March 20, 2024 • 53 mins
Ever wonder why Silicon Valley stopped making anything new or interesting? It's because of the same growth-at-all-costs mindset that's destroyed the rest of the tech ecosystem. Ed Zitron is joined by Robert Evans to discuss how venture capital demolished tech's ability to innovate by forcing the smartest people in the world to work on the dumbest things ever invented.
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Speaker 1 (00:02):
All Zone Media.
Speaker 2 (00:05):
Welcome to Better Offline. I'm your host ed zetron Today
I am joined barcul Zone Media's Robert Evans, and he's
joining me to talk more about the growth that all
(00:26):
costs rot economy. It's the thing that's making your beloved
tech products worse to make someone else hundreds of millions
of dollars. And it's so good, Robert. We love it,
don't we, folks.
Speaker 1 (00:36):
I'm having a great time. I love that I used
to make a living teaching like people who would pay
you to the company. I worked for huge amounts of
money to be trained in like how to use Google
more effectively, all these little dorks and stuff that allow
you to like really specialize your search settings. And I
love that. Just in the last couple of years, Google
(00:58):
has placed a shot gun to the base of their
searches engines. Skull pulled the trigger, and now a bunch
of people are desperately trying to be like, oh, there's
this new perperplexity AI or this other AI search engine,
like it's much better. And it's like, no, it's slightly
better than Google now, but they're all worse than Google
used to be. None of this is a step forward.
(01:19):
They're just pains in the ass.
Speaker 2 (01:21):
So one of the reasons that that's happening isn't just
the public markets. The public markets are a big part
of the problem, and they're the ones that incentivize this
whole growth or costs phenomenon. But I actually want you
to know that this has another cause, and it's private
investing and venture capital. Those are the ones who are
(01:41):
pretty much putting a thumb on the head of innovation
that is stopping great companies being built by incentivizing well,
kind of a form of slaughter, fattening up pigs to
sell to the market, rather than making something innovative.
Speaker 1 (01:57):
Yeah, like like some sort of like a pig sheep
hybrid like a peep.
Speaker 2 (02:02):
But you could eat the meat from there.
Speaker 1 (02:04):
Yeah yeah, I think it would probably be like like
the like the clone from the fourth Alien movie that
just is begging for you to kill it, but then
you know, you get some sort of fucked up bacon.
Speaker 2 (02:15):
But instead of getting that fucked up bacon, what you
actually get is more like the creature from the Thing,
the weird spider creature, which is funny, scary, but not
particularly useful.
Speaker 1 (02:25):
Yeah, probably not very tasty.
Speaker 2 (02:26):
So before companies like Uber reached the public markets. They're
fueled by a much more violent and reckless form of funding,
venture capital. Venture capitalists can be seed stage investors or
regular guy putting ten grand into a company, all the
way up to massive firms with hundreds of people like
Andresen Horowitz, who invested early in Facebook and Airbnb.
Speaker 1 (02:45):
Yeah, Like the thing that I've always that I came
to realize about like venture capital money just from studying scams,
is you have like Corey Doctor talks about this a lot.
But like in traditional scam terminology of this period called
like the bezel right, which is the time between starting
the scam when everybody else realizes it's a fucking scam.
It's the period in which you're making a bunch of money,
(03:06):
and like that's that's where all of these VC people
like make their fortune. You know, some of the companies
they back do turn out to be long term profitable,
but they don't have to be. If you can just
sort of get this IPO where everybody values it super
highly for a while and cash out what you have
in the company during that period of time. If the
company fails a few years after its IPO, if it
(03:28):
turns out that like it wasn't really a good business,
you still get rich. Like the key thing is, it's
great if you wind up making a successful business in
their eyes, but you don't have to for them to
make a lot of money, right, They just have to
have to be able to get out before you know,
the scam reaches its its conclusion, they.
Speaker 2 (03:45):
Have to reach a liquidity events, so either selling that
company to someone else or taking it public. And a
big thing is the venture capital. Yes, like all investment things,
is always just evil at its core, but it used
to be much smaller. Used to be maybe a billion
dollars in a year that would go into tech startups.
Now it's in twenty twenty two, it's like two hundred
and forty billion dollars. And I'll get to why that's
(04:09):
an obscene number later, specifically around crypto. But when it
was smaller, investment wasn't done with these ideas of these five, ten,
twenty x multipliers. It was I want to put money
early into this company because I think they're making a
good product that people will buy. The problem was companies
like Google and Apple to a lesser extent, but really
(04:31):
companies like Facebook getting these massive multi billion, hundred billion
dollar valuations. Suddenly startups stopped needing ten twenty fifty one
hundred grand at seed stage and started needing two to
five to ten million dollars at the seed or even
series A stage. And suddenly venture capitalists started moving away
(04:53):
from this idea of good businesses that could last without them,
and they started to go into a form of kind
of of symbolic capital, investing in things that looked value
but aren't necessarily valuable at their whole. As a result,
they create this ecosystem where these companies go through this
kind of volatile, irrosive cycle of growth, with the only
(05:15):
goal being that they get to a stage when they
become someone else's problem, either by listing on the public
markets or selling to a much bigger company.
Speaker 1 (05:23):
Yeah, and the whole crypto industry is essentially taking that
like it comes out of everyone. People who came to
expect this and in a lot of cases got rich
for the first time through this chunk of the tech
industry and then realized, well, if we create a way
to utilize some of these these psychological phenomenons and like
some of these ideas without any kind of regulation, like
(05:45):
that's where crypto comes from, right Like it's it's purely
the scam aspects of this with none of the real businesses.
Speaker 2 (05:51):
And you're completely right, And I will shortly get to
that as well, because yeah, here's let me set the
scene of the current state of the value up emerges,
they're considered the next big thing. They ideally reach unicorn status,
which refers to them being worth a billion dollars, and
they experience unprecedented growth, they explode, and nobody asks the question, hey,
(06:14):
you make in more money than you're spending. Open Ai
is a great example of this. Right now, they get
these articles saying, oh, we've got over a billion dollars
in revenue. No one's saying, are you how much you
spending to get there? But suddenly, after all of this
venture investment, after all of this hype, they're challenging the
big dogs of their industry. They're getting in there and
(06:35):
they raise more and more money, and then they buy
up a few more companies and now they're at this big, fat,
nasty penultimate stage when people begin to ask if it
was a good business. And at this point they either
have to sell it to someone else or take it public,
So the destination may change, but the journey's always kind
of the same. You grow, you grow, you try and
(06:56):
find a business model, you grow a bit more, and
then you face reality. The idea the deal state, by
the way, for venture capital is before this point reality
should not interfere with making money. So venture capital pumps
millions and billions of dollars into these ideas that might
kind of sell a product or a service, but really
just resemble something that was worth something in the past.
(07:17):
Perhaps the founder is a white guy who looks kind
of like Mark Zuckerberg. This is literally a phenomena. In
the twenty tens, it was guys who looked like Mark
Zuckerberg wearing hoodies. Or maybe it's hey, Uber's a big company.
What if you're the uber for something else, Uber for laundry,
for example. Yeah, a lot of those companies die, and
what they're trying to do is keep the dance going
(07:38):
until someone is dumb enough to buy them, or they
can convince Morgan Stanley to help them go public. And
the real problem with the value right now is people
are conflating the concept of great ideas with things they
like and things that might sell, and the result is
less innovative things are happening. These companies that are getting
(08:00):
the money Open Aye, getting ten billion dollars mostly in
cloud credits isn't making the world better. It's looking a
major startup into being a customer of Microsoft and making
a product that has yet to really prove itself.
Speaker 1 (08:14):
Yeah, I think people are surprised by that. But like
what we mean is not that like you can't do
things that are cool or surprising with this stuff, but
that that does not could like that does not conclude
with it being a great business. Right A bunch of
people are flipping out about that new them the video generator.
We can make a minute song video that kind of
looks like a California boom town or whatever, and it's like, yeah,
(08:36):
it's cool, but like, is this number one something that's
realistically going to be used in some things? Yeah, I'm
sure it'll be in some things. This is going to
like replace actually making movies? Well, probably not. And that
kind of means there's probably a pretty limited amount of
money that you're going to make with this right now,
Like it's it's it's something that could potentially be a
(08:58):
business that is profitable, but could it be a business
that is more profitable than the amount of money they
are continuing to shovel and open AI. That actually is
still an open question.
Speaker 2 (09:08):
And the problem is that I'm not even saying that
venture capital shouldn't happen. I do think it is a
necessary force to get some ideas off the ground. But
the problem is it's controlling the valley now, and as
a result, the things that are getting funded are the problem.
It's not that there are no good ideas, it's not
that there are no good founders. It's that the funding
is coming from an increasingly more centralized group of people
(09:31):
who are pretty much and I get everyone's profit seeking,
every investor wants a return, But there are venture capitalists
out there who just don't care about creating new things.
In fact, they're very, very very focused on keeping the
status quo going. And that's where Andreason Horowitz comes in.
My absolute favorite venture capital firm. You may remember them
(09:52):
from Facebook.
Speaker 1 (09:55):
Reason Yeah so.
Speaker 2 (09:57):
Andreason Horowitz is amazing because they are large firm and
they have various partners who all walk around making speeches
and they do their tweets vaguely saying like decentralization is
the future and it's good because of that, and you're like,
what does that mean? And then they don't want to
talk to you any further. Chris Dixon being one of
the more ugly ones, a partner that is entirely focused
(10:18):
on cryptocurrency, which I'm shortly going to get to. And
nowhere was Andrews and Horowitz more crooked than crypto. The
scam that Andreson Horowitz pulled on the crypto markets in
twenty twenty one and twenty twenty two should be studied
as a financial crime, and indeed it should be one.
What it actually is is a way that they managed
to turn basically money into more money without ever creating
(10:40):
anything of value. They pumped billions of dollars into these
things called Web three companies, which were allegedly new companies
that were decentralized, but they were really just shells for
a cryptocurrency token that someone could then hype and sell
before the sec got aware of the problem. And I
(11:02):
really must be clear how few of these companies actually
did anything. Let me take a step back, let me
explain how cryptocurrency companies made their money in like twenty
twenty one, twenty twenty two. They would put out some
a website for the thing, and they would say, we're
going to do a decentralized social network and we're going
to have this token. This token will reward people for
the contributions to the social network. There were like eighty
(11:24):
different versions of this idea. That token would then get
a financial valuation through trading on various different crypto exchanges
Binance or coinbase in many cases. And at this point
you think, cool, what does the company do? And that
was the wrong question to ask. The companies don't really
do anything, or they're just traditional companies that have created
(11:45):
a token as a means of monetizing a market. What
Andrews and Horoids would do was invest in these companies
and then receive a massive amount of these tokens at
this vastly discounted price, kind of like how it works
with stock and startup, and then you would hope, in
the case of the stock for the startup, that you
could sell it on the public markets or perhaps you
(12:05):
could sell to another company. This usually takes about five
to ten years. But what was amazing about the crypto
scam was Andrewson Horowitz only had to wait a few
months for these tokens, which they had bought at massive
discount to list on say coinbase, a major cryptocurrency exchange
where Mark Andreson has a board seat. This allowed them
to dump all of their investment, which they got at
(12:28):
this remarkably small price, onto retail investors, believing that they
were in the ground floor. They basically invested in the
stock market, invested in Morgan Stanley, invested in every part,
and just funneled money between places. It was completely insane,
and they be billions of dollars doing this. I feel
(12:48):
crazy whenever I read about this stuff, because it happened
in broad daylight.
Speaker 1 (12:53):
It's it's you know, you can say what you will
about like the ability of anyone to accumulate that much money,
but it at least even with like I don't think
Zuckerberg deserves certainly wouldn't say he deserves to have billions
of dollars. But if you say, if you like, say, okay,
this guy's crazy rich, he's worth this many billions.
Speaker 2 (13:10):
What did you do?
Speaker 1 (13:11):
Well, he made this thing that everybody uses. That is
a thing, right, as opposed to like this, which is
how did he become a billionaire? Well, he played a
really really fancy version of the shell game they play
on the street in New York and all those movies
from the eighties.
Speaker 2 (13:25):
And it's crazy because there was one called Definity they
invested in school. It had a token called ICP Internet Computer.
I think it stand for that's not done anything. That
company's never made anything, No one's using that, there are
no users. But Andres and Horwitz made so much money
off of it. At the beginning of the pandemic, Mark
and Dreson did this big bloviating posting it's time to build.
(13:48):
But I think the real fun scam of this, the
thing that makes me laugh but also cry, is that
there was a prolonged period where Andresen Horowitz and many
venture capitalists invested in building nothing. They found these shell
companies that they then filled full of venture dollars. In exchange,
they got a bunch of tokens that they were allowed
to dump onto the markets. They conned so many people.
(14:12):
They invested in Yuga Labs, who makes the board ape
Yacht Club.
Speaker 1 (14:15):
Ah, that one's gonna pay off. That investment's gonna pay off.
I've seen their their bored ape world of Warcraft thing
that they believe it's going to be the future of
social networking or whatever.
Speaker 2 (14:28):
And this is the thing. These companies never really built anything.
They invested. They got the early ape coin. I really
hate saying this stuff out loud, very annoying. Yeah, they've
got the ape coins and they were able to profit
off of that, and then they have the temerity to
say Christison went on hard Fork the New York Times
podcast and said, oh, yeah, we don't invest in anyone
(14:49):
who has their own tokens. It's just they're just fucking liars.
They're just liars lying to us.
Speaker 1 (14:55):
All I do kind of wonder that one of the
things that makes me makes me believe some sort of
like universal spirit guiding reality, is that like Peter Jennings
had to die when he did, we simply couldn't have
had a world in which Peter Jennings was explaining ape
coin to people over the television like that. That wouldn't
have been allowed. Like that's simply unimaginable.
Speaker 2 (15:15):
And it's just having to sit there here and say, yeah,
ape ape coin, that's how they made them money. Ape chain,
Oh yeah, definity Ic. It's these things that sucked. But
also as funny as this is, this was a prolonged
period when nothing was created other than money for already
rich guys. The people that were disadvantaged by dumping these
(15:39):
tokens were regular investors who, in twenty twenty one to
twenty twenty two believe that the crypto market was going
to make them wildly rich and it didn't. Coinbase, who
andresen Horitz invested in, they helped millions of people lose
billions of dollars because they did a Super Bowl commercial
in February twenty twenty two, which eventually led Well, I
(16:00):
think if you invested on that day, if you waited
to sell any later than March, you would have lost
your shirt. You would have just been at a loss. However,
if you'd wait it, it's now back up to sixty
seven thousand, So who the fuck knows either way.
Speaker 1 (16:13):
Yeah.
Speaker 2 (16:15):
The big thing with the crypto craze was that it
was the most pornographic version of the problem of venture
capital today in that it was entirely symbolic value. It was, oh,
a decentralized computer, what a novel idea? Are we building it?
Who knows? But we have a token today. Yay, let's
make some money. And in twenty twenty two, crypto startups
(16:35):
raise thirty three billion dollars a venture capital, which is
more than ten percent of the two hundred and forty
one billion dollars that was invested in that entire year. Jeezuz,
And none of them have made a real product. Yuga Labs.
You laugh at the bored Apoch Club, but that is
actually one of the few real products that actually launch.
Speaker 1 (16:54):
Yeah, they do seem to be making a video game.
It looks like shit, but it does seem to be
a video game.
Speaker 2 (17:09):
And I think that it's a symptom of a much
larger problem, both in that they're not investing to actually
make cool tech happen, but they're just trying to make
as much money in the most lazy way possible. But
I also think there's another problem. I don't think these
freaks actually know what good looks like anymore. And nowhere
(17:30):
else is that more obvious than Adam goddamn Newman. Yeah, baby,
we love him so Adam Newman. For those of you
who don't know round, a company called we Work. We
Work's business model was that they would buy or lease
a building and they would sub lease it to people,
allowing them to run their company out of it or
(17:51):
use a coworking space. Theoretically a good idea until you
looked at the financials, where it constantly bled money almost
immediately because real estate is a terrible investment. Yeah, and
also it was way too cheap. It was way too
cheap from the very beginning, so they were always operating
a loss.
Speaker 1 (18:09):
Yeah, it's it's he Newman. The thing that's interesting about
him because he and Elizabeth Holmes were kind of having
their glory days around the same time, and they're both
very similar figures. Newman was much smarter because he chose
he picked a field where like no one was going
to vengefully come after him for fucking up, because everyone
in real estates some kind of con artist at that
(18:31):
scale as opposed to trying to get into like blood science.
Speaker 2 (18:36):
But what's great about it is he turned a company
that was at one point worth forty seven billion dollars
into one worth ten point sixty five million dollars, and
then the company died, it went into Chapter eleven bankruptcy.
Speaker 1 (18:50):
We all love it.
Speaker 2 (18:52):
And right now those cleaning up the mess, if we work,
are just desperately trying to renegotiate its debts and just
being like his company. I'm sorry I can't pay you
due to this business model which I have inherited. At
one point we work traded at five hundred or something
dollars a share, and I believe right now it's like
(19:12):
zero point zero five cents. See the thing thing now,
there's been a show about we work with Jared Lito
in it of Morebius fame, and this is one of
the more legendary startups.
Speaker 1 (19:25):
And I tend to I choose to believe by the
way that it is within the Morbius cannon, that this
is what he's doing when his character is not unshowered
in a hoodie fighting crime.
Speaker 2 (19:35):
Fighting Matt Smith from Doctor Who. So as we've established
Adam Newman aka Morbius, he you'd think, Okay, this guy
famously TV show about how bad he was at business,
this guy'd be run out of town.
Speaker 3 (19:49):
Right wrong.
Speaker 2 (19:52):
Adam Newman managed to raise in August twenty twenty two
three hundred and fifty million dollars for his new co
company Flow Great.
Speaker 1 (20:01):
I love how people learn lessons.
Speaker 2 (20:04):
And what's great about Flow is when you go and
look about actually what it is, no one can really
tell you. It appears to be a rent to own
apartment company, but it isn't obvious what the actual difference
is between it and I don't know what BlackRock's been
doing for years, what the asset management firms have been doing. Nevertheless,
Mark Andresen absolutely busted. Is not everywhere to get three
(20:27):
hundred and fifty million dollars into this company. They claim
that there will be community oriented features and that there
will be something special about being involved in Flow. Now
you think that I'm just being vague. It's been like
a year and a half since this company went out
and there's really nothing that like out there for it.
And I think it's because Adam Newman just was someone
(20:49):
that Mark Andreson remembered.
Speaker 3 (20:50):
I'm not.
Speaker 2 (20:51):
I still cannot work out why this happened. He's always
been full of shit. Just to be clear, because there
was this, Andrews and Horowitz actually really used to video
an interview with Adam Newman. He was describing home ownership
and why home ownership was very special. He was saying,
it's the difference between cooling your own building supert to
(21:11):
unclogged the toilet or unclogging it yourself. And he was
saying that doing so and I quote, shifts your thinking
from being transactional to actually being part of a community
and feeling like you own something, but you.
Speaker 1 (21:23):
Don't want them to own anything. You just want them
to have to do shit that the landlord is supposed
to do.
Speaker 2 (21:29):
But also, if I have to unclog my shitter, I'm
not sitting there being like yeah, damn, I love the community.
Speaker 1 (21:35):
I'm like, what the hell right, Well, it's also like
it's it's fucked up because like one of the I
mean this is actually unclogging your toilet is always on
the person using the toilet. That's not really saying that
that that involves changes based on whether or not you're
the landlord. But one of like the bit like renting.
A lot of things that suck about renting, namely the
(21:56):
fact that like it keeps getting more and more expensive.
But one of the if it's of renting is that
if something breaks, you're supposed to just be able to
call the owner and they have to fix it. It's
not on you if you're fucking ac breaks, it's on
them to make it work. And he's saying that like, no,
if you if you are responsible for fixing things but
have absolutely no ownership of them, it's fine because that
(22:17):
makes you part of a community, and that's that's nuts.
Speaker 2 (22:21):
But also that just to be clear, that quote is
from an interview he gave at Andrew's and Horowitz at
his investor. Yeah, if I was watching that as an investor,
unless I was completely disconnected from humanity, I'd be like,
this guy's never unclogged the toilet, this guy's never on
this guy's never done home maintenance. Also, why would you
call your super to unclog your toilet just just have
(22:42):
a plunger unless Yeah, they nearly backed that bad boy up,
and I have.
Speaker 1 (22:47):
To have done a lot more damage than that.
Speaker 2 (22:49):
Yeah, yeah, you're literally shitting bricks in this case. But
I think it's more indicative of the fact that I
don't think Adam Newman has had a normal human experience
in quite some time, and I don't think Mark Andresen
has either, And yet he just got this insane amount
of money to address problems allegedly related to a thing
he does not understand.
Speaker 1 (23:09):
Yeah, love to see, which.
Speaker 2 (23:10):
Is also something he's been proven to be bad at.
Adam Newman lost billions of dollars of soft Bank's money,
which is really funny when you think about it, and actually,
do you want to hear a fun scam. He took
a loan out on his stock at we Work and
he actually had to put his stock from we Work
out to soft Bank, took real money from them and
(23:32):
leveraged his stock, and then soft Bank was like, hey,
if you don't pay this back, we're going to take
your stock. And he was like, yeah, sure, fuck you,
I'll just I'll like that stock's worth like thirty dollars. Now,
I'll just keep the real money and never repay ye
see it, bitch. But this is the thing. This is why,
And I think situations like this are where people are
going to start really getting black pilled with the tech industry.
(23:53):
So I think that you see things like this happening
and you think, are they laughing at us? Yeah? Like,
is this in a sane world? Adam Newman wouldn't see
a single dollar for the rest of his life. Yeah,
he got three hundred and fifty million goddamn dollars. It
was immediately a billion dollar company before it done anything.
(24:14):
And all they have to show for it is a
six hundred and thirty nine unit apartment building for Lauderdale.
Speaker 1 (24:20):
Yeah. And when you see a guy with the record
that Newman has get a company valued at that. What
that means is that investors investors are not are are
not valuing it that much because they think it will
actually make that much money. They're valuing it that high
because they think this guy is good at spin enough
that we'll be able to flip this shit and get
(24:42):
some money out of it before the company collapses. Right,
we can do an IPO, our shares will be worth money,
and then we cash the fuck out. That's what they're seeing,
and they may be right. It may wind up being
it like we work made some people a lot of money.
Speaker 2 (24:56):
But that's the thing. I actually wonder if that system
work anymore. Yeah, I don't know when whether they're going
to be able to get liquidity on this, because real
estate is a fairly well it can be a variable asset,
but it's also kind of an annoyingly real one. You
can't really go to someone and be like, actually, this
apartment building's worth fifty million dollars more because of the
(25:18):
future of innovation. No, No, it's a fucking apartment.
Speaker 1 (25:21):
Yeah.
Speaker 2 (25:22):
And I just think that Venger Capital has completely lost
the plot and has lost its ability to say what
good is they just it's almost like there are some
of them who are con artists feeding corn artists. Yeah,
and some of the largest investment arounds the last few
years have just gone into systems like this, gone into
things that when you look at them, you're like this,
(25:43):
this doesn't need this much money. Why are you doing this?
And I think it's because they just are gamblers. I
just think they're gambling, and they're gambling based on an
increasingly small amount of information because it's been twenty years
since they've done something. No there was a company called Noom,
which was a weight loss app that connected with coaches
and various things. They raised five hundred and forty million
dollars in twenty twenty two. Not sustainable and not profitable either.
(26:08):
But also the entire weight loss industry is worth about
four billion dollars, So you're saying they are worth that much.
Speaker 1 (26:15):
Of an eighth of the whole industry. Yeah, right, And
if I'm mathing right now, yeah.
Speaker 2 (26:21):
I was also failing to do the math in real
time there, but oh whatever, people know, people know how
dumn math good. Clubhouse is one of my favorites that
I'm not sure if you remember Clubhouse. It was this
audio app that grew during the pandemic, and everyone said
this is the future, and what it was was it
would be it's basically Twitter spaces. It's what we know
as Twitter Space is now a live audio room where
(26:43):
you can go in and have, in this case, extremely
vacuous tech conversations. It was big during the pandemic because
everyone was at home and you have people on Mark
Andrews and who of course had invested, going on there
and saying stuff like, oh, the future of technology is
the future and I've won. Wow, Mark, thank you. And
there was this weird period where almost every other almost
(27:03):
every week, there was some kind of valuation story that
would quote unquote league and it would be like, oh,
it's worth two billion dollars. Oh, it's worth four billion
dollars now. And then they started disappearing and nothing's really happening,
and as people started leaving their houses again after the
lockdowns ended, Clubhouse just kind of faded to black. The
thing that pissed me off about that was the amount
(27:24):
of stories in major media outlets claiming that Clubhouse was
the future, the future specifically of radio, which is a
twelve billion dollar industry. Totally yeah, that constantly has trouble
making money, not that we know anything about that, but.
Speaker 1 (27:41):
I mean also, you know, the fun thing about that
to me is that, like we know really well what
like the issues that radio has with making money are
like due in part to you know, ways in which
advertising and stuff has changed, but like pretty durably, the
things that people want out of radio are like people
(28:02):
they like talking about things they're interested in. Right, initially
that was like people DJs, they liked talking about the
cool music. But it's expanded now beyond that. But it's
never just been like random unscripted conversations between people who
have mics of varying quality. Like that's not particularly a
(28:25):
thing that folks have ever expressed a desire for. And
it's weird to me that anyone thought that like Clubhouse
was going to be interesting beyond a very specific subset
of people that wanted to suck these these people's proverbial dicks.
Speaker 2 (28:38):
And it felt like a corn in real time as well,
because they were pushing Andrew S Norwittz was pushing every
partner they could to use it. They were paying celebrities
to go on there, they were getting anyone they could
to get on the platform, and they were very clearly
behind the scenes trying to get someone to buy it.
And then Twitter just built Twitter spaces that everyone's like, oh,
(29:00):
we can just use this on a network that we use. Clubhouse, now,
by the way, is really funny. It's ninety percent scams
or ninety percent people doing manifestation stuff. It's amazing. But
there was a brief period where the venture capital elite
had spread around enough journalists and enough people on Twitter
that they truly believed this was the future. But if
you sat there and really thought about it, there was
(29:22):
never a point where it could make money. Like you said,
unscripted stuff, unscripted stuff's difficult. It's very difficult. Even when
you have great, really great chemistry with someone, you can
trip over stuff as I just did. There are numerous
things that can go wrong. And let's just be honest.
None of these tech people were particularly eloquent to begin with.
Yet based on everyone's conversations, everyone's saying, this is the future,
(29:45):
this is how what's our clubhouse strategy? What are we
going to do on Clubhouse? Nothing? Nothing, because you're so boring.
But it raised so much money. I think it raised
over a billion. It was ridiculous. And yet this is
what venture has become, pumping up these very shitty businesses,
these non entities, these features rather than products, and the
(30:07):
result is that the money is not going to actually
innovative things. And I get it. The venture takes risks.
The whole point of venture capital is it's risky money.
That's why you buy a half percent or a percent
of a company for I don't know, a million dollars
just choosing random numbers. There there is a risk to air,
and capital is required to get a company off the ground.
But the massive, massive amounts of money going into these
(30:31):
non entities, into these, in the case of Flow Adam
Newman's thing, very boring remakes of already boring and kind
of not profitable businesses to begin with. Yeah, the result
is that you get a venture capital industry that makes
startups require their existence. You get companies that cannot function
without venture capital. You get lossy companies like Uber who
(30:55):
get bigger and bigger without ever finding a business model
because venture capital keeps them alive until they've completed the
dance that less than go public or gets sold to
someone else. And companies like Uber are actually a great
example they're taking public and they get these massive windfors
from vcs, yet they immediately find themselves in this horrible
(31:15):
position where they have to start dancing for the real
public markets. That's why Uber has become my chilge is
get an Uber in some markets and it's much more expensive,
yet the drivers are making less money. It's because we're
in a situation where Uber now has to become a
growth that all costs startup, rather than just a venture
backed welfare recipient. And it's just it's a deeply depressing
(31:37):
time because people making real companies, people making new ideas,
people young people in the tech space are now going
into this and seeing that the people getting money are
just people that look like other people that have made
money before, that have ideas that aren't even particularly good,
but they sound like something you can flog. The amount
of money going to AI right now for companies that
(31:59):
have no business model at all, let alone a path
to revenue, they just don't. They just trying to grow
and grow and grow. It's just a deeply depressing time.
VCS they put I think forty one billion dollars into
crypto between Jerry twenty one and twenty twenty two, and
that was all without Crypto ever having done anything. It's
(32:20):
what twenty twenty four now, like I just had to
ask that, and Crypto is still not doing anything. There's
still nothing. There's still bitcoins worth sixty seven thousand dollars
and there's still no crypto use case. The Metaverse, which
you would by now have heard an episode about, did
absolutely nothing other than rebrand something we'd had for upwards
(32:41):
of fifteen years, and they raised one hundred and twenty
billion dollars in twenty twenty two. These concepts are what
are getting money. Innovation isn't Innovation is not enough to
get you investment these days, and venture capitalists no, the
thing that you want to do to a VC is
find a way to get them in on a scam
that you invented. And that's not going to help this world.
(33:04):
It's going to destroy the tech ecosystem if we're not
care for. And quite honestly, I have no idea what
changes the tide on this other than a major startup dying.
So when right in the rot economy, originally my mate
(33:26):
Casey and I were talking about fire and how growth
is like a fire if you build a nice, sustainable fire.
It will keep you warm, cook your food, sustain your life.
But if the only thing you care about is how
big your fire is, then all it's going to do
is set fire to everything around it, and it's going
to require so much more to keep it burning. Eventually
you'll have nothing left. But if you desperately desire that fire,
(33:48):
you'll constantly have to find new things to burn, no
matter what the cost is. And that's kind of where
the markets are at this point. We've kind of turned
the private and public markets over to arsonists. We've created
the conditions where we celebrate people like Marc Andresen for
making these big investments, these big bets, these big nasty
(34:08):
companies that don't do anything, or the even bigger firms
like Google and Meta who were just turning against their
users and rightly turning against the people, the tens of
thousands of people that they regularly fire. Venture capital and
the public markets are no longer rewarding good businesses or
good CEOs that run good sustainable companies. They're rewarding arsoness
(34:31):
people that can steer the kind of growth that raises
the value of an asset, even if that value isn't
even attached to the value it provides to humanity. Elon
Must's success, everything he's done with Tesla, didn't come from
his love of science or that he ended the monopoly
of the internal combustion engine. It came from his ability
(34:51):
to manipulate symbolic value, his hypeerman mentality. He worked out
in as early as twenty thirteen that anyone in the
world in a media outlet would cover the fact that
he spoke about anything.
Speaker 1 (35:03):
Mm hm.
Speaker 2 (35:04):
He's made so much money for him, and people buying
Tesla stock pretty much do lies in half truths. There's
always a good reason to buy Tesla for an idiot
in the market because Elon Musk's always saying, oh yes, sir, now,
Tesla's will now drive side to side. It doesn't matter
if it's true, doesn't matter if it never happens. Elon
Musk promised autopilot for years and years and years until
(35:26):
it actually arrived, and then it would arrive in these
little bits and chunks, and then it started killing people.
Tesla isn't a good company. It's a good stock to buy,
and that is a problem. That is where we are
right now with the public markets and with the private markets.
We're not far behind. So Google summed up a shy.
He hasn't paid two hundred odd million dollars a year
(35:48):
because he's a good CEO. Google's destroyed Search. We've been
over that at nauseum, and it sucks. You'd think that
someone who destroyed the most beloved tech used by billions
of people, that has changed people's lives and will continue
to do so. This is empirical fact, the damage he
has done to the tech ecosystem and his core product,
(36:11):
yet he's rewarded. He's paid this obscene amount of money.
The fact that Google's core product is getting worse doesn't
matter at all, because Bishai is paid because he finds
new innovative ways to increase the growth of the company,
even if doing so makes the product suck. And the
consequences are that these companies will continue to invest in
(36:32):
things that grow the overall revenue of the company or
their market share over everything else. They will mass hire,
they will mass fire, and they'll do so because there
are no consequences from the market. They don't care. All
they want to know is that the company will continue growing.
Venture capitalists are just as bad. They don't mind as
long as you have enough money to keep going to
(36:54):
the next funding round. As long as you can keep
growing this symbolic value. It doesn't matter if you hire
and fire people around them. It doesn't matter if your
product's kind of won key, as long as it's good
enough to flog to someone else. Look at the AI industry,
Look how bad chat GBT is at certain things, Look
at how bad clawed anthropics one is. Doesn't really matter
(37:15):
because AI is the future. We can make money off
of that at some point. And I think that this
is really the problem, and it's the thing that unites
the private and the public markets. We're not building things
for humans anymore. We're building things for humans that invest money.
We're building symbolic capital. And when you do that, you
(37:36):
will strangle innovation, and you'll do it at scale. You
will build tech for nobody. You will build tech that
sucks and doesn't do things and burns money, and in
the case of AI, probably rainforests. And the result is
just a shitty or worse world. Until we see a
seismic shift in how investors treat the companies they invest in,
(37:57):
both private and public. This cycle is going to continue,
and it's going to make us dumber. I guarantee you
that we're going to see every single one of the
companies that you've recently seen lay off thousands of people
do mass hiring in a year or two. They don't care.
They're not punished for this. The labor markets in America
don't punish them, the governments don't punish them. They will
(38:19):
keep fucking with human capital as much as they can
because they don't won't get punished for it. No one's
going to hold it against any startup that's done massive layoffs,
even if the CEOs are incredibly well paid and ran
the company into the ground. Companies aren't structured anymore to
evaluate whether a business is sustainable or good or make
something useful. The only thing that they're interested in is
(38:41):
making something they can flog.
Speaker 1 (38:43):
Yeah.
Speaker 2 (38:44):
Like.
Speaker 1 (38:44):
One of the important things to understand about how all
of this fits together is that the actual business from
most of these tech guys has very little, if not nothing,
to do with producing a product or getting people to
adopt a product, having any kind of impact on the
way people actually use technology. The actual business is in
(39:06):
conning other people to think that a business has a value, right, Yeah,
Like that that's become the game which is you know,
we're doing our episodes on Steve Jobs these next two weeks.
A lot of bad things will have to say about him.
But he actually did care about, like making a thing
and convincing a lot of people to use that thing,
and he was good at that. And it's become so
(39:28):
abstracted and so much about just the bezel, just about
tricking people so that you can make money before everyone
realizes that it's a fucking god. I don't think it's
I think it's probably bad for society that that's the
best way to make money.
Speaker 2 (39:44):
And I think that you're exactly right. The way we
look at companies, the way we value businesses, the way
we value startups, public companies, it doesn't really matter, is
just fundamentally broken. It's creating these really nasty cycles where
humans are hired and fired, scale, where companies make products
worse so that we use them more. Things become more
(40:05):
difficult to enrich someone and make our lives worse. And
it really is. It goes further than tech as well.
It's at the center of everything. Look, why are so
many bosses mad about you not coming back to the office.
It's because they bought a bunch of real estate that
they never needed or they've leased it, I guess. And
then they were like, well, I don't do any real work.
(40:26):
And I think what business looks like is when someone's
at an office. Yeah, And it's because we don't really
as a society understand what executives do, because we've never asked,
We've never really sat and thought, why does an executive
get paid so much more than others? What is it
that they do? And I think the pandemic and the
mass remote work we saw really highlighted that. I think
(40:50):
it really showed everyone exactly how big that con was.
But I think that I think that we're on the
verge of an awakening to this kind of thing. I
think as the labor market becomes so much worse, as
so many game studios, for example, lay off so many people,
they're going to start realizing the executives are making all
the money while everyone does all the work, and none
(41:11):
of these people are connected to the product, And we're
going to keep building things for nobody other than investors
until we're at a point where we have entire business
ecosystems building for nobody. Just look at the crypto industry
yea billions of dollars into Look at that. Look at
the crypto industry. Look how big that con was. Look
(41:33):
how much money went into nothing, went into creating nothing.
Because that's where we are as a society, that's where
innovation is today. In a real ecosystem, in a real
tech ecosystem, the heads of the industry wouldn't be trying
to find ways to crow bot ai or crypto or
metaverse into it because the market's like it. They would
be saying, I'm not sure that this is a thing,
(41:56):
let alone a business model. None of these companies get
bled for these bad decisions, and as long as they don't,
they're going to keep making them. And I think it's
going to and I have a wider theory I have
that it's going to take one of the major tech
firms dying to change something, and I think it's possible.
I think Facebook is, weirdly enough, the one that I
(42:17):
would call first, just because the ad models die. But
until that happens, we're just going to keep having these
cycles where the markets don't blame anyone for anything other
than the consumer. The consumer is made to almost apologize
to the vendor. It really sickens me. I think that
this is really what this is the joke offying in
real time that I get because I've been in the
(42:39):
tech industry since two thousand and eight, and I've been
right about games since like two thousand and four. So
I've seen tech as a blob go from something that was, oh,
you have nerdsy like tech, and people use laptops, to
everyone has a phone, to everyone is on some level
connected to the tech industry. Now it's impossible to remove
from our lives. But now I look around and the
(43:02):
things that are being created and the things that are
being hyped up, they're not for people anymore. Yeah, and
then the actions of the CEOs don't seem to actually
mesh with reality. Why did nobody get fired for over
hiring In twenty twenty two, so many companies one hundreds
of thousands of tech workers were laid off. How did
(43:23):
nobody get fired for just hoarding human capital? How did
nobody get fired for that?
Speaker 1 (43:29):
Yeah, or for like I mean, if you want to
see it, for the way that these people. How did
nobody get fired for wasting tens of millions, hundreds of millions,
billions of dollars in stockholders' money, right, Like, stuff that
should have gone the way that they see things out
in dividend payments was instead spent on people the company
apparently didn't need. How does no one lose their job
(43:50):
over that? If that's the way you're looking at things,
that seems like the real problem.
Speaker 2 (43:55):
And the amount of layoffs that happened and the amount
of well, I think it was Google spent a billion
two billion on Severance alone. Yeah, how did sun Dar
Pashai not get fired for that? Why did he get
so much money? And I hate to say, I think
the answer is people are not people in the eyes
of the markets. They don't give a shit. It's just
a fuel. This is just the cost of fuel. This
(44:16):
is like oil to them, except there are sometimes annoying
laws that stop me getting rid of the oil quite
as fast. And I think what the tech industry really
needs to realize is nothing lasts forever. Nothing lasts forever,
and nothing grows forever other than a cancer. And at
some point, this whole growth of all costs economy is
(44:38):
working pretty well for now, but at some point the
markets will turn on them, because at some point someone
has to notice, somebody who is investing has to notice, Wait,
are these actually good companies or are they just growing
and then contracting, and then growing and contracting and just
never really making anything within the pro It's just deeply worrying.
(45:02):
I actually worry about the health of the tech ecosystem
long term if we keep pursuing this. We have private
companies that are building things to sell to large companies,
and large companies that are building things to market their
own stock to investors, and at some point a consumer
gets served somewhere within that equation, but nowhere near to
(45:24):
the level that it should dictate anyone's choices. A product
may be profitable for a while, but there's a line
at which profitability comes at the cost of functionality, and
your company may simply not be able to grow anymore. Look,
a business that can't generate profit isn't a good business,
and a business that can never generate a profit deserves
to die. These seem like obvious things, but they just
(45:49):
don't apply to anyone other than regular people. And the
net result of this rotten economy, this broken thing that
rewards people that create symbolic capital, is that it kills innovation.
If capital isn't invested in providing a good service by say,
a profitable business, it will never sustain things that are
(46:09):
actually useful to society. Companies aren't incentivized at the moment
to provide better services or improve lives outside of the
ways in which they can drain more and more blood
and revenue and growth from customers, and right now the
street doesn't care. Just look at Facebook and Instagram, two
beloved products that have now grown exceedingly profitable while not
(46:30):
providing the basic function that made them big. And frankly,
look if capital wishes to call labor and title as
they have so many times, if they wish to treat
people like shit. As it stands, the private and public
markets are not working for you. They're not building things
for you. They're not building things for anyone. Google, as
(46:53):
it stands, is forcing Gemini, their generator of AI, into
every corner of their company, not because it's going to
make your life better, but because it's going to make
them seem more futuristic.
Speaker 1 (47:04):
YEP.
Speaker 2 (47:04):
As long as private businesses are funded by venture capitalists
that are not interested in funding innovation and just want
to find more ways to flog money to larger entities,
we're not going to see a better world. We're not
going to see cooler tech things. We're going to get
increasingly more expensive and convoluted versions of things we're already
paying for. I hope things can change, I really do,
(47:27):
but with the current crop of venture capitalists, I'm not
holding my breath. So thank you for listening to today's episode, Robert,
thank you for joining me as well, YV. This wonderful,
happy episode we've done. It's funny. It's in my day job,
my PR firm, I do run into decent companies that
(47:48):
are doing well, that actually make more money than their spending,
that actually have business plans. But occasion I talk to
someone who just throws like eight buzzwords at me, and
they'll have raised this crazy amount of money and you
look at them and you're like, am I in the
wrong game? Should I be pot? There is this weird
sense you're like, am I what am I missing here?
(48:08):
And I think that that's what fuels a lot of this,
that there are these people getting so rich or nothing.
The people like they must they can't be lying.
Speaker 1 (48:15):
It has to be something. I have to be missing something,
and it's like, no, you're you're not. The business is entirely.
It's a confidence game. It's like, pretend you have the
confidence that this is such a world changing product even
though it's really just Uber for dry cleaning or whatever
that Like, if you don't get in on the ground floor,
(48:36):
you're going to be left behind, or like you know
with crypto, this is the way all money is going
to work, and you have to get in now or
have fun being poor or yeah. Same basically the same
shit about AI, right, it's always and honestly, whether or
not there's actually a good product, it's always the same,
the same thing, right, like you, Yeah, it's alf fomo.
Speaker 2 (49:01):
And it sucks because it can be better. There is
a way. The thing that I always talk about is
there is an alternate universe where Uber actually could have
been probably the most disruptive company of all time. Had
Uber tried to scale slower and charged more and had
real employee benefits and a paycheck that they gave people,
(49:23):
it would have had to grow very slowly and would
have cost more in venture dollars, But I think that
company would have worth been worth trillions and actually changed
the world, like truly, had they used it as a
way to actually create a bullwark for labor versus a
way to screw workers again and again so venture capitalists
can get rich. It could have been amazing, but that's
(49:43):
not how these people are thinking. They're not thinking ten twenty, thirty,
forty years. They're thinking five to ten years, so I
can get the fuck out of this. Yeah, and it's
so oh, it's so depressing because a better world as possible.
Speaker 1 (49:55):
That these people, because of the amount of money they've made,
in large part in tech, they've taken over everything and
so they're applying this lot. I mean, we could talk
about journalism, right, they're applying this logic to the media
properties they buy, which, like, that's not why you have
a newspaper, right, Like, that's not the value of a
newspaper is not its ability to like get a bunch
(50:16):
of hype around it. And like we saw this with
Vice where it was valued at billions and billions of
dollars and then it collapsed. Because no, that's not how
newspapers work, right, That's essentially what Vice was trying to be,
And that's not the way that they're not worth money
in that way doesn't mean you can't make money off
of them. There's a number of papers like the New
York Times that are very profitable institutions. It's just you can't.
(50:38):
It's not gonna give you that kind of like astronomic
or turn on investment that you do when somebody invents
a fucking iPhone. It shouldn't have to.
Speaker 2 (50:46):
But what's crazy is like inventing the iPhone was very profitable,
but Apple also is something with it. It's actually useful.
Speaker 1 (50:53):
Yes, yes, And I think understanding about what people wanted,
you know, I.
Speaker 2 (51:00):
Think that that's the ultimate problem. I don't think that
people running tech companies actually experience real people. They don't
have real problems. But also they don't speak to real people.
Adam Newman thinks, oh, my toilet's clogged. I will now
call someone else to one clog it. Just I would
(51:21):
never use a plunger. What's that? What is a plunger?
I would actually love to ask him if he knows
what a plunge. It looks like, yeah, it doesn't. But
that's the thing. These people are disconnect.
Speaker 1 (51:33):
Kind of guy who just moves that happens.
Speaker 2 (51:35):
Yeah, can't use toilet anymore, go get rid of it.
But I think, to wrap it up, it's there is
this genuine sense throughout all of this through the original
rock Economy piece. Everything I'm talking about, that these people
don't experience real life, that they've made so much money,
and that they think they've found a way to con
money out of the world, that they just don't think
(51:57):
about human beings and human problems anymore. And as long
as these people are in power, Texit.
Speaker 1 (52:03):
Risk, yeah, so is everything else. Well this was fun.
Speaker 2 (52:09):
Yep, there we go. Robert, thank you so much for
joining me.
Speaker 1 (52:12):
Yeah, thanks for having me on and thanks for being
you know, the Shai Hallud of content. You know, just
like the sandworm excrete spice which allows the navigators to
live forever and navigate through faster than light travel. You
also produce spice trying to shovel and dune references.
Speaker 3 (52:38):
Yeah, there we go.
Speaker 2 (52:39):
Re sponsored by Jim. Thank you so much. Thank you
so much for listening.
Speaker 3 (52:43):
Everyone, Thank you.
Speaker 2 (52:53):
For listening to Better Offline. The editor and composer of
the Better Offline theme song is Metosolski. You can check
out more of his music and audio projects at mattaslsk
dot com, m A T T O.
Speaker 3 (53:04):
S O W s Ki dot com.
Speaker 2 (53:07):
You can email me at easy at Better Offline dot
com or check out Better Offline dot com to find
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so much for listening. Better Offline is a production of
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All Zone Media.
Speaker 2 (00:05):
Welcome to Better Offline. I'm your host ed zetron Today
I am joined barcul Zone Media's Robert Evans, and he's
joining me to talk more about the growth that all
(00:26):
costs rot economy. It's the thing that's making your beloved
tech products worse to make someone else hundreds of millions
of dollars. And it's so good, Robert. We love it,
don't we, folks.
Speaker 1 (00:36):
I'm having a great time. I love that I used
to make a living teaching like people who would pay
you to the company. I worked for huge amounts of
money to be trained in like how to use Google
more effectively, all these little dorks and stuff that allow
you to like really specialize your search settings. And I
love that. Just in the last couple of years, Google
(00:58):
has placed a shot gun to the base of their
searches engines. Skull pulled the trigger, and now a bunch
of people are desperately trying to be like, oh, there's
this new perperplexity AI or this other AI search engine,
like it's much better. And it's like, no, it's slightly
better than Google now, but they're all worse than Google
used to be. None of this is a step forward.
(01:19):
They're just pains in the ass.
Speaker 2 (01:21):
So one of the reasons that that's happening isn't just
the public markets. The public markets are a big part
of the problem, and they're the ones that incentivize this
whole growth or costs phenomenon. But I actually want you
to know that this has another cause, and it's private
investing and venture capital. Those are the ones who are
(01:41):
pretty much putting a thumb on the head of innovation
that is stopping great companies being built by incentivizing well,
kind of a form of slaughter, fattening up pigs to
sell to the market, rather than making something innovative.
Speaker 1 (01:57):
Yeah, like like some sort of like a pig sheep
hybrid like a peep.
Speaker 2 (02:02):
But you could eat the meat from there.
Speaker 1 (02:04):
Yeah yeah, I think it would probably be like like
the like the clone from the fourth Alien movie that
just is begging for you to kill it, but then
you know, you get some sort of fucked up bacon.
Speaker 2 (02:15):
But instead of getting that fucked up bacon, what you
actually get is more like the creature from the Thing,
the weird spider creature, which is funny, scary, but not
particularly useful.
Speaker 1 (02:25):
Yeah, probably not very tasty.
Speaker 2 (02:26):
So before companies like Uber reached the public markets. They're
fueled by a much more violent and reckless form of funding,
venture capital. Venture capitalists can be seed stage investors or
regular guy putting ten grand into a company, all the
way up to massive firms with hundreds of people like
Andresen Horowitz, who invested early in Facebook and Airbnb.
Speaker 1 (02:45):
Yeah, Like the thing that I've always that I came
to realize about like venture capital money just from studying scams,
is you have like Corey Doctor talks about this a lot.
But like in traditional scam terminology of this period called
like the bezel right, which is the time between starting
the scam when everybody else realizes it's a fucking scam.
It's the period in which you're making a bunch of money,
(03:06):
and like that's that's where all of these VC people
like make their fortune. You know, some of the companies
they back do turn out to be long term profitable,
but they don't have to be. If you can just
sort of get this IPO where everybody values it super
highly for a while and cash out what you have
in the company during that period of time. If the
company fails a few years after its IPO, if it
(03:28):
turns out that like it wasn't really a good business,
you still get rich. Like the key thing is, it's
great if you wind up making a successful business in
their eyes, but you don't have to for them to
make a lot of money, right, They just have to
have to be able to get out before you know,
the scam reaches its its conclusion, they.
Speaker 2 (03:45):
Have to reach a liquidity events, so either selling that
company to someone else or taking it public. And a
big thing is the venture capital. Yes, like all investment things,
is always just evil at its core, but it used
to be much smaller. Used to be maybe a billion
dollars in a year that would go into tech startups.
Now it's in twenty twenty two, it's like two hundred
and forty billion dollars. And I'll get to why that's
(04:09):
an obscene number later, specifically around crypto. But when it
was smaller, investment wasn't done with these ideas of these five, ten,
twenty x multipliers. It was I want to put money
early into this company because I think they're making a
good product that people will buy. The problem was companies
like Google and Apple to a lesser extent, but really
(04:31):
companies like Facebook getting these massive multi billion, hundred billion
dollar valuations. Suddenly startups stopped needing ten twenty fifty one
hundred grand at seed stage and started needing two to
five to ten million dollars at the seed or even
series A stage. And suddenly venture capitalists started moving away
(04:53):
from this idea of good businesses that could last without them,
and they started to go into a form of kind
of of symbolic capital, investing in things that looked value
but aren't necessarily valuable at their whole. As a result,
they create this ecosystem where these companies go through this
kind of volatile, irrosive cycle of growth, with the only
(05:15):
goal being that they get to a stage when they
become someone else's problem, either by listing on the public
markets or selling to a much bigger company.
Speaker 1 (05:23):
Yeah, and the whole crypto industry is essentially taking that
like it comes out of everyone. People who came to
expect this and in a lot of cases got rich
for the first time through this chunk of the tech
industry and then realized, well, if we create a way
to utilize some of these these psychological phenomenons and like
some of these ideas without any kind of regulation, like
(05:45):
that's where crypto comes from, right Like it's it's purely
the scam aspects of this with none of the real businesses.
Speaker 2 (05:51):
And you're completely right, And I will shortly get to
that as well, because yeah, here's let me set the
scene of the current state of the value up emerges,
they're considered the next big thing. They ideally reach unicorn status,
which refers to them being worth a billion dollars, and
they experience unprecedented growth, they explode, and nobody asks the question, hey,
(06:14):
you make in more money than you're spending. Open Ai
is a great example of this. Right now, they get
these articles saying, oh, we've got over a billion dollars
in revenue. No one's saying, are you how much you
spending to get there? But suddenly, after all of this
venture investment, after all of this hype, they're challenging the
big dogs of their industry. They're getting in there and
(06:35):
they raise more and more money, and then they buy
up a few more companies and now they're at this big, fat,
nasty penultimate stage when people begin to ask if it
was a good business. And at this point they either
have to sell it to someone else or take it public,
So the destination may change, but the journey's always kind
of the same. You grow, you grow, you try and
(06:56):
find a business model, you grow a bit more, and
then you face reality. The idea the deal state, by
the way, for venture capital is before this point reality
should not interfere with making money. So venture capital pumps
millions and billions of dollars into these ideas that might
kind of sell a product or a service, but really
just resemble something that was worth something in the past.
(07:17):
Perhaps the founder is a white guy who looks kind
of like Mark Zuckerberg. This is literally a phenomena. In
the twenty tens, it was guys who looked like Mark
Zuckerberg wearing hoodies. Or maybe it's hey, Uber's a big company.
What if you're the uber for something else, Uber for laundry,
for example. Yeah, a lot of those companies die, and
what they're trying to do is keep the dance going
(07:38):
until someone is dumb enough to buy them, or they
can convince Morgan Stanley to help them go public. And
the real problem with the value right now is people
are conflating the concept of great ideas with things they
like and things that might sell, and the result is
less innovative things are happening. These companies that are getting
(08:00):
the money Open Aye, getting ten billion dollars mostly in
cloud credits isn't making the world better. It's looking a
major startup into being a customer of Microsoft and making
a product that has yet to really prove itself.
Speaker 1 (08:14):
Yeah, I think people are surprised by that. But like
what we mean is not that like you can't do
things that are cool or surprising with this stuff, but
that that does not could like that does not conclude
with it being a great business. Right A bunch of
people are flipping out about that new them the video generator.
We can make a minute song video that kind of
looks like a California boom town or whatever, and it's like, yeah,
(08:36):
it's cool, but like, is this number one something that's
realistically going to be used in some things? Yeah, I'm
sure it'll be in some things. This is going to
like replace actually making movies? Well, probably not. And that
kind of means there's probably a pretty limited amount of
money that you're going to make with this right now,
Like it's it's it's something that could potentially be a
(08:58):
business that is profitable, but could it be a business
that is more profitable than the amount of money they
are continuing to shovel and open AI. That actually is
still an open question.
Speaker 2 (09:08):
And the problem is that I'm not even saying that
venture capital shouldn't happen. I do think it is a
necessary force to get some ideas off the ground. But
the problem is it's controlling the valley now, and as
a result, the things that are getting funded are the problem.
It's not that there are no good ideas, it's not
that there are no good founders. It's that the funding
is coming from an increasingly more centralized group of people
(09:31):
who are pretty much and I get everyone's profit seeking,
every investor wants a return, But there are venture capitalists
out there who just don't care about creating new things.
In fact, they're very, very very focused on keeping the
status quo going. And that's where Andreason Horowitz comes in.
My absolute favorite venture capital firm. You may remember them
(09:52):
from Facebook.
Speaker 1 (09:55):
Reason Yeah so.
Speaker 2 (09:57):
Andreason Horowitz is amazing because they are large firm and
they have various partners who all walk around making speeches
and they do their tweets vaguely saying like decentralization is
the future and it's good because of that, and you're like,
what does that mean? And then they don't want to
talk to you any further. Chris Dixon being one of
the more ugly ones, a partner that is entirely focused
(10:18):
on cryptocurrency, which I'm shortly going to get to. And
nowhere was Andrews and Horowitz more crooked than crypto. The
scam that Andreson Horowitz pulled on the crypto markets in
twenty twenty one and twenty twenty two should be studied
as a financial crime, and indeed it should be one.
What it actually is is a way that they managed
to turn basically money into more money without ever creating
(10:40):
anything of value. They pumped billions of dollars into these
things called Web three companies, which were allegedly new companies
that were decentralized, but they were really just shells for
a cryptocurrency token that someone could then hype and sell
before the sec got aware of the problem. And I
(11:02):
really must be clear how few of these companies actually
did anything. Let me take a step back, let me
explain how cryptocurrency companies made their money in like twenty
twenty one, twenty twenty two. They would put out some
a website for the thing, and they would say, we're
going to do a decentralized social network and we're going
to have this token. This token will reward people for
the contributions to the social network. There were like eighty
(11:24):
different versions of this idea. That token would then get
a financial valuation through trading on various different crypto exchanges
Binance or coinbase in many cases. And at this point
you think, cool, what does the company do? And that
was the wrong question to ask. The companies don't really
do anything, or they're just traditional companies that have created
(11:45):
a token as a means of monetizing a market. What
Andrews and Horoids would do was invest in these companies
and then receive a massive amount of these tokens at
this vastly discounted price, kind of like how it works
with stock and startup, and then you would hope, in
the case of the stock for the startup, that you
could sell it on the public markets or perhaps you
(12:05):
could sell to another company. This usually takes about five
to ten years. But what was amazing about the crypto
scam was Andrewson Horowitz only had to wait a few
months for these tokens, which they had bought at massive
discount to list on say coinbase, a major cryptocurrency exchange
where Mark Andreson has a board seat. This allowed them
to dump all of their investment, which they got at
(12:28):
this remarkably small price, onto retail investors, believing that they
were in the ground floor. They basically invested in the
stock market, invested in Morgan Stanley, invested in every part,
and just funneled money between places. It was completely insane,
and they be billions of dollars doing this. I feel
(12:48):
crazy whenever I read about this stuff, because it happened
in broad daylight.
Speaker 1 (12:53):
It's it's you know, you can say what you will
about like the ability of anyone to accumulate that much money,
but it at least even with like I don't think
Zuckerberg deserves certainly wouldn't say he deserves to have billions
of dollars. But if you say, if you like, say, okay,
this guy's crazy rich, he's worth this many billions.
Speaker 2 (13:10):
What did you do?
Speaker 1 (13:11):
Well, he made this thing that everybody uses. That is
a thing, right, as opposed to like this, which is
how did he become a billionaire? Well, he played a
really really fancy version of the shell game they play
on the street in New York and all those movies
from the eighties.
Speaker 2 (13:25):
And it's crazy because there was one called Definity they
invested in school. It had a token called ICP Internet Computer.
I think it stand for that's not done anything. That
company's never made anything, No one's using that, there are
no users. But Andres and Horwitz made so much money
off of it. At the beginning of the pandemic, Mark
and Dreson did this big bloviating posting it's time to build.
(13:48):
But I think the real fun scam of this, the
thing that makes me laugh but also cry, is that
there was a prolonged period where Andresen Horowitz and many
venture capitalists invested in building nothing. They found these shell
companies that they then filled full of venture dollars. In exchange,
they got a bunch of tokens that they were allowed
to dump onto the markets. They conned so many people.
(14:12):
They invested in Yuga Labs, who makes the board ape
Yacht Club.
Speaker 1 (14:15):
Ah, that one's gonna pay off. That investment's gonna pay off.
I've seen their their bored ape world of Warcraft thing
that they believe it's going to be the future of
social networking or whatever.
Speaker 2 (14:28):
And this is the thing. These companies never really built anything.
They invested. They got the early ape coin. I really
hate saying this stuff out loud, very annoying. Yeah, they've
got the ape coins and they were able to profit
off of that, and then they have the temerity to
say Christison went on hard Fork the New York Times
podcast and said, oh, yeah, we don't invest in anyone
(14:49):
who has their own tokens. It's just they're just fucking liars.
They're just liars lying to us.
Speaker 1 (14:55):
All I do kind of wonder that one of the
things that makes me makes me believe some sort of
like universal spirit guiding reality, is that like Peter Jennings
had to die when he did, we simply couldn't have
had a world in which Peter Jennings was explaining ape
coin to people over the television like that. That wouldn't
have been allowed. Like that's simply unimaginable.
Speaker 2 (15:15):
And it's just having to sit there here and say, yeah,
ape ape coin, that's how they made them money. Ape chain,
Oh yeah, definity Ic. It's these things that sucked. But
also as funny as this is, this was a prolonged
period when nothing was created other than money for already
rich guys. The people that were disadvantaged by dumping these
(15:39):
tokens were regular investors who, in twenty twenty one to
twenty twenty two believe that the crypto market was going
to make them wildly rich and it didn't. Coinbase, who
andresen Horitz invested in, they helped millions of people lose
billions of dollars because they did a Super Bowl commercial
in February twenty twenty two, which eventually led Well, I
(16:00):
think if you invested on that day, if you waited
to sell any later than March, you would have lost
your shirt. You would have just been at a loss. However,
if you'd wait it, it's now back up to sixty
seven thousand, So who the fuck knows either way.
Speaker 1 (16:13):
Yeah.
Speaker 2 (16:15):
The big thing with the crypto craze was that it
was the most pornographic version of the problem of venture
capital today in that it was entirely symbolic value. It was, oh,
a decentralized computer, what a novel idea? Are we building it?
Who knows? But we have a token today. Yay, let's
make some money. And in twenty twenty two, crypto startups
(16:35):
raise thirty three billion dollars a venture capital, which is
more than ten percent of the two hundred and forty
one billion dollars that was invested in that entire year. Jeezuz,
And none of them have made a real product. Yuga Labs.
You laugh at the bored Apoch Club, but that is
actually one of the few real products that actually launch.
Speaker 1 (16:54):
Yeah, they do seem to be making a video game.
It looks like shit, but it does seem to be
a video game.
Speaker 2 (17:09):
And I think that it's a symptom of a much
larger problem, both in that they're not investing to actually
make cool tech happen, but they're just trying to make
as much money in the most lazy way possible. But
I also think there's another problem. I don't think these
freaks actually know what good looks like anymore. And nowhere
(17:30):
else is that more obvious than Adam goddamn Newman. Yeah, baby,
we love him so Adam Newman. For those of you
who don't know round, a company called we Work. We
Work's business model was that they would buy or lease
a building and they would sub lease it to people,
allowing them to run their company out of it or
(17:51):
use a coworking space. Theoretically a good idea until you
looked at the financials, where it constantly bled money almost
immediately because real estate is a terrible investment. Yeah, and
also it was way too cheap. It was way too
cheap from the very beginning, so they were always operating
a loss.
Speaker 1 (18:09):
Yeah, it's it's he Newman. The thing that's interesting about
him because he and Elizabeth Holmes were kind of having
their glory days around the same time, and they're both
very similar figures. Newman was much smarter because he chose
he picked a field where like no one was going
to vengefully come after him for fucking up, because everyone
in real estates some kind of con artist at that
(18:31):
scale as opposed to trying to get into like blood science.
Speaker 2 (18:36):
But what's great about it is he turned a company
that was at one point worth forty seven billion dollars
into one worth ten point sixty five million dollars, and
then the company died, it went into Chapter eleven bankruptcy.
Speaker 1 (18:50):
We all love it.
Speaker 2 (18:52):
And right now those cleaning up the mess, if we work,
are just desperately trying to renegotiate its debts and just
being like his company. I'm sorry I can't pay you
due to this business model which I have inherited. At
one point we work traded at five hundred or something
dollars a share, and I believe right now it's like
(19:12):
zero point zero five cents. See the thing thing now,
there's been a show about we work with Jared Lito
in it of Morebius fame, and this is one of
the more legendary startups.
Speaker 1 (19:25):
And I tend to I choose to believe by the
way that it is within the Morbius cannon, that this
is what he's doing when his character is not unshowered
in a hoodie fighting crime.
Speaker 2 (19:35):
Fighting Matt Smith from Doctor Who. So as we've established
Adam Newman aka Morbius, he you'd think, Okay, this guy
famously TV show about how bad he was at business,
this guy'd be run out of town.
Speaker 3 (19:49):
Right wrong.
Speaker 2 (19:52):
Adam Newman managed to raise in August twenty twenty two
three hundred and fifty million dollars for his new co
company Flow Great.
Speaker 1 (20:01):
I love how people learn lessons.
Speaker 2 (20:04):
And what's great about Flow is when you go and
look about actually what it is, no one can really
tell you. It appears to be a rent to own
apartment company, but it isn't obvious what the actual difference
is between it and I don't know what BlackRock's been
doing for years, what the asset management firms have been doing. Nevertheless,
Mark Andresen absolutely busted. Is not everywhere to get three
(20:27):
hundred and fifty million dollars into this company. They claim
that there will be community oriented features and that there
will be something special about being involved in Flow. Now
you think that I'm just being vague. It's been like
a year and a half since this company went out
and there's really nothing that like out there for it.
And I think it's because Adam Newman just was someone
(20:49):
that Mark Andreson remembered.
Speaker 3 (20:50):
I'm not.
Speaker 2 (20:51):
I still cannot work out why this happened. He's always
been full of shit. Just to be clear, because there
was this, Andrews and Horowitz actually really used to video
an interview with Adam Newman. He was describing home ownership
and why home ownership was very special. He was saying,
it's the difference between cooling your own building supert to
(21:11):
unclogged the toilet or unclogging it yourself. And he was
saying that doing so and I quote, shifts your thinking
from being transactional to actually being part of a community
and feeling like you own something, but you.
Speaker 1 (21:23):
Don't want them to own anything. You just want them
to have to do shit that the landlord is supposed
to do.
Speaker 2 (21:29):
But also, if I have to unclog my shitter, I'm
not sitting there being like yeah, damn, I love the community.
Speaker 1 (21:35):
I'm like, what the hell right, Well, it's also like
it's it's fucked up because like one of the I
mean this is actually unclogging your toilet is always on
the person using the toilet. That's not really saying that
that that involves changes based on whether or not you're
the landlord. But one of like the bit like renting.
A lot of things that suck about renting, namely the
(21:56):
fact that like it keeps getting more and more expensive.
But one of the if it's of renting is that
if something breaks, you're supposed to just be able to
call the owner and they have to fix it. It's
not on you if you're fucking ac breaks, it's on
them to make it work. And he's saying that like, no,
if you if you are responsible for fixing things but
have absolutely no ownership of them, it's fine because that
(22:17):
makes you part of a community, and that's that's nuts.
Speaker 2 (22:21):
But also that just to be clear, that quote is
from an interview he gave at Andrew's and Horowitz at
his investor. Yeah, if I was watching that as an investor,
unless I was completely disconnected from humanity, I'd be like,
this guy's never unclogged the toilet, this guy's never on
this guy's never done home maintenance. Also, why would you
call your super to unclog your toilet just just have
(22:42):
a plunger unless Yeah, they nearly backed that bad boy up,
and I have.
Speaker 1 (22:47):
To have done a lot more damage than that.
Speaker 2 (22:49):
Yeah, yeah, you're literally shitting bricks in this case. But
I think it's more indicative of the fact that I
don't think Adam Newman has had a normal human experience
in quite some time, and I don't think Mark Andresen
has either, And yet he just got this insane amount
of money to address problems allegedly related to a thing
he does not understand.
Speaker 1 (23:09):
Yeah, love to see, which.
Speaker 2 (23:10):
Is also something he's been proven to be bad at.
Adam Newman lost billions of dollars of soft Bank's money,
which is really funny when you think about it, and actually,
do you want to hear a fun scam. He took
a loan out on his stock at we Work and
he actually had to put his stock from we Work
out to soft Bank, took real money from them and
(23:32):
leveraged his stock, and then soft Bank was like, hey,
if you don't pay this back, we're going to take
your stock. And he was like, yeah, sure, fuck you,
I'll just I'll like that stock's worth like thirty dollars. Now,
I'll just keep the real money and never repay ye
see it, bitch. But this is the thing. This is why,
And I think situations like this are where people are
going to start really getting black pilled with the tech industry.
(23:53):
So I think that you see things like this happening
and you think, are they laughing at us? Yeah? Like,
is this in a sane world? Adam Newman wouldn't see
a single dollar for the rest of his life. Yeah,
he got three hundred and fifty million goddamn dollars. It
was immediately a billion dollar company before it done anything.
(24:14):
And all they have to show for it is a
six hundred and thirty nine unit apartment building for Lauderdale.
Speaker 1 (24:20):
Yeah. And when you see a guy with the record
that Newman has get a company valued at that. What
that means is that investors investors are not are are
not valuing it that much because they think it will
actually make that much money. They're valuing it that high
because they think this guy is good at spin enough
that we'll be able to flip this shit and get
(24:42):
some money out of it before the company collapses. Right,
we can do an IPO, our shares will be worth money,
and then we cash the fuck out. That's what they're seeing,
and they may be right. It may wind up being
it like we work made some people a lot of money.
Speaker 2 (24:56):
But that's the thing. I actually wonder if that system
work anymore. Yeah, I don't know when whether they're going
to be able to get liquidity on this, because real
estate is a fairly well it can be a variable asset,
but it's also kind of an annoyingly real one. You
can't really go to someone and be like, actually, this
apartment building's worth fifty million dollars more because of the
(25:18):
future of innovation. No, No, it's a fucking apartment.
Speaker 1 (25:21):
Yeah.
Speaker 2 (25:22):
And I just think that Venger Capital has completely lost
the plot and has lost its ability to say what
good is they just it's almost like there are some
of them who are con artists feeding corn artists. Yeah,
and some of the largest investment arounds the last few
years have just gone into systems like this, gone into
things that when you look at them, you're like this,
(25:43):
this doesn't need this much money. Why are you doing this?
And I think it's because they just are gamblers. I
just think they're gambling, and they're gambling based on an
increasingly small amount of information because it's been twenty years
since they've done something. No there was a company called Noom,
which was a weight loss app that connected with coaches
and various things. They raised five hundred and forty million
dollars in twenty twenty two. Not sustainable and not profitable either.
(26:08):
But also the entire weight loss industry is worth about
four billion dollars, So you're saying they are worth that much.
Speaker 1 (26:15):
Of an eighth of the whole industry. Yeah, right, And
if I'm mathing right now, yeah.
Speaker 2 (26:21):
I was also failing to do the math in real
time there, but oh whatever, people know, people know how
dumn math good. Clubhouse is one of my favorites that
I'm not sure if you remember Clubhouse. It was this
audio app that grew during the pandemic, and everyone said
this is the future, and what it was was it
would be it's basically Twitter spaces. It's what we know
as Twitter Space is now a live audio room where
(26:43):
you can go in and have, in this case, extremely
vacuous tech conversations. It was big during the pandemic because
everyone was at home and you have people on Mark
Andrews and who of course had invested, going on there
and saying stuff like, oh, the future of technology is
the future and I've won. Wow, Mark, thank you. And
there was this weird period where almost every other almost
(27:03):
every week, there was some kind of valuation story that
would quote unquote league and it would be like, oh,
it's worth two billion dollars. Oh, it's worth four billion
dollars now. And then they started disappearing and nothing's really happening,
and as people started leaving their houses again after the
lockdowns ended, Clubhouse just kind of faded to black. The
thing that pissed me off about that was the amount
(27:24):
of stories in major media outlets claiming that Clubhouse was
the future, the future specifically of radio, which is a
twelve billion dollar industry. Totally yeah, that constantly has trouble
making money, not that we know anything about that, but.
Speaker 1 (27:41):
I mean also, you know, the fun thing about that
to me is that, like we know really well what
like the issues that radio has with making money are
like due in part to you know, ways in which
advertising and stuff has changed, but like pretty durably, the
things that people want out of radio are like people
(28:02):
they like talking about things they're interested in. Right, initially
that was like people DJs, they liked talking about the
cool music. But it's expanded now beyond that. But it's
never just been like random unscripted conversations between people who
have mics of varying quality. Like that's not particularly a
(28:25):
thing that folks have ever expressed a desire for. And
it's weird to me that anyone thought that like Clubhouse
was going to be interesting beyond a very specific subset
of people that wanted to suck these these people's proverbial dicks.
Speaker 2 (28:38):
And it felt like a corn in real time as well,
because they were pushing Andrew S Norwittz was pushing every
partner they could to use it. They were paying celebrities
to go on there, they were getting anyone they could
to get on the platform, and they were very clearly
behind the scenes trying to get someone to buy it.
And then Twitter just built Twitter spaces that everyone's like, oh,
(29:00):
we can just use this on a network that we use. Clubhouse, now,
by the way, is really funny. It's ninety percent scams
or ninety percent people doing manifestation stuff. It's amazing. But
there was a brief period where the venture capital elite
had spread around enough journalists and enough people on Twitter
that they truly believed this was the future. But if
you sat there and really thought about it, there was
(29:22):
never a point where it could make money. Like you said,
unscripted stuff, unscripted stuff's difficult. It's very difficult. Even when
you have great, really great chemistry with someone, you can
trip over stuff as I just did. There are numerous
things that can go wrong. And let's just be honest.
None of these tech people were particularly eloquent to begin with.
Yet based on everyone's conversations, everyone's saying, this is the future,
(29:45):
this is how what's our clubhouse strategy? What are we
going to do on Clubhouse? Nothing? Nothing, because you're so boring.
But it raised so much money. I think it raised
over a billion. It was ridiculous. And yet this is
what venture has become, pumping up these very shitty businesses,
these non entities, these features rather than products, and the
(30:07):
result is that the money is not going to actually
innovative things. And I get it. The venture takes risks.
The whole point of venture capital is it's risky money.
That's why you buy a half percent or a percent
of a company for I don't know, a million dollars
just choosing random numbers. There there is a risk to air,
and capital is required to get a company off the ground.
But the massive, massive amounts of money going into these
(30:31):
non entities, into these, in the case of Flow Adam
Newman's thing, very boring remakes of already boring and kind
of not profitable businesses to begin with. Yeah, the result
is that you get a venture capital industry that makes
startups require their existence. You get companies that cannot function
without venture capital. You get lossy companies like Uber who
(30:55):
get bigger and bigger without ever finding a business model
because venture capital keeps them alive until they've completed the
dance that less than go public or gets sold to
someone else. And companies like Uber are actually a great
example they're taking public and they get these massive windfors
from vcs, yet they immediately find themselves in this horrible
(31:15):
position where they have to start dancing for the real
public markets. That's why Uber has become my chilge is
get an Uber in some markets and it's much more expensive,
yet the drivers are making less money. It's because we're
in a situation where Uber now has to become a
growth that all costs startup, rather than just a venture
backed welfare recipient. And it's just it's a deeply depressing
(31:37):
time because people making real companies, people making new ideas,
people young people in the tech space are now going
into this and seeing that the people getting money are
just people that look like other people that have made
money before, that have ideas that aren't even particularly good,
but they sound like something you can flog. The amount
of money going to AI right now for companies that
(31:59):
have no business model at all, let alone a path
to revenue, they just don't. They just trying to grow
and grow and grow. It's just a deeply depressing time.
VCS they put I think forty one billion dollars into
crypto between Jerry twenty one and twenty twenty two, and
that was all without Crypto ever having done anything. It's
(32:20):
what twenty twenty four now, like I just had to
ask that, and Crypto is still not doing anything. There's
still nothing. There's still bitcoins worth sixty seven thousand dollars
and there's still no crypto use case. The Metaverse, which
you would by now have heard an episode about, did
absolutely nothing other than rebrand something we'd had for upwards
(32:41):
of fifteen years, and they raised one hundred and twenty
billion dollars in twenty twenty two. These concepts are what
are getting money. Innovation isn't Innovation is not enough to
get you investment these days, and venture capitalists no, the
thing that you want to do to a VC is
find a way to get them in on a scam
that you invented. And that's not going to help this world.
(33:04):
It's going to destroy the tech ecosystem if we're not
care for. And quite honestly, I have no idea what
changes the tide on this other than a major startup dying.
So when right in the rot economy, originally my mate
(33:26):
Casey and I were talking about fire and how growth
is like a fire if you build a nice, sustainable fire.
It will keep you warm, cook your food, sustain your life.
But if the only thing you care about is how
big your fire is, then all it's going to do
is set fire to everything around it, and it's going
to require so much more to keep it burning. Eventually
you'll have nothing left. But if you desperately desire that fire,
(33:48):
you'll constantly have to find new things to burn, no
matter what the cost is. And that's kind of where
the markets are at this point. We've kind of turned
the private and public markets over to arsonists. We've created
the conditions where we celebrate people like Marc Andresen for
making these big investments, these big bets, these big nasty
(34:08):
companies that don't do anything, or the even bigger firms
like Google and Meta who were just turning against their
users and rightly turning against the people, the tens of
thousands of people that they regularly fire. Venture capital and
the public markets are no longer rewarding good businesses or
good CEOs that run good sustainable companies. They're rewarding arsoness
(34:31):
people that can steer the kind of growth that raises
the value of an asset, even if that value isn't
even attached to the value it provides to humanity. Elon
Must's success, everything he's done with Tesla, didn't come from
his love of science or that he ended the monopoly
of the internal combustion engine. It came from his ability
(34:51):
to manipulate symbolic value, his hypeerman mentality. He worked out
in as early as twenty thirteen that anyone in the
world in a media outlet would cover the fact that
he spoke about anything.
Speaker 1 (35:03):
Mm hm.
Speaker 2 (35:04):
He's made so much money for him, and people buying
Tesla stock pretty much do lies in half truths. There's
always a good reason to buy Tesla for an idiot
in the market because Elon Musk's always saying, oh yes, sir, now,
Tesla's will now drive side to side. It doesn't matter
if it's true, doesn't matter if it never happens. Elon
Musk promised autopilot for years and years and years until
(35:26):
it actually arrived, and then it would arrive in these
little bits and chunks, and then it started killing people.
Tesla isn't a good company. It's a good stock to buy,
and that is a problem. That is where we are
right now with the public markets and with the private markets.
We're not far behind. So Google summed up a shy.
He hasn't paid two hundred odd million dollars a year
(35:48):
because he's a good CEO. Google's destroyed Search. We've been
over that at nauseum, and it sucks. You'd think that
someone who destroyed the most beloved tech used by billions
of people, that has changed people's lives and will continue
to do so. This is empirical fact, the damage he
has done to the tech ecosystem and his core product,
(36:11):
yet he's rewarded. He's paid this obscene amount of money.
The fact that Google's core product is getting worse doesn't
matter at all, because Bishai is paid because he finds
new innovative ways to increase the growth of the company,
even if doing so makes the product suck. And the
consequences are that these companies will continue to invest in
(36:32):
things that grow the overall revenue of the company or
their market share over everything else. They will mass hire,
they will mass fire, and they'll do so because there
are no consequences from the market. They don't care. All
they want to know is that the company will continue growing.
Venture capitalists are just as bad. They don't mind as
long as you have enough money to keep going to
(36:54):
the next funding round. As long as you can keep
growing this symbolic value. It doesn't matter if you hire
and fire people around them. It doesn't matter if your
product's kind of won key, as long as it's good
enough to flog to someone else. Look at the AI industry,
Look how bad chat GBT is at certain things, Look
at how bad clawed anthropics one is. Doesn't really matter
(37:15):
because AI is the future. We can make money off
of that at some point. And I think that this
is really the problem, and it's the thing that unites
the private and the public markets. We're not building things
for humans anymore. We're building things for humans that invest money.
We're building symbolic capital. And when you do that, you
(37:36):
will strangle innovation, and you'll do it at scale. You
will build tech for nobody. You will build tech that
sucks and doesn't do things and burns money, and in
the case of AI, probably rainforests. And the result is
just a shitty or worse world. Until we see a
seismic shift in how investors treat the companies they invest in,
(37:57):
both private and public. This cycle is going to continue,
and it's going to make us dumber. I guarantee you
that we're going to see every single one of the
companies that you've recently seen lay off thousands of people
do mass hiring in a year or two. They don't care.
They're not punished for this. The labor markets in America
don't punish them, the governments don't punish them. They will
(38:19):
keep fucking with human capital as much as they can
because they don't won't get punished for it. No one's
going to hold it against any startup that's done massive layoffs,
even if the CEOs are incredibly well paid and ran
the company into the ground. Companies aren't structured anymore to
evaluate whether a business is sustainable or good or make
something useful. The only thing that they're interested in is
(38:41):
making something they can flog.
Speaker 1 (38:43):
Yeah.
Speaker 2 (38:44):
Like.
Speaker 1 (38:44):
One of the important things to understand about how all
of this fits together is that the actual business from
most of these tech guys has very little, if not nothing,
to do with producing a product or getting people to
adopt a product, having any kind of impact on the
way people actually use technology. The actual business is in
(39:06):
conning other people to think that a business has a value, right, Yeah,
Like that that's become the game which is you know,
we're doing our episodes on Steve Jobs these next two weeks.
A lot of bad things will have to say about him.
But he actually did care about, like making a thing
and convincing a lot of people to use that thing,
and he was good at that. And it's become so
(39:28):
abstracted and so much about just the bezel, just about
tricking people so that you can make money before everyone
realizes that it's a fucking god. I don't think it's
I think it's probably bad for society that that's the
best way to make money.
Speaker 2 (39:44):
And I think that you're exactly right. The way we
look at companies, the way we value businesses, the way
we value startups, public companies, it doesn't really matter, is
just fundamentally broken. It's creating these really nasty cycles where
humans are hired and fired, scale, where companies make products
worse so that we use them more. Things become more
(40:05):
difficult to enrich someone and make our lives worse. And
it really is. It goes further than tech as well.
It's at the center of everything. Look, why are so
many bosses mad about you not coming back to the office.
It's because they bought a bunch of real estate that
they never needed or they've leased it, I guess. And
then they were like, well, I don't do any real work.
(40:26):
And I think what business looks like is when someone's
at an office. Yeah, And it's because we don't really
as a society understand what executives do, because we've never asked,
We've never really sat and thought, why does an executive
get paid so much more than others? What is it
that they do? And I think the pandemic and the
mass remote work we saw really highlighted that. I think
(40:50):
it really showed everyone exactly how big that con was.
But I think that I think that we're on the
verge of an awakening to this kind of thing. I
think as the labor market becomes so much worse, as
so many game studios, for example, lay off so many people,
they're going to start realizing the executives are making all
the money while everyone does all the work, and none
(41:11):
of these people are connected to the product, And we're
going to keep building things for nobody other than investors
until we're at a point where we have entire business
ecosystems building for nobody. Just look at the crypto industry
yea billions of dollars into Look at that. Look at
the crypto industry. Look how big that con was. Look
(41:33):
how much money went into nothing, went into creating nothing.
Because that's where we are as a society, that's where
innovation is today. In a real ecosystem, in a real
tech ecosystem, the heads of the industry wouldn't be trying
to find ways to crow bot ai or crypto or
metaverse into it because the market's like it. They would
be saying, I'm not sure that this is a thing,
(41:56):
let alone a business model. None of these companies get
bled for these bad decisions, and as long as they don't,
they're going to keep making them. And I think it's
going to and I have a wider theory I have
that it's going to take one of the major tech
firms dying to change something, and I think it's possible.
I think Facebook is, weirdly enough, the one that I
(42:17):
would call first, just because the ad models die. But
until that happens, we're just going to keep having these
cycles where the markets don't blame anyone for anything other
than the consumer. The consumer is made to almost apologize
to the vendor. It really sickens me. I think that
this is really what this is the joke offying in
real time that I get because I've been in the
(42:39):
tech industry since two thousand and eight, and I've been
right about games since like two thousand and four. So
I've seen tech as a blob go from something that was, oh,
you have nerdsy like tech, and people use laptops, to
everyone has a phone, to everyone is on some level
connected to the tech industry. Now it's impossible to remove
from our lives. But now I look around and the
(43:02):
things that are being created and the things that are
being hyped up, they're not for people anymore. Yeah, and
then the actions of the CEOs don't seem to actually
mesh with reality. Why did nobody get fired for over
hiring In twenty twenty two, so many companies one hundreds
of thousands of tech workers were laid off. How did
(43:23):
nobody get fired for just hoarding human capital? How did
nobody get fired for that?
Speaker 1 (43:29):
Yeah, or for like I mean, if you want to
see it, for the way that these people. How did
nobody get fired for wasting tens of millions, hundreds of millions,
billions of dollars in stockholders' money, right, Like, stuff that
should have gone the way that they see things out
in dividend payments was instead spent on people the company
apparently didn't need. How does no one lose their job
(43:50):
over that? If that's the way you're looking at things,
that seems like the real problem.
Speaker 2 (43:55):
And the amount of layoffs that happened and the amount
of well, I think it was Google spent a billion
two billion on Severance alone. Yeah, how did sun Dar
Pashai not get fired for that? Why did he get
so much money? And I hate to say, I think
the answer is people are not people in the eyes
of the markets. They don't give a shit. It's just
a fuel. This is just the cost of fuel. This
(44:16):
is like oil to them, except there are sometimes annoying
laws that stop me getting rid of the oil quite
as fast. And I think what the tech industry really
needs to realize is nothing lasts forever. Nothing lasts forever,
and nothing grows forever other than a cancer. And at
some point, this whole growth of all costs economy is
(44:38):
working pretty well for now, but at some point the
markets will turn on them, because at some point someone
has to notice, somebody who is investing has to notice, Wait,
are these actually good companies or are they just growing
and then contracting, and then growing and contracting and just
never really making anything within the pro It's just deeply worrying.
(45:02):
I actually worry about the health of the tech ecosystem
long term if we keep pursuing this. We have private
companies that are building things to sell to large companies,
and large companies that are building things to market their
own stock to investors, and at some point a consumer
gets served somewhere within that equation, but nowhere near to
(45:24):
the level that it should dictate anyone's choices. A product
may be profitable for a while, but there's a line
at which profitability comes at the cost of functionality, and
your company may simply not be able to grow anymore. Look,
a business that can't generate profit isn't a good business,
and a business that can never generate a profit deserves
to die. These seem like obvious things, but they just
(45:49):
don't apply to anyone other than regular people. And the
net result of this rotten economy, this broken thing that
rewards people that create symbolic capital, is that it kills innovation.
If capital isn't invested in providing a good service by say,
a profitable business, it will never sustain things that are
(46:09):
actually useful to society. Companies aren't incentivized at the moment
to provide better services or improve lives outside of the
ways in which they can drain more and more blood
and revenue and growth from customers, and right now the
street doesn't care. Just look at Facebook and Instagram, two
beloved products that have now grown exceedingly profitable while not
(46:30):
providing the basic function that made them big. And frankly,
look if capital wishes to call labor and title as
they have so many times, if they wish to treat
people like shit. As it stands, the private and public
markets are not working for you. They're not building things
for you. They're not building things for anyone. Google, as
(46:53):
it stands, is forcing Gemini, their generator of AI, into
every corner of their company, not because it's going to
make your life better, but because it's going to make
them seem more futuristic.
Speaker 1 (47:04):
YEP.
Speaker 2 (47:04):
As long as private businesses are funded by venture capitalists
that are not interested in funding innovation and just want
to find more ways to flog money to larger entities,
we're not going to see a better world. We're not
going to see cooler tech things. We're going to get
increasingly more expensive and convoluted versions of things we're already
paying for. I hope things can change, I really do,
(47:27):
but with the current crop of venture capitalists, I'm not
holding my breath. So thank you for listening to today's episode, Robert,
thank you for joining me as well, YV. This wonderful,
happy episode we've done. It's funny. It's in my day job,
my PR firm, I do run into decent companies that
(47:48):
are doing well, that actually make more money than their spending,
that actually have business plans. But occasion I talk to
someone who just throws like eight buzzwords at me, and
they'll have raised this crazy amount of money and you
look at them and you're like, am I in the
wrong game? Should I be pot? There is this weird
sense you're like, am I what am I missing here?
(48:08):
And I think that that's what fuels a lot of this,
that there are these people getting so rich or nothing.
The people like they must they can't be lying.
Speaker 1 (48:15):
It has to be something. I have to be missing something,
and it's like, no, you're you're not. The business is entirely.
It's a confidence game. It's like, pretend you have the
confidence that this is such a world changing product even
though it's really just Uber for dry cleaning or whatever
that Like, if you don't get in on the ground floor,
(48:36):
you're going to be left behind, or like you know
with crypto, this is the way all money is going
to work, and you have to get in now or
have fun being poor or yeah. Same basically the same
shit about AI, right, it's always and honestly, whether or
not there's actually a good product, it's always the same,
the same thing, right, like you, Yeah, it's alf fomo.
Speaker 2 (49:01):
And it sucks because it can be better. There is
a way. The thing that I always talk about is
there is an alternate universe where Uber actually could have
been probably the most disruptive company of all time. Had
Uber tried to scale slower and charged more and had
real employee benefits and a paycheck that they gave people,
(49:23):
it would have had to grow very slowly and would
have cost more in venture dollars, But I think that
company would have worth been worth trillions and actually changed
the world, like truly, had they used it as a
way to actually create a bullwark for labor versus a
way to screw workers again and again so venture capitalists
can get rich. It could have been amazing, but that's
(49:43):
not how these people are thinking. They're not thinking ten twenty, thirty,
forty years. They're thinking five to ten years, so I
can get the fuck out of this. Yeah, and it's
so oh, it's so depressing because a better world as possible.
Speaker 1 (49:55):
That these people, because of the amount of money they've made,
in large part in tech, they've taken over everything and
so they're applying this lot. I mean, we could talk
about journalism, right, they're applying this logic to the media
properties they buy, which, like, that's not why you have
a newspaper, right, Like, that's not the value of a
newspaper is not its ability to like get a bunch
(50:16):
of hype around it. And like we saw this with
Vice where it was valued at billions and billions of
dollars and then it collapsed. Because no, that's not how
newspapers work, right, That's essentially what Vice was trying to be,
And that's not the way that they're not worth money
in that way doesn't mean you can't make money off
of them. There's a number of papers like the New
York Times that are very profitable institutions. It's just you can't.
(50:38):
It's not gonna give you that kind of like astronomic
or turn on investment that you do when somebody invents
a fucking iPhone. It shouldn't have to.
Speaker 2 (50:46):
But what's crazy is like inventing the iPhone was very profitable,
but Apple also is something with it. It's actually useful.
Speaker 1 (50:53):
Yes, yes, And I think understanding about what people wanted,
you know, I.
Speaker 2 (51:00):
Think that that's the ultimate problem. I don't think that
people running tech companies actually experience real people. They don't
have real problems. But also they don't speak to real people.
Adam Newman thinks, oh, my toilet's clogged. I will now
call someone else to one clog it. Just I would
(51:21):
never use a plunger. What's that? What is a plunger?
I would actually love to ask him if he knows
what a plunge. It looks like, yeah, it doesn't. But
that's the thing. These people are disconnect.
Speaker 1 (51:33):
Kind of guy who just moves that happens.
Speaker 2 (51:35):
Yeah, can't use toilet anymore, go get rid of it.
But I think, to wrap it up, it's there is
this genuine sense throughout all of this through the original
rock Economy piece. Everything I'm talking about, that these people
don't experience real life, that they've made so much money,
and that they think they've found a way to con
money out of the world, that they just don't think
(51:57):
about human beings and human problems anymore. And as long
as these people are in power, Texit.
Speaker 1 (52:03):
Risk, yeah, so is everything else. Well this was fun.
Speaker 2 (52:09):
Yep, there we go. Robert, thank you so much for
joining me.
Speaker 1 (52:12):
Yeah, thanks for having me on and thanks for being
you know, the Shai Hallud of content. You know, just
like the sandworm excrete spice which allows the navigators to
live forever and navigate through faster than light travel. You
also produce spice trying to shovel and dune references.
Speaker 3 (52:38):
Yeah, there we go.
Speaker 2 (52:39):
Re sponsored by Jim. Thank you so much. Thank you
so much for listening.
Speaker 3 (52:43):
Everyone, Thank you.
Speaker 2 (52:53):
For listening to Better Offline. The editor and composer of
the Better Offline theme song is Metosolski. You can check
out more of his music and audio projects at mattaslsk
dot com, m A T T O.
Speaker 3 (53:04):
S O W s Ki dot com.
Speaker 2 (53:07):
You can email me at easy at Better Offline dot
com or check out Better Offline dot com to find
my newsletter and more links to this podcast. Thank you
so much for listening. Better Offline is a production of
cool Zone Media. For more from cool Zone Media, visit
our website cool Zonemedia dot com, or check us out
on the iHeartRadio app, Apple Podcasts, or wherever you get
your podcasts.
Host
Ed Zitron
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