This Week in Startups - The charges against Pavel Durov, the future of encryption, and secondaries are heating up | E1998

Starting point is 00:00:00 I think as Americans, we should be very proud of the fact that technology companies and the citizenry, and by and large, our representatives are in alignment that privacy does matter. I think we can take that win, despite Saxis tweet and the pile on that I experienced this weekend. The fact is we are nowhere near what is going on in the three buckets. You have dictatorships on one side. You have free countries on the other. and then there's a little bit of gray in the middle. You got France clearly is going to be in that middle.

Starting point is 00:00:33 You have the monarchies in the Middle East. They believe in some amount of, you know, encryption. Some places don't. You know, and it's just going to be a jurisdiction thing. This week in startups is brought to you by Vanta. Compliance and security shouldn't be a deal breaker for startups to win new business. Vanta makes it easy for companies, to get a SOC2 report fast.

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Starting point is 00:01:27 Get 15% off your first four weeks of developer time at lemon.io slash twist. Hey, everybody, welcome back to this week in startups. I'm your host, Jason Kalakana. We're about to hit 2,000 episodes of this podcast in 14 years. And Alex, I'm not tired. I love doing it. And having you here to do the news of me twice a week,

Starting point is 00:01:49 three times a week, has been a fresh air. It's really reinvigorated the show. So, uh, here we go. Any, uh, anything big this weekend personally? Any, any, uh, big stories breaking that you're watching? Well, the biggest story that's breaking is, uh, my, my next, my next kid's doing, uh, seven, eight days. So, um, that's pretty big. Yeah.

Starting point is 00:02:10 I'm, I'm actually kind of glad we had this one enormous story that's consumed our attention because it's been such a beautiful, um, distraction for me to not be worrying about, like, do I know how to swaddle? Do I recall how to have an infant? So, um, yes. Not that I'm saying I'm in favor of people being arrested, but the Pavel Duroff story that we're going to start with has been. Sure. Big story. Electrifying. Also, everyone, uh, if you want to know what else is on the show today, we're talking about a massive new secondaries fund.

Starting point is 00:02:35 The future of IBM and other tech companies in China, but Jason, clearly, clearly the biggest story from the last 24 hours, lost 36 hours has been the arrest of Pavel Duro. Best known, I think, in the West for his helping found a telegram, a mostly encrypted chat. application, got arrested in France. So, first of all, when did you first catch the story in your eyes? So, I mean, over the weekend, you know, this has been a big breaking story because it's dramatic. Flying into France on a private jet, getting picked up for a lack of moderation, which to me is like a very nebulous term. I just assume that the French language and English, you know, there might be something mixed up because, and, you know, in a breaking news situation like this,

Starting point is 00:03:23 I always like to be thoughtful, be demure, be thoughtful, not like these other girls, you know, who fly off the handle and start, you know, sharing things. But in all seriousness, like, in a breaking news context, you and I know, there's going to be a lot of cards that are going to turn over, and in fact, the actual charges came out moments ago, so we're going to talk about that.

Starting point is 00:03:47 But this triggers a lot of side discussions, So I think today, you know, we should really open up the aperture of this discussion because there's international relations here. There's a Russia angle because he's Russian and he started his career, you know, in Russia and there's a Putin connection. There's a freedom of speech issue here. And then there's this peculiar nature of the French. And also the Pavel's got a couple of passports. He's a pretty larger-than-life figure right now. and there's a big discussion of which is more important,

Starting point is 00:04:25 the sovereignty of the individual or the effectiveness of our law enforcement because if you give people the ability to talk privately at scale across the world, not just talking to people around your kitchen table or whispering and somebody's here, we're talking about a global network, then there's a really important conversation

Starting point is 00:04:51 around, you know, some of the most nefarious illegal activities and how those impact society. And then does a society want to enable at-scale, end-to-end encryption that cannot be cracked, or do they want to give a backdoor to law enforcement so you could do things like, I don't know, stop a terrorist attack,

Starting point is 00:05:14 or human trafficking, or fentanyl. So, you know, there's a lot of feelings here, I think, and, and it's a, it's, perhaps this will become like one of the, I think this will be the story of the rest of the year, if I'm being honest. Pending the U.S. election, dropping some sort of, you know, news bomb on the technology industry, I think that's probably right. So to give people a little bit of context before the charges dropped, and we're going to get those in just one second. Jean-Michael, I'm going to ruin the French here, everybody, I'm sorry, but Bernagod, who's the general secretary of the, Office of Miners or Offman in France said that Pavel Dura, this is actually from his LinkedIn, and I'm using a machine translation,

Starting point is 00:05:54 everybody. So if it's slightly off, blame Google. Pablo Dura, the founder and CEO of the messaging app telegram was arrested Saturday. At the heart of this issue is the lack of moderation, Jason's point, and cooperation of the platform, particularly in the fight against pedophilia. So let's go to the charges, Jason.

Starting point is 00:06:12 And these just came out before we went live, and we have them in both French and, English. I'm just going to quickly run through these. Just interrupt me whenever you want to jump in, okay? Yes, sir. The judicial investigation was opened against person unnamed on charges of complicity, webmastering,

Starting point is 00:06:29 an online platform in order to enable an illegal transaction, refusal to communicate, this is a relatively long one, complicity in the possessing of pornographic images of minors, complicity in distributing, offering or making available pornographic images of minors, complicity in acquiring, transporting, possessing, offering their

Starting point is 00:06:46 slide narcotic substances back to the fentanyl point. And then fraud, criminal association, laundering of proceeds, providing cryptology services aiming to ensure confidentiality without certified declaration, and a whole bunch of other stuff. Which, Jason, I think, if we boil this down, it is essentially what you said. Here's a service that offers encryption and people use it for stuff. And it seems that the company's level of cooperation with French authorities was less than was hoped for or expected. And so Pavel got snared in this and was then arrested when he landed in

Starting point is 00:07:21 France. Because I don't think they're saying Pavel is doing each of those individual things, but his platform was being used, ergo he is complicit. So what we're talking about now is the French rules around encrypted services and the owner of those services. So other services like Signal, I think what's has end-to-end encryption.

Starting point is 00:07:47 There's other, and I message has end-to-end encryption. So there is one issue of end-to-end encryption, and then there's another issue of giving information at the request when there's a legal issue. So he clearly is not cooperating with them. Everybody knows Telegram, very good for groups. I keep getting added to all kinds of crypto-I-C-O spam groups.

Starting point is 00:08:10 Oh my gosh, those are the worst. The worst, where, and my favorite part about them in the peak was they were called pump, pump, pump. And then people would get in there and they would coordinate pumping a coin with absolutely no awareness that a person running the group had probably already bought their coins a week ago and then was clearing them out as you pump, pump them. And they were telling you hold, hold, hold while they sold, sold, sold. So my question then becomes, how is this different than other encrypted services? Let's take I message and Tim Cook. when Tim Cook or Apple executives are in France right now

Starting point is 00:08:48 and people are using iMessage, I'm assuming with some level of encryption or other services, are they also going to get picked up next? So that's sort of the next shoe to drop. And why are the French going? So, yeah, that's my first question. Why are the French going after him?

Starting point is 00:09:06 Well, he is a French citizen. So to understand Pavel and how he built Telegram, we should probably go back a little bit to his days in Russia. He's a co-founder, of the contact, which is probably the best known Russian originated social network, I want to say. And he ran into quite a lot of trouble with the Kremlin. There were take down requests. Eventually, he sold his stake, was kind of forced out of the company. There was a little bit of nuance there about how he got forced out. We don't have time to go into that. But essentially,

Starting point is 00:09:35 back in Russia in 2018, there was a law called the Yarravaya law. And it meant that you had to store voice and text communications for a certain period of time and also critically store encryption keys with the Russian FSB, which is their security service. He said no and then had to leave and then left the country. I think at that point he became a citizen of St. Kitts and since then he's become a citizen of France and also the UAE. Now in the French case, Jason, just because I had to do a lot of research, this is interesting, did you know that you can get a French passport if you are a quote, Emeritus foreigner.

Starting point is 00:10:14 This is a way in which some very powerful and influential people can get French citizenship without having a French background, i.e. in a territory or in the nation itself or parents there are up. So essentially, he got a really special passport to France. So recently, as of 2021,

Starting point is 00:10:30 he was in good keeping in France. Right? And so that's what I kind of struggle with is what changed in the last three years that led to what seems from what I understand now to be a relatively quick reversal of his favor and fortunes in his adopted, well, one of his adopted home countries. I'm a little perplexed by that. Yeah, that was so confusing to me because it's pretty well established. That in France, you have to give access, you have to

Starting point is 00:10:57 maintain the keys, the encryption keys, as opposed to say the individuals having the encryption keys. You have to hand over the keys to authorities and give them a back door essentially if they requested, but if you're running a service where you don't keep the keys, as you just explained in the Russian example, then you can't do that. So I guess I don't have the keys if I'm understanding technically what's going on here and the request, because we're reading into this in a breaking news atmosphere, then he doesn't have, he's saying, I don't have the keys, they're saying you're supposed to have the keys, you're supposed to maintain the keys. but that's not how it works with this end-to-end encryption.

Starting point is 00:11:36 And you're supposed that, my understanding was they allowed end-to-end encryption. So I guess this is perhaps the beginning of the end of end-to-end encryption. I hope not. But it's just worth like remembering how long we've been having this conversation. Now, this was called the Crypto Wars before the invention of cryptocurrency, which has taken the word crypto and kind of taking it onto its own. we could call it the encryption wars, but it's absolutely a long-term push and pull between, you know, the public wanting to have secure communications, both for payments and also for chat, and the government wanting to be able to stick its nose into everything. And just, you know, reminding the clock back to Snowden, I think we all learned just how voracious, even countries with relatively strong First Amendment style protections can be when it comes to collecting all this information. Now, in the case of the European Union, I was surprised to see a report from the EFF from March of this year.

Starting point is 00:12:36 There was a, quote, milestone judgment in which the European Court of Human Rights ruled that weakening encryption can lead to the general indiscriminate surveillance of the communications of all users and violates the human right privacy. So to me, there seems to be precedent, even inside the EU itself, that encryption should be allowed, which throws further confusion onto what's going on with Pavel and Telegram and France. Listen, a strong sales team can make all the difference for a B2B startup. But if you're going to hire sharks, you need to let them hunt, and you can't slow them down with compliance hurdles like SOC2.

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Starting point is 00:13:38 And Vanta does more than just SOC2. They also automate up to 90% compliance for GDPR, HIPAA, and more. So here's your call to action. Stop slowing your sales team down and use Vanta. Get $1,000 off at vanta.com slash twist. That's vanta.com slash twist for $1,000 off your sock, too. We're going to get to reactions in a second. but Jason, how closely have you been tracking the Russia-Ukraine war?

Starting point is 00:14:01 And I'm not asking that impishly. I'm asking that honestly. Well, I mean, it comes up because one of my besties on the All-In podcast is pretty enthusiastic about that topic. And so, you know, to a certain extent, I keep up to date on it. But I know that Ukraine has made some incursions into Russia of late. Russia has been over 900 days. unable to defeat the proud people of Ukraine during their illegal invasion,

Starting point is 00:14:35 murderous, you know, invasion that they, obviously, some people feel like Russia was provoked. I think that's nonsensical. If you're provoked, that doesn't give you the right to murder your neighbors. And I believe in the free sovereignty of countries. So long way of saying, I keep probably more up to date to it than the average person, but I've never been to Ukraine. I've never been to Russia. I am not a student of the entire history there. So, you know, some humility as well. Well, we can buy you a copy copy of Crusader Kings 3 and you can rewrite history as much as you want. Video game jokes aside,

Starting point is 00:15:12 Telegram is a very popular channel for Russian communication and also just for information getting out of Russia and the Ukraine area. So if you track military bloggers, open source intelligence, you end up reading through a lot of telegram materials. And I raised that because France has been a pretty robust ally of Ukraine since it was invaded. And I wonder, you know, if there's a national security element to this in some way, because it does seem a little bit strange that a encrypted application of which there are many, including from meta and Apple and other major tech companies, that the EU does not mind fining billions of dollars when they break the

Starting point is 00:15:54 rules, right, is getting caught up in this. Now, the fact that Pavel had flown in from Azerbaijan, you can read into that, whatever you want. There's other bits of rumor and gossip that haven't been confirmed that I'm not going to share here because I don't feel confident in the sourcing, but I wouldn't be shocked if there was something involving national security at right here. So, yeah, that's not a tinfoil hat. That's just informed speculation. This is a popular app. France is supporting Ukraine, Russia, obviously. And this person is a dual citizen of Russia, France, or quad?

Starting point is 00:16:28 Quad? I mean, like, he's got more passports than, you know, I mean, if I lost a finger, I'd have the same number of fingers on one hand as he is passports, which is an impressive feat, all right, honestly. But then again, if my country of origin was Russia, I also would like to have a second or third passport. So we are now in, you know, a very weird situation. One of the, I would say,

Starting point is 00:16:49 maybe it's six or seven major encrypted apps, is being penalized in France. Why? Because you can be certain that the encryption used in Google messaging, WhatsApp, Facebook Messenger, I message,

Starting point is 00:17:05 signal, or Skype even, I guess, has end-to-end encryption, I believe, you know, is similar to Telegram, therefore is everybody else

Starting point is 00:17:16 going to get picked up? And I know X, formerly Twitter, was adding end-to-en encryption, and I believe I'm in the beta of it, So in DMs, I did test it with a couple of friends. And it's in there. So this all just looks a little confusing.

Starting point is 00:17:31 We'll have to cover it over time, right? Yeah, I just feel like we're missing something. Like, there seems to be some piece in this saga that doesn't quite add up. And, you know, Telegram responded to this news by saying that they abide by EU laws, including the Digital Services Act, which only applies to companies of the largest size. they say telegram CEO travels frequently in Europe and that it's, quote, absurd to claim that a platform or its owner are responsible for the abuse of that platform. I mean, that is, that is exactly how I see this. And so it just, it's, I wonder what else is going to shake loose.

Starting point is 00:18:06 But there has been some commentary. And I want to start. Yeah, let's go around the horn. Yeah. Yeah, let's start with the French president. We have his tweet from earlier today saying that. And I'm quoting the English language version here. France is deeply committed to freedom of.

Starting point is 00:18:21 expression and communication to innovation and to the spirit of entrepreneurship. And then he goes on to say that in a state governed by the rule of law, freedoms are upheld within a legal framework to protect citizens and their fundamental rights. And then essentially the arrest of the president of telegram on French soil took place as part of an ongoing judicial investigation. It is in no way a political decision. And then the judges will rule. Not a lot of new context there, but I think it was good for the French president to at least say,

Starting point is 00:18:48 you know, look, I'm not doing this because this is a vendetta. There's an ongoing investigation. So that to me means the fact that he felt it necessary to put that out means he wanted to squash the concept that this is a political thing as opposed to simply a legal issue around illegal activity, which they pointed out in that press release. So either there's a conspiracy at work here, as we're sort of looking at, or this is just people are using this for some pretty heinous stuff,

Starting point is 00:19:20 and we want to stop the heinous use of this, and we're going to force people who use these, and this is the first one we're going to do it to, to give us a backdoor. Now, if we were to look at the wider issue of freedom of speech, individual sovereignty, private communications in the United States, which I spent the weekend getting dunk on

Starting point is 00:19:42 by David Sachs's followers, because I said, hey, listen, it's absurd to think here in the U.S. that, you know, all the services are going to be shut down just because TikTok is, and then now people are saying like, oh my God, look, Sacks got it right. This is France, not the United States. And in the United States, I took a look, a long, hard look,

Starting point is 00:20:06 and maybe we could pull up Sacks this tweet. I tried to figure out, has there been an instance of any instance of the United States government? Now we're moving out of France. So, yeah, here's the tweet. You know, he said on April 24th that TikTok, and he has a line through it, then Telegram X Rumble.

Starting point is 00:20:22 The truth is, TikTok has not been banned, and Trump did an executive order to ban TikTok, and then Biden passed legislation that was voted on and approved to give a window of time

Starting point is 00:20:34 before TikTok it needs to divest. This seems to me to be completely different than what's happening here with Telegram, or the freedom of speech issues that were exposed at Twitter or at Facebook,

Starting point is 00:20:46 where the FBI and people inside those private companies decided that they would collaborate, you know, on either silencing voices or getting rid of voices they felt were dangerous. Let's put that aside for a second. In the United States, has there been any instance of the United States government shutting down private communications and encryption, and then have there been instances of the United States being extremely frustrated that they cannot get through these encryption services.

Starting point is 00:21:21 And so I'm just putting that up there so we can level set because this is a nuanced discussion. Now, there's a bunch of maga lunatics who follow sacks and who love to dunk on me because I have this thing called nuance. But I think the nuance here is so important. It's so important in the story because this is one instance in France and TikTok is a completely other instance. TikTok is, the concerns around TikTok are.

Starting point is 00:21:47 they have spied on Americans already, and they have government officials on the board, and they refuse to divest. So this is a very unique situation that we have them. Our number one foreign adversary has been spying on Americans, and it has been proven they have spied on Americans, right? This is just a fact. And that there is a bipartisan law for them to divest.

Starting point is 00:22:14 That has nothing to do with Biden or Trump. It has to do with, our government in one of the few bipartisan efforts saying we need to stop, I mean, we need to stop the Russian, I'm sorry, the Chinese from having access to 100 million Americans, and we know that they're spying already on them, and we know the algorithm could bend public views. So on a bipartisan basis, Republicans and Democrats agree, TikTok no bueno, but take us through America here and what we can look at in terms of how encryption is looked at on American. Yeah, so this is a recurring thing, and you're right, it's not partisan.

Starting point is 00:22:51 The strong encryption at rest in motion, essentially end-end encryption, has been a point of conflict throughout our history. Just to pull some things here that I think are pertinent, the FBI director Comey back in 2014, was complaining that, quote, we've gone too far by offering essentially anybody end-to-end encryption. we've also seen, in the case of TikTok, two consecutive administrations to your point, at least at one point in time being in favor of that. And I bring up both of those again because it underscores that the government would like to have more power. The government, it's an entity.

Starting point is 00:23:28 It has incentives. It wants to have access to more information. And there's a lot of people that are on our public payroll who are hired to keep us safe and they would like to have more information. And it's hard to say, no, the kids should be at greater risk versus we can have greater freedom. but that's what it comes down to. You almost get tired of this because it comes up, you know, every couple of years,

Starting point is 00:23:49 but the way the argument tends to go is something bad happens. There's some data that's protected. And then either we need to, for the case of national security or to protect the kids, we need to have an encryption backdoor. And this always sounds very reasonable to people who don't build encrypted products and services. But as Apple pointed out in the wake of the San Bernardino case, building an insecure system to allow for third-party entrance,

Starting point is 00:24:12 even if it's the secure backdoor just for the FBI, creates an insecure system, and therefore you either have encryption or you don't. And consistently, here in the U.S., we have managed to beat back the government and preserve our right to have encrypted products. But as recently as 2020, three U.S. senators, I think it was cotton, blackburn, and one in Graham,

Starting point is 00:24:36 put out a bill that would essentially, force encryption to be weakened. So this is a recurring issue. I just, again, don't understand why it's this moment in time in which an Indian encrypted chat application got busted by one particular government and not even a supernational government like the European Union block. It was just France. So I still feel like we're missing something, but we have defended the right to encryption here in the U.S. and without it, we don't have e-commerce, privacy, et cetera. So to me, you know, we'll do this again in three or four years, Jason, but it's, It's another example of, here come the governments, once again, wanting to break down the, you know, the doors of encryption.

Starting point is 00:25:14 This is a specific case of Pavel will figure out as time goes on. You know, listen, I am sympathetic to law enforcement. They have a tuck job. They want to protect you. I think that's the overwhelming majority of the driving force here. You have an FBI agent, a CIA agent, you know, local law enforcement. And there's a horrific, we'll take the most intense. terrorist attack. So we have two instances of that. Recently, there was the Pensacola in 2020,

Starting point is 00:25:44 Florida, and the FBI requested Apple's help to unlock two iPhones. And then there was San Bernardino, you pointed out, I think that was 2015, according to my notes. And Apple refused and said, hey, you know, if we do a backdoor for this, it's kind of be a backdoor for everything. So either, and the real backdrop here is encryption's gotten easier. You used to be able to, do this kind of encryption, but you had to have keys. You needed to be technical to do it. Then we abstracted away all the technology, and you just downloaded signal, telegram, iMessage, it was built in.

Starting point is 00:26:19 And so then everybody has it by default. I can tell you how humans in the 90% of cases, if we had San Bernardino, God forbid, or 9-11, on a regular basis, which is to say, more than, than once in a lifetime for 9-11, and more than once every, call it 10 years for something like San Bernardino, it seems like those happen every 10 years or so. If those things happened every year,

Starting point is 00:26:50 I can guarantee you that 90% of people would say build the back door. That's how strongly most people feel about their own privacy. And when those things aren't occurring, I think 90% of people would say, I want my privacy. I don't want backdoors. So I think the public flip-flops on this issue based upon how secure you feel at this very moment.

Starting point is 00:27:18 I think maybe 10% of people are principled enough to say, I would rather have, and this is, you know, the long and short of it, I would rather have people die in San Bernardino like events, or God forbid or 9-11, you know, dozen people or thousands of people. I'd rather have that and have my privacy. I'd rather have that every year and maintain my privacy.

Starting point is 00:27:42 And I think that's the reality of the situation is most people don't care about their privacy until, and we'd be willing to give it up to be safe. Just like people were willing to absolutely have everything scanned and have their, you know, I don't know if you've had this experience going through, but, you know, back in the day when we had some intense TSA moment, I have to tell you, the sweep up, you ever get to sweep up your leg? And then the inside kind of whack you, because I'm 53, they're not hanging, they're hanging a little bit lower these days.

Starting point is 00:28:16 I hate to make a graphic. But I've had my nuts whacked many times, and I'm willing to have my nuts whack to make sure somebody doesn't put a bomb, you know, in their shorts. And I'm willing to have somebody look at a silhouette of my junk

Starting point is 00:28:32 on one of these scanners. So that's the reality. of it. Um, how do you feel? So I opted out of the new scanners for a couple of years and made them pat me down. Me too. Yeah. I used to, I was a wrestler in high school and middle school. So me, getting, getting manhandled doesn't really bother me too much. Just to be totally honest, I, people have different preferences. They're off. But, uh, I just, I was so annoyed by the intrusion into my privacy that I just wanted to make it harder on the system, even though I know I'm just making some $14 an hour guy who just wants to make his car payment, you know, do extra work. But it just,

Starting point is 00:29:05 it felt like the need to stand up a little bit. And I say that because that's my take here. If we give up on encryption, we are moving towards a world in which every single thing you do is by default, public forever. And I just don't think that's exactly the way that I would like to live my life. And Jason, to be honest,

Starting point is 00:29:23 I'm an incredibly boring person. If you read my group chats with my friends, you'd be like, I'm bored. Nothing in there is particularly spicy or interesting. We joke a little bit, but that's it. I just think that I have a right to be able to essentially,

Starting point is 00:29:35 close my door in my house and also close my digital door. And so to your point about are people going to be willing to say, I'll take the risk to have more privacy? I will say yes to that now. And I'll say yes to that in the wake of the next catastrophe that comes along. I just

Starting point is 00:29:51 think it is the right way to go. And I do think that it's one of those, if you lose it, you'll never get it back type things. So we're fighting this recurring issue. And you know, just for everyone out there is listening, this is not a partisan issue.

Starting point is 00:30:07 People on all sides of the American political spectrum occasionally wish to break encryption and they say things like, well, the tech people should just tech harder. You know, they should just make it even more secure but also less secure. They just want a magic key that does not exist to solve this. And it's not how it works, folks.

Starting point is 00:30:23 But I want to ask. It's not how it works, right? If you use multiple devices and apps to run your business, you need open phone. Open phone simplifies your communication. with one simple app. An open phone has rethought what a modern business phone can be. What's magical about open phone is that it works through a simple, elegant app right on your existing phone, or you can even use it on your desktop. I know because we use it here at launch and our sales team

Starting point is 00:30:49 loves it. And you know what? Those phone numbers, those discussions, all those text messages, we need those to be on launch phone numbers. We don't want those on people's personal phones where if they leave the company, it's distracting, it's annoying to your sales team as but one example. And we love having a shared number for customer support as well. We do a little round robin where different people can pick up the one phone number. So customers have one number, but we can have that phone call go to multiple people on the team. So we, you know, can just have somebody pick up the phone quicker. It's that simple. Answering the phone quickly is a best practice and it makes people love your product or service. Open phone is already super affordable at just 13.

Starting point is 00:31:29 a month. My lord, that's affordable. But Twist listeners can get an extra 20% off for any plan. The first six months, that's incredibly generous. Just head over to openphone.com slash twist. And what if you have an existing number with another service that you hate? Well, Open Phone will port them over at no extra cost, easy, peasy, lemon squeezy. So head over to openphone.com slash twist and get a free trial and get 20% off. I think as Americans, we should be very proud of the fact that technology companies, and the citizenry, and by and large,

Starting point is 00:32:03 our representatives are in alignment that privacy does matter. And I think we can take that win, despite Saxis tweet and the pile on that I experienced this weekend. The fact is, we are nowhere near what is going on in the three buckets.

Starting point is 00:32:20 You have dictatorships on one side. You have free countries on the other. And then there's a little bit of gray in the middle. You got France, clearly, in that middle. You have the monarchies in the Middle East. They believe in some amount of, you know, encryption. Some places don't. You know, and it's just going to be a jurisdiction thing. Just like a lot of topics, folks. Drugs, abortion, right to choose, you know, guns. I was talking to one of my

Starting point is 00:32:50 daughters about guns and just like, I wish we lived in a country that didn't have guns. I said, me too, but it's not changing. So your choices are move to Australia or the Nordics and have no guns or, you know, be in American and you're going to have guns forever. It's just the way it is. You can't get the guns out of the nation. There's too many of them. And the Second Amendment's pretty high up. It's number two.

Starting point is 00:33:12 Kind of hard to change. You start reading the list and you get to it pretty quickly. You had a question for me, though. I just wanted to clear. I wanted to get it off. I just wanted to get it off my chest here because I'm actually proud of America writ large. Everybody has

Starting point is 00:33:27 seemed to align with privacy good. It's great news. It makes me incredibly happy. Take the win. We still have to beat back to the occasional group of senators or House members when they introduce yet another one of these bills, but we'll just keep doing and we'll keep winning. You though. So my stance here is definitely encryption is worth it. It's a human right. You can, privacy is a human right. encryption enables that. So we must have it. Where do you stand on the balance between encryption and security? Because you set it up, but then I don't think you gave us your personal take. I'm for encryption. I'm for privacy. And I am for law enforcement having, with subpoenas, with judges, having other tools in order to make this happen.

Starting point is 00:34:11 And there are other tools. If you look at the January 6th, I'm not going to use the word insurrection, I'm just going to say rioters, the oathkeepers, the proud boys. All of their signal chats were in their, you know, guilty verdicts. when they went to court, and they said it very clearly, they were there to carry out an insurrection. They were there to take over the government. They were there to overturn the election. Now, they could be dipships, ineffective, lunatics.

Starting point is 00:34:44 You know, fine, you can have that argument. But all of their stuff was uncovered, and their intent was very clear. You can't connect it to Trump? Sure, fine. I don't think Trump told them to do it explicitly. But they didn't want to do it. Now, you have to ask yourself,

Starting point is 00:34:59 Well, how do they have their signal? How do they have all their encrypted stuff? Pretty simple, folks. You have somebody who join the proud boys, who is in law enforcement, or you have somebody who's in the proud boys that law enforcement got to and said, hey, come here, buddy, we got you.

Starting point is 00:35:15 We got you on the heroin. We got you on the opioids. We got you on this. We got you on that. Here's what you're going to do for us. You're either going to jail for 20 years for the opioids, or you're going to take this phone

Starting point is 00:35:28 and you're going to take your other phone and you're going to take a picture of your signal or a screenshot or whatever pretty straightforward the comments on the screen it's going to go away in an hour and you can just take a picture of it

Starting point is 00:35:45 so law enforcement has a lot of opportunities they could put a little camera up there and then three other ones on the bookcase and when you have your phone out it can see over your shoulder pretty clearly So they have lots of ways, law enforcement, to, with a subpoena, with a warrant to get your information. And your friends in your group chat when you're doing stupid stuff are going to flip. So law enforcement still has a lot of options.

Starting point is 00:36:14 And so I'll go, and by the way, how many terrorist attacks since 9-11 have been thwarted, and how many have occurred? the number of people who have died in terrorist attacks on U.S. soil has been less than B-stings today. The number of people who will die with B-stings this week is much bigger than the number of people who have died since 9-11 in a terrorist attack, which means we should be so proud of law enforcement

Starting point is 00:36:42 and they don't actually need to crack signal in order to do their jobs. I don't think they need it. It would be nice, I'm sure, but they don't need it. Yes. So we can have, to your point, a secure nation and strong encryption. Now, on the point you brought up about someone being part of a group, leaking things and so forth, there was a really interesting article in 2020 from Wired, and that essentially people were like, look, I don't know if Telegram is compromised or if it's just completely full of Russian state agents,

Starting point is 00:37:14 but people were getting picked up before doing things that they had talked about in Telegram. So there was some concern about that. Again, we can't tell from where we see. We don't have tinfoil hats on, but we are speculating here. I mean, I've always believed the Tor network, you know, is compromised. I think it was built by, I think Bitcoin and Tor, there is a non-zero chance that those projects, Satoshi is the CIA. Okay? Tor was built by the CIA or FBI.

Starting point is 00:37:46 You might think I'm crazy, but can you tell me, Alex, that you, You think it's a 0% chance that they have either compromised or created those two things? No, Tor, Tor, I'm not going to gobble with it all. I'm just in my head imagining how many heads in the world of cryptocurrency would literally explode. If it turned out that it was the government. Or that the government compromised it in year one, let's say. Oh, yeah. The government knows this is Satoshi.

Starting point is 00:38:12 These are the two other people. They went to them and said, hey, this is going to be the greatest honeypot of all time. we don't need a backdoor, we're just going to monitor it. We're going to sweep 40% of the coins. So if this thing does blow, you know, anything's possible here. And if you look back at the history of the CIA, you know, you look back at the history of Musad, FBI, everybody in between MI6, like their capabilities are strong. Yes.

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Starting point is 00:39:56 Stop burning money, hire developer smarter, visit lemon.io slash twist. So independent of, you know, this issue of encryption, the United States has done an amazing job. Law enforcement's done an amazing job, the public, and so have our representatives. And, you know, there's been a couple of failures on the margins. I think of private companies. And maybe we should talk about private company failures. I think lava comes up,

Starting point is 00:40:23 but you had another point, perhaps. Well, yeah, we'll get to lava bit in a second, but I just, I'm annoyed by the kind of bad faith takes about the situation because people were popping off pretty quickly with their own political priors as the jumping off point about what's going on, what happened without knowing. And, you know, I get that everyone on social media

Starting point is 00:40:43 are not journalists. And so they just kind of do whatever they want, and that's fine. and you could even argue that social media rewards people who are first and wrong if they're loud. But I do think the conflation of different issues around the world to make a political point that matches up with your own views is a little bit cheap and a little bit hacky, especially about an issue that matters so much to me, which is freedom of speech.

Starting point is 00:41:06 So I just, I just want to say, let's all do our best here, you know. I've enjoyed coming to your TED Talk. Thank you. No, I mean, partisans, will take any piece of information, put it into their partisan filter, and then try to get a win from it. I think what we're trying to do here is maybe have a nuanced discussion. The fact is, France, very different than the United States. United States, let's go through the instances where the government has actually shut stuff down,

Starting point is 00:41:36 because I, acting in good faith and a person of nuance and somebody who was a former journalist said, I wonder what I'm missing. So I asked chat GPT, and I asked the lazy web on Twitter, two best places for me to go to collect some information. And the overwhelming feedback I got of things the government has shut down. Explicitly were Backpage and Silk Road.

Starting point is 00:42:02 And then I got a couple of people who said Lava bit under duress shutdown. Those are the only three. I don't know if you found any in the research of things being shut down, but let's talk about those and how those are just. distinctly different than I message or WhatsApp.

Starting point is 00:42:16 Sure. So Silk Road was the, I'll go ahead and say infamous early crypto marketplace for the buying and selling of various things. It was the place to get drugs for a long period of time. It was also the place you could get a hitman and eventually ran a foul of the law. I mean, to me, if you're running eBay for drugs, you're going to get in trouble. And that's nothing to do with free speech. That has to do with just breaking the law.

Starting point is 00:42:43 And I think we learned a lot about, back to your point about Bitcoin being a honeypot, which is that not everything in the world of Web 3 is actually entirely anonymous. So to me, that does not fit into the rubric that you mentioned. Yes. The Silk Road was a marketplace on the dark web explicitly to do illegal things. There was no legal platform nature to it. You could say it was a platform, a marketplace is, I guess, a, platform. But if it was for legal things, it would be Etsy and Craigslist and eBay. Those legal things exist in the world or Amazon third-party sellers. Why would you go through the dark web?

Starting point is 00:43:28 Now, if you feel drugs should be legal and decriminalized, which I do in almost all cases, except for the super drugs, fentanyl and meth, I think those drugs should be in a different category. I think the other one should be regulated, decriminalized, cleaned up, and otherwise made you know, less dangerous for people who are addicted and, you know, whatever we could have. And I think it should probably reclassified as well. No complaints there. The most, I mean, the dark web, people were putting hits on people. I think that was proven.

Starting point is 00:44:00 So, and hacking people. So you could go on those and like literally say, I want to harass this person, put a dead fish on their doorstep for a Bitcoin, you know, and people would do that. It was a wild time. It was also very early on in the web three era, if you will. So not really something that's talked about too much lately. Then it was Backpage, which was essentially prostitution ads. And prostitution is broadly illegal in the United States. And it got shut down.

Starting point is 00:44:28 Now, there is a lot of arguments to be made from sex workers that, going back into my memory bucket here, that shutting down Backpage led to less safe working conditions for sex workers. And it's a perfectly valid argument to make. but that doesn't have to do with what the law is. And the law says no, and it got shut down. And again, not really free speech if you're committing felonies. So that to me is not a good example.

Starting point is 00:44:53 Lava bit is, I think, the one that does stick out to me as a possible point of weight. So if you go back in time, Edward Snowden, he used that service for email. So when he dropped all of his documents, the CEO of the Lava bit email service got a couple of knocks on his door. as you might expect. So a lot of the bit was a secure email service like, what's the one that all the journalists use? Proton Mal. So if you use Proton Mal,

Starting point is 00:45:23 if I have encryption on my side, you have encryption, nobody can get that message, correct? That's my understanding of how it works, and it's why I chose to use it. So I really hope that we have that right. But what happened was he essentially lawyered up and was like,

Starting point is 00:45:36 whoa, you know, I'm going to try to figure out what's going on here. And then the sheer weight of government expectation about what he would do, what he had to do, but having it to follow up, was so great, he said, I'm not going to do it, I'm out.

Starting point is 00:45:46 And then later on, I think it was relaunched in some capacity, but essentially, the government leaned on a very small company and it decided to just fold and evaporate versus try to comply with the demands. That is, that is a disappointment,

Starting point is 00:46:02 I think, because think about the other people on that service and the possible cybersecurity issues and just freedom of communication and so forth. That makes me sad to go back through it and reread. I hope that we do better in the future. But there's not a history here, to your earlier point, of encrypted applications being banned in the United States.

Starting point is 00:46:23 And so to me, it has not happened. TikTok is not a reasonable example. One tech executive being arrested in France does not mean that this entire experiment in human communication is over. And it means nothing to do with Rumble, which was thrown in there for reasons that confuse me. Well, I think they're on the right. I think partisans who care very much about their political party winning on both sides, obviously.

Starting point is 00:46:50 I think on the right feel under assault because of what happened on Twitter with the shutting down of a lot of right wing. That's a private company. If a private company decides they want to have real names, as one example, like LinkedIn does or Facebook requires real names. or if they don't want people talking about politics, which threads has said any political discussion is going to be downranked by the algorithm and then in other places it might, you know, X might be upranking political discussions.

Starting point is 00:47:24 Okay, those are just private company choices. That hasn't to do with your individual sovereignty. Now, you could consider it censorship, but it's private censorship. In the same way, a private company might say, you're not allowed to come in here and stand up on the restaurant table. I was just about to say, yeah. You know, give your speech about whatever, you know. So there's a pizza store near my house and they have a community wall.

Starting point is 00:47:55 They have, I live near universities. There's like, join a study and poetry reading and, you know, a play from some kids and, you know, local magazines and such. that's not a free speech forum because they are allowing that space for people who don't abuse it. So they take down requests for hits? I think if I said, I'm going to kill the mayor of Providence

Starting point is 00:48:16 and put a poster up that offering $50. I'm pretty sure it wouldn't last. They might take it down. So you would be censored. The man would be censored. Yes. There's a conflation of corporate power and private corporate power

Starting point is 00:48:29 and public government action that I think is particularly pernicious because people blend the two to confuse people who aren't familiar with the distinction. And that to me is poor stewardship of an audience. Now, Jason, you and I could say that we think that private companies should have different moderation approaches, that they should have less active algorithms and that they should let people have more unweighted discourse on their services.

Starting point is 00:48:55 But I believe the market would tell us to go build our own dang service as opposed to complaining about what someone else is doing. Because you know what? Meadow wants to do. It wants to make money. and loss of it. Yeah, I think that's the beginning and end of it. And then, you know, this was tried.

Starting point is 00:49:09 In Florida, they did this social media censorship law, SB 7072, but I think made its way to the Supreme Court and got a bunch of legal challenges. It may have gotten sent down to a lower court, but, you know, they wanted to define at scale social networks as having a different private company rule set, right? So once you hit X number of users, you can't ban somebody. interesting because you did see people disappear.

Starting point is 00:49:37 You could take somebody, you know, independent of how you feel about him, I knew him when he was an independent journalist, Milo Yanopolis, who kind of went, he went kind of, I mean, I knew him when he was like a guardian. He might have worked a tech crunch for a hot minute back in the day, but he, he... I met him once, yeah, back in London. He was a tech journalist in London, you know, and was considered like, you know, flamboyant and effervescent and cheeky. Then he went like full knots.

Starting point is 00:50:02 and was like, you know, got a little bit strange there towards the end, and then somehow wound up with Kanye, but he was banned across all platforms. Now, there is something to that, which I am sympathetic to, which is if you could be banned on YouTube, Twitter, Facebook, rumble, you know, LinkedIn, everything. Sure. You have no voice in the world.

Starting point is 00:50:26 I'm also sympathetic to those platforms not wanting to have somebody, putting him aside, who's a not-s- on their platforms. And Substack had to deal with it. Substack is a free speech platform. They really care about free speech. But then somebody was like, hey,

Starting point is 00:50:40 I'm going to search for the word Nazi or white supremacy and I'm going to find the long tail of like, I don't know, five newsletters they found. I think Casey found like five newsletters that were kind of Nazi. And he took his custom somewhere else.

Starting point is 00:50:55 And he took his custom somewhere else. I mean, he made a business decision based off a business decision. Private companies deciding when to do business, with one another of their own free will based on the rules and policies of the other company is not free speech. It is business. But how do you feel about

Starting point is 00:51:10 the at-scale censorship and like nukeing of a person? This happened Trump, in the most canonical example, he was taken off of Twitter, Facebook, and YouTube. I mean, that's kind of like a death sentence for a political candidate and

Starting point is 00:51:25 looking back on that. Do you have any thoughts on it? Oh, I mean, the general concept, worries me because one concern that I have, and this brings up you and I our favorite topic, antitrust and Lena Con, but it does seem that they're in the hands of just a handful of corporations, there is an enormous amount of control over what people see and consume. And just to put this into kind of Gen Z, Gen A, is it Gen A, Generation Alpha? Sure, why not? Sure. Love it. Let's do. Let's go with that. The kids and the younger kids, they use YouTube like

Starting point is 00:51:57 television. Yes. So YouTube is essentially cable all in one platform, which means that it has enormous power. And it does concern me that people can be bounced off these platforms because it's not like you can go to YouTube and knock on the door and be like, hey, can we sit down and have a chat about this? No, you got bounced by an algorithm that just said no to you and there's no customer support. So it does seem to be a bit too powerful.

Starting point is 00:52:23 And that's why, you know, I like more competition in the marketplace, more space for ideas. I go beef with Rumble, other than the fact that so far it's been a terrible business, and their margar complex is pretty frustrating, but it's good PR for them, so I kind of get it. No, but it worries me. But you know what, we can make a wrong. What should happen with Trump, do you think? If you were in charge, what would you have done? You know, you have January 6 occurs. People are pretty scared like, hey, this could have been, you know, many people could have died instead of like the one woman who died. You know, those police showed great restraint. police officers.

Starting point is 00:52:56 Well, they kind of died afterwards, suicides or other issues, but not on that day. But, you know, when I talked to a number of law enforcement in my family, they said, hey, you know, we should have just unloaded, you know, like when people start beating up cops, you unload the clip. I'm amazed that people got away with what they got away with there because I've seen people shot for 1,000th of a percent of that, you know? Like, literally you'll have people go into their, like, pocket and the police are like, take your hand out of your pocket.

Starting point is 00:53:26 You refuse to take your hand out of your pocket. You get shot. Pretty straightforward. Like, cops got to protect themselves. Here, you've got cops being beaten, crushed in the door, and they don't unload. I was like, whoa, that is some incredible, thank God, but like some incredible, you know, restraint. Thank you.

Starting point is 00:53:42 So, you know, I thought the Trump thing should have been a temporary ban. I think it should have been like a, whatever, 30-day cool off. Like, let's figure out what happened here. And I, I don't, the permanent ban, I thought was weird. How do you permanently ban the president? or former president, you know, without a trial or whatever. I just thought it should have been like, hey, maybe 30 days we have a cool off and we talk about it.

Starting point is 00:54:02 30 days for inciting an insurrection, as Mitch McConnell kind of detailed in Romney, 60 days for, I mean, you end up with a weird hierarchy. If I was in charge of it, I would have just said he's very annoying and I don't want him on my service. But this goes back to the point of, it's a little weird that single points of power have so much control over the discussion.

Starting point is 00:54:24 and that's why I'm in favor of more free platforms around the internet to prevent corporate powers which we have less redressed to telling us what we can and can't say. And YouTube, by the way, I mean, they're so powerful that I think they had to take a deep look in the mirror

Starting point is 00:54:40 when this one mentally disturbed woman got her videos deemotized. She bought a gun. She drove to the YouTube campus in San Bruno and she shot the place up and she killed some people. So with great power comes great response. and this idea that you can just turn people's accounts off, turn off their monetization, I think that's a big major learning for these platforms, which is, hey, you're kind of turning

Starting point is 00:55:08 off an entire person's life if you turn off their account like this. And in the case of a mentally disturbed person, they might come and do something incredibly damaging and dangerous. So it just proves how powerful these platforms are. We have to move on. But one of the One thing is also bipartisan is people want to diminish Section 230 protections for companies. This allows them to essentially decide what is possible and not possible on their platforms. And ironically, it's bipartisan from two different angles, but there is an attempt to limit corporation's abilities to make decisions like this. To me, that's a cure that's worse than the illness, if that makes sense.

Starting point is 00:55:48 But we'll talk about that. Let's go lightning round. Let's go lightning round. We've got some good data here to go through. as we wrap up. So, first off, we're talking about secondary sales. Jason, the news item is that G squared has raised $1.1 billion for its new secondary fund. Okay.

Starting point is 00:56:02 $4 billion under management. The quote that stuck out to me was from Larry Ashbrook. Do you know him? I do not. I do not know G squared. Oh, all right. Well, we're both learning then. So Larry said that he can quote, buy shares in the secondary market at about a 30% discount to a company's value.

Starting point is 00:56:18 And at 70% to 80% discount to the prices paid back in 2021. basically rolled up a whole bunch of money he's going to go out there and buy stakes from you and other VECs. Sooner to me is the amount of money here at play. A $1.1 billion funds enormous, especially if you're buying discounted stakes. So, thoughts?

Starting point is 00:56:35 This is a great sign that the market is in the late stages, perhaps even past the end of the bottoming out. When people see an opportunity like this that they can't, and the greed is there. You know, there's blood in the streets. Things are marked off 70% from their peak, 30% from their recent valuations.

Starting point is 00:57:00 That means an opportunity has emerged and people want to start buying. And, you know, we saw that two years ago when I started J trading. I was like, this makes no sense. Like Uber at $20, Facebook at $90. Like, these valuations don't make sense to me. This feels once in a lifetime

Starting point is 00:57:14 and I just took a, you know, a little bit of money and just started buying up shares to make it entertaining here on the podcast. And then my goal was always to hold them for 10 years to see how they would do and see if I was good at buying at the bottom. And sure enough, I beat Nancy Pelosi in the market. The point is, that's what's happening here. Some smart person is saying the opportunity to invest in the next set of new companies,

Starting point is 00:57:36 that might be great. But I see another opportunity here that I think is better. So instead of $1.1 billion to the next cohort of companies like I'm doing and many VCs are doing, he's saying the last cohort of companies, I can do a little bit of math and kick the tires and find some great opportunities

Starting point is 00:57:57 in the last vintage or the last two vintages. And I think that's wise because I'm looking at the last two of three vintages in our first two funds and saying, you know what, there's some winners in here that are undervalued and I'm not getting secondary offers for them.

Starting point is 00:58:11 And the only secondary offers, I see anecdotally, are from employees who need to set. So I will get an email sometimes, hey, do you want to increase your position in X, Y, and Z? And I say, okay, who's selling? What are they selling? Oh, it's common share.

Starting point is 00:58:28 I say, okay, it's not preferred. It's common. Okay, those common shares are coming from an employee. Okay, what are they selling for? And then I look at what the preferred price is. And I'm like, oh, that's interesting. Thanks for the information. Put it in a spreadsheet.

Starting point is 00:58:38 I have it just for my own knowledge. And, you know, we're not buying anymore. I'm certainly not buying common because that's behind the preference stack. But yeah, here is a great. opportunity. And I think an even better opportunity might be for the companies to buy back these shares. You know, if it's that low, why not raise money as a company and say, we're going to get, we're going to raise some money to buy back some shares, right, and then clean up the cap table. So lots of opportunities. This is a very bullish sign for me for private market companies and

Starting point is 00:59:06 inspires me to keep working on the Twist500.com really, really interesting. Yeah. And just as a last data point here, these have become a lot more popular. So if you go back to 2013, there's about $28 billion worth of trades in the secondary market that rose to about $134 billion, according to William Blair in 2021. And they were expecting this year to come in roughly the same. So lots of transactions, lots of private capital in motion, something to keep an eye on. And to me, Jason, this is just the IPO market is trash. People are desperate for time or money and time's running out. So we'll see what happens next. Two other firms doing it is stepstone and industry venture. So those two are two.

Starting point is 00:59:45 the other big name. Stepstone industry ventures are pursuing the strategy as well. First more. Okay. Next up is just the end of a big project for the IBM in China. We have talked about the China trade and how that country was at one point the leading light of venture capital for a short period of time. And since then has turned away from capitalism and a market economy and has seen things shift dramatically. We have a chart here of IBM's revenue in China that I think is incredibly illustrative of the dynamic for American business. Jason, the blue bars are their business in China on a percentage basis. And then the gray is their overall growth. So IBM is growing again, but in China, it seems some of its sharpest declines. And essentially, this comes

Starting point is 01:00:29 down to China trying to buy more domestic. And so IBM's yanking a thousand jobs out of the nation. That's a lot. That's a big decoupling. But here, instead of it being geopolitics, it seems to be just a straight business decision. We're not doing well. We're out. Yeah, and I think a lot of these are R&D jobs from what I read, research and development. So, you know, it makes also sense on a geopolitical basis, reading into the tea leaves here a little bit. Perhaps if you're doing R&D in China, maybe the government wants you to do that a little bit more domestically or in other locations where you're not have, where you have maybe a little more respect of IP intellectual property. So, you know, the decoupling continues. We probably coupled a little too much with China and created too many dependencies.

Starting point is 01:01:19 So investments over there, no VCs, no private equity investment. And now we're seeing the next shoot-a-drop, which is, you know, services, businesses, and research and development, they're going to be out. Manufacturing's leaving. So, you know, the India and Vietnam are the big beneficiaries there in iPhone 15. I know iPhone 14 was being made in India. I think 15's going to be made there. I kind of got laughed at on all in when I said,

Starting point is 01:01:46 they're going to move this all to India. And it's like, it's actually happening. And India's a thriving, growing country that's, you know, pretty, I mean,

Starting point is 01:01:55 it's not a perfect democracy by far, but it's a much more functional democracy. It is a democracy. Yes. So, which is very different than how China works. Very different than how China works, where,

Starting point is 01:02:09 you know, if you were, investing in all these education companies or Alibaba's financial group and you know you can just have the whole thing just go away like Russia did to Pavel with his business like your business can be seized or shut down just like that so who's investing in a market where

Starting point is 01:02:27 some God king can come in and just be like it's hard enough with competition coming in you know and fighting the competitors or incumbents to have the government come in and just pull the plug that's kind of rough On the on the India point, actually, they're now going to manufacture the next iPhone pro series. I think before they were doing the lower tier iPhones, now I think they're expanding into the highest tier as well, which means that if the Chinese market closed tomorrow, that they would still be able to at least for a time keep making iPhones, which is something that I don't think people five years ago thought was possible at all. But it turns out where there's a will and a couple hundred billion dollars in the bank, Jason, there's a way, shockingly enough.

Starting point is 01:03:08 I'm just reading here some notes 25% of the world iPhones are built in India now Wow Now I think a lot of those To your point were the earlier generation But you know The fact that

Starting point is 01:03:21 The gap between the new it The latest and greatest And the at scale ones It's closing speaks volumes And this is where You know We do need to think about The decoupling

Starting point is 01:03:35 There are good aspects to decoupling because there was too much dependency, like being able to get masks and drugs and stuff like that out of China during the pandemic. That's a little troublesome and chips if they invade Taiwan. But also the dependencies, the co-dependencies can make for a good marriage. We're like, hey, we have a mortgage and we have three kids.

Starting point is 01:03:57 Like, we shouldn't get divorced. We should try to stick this out and go to therapy. I'm afraid right now, this could lead to, hey, just straight up. It feels like we're in a divorce with China. Like, it's irreconcilable differences. I wonder if that is good for society. It would be better that businesses were maybe still functioning in China. But I think it's largely China's decision.

Starting point is 01:04:21 Yeah, I don't think it's us. I mean, I mean, we only ended up so overly coupled because so many international businesses wanted to do business there because it was efficient and cheap and high quality and all those things. And it turns out that's not going to loss. The way this was put to me, I forget where I read this, but someone said, it was never going to last that the entire world put its manufacturing on one coast of an autocratic nation. And when you think about it that way, yeah, that was never going to last.

Starting point is 01:04:48 Lasted for a long time. Now, two quick things to get to our last story here. One, India, going back to the point about encryption, don't forget, they've been in a fight with WhatsApp about the encryption in that service. So another country, another government, another democracy, doing some stuff. And then also in China, this week, there was the World Robot Conference. And here is the stat that blows my mind. CNBC reported that Beijing claimed 27 humanoid robots debuted at the event, which was a record. Now, we've talked about on this show for the Twist 500 companies like 1X and figure and atronics and co-bot and these other companies that are building humanoid robots.

Starting point is 01:05:29 We've also talked about China, EVs, industrial overcapacity and production, and it seems that what we have seen in EVs, Jason, is now being replicated to some degree in humanoid robots. But personally, I'm kind of excited because if there's that many new ones, that's a lot of competition, and competition yields great results. So bring on the robots. I think this is going to parallel the, what we saw with the DARPA challenge. People don't know the DARPA challenge.

Starting point is 01:05:54 Defense industry here in the US put a challenge out for self-driving. It was comical and bad. it was kind of laughable. And when you watch optimists or humane or any of these robots, with the exception of Boston Dynamics, doing backflips, you know, it does feel like you're dealing with like a drunk toddler. And it's going to, just like the self-driving cars look like a drunk toddler was driving them. And as we go from drunk toddler to sober toddler to teenager,

Starting point is 01:06:22 distracted teenager, to focus adult professional, you know, with a cup of coffee in them, you know, the world's going to get a lot better. And, you know, the self-driving we're seeing, I use FSD every day. Number of interventions for me, probably one every 20 minutes. It's not bad. And, you know, when it's a highway, it's zero.

Starting point is 01:06:45 Now, highway also is high stakes because you're going fast, and if you get an accident, you're dead. So it's pretty good that it's perfect. And, you know, I'm only talking about Tesla's here. And then, you know, when you get to weird lecterns, or unmarked roads or, you know, in a city, people doing weird stuff, that's when I find myself disengaging is I get into some weird, you know, area, and it's not clearly labeled or it's a three-way stop.

Starting point is 01:07:11 And I think that's just time. I think it's just time in getting those edge cases ironed out. But I was very, very, it's not on the docket today, but I'm very encouraged that Uber did a cruise deal. And that's a big deal. Uber has Waymo already. and Uber has the B-Y-D-L-M still a shareholder in Uber. I mean, I did sell some with Tomaso Yosh's on back in the day,

Starting point is 01:07:36 but I'm still long because I do think once this technology hits full deployment, which is going to take a decade, I'm sure, and you also have to build the cars. I think the market for ride sharing goes from less than 1% of rides we calculated, $250 million a week, less than 1% of rides in the United States. I think it grows to 20%. So then your question is, if it does grow to 20% in 20 years, like let's say it adds a percentage point every year,

Starting point is 01:08:04 which would roughly be double for now, how much of that does Uber capture versus the competitors? And if it captures any amount of it, it's going to be a huge business. I mean, if it goes from one to five percent and the other 15% goes to other players, Uber's still a huge business, like a ginormous business, a business for the agent.

Starting point is 01:08:25 So I do think it's a trillion-dollar company, And I do think Tesla, Waymo, and B-YD will become trillion-dollar companies. I think there'll be five trillion-dollar companies in soft-driving. I honestly believe that. And young people don't seem to want to have driver's licenses. No, that's, man, don't get me started about that. That means they're too friendly with their parents. I could not wait to get the hell away from mine.

Starting point is 01:08:48 You know what? Parents are giving their kids Uber teenager accounts now. They have a teenager account. So when your kid gets in the car, you can see your child going somewhere. You get alerts that they got dropped off safely, all that stuff. And then those rides, I believe, are automatically recorded. And then the recording is done. So if somebody were to start talking to your child, it would be recorded on both their phones, right?

Starting point is 01:09:13 So there is like this agreement that if you pick up children and you want those rides, I think you have to. Somebody will correct me, but I think there's a lot more. monitoring. And that's fine because you're in someone else's car, part of a service. But I mean, when I was 16, 17, I wanted to get in my car and drive out of my parents line of sight. Yes. Because once I was out of their line of sight, they didn't know what I was doing. I was, what was your first? I was free. Uh, I had a, I had a roughly 10 year old BMW 318 TI, which is the little hatchback BMW, little teeny four cylinder engine, tinted windows. It was so much fun.

Starting point is 01:09:53 I was, I mean, because once you can go away, you can leave, and then you don't have to be there anymore. Your parents can't tell you what to do. That's what I don't get about kids these days. Is they're like friends with their parents? Like, what? That blows my mind. Yeah, well, they are not part of it.

Starting point is 01:10:09 Here, I'll show you my first car. I should go buy this car. Let's see. Let's see. 1973 Mustang Grande hardtop with vinyl. So that was vinyl. That leather. It's like vinyl.

Starting point is 01:10:22 And it was mustard gold. kind of color, and that's a 351 Cleveland. It's all, you see the front of the car? Yeah. It's as big as the rest of the car. Yeah. It's all engine. And when you would hit the gas on this thing, man, the front of the car went up.

Starting point is 01:10:37 It was so powerful. Rear wheel drive, I presume. Yeah. I mean, it was, there's a 351 Cleveland. And I mean, it was bonkers. And, yeah, there was 351C, four barrel. I think mine came with a two barrel and I just upgraded it to a four barrel, Yeah, so there's a two,

Starting point is 01:10:55 the incredible car. I should buy one. I mean, I always wanted to have a convertible version of it. It was beautiful. The 1970 and 1970s, it was the end of the muscle car era. Questions, we'll do one or two.

Starting point is 01:11:06 Yeah, so the two that are most interesting to me. One's from Austin Hill, ones from J.B. They bring up two other companies that might fit under the rubric of shutdowns. And so I'll just throw these at you and get your feedback. So Austin says, Kick Messenger, K-I-K,

Starting point is 01:11:21 were shut down by the U.S. government. It was a VC-funded Canadian company, and it was sued, but I think it was sued over its cryptocurrency work, and then I think of memory serves, they shut down the message you now have to focus on the crypto side of things. So I don't think that falls, Jason, under your rubric of shutdown for encryption purposes.

Starting point is 01:11:43 No, I don't think it was. I think they did have a legal battle, but that was with the SEC over Kins. So they were doing the shenanigans and that. I mean, and to just do a callback, you know, we don't know how Pavel was making money, but he was making a fortune from Telegram apparently. And so if money is flowing and illegal activities are occurring,

Starting point is 01:12:10 and the government connects those in some way, fairly or unfairly, that kind of changes things. So keep that in mind. And I think that's where the Silk Road and the back page story, might be interesting parallels here. We have to wait for the court cases and the details. But if Pavel was benefiting from these horrible things, they're alleging were occurring,

Starting point is 01:12:33 and those people were paying in some way or he was monetizing in some way, and they can connect those. That's the big problem, as I see. That would be huge. And then the other idea that J.B. brought up was Darkwire, which was the FBI's encrypted cell phone company. But that was the FBI creating a fake encrypted,

Starting point is 01:12:51 app to catch criminals. That wasn't them shutting down a legitimate app. So to me, related. It's still interesting. Still interesting. Yeah. Well, very interesting. Yeah. Here's the thing. If anyone comes to you online offering to do something bad for you, don't say yes, because it's probably the government

Starting point is 01:13:07 trying to trap you. Now, I have lots of thoughts about entrapment, but that's not this conversation. And then finally, to JCal, right at the end here, what is the real reason do you believe is why I'm going to translate? Jason, What do you think is the real reason why Telegram's CEO was arrested?

Starting point is 01:13:25 Well, I think we've kind of hit that as best we can. I mean, I think I'm going to go with you that there's more to the story here than meets the young. Because we are a little confounded about why now and the confusion as to what's happening being illegal or not. So there's something else at play is what my spidey sense says based on. off 50 minute discussion of the entire space. What do you think, Alex? No, a hard degree.

Starting point is 01:13:57 There's going to be more that comes out about this. There's a lot of interesting things, national security, the ton token, which is the telegram associated cryptocurrency. Lots of things to dig into. As long as strong encryption makes it out the other end, I'm happy. If Pavel is innocent,

Starting point is 01:14:13 then may he also walk free and quickly. But, guys, I think we need to wait about 24 more hours and then we'll have a lot more information, because every single newsroom is working on this. If we're thinking about this like a hand to poker, which is kind of how I look at everything in life, it's not bad the addiction.

Starting point is 01:14:29 You know, the whole cards was him being arrested. Those are our two cards. We know those. He was arrested by the French, coming off his plane for this moderation issue. The flop were the charges that just came down, and we're just sort of examining the flop right now, right? So we've got to put those two things together.

Starting point is 01:14:45 What are our whole cards? What's the flop? The turn in the river will come out during the case, if there is in fact the case. There's going to be a turn. There's going to be a river. There's two more cards, and those two could have a dramatic impact

Starting point is 01:14:56 on what's happening here. And we'll be here for you. Subscribe to this week and startups on YouTube. Hit the bell. We go live two or three times a week. We're trying to get the three times a week. Because we know you love when Alex and I could do news. Go to twist 500.com and look at those 500 private companies.

Starting point is 01:15:12 We're going to do some sort of an event around them. And we're going to have a really fun time building out that list. We're trying to add, you know, a couple dozen companies a week to Twist 500, and there's a newsletter for Twist 500 in the mornings at free, and the afternoon will be paid. We're going to try to profile all of those. So we're looking for a full-time journalist researcher here over time,

Starting point is 01:15:33 hopefully in Austin, to be in an office with me. If you're interested, email Alexw. at launch.com and send a writing sample. Yeah, more to come on that. Actually, I just finished our media plan, Jason. And everybody will be live later this week. We've some special stuff coming up. See you then.

Starting point is 01:15:49 Bye. Bye.

This Week in Startups - The charges against Pavel Durov, the future of encryption, and secondaries are heating up | E1998

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