steps down at Peloton, Should Amazon spin off AWS? + Startup of the Day: Island | E1381

Episode Date: February 9, 2022

Molly and Jason cover Peter Thiel stepping down from FB’s board and look back at the board's evolution over time (2:07). Next, we cover Joe Lonsdale’s op-ed in the Wall Street Journal, where he argues AWS should be split off from Amazon (27:41). We debate if valuations would increase if separated. Then, Peloton Founder & CEO John Foley is stepping down as the firm lays off 2800 people (40:30). We debate if they angling for an acquisition or making a turnaround attempt. To wrap, we discuss our startup of the day, Island, which is a browser for enterprise with a big valuation for a pre-product company (50:11). 00:00 Jason and Molly tee up today’s topics 02:07 Peter Thiel is stepping down from Meta’s board after almost 17 years of service 11:48 Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST 13:12 Thiel maximizing political influence, Marc Andreessen’s shadow advice to Zuckerberg, other $FB board squabbles 24:32 Marlow - Get 15% off your individual or team memberships at https://getmarlow.com/twist. 25:47 Reed Hastings testy email to Peter Thiel in 2016 (while they were both $FB board members) 27:41 Joe Lonsdale’s case for splitting AWS away from Amazon’s retail business 39:08 Indochino - Get $50 off any purchase of $399 or more by using code TWIST at checkout https://indochino.com 40:30 Peloton CEO John Foley steps down as the company lays off ~2800 employees (20% of its corporate workforce) 50:11 Startup of the Day: Island.io — enterprise browsers in the cloud: valuation vs. traction, founder, market, and more FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood

Hey, everybody, hey everybody. We have a jam-packed, all-news show for you today. We're going to talk about Peter Thiel stepping down from Facebook's board. Does it mean that Facebook is even weaker? And what is Peter going to do next? And speaking of Facebook's board, we look at an exchange from 2016. And apparently everybody forgot about between Mark Andreessen and Mark Zuckerberg. Then we covered Joe Lonsdale's op-ed in the Wall Street Journal,

where he claims AWS should be split off from Amazon Store. Would you like these two entities more if they were split up? Would that be better for competition? We're going to double click on that and we've got some interesting takes on it. And then obviously it wouldn't be a day in 2022 if we weren't talking about either Peloton or Spotify. In this case, it's Peloton, the continued chaos, the CEO stepping down. They lit off 2,800 people, which is about 20% of these surprisingly large workforce. And is this being they're angling for an acquisition or just cleaning up the balance sheet?

It's a turnaround attempt. We'll get into that. And of course, it is this weekend startup. So we have a startup of the day, a very interesting browser software with a very big valuation for a pre-revenue company. We're going to cover it all and more today.

It's going to be a great show. Stick with us. This weekend startups is brought to you by Squarespace. Turn your idea into a new website. Go to Squarespace.com slash twist for a free trial. When you're ready to launch, use offer code Twist to save 10% off your

first purchase of a website or domain. Marlowe. Every founder should have a coach to help them become more effective at managing and leading their teams. Get 15% off your coaching membership at getmarlo.com slash twist. And Indochino makes custom fitted suits, shirts, and casual wear at affordable prices. Shop for your next best look or book a virtual style consultation at Indochino.com dot com. Right now, you can get $50 off any purchase of $399 or more by using code Twist at checkout. Peter Thiel is stepping down from Mehta's board. That's also the company formerly known as Facebook. After almost 17 years of service yesterday, Meta published a press release announcing Teal will be retiring from Meta's board at their 22 annual shareholder meeting. He's been on the board since April

2005. I'm going to guess he was the first board member. He obviously was the first investor. Meta stock was down another 2% in early trading. I don't think related to this at all. Till gave the following quote in the release, it has been a privilege to work with one of the great entrepreneurs of our time, Mark Zuckerberg's intelligence, energy, and conscientiousness are tremendous. Okay. His talents will serve meta well as he leads the company into a new era. I can translate those in a minute. That's quote It's on deal.

Peter has been a valuable member of our board and I'm deeply grateful for everything he has done for our company from believing in us when fewer others would to teaching me so many lessons

about business economics in the world. Uh-oh. Peter is truly an original thinker who you can bring your hardest problems and get unique suggestions. That's actually very true.

He has served on our board for almost two decades and we've always known that at some point he would devote his time to other interests. I'm grateful. he's served on our board for as long as he has, and I wish him all the best in the journey ahead.

Some folks who are left on the board, Mark and Drison, surprisingly, after a bunch of damaging tweets and behaviors from him, we can talk about that in a minute. I can't believe Mark's still on the board. I mean, I thought he would have got kicked off the board by now. Dropbox CEO, Drew Houston, who's amazing, and he was joined in 2020. That's a great ad to your board. DoorDash CEO, Tony Shue, who joined this month, another great person. Peggy Alfred, EVP of Global Sales at PayPal,

and of course, Zuck and Cheryl. Zuck, of course, has super duper crazy voting shares. So the board is a formality at best. He can do whatever he wants for better or worse. So the board didn't mention they were replacing T.L. Theories on why T.L. is leaving, Molly? Do you have any? Well, I mean, this is where it gets interesting.

The New York Times reported Mr. Tiel 54 wants to focus on influencing November's mid-term. election said a person with knowledge of Mr. Teal's thinking who declined to be identified. Mr. Teal sees the midterms as crucial to changing the direction of this country, this person said, and he is backing candidates who support the agenda of former President Donald J. Trump last year, Teal gave Blake Masters of Arizona and J.D. Vance of Ohio, $10 million each for their Senate campaigns. Now, there was a really interesting, I think I put this tweet in our chat. I'll try to find it, but the tech editor for the LA Times said a couple things about this. One was that Teal stepping off of Facebook's board suggests that he thinks that Facebook's influence and ability to influence elections in particular is done.

Wait, who said that? Or Jeff Berkovichi, Berkovici, he's the check editor of the LA Times. Great, great insights. So two things, right. One is that he might think like, okay, my ability to. influence this platform in the direction that I wanted to go may be waning and or that he just wants to have sort of free reign to go pretty far right is how it's being characterized in the news, is to basically put his support behind a lot of pretty far right politicians. The other thing

that's interesting is that back in October, J.D. Vance and Blake Masters, the two that got $10 million each from Peter Thiel, co-wrote an opinion piece for the New York Post titled we must stop Facebook from election meddling. And then they specifically call out Mark Zuckerberg for donating $420 million to this nonpartisan charity to help administer the election. And they claim that Zuckerberg paid to, quote, by the presidency for Joe Biden. Okay, this is very weird. I did not know Zuckerberg donated $420 million to a non-partisan charity to administer the election. 420 is an interesting number.

very strange. I mean, my God. People pick that 14 year old boys running the... Exactly. Running the world. Okay, so 419 maybe. Maybe just below 420.

So I don't know for being troll with that number by Zach, if not well played. But I want to know if that nonpartisan charity is in fact nonpartisan, or are they doing things in the election that would get more people to vote? Because my understanding is, the more people who vote, the worse it is for the right

at the current time, because more people voting the country's demographics are shifting more towards what would be people traditionally consider it to be democratic. But I can tell you from this, what's happening probably is, you know, based on my, I'm not going to say inside information. I don't have inside information. My inside vibe check. Is that what the kids are saying now, vibe check? So on the inside vibe check, I will say that cohort of individuals in that circle are getting very activated in politics in their. their 50s. I think when we saw Peter Thiel give his talk at the Republican National Convention,

the RNC, which was quite interesting. Some might say awkward or inspiring, but he was pretty fired up, right? And I would not be surprised that this doesn't have to do with 2022. I think this has to do with 2024. Oh, for sure. When I believe T.L. will play a very strategic role in getting either Trump or, you know, DeSantis. I think DeSantis is more likely if Trump doesn't do it. But I think you will see a doubling down by Peter Thiel. And I think Peter will become the Secretary of State or is it Treasury? What is the Treasury's top Treasury position called?

Gosh. Treasury Secretary or Secretary of State. I think he will be in the 2024 administration. And what this is about is creating enough distance, Molly. so that when you see him in 2023 getting super active, forget about 2022, he's already acting. But when you see that hyperactivity, where he's really, you know,

maybe playing the Steve Bannon, if you will, in terms of strategy, and then I think you will see a cabinet position for Peter Thiel. Peter Thiel, I will say, although I know people, you know, didn't like his support of Trump, he is very smart. And I think in a certain position,

he might actually make good decisions. But you have to also understand that he sees himself as a contrarian and very much likes to take polarizing crazy positions or what most people would consider like crazy extreme positions. That works very well in investing

and in startup land. Will that work well geopolitically? Will it work well in terms of the treasury? If you told me right now Peter Till could be running the treasury, I'd be like,

probably would run better. Secretary of State, I'd be a little concerned. But he wouldn't start wars. But I think that this is the inevitability. I don't think Peter Till will ever be run for president. I think it's inevitable. He'll be in the cabinet.

And so you're... Are you okay, Molly? Assuming that his candidate wins in 20... Did you just fall over in your chair? She's like, oh, my God. You're being really diplomatic here. I don't have a single nice thing to say about Peter Thiel. And I think that the fact that he is going to devote more of his money and time to

extremely far-right candidates, many of whom I think there was a piece in the Guardian the other day that said that fully a third of the... the far-right Republicans who are being fielded of the hundred far-right candidates that are being fielded across the United States, at least a third of them, have explicit connections to white supremacists, anti-government extremists and members of the far-right proud boys. Yeah. You know, I mean, look, Peter Thiel invented cancel culture. Like, the idea, like, they're sort of saying, like, he's going to go and devote all his

money to, like, these free speech platforms. It's like, which is breathtaking. Absolutely breathtaking. And it's a thought. So there's that. I mean, I think that the politics that he may be leaving to devote his time for are among the most dangerous in America right now. However, you're probably right that that's the plan. Right.

I'm reading that. Look, I'm reading that Ray Dalio book right now that everyone's so into. I started it, yeah. And he quite specifically is like all throughout the cycles of history, the people who have the most money have aligned themselves and colluded with the politicians who can preserve their influence and riches. So I think you have a couple of things happening. One, Peter Thiel's... They collaborated. Well, I mean colluded, not in the legal sense, but in the quite literal sense of the word.

Like, they work together, right? Yeah. I mean... Yes, the darkest version of it is collusion, yes. So you have Peter Thiel quite clearly saying, well, collude used to just mean work together, right, until it became a legal term. So... Yeah. Okay.

Collaborated, sure. I'll strike that and replace it with collaborating. No, no. I mean, it colluding might actually be more accurate. Well, I mean, in today's America, where you can donate... however much you want if you're a business and like and there's dark money pools. These super PACs are crazy, right? That's how we gave the 10 million to those, you know, folks, the Arizona and then who's the other

kid, the kid who wrote Hillbilly Ellogy. If you can give 10 million dollars to a single candidate to get them to like do whatever you want and then put them into office, like that's pretty, you know. Probably we should not allow that. Maybe we should rethink that like and give a minute. We should definitely rethink that. Yeah, maybe like level the playing field like what's the right number? Like the max you could give is a that.

thousand dollars and we get rid of these packs. Yeah. Just think these packs seem really weird. I think they do. It's 2020 and it's a great time for you to start your own online business or a blog. And Squarespace is the answer. From websites and online stores to marketing tools and analytics, Squarespace is the all-in-one platform for you to build a beautiful online presence and run your business.

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And thanks so much for supporting this week in startups. We really do appreciate it. But anyway, I think he has clearly decided that there's a way that he can go to maximize his own profit making, you know, to influence government to his view of the world. And it is probably at this point counterproductive for him to be on the board of Facebook. Yeah, it's definitely counterproductive. And achieve those goals. The white supremacy thing's interesting. I had Max Chaffkin, I believe is how he pronounced his name.

He wrote that Peter Thiel book. And he was, and I basically, I don't know. People should go back and listen to that episode 1305, because I think it'll be very interesting. He is very, he had like two claims in it that were, he kept insinuating like young boys, Peter hiring young boys, and I kind of confronted him on that.

Like, are you saying? Like, you know, and he's like, no, it's just an observation. I was like, okay. Made that observation like many times in the book. And then he has this thing in the book where he keeps putting Peter Thiel one step away from white supremacy. and I'm like, do you think Peter Taylor's white supremacy is like, well, I'm just saying he's like next to it. I'm like, okay, is it six degrees of separation next to it where any of us would be next to it or is it like he's next to it and too close to it?

And I think a lot of the folks who were part of that alt-right. That alt-right was like this very weird space of weirdos who were grifters trying to get money. then a bunch of white supremacists, you know, on the far right of it. And then in between like a bunch of dopey provocateurs, right? So you have like Milo Yianopoulos going to these things. And then that guy Richard Spencer shows up. And then all of a sudden they're at some party and people are throwing up, you know, hell Hitler signs.

Like it's like a very dangerous area of weird people. And then people trying to get their Patreon money or subscriptions or fame or whatever. And it's all gross and disgusting. And, you know, he makes all these claims that Peter O'T.L. is supporting it or in somehow adjacent to it. I don't know if I buy that. But I do think anybody who's in the Republican Party now needs to really disavow that stuff. Well, I'll tell you what. He's getting closer every day.

It feels like it's getting closer and closer. And I think that's the thing that's very troubling about all this to me is that, you know, you add the violence of, you know, these extreme groups on either side. Either group could get violent. And we have seen violence on either group, but it does seem like the violence is trending a lot more towards that right side at this moment in history. I mean, in the 60s, it might have been more on the left. But now the right has a serious problem of violence, guns, white supremacists being so close, these proud boys or whatever, the oathkeepers, like all these weird organizations seem to have guns and violence and paramilitary cosplay. And like, you can diminish them by saying, hey, you know, they may be coordinating online. They may be associated with Facebook, but they're just dopes.

But you know what? Dopes with guns is a pretty volatile combination. So you're going to be careful. You know, you could claim the Oklahoma City guys who blew up the federal building were dopes as well. They were dope who killed a lot of children who were at a nursery, you know, daycare center. And they had extreme views. So people with extreme views can do extremely bad things, even if they're extremely dumb. And that's what I hope Peter Thiel kind of disavows is like that whole group.

No, he's going wholeheartedly. He's literally running right toward that. I don't know if he's running towards it or if it's just. Where's he putting his money? I mean, I don't think J.D. Vance is a white supremacist. I don't think like Masters is either. J.D. Vance has trended farther and farther and farther and farther right with every single passing day. You know?

And when you look at like who is being courted to be on these quote unquote free speech platforms. Hmm. Not jobs. You know, where is the money going? This is the thing where I think, you know, anybody who's on that side, I am an independent, critical thinker and an independent. Don't call me a liberal. Don't call me a Republican.

The best is independent critical thinker, maybe a libertarian at times. I don't know. But I'm not picking either side here. I just think I don't like the violence involved on either side. And there was one side that seems to be courting very dangerous violent tendencies. And I think Peter Till is very close to those people. So my message to Peter or anybody like that is just like, you got to disavow this crazy violent stuff, too dangerous.

And I think for Facebook, I wouldn't be surprised if Zuckerberg said, hey, not a bad time for you to leave. You're right. I could use less heat here. And then with Mark and Dresen, remember Mark and Dresen, and I don't know, unless my producers to check this, there was the whole thing where Mark was trying to give Zuckerberg the ability to take two years off and still be in control

and have super voting shares in case he wanted to run for Senator or something was the buzz in Silicon Valley that he might want to take some time off at some point. And there was this SEC investigation. So many, my producers can pull this up and we'll pull the story up. But you had Mark and Driesen coaching Zuckerberg on how to negotiate with other members of the board that was deciding his superpowers, basically. I can't believe in Driesen staying on the board after this. But here's the story. Mark and Driesen's text messages to Facebook, CEO Mark Zuckerberg. are filled with smiley faces,

and odd turns of phrase, but that's not what some people find objection about the text, which have come to light in a lawsuit over Facebook's plan to reclassify its stock structure and create a new class of non-voting shares, Facebook shareholders,

suing the company, alleged that injuries, an independent and independent representing the company's stockholders, ha-ha, surreptitiously coached Stockerberg through a multi-week negotiation process to win board approval of the stock change,

something the stockholds argue is a major conflict of interest, you think? The text messages have changed. by the lawsuit in the lawsuit, show that Indieson and Zuckerberg kept a constant behind-the-scenes dialogue going while negotiations took place. Indreason was an early investor in Facebook. Our feedback is entirely intended to protect you and the company, Indreason reassured Zuckerberg

in one message. So this is what happens, right? Like you want to be on the side of your guy? I've talked about that, right? Here's a closer look at the trove of messages. The day before Zuckerberg was to negotiate with the board's special three-person committee, of which Indreason himself was a member in March. Andresen asked Zuckerberg if you'd like to talk tonight or tomorrow before 3.30.

During the following day of negotiations between Zuckerberg and the committee, Andreessen, Texas, Zach, live feedback on how to better sway the committee's thinking. This line of argument is not helping smiley face, and Drason wrote, Zuckerberg at one point, quote, they are both genuinely trying to get to the right answer, Andreessen added, referring to his two fellow committee members. This is the key topic. Wait, so why is this a conflict of interest? Because he was also on the committee. I'm confused. He's on the committee. Oh, he's on the committee.

On the committee. and then he's coaching Zuckerberg without the other two people on the committee on how to win them over. Right, right. Is this illegal? But, you know, there's a whole concept in Delaware law and other law that you have this fiduciary as a board member to all of the shareholders in the company. Is this in the best interest of all shareholders? Seems like the big problem is having Andresen on the committee. Correct.

And then here we go. He writes in all caps. And Drason writes in all caps. Now we're cooking with gas. And then he says, I'll push them on. having a longer period, at least for Cheryl and Chris. Don't know if that's helpful, but the negotiations centered around Zuckerberg to sell off his highly valued Class B shares so he could fund a charity charity work while still maintaining

his majority voting power of Facebook. If the special committee found the proposal undermined Facebook shareholders, Zuckerberg would have to find a different way to fund his philanthropy. Bloomberg first report of the case, and Insider apparently rehashed it. So you get the idea. It was a little gnarly, and I don't know where that lawsuit ever wound up. So that's something our producer should go take a look at. Usually these things get settled with a payoff for the people who are upset,

and this is back in 2016. But then there was also the famous tweet where Mark and Driesen talked about colonialism and how colonialism was good, which is kind of like this Silicon Valley weird thinking. I think that was influenced by some historical scholars, I think, including a Sapiens author maybe. where it was like anytime a more advanced society conquered a less advanced society, net net, aside from the conquest and the death and the rape and the pillaging, things might have gotten incrementally better because you got some technology out of it,

which is a really techno, you know, extreme as position. Technocratic way to look at it, yes. Yeah. It's a little, let's you say, palace. And that is denying the world's poorest free partial internet connectivity, when today they have none for ideological reasons to me strikes me as morally wrong.

Another in a long line of economically suicidal decisions made by the Indian government against its own citizens, he added. Ouch, that was 2016. Yeah. Indian critics of the program then jumped to the fray arguing arguments by prominent members of India's venture capital and tech communities

that free basics recalled imperialism and the East Indian company and was a modern twist to what essentially used to be the white man's burden. So essentially, hey, we're bringing you tea, we're bringing your railroads, whatever technology we're bringing you. Zuckerberg's idea was, I'm going to bring you free internet. Like very low-speed internet.

Oh, by the way, you get to use Facebook as part of that. It just felt imperialistic. I understand how people in India feel about that. Like, hey, some white guy shows up. It's like, hey. And Theresa responded with, anti-colonialism has been economically catastrophic for the Indian people for decades, why stop now?

That was the tweet. No wonder he blocks everybody. Okay. I mean, you'll block me again for even bringing this up because, you know, this is like a, and this is why I believe this is when he turned off his Twitter and stopped blogging, was he just got a little too candid there. Like, I mean, even if the anti-colonialism, I'm just even trying to give him the most generous benefit of the doubt here.

I don't even know where the rails are right now. Let's say there was theoretically. Some people felt like we shouldn't accept any help from Western places because of colonialism. And it did in fact lead to a worse condition because somebody was offering medicine. I think you have to cite an instance of that and maybe it's not your place. I don't know. Or it's really just dumb. You're a board member of a comp.

I'll just say this was like a really boneheaded, dumb move by Mark. and who's an otherwise very smart person, obviously. Brilliant might be a more accurate description of Mark, like literally a brilliant person. But sometimes brilliant people can think themselves into a thought that might be not something they should put in a tweet. Does that make sense? Mm-hmm.

I think that's something I'm saying. Not just sometimes. Not just sometimes. Yeah, it could be like pretty regularly. And so I think he, yeah, that was incredibly damaging for Facebook. Because I think it did have ramifications. That's when Mark just started to zip it. But now he's back in doing memes.

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direct with each other. I have our board gaudy feedback session tomorrow. I don't know what that means. I see our board being about great judgment, particularly an unlikely disaster where we have to pick New Peters. I'm so mystified. by your endorsement of Trump for our president that, for me, it moves from different judgment to bad judgment. Some diversity in views is healthy, but catastrophically bad judgment in a view view is not what anyone wants in a fellow board member. I continue to experience you as very honest, well-intentioned, and certainly very independent, no response. I was right. I just didn't say the stuff behind your back. Read. I think didn't want to say. I didn't want to say. I think Reid wrote that, you know,

in a little bit of a... Yes. I mean, to sum up... By the way, the subject line. To TLDR, I think that a lot of behind the scenes politics has almost certainly contributed to this decision. In some ways, it might make Facebook's life easier. But the fact is, like, the Facebook board is sort of the most meaningless of trinkets because, you know, Zuckerberg and Cheryl control the whole thing. Zuck does.

Yeah. Yeah. I think actually. Yeah. Yeah. So there we go. She has soft power and influence, but I think probably has. probably has waned as Zuckerberg consolidated power with a lot of these moves with the super voting

shows, etc. Did you know the, do you happen to read the subject of the Reed Hastings to Peter Thiel 2016, you know? Straightforward. Straightforward as him, he said. You're making a bad decision. And I don't want any part of it. All right. So I think enough of that. Let's go to this Joe Lonsdale story. Maybe you could kick it off. So this is interesting. An opinion piece in the Wall Street Journal today, titled The Case for Splitting Amazon into, in which Joe Lonsdale, a venture capitalist, who, at the bottom, they're like, has invested in several e-commerce companies, argues that AWS and Amazon.com should be separated into different entities. The argument basically is that AWS is subsidizing Amazon.com, the e-commerce business, which is really unquestionably true, right? The Amazon,

the, the e-commerce business is break-even at best, and AWS just prints money. And then this is what I thought was particularly interesting is like when antitrust comes down to consumer price and that's been a hard thing. Consumer harm in the form of higher prices, that's been a hard thing to pin on a lot of big tech companies. But this piece argues that because AWS subsidizes Amazon.com's ecommerce losses, that lets them charge more, including for the prime service. Got it. And here we go. You can actually, I guess Joe Lonsdale does. the math here, Amazon Q4 revenue was 137 billion.

Amazon Q4 operating income 3.5 billion. Okay. AWS, they do break out now. Q4 revenue 118 billion. So, you know, approximately just over 10% of their total revenue. They're operating income 5.3 billion. So if you notice there is a $1.8 billion gap between AWS and Amazon's total operating income. This means, I guess,

that the non-AWS segments of Amazon businesses lost $1.8 billion is what he's saying. Right. So he also notes that the former head of AWS, Andy Jassy, is now CEO. So that means, Andy, if you pick the person from AWS, ADWIS is driving things,

and here's a quote from the op-ed. When artificially low prices drive competitors out of a sector, concerns about predatory pricing arise. I guess that means later in life, could raise the prices, right? In 1993, the Supreme Court ruled that to prove predatory pricing a plaintiff must show that a business priced services below its own and rival's costs and that there was a likelihood of successful recoupment of the lost profits later. Okay, that seems hard to prove here because they could, it seems like, indefinitely run AWS and, I'm sorry, Amazon at

break even, or Amazon the store at break even or slight loss. So there's no indication here that later on, they're going to pop the prices. And then maybe you could take this next section here on how he explains that Amazon does that. Although I would say that a business price service is below its own rivals costs and that there was a likelihood of successful recoupment of the lost profits later, it doesn't necessarily mean that Amazon.com has to end up making a bunch of money in e-commerce. It means essentially that Amazon will make up the difference one way or the other. And in this case, that would be because it makes so much money off of AWS.

Okay. So what he says is Amazon's market share in e-commerce is greater than 40 percent, the next closest competitors Walmart at around 6%, a store that sells everything and is able to price everything below market price, including the logistics of inventory and delivery, has a much greater ability to recoup profits than any stand-alone business. And then his final statement is that Amazon should separate AWS from Amazon.com to create two distinct businesses. If it doesn't, US regulators should consider forcing the move to protect competitive freedom the most surefire way to guarantee that the best ideas

and the lowest sustainable prices win in the end. What do you think? Well, the first thing I think is what are Joe Lonsdale's investments in commerce or cloud computing? Because that would be, to me, the tell here. And did the Wall Street Journal require him to put his competitor? It does, yeah, actually. Hold on.

I have to open it in a different window because I'm in the wrong freaking Google tab. It's okay. I think that's the first thing that comes to mind. Anytime an investor is moving their lips, they're talking about their companies. That's how you, how do you know investors

talking about their companies, their lips are moving. Period. End of story. So if I'm talking, if he's talking, somehow it's going to go back to your investments and talk to your book.

It's a little bit of an, uh, over, I mean, I think that's what I thought was so interesting here is that it really is like calling in a regulatory air strike to protect your businesses. Yes.

I mean, that was, and I just think that that is a sort of a fascinating and, you know, in keeping with this conversation about like competition wins and capitalism is the best and blah, blah, which is sort of like, you know, half of the time, that's exactly what everybody wants to happen. And then the other half of the time when they've invested in wish and deliver, then they want the, look, I mean, the argument about that argument about Amazon from an antitrust perspective is both well articulated. Yes, sure.

And likely true, right? AWS unquestionably subsidizes the e-commerce business to the detriment of others in that space. No doubt about it. Okay. Yeah, I'll go with that. But for a venture capitalist to come and make the argument in this sort of, you know, environment where the best competition can and should win, I found a little interesting. Yeah. So he has a company called Deliver, D-E-L-I-V-E-R-R.

It's an e-commerce fulfillment company, which helps brands do two-day less fulfillments. familiar. Obviously, that's Amazon's business, and he's also in Wish, which everybody knows is a marketplace of like really unique items. And so is he talking his book or does he actually feel this way? It could be both. Could be both. And I think that's probably why they put that his VC firm, EVC, has horses in this race. And it's not the first time that people have pointed to another person and said, well, what about them? What about what they're doing, right? They bought Instagram. They bought YouTube. They bought Android. You know, your constantly can have this finger pointing of, you know, top investors, capital allocators,

and venture capitalists. In this case, consumers are undeniably benefiting from lower costs. So, and then, you know, the e-commerce is not the only way people acquire things. You also have people acquiring things in person. So Walmart, I believe, sells more at the end of the day than Amazon does, because they have not only the 6% e-commerce, they also. have the real world. Right. So Amazon's like over, Amazon's overall footprint in retail is still relatively low, right?

It's the e-commerce where they have this greater than 40%. I mean, it is like, it is very interesting because a huge cloud business is an almost insurmountable moat for competition. The, the, the CAPX,

you know, that goes into, because, you know, servers, everybody should realize this by now, But in case you don't, the cloud means a crap ton of expensive servers in really big buildings with massive energy costs or solar installations. It is unbelievably prohibitive, cost prohibitive for anybody to get into that business.

Serious capbacks. So if you do have that and like a little store attached and the one can pay for the other, that's a pretty big competitive advantage for a pure play e-commerce retailer. It doesn't mean, though, that people don't want to shop somewhere. else. And Amazon is, you know, sure, I'm not sure I completely, I don't know enough to say for sure, but I don't think that Amazon always beats on price, the price of the actual good. For sure, they don't. I don't think that's the case at all. I have learned this lesson because my wife has been like, hey, Demi, you're buying this over here and it's much cheaper in this other place. I'm like, yeah, but one click, one click, prime member, I got it. And she's like, you literally played 50% more than you needed to. And I'm like, but one click, it's coming in an

Amazon box at the smiley face. Like they have boiled this frog. And Amazon keeps raising the price of prime. Like they just raise the price of prime. So you do start to get to. Yeah. So if Amazon is able to charge you more because one click and AWS subsidizes it and they're continuing to raise the price of prime, at some point you actually start to have a question

of like our consumers benefiting. I don't know. It's pretty clear consumers are benefiting from plummeting prices and more convenient delivery. The idea that like somebody can't get something. has gone out the window now. Like, if you look at, I bought Ethernet cables the other day. I was like, wait,

four for $4? I was like, this doesn't make any sense. Like, wait, it's $4 each or $16. And they're like, no, no, no, no. I'm like talking to my screen

trying to figure out how could this possibly be so cheap? Yeah. And just the nature of being able to make a lot of white label products and scale them and sell it to the world is pretty powerful. What I think Lena Khan,

as we talked about in our previous episode, shout out to Kara Swisher and Andrew Rosorckin for that. great, long interview they did. Here, she talked about future, harming future competition. Right. Which I don't think Joe mentioned here,

explicitly, but, you know, the future harm. That's what that bottom part's about. I should deliver. Well, okay, yeah. But is this going to, if our new lenses, will Amazon's web

services business give them in the future, well, this combination of being the world's biggest retail store and having the world's biggest server forms give you reduced competition in the future. The answer is clearly yes. Absolutely. Clearly yes. So I think no one will be able to compete with that. Yeah. And I think for Amazon shareholders, I'm going to be honest here, if the two businesses separated, it would be, they would both be worth more, probably 20%

more immediately. Because what you'd have is the AWS people would then not have to worry about the Walmarts of the world, not wanting to use their server farm. Right now, there's a lot of people who will not use AWS, because they're scared of Amazon having some insight. Now, they may not be able to see what you're doing in your code base. So they may not have the right to do that and gets the terms of service, yada, yada. But they might be able to see your spikes in bandwidth. Okay. 100%.

If you're spiking on this Thursday, you will never be able to guarantee that they're not snooping on your bestsellers. I mean, that's been a complaint about AWS already is that that's how they're able to sort of, you know, they snoop on all the best sellers and then make an in-house brand. So, yeah, without a doubt, AWS would be worth more. really you think Amazon.com? Retail? I think it would be actually. I'll tell you why.

Because they would have to have even more discipline. So what's happening over time is if that part of the business is subsidizing it, the people in that part of the business are like, hey, we're going to get our bonuses anyway. All we've got to do is keep the top line growing. And they're getting a little disconnected from the reality. Maybe they're delivering things that, you know, they shouldn't deliver. Maybe, you know, furniture should not be part of the Amazon offering

because you lose money delivering furniture. Maybe that is something that should be done locally. So they might be making bad decisions on what they do for, because they have this sort of mulligan, right? So it's like if I started you on, I don't know, if this is a football analogy, if I started you on the 50-yard line, you might think that you're like an incredibly offensively talented team

because you're not starting on the 20 or 30-yard line. Right. No, that's a really good point. I like that idea of the operational discipline that would have to come in. Then they would still, I mean, the competition would be tremendous because retail is a tough business and people have come into that e-commerce game with some pretty powerful offerings.

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Should we quickly do our little Peloton update here? I mean, it feels like the Peloton saga and the Joe Rogan saga should just be burned into every episode now. In Peloton and Joe Rogan news. In Peloton and Spotify news say, can we just call it Spotify? Okay, Peloton, thank you for doing the last story. I'll do this one. Peloton CEO, John Foley, who I kept trying to get on the pod, is stepping down.

So we'll have him on for his next company. His Gold Watch. Exactly. And the company is laying off 20. 800 employees. Ouch. Foley is the co-founder of Peloton has been the CEO

since the company started 10 years ago. Foley will remain, executive chairman, former Spotify, Netflix CEO, Barry McCarthy will take over his CEO. Peloton President

William Lynch will step down, but also remain on the board. A board director is leaving to new board directors are being added. Obviously, there's a ton of chaos over there with their stock price down,

I think over 80% at this point still, even though it rebounded a little bit because of the Amazon on interest news that came in the Wall Street Journal. This is 20% of its corporate workflow. So they have five times 28 in terms of total employees. So I guess the remaining employee count is going to be in the 14,000 range, something like that, according to the Wall Street Journal. It's not going to impact instructors or their content.

That seems pretty obvious. I can't believe that Peloton has five times 2800, like over 15,000 employees at this point. I actually was thinking the same thing. I mean, that's a awful lot of people and that's really disruptive to them. But yeah, what do you do? I mean, it just, with everything that comes out about this company, it does seem to be that there was some real leadership problems here. And so maybe John Foley stepping down is the best thing that could happen

because clearly they're bloated as hell in terms of employees. I mean, I don't understand how you could have 2,800 employees at that company. Like, how many people do you need to have? Is that including installers or the people building the bikes in China or if they're building them? Like, that makes no sense. I mean, is there like a 10,000 person customer support. There's no sales team.

They put them in the U.S. don't they? I thought that was their whole deal. Anyway, but yeah, that's, we, I definitely want to do a little digging into that. But then you look at, you know, in episode 1368, we also talked about these failures of leadership, Blackwell's capital calling for Foley to step down because they were saying, you know, he poorly handled the recall of the tread, committed to this 20-year lease. I think hired his wife. Yeah. He hired his wife as BP of Apparel, which you know, whatever, but when you put it in this sort of nice long list, you start to be like,

yeah, and then of course, it's the appearance of impropriety, right? We talked about this. Like, if things are going well and you do some things on the margins, nobody cares. And if things are going badly and there's an appearance of impropriety, oh my lord, that's why all founders should avoid the appearance of impropriety. I keep telling you this. And they utterly fail. I'm just, I mean, just as a forecasting exercise. The fact that they utterly failed to see a drop in demand as the pandemic waned and then got stuck with a ton of inventory and don't know what to do with it. I mean, it just sort of goes on and on and on. And then earlier this morning, speaking of appearance, of impropriety or actually just like crappy behavior, let's be honest.

CNBC journalist Lauren Thomas tweeted the following and receiving many messages from now former Peloton employees who learned they were being let go because the company turned their Slack access off. Oh, great. So the old, we don't know how to lay people off properly in the remote world. Yes, it is really hard to do this. The way you're supposed to do it is let everybody know that there's going to be a 20% cut and that we're working with our managers and they will work with your teams

and we're sorry this is happening, but for the health of the business, we're going to need to reorganize. The reorganization is occurring over the next 30 days. You'll discuss it with your manager on Zoom or in person. You don't push the button like this and just turn off all those people to access. I think I know.

If there's an HR person out there, email producers at this week and startup, and dot com and tell us what the best practice should be in a remote world. But I think mine is a better one, which is to do it in small groups and to have a considered discussion and let people know ahead of time because people are grownups. Right, right. And it's really kind of shi to do this to people, you know, so coldly after they've dedicated their lives to you or some portion of their lives.

Well, this wasn't even a conversation. Literally their slack just got turned off and it was like, I guess I'm fired. I mean, that is just appalling. So according to LinkedIn, the distribution of their employees indicates that they had about 780 salespeople. Oh, okay. So salespeople were on the phone, they're like, that makes sense.

They're on the, because it is a considered purchase. Right, sure, answering questions. Are they salespeople or are they kind of customer support people? But I get it. Maybe customer support people, I guess I could see that. Yeah. But that that was, it seems to be,

let's see, the fastest growing part of the business was information technology. I don't know what that means. IT. Yeah. Like, IT, really? Okay. All right, IT.

That's just the fastest growing number of employees, not necessarily the biggest employee center, I don't think. The other thing I thought when I saw that they were getting rid of Foley and laying up 2800 people was this is a company that is trying really hard not to get acquired. Like, it seems like they're angling for a turnaround so that they can stay independent, maybe. At least maybe that's what the board is trying to do as opposed to get it bought, but or they're making themselves leaner in order to be a cheaper buy. all of this, the answer is yes. What's happened? And it is both.

One, if you have activist shareholders, this would calm them down a bit. And it also might be the right thing for the business. And if it's the right thing for the business, you do this and then the acquisition gets easier because somebody's going to look at it and say, okay, the cost went down this much. Okay, profits are going up or the bird is going down,

whatever the case may be, you know, depending on where they are, it will start to look like a healthier business. And that's what activist shareholders want to do. They want to buy things when they're distressed and then take, you know, decisive action that would then make the business optics and the business reality better.

What does a founder want to do? Like, especially an early stage founder who's now running an at-scale business. They want to invest in products. They want to deploy capital. They want to make factories. They want to make new products. They want to hire a lot of people.

They want to drive the top line and they want shiny new objects. And this is where, you know, you'll learn as an investor. These two different mindsets are hard for one person to be able to switch between, right? Yeah. So who's good at switching between these?

Steve Jobs. He knew how to run an at-scale business, had Tim Cook, you know, Eddie Q, you know, his design guy, the famous design guy, who was his... Johnny Ives, his partner in crime, his muse. he had a really good cohort around him

where one group of people could optimize the hardware and the supply chain and the other group could inspire him and he could go to a laboratory and bug out at all these new amazing designs they were creating. It's hard for a founding CEO

to keep that in their head and maybe Zuckerberg is going through that right now where he's like, I'm kind of bored with Facebook and Instagram and copying everyone's like, yeah, I want to go to this meta thing. Oh, he clearly is, right? I think there's even reporting to that effect.

Yeah, he's like, I'm out. You guys handle the big blue. The thing that's printing money, the printing money machine, like, not interesting to me anymore because I have $50 billion awardy. I have $100 billion in personal wealth. I've seen this actually happen to people. They become so wealthy personally. The company becomes so money printing that it's like, that's not rewarding.

I'm not into it for a machine that spits out $100 bills. I want to build the future. And, you know, that's why Zatkes. From what I understand, stuck ain't hanging out at the main campus. There's a secret campus over in San Mateo by the water

by an area called Coyote Point by us and they just bought a bunch of buildings over there. And I hear he's hanging out over there with the meta folks. I'm sure. Working on this new meta stuff. And so I actually, you know,

it just actually gives me a good idea for Facebook as we talk about this. What if they gave Cheryl Sandberg and made her CEO like they did with Susan Wojecky? they made her CEO of Facebook YouTube and then they make Cheryl

CEO of Facebook, Instagram, WhatsApp and then Zuck becomes CEO of Meta and you have two different divisions, two different CEOs. That would be a very powerful move then when they have to drag somebody in front of politicians they're dragging Cheryl Sandberg who's quite good at that and who has successfully skated out of that many, many times so yeah, it's time.

She's good at that and she might actually make some more humanistic decisions that would be better for humans who use those services as opposed to Zuck who really doesn't make good decisions for humanity. I remember years ago,

I mean, I only have 10 minutes left, but I'm so going to say that very briefly. I remember years ago he was giving a presentation and he was talking about photo sharing and how rapidly photo sharing could scale, which by the way, Facebook has just absolutely failed that in terms of like using it

for anything good, such as searching or putting it in good albums. But he said in the presentation, humans are very bad at understanding exponential growth. And it was such an awesome moment that one of my producers had a mug made for me that said, humans are very bad at understand. I mean, because it's just like,

that's how robots talk. Like, come on, man. Yeah. Anyways, let's do our startup of the day. The start of the day is always great. Why don't you kick it off? And let's be honest, it's in the name. Startup of the Day, Island, a new,

browser for enterprise. This is very relevant because we were just complaining before the show about how Google keeps trying to split the profiles into two separate browsers and it's really irritating because it just figured it out. Leave me alone. But there is value in having two instances of a browser, particularly if as Island is claiming it can do, one of those instances is focused on business and is more secure and gives companies control of the browser, mitigates security risks.

and also, of course, keeps an eye on what folks are doing at work. We assume. Yeah, I think that would be a pretty good assumption. Provides company controls, let's say. Yes, and I think this company is island.io. You can go see it if you want to. This is a great idea, especially because people are working from home. And you ever, you know, there's two things that are happening.

Actually, that company, was it better the company with the crazy CEO who? The one that laid out than 900 people. Yeah, that laid everybody on. They said he was monitoring everybody's, like, when they sent their corporate laptops out. And this is fair game. It might be a little creepy, but it is a corporate laptop. They were essentially monitoring all their employees. And he had a frustration that he was paying people to work three hours a day.

Because somebody in the IT department was like, hey, by the way, these 200 people out of our 2000 are on average typing on their computers for two hours a day. And, you know, they're logging their email, whatever. for those days, which now there's a, I saw somebody had a robot that would kit the refresh key or something or like a, that's kind of funny and silly, but people have made bots now that will change windows and reload your email, go to your Slack. So if your boss has, because this is like, let's be clear, the fact that better was doing that doesn't necessarily, every company is doing this on some level, right, to the extent that they are staffed and technically capable of doing it. I mean, Slack offers all of those tools.

When Slack goes and sells its enterprise product, it's like, P.S, you can see everything that everybody's doing if you want to, because that is what businesses do in case they get sued. They want to have all those records. You have to. You have to. So you have to on some level. And if they're tracking productivity, they want it.

I mean, this is giving company controls like this is, we might not like it as employees, but it's a really good pitch as a startup. Yeah. And again, we don't know that this is about tracking employees, but the product is definitely a brilliant idea. I've seen a couple of companies do this before. The concept is if you were to run this secure browser, then your employees are at an airport or, you know, whatever, coffee shop working. They do their business in this browser, I believe is the concept here. It's built on chromium, which is the open source version of Chrome.

And it eliminates all these security risks because you can't get fished, right? If somebody sends you a login to some crazy, you know, Google login or whatever, it's going to detect that. It's going to stop them. If people want to load something nutty like some crazy Chrome extension, et cetera, they'll know about that. And I think actually it's good for employees in this way. When you're on that browser, you know that's the company browser. Do company stuff on there. Keep it down.

If you wanted to do something that was like shopping and you were getting your kids like some oatmeal, like, Like, yeah, you do that on your... Or you can accidentally download a virus, like, you know, if you're visiting some sedentary website. Yeah, I mean, it does separate things out. Okay, so good idea. We agree. Could imagine businesses definitely wanting to buy this. But let's talk from the startup perspective about how this has raised $100 million.

Big time, yeah. At we assume about a $500 million valuation, according to Bloomberg. If I was thinking, yes, $400,500 would be my number, yeah. And it's pre-revenue. Got it. They have not launched yet. So if this happens... Not launched.

Yeah. I mean, you know my rule of Jason's law, a company that has a billion dollar valuation or gets raised his money at over a billion dollar valuation. Before they have a product in market, is either going to fail or could be a fraud. Quibi, magically, Theranos.

Nicola was in that group. Rivian? Rivian? I can't remember where they were in the law. I think they did raise a lot of money, but I don't know if they had any... cars in market then? I think maybe their employees had some cars. They have 15 cars sold. I mean, now. Yeah. Sure. Sounds reasonable. Totally real. Yeah, all to employees, sure. And employee spouses.

Very pretty pretty truck. It's really pretty. By the way, can we just talk about how like Ford and Amazon, by the way, like at least huge massive chunks of the earnings that they reported were on money that they realized from the Rivian IPO? Like, didn't even, not even real. Did they sell shares? Was it clear or they're just marking their investment in their books? I wonder if they actually. actually cleared their positions. I said they should have cleared the whole position. The power moved by Ford would be to sell that whole goddamn position. I mean, they realized it as revenue in their earnings reports.

And then they'll have to mark it down when it comes back down to Earth. I would have just cleared the whole position and said, hey, by the way, we made $15 billion. And for taxes, we got $8 billion. Or maybe it would be offset by losses so they get the whole $15 billion. Hey, we're going to put this whole $15 billion into competing against that company. Ha-ha. Thanks for the $15 billion. Ford for sure is because then they like canceled the deal.

Yeah. They should just basically take the $15 billion and say, You know what? We're going to give our first. We're going to put that $15 billion towards $50K towards each truck and sell the trucks for $30K. And you want to talk about a gangster move. We're using your money to discount our cars against yours.

It's pretty much exactly what Ford is doing. So anyway, sorry, back to this. Is this valuation just bananas? It is a high valuation for a big opportunity. And the founder Mike Fay, who will invite on the program when they're ready to launch, he was president at Symantec.

and he was EVP and CTO at McCaffey. Those are $10 billion plus companies. This is a money printing space enterprise. It's a rich valuation in today's market, but you're betting on a killer. So this would be the equivalent of, you know, some great entrepreneur with incredible operational ability. If they asked me to be involved in this round,

I would have said yes. So just to give you my own case. And then if you look at who wrote the check, it's Sequoia. Right. And Inside Venture Partners. Yeah. These are two of the best funds, Sequoia, the best fund in the history of venture capital. And Inside Venture Partners, IVP, is really well known for making great bets, although they're a little bit younger.

So, yeah, you know, we don't have complete information, but this thing sounds like it's off to a great start. It's probably going to do really well. I mean, listen, every law has exceptions. Well, no, this is under a billion. So it doesn't break my law. It's just kind of teetering on the way there, right? So if they don't get their product out and they raise a billion, it would put itself into the Jason's law of a billion,

raising out a billion before you have a product in market. But it sounds like they'll have the product in market before they get to a billion. Here's the other thing to keep in mind. When somebody invests at that high valuation, let's say that valuation is double what it should have been. They have downside protection. If the company were to fail and sell for $101 million, they get their $100 million first,

and then the million that's left over gets divided, let's say they own 20% of the company, they would get 200,000 of that million, and the 800,000 would go to the rest of the shareholders. So last money and gets their money back. Make sense? Totally. Yeah.

So that's a little downside protection. It's just the downside protection. But it's a really good point. Like they're saying, worst case, we're going to get our money back. We're going to be made whole. Even if we don't go to the moon, but they clearly think they're going to

And look, for enterprises, this is a real, especially enterprises in a remote work environment. Yes. I know that every, I know nobody wants to contemplate it as an employee, but it's a great, it's a great move. Here's probably what they had. Not only a great founder, not only a great idea, they probably have the product done. And when they showed the product to people and the patents or whatever is, you know, under the hood, it's probably transcendently good. Yeah, you can tell. So the website is super clean.

Like, you could tell it was put together really, really, seriously. Yeah, the website is tight. Maybe we played up the part on spying. employees too. I mean, that look, visibility is a thing for enterprises, but what this really is probably about is visibility and maybe built-in productivity tools. Like, maybe it integrates a feature like Callantly. And so it makes everything with your email, you know, it's like, here's the thing. You're not, if you're not, if you're, the concept that you could spy on employees when they're doing work is kind of silly. If you're doing work for your company,

yeah, you should expect every email is the companies. You sign that document. This is not just me saying that, yeah. So when you work at McDonald's, they expect every minute of your life. It's recorded on some video camera. Your keystrokes on the register are recorded. That's, you don't have any expectation of privacy, right? Yep. The problem is information and knowledge workers have a false sense of privacy, especially when working from home because they're like, well, I'm in my shorts. I'm wearing running shorts right now. Nobody knows. But I'm going to get on my peloton on my tonal after this. They are,

have a weird concept that, oh, you know, I'm DMing somebody on Slack. I'm emailing somebody, but that's private. It's like, mm,

you think it's private. It's not. Everything you do on your corporate computer is being recorded, is being logged in 90 plus percent of cases. Don't ever use your corporate computing for personal stuff.

Don't do it. I can tell you, having been deposed once, when my company was being sued by some other third party. And I was not to pose about anything I did, but it was like communications related to the topic of the lawsuit. Like when you see your own emails and the stupid, crappy, casual crap that you write in there,

like, you don't want to see that. But the company has to keep it. Yes. Everything I write is as if, and this has been for decades, I write every single thing as if it was a blog post. And I train all my executives. Just assume it's a blog post. It's going to be leaked at some point.

Everything gets late. Just everything you do, assume it's a blog post or a tweet. So don't write anything. This is why the random channel on Slack needs to, corporate environments not exist. And you have to give random training.

Random is not for random stuff in your signal group with your bros or your fraternity or your sorority or whatever. I can't believe the stuff that people would send me on Slack. And I'm always like, you know, they send me some insane thing on Slack

and then they get a text back or a signal message back from me. Like, okay. Hi, HR. Here's signal Here's signal It deletes everything Get to know it

And people can take pictures of their signal So even when you're doing that Like every celebrity Like everything Kanye sends on signal The other side is taking a picture of it With our other phone Like so be careful Yeah

Celebrity is a whole other nightmare That I luckily don't have to deal with Well yeah All right everybody This has been a great episode We'll play some plugs after this And we'll see you all next time. Bye bye. Bye bye.

Hey guys, Rachel reporting here. On February 14th and 15th, we'll be hosting Founder University Intensive. This is a two-day program for Founders. Now, this course is only open to women founders. We'll be hosting a course open to everyone on May 9th and 10. You can apply for both at founder.com. And applications for the longer 12-week Founder University program are due on February 14th, and you can also apply for those at Founder.com. University. Follow Jason and Molly on Twitter at Jason and at Molly Wood. If you're not a boomer and prefer TikTok, search for this week in startups to find the fan account at this underscore week underscore in underscore startups. And our official account at TWA startups, but honestly the fan

account is way better than ours. And if you're still not tired of hearing from Jason six days a week, you can hear a read his book angel at angel the book.com slash audible.