This Week in Startups - Zoom earnings, SaaS burnout, Amazon's $10B Alexa loss + FTX contagion with Sunny Madra | E1619

Episode Date: November 23, 2022

First up, Jason and Molly discuss Zoom's Q3 earnings and SaaS burnout throughout the industry (1:37). Then, they break down Amazon's $10B loss tied to its Alexa smart speakers (22:13) and an Airbnb Co-Founder's new housing startup! (34:54) Sunny Madra joins in the final segment to help explain the crypto contagion caused by the FTX collapse. (45:12) (0:00) Jason tees up today's segments! (1:37) J+M wind-down earnings season with Zoom's Q3 results and discuss SaaS burnout in tech (14:40) Embroker - Use code TWIST to get an extra 10% off insurance at https://Embroker.com/twist  (15:55) How Zoom survives and thrives with insane competition (22:13) Amazon's hardware/Prime Video division is on pace to lose ~$10B this year, mostly due to Alexa losses (30:33) Squarespace - Use offer code TWIST to save 10% off your first purchase of a website or domain at https://Squarespace.com/TWIST (32:01) Solving Amazon's Alexa problem (34:54) Startup of the Day: Airbnb Co-Founder Joe Gebbia has started a housing startup! (43:46) Mixpanel - Apply for $50K in credits at https://mixpanel.com/startups  (45:12) Sunny Madra joins to break down the contagion throughout crypto caused by the FTX collapse (1:08:51) More FTX craziness: SBF's hundreds of millions of secondary, FTX's real estate purchases, and more! (1:14:14) Is Coinbase in danger as one of the last major exchanges standing? Could Bitcoin fall further? How hard will it be to raise VC in crypto going forward? FOLLOW Sunny: https://twitter.com/sundeep FOLLOW Jason: https://linktr.ee/calacanis FOLLOW Molly: https://twitter.com/mollywood Subscribe to our YouTube to watch all full episodes: https://www.youtube.com/channel/UCkkhmBWfS7pILYIk0izkc3A?sub_confirmation=1

Hey, everybody, welcome to Tuesday. First up, we have some rapid fire news. Zoom reported their earnings for Q3. Not too pretty. And Amazon is reportedly on pace to lose 10 billion on its Alexa devices and their streaming service in 2022. We're going to break that down. And for our startup of the day, we have Samara. This is a ADU, you know, like a nanny unit in your backyard, founded by one of the Airbnb co-founders, Joe. And they're creating factory-produced studio and one-bedroom units that are absolutely gorgeous. Then, Our guy, Sunny Madra, comes on the show to break down some of the contagion that's happening in crypto since the FTX collapse. It's going to be a great show, so stick with us. This weekend startups is brought to you by Embroker's Startup Insurance Program, help startups secure the most important types of insurance at a lower cost and with less hassle. Save up to 20% off of traditional insurance today at imbroker.com slash twist. While you're there, get an extra 10% off using offer code Twist. Squarespace.

Turn your idea into a new website. Go to Squarespace.com slash twist for a free trial. When you're ready to launch, use OfferCode Twist to save 10% off your first purchase of a website or domain. And MixPanel helps startups find product market fit faster by offering powerful, self-serve product analytics. apply today to join MixPanel's startup program and get $50,000 in credits at Mixpanel.com slash startups. It's still earning seasons right around the tail end of earnings season. It is. I'm just laughing because it's like in other news that's not as interesting as FTXT, but still pretty good.

Well, I would like to get back to startups and tech companies and I'm just tired of talking about crypto because I told you, this thing was a grift, 99% of the time. Now I'm right. And there's no, like, joy in being right about this, because I didn't make any of the money. I found no bagholders. I didn't flip anything, so I made no money. Yeah. And all the people who were wrong made out like bandits, it seems. I know. This is the cruel nature of being a traitor, is that you could be right that it's a grift, but you didn't, by being right that it's a grift, you didn't get anything from it. You didn't get anything from it, if you identify a grift, the whole point is to grift. I'm an idiot. I was early on this grift and I didn't take advantage of it. No NFTs, no J-coin, nothing. No trades, no soul.

Yeah. That's my hot tape. It's incredibly infuriating. And you can't short this stuff. I could have been a multi, I mean, you know, you know. I just every day I live with the imaginary $20 million that's just gone. Yeah, mine too. Anyway, grift, grift, grift. Let's get back to J-trade. So let's talk about taxa. Where I can lose more money. Some j trading if you want to. I mean, you know,

I'm going to buy more Disney. I haven't, but I'm going to. Let's, we should talk more about Disney. We should really, because I've been listening to more, like they got a bunch of debt.

It's still, it's going to be fine. It's going to be fine. It's a long term buy. I know they have debt. I know they got problems. They got a little mini pop from the new, the return of the king.

Yeah. Which is great. Yeah. But I don't think that that's why you trade it. I don't think you traded on the return of the king. Right. I think it traded on what he does and the execution of the king. There's going to be an awesome acquisition.

Like, it's going to be, we were speculating in the group chat yesterday that it might be Spotify. Like, feel like something exciting. I saw that. Bob one slash three is going to do something exciting. But yes, it is still earning season. Remember pandemic darling Zoom? Yes.

Remember when Zoom was the most unstoppable company on earth? It's like a hundred billion dollar country. company at one point. Yeah. Yeah. Yep. And is frankly, like, still doing pretty well, although not as well as everybody was hoping shares dropped 7% after Zoom released its Q3 earnings report. Revenue hit $1.1 billion. That was up 5% year over year. Free cash flow was $295. That was down 25% year over year. Net income topped out at 48.3 million down 86% year over year. might be one of those things that people are starting to cancel because they've got enough folks in the office that they don't need the paid version anymore. Zoom also for...

I have another theory there. Okay. What don't you finish up and that'll give you my theory. Okay, yeah, perfect. Zoom also reported 3,286 customers paying more than $100,000 a year. That number was actually up 31% year over year. And cash and marketable securities on hand, $5.2 billion. Okay.

great company, great product. We're actually using it right now. There's only one feature that matters in this product. It's the de-aging feature. You and I look like we're 38. We look amazing. We don't need makeup artists. This stock is going to crash once somebody figures out

how to do the same video filters and make people look young in Slack, Google Hangouts, etc. This touch-up my appearance is the key feature that doesn't exist in other products. If Slack ads touch up my appearance or other people add that, I think it's going to be game over. I'm being a little facetious here. Here's the issue. Honestly, this makes me think that Snap

should start doing video conferencing immediately. Because they got the filter thing dialed. Why are they not going for business, Enterprise? Here's the thing. Yeah. I want those eyelashes like Snap can give me. It's like the greatest. Well, I'd like to have somebody, they should, there should be a filter store where like it's independent of any particular product. Like I would love to have Zoom's lighting features and all that stuff as a system tray startup. Where it does it in the system tray, no matter what software I use, Zoom, Google Hangout, Slack huddles, Microsoft Teams. I can control my video settings independent of those. Now, I know that's a little bit hard to do, but that would be a very cool thing to do APIs.

But here's what's happening. Everybody's going to question every SaaS bill. Everybody's looking for duplications in the SaaS stack. That's what I said. Zoom, yes. And Zoom, you were right again. Zoom was an add-on feature that other products didn't have. I have done more and more huddles in Slack recently.

And they do video, and you can pop them out. And the thread is kept there. Now, when I use Zoom and I have a chat, that chat is gone. It doesn't exist anymore. It's lost like tears in the rain. And when I use Slack, the history is there. And the fidelity of huddles in Slack has made me think, I want to find out what our Zoom spend is. And I want to go down to two Zoom accounts in the whole company of 22.

Nobody should be paying for Zoom. Everybody go back to the free version. We'll have two versions for webinars or whatever we need. So I want to trim that spend because it's duplicated here. And then additionally, we have Notion. and at some point I believe Notion will add chat, Slack added Zoom, Zoom's going to add Slack, and Slack is adding documents, right? They did that announcement recently.

So they have a document associated with each chat room. So now it's the race for who can unify chat, video conferencing, and documents. Right. Now who's going to win. Simultaneous editing. Yeah. All of that put together. That's going to be the Holy Grail.

I think it's a three horse race right now between Notion, Slack, and Zoom. And it's funny because that is all true. And all three of those combined represent like the teeny tini tiniest fraction of the actual

like Google and Microsoft market share. Right? Like everyone is still, we have this idea that all of these people are using these products. And the fact is most big enterprises are still just paying for Google. Like the the whatever they call it, the office suite or Microsoft.

Yeah. And so it's not, it's not just a race. It's like a race to the death. So I had, I am going to take like, I had my single most successful tweet thread ever about. Oh,

really? Oh, yeah. Like far into way. The only thing that ever came close was one time when I tweeted about BTS is that, you know, they get you. They get you.

They were happy. I was like, you're a thread VC now. Is that a thread VC? Yeah, totally. I'm a freaking thought leader B's. I do. No,

I'm talking about SaaS software because like I do, this is exactly what I think is happening inside companies as that they're going, wait a second, they're doing exactly what I'm doing as a consumer. And what made me think this is that I just went through this thing where I was like, Jesus Christ, I pay for a lot of things. I'm going to cut. This is just like this. Why do I have this? I'm paying for storage in three different places.

Da-da-da-da-da-da. Yep. And I was like, ooh, companies are going to start to do this too. And as we flood the zone with SaaS products, they're going to be like, no. If you're a new one, God help you. And if you're an existing one and you're like Zoom, just count. Zoom is pulling a Peloton here. I'm going to call it.

Like, they are acting as though the pandemic is never going to end and they don't have to innovate. Or they got completely overwhelmed just trying to keep the service alive during the pandemic, which I think did happen, but have not added on to it. And so what's going to happen is, like, I can't believe I'm going to say this. Oh, God. I'm really sorry to my coworkers. Like, I want to go to an office now.

I want to twice, like two times a week. I want to. No, everybody does. Everybody does. It's fun. We should do like a 48 hour sprint. What we'll do is everybody comes to work. And then we go to Miller and Lux.

We get the steak. And then if we want to, we come in the next day. But I think we're going to do Wednesdays. Maybe we just do Wednesdays. It'll be like opt in. But if you opt in, you get to hang out with the king and the queen and you get to have a steak.

I mean, seriously. And so like Zoom has sat there and just been like, oh, we'll be indispensable forever. That's what Peloton thought. Know what you won't. They're going to have to build these new features. Yeah, I've got to add features fast. And to the SaaS point, I had SaaS frustration yesterday. I mean, these SaaS companies have got to get their ish together.

I love a, I tell all my founders, do year-long contracts, totally cool, offer that. Make that the primary way you sell. But also, I have like, I wanted to, my sales teams over at Insai, I want to use like one of these sales coaching software like gong is the, leader and then there's like 10 other ones. And it turns out, if you scroll down here, you'll see Mark Benioff responded to me. He's like, oh, use Salesforce. But here's the problem. I want to pay month to month. I want just this one piece of software. So I'm going to check out, if Mark Benioff is telling me they have like a gong competitor. I'm going to check it out. What these things do is they record the sales calls and then they look for trends and they tell

you if you're talking too much, if you've got empathy, what your tone is and you can coach your salespeople to be better salespeople. It's going to be. kind of cool. And I was actually thinking about it for our founder calls. Now, this is a little controversial. It's a little creepy. It's got all kinds of issues. But the truth is, like, people become better in conversation with coaching. And so this records them and then gives you, like, coaching tips. It's actually seems to work. And none of these companies were like the first three or four companies would not give me monthly pricing because I'm like, I don't want to sign, you know, these things cost $1,000, $100 a month per salesperson. We have 10 salespeople at inside.

I'm like, I don't want to spend $12,000 on this for two years. They all pushing me really hard. But it turns out anybody can build this software apparently. Like Gong is not difficult software to build. And there's 10 different companies doing it, maybe 20 now. And sure enough, in my replies, one of the companies is like, oh, hey, Jake out, we actually charge monthly. We know that this is like an issue. And I'm just like, the whole point of SaaS was to give me the ability to sample software.

That was one of the strengths of it. So now you're going to bind me to. a contract? No, I'm out. Okay, so what's funny about that is that the whole point of SaaS from the investor perspective was to have companies that came and said, we have completely predictable recurring revenue. And we would probably advise them, I would think, as investors, to lock people into a contract because I don't want your revenue to be fluctuating wildly because you only charge month to month, right? Like, fundamentally, this is the issue with subscriptions. The thing people like, whether you're running a business or you're a consumer, like I loved when, you know, it was like,

I could try YouTube TV. I could try Sling. I could try PlayStation, whatever their thing was. And it was like, try it for a month. And if I don't like it, I'm out, unlike Expendity and da, da, da, da. But then PlayStation went out of business and Sling, I think I bought and whatever. Because you can't make enough money. You can't make recurring revenue. You can make monthly. Without contracts. Well, monthly works for consumer products. And most SaaS, like Google, I don't know about Salesforce, but like Google will offer you a discount for a year, but you can still do month to month. So what I think is happening, this to me is a negative signal that these companies are in

a panic, that they need to lord it over people who want to try their products. I think it's a bad precedent to say, I am so unsure of my product's value that you might quit after three months and try another one. But this is why I love about like the competition for ideas. I just shared another tweet link there if you pull it up. This guy's got meat record. I'm just going to give him a shout out. And he's like, oh, you know, we're doing it self-service, free and affordable plans,

yada, yada. And so this is like what you have to understand in SaaS. If you are going to be like over, I'm not going to say which companies were over the top, but all of them, they're pricing and like trying to harang us. And then my sales team really wants to use one of these. So I'm just telling my sales team, use this one. shout out to Meet record HQ

Hal, senal Senhal. I'm sorry if I'm mispronouncing your name but shout out. Snehaal. And I'm just going to give his product a shot because he wants to do monthly. Now he may not have the best product, but he's going to get my support and I'm going to go with the person who's confident enough to win my business back every month.

You know, if Spotify sucks and it's month to month, I can quit and go try Apple Music or vice versa. I happen to pay for both, by the way, because I have Apple bundle and I'm like, whatever. I like having the two. Listen, I have been dealing with business insurance for three decades. And switching providers, always a nightmare. It's too expensive. It takes so much time. Often, you don't even get better coverage, but now you can make switching radically simple with imbroker. Embroker is the radically simple destination for industry tailored commercial insurance. Embroker's single application helps startups get four quotes for four lines of

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slash twist. That's EM-B-R-O-K-E-R.com slash twist. Chef's Kiss. I give them my highest rating. We love inbroker. Inbroker.com slash twist. The Apple bundle, speaking of this entire trend, right? You're seeing all kinds, you're seeing companies respond to, I think, what is a, I'm going to just call it a broad scale subscription killing.

There's a calling happening in subscriptions, whether it's enterprise or consumer. And some, so you're seeing companies have to raise prices because they can't afford to subsidize anymore. Apple just raised the price of that bundle, like almost $4, I think, from,

well, three, 30, from basically 30 to 33 bucks a month, which caused me to go in, because I'm turning into such a cheap bastard, go in and turn off all the things I don't actually use such as Apple Music because I only want to pay for one. And then simultaneously, my friend who's like a big media exec was like, oh yeah, I just told our entire division,

give me a list of the stuff that you, like here's a list of all the things we pay for. You have one week to tell me if you use it or not. And if not, we're killing it. Like massive budget cutting. So you're seeing differentiation, right? Like, and this is getting all the way back to Zoom or Snehall and his hustle. He's going to differentiate that company with month to month pricing. Zoom is not differentiating with new features. Like, if you want to survive now, yep.

Who, boy, are you going to have to work harder? I'm surprised, like, there hasn't been an independent Zoom competitor that has, like, more affordable pricing. I don't think Zoom's particularly expensive necessarily, but Zoom is in beta for, like, mail and calendars and stuff like that. So, you know, I think- Bear move faster, guys. It's been three years.

It's been a little too slow, I'm a little... It's been too long. It is rock solid. I mean, I will say that about Zoom. It is the best of, that's why I still use that. I think it's still best in class. Yep. But if I'm being, look at this glow.

Yeah, that's the thing. Touch up my appearance to whoever. Mark Benny off on Slack. Touch up my appearance. Mark, we're both in the, I mean, Mark might be over 60. I'm over 50. You're still holding on to the 40s. I'm still holding on, baby.

Hold on. I mean, when the five comes, it's kind of freeing because you're like, well, I'll be dead soon. So who cares? You know. It does. That's going to be great, but I'm not there yet. I'm still working hard. Hold on.

Hold on and just enjoy 40. You can say I'm in my 40s. I'm in my 40s. I'm in my 40s. Yes. You have left in your 40s. Years. I have years left in my 40s.

Okay. Years. 23 months. Whatever you want to consider years. It's good. It's greater than 12 months is years. It is. 12 months in one day.

Okay. You just stop counting. You stop counting over 50. You're just like, I'm counting down. Just enjoy every day. Enjoy every sandwich. I just want to give the shout out to the Slack team.

Huddles are awesome. Huddles are awesome. Huddles are awesome. And keep making huddles better. People don't even understand like huddles exist, but the integration of the threaded chat with the huddle. And I would like to, I don't know if it lets you save huddles or not. But that would be cool, too, if you save the huddle and it was still there in your feed.

I don't know. I wonder if you could. That would be cool if you could record huddles. That should happen. That should happen. But it would be good if it just dumped it into the feed. Can you save Slack puddles? It's not possible to record huddles.

And huddles transcriptions are not sorted by Slack or Amazon website. See, that's a mistake. Filters and saving. Come on, Mark. We'll tweet them. We'll tweet them after this. Yeah, tweet out. We need those huddles.

So anyway, I wish Zoom the best. I'm not a shareholder at this point. But I think they do need to move faster. I invited the founder on this pod a couple times. It doesn't come. Come on the pod. Okay. We got to talk about this Amazon situation.

Okay. With Alexa. I'm in the room. I'm in the room with one, so I got to, I got to. Just say Lexa. Lex. With Lexa. Right.

That must be what they do on commercials. Like Lex. Lex. Lex Friedman, by the way. I am a fan of Alexa because they, you don't know this, but they created a product extension. It's called Lex Friedman. So that's the two point over Lex's Lex Friedman.

It's an automated AI that asks questions to celebrities. Lex, it's just a joke. I'm not saying you're a robotic. I'm not saying your delivery is a little robotic. I'm just saying it's a remarkably consistent cadence. I'm going to work on my Lex Freeman. Today on the program, my dear friend, Kanye West. Artist, anti-Semite, fashion designer.

I'm Jewish. Kanye, I don't even know. Kanye, I'm Jewish. do you hate me we're friends. I'm part of the Jewish media. Isn't that redundant? I'm like, Kanye. It's a funny joke, but it's not cool, dude.

Oh, boy. And he's trying to make a joke to a Jewish guy about the Jewish criminal. I'm like, Kanye, no. And then I'm like, I'm sorry. I'm like, why are you platforming him? Exactly. I'm like, he's mentally ill.

Stop. Oh, you had a scorpion on your podcast and your scorpion's done you? I can't believe it. Okay, so. Interesting. I just don't have mental, people in a mental, I'm just a public service announcement, if somebody is having a mental health episode and or if somebody is a racist, anti-Semite, exactly,

anti-Semite piece of sugar, in either case you don't have them on the pod. Yeah. Either case. Yep. And or case. I know what Lex was trying to do. He was trying to use this friendship to capture like somebody standing up to Kanye. It's like standing up to a person who's having a mental episode, it doesn't matter.

The words just go straight through them. And now I'm just going to pick a fight. But the amount of ego that is involved in thinking like that you, it's like some beauty in the beast syndrome or something like, well, I'll be the one that will get through to him. And it's like the ego involved in that like, no. And also, I'm not even sure that really it's a beauty and the beast thing. Like, you just want the, you just want the clicks.

Like, come on. I think that's like, I mean, I hate to be cynical, but I think a lot of people are like, is I get to have Kanye West. you know, top 10 celebrity in the world on my pod. It's going to be a ratings bonanza. So, but I take Lex at his word that he thought he could get through to them. I agree with your point about it. It's like an ego trip.

Like, I'm going to be the one who gets through a person. Yeah. Like, no, you're not. Spoiler alert. You're not. Okay. So Alexa. So I think the story is freaking fascinating.

So business and insider is reporting, uh, that Amazon's worldwide digital unit, which includes hardware devices like Alexa and the prime video streaming service is on page. to have an operating loss of $10 billion this year and that most of those losses are tied to hardware devices and that those losses were actually two times greater than the losses from the brick and mortar store locations and grocery business. So primarily this is about Echo and Mark Trump. And Prime Video Streaming. So you have to include some of that, yeah. You have to include the Lord of the Rings. Echo.

billion dollar debacle. Sorry about... That was not a debacle. That was an awesome show. I'm just talking about on a financial basis. All right. So there's 10 billion in losses across three distinct businesses that they bundle together so that other people, investors slash competitors don't know exactly how they're spending their money. That's what these big companies sometimes do. So Prime Video is part of this 10 billion. But most of the losses they specify are from this hardware business, the error and it.

And it could, yeah, and it could include probably their cash. camera business to and ring. Who knows if those things are losing money or not, but I'm sure those are in there too. Okay, but let's say it's $5 billion of it. That's a lot. It sort of goes into, you're kind of dipping into, I guess, Zuckerberg territory is what we're going to sort of the punchline here. We think it kind of feels that way.

Maybe. The story focuses really heavily on Alexa and the investment and the Bezos, his personal obsession with this. So, you know, it's like he was so into it that he was reviewed. doing the emails personally that obviously there was never like... A marketing email. So you wanted to make sure the copy, right? That's part of their philosophy with that book.

What was the book we read? Working backwards. Working backwards. Yeah, there's a great book about Amazon's philosophy where they would write the marketing copy first. This way you kind of would understand the value prop as explained. The press release. So the value prop has explained to the press and the value prop would be the FAQ or the marketing

copy, the landing page. basically for the public so that you understand the spec. So that makes sense that he was involved in that, I guess. It does. That's not that unusual. It's clear. This piece makes it clear that this was a Bezos baby. And that, you know, and it's interesting because what they did was sort of flood the zone with hard, with money losing hardware,

hoping that there would be this uptake in usage of these voice assistants that would eventually make money. And, you know, they had, they tried all these integrations like, oh, it's going to be in. the microwave. It's going to be an Uber. You're going to order dominoes. You're going to, there's, you know, something, something Disney. For five minutes, there was like a food network thing that would be show up on my little, you know, screen and give me recipes. None of that happened. People just used it to set timers and ask the weather. Yeah. And so, so it's 10 years. I mean, I just find it so fascinating, I think, because there's so much social awareness of this feature and this product, that it turns out,

they're calling it like a staggering failure. All right. There's a little bit of cynicism here. This has been a moderate success. And when I say moderate, tens of millions of people do use it. The challenge here, this is where like for startups listening, you spend all this money, you get product market fit, modest product market fit for consumers.

So I do use Siri to set my alarm. So if I'm falling asleep, I'll just say, eerie. set an alarm for 830. And that works great. Or I'll say in the car, you know, play the war on drugs on Spotify, you know,

or play the specific song. So playing a song, setting an alarm, all these things work well. What hasn't worked is commerce. Yeah. And this is where Bezos, I think,

you know, thought, and this could still work. So this is where you have to make hard decisions as a business owner. People never said, uh, Lex Friedman, order me more coffee beans.

Because they like to see the coffee beans. They don't trust it enough to just say that. And it wasn't good enough, right? It would be like ordering you a Maserati. And you'd be like, whoa, whoa, whoa, whoa, whoa. Yes. And I think it probably is good enough. Now.

Lex is probably good enough right now to order my coffee beans, knowing what I previously offered. And I do now, I don't know if you do this, but I don't look at my Amazon shipping page anymore. to look at it. Oh, am I going to bundle everything? Now I just, I do one-click ordering. I don't look at all the stuff. I'm like, you know what? I'm not going to even, I'll just,

whatever they default shipping is I'm going to go for, unless I really need it. Like, it's a specific screwdriver I need for tomorrow. So I think consumers might at some point really like to do commerce here, but ordering an Uber, ordering coffee beans, it didn't work. There's no business model here.

And there's no subscription model here. And it's been commoditized by Google. an apple. And they're winning. They have pulled ahead. I mean, as market share goes, they are much, well now much bigger, I think, or have slightly more users. I also, I think there's a couple, right.

There's a couple sort of- Do you use any of these, by the way? What do you use it for? I use all of them. I don't really use the Google Assistant. I briefly had one of the little pucks, and we would use it to play this fun, like, music trivia game. Okay.

Oh, wow. So you did something outside of like setting an alarm and playing music. That was it, though. Literally, I found out. about this one music trivia game and now they have it on Lex. So once in a great while to entertain my child, I will do that. I use them for timers. I use them for the weather.

I do use it for timers. Constantly, my life revolves around reminders on my phone. Remind me in two hours to send that one email or remind me when I get home to blah, blah, blah, blah, blah. Like I do that with voice constantly. But that's pretty much it. And so I think that there are two lessons. one, flooding the market with zero revenue with money losing hardware and hoping to find a business plan later is something that only Amazon can afford to do and then write off and then

have it be a nice hedge against their monopoly profits. So good for that. But two, or B, you can lead a consumer to behavior change, but you cannot make them change. Like, this to me is a lesson that Zuckerberg should internalize, which is you try to get people to fundamentally change the way they interact with devices, the internet and commerce and the world. And if they wouldn't do it by changing their input to voice, they're not going to do it by changing their input to their face and standing in a room. Like, I think that's a cautionary tale. Yeah.

The way I look at this, I think it's a very good point. It has to be much, much easier to change behavior, like two or three times easier. So it is to set a reminder, to set a timer when you're cooking, is. 10 times easier than picking up your phone. Because your hands are dirty, you're cooking, you don't want to get the schmutz on your phone. Doing a reminder. It works so well,

again, playing music, it works so well. It works three times, it's 10 times faster to just play a certain song or album or artist than to go hunt and pack and type the sentence. But other things don't. And so that's where you start to have this problem is people have probably, and we're the tip of the spear, right?

We're part of the avant-garde. We're part of the early adopters. We've added one, you know, category of behavior every year or two of this thing's existence. So over 10 years, we use it for a half dozen things or less, maybe three or four regularly. I'm going to say probably three. I'm probably four maybe.

So anyway, so you use it for less and five things. It's not essential. No. If it went away, I wouldn't care. Experience is getting ruined. If it went away, it would irritate me a lot less than today's recording. And it's getting more and more annoying

because every time I try to set a timer, it's like, by the way, did you also know that I can dance the Meringa? You know, like, I'm like, oh, it tells you, Alexa. It's, oh, it's trying constantly to, like, tell you about new things that it can do. And it's like, I don't want to do new things. Listen, Squarespace is the platform where you can build or sell anything. And you all know, I've talked about it forever. I've been talking about Squarespace for a decade. We love it here.

We use it for all of our websites. It's beautiful. It's responsive. They have 24 hours. seven day a week, 365 day a year, amazing support. And you know, they have these beautiful templates. So your website looks like you spent a quarter million dollars on it. They've also added all this powerful e-commerce functionality. And what is in that e-commerce functionality? Inventory management APIs, advanced analytics. Now they have the ability to sell content and membership. This is critical.

So for example, maybe you're a piano teacher or you're a chef. You want to sell cooking lessons. You can do that. All of that is built in to Squarespace. And this is why Squarespace is such a brilliant The team sits there. They study the customers. They talk to the customers. They say, hey, what can we build for you to make your life better and easier? And they just include it in the product. You can add online booking and scheduling too now. Think about that. You've got classes or maybe you're a hairdresser, your tennis teacher. Now you've got booking and scheduling built right in. Your clients can see your availability, right? And you don't have to worry about coordinating calendars. It's all just done easy, peasy, lemon, squeeze you right inside there. Head to squarespace.com slash twist for a free trial. And when you have friends in your life, life. Well, like, I need to build a website. You don't need to hire a developer. Just go to Squarespace.com slash twist and tell your friends, start a free trial. When you're ready to check out and you're going to use it, use the offer code twist. They get 10% off your first purchase of a website or domain. Okay, so they're doing the right thing. They're trying to get you to a six or seven. This is a great paradox. I don't know if I would shut it down. Here's what I

think they should do. Alexis should say this is so important for humanity. We're going to open source this and make it part of AWS. And we're going to open source the code. Smart. And anybody can build any Alexa into any device because they already allow you to partner with it. But I would even take that further. We're going to dump the data, you know, the the abstracted data, obviously not people's actual recordings. But we're going to make this the greatest open source project of all time. And we'll take the 10,000. They said 10,000 employees might be working on this. Is that correct? Oh, no, no. They're laying off 10,000

employees as we talked about last. Oh, okay. So some number of those might be. Some number of those. So maybe they're like that to be. Well, they said it was, yeah, I think they are. They said it was going to be devices. Is that where those layoffs would start devices, retail, and human resources.

Yeah. Time to get focused. I mean, this is, we're moving into the age of austerity and efficiency. Yeah. Because we lived in the speculative asset bubble. So the price to pay for the speculative asset. Bob, you all had a good time buying crypto and, you know, yoloing meme stocks. Now you all pay the price.

Taking those cheap Uber's. You're all going to pay the price. Yeah, getting your like DoorDash at a discount. Guess what? Here's the price. Everybody going to have to come back to work. Yeah. And salaries are going down.

It's going to be hard. You got to come back to the office and yada, yada, yada. It's now the AIOS is coming. Speaking for a friend, you got to cut your DoorDash budget in. Yeah, you got a doorday. I mean, you got a... My kid's about to move out. I was like, mm-mm, we got a budget now.

We got a cap on DoorDash. I think that's reasonable. I mean, I had... There's been some serious marital strife in the Calacanus household over the, you know, and listen, I'm a very, you know, doting father, but when I see the door debt, the Uber Eats, rather, of Boba, that's the marginal, that's the line in the sand. No. You can order dinner.

But hell no on the second and ordering seven. I mean, when you put in all the delivery costs and everything, we're at $10 per boba. I got three daughters. There's a lot of boba and the wife and me. I don't order the boba. I just go, I'm like the vacuum cleaner there. You know, there's always like 20% left in each boba. Yeah. And that's my, that's my boba experience. I'm the cleanup crew. I take each daughter's backwash. I get, that's what I get to have. That's what I get. Because I don't want to spend, I don't want the $510 boba in there. That's why you got that bulletproof immune system, by the way, like the more kids you have, I think there's something to this. The more kids you have, the more bulletproof your immune

system is because you're just ingesting all the germs. Let's do the startup of the day. Let's do it. This is a fun one. Yeah, I mean, I'm friends with Joe and I traded some text messages with him over this. Yeah, okay, cool. So he should come on the show and talk about this. Samara, Samara, I'm going to call it, uh, is the new joint by Airbnb co-founder Joe Gabia and former Flex Chief Executive Mike McNamara. And it creates, it's actually a housing startup, housing designs. ADUs creates factory-produced studios and one-bedroom units. This actually started as an internal innovation team within Airbnb in 2016 as sort of this

clever like, how could we create more stock, probably? And then earlier this year, so it was effectively incubated in Airbnb and then broke away to become an independent startup. Airbnb retains a minority stake in the company, and it's made up entirely of Airbnb alumni. What do you know about it? Tell me more. Well, you know, Joe's a great designer, and this is gorgeous design. I have a little bit of a background in this. We incubated a company called Blockable, which started by making blocks like this, you know, six, seven years ago. and then they realized this is an okay business, but not a great business. It's a low margin business. It's very bespoke. People want to customize stuff. But the concept of building in a

factory is a very powerful concept. And I'll explain why in a moment. Blockable eventually said, you know what? We're going to do multifamily dwellings. And so they did one for people coming out of recovery slash homelessness, which sometimes addiction and homelessness as we know, tragically gets combined. And you can build in half the amount of time, a third of the amount of time, and for less money, although the money isn't really in the savings of the materials or anything, it's the savings of time. So when you try to build an ADU in your backyard, you got to get an architect, you get permits, all this stuff, and then you got to build. And when you build, you have to use materials. And the materials get delivered, you know, and if it rains one day, everything's

covered. And, you know, you got people with exacto knives and saws and, you know, they're cutting things in the field. It doesn't lead to the greatest precision. And it means you're limited in the materials you can use because you can only cut certain things in the field. Now, what blockable did was they had power water cutters, precision water cutters, and they could use new materials, Molly, that last 100 or 200 years, or that are sustainable, or that are better for the HVAC and for energy consumption. And then when you cut them perfectly with a watercutter with a CAD computer, attached to it, it's perfect. And then when you snap them on, you go, four rivets, and it's on. Now, in the field, you know, they're doing, you know, sheet rock and they're

plastering and all the stuff. And it would be far from precise, which means there's going to be a lot of gaps, the heat and the cooling is not going to be perfect. And you can't work 24 hours a day. So there was this moment of blockable where we were talking about plumbing and there was like, hey, we don't have, there's a shortage of plumbers in the country. It turns out Americans don't want to do jobs. Uh-huh. But I'm bum. Dad, Joe.

They don't want to do these jobs. And so, like, the average age of a plumber is like 60 years old or something. Anyway, we got this plumber shortage and we were going to do the plumbing on site. And it was like, wait a second. Why don't we just hire a plumber full time, buy out their business, put them in the factory? And then all of the construction workers who normally would be sent into the field and have to leave their families for 30 days, 20 days, and you'd have four of them living in a RV somewhere or in a cheap hotel and you're an Airbnb share with four or five of them,

they can go to work every day in a factory. Yeah. They can leave that or you can run two shifts in a factory or three. Yep. And there's no rain and it's controlled and it's a better life for the workers and it's more efficient and then you just drive these things to the field. So that's the genius of Samara and Joe's a great designer. And these things will be lightly customizable, I predict.

And they have a specific concept here, which is to have these be for rentalsals. renting them out for Airbnb's. And yeah, that's a great business. The better business that blockable chose was to not do these, but to do stackable ones. I do think that it'll be interesting to see what is the ultimate TAM for the backyard unit, right? ADUs have been very, very popular in California. We've gotten a lot more permissive about them. There's this idea that this is what creates more housing now.

Yep. Sure. But then you have divided your total addressable market, not only by people who want to rent in somebody's backyard, but want to rent a studio or a one bedroom, right? Like, I think there's this, as an Airbnb play, great. The question for homeowners is going to be like, is this really worth it to spend, let's say they start at $289,000. A one-bedroom unit starts at $329,000 to put this in the backyard to rent it out.

It's a, you know, as opposed to there's an ADU boom because of the laws. The laws have changed. You can't stop an ADU. you used to be able to stop these. Now, actually, did I tell you the story about, like, the Ucolic town I live in, I won't say the name of it here, but I don't want to docks myself, but in the towns up and down, the Bay Area, ADUs count as affordable housing.

Yes. And so there's a little cynical game going on. If you commit to building an ADU and a neighborhood gets X number of ADUs on the board, they don't have to build affordable housing. And then if you were to build the ADU, and then, you know, you used it as your kid's art room, but you said you were going to rent it out. Maybe you could kick the can down the road

and stop building low-income housing or multifamily housing in your community for another five or ten years and filibuster your one for this. So ADUs are going to fly off the shelves for that reason. And otherwise, people working from home, the work-from-home thing is making ADUs into offices. So how often are you like, I wish I was? Because you use your garage, correct me if I'm wrong?

I do. for your studio. And built a studio up there. I mean, it was like, oh, I need this. You know, yeah.

Yeah. So that's, that's the future of this. But, you know, Joe's the perfect person to run this. This will be a billion, multi-billion dollar company.

Because he's a design head. They'll make these in factories. It's going to be really great also in people building communities for this. So Tony Shea, rest in peace, built an air stream park, you know, inspired by Burning Man. Yeah.

And you go to Burning Man, you're like, you know what, living in an RV. Kind of nice. It's contained. It's affordable. all, you know, like the small house living concept.

Yeah, totally. It's quite delightful. I have a whole collection of women friends that just want to start a like a ladies commune because I'm sorry to say it like this, but like the men die first. And so we have this like we want to create kind of our old folks community. And that's entirely the concept is like tiny houses organized around a big lodge where you can come together. I mean, like it'll be like summer forever.

But anyway, these that's what, that's what I predict will be the big win. Somebody in Austin is going to get, you know, 20 acres just outside of Austin and put 40 of these, a half acre each. And a bunch of young people are going to be like, you know what? This is going to cost me 100 grand for this home. And I get to hang out and there's a central lodge where every night there's dinner and I just pay 10 bucks for dinner on my, you know, little, you know, community card. Right. This is going to be good for society. People need to start living like this.

This is good. Good for society. This could also solve the housing problem. affordability. Now, in some places like California, people are going to be protectionist, as I previously described. Of course. But then the places where they're not will have these. So you don't need everybody to agree to these. You just need some places to agree to these. Just like Houston and Austin and some in New York City, Manhattan, allowed for a lot of building.

And that, you know, led to a lot of people wanting to live in those places because they were more affordable. If you put more units in, then just because of supply demand, And the worst units will have a lower price eventually. So this is where like the NIMBY's screw up. They don't want high-end housing because they're like, oh, it's, you know, but there are a bunch of developers living in the mission in what was formerly the low-end housing. And they're like, and those people would move to a place with a pool. Yes.

Or a gym. And then those places would be available for firefighters, cops, teachers. We have a little, we'd have to do a little bit. because this is our last show until Sunday, we're going to bring on our emergency buddy, Sunny Madra, to talk about the latest in the FTX contagion, just to tide you all over so that hopefully you can ignore it over the Thanksgiving break.

But coming up right now, here's Sunny Madra. Two things we always want to talk about on this show. Number one, how to build the best product possible. And number two, how to find product market fit, faster. These things usually go hand in hand, but relying on your gut is not good enough. Many VCs aren't willing to wait around for you to figure it out based on your instincts. No. Investors are looking for founders that can use data-driven solutions to find product market fit more efficiently. So you have to check out Mix Panel right now, and they'll give you $50,000 in credits when you join their startup program.

MixPanel helps startups find product market fit faster by offering powerful self-serve product analytics. You can get insights in real time with the help of MixPanels, pre-built templates. And this is critically important. Startups I've invested in, they've been trying to figure out what their customers are actually doing in the product. Well, if you don't have Mix Panel set up, you don't have cohort data, you don't have the features designed to see, hey, you know, maybe you spent 100 hours on a feature and 10% of your users actually use that feature. How do you know? Well, you have to have the right analytics stack, and that is Mix Panel. Apply today to claim.

You're $50,000 in credits at Mixpanel.com slash startups. Of course, they want to grow with you. That's why they're giving you 50 dimes. That's M-I-X-P-A-N-E-L.com slash startups. And that's startups with an S, okay, plural. All right, it's Tuesday, November 22nd, 2022. Now, Molly, we know it's a Thanksgiving week, which means journalists, you know, whatever stories they have, hey, you bank them for Monday, Tuesday.

you start banking your stories. But in the age... Your feature pieces, you're like your feel good stuff. Yeah. You just you bank it. You sell into Thanksgiving. Wednesday, you know, you don't want to be like publishing a story late Tuesday or Tuesday. God forbid Wednesday and then having that roll over into your Thanksgiving.

But you know what? You know who don't care about any of that? Who doesn't care? SBF don't care. SBF does not care. Citizen journalists. Citizen journalists. Citizen journalist, DGaff.

Because DGF. journalists will learn. Let's take a couple of years. Trust me. In another three years of this. Yeah. In another three years, like a bunch of like coin report or, you know, cryptoology, all these folks are going to be like, you know what?

Yeah, I'm going to shut it down December 20th, 21st and have a holiday. With us, Sunny Sandeep Madra. Because this is so much crypto news. and we want to get you to check in here. I don't know where to start, but I guess contagion is the word people are using now, Molly. I think that's where we got to start, right? Thank you, Sunny, for joining us on the holiday week.

We are, as a programming note, this show is off Wednesday through Sunday, which is why we have to do an emergency. All our emergency coverage has to happen yesterday and today. So Tuesday, and Sunny was kind enough to come on from his travels during this holiday week to talk about the contagion. So there's all the stuff that's just nonstop with FTX, and we will get to some of the just the T, because at this point it's just ongoing bananas crap. But it seems like the real salient question is, how bad is this going to get now?

Because it seems like a lot of firms are getting caught up in the crossfire. Yeah, definitely. And, you know, we saw last week, you know, the Block 5 filing for bankruptcy. And the big one right now that everyone is really staring at is Genesis. And so Genesis is essentially a prime broker trading arm of DCG. And they got caught in the FTX meltdown. Lots of money, I believe, $175 million they had stored there. And I think what everyone is really waiting on right now is, you know, do they file for bankruptcy?

and then what is the subsequent impacts of that. If we were to try to summarize it into the most salient things that I think maybe both you and JCal would be most effective by is the grayscale Bitcoin trust. And so that's another asset of DCG. And what everyone is sort of wondering now is if Genesis goes down, what happens to DCG in trying to save Genesis? And then... Now, DCG is the digital currency group. Correct.

Okay. What is that? Yeah. Thank you. FTX, DCG. I mean, I didn't know there were this many players, but there is this gray scale Bitcoin trust. Correct. Now that I have heard of.

It's the parent of both of those? DCG is the parent of both of those. Okay. So what is it? So think of DCG as a holding company with a bunch of entities in it, right? And the two will focus on right now. And I don't want to speak on it too much. I don't know all the entities they hold.

But the two that are in question right now are the grayscale trust. And the gray scale trust is interesting because that's the first publicly listed vehicle where people were able to buy, you know, Bitcoin through their traditional, you know, brokerages. And what's become in question and yesterday, you know, there's some more details came out, which are positive, is that what was becoming in question was, are the assets that are held by the trust actually there as well? Because we've seen all this stuff happen with the rest of the ecosystem. So Coinbase came out yesterday.

They're the custodian for the Grayscale Trust and basically verified that the holdings do exist. About 640,000 Bitcoin, I believe they came out and confirmed are actually there. So that's a really good news for the ecosystem because we don't have a situation where the assets are gone. The challenge is that is a income producing asset for DCG. And in trying to save Genesis, which, you know, is important. part of the ecosystem because it's a prime brokerage for like a lot of crypto. Do they end up unwinding that and does that end up pushing out those 600,000 Bitcoin into the ecosystem and further impact the price of Bitcoin? That's one thing that. And there's other assets in there too.

There's Ethereum and other things in there. But the biggest asset in there, I believe, is the Bitcoin. And so that's the real question. Everyone is kind of wondering right now what ends up happening with this asset. Okay. So just to put a little mini recap here, you got DCG, this is another one of these holding companies. Nobody can have one company anymore. Got to have like a bunch of companies.

There's nothing suss about that necessarily. DCG invested in a lot of different crypto companies. They've got like a portfolio of crypto companies. One of those is Genesis and then one of those is this gray scale Bitcoin trust. Now, you can buy gray scale. There's a ticker symbol associated with it, so I could buy it if I was on my Robin Hood app or E-Trade. Correct.

Now, it also has 635 or 640,000 Bitcoin. But instead of holding them themselves, they use the most trusted name in exchanges, which seems to be the last exchange standing Coinbase. Correct. Coinbase, a gray scale did not come out and say, hey, we have the goods. They did not, but Coinbase, which does a custodian service,

and a custodian services, they charge you a percentage of your holdings to make sure that your coins are, your tokens are secure. That's what a custodian service does. That's the function. And there's two functions at Coinbase. We've had Brian on here talking about it. One is retail and one is a custodian service for like enterprises. So if somebody like when Tesla bought a bunch of Bitcoin, they might have used, I don't know if this is correct, Coinbase to be their custodians or for treasuries or whatever that wanted to be on that.

And there is a letter from Coinbase's CFO in a tweet. Here's the letter. And this comes from Genesis, I guess. All digital assets that underlie gray scales digital assets products are stored under the custodia of Coinbase custody trust company LLC. Okay. And then in that letter, Coinbase is like, no problem. We have it. it's good. It's right here. We could go up my hands on. We got the guns. But, okay. If that had to get liquidated to cover, am I correct,

Genesis is? Or DCG's collapse? Genesis. Genesis. Genesis owns Grayscale. Gray scale is a Genesis product? No. I think Gray scale is a DCG product.

Correct. Genesis and Grayscale in theory shouldn't have anything to do with each other, but you could imagine a scenario in which maybe DCG would be like, Genesis is out here saying they need a billion dollars in cash. We know that that is currently in custody at Coinbase. We could go get it? No, it wouldn't be to borrow.

It wouldn't be to borrow from it, but it would be to unwind this truck. Because this trust generates revenues. I believe it was about $200 million here. There's like a fee associated with running this trust, something like 2%. So if the assets in there are like $200 million, sorry, a $10 billion, then you you get a serious amount of fee revenue associated with it. So that could be associated with liquidating this asset. GBT, by the way, GBT is the ticker.

Correct. And then one other question to clarify about DCG, it sounded like the way that you described that entity, that it could be among the entities that increased exposure in institutions, like in what we think of as traditional financial services, like made this more accessible? Is that a fair assessment here? Genesis, not Genesis.

Yeah, Genesis. Genesis was acting as, you know, sort of a prime broker. So they were basically facilitating trades between institutions that are, you know, trying to, you know, transact in the crypto ecosystem, which is important for the crypto ecosystem to grow. Definitely. But does increase the risk that then if Genesis does fail, if the contagion spreads, if gray scale has to be unwound, that all of a sudden the exposure is being.

beyond just, it's not as contained, shall we say, to the crypto economy. That's exactly. Yeah. Exactly. And that's the risk. And I think Coinbase coming out and talking about that yesterday was really good for the ecosystem. And now we can just hope that this liquidity crunch that Genesis is in, given some of their

funds were locked up inside FTX and then given that, you know, there was a run on them. And they've stopped withdrawals that they're able to plug that liquidity crunch and without having to go under it. That's what would be great for the ecosystem. Genesis is going down. Yeah. It's a million dollars. $1,000, I was going to take you.

Like, okay. I'm just going to say it. Like, I don't think anybody wants to catch a knife anymore. The knife catcher is trying to find somebody to catch his knife. Sam, Bankman, freed, SBF, from what I understand, is in the Bahamas, working the phones, doesn't have an FTCS email anymore. He's kicked out of the company, but he's still trying to work the phones over the Thanksgiving weekend to get $3 billion to save FTCs. I mean, what maniac is going to get? give him three billion.

Yeah, that's a difficult one right now, I think, given everything that's happened. Yeah. Although I think, you know, with DCG, Genesis, these are entities that aren't caught up and, you know, I think bundling to putting them together is a little bit not fair to those folks. Like, these folks have been operating legitimate businesses. They've been operating with, you know, in a business to business fashion. And so. Wait, then why did they get caught? Right. Why are they their skis? Why are you so differential to them? They had 170. million in deposits at FTX.

Got it. Right? So their deposits are gone. But how does that lead to a billion dollar liquidity crunch? Well, there's a lot of leverage in these things, right? So. Uh-huh. There it is.

And they put it on the Nix. They put the $175 million on the Nix. They didn't cover the spread. You know, I was having this conversation with someone over text yesterday. And there's a lot of. There's a lot of, yeah. And there's a lot of noise around leverage in the in the crypto ecosystem, which, you know, obviously it's, it's been kind of really bad. And I think there needs to be some regulation around it. But our lives are surrounded by by leverage, right? Our credit cards are leveraged. Our student loans are leverage. Our houses are leveraged, right? Our bank deposits go in and they get leveraged. This is not something that's, you know, only just in the crypto ecosystem. It's just that there's rules. So what's the difference? Well, I think like, crypto leverage and my regulation, right?

Orders of magnitude? Well, yeah. But if I were to simplify it, right, there is up to, you know, so banks in the U.S. operate with fractional reserves. But the FDIC, you know, backs it to 250,000. So there's some safety there for the depositors, even though the banks are operating in a fractional reserve model. Then there are these stress tests that, you know, came in after the 0809 financial crisis, which are, you know, forced the banks to basically, you know, publish what their leverage ratios

are and undergo tests as well to make sure that, you know, they don't blow up in the case of, you know, certain situations that occur. Lastly, this bank runs, you know, if that were to occur in the regular financial system, we'd see the same thing happen. And it's just happening much more frequently now in this ecosystem. But, you know, regulate, we've talked about this in many times that it comes down to regulation, right? Without that, that's where, you know, this stuff got really, really, I think people got over their skis using your term, J-Cal. Well, and also, let's be honest. If we were to compare it to a home, Molly correctly points out, order of magnitude. People were trading five to ten times their assets in some of these offshore casinos, aka Mark,

exchanges. And like, who gives five to ten X leverage? Like, the mob. Like, you really don't give five to ten X leverage to anybody. But then there is the underlying value, which causes revenue generation of an asset. So the intrinsic value is, you know, a home can be rented and maybe cover part of the mortgage or all the mortgage or it can be sold and cover part or all of the loan. But the intrinsic value, as we've seen of some coins, is $0.0 and sometimes they go there. Whereas a home, you know, it's possible for a home to go to zero, I guess in Detroit, like there's no value to it, but it's not common. No intrinsic value for an asset, I think, no leverage. if it's not a revenue generating thing.

And the magnitude of this, I think, Molly, is the key. If you wanted to borrow against your stock portfolio, what do they let you borrow? 25%, 40% sunny before you get called? And they ask you to cover, 20, 30, 40%. Yeah, I mean, you can even go up to 100% a lot of cases. Depends on the stocks, right? It depends on the stocks, exactly, right?

You know, I think if you're taking a blue chip, they'll let you borrow 100% against it, right? Because they know it has some intrinsic value. Yeah. Yeah. I mean, I think, you know, this is, well, this is, again, like, this is a thing we keep repeating, which is that the parallel to the financial industry, the traditional financial industry, as we think of it, is one to one, right?

Like, every time that we've taken away guardrails or had an oversight with respect to some rules, someone has come along and found a way to exploit those rules and make a ton of money. That has happened all throughout history with traditional banking. It's, it's, there is somewhere, there's an asset bubble being built up that. nobody's thought about in traditional banking. And crypto and the financialization of crypto just open the floodgates of opportunity to basically use the exact same tools, leverage, you know, using customer assets, under collateralizing.

Like, it's all the same. I mean, I think what's so kind of mundane about it is that it's all the same shenanigans that it ever is. It's just like slightly technically more complicated. It also has no friction, right, Sunny? There's no friction in this. There's no controls. Definitely, right?

It's harder in the regular, you know, TradFi system to go and borrow money, right? You have to sign a lot more. I love that. Trat-fi. Oh, God, you crypto-pubble. That stands for traditional finance. That's their dig. Trad-fi.

You have to go and sign papers. You may have to sign a doctor sign. You might have to sign docu-signs now. You know, it's a docu-sign, really? Yeah. You might have to get it notarized if you're transacting millions of dollars on leverage. You might actually have to shake the person's hand and say congratulations on your new home. Wow.

What incredible innovation. There's a key. Wait, are they going to inspect the home next? Are they going to check that you actually have the house, the deed foundation? I know. I was saying, not in California. Yeah. But they had those loans, right?

They had those no-income loans. I know. That was- They did. They did. I mean, I remember in 2006, going, you know, having a lot of, in conversation with a mortgage broker who basically was like, oh yeah, you can get a loan this big. And I was like, that is our entire monthly like income.

Yeah. Like that is so unbelievably irresponsible. Practically, it was almost gross. But it would be like more than our take home, right? At the time when I was married. And it was just like, and thank God I had, you know, was previously married to a really nice Eagle Scout who was like, yeah, that's not no. That's not a good idea is the thing about that. you should not actually borrow more than you could ever hope to pay back.

But like, no, but there are very many people in this world who cannot resist the allure of borrowing borrowing more than they could ever hope to pay back. Yeah. And just hoping it's going to be fine. Credit cards. Well, yeah, buy now, pay later. Is it $3 trillion in credit card debt that Americans have? Like, it's, we are actually, the whole nation is kind of a financial.

It's a whole time high right now, right? I think that's what, keep spending. This is what's going to get the economy. is what's going to kill inflation. USA. No, I mean, if this is, I think the Fed's concept here is like, hey, listen, spend,

YOLO, get in debt, and then go back to work and get a job and be productive in society, pay your taxes, and then stop spending money on stuff. They literally want people, unconvinced. They don't care if you get a job and pay it back. They really don't. The Fed?

Yeah, they don't give a shit about that. The Fed, sorry. Banks make a ton of money. when you don't pay. No, yeah, and I'm just talking about the Fed is like, if you, they want to crack consumers. And the consumers refuse to be cracked. Like, when are the consumers going to stop spending money? No austerity.

It seems like there's no austerity measures. It's really crazy. When does it stop? I mean, have you seen airline tickets? I just bought one, but I used miles because it was so scary. Bananas. I said, I was thinking about like popping to London for. during Christmas and New Year's to like see Phantom of the Opera or something.

And it's like I just set a price alert for it. And every time it pops up, I laugh out loud. I'm like, you gotta be kidding me with this. What is it? What is like, like, coach to UK is like two grand? That should be a business class ticket. Or at least economy plus. That's crazy.

I had to spend 90,000 miles on a one-way business class to Texas. And I was just like, I just, it was such an offensive price. One way. I was like, I got so many miles. I'll just start using miles at this point because the can. Cash has more value cash today. I just want to say there's one person that the consumer should look to when evaluating what to do in a situation like this. Let's bring up the goat. If I told you, I know how it all ends, right? Once you know how it all ends, the only use of time is,

how do I buy more Bitcoin? But take all your money by Bitcoin, then take all your time, figure out how to borrow more money to buy more Bitcoin, then take all your time and figure out what you can sell to buy Bitcoin. And if you absolutely love the thing that you're, that you don't want to sell it, go mortgage your house and buy Bitcoin with it. And if you've got a business that you love because your family works for the business that's in your family for 37 years, and you can't bear to sell it, mortgage it, finance it, and convert the proceeds into the hardest money on earth, which is Bitcoin. So what I would say is, use all your time to acquire Bitcoin, finance entities, and weaker currencies to buy Bitcoin,

or educate yourself on why this makes sense if you're not sure, and then educate everybody around you. If you're working for a company that's got $100 million in the Treasury, you ought to convince the CEO and the board of directors to convert the Treasury to Bitcoin. That's the most of creative thing you can do. That'd be worth billions to them. It's like, if you were to say to me, Mike, it's the year 2000. you're in Argentina, what's the best use of your time?

The best use in my time is figure out how to get all of my money converted into dollars and get it out of Argentina because I'm going to lose 99.5% of the money if I don't. Nothing else matters. All right, folks, well, they're sure. I don't know. The date of that exactly. I think it was a year ago. I think Bitcoin was that like $60,000 at that way.

Do not listen to that. March 2021. So this is March, March, March, 20, that. It has since lost two-thirds of its value. Bitcoin's under $16,000. I'm just saying that my $1,300 portfolio is in danger of going to zero. It's now, like, at $350. It's become like a sick fascination.

Like, I'm like, wow. But I will say, I saw St. Lawrence, NBC the other day. And Benny has been saying this, too. Plenty of people are like, actually Bitcoin seems really resilient. And he sounded, relatively speaking, pretty sane. He was like, you know, those of us in Bitcoin are in an unhealthy relationship with cryptocurrency and we won out. Like, they just have messed this all up and Bitcoin remains the only pure, you know, thing. And I was like, okay, how have we reached a point where he sounds

like our rational crypto uncle? It speaks to the broader. Are you still long? Are you still long your Bitcoin? Yeah, I am. You're still long. Okay. Now, you got in Bitcoin at what dollar amounts? It's sub 100. Okay. Now, could it stole the 50, 60, 70, be honest. Do you think you should have paired your position? Or are you still long and think we'll return to that? Here's my thesis on Bitcoin. It's been correlated, kind of to Molly's point, all this stuff is happening. I think it's just a replacement for a store of value that's much easier than, you know, gold

or anything that's been there. It's been around. It's never been hacked. It's been super solid through all this stuff that's happened. And I think, you know, the next generation of folks that come out there when they look for a place in terms of a store of value, you know, I think it's going to be something that'll be there. and I think it'll increase in value over time. I just continue to believe that with respect to Bitcoin.

I think every asset's gone through speculation. Well, even gold has, right? You look at gold in the early 80s, right? It hit, you know, huge highs and it came back down. And so I kind of just feel like it's, I don't really think about it as a cryptocurrency. I don't think about it as, you know, all the stuff that happened in this ecosystem right now. I just think of it as a store of value asset for myself. That's easier than other stores of value for now.

And my portfolio allocation, that's how it's allocated. as a store of value. Got it. Right now. Yeah. I was going to show you the debt since you guys brought up the debt chart. I think this is from the Fred website. Sumer loans, credit cards and other revolving plans.

You know, we had a little dipy poo there during the pandemic. People stopped spending. So it went way down. You get a little stimmy check. Maybe you pay down and you're not going out. But then it just sort of picked right up. The line seems to be a straight line from 2010 and obviously accelerated from the 2000s. But we got a lot of debt in this country.

It's $3,000 for each of the 330 million Americans. Now, that includes 70 million kids, I think, in that number. But every American now is $3,000. $15 an hour average, you know, entry-level wage, 200 hours. The house of cards, you guys. It's a house of cards. 200 hours of work to burn this off. Everybody's got to do 10% more work this year to pay down their debt if they,

or if you were actually an Uber driver, $36, it's actually $100 per person. If you've got kids, you've got to do, if you got two kids, you've got to do 300 hours of Uber driving to pay down the country's debt. It's possible, but it's not healthy. Yeah. But it's 70% of GDP, so we're not getting off that crack as a country. I know, I'm just trying to get Uber drivers for Dara. We have a driver shortage. So if you have debt, may I suggest $36 an average wage at Uber?

Shout out to my gosh. I'm not a person advice. No, it's life advice. Okay. Now can we talk about the crazy stuff? Can we just like dish for a minute on the FTX story? Let's do it. Tea time.

Let's go. Okay. Insane quotes coming out just by minute by minute by minute. The latest is that according to the Wall Street Journal, FTC's SBF cashed out $300 million during the funding period of FTCS's growth. When FDX raised $420 million, this is a quote from the Wall Street Journal, from an array of big name investors in October last year, the cryptocurrency exchange said the money would help grow the business, improve user experience, and allow it to engage more

with regulators. Left undmentioned was that nearly three quarters of the money, $300 million went instead directly to Sam Bankman Fried, who sold some of his personal stake in the company, according to FTX Financial Records, reviewed by the Wall Street Journal and people familiar with the transaction. And then apparently, he just bought a bunch of nice houses for himself, his compatriots and his two Stanford ethic professor parents. I'm sorry, did you say ethics? I believe that they are in fact ethics professors. Can't make the shit out.

I need to verify that. But yeah, I'm pretty sure they are. Like, what? And so the tweets today were like, okay, now we can blame the parents too because no one asked. This whole secondary thing, I'd like to push it back to J-Cal. I'd love to because, you know, I think it's come up in several conversations. But where do you stand on a secondary of that size?

I have always had the same position. A secondary, that's enough for a founder to buy a home in their city. Buy it outright and have a million or two bucks in their bank account, takes the edge off and lets them go long. I speak from firsthand experience, having watched founders who got more than that, start thinking about the plane, the second home and all the distracting things that happened from wealth creation. But taking off the edge, buying yourself a three-bedroom law for $2 million and having $2 million in savings in a bank account, now you don't have to worry. You did the aid insurance. So if you had a $50 million, let's say it was worth $200 million, you were two co-founder. You each got $50 million.

You sold $5 or $10 million. I'm okay with you selling 10%, 20%. If it doesn't exceed your home plus $2 million, let's make a number here. So depending on where you live, you know, if you live in Salt Lake, that's, you know, could be. be two million plus another million for the home plus a million or two million in taxes, you know, four or five million. You live in the bay, it might be ten. When you see it go above those numbers, founder distraction becomes a real thing. And I think the people who are providing the secondary just need to pause and think, do we want our founder super distracted? If the company's

going public, you know, and it's been year 10 or 11 or 12, well, the founder has been post money for a long time, sunny, post money, sunny. And when you become post money, it can take the edge off. Not everybody is like you post money, Sunny, who you still have the blade and you wanted to start a company. But if I'm being honest, you know, Sunny and I have, have recreated. We've recreated. We've had a couple of ski days here and there and, you know, talked about the finer things in life. And so it can take the edge off. That's all.

You've got to decide if you want to take the edge off. And there's a little bit of a trow, right? Like productivity, crazy, crazy, crazy. Then you get the money and all of a sudden you get lazy. And then you're kind of hanging out down here and you're like, like, well, this is boring AF, Molly. And then you're like, I got to get back and go win again. So you just have to be careful when you insert that trow of hedonism and wealth in my mind.

Quick correction. Both parents are law professors, not ethics professors. But they are law professors and the father is focused on tax law. And then second, yeah, that was one of the chapters of particular. That's actually in J. Cal's book in Angel. And that question of the secondary sales and specifically of the government. governance around them and not letting your founder get to the point where they're taking out F at money. And I think we can all agree that SBF was like way beyond F at money. Like F all

morals money. This is what we're talking about at some point. It's like a nice double div because he got the cash himself, it seems like, and then he used the company proceeds to buy real estate. So he kind of did the opposite of what you guys were talking about. And it's kind of sounding like that money might just be gone, like that it might have just been kind of disappeared in a way that. creditors are not going to be able to get access to it. That I go. But go ahead, Jigel. I was just going to say the, I am seeing a lot of people talk about their parents,

maybe not being ethics professors as such. They're legal professors, but they have done some teaching and or writing around ethics. So I think that's where that. That's definitely come up. Philosophy of personal responsibility and that kind of stuff. Well, there's personal responsibility and then there's a luxury beachfront home. What do you want? They're only human. I mean, is it possible that he lied to his parents about the state of the business?

And so he just, you know, thought, hey, my business is worth 50 billion or whatever, 30 billion at the peak. And I, hey, mom and dad, I sold 10% of my business. I got my 3 billion in secondary. And I just wanted you to have these homes. I mean, it seems like he could reasonably have lied to them. And it would not have seemed out of market. If you see Coinbase as a public company, I remember the Coinbase investors like were popping champagne. on Twitter,

you know, hey, we're the greatest investors of all time. Look at our returns. What was the peak coin base valuation? And then I guess that's what we should,

that's one thing, you know, I'm a fan of Brian Armstrong's. Is he the last exchange standing here now, Sonny? And what do you think? Is there going to be,

is there going to be a run of a coin base? I don't think so. I think, you know, look, one of the things that Brian is done and you guys have had him

on here and all in and other places is, you know, he is, now showing stability in the ecosystem, which, you know, in a weird way, like everyone was looking at Sam, but it's like, it's really Brian, right? And he's speaking for many standpoint, whether it's like sort of the work, life balance stuff. You know, he spoke about that to, you know, the regulatory ecosystem. You know, I think when you had, you guys had him on the all in potty, he's wearing like

a suit and tie or at least a shirt and tie. So he's kind of picking up the mantle there. I actually think it's really good for Coinbase, right? There, and, you know, them coming out and what they did, what we just talked about earlier with the gray scale trust, coming out and their CFO, putting a letter out and doing that. These are really, really good things for the ecosystem. Yeah,

and I think they're important. As long as it is all true. And we have no reason to believe that it's not, right? But at this point, it really does feel like Coinbase is sort of the last. That's interesting, Molly. You're assuming, you're assuming, I think, or maybe, I don't want to put words in your mouth,

but I think it's an interesting test to assume fraud, in crypto and work backwards to prove to me it's not. I'm not saying that Coinbase says anything like that, but I would assume now there is shenanigans, malfeasance, problems, assume problems, assume that at least some of, because the thing is like even Coinbase, I would assume, and I'm conjecturing here, but even Coinbase, I would assume, has to rely on, like, a bank who takes deposits and makes loans and places, trades or whatever, has to rely on the collective faith and credit of the other banks in its system. And so I guess where I feel that Coinbase could still be vulnerable is too contagion,

to the full faith and credit of the other players in its system. Sunny? I think it's, I think it's a fair assumption. I do, I think, like, they, because they're, you know, listed in the public markets, I just think that they haven't done sort of what some of the other, um, players in the ecosystem we're doing. Like, if we think back, even through, you know, using your analogy there for a second, Molly, look at what happened in the banking crisis, right?

It was, you know, it was a few banks that had really kind of overstretched themselves in that, in that time frame. And it feels like, again, with Coinbase's transparency, that they're not one of the folks that have overstretched themselves. And so I feel like they should remain solid through this. And the real thing for them is innovation. Can they continue to innovate in this ecosystem? because one of the challenges that I see for them is, given that they have to play this role,

like innovation usually requires going and taking some risks and doing some new things for people. And we're not seeing them do that right now. And that really sucks because we need more of that in the ecosystem as well. And is that the distraction factor largely, right? It's just like keep everything together. Just trusted, stable and that, yeah, definitely. Right, right. I'm wondering, you know, in terms of the health of businesses, a lot of people will

look at the debt to equity ratio of businesses. How much debt did they have to their equity? How much cash do they have on hand? Coinbase's debt to equity is now 60%, I guess, if I'm reading this debt to equity ratio chart. So they must have a couple billion in debt. And they're worth nine billion or something now. They've gotten clobbered. They were worth at the peak, $76 billion. And then what is the revenue going to be like, to your point? Are people going to be trading crypto or just trading out and giving up? Or just thinking about retail. I mean, I think trading volumes are definitely down, right?

There's been a lot of stuff published. And you know, you see that not so much with Bitcoin, but with the other assets right now. And you see when that, those prices fall, like if you try to go to some fundamental analysis, as the use of blockchain's fall, then they're, you know, the associated tokens, whether there's Ethereum, you know, ETH for Ethereum or, you know, Sol for Solana. As those things start to fall, the value falls, right? There's less happening on those block. chains and that you can kind of just see that from the broader ecosystem right now. And they have

a cloud that they're launching, you know, for folks that are building in the crypto ecosystem. So they, you know, they have started to put some real kind of good products into the market. You think Coinbase wants to be AWS-esque and be infrastructure as well as trading. Definitely. Definitely. And they're doing it for themselves. It's very Amazon-like as well. Like they need it for themselves. So they're just making it available to others, which I think is a smart play. So they, that might be a, that might be a signal to buy. Coinbase then. If they're going to build the rails for people to build on, whether it's NFTs or tokens or trading systems, and they have to build it for themselves, yeah, why not do that?

So, you know, a lot of people go to this website, Coin Market Cap. I don't know who runs it. I don't know if the data is correct because the amount of trading it showed was bonkers. I never bought that that was the actual volume. But Coin Market Cap, do you trust their data? Because they said the entire market cap of everything, all coins they could identify was like almost $3 trillion at some point. Now it's down at the peak. And now we're down at like whatever it is, 800. 800, yeah.

Yeah, that feels right. Do you trust those numbers? The beauty of the blockchain, and I can speak to this with some level of authority. Because of your company, give a shot up. We do. Yeah. Yeah, I mean, most of these folks are pulling this stuff from the blockchain, right? So transactions, prices.

So these things are being pulled from records. And so, yeah, I would, you know, I don't particularly, like, we don't use these guys as a data source, but the numbers, just for what you're saying there seem to line up with what's happening in the ecosystem. Give a plug for your company and what you're doing in terms of trying to understand all this and then what you know, what inside information or insights you have from what you do. Yeah, I mean, like just across the board, like one, we've been really focused on the growth of this ecosystem. So what's happened is speculation. And what we've been really trying to bring products towards is taking the actual data and helping them grow. And so whether it's finding lookalike customers with, you know, some of our algorithms that we have using blockchain data for that, or basically finding projects that other projects that collaborate with based on, you know, holdings that exist between projects.

We do that type of stuff. And now as a lot of, you know, big companies are entering the ecosystem. You're seeing a lot of brands come in the NFT space right now. And they want to understand, you know, who they should interact with, how the royalties are being generated. We do a lot of royalty dashboards for companies that are generating royalties for these NFTs that have been created. And we've talked about that before. And royalties that are not being paid as well. And so, yeah, so we're basically acting as a like a de facto source, a trusted source within the ecosystem within the crypto ecosystem.

How can people learn more about that? Definitive.io. Definitive.io. That's it. Definitive. Dotio. We could pull it up on the screen here. And, you know, if you come to the show, I think, given your amazing insights, pulling up a charter or two, always.

fair game, I think, here, since we're paying you such a huge amount of money for your appearances, feel free to pull up, well, there's the website, but yeah, that's your goal is to try to make sense of all this with all the on-chain data. Yeah, and one of the things that we really also focus on, and just last plug here, is that we allow people to pull in off-chain data, and I think it's important to look at those two sources together. What is off-chain data? It's like just regular data, data, data that lives in your private databases and mash that up against the stuff that exists on-chain, because not everything, you know, if you're building a product today, even if it's a Web 3 product, not every transaction is happening off-chain. And so a classic

example, something you may want to do, and this is where you spend a lot, some of your time now, J-Cal is if you're an NFT project and you want to understand how many of your holders have gone and made their Twitter pfp picture, the verified NFT, you know, they have that functionality. So we basically pull that information from Twitter. We look at that. And you can see, is that a net benefit for your ecosystem? Is that cohort? Is that cohort, a better cohort, a different cohort? Do they spend more? Are they more active? And then you can understand if you should support that from within side your project and say,

yeah, convince your holders to go and make their Twitter pfp that and maybe give them something for doing it because it drives more usage of your NFT, depending on whatever you're trying to do in your, you know, your particular project. Did you just reveal Jekal's secret NFT project? No one called me. I am not doing it. I mean, that would be amazing to launch an NFT drift. in the trow of like chaos and just being out there and be like,

get your NFTs, everybody. Yeah. I mean, you really, this now means, this whole collapse, I think, means if you have a product, if you're raising for a crypto project, what are the chances of getting funded today? And what do you think you need to have to clear market with venture capitalists? Because you've been doing raising money. Is it still like VCs have tons of crypto funds laying around?

There's a lot of crypto, you know, there's a lot of funds available. I think what you're going to see now is a lot more diligence and really, really deep diligence. And, you know, sort of we're gone are the days of the seven days, turn around to less, you know, from meeting to funding to could be a 30, 60 day process, which is a lot more natural than what we've seen in the past. I think people are going to be a lot more, do have a lot more scrutiny to your business plan. I think coming out of this, people are going to be definitely want to understand what your governance models are, you know, board seats, you know, things associated. to that. And so, and I think that's all good for the ecosystem because, you know, when things were flying high, funding was happening quickly, diligence was low, governance was really poor, and then bad things happen, right? So what's the saying, we can't have nice things. We can't

have those good times again, but it's probably for the better this time around. That's for the better. Yeah. All right. There you have it. I hope you're right. I hope you're right. Have a great restful weekend and hopefully we'll see you and Vinnie again. Vinnie is, of course, spending on his crypto money at some music festival what's left of his crypto fortune he is yoloing at some rave slash I mean the life of Vinnie Limb I mean I follow that Instagram and I am like

he figured it out what am I doing I mean five days a week six days a week with Molly grinding out podcasts working second jobs I'm just like working three jobs over here I'm on side quest I'm on side quest I'm trying to find like golden You've got an unpaid job, too, J. Cal. I mean, I'm trying to get some stuff done here. And, like, he's out there.

Music festivals. This guy's got, I think he's got costumers on the payroll. Every time I, you follow Vinnie Lingham, Molly? No, but I'm about to. I mean, you follow Vinny Lingam. It's like, I think he's got. I'm just saying that's how you hardcore. That's all I'm saying is.

This guy's got cosplay. This guy's got more cosplay and costume designers on his payroll. Really? Doing everything. Okay, okay. No fly zone, no fly zone. Anyway, Sunny, happy Thanksgiving. Great to see you.

Great to see you. Thanks. Thanks. Great conversation. You love it. Thanks.