Andrew Ross Sorkin on Meme Stocks, Bitcoin, SPACs, and Elon Musk

Channel: Alex Kantrowitz

Published at: 2021-06-16

YouTube video id: 0XtaOfF23jo

Source: https://www.youtube.com/watch?v=0XtaOfF23jo

hello and welcome to the big technology
podcast
a show for cool-headed nuanced
conversation of the tech world and
beyond
we are ready to talk meme stocks spax
bitcoin
and all that jazz because our guest
today is andrew ross sorkin
he's the co-anchor of squawk box on cnbc
the founder and editor of deal book at
the new york times
and the author of too big to fail which
might have some good lessons for our
time today
he's the perfect person to help us make
sense of this moment
andrew welcome to the show thank you for
having me i am uh
a longtime fan and listener first time
um
first time on the on the show so thank
you oh it's great to have you on and the
feelings are mutual for sure
um so i'd love to start open-ended i'm
just talking about the economy
in general so it seems to me right now
that the market is crazy and you watch
this stuff every day
and it seems totally absurd so what's
your sense of
you know the market's rationality or
lack thereof right now
what's happening here okay so well we
have to break apart what we're
describing as the market for a second
because you know i was going to start
uh telling you like i'm here to deliver
a message on behalf of the meme stalkers
but like yes
okay so we'll wait for the second set
but you just said it there's one part of
the market that is this
meme stock driven um
explosion and and that is something i
think
unto itself then there is the market uh
if you
the sort of market excluding uh
all of that and then there is this thing
we'll call the real economy
over here they're all
potentially interrelated or you'd like
to think
the stock market unto itself again memes
topic
excluded for a second i think is
i don't know if it's fairly valued maybe
it's a little bit
uh over its skis there's lots of
excitement still
about where we are but you're even
starting to see
what they call the great rotations
people moving in and out
out of technology into travel because
they think everyone's going to travel
again and all sorts of like
that that seems at least rational what's
happening
and we can debate about whether there's
going to be more infrastructure spending
or what the federal reserve is going to
do
but what's really caught everybody's
excitement
are the meme stocks you know the amc
apes
and uh the game stop hysteria
and don't forget bed bath and beyond or
or some of the others that are
completely and utterly divorced from
reality
alex um yeah it you know
it's a bunch of people who have an idea
um i don't think that the idea is about
fundamental investing it's about
demonstrating that they can push
up the price of a stock
it's i hate to use the word manipulation
because and
people will get very angry if you put it
in this sort of context but i think
there's a group of people who would like
to press the price of a stock up
and you're seeing it in this sort of
very unique social media
enabled you know mobilized moment
and i think that's that's what's
happening and some of those people are
doing it because they actually believe
in the stock
most of them are doing it to sort of
prove something
other people are doing it hopefully just
to make a lot of money because they
think they can sort of ride a wave
so there's a lot of elements to this
right and so let's get right into the
mean
stock thing um so the argument that
people make to say this is totally
normal is that
all stocks are traded on momentum and
stories
and so what if a gamestop or what if an
amc
is uh traded on a story and people just
get mad
when it's you know the common person
doing it versus
uh you know traditional investors that
are doing it what do you think about
that argument
i i i don't i don't buy it i i just
don't buy it and it's not because i
you know first of all i i would love the
quote-unquote little guy i even hate
that phrase
to do you know to be wildly successful
and to beat the man
i would love that i'm not even sure
that's what's even happening here
but there is i think a distinction
between
what's happening in this in in the sort
of meme stock era
and the sort of frankly blatant
manipulation that happens
to the extent we're going to call it
manipulation that happens in the market
via institutional investors and
the biggest distinction i'd make is that
one group the professional investor
typically kind of knows what they're
doing
they understand it and they understand
the
risks of it if you spend enough time on
reddit
and for better or worse i do there are a
lot of people
that don't really understand what's
going on at all
and uh there's a lot of misinformation
there's a lot of disinformation
um there's a lot of people who who
don't even believe information that's
factual in front of them i mean this is
sort of almost
financial the financial is this
financial moment's almost become
politicized in in certain ways
and some of the things that we've seen
in politics over the last
four or five years have it sort of come
to the market
uh and so i worry about that
and i worry about the people
who have frankly a lot to lose
and that's why we've always as in we
as an industry in the media but
hopefully the
the laws and regulations that are in
place have always been
tr about trying to protect the smaller
investor now
what's so unique about this moment is
that a lot of those smaller investors
are saying
no no no those laws you sork in the
media
they don't protect it they don't protect
us at all in fact you're not protecting
us
you're protecting the man you're
protecting the establishment you're
protecting the big guy
with all of those laws and you're
preventing us from having the
opportunity
to make money and to some degree they're
probably right they've actually hit on
something
some of those rules and laws and maybe
even the way we approach it
do prevent some of them from
buying some of those lottery tickets and
and winning
but i i think or at least i want to
think unless my head is not screwed on
straight and i've got this totally wrong
i think it's also about protecting
them on the downside and it's almost
impossible to believe that the downside
won't come
yeah your mentions must be a pretty
pleasant place when you speak about this
stuff oh goodness
uh yes i'm i'm a suit and much worse
than that
oh yeah i've i've been on the receiving
end too it's not pleasant
so um but it is good to actually go up
there and start speaking about this
stuff because it is
easy to sort of get caught right in
the story and it's tough to step out and
say hey what is this going to mean
the other counterpoint that you know
folks who would be the pro meme stock
uh group would have would be that
the gamestop has actually stayed pretty
high i've been surprised at how high it
stayed
who knows if amc is going to stop going
to drop given the current levels
so maybe the joke really is on the short
sellers well look maybe it is just
maybe maybe it really is and and you're
right look there are people who believe
uh that ryan cohen who's now been
installed as the chairman and the new
team
most of whom come from amazon are going
to reinvent the company
and and maybe this is like a venture
capital bet that these folks are going
to somehow
totally reinvent this thing in ways that
we don't even know it would
whatever they would do to get to the
price that we're at now would obviously
have to
it would almost have to be a completely
different business it would have to be
you know
transformed into something uh that that
looks
almost nothing like what it is today and
maybe that's possible
now historically public market investors
have not made those types of bets before
that's
the place where historically venture
capital has made those kinds of bets
or maybe private equity has made a sort
of a turnaround
bet and maybe the argument in this case
is look
those kind of bets happen in these
private private areas where
typically the public can't participate
we want to participate
so i get it i get it and um there's an
element of it which i
admire greatly but there's also a piece
of it that that that i think is
um at minimum nerve wracking and i do
one other thing i think there's a
distinction between what you're seeing
gamestop like i i
i don't want to say i see it but i i
understand it
even on a sort of fundamental level
uh or a fundamental basis not because
today's fundamentals
mean anything but i could see the bet
you'd make in that regard
amc for example though i think is a
completely different
um different
because they're not sticking it to the
shorts it's just all speculation
well it's it may very well be sticking
to the shorts but i think that the
look you look at the secular trends
in the in the in the theater business in
the film business
before we had the pandemic and then you
have to
and are we going to believe that somehow
the secular trends are going to be even
are going the opposite direction after
the pandemic i don't think anyone's
making that argument
nobody's making the argument that adam
aaron who's the ceo of amc
is planning to somehow magically
transform the company he's not saying
he's going to transform the company
right this isn't
i mean brother ryan coming right into it
yeah
ryan cohen will will transform the
company or not he sort of represents the
sort of sun god that's going to come in
and do something different
adam aaron's not claiming he's gonna do
anything different in fact the only
thing that adam rammer's doing
is is to some degree and i i i also
admire this
though i think that he craves all sorts
of questions yeah he's winking at the
at the uh he's waking up retail
investors and saying keep on going
keep on going and by the way at the same
time
i don't want to say he's taking
advantage of them but if they're taking
advantage he's taking advantage
by selling shares to them at prices that
i think he knows
full well are vastly overvalued
right and so he's he's taking that money
using it hopefully to pay down debt
and maybe put the company in at least a
a better position
to not fail but is he putting it in a
better position to have
you know great shoot the moon success
i'm not i'm not sure that's
that's his plan yeah so where does this
go does
every ceo all of a sudden need to have
like a meme strategy where
you know they uh make uh do an ama on
wall street bets and
try to you know corral well so there's
all these retail investors
you know i think there's a whole whole
world of ceos who say oh my god could
this happen to us how's this gonna work
in some respects there's an argument you
made this can't really happen to
every company out there and especially
massive large companies i mean
it would be very hard for a retail base
of investors
to move the stock of an apple or a
walmart
or an amazon in this kind of way um
what made these things attractive was
both the short interest
um i don't want to say the small amount
of volume but the sort of the
these were smaller companies i mean by
the way now they're big
big multi-uh tens of billions of dollar
value companies um so it's possible at
some level this can happen i don't want
to say
that nobody's susceptible but
i think there's sort of a range of kind
of company with a kind of valuation and
a
a kind of perspective around these
issues around
what the short interest is like for
something like this to happen
and be attractive to this group yeah but
big stories can also be sorry big
uh stocks can also be a story company i
mean
i i started to think about this and i
don't think it happens unless you start
to have
some of the stock market unhinged from
the fundamentals to begin with
right and that's when i start to think
about tesla which is a real story stock
yes so but i don't i guess elon can do
it on a scale because he's elon but it
will be
more difficult but that's the argument i
mean i think
a lot of people would say look look at
tesla that was a story stock
and people believed and look at where it
is now and so why can't that be amc why
can't you
will why can't you will the valuation
not just the valuation but the success
of a company into being
simply by getting behind it and getting
behind its stock and
effectively giving them the opportunity
to raise so much money that they can
they can do these things that is
possible by the way there's an
intersection here probably with crypto
which is to say yeah
and you know to those people but had
people not decide
some people thought like would bitcoin
succeed that was a bit of a belief
system
it is a belief system and
11 years later people still believe so
yes if people will decide they're going
to believe in amc for the next 100 years
and they decide they want to keep giving
uh adam aaron money
maybe this can end spectacularly
yeah so let's think about what's going
to happen next because
you've said that either this
type of manipulation or whatever you
want to call it is going to be regulated
or they're going to prove that the whole
system is broken
and caused some lasting changes right so
what could that look like
well i think there's there's right
there's there's two
there's two two possibilities probably
relatively binary
one is that gary gensler at the sec
decides that he's going to
crack down for lack of a better word or
phrase
on this kind of trading either he's
going to
regulate what can be said uh
on on on social media platforms about
stocks
uh whether he's going to try to
prosecute
um some of the people that have been
involved
in these things online
i don't know if that's a good case or
bad case i don't think by the way it'd
be a particularly popular case to
be made uh but you know could you find
email you know could you subpoena some
of these individuals
emails uh have them talking about how
they don't believe the stock is worth
anything and that they're trying to
manipulate the price to push it higher
and they actually like say that in email
and could you bring a case against them
and make an example of them yes you
could
and then how would that change the
dynamic would it force
reddit and other social media sites to
to put in
different different procedures and
things maybe in the same way that you're
seeing facebook and others
try to deal with misinformation or
disinformation in the world of politics
i mean
that's what it could get interesting on
one side of things
the other side of things is if they
really succeed
they could effectively break the markets
as we know them
i mean one of the things that's so
interesting is if if you own the russell
2000
which is an index passive index it's
actually doing quite well
almost spectacularly so why
because amc and gamestop are part of it
and so you could start to do things to
the market that divorce it from
reality and i don't know what that
where that ultimately goes but again
by the way at some point everything's
not going to go to the sky
something will go wrong and when things
go wrong
lots of things typically go wrong so
that's when i think the divorcing of
everything
will come into play yeah i think it
would be also tough for the sec to start
cracking down on this in particular even
if there are people that are
manipulating
on the back end because they will face
this backlash and they've been so
ineffective elsewhere like the elon musk
for instance like when elon can tweet
uh sec stands for uh you know a
three-letter acronym and the e is elon's
and they they can't do anything to him
but so that's a great question though
um well i think there's two issues one
is gary gensler is a different person
than jay clayton
who's the former uh chair of the sec
gary's just gotten into this role and i
think he's gonna
want to put his stamp on this agency
and make a mark i do
and so i just i i don't think that we
i think it's almost impossible to
believe that he would have done
something already
in any kind of real way i'd also remind
your listeners and it's such a fabulous
story if you can go back and google it
and find it
michael lewis wrote a piece probably 20
years ago this is after the dot-com
bubble burst about an 18 year old kid
that the sec had actually prosecuted
um or i i should say sued uh because
it's not a criminal case
uh for effectively manipulation using
chat boards and the like to push stocks
and they won um and so
you should go back and find the article
it is i mean michael lewis yeah we'll
link it like everything he does
is you know is perfect but um it's a
great article
but it really gets at this issue and so
could he could he go after
some individuals i wouldn't be surprised
if he were
and i wouldn't be surprised if he even
went after an elon musk
i wouldn't be surprised if he tried to
go after some of the people uh some of
the higher profile people involved in
spax
just to make a point mm-hmm yeah
oh it'll be interesting i mean the the
uh order of operations on that is going
to be important
right because if you're if you go only
after like the folks involved in this
retail trade and i know there's lots of
implications there
and you leave elon and you leave this
back guys alone you could have a problem
on your hands so
bingo let's talk a little bit about uh
another speculative asset although i'm
going to get in trouble for saying that
bitcoin so when i hear you talk about
bitcoin
you seem somewhat amused pretty
skeptical
um obviously the price over the last
couple of months has gone
wild you know up to around 60 000 down
to 30
000 back up again down again where do
you think the freight train's heading on
that front
on the price i have no idea i mean i
think there's now
um a considerable group of people who
believe in
the idea of bitcoin um and i would by
the way say i'm not
i've been fascinated by bitcoin probably
since about
two i think i'm trying to think i met
brian armstrong who i remember trying to
convince me
uh about bitcoin's benefits had i
listened to him i
i'd probably be in a different
profession right now back then um
did you buy i did not i did not uh i did
not buy
you you like to ask guests you know
whether they own yeah you own bitcoin
it's a great question i do not own
bitcoin and i will also say
as a journalist i was always skeptical
of whether i
should or could i don't own stocks as
you
probably know um because that's a policy
that
that uh we've long had and because of
the
information that oftentimes i'm privy to
sometimes in the reporting process so
you know i own mutual funds and things
like that but nothing beyond that
um and i always didn't know is bitcoin
count as a currency
how would we think it's so strange in
terms of what it is actually
because my kids now but now that it's
become sort of a mainstream thing it
might even be a bit of a currency
maybe i'd feel more comfortable owning
it i don't know my kids
i have two ten-year-old boys and a
four-year-old but the 10 year olds
are trying to design nfts
and so and to also buy nfts not
i mean for like four dollars but not 69
million
right not not the people but they need
ethereum
which would be that we so we we need to
get a wallet for them
so they would have a theory so this is
all of a sudden very interesting
can you really own a theory you know are
you it's
it's um it's getting complicated quickly
yeah i like how you asked uh francis
suarez the mayor of miami a former guest
of the show uh
whether he owns and he said yes
and and i thought there were two really
interesting things about his answer
first of all he's like the bitcoin mayor
and he bought in mid to high 30s so he's
probably underwater right now on bitcoin
and second he flat out said the reason
why he bought was because he
bought it as a hedge against inflation
which was so fascinating to me that
an elected representative i mean a mayor
of a major u.s city was basically like
our currency is going to inflate i need
something else right what did you think
when you heard that
um
i thought that was the right thing just
if you're the mayor of miami and you're
trying to become the mayor of you know
the crypto capital if it becomes the
crypto capital
i think those that he said the words you
were supposed to say i
imagine he bought it because he wanted
to play with it i think he imagined he
bought it so he could say that he
had bought some uh and believed in it in
the same way that he's
trying to to do this for the city
i have been somewhat skeptical of of the
argument around
uh inflation i think inflation is real
by the way but i uh around sort of
whether bitcoin
becomes the standard um it may
it may not it's it's to me the whole
thing is so hard to
figure out and maybe i'm maybe that
makes me too skeptical
of it i think it could it could have
some
success i just don't know if it's really
going to turn into a currency
i don't know what happens when there is
regulation you know
for the first time um we just learned
that
401 there's a couple of companies that
are going to start working on 401k plans
to allow you to put crypto into them
i think all of a sudden that's going to
force the issue for regulators
to figure out what they're going to do
people betting their retirement on this
stuff so
and once you get there okay so now are
you going to say there has to be a know
your customer what's called the kyc
policy around bitcoin uh anti-money
laundering
uh implementations in the same way that
banks have if you actually do that
then what does that do to bitcoin you
can't have a private wallet you can't
all of the benefits of bitcoin
sort of disappear very quickly um
so i think there's that i also wonder
about the environmental
piece of it and i know there's lots of
people who are now arguing that somehow
it's going to be an
improvement for the environment the
water is pretty muddy on that front
i think long term long term we will
figure out how to
mine bitcoin and also just create
electricity of course
um hopefully more cleanly that will
happen but
if you were going to create a new
currency in this day and age today
you would think you would try to deal
with the
the how much electricity is used
how much you know whether it has kyc you
know know your customer information
except but that's the virtue of it by
the way some people say that's the
virtue it
takes a lot of electricity that makes it
creates value gives it
it abuses it with value and of course
the fact that it's
anonymous also imbues it with value
yeah and you know talking about the
inflation stuff i don't agree
with you know francis suarez that it is
a uh
good check on inflation but i also my
perspective on why it's increased so
much i'm curious what you think about
this is that
um money has become uh somewhat
meaningless to
lots of folks recently i mean of course
there's a lot of money that's
floating around i think stimulus money
yeah i think the federal reserve being
as low as it is
look you know you have michael saylor at
uh microstrategy
he's now effectively raising money from
public investors
in taking out loans this is like a his
company's
turned into a leveraged basically a a
leveraged bitcoin fund is effectively
what it is
and people are willing to loan him money
to go buy bitcoin
that's what's happened it's
extraordinary
so so it feels like a house of cards
there's a lot of money floating around
and the question is
when the music stops and the music will
stop is bitcoin somehow completely
not correlated to all to everything else
i have a hard time believing that but
there's clearly a lot of people who uh
you know uh
spent uh spent time in in the month of
june in miami who believe it
that's right yeah i think the bitcoin
miami emails have finally tailed off in
my inbox i don't know about yours
uh i'm still getting some eyes there a
lot
yeah when does the music stop i mean is
it when the fed
uh raises the rate in some way or
how does this sort of party come to and
not just bitcoin but
economy overall
so i though the only lesson i feel like
i learned writing too big to fail and
and
you know reporting around that crisis
and now really trying to
understand financial crisis as a
phenomenon is
every financial crisis is really only a
function of one thing
it's too much debt it's too much credit
leverage in the system
uh you can have as many bad actors as
you want
on the stage doing as many bad things on
the stage as you could imagine so
if you think that the spac people are
being irresponsible and you think that
the
sec is not minding the store and
you name your you can name whatever you
think is bad
it doesn't really matter unless there's
too much leverage in the system
and so the question is where that
leverage is today it's not at the banks
um and so the question is is it somehow
levered into crypto is uh this
quote-unquote shadow banking system is
that where the leverage is
um clearly one of the big places the
leverage has moved
is you know the even the phrase too big
to fail
back in 2008 we talked about the context
of banks
today we talk about you know cities
municipalities
states countries that are too big to
fail i mean think about the amount of
debt that we took on even during the
pandemic in the united states let alone
every other country in the world
so that's what i really worry about long
term
what do you think is going to be the
implications of taking on all that debt
i mean we did what six trillion dollars
in stimulus
in a year well unlike i mean
so the benefit of a government taking on
that kind of debt
unlike a company uh or a bank
is you can keep printing money but as
you keep printing money you devalue your
currency and
and you have inflation so that's that's
i think what
ultimately happens the question is if
every other country is doing the same
thing at the same time
you could argue maybe it doesn't matter
um and i think that's sort of the
the mmt theory of life
i wish i knew the answer yeah
to bring it full circle it does seem you
know you think about
the way that all this is going and it
does seem like
it's the the actual you know
quote unquote little person that ends up
getting hurt it seems like it's a great
time
to be in the money and in the right
places but oh goodness
if you can own the bag if you own
property if you own
stocks if you own if you could just own
anything right now
at least it appears that that is that is
the winning ticket uh at the moment and
uh if you're renting it is it is is
probably i mean there may be some
renting and a wage worker yeah and a
wage worker
it's a hard it's a hard place to be it's
a very very hard place to be we've seen
that
and we've received the movie it's it
keeps keeps
you know the the divergence keeps
getting worse yeah and i worry what's
going to happen
to the country because you will have
like a very distinct we already had
a distinct set of winners and losers and
now we're going to have a
much more distinct set of them uh and i
think it'll then play into the politics
and it's going to get hurt
you know completely yeah okay uh let's
talk about something more uplifting
specs
yeah um i really had just one question
written down about specs
okay legit or scam what's your take on
it
um so these are blink check companies
that
uh investors will raise lots of money
for and then invest
in a company that they want to take over
just for listeners but so go ahead
it's okay the answer is actually it's
not binary i actually think spax will be
around for a very very long time
i think they'll be a feature of the
market and by the way they were a
feature of the market
for years they were just sort of a dark
sort of
corner and people did think they were uh
somewhat shady
i think that this uh sort of spec
phenomenon we're seeing
is probably going to be long term
actually a good thing for spax insofar
as they're going to
uh create more regulations and other
policies and
better practices around these things so
that they're not
um effectively backdoor ways for
companies to go public that shouldn't be
public i mean that's the issue right now
it's a back door it's oftentimes a
backdoor way for a company that is
has no business being public to be
public without going through the sort of
rigorous
process of an ipo that's i think the
issue
um pushed by quote unquote sponsors
um who really have no interest in
actually hanging around the hoop
at all and actually investing in the
company but you know making a quick buck
that's the
the problem i think longer term you're
going to find
um more specs with more reputable
sponsors or
um and that's not to say that the
current sponsors aren't reputable there
are some that are and some that aren't
that will have more attractive pricing
uh
and more attractive transparency around
what they're doing
and then it will become just another
sort of way for companies to go public
but but i don't think we will um look at
it
as a scance as we are now and i think
we're looking at scans
today rightly yep that's a kind of an
inside baseball question but did you
redo higgs story
on uh specs and jamaat i'm curious i did
what you thought about it
you know i thought uh i i worked with
charles for many many years he's a great
uh writer i thought he did a great job
with the piece um
i think jamal's a an interesting fast
complicated
uh brilliant guy um
who i think has skated you know but
skates close to the edge
no question um and
i i think 20 years from now he will get
credit as the spat king i think he will
get credit but the question is whether
that will be
good credit or bankruptcy and i don't
know what you want no no
and i'm not sure what i'm not sure what
the answer will be um
you know i only say that because i think
if you're
as we were talking about before if
you're a gary gensler and you're trying
to make your mark
and you look at the stock market and you
think that it
is not being done above
board you know a lot of these spacks are
presented
in you know the in the best light always
and i'm sure
that if you subpoenaed the emails you
would find lots of people
of these sponsors maybe the chamats of
the world and people like chimoth who
are emailing each other and clearly they
have projections that are not great and
protections that are great
um and if you go out and make only great
projections but you don't acknowledge
the other projections you know
is that a good case to bring maybe it is
i don't know but i think that that's the
kind of thing that you could see
all these things that we've talked about
uh meme stocks bitcoin
specs i like the way that they work in
theory
they are a way for the everyday person
to get in on for instance the value of
the ipo or
you know rising currency or uh a
momentum stock before the institutional
investors get in there
so totally i like what you're saying i
love the idea of democratizing
finance what i find so strange yeah
what i find so strange is the people who
say they're trying to democratize
finance
seem to do such a lousy job of actually
trying to protect
the people that they say they're
democratizing it for so i would feel
totally differently about spax if
the the spa sponsors were out there
saying look we want to give you an
early opportunity to get in now but here
are really all of the issues
and and problems and connect and and
conflicts and everything else
that are involved in it in a very easy
to digest way
why don't they do that for obvious
reasons they don't do that
i think half of its crypt yeah right but
i think that's it but that's the issue i
think that
there's a lot of these things same thing
with the meme stocks
you know i would love if the people who
were uh
really out there promoting the stuff on
reddit didn't just explain what they
were doing but said
here are the risks i don't know what's
going to happen here like
this is a theory and but you don't
you don't see that um you know
i think robin hood by the way has done a
tremendous job
of creating a product that that people
want to use
um but most of them unfortunately even
though they
in the terms of service don't understand
that there's this payment for order flow
issue
that effectively some of the money that
they're uh that they could be making
effectively is getting paid out
to to to other financial firms and
that's how robin hood is getting paid
so that's that's sort of
my if if i have a it's i mean
i guess journalists are supposed to be
professional skeptics but that's that's
where my skepticism lies yeah and i
think it's all fair skepticism
all the stuff's nice in theory we
probably need some rule making in order
to
make sure that people can really share
in the wealth and you know don't end up
getting
hammered by the downside and
i look i hope everybody does really well
i mean that would be a
great outcome yeah okay let's take a
quick break and talk about big tech
antitrust one of our favorite discussion
topics when we come back
and we're back here for the second half
of the big technology podcast our guest
is andrew ross sorkin
okay we're going to talk about uh big
tech antitrust
this is one of our favorite issues to
discuss slash debate
so why don't we jump right into it um
first i want to hear your personal story
i saw you hint at it on twitter and i
want to hear that
the full deal so um your father uh
was an anti-trust litigator
for olivia yeah so you um grew up
talking about anti-trust cases around
the dinner table tell us more about
all day long so my father was an
anti-trust lawyer in new york city yeah
yeah um and that's what we talked about
we talked about
uh whether mergers uh should go through
or not
how to define a market we talked about
dumping cases when
foreign companies were uh you know
are we dumping products in the united
states at lower prices that's an
antitrust
uh issue and that's
i loved it frankly uh and we had debates
on microsoft for years
you know should the browser be connected
should it not be connected is it whose
side were you on
oh i went back i went back and forth
um there was certain evidence that was
presented
as i was a believer at one point i do
remember thinking
it was an ecosystem and actually that
the ecosystem mattered
um so i remember going back and forth
about that with him
uh a lot and um
but those were we've anyway i love a
great anti-trust debate so yeah
let's go for it okay so apple yes
you don't think apple is a monopoly i
don't think apple is
a monopoly in the way it's being argued
in the construct of the epic case
um clearly and probably
more more broadly i i don't
think it's a monopoly either yet
remember that there's two pieces
one is the other thing i remember
learning uh
as a child is being a monopoly unto
itself is actually not illegal
it's the maintenance of america i don't
think that people really know that yeah
they'll say oh it's a monopoly therefore
it's illegal um it's it's
it's it's what you did to either become
a monopoly or to
quote-unquote maintain the monopoly as
you just said and so
you know in the in the context of the
epic case for example
right and just just for context epic is
the maker fortnite
fortnite sued apple sorry epics food
apple because
apple was charging this 30 tax on top of
the money that people were paying
to upgrade on fortnight and didn't like
it got kicked off the app store but
fortnite does exist you know in many
different places not just the app store
but
on computers and actually most of its
businesses are is outside the app store
so to me the the lesson i learned my
father many years ago
when you when you think about any type
of antitrust
suit you first have to think about the
market what is the market so
in the context of epic suing apple i've
never thought that they
had a great case i thought there were
other companies that could probably
bring a stronger case
because most of epic's market if you
will
doesn't even exist on the phone that's
not where
the majority of the people are even
playing fortnite they're playing it on
consoles they're playing on computers
they're playing in other places
so arguing that that apple is somehow a
monopoly
that's doing some disservice to them i i
think once you
sort of define the market and say that
they're
not a monopoly in the context of epic
everything else goes out the window and
you know there was lots of look there
are lots of things that came up during
that trial because i listened to it
every day
on on youtube i was fascinated by it and
there were some very unattractive facts
that were brought forward
uh for apple's purposes not necessarily
in relation to epic but about
sort of how they keep a walled garden
and what they're trying to do
all of that and i i i i'm not gonna i
wouldn't sit here to defend apple in
that regard i would just say
in the context of the epic case i think
it's a it's a very
um tall tall hill to climb
um to win that case i also think
it's very hard even more more broadly
to claim that the app store unto itself
is monopolistic
insofar as it's very hard to say that
walmart is a monopoly
uh you know if you have your own store
what you sell in it
you know you typically don't have to
open up your store to others that's
it's a very unusual sort of thing
uh to ask for um and i've always been
surprised in a way by the resistance
from
i understand why developers would like
more money fees
no question but you know
this isn't like a false inducement case
so there are there are
there there's called for there there are
cases where
um a company a store might say
please make a product for us um
and we will give you a certain
percentage of the sale or we'll take a
certain percentage of the sale and they
they bring you in at a you know
at five percent and then 12 months later
they jacked the price
on you right that would be a problem
because you've you've built a product
for a specific thing
and then they've changed the terms on
you in fact at apple
the terms have actually only gotten
better right they've first of all
they've either been at 30 percent
or in some cases they've since come down
so
it's it's not like everybody who was
developing for apple didn't know
what the arrangement is it's a little
and and
people forget that every product every
developer is developing
for apple it's a little bit like if you
were an automaker
and an auto supply maker uh
you know that you you said that we're
looking for steering wheels for this car
and you will make the steering wheel for
this car and then the steering wheel the
the auto supply maker decides to make a
steering wheel for this car and then
decides they don't like the deal
oh okay it is it is uh what's happening
here
yeah because it is sure because you're
talking about like the
the i mean the way to to get to people
people using phones like that's become
the internet so
so that is actually to me the most
interesting piece of this
at some point you can just make a public
policy argument
which is a case that the government
would have to bring i think not an
individual company but the government
could bring
and it really is a public policy issue
which is to say at some point
do you decide that it's somehow bad for
the economy
for a company to be of a certain size
and scale
um i'll give you a great by the way
example of this
so after the baby bells uh we're after
the bells are broken up this is in i
believe the late 70s early 80s
there was a fascinating case um
where there were third-party companies
that made telephones
like the physical telephones and they
weren't allowed
to connect into the baby bells networks
it was it was called was an interchange
business because the baby bell said
you have to use our physical phones on
the network
and a lot of those third-party companies
sued and they lost
um individually but then the government
brought a case and they won
and so i think that that's to me the
sort of larger piece
of it and and again there is a sort of
public policy question and i don't know
the answer
but i also don't know if you broke it up
or or i'm not sure what the what the um
solution would be because i do think
that the reason why you
buy an iphone the reason i buy an iphone
is because i like it the way it is i do
actually i don't think i'd be happy if
it was the wild west otherwise i'd buy
an android
true uh that definitely has something to
do with it it's also
um they get you locked in on the
ecosystem
so if you started using an iphone before
androids were good you're kind of
stuck there now you're going to break
all your group messages if you go
android and
you'll appear as a snapchat i also think
by the way that what people don't
appreciate
yeah what do you think the implication
would be if they won
let's say let's say there was now
multiple app stores in the iphone yeah
what happens it just means that the
hardware will get more expensive
so that's why i think there's some
interesting sort of dynamics that are
often not thought about
yeah do you think apple could raise the
iphone price
and still sell the same amount as as
they are i mean
it's pretty high right now could they go
to 1500 and sell the same amount or does
that
make switching become more appealing to
people given that android's really
improved
like there's got to be a ceiling for
them in terms of the way that they raise
their prices so i've always thought
there would be a ceiling for
them and then look at us hasn't it
hasn't surprised you
back to meme stocks a little bit like
the world is a little bit divorced from
what you might think is completely
realistic totally
um look maybe for you know
the highest end phone i think there will
come up on a
on a top i would imagine but i also
think they could probably
manage to create um not cheaper phones
but sort of
more middle tier phones and and and
build up build the premium effectively
into that yeah also the whole reason why
they're so adamant about this stuff
is because they realize people are going
to hang on to their phones for longer
used to be they upgrade every year every
other year
now you could hold on to a phone for
four or five years and not suffer too
badly for it
so they need that app store revenue in
order to be able to
justify their two trillion dollar
valuation even in our non-realistic
right but by the way you could also
decide from a public policy perspective
that it doesn't matter that apple has a
two trillion dollar evaluation and so
that shouldn't be that shouldn't be part
of the calculus the question is
if there was a lower price would that
you know where would the value go that's
the other question by the way
i think which is to say would that value
really get
spread out would it just go to those
other companies
uh is that a better answer anyway um
and i don't know the answer right let me
ask you this so i mean we talked a
little bit about that 30
tax do you think apple should be able to
prohibit
app developers from telling people they
can go
pay for services uh for less money
on the web for instance so if you want
to upgrade your spotify or something or
go buy upgrades and fortnight can can
should fortnight be able to tell you you
can go to the web and buy this upgrade
for less or
is apple in its rights to prevent people
from doing that because that seems to be
the thing that you've got me in a very
tough one
because i'm a total freaking speech
believer and you know i think that
people should be able to say whatever
they want right
yeah but i also recognize that the
business model
sort of comes undone effectively
if everything uh sort of goes off-piste
if you will so i don't know i don't know
i don't know yeah well i'll make it easy
for you because
um i i just gotta look at some of the
draft bills that they're circulating in
congress you know you talk about
you mentioned earlier maybe this is a
government solution
and there's five of them um
and one of them explicitly prohibits
companies
uh from telling people who are using
their services
uh that they can wait basically let me
see if i can phrase it right
it explicitly prohibits companies from
preventing app developers from telling
their users they can get the services
cheaper
elsewhere which i thought was
fascinating and i've always been
and i think we've talked about this in
the past like i've always been pretty
skeptical that the us government is
going to do anything to these companies
right because they've proven themselves
so ineffective time after time but
looking at these bills today and seeing
the momentum that's come out of
cecilene's committee and the house
judiciary it seems like that might be
changing
they're starting to fund the regulators
they're writing these bills that are
focused like another one of the things
that
uh they were talking about was that um
companies will no longer be able to use
uh like third party data that they get
from developers
and use that to privilege their own prop
their own products and up until now
that was largely like amazon wasn't
going to do that because they needed
merchants not because it was against the
law we sort of like
you know assume good faith and then when
they asked bezos about it he was like
yeah maybe we actually do do this a lot
and
uh but now they're starting to put that
into legislation and who knows if it
will pass
but it does seem like the government is
much more serious about doing something
to these companies than it ever has
before ever has been before
yeah i think they will do something i
just don't know how far
it will go and how big of an impact it
will have
do you remember and i got to go back and
look the
result there was a case against american
express because they had a terms in
terms of service for merchants
that were not allowed to say that you
could you couldn't offer a better price
uh if you accepted american express you
could not offer a better price
to mastercard users or visa users
and you could not advertise that
ostensibly the idea was there was a
higher transaction fee
with with american express i believe and
i got to go back and look at this
american request i thought originally
lost the case and then maybe
won afterwards on appeal
um unless my memory is not capturing
that right i have a computer in front of
me so maybe we'll
look while we're talking but yeah um
you know it's it's fascinating
so let me ask you this as you search for
that
no no worries so uh do
can you see one company that starts to
be like i mean i know we have
uh cases against facebook and google
from the ftc
and doj and then investigations going on
with apple and amazon and those two
regulatory agencies
uh what's your gut like what do you
think do you think that these companies
are going to be broken up do you think
that it's just like
these laws are passed or you know uh or
is it well
correct it's gonna be i think it'll be
very hard
look i think it'll be very hard for
america for americans i think it'd be
very hard for amazon
for example um i think some of the
things
that we've read over the years around
what's happened with
some of the third-party merchants and
building product
on top you know effectively to compete
with them and using some of that data
i think there's going to be rules
regulation and enforcement around that
that's going to make that kind of thing
very difficult do i think that amazon
unto itself is gonna get broken up
i'd be very hard-pressed to see that
really happen yeah i think it's tough to
do
also very tough to do i think facebook
will ultimately get broken up
no i don't and and part of that is
because
the other element of this and this is
the thing that i i do believe
um even though i know we think there's
no competition
i mean if i had said alex to you if i
just looked at you and said
tick-tock yeah like three years ago you
would have looked at your watch
it's true right like that's what would
have happened yeah and so
if you go look at the top
20 largest companies in america 30 years
ago and you look at the top
20 large companies in america today like
they're
pretty much all different they really
are
um and then of course the question is 30
years from now will they be again
and and that is the fundamental question
but i think i am a believer in
innovation yeah i am
i think we all know that amc and
gamestop will be the top two companies
in the economy
given how much money is going to be
thrown at them and you and
if so tesla's gonna be number three is
that what you're saying oh you depending
on a felon's in jail or not
wow that you see you see the gloves just
came off
at the end of the podcast that's right
do you really think he's going to jail
no probably not but you never know with
that guy he's unpredictable
for what though i don't know i mean i
don't think he's going to go to jail for
financial crimes
interesting hmm
i'm one of those believers and i can't
claim to to have made up this
this phrase it might have been like
jason calcanos or someone like who said
you know betting against elon is like
betting against humanity
and i kind of i kind of believe that i
don't agree with everything that elon
does
at all and i think he's done done lots
of
uh things that i've just frankly
disagreed with but i think
i marvel uh i do marvel at what he's
what he's
been able to do yeah i give him credit
um
i mean especially the stuff he's done
with tesla and spacex i mean i've been
newly fascinated with this whole space
race that's going on between him and
bezos
and i think the fact that both of them
are in it uh is gonna make it even more
exciting because
never bet against a billionaire's ego
and these two guys have egos you know
the size of the planet
and uh they're gonna put everything they
have into
one up and the other but is all of their
wealth going to be taxed
such that they won't be able to do this
oh what do you think is going to happen
because i mean i guess like that's
another big thing that they're talking
about this 40
capital gains tax well last thing before
you answer that yeah
i'll just say i i wouldn't bet against
elon the comp you know the companies but
the dude is a maniac
like he's so unpredictable and he's
shown an uh a total inability to grasp
with like what the consequences of his
behavior might be
so you know i don't think he's gonna be
in jail but would i be surprised
not a hundred percent okay sorry uh
both taxes will tax i don't know if
we're gonna get to a wealth tax but i
i do think that there is a real question
about
coming up with a fairer tax system and
um i i'd like to i mean that's the one
thing that i've cared about for a very
long time i think it's very important in
a democracy that people
feel that the system is fair i think
it's actually
i think taxes are actually part of that
democracy and the fact that it isn't
fair the fact that everybody knows it
isn't fair
and that it's been this unfair i think
unless it does get
fixed and solved not just for the sense
of fairness so there's the fairness
issue and then there's just the
practical like
we need revenue uh issue but it does
seem that when you look at
and this propublica piece really i think
demonstrated it
some of the wealthiest people in the
world have really managed
to effectively never pay taxes
hey look some of that's because they're
giving it away and it's a it's a
charitable contribution
and i appreciate that but it also means
affecting that everybody else including
us effectively subsidizing their
philanthropy right
okay they get to choose where they're
giving their money uh you
don't and so i and by the way i think
that actually oddly enough goes against
people's fundamental
sense of fairness so i think that there
has to be at some point look i'm a
believer in increasing the step-up basis
um at uh at the end of life
i think a a lifetime of not paying taxes
is enough
uh even if you lose the family farm not
a popular thing to say i know but i
think
you you have to pay it um
i would deal with i think some people
like larry ellison who live off of uh
effectively interest uh basically they
take out loans against their stock and
so that they yeah
yeah i think there should probably be a
limit on the amount of
interest deduction you can actually take
and i
very unpopularly would probably tax
um great philanthropy meaning
most philanthropists including warren
buffett or bill gates
effectively are transferring shares
typically founder's shares into either
their foundations or their charity
which means that those shares which have
created enormous value and wealth it if
if you will will never be taxed ever
um when they're sold by the charity and
so my view is maybe
maybe your the first five million
dollars you give away on an annual basis
should be you know tax-free
but after that um there probably should
be some rate
maybe there's a special philanthropy
rate even maybe it's maybe that's closer
to the current capital gains rate
especially if capital gains goes to
something that uh goes to income taxes
but
that's sort of a little bit of how i'm
thinking about it i like that because
essentially if you're not taxing that
money it's going to philanthropy what
the government is saying
is we think you billionaires are going
to do a better job at providing services
than we are right so and by the way yeah
there is an argument you made
i do want people to give me difficulties
but
it can't be complete substitute for
government can't be a complete can't be
a complete substitute
and i think that if you took 20 of it uh
a would go towards the government and b
then would also go towards the
philanthropy
i would also say you look i mean we can
have lots of debates about bill gates
but i was going to say
what bill gates has done no but what
bill gates did even during covid
actually to me proved that you actually
occasionally might want a billionaire
out there working on some of these
projects
i agree with you 100 percent effectively
now uniquely though
they're almost like nation states
because they're competing with the
government
but in a way that competition was
probably helpful
yeah no i agree i think that gates's
work on the vaccines in particular
uh helped push everybody forward and i'm
glad to be vaccinated so i'll
say that much but it does strike me as
unfair
you know talking about that propublica
story that all these billionaires are
paying
less tax than big technology it just
seems crazy
i'm struggling to make it and you know
it should be there should be some
more fairness on that front well after
this podcast you won't be struggling to
make it i know yeah
i mean aren't you going to be on your
like you know seriously serious d
no no investigating what's the cap table
look like i can't take any investment i
think taking investment in a new media
company is is absurd most of the time
you're just bootstrapping yourself i
like you bootstrap away
ad supported and and you know across the
field create even more value for you
when you
when you go public through a spec that's
right we'll have to give
chimoff a call after this one see how we
can do that
um okay well i think we should wrap
there that's
that's a great place to end thank you so
much for coming on it's great having a
discussion with you as always
thank you for having me i appreciate it
this is awesome are you still doing
now i'm yeah yeah are you still doing uh
clubhouses and spaces or have you given
up on that
oh um i haven't done any clubhouses in
quite a while i turn them down i turn
the notifications off which might be
same here same here because they were
very aggressive with the notifications
which i thought was smart for them to do
but then i they just became less
valuable to me over time because i
haven't seen
as many people like you and others on it
i've done a little bit of the spacious
stuff here and there i haven't been
hosting anything
really myself occasionally i'll listen
in i know
you know if i happen to be around when
uh
you know cara has been doing one on uh
thursday night that's occasionally
interesting but i haven't
i don't know what's what's your take on
the whole whole audio
uh live audio space yeah i i was always
a little skeptical of clubhouse because
i thought it would be
tough i remember you wrote the very
controversial tweets
sort of tweeted on pretty hard for that
but i always thought it would be tough
for them to
a keep the middle class of creators
around so like they were going to be a
few people that were going to crew a
million followers
right but everybody else you know who
might have been able to attract a larger
audience elsewhere
shows up on clubhouse and gets like 40
people and it immediately becomes a
terrible
experience to them they don't want to go
back and then i think the challenge from
twitter is pretty significant
and i think that twitter spaces has
potential long term and
is good as a feature you know to pop up
here and there is something you'd want
to jump into but
i think that andreessen horowitz
definitely overpaid uh in terms of their
investment and clubhouse and
twitter seems to be doing a lot of the
right things to make this thing
something that is useful when the time
calls for it but
you know not like a revolutionary social
product i was afraid at first that
um it would crush podcasts but
that doesn't seem to be the case and
where are you i don't know if we're
still live or not yeah we can
i mean you can tell me when you want to
call it but no you can take whatever you
want on
podcasts yeah um
how do you think about sort of the free
rss
if you will versus what you see
happening with the walled gardens the
spotify
kind of situation uh or luminary
or uh sort of the substation
stub stackization of podcasts
yeah it's really interesting so actually
i'm talking about taking money when i
first decided to start this i did hear
from a vc who wanted to put money
into the podcast in particular because
he believed that there was real
opportunity there
and the way that he wanted to do it was
do it subscriber based
so like kind of a patreon model yep
i think that there's like a real place
for that and i wouldn't be surprised if
this show ends up doing that
maybe one free show one page show a week
or something like that
um but like i also think that there's
really something to be said especially
early on
for getting your stuff in as many
platforms as possible and making it
accessible
like i remember i was late to turn on
stitcher for this show
and i was like all right who uses
stitcher and i turned stitcher on it
became an important part of the audience
so people like had been talking about
like oh
spotify overcast like every single uh
platform
people even listen on desktop so as i'm
building you know it's important for me
to grow the biggest audience possible i
wanted to make it available to everyone
and which network or which platform
gives you the best
access to be able to get directly to the
consumer because i know obviously
one of the big issues with apple is that
you don't really have a direct
relationship for example oh yeah so
that's the problem there's no direct
relationship with people um like there
are listeners that will come in through
third party platforms like
spotify overcast apple but all those
platforms will own
the relationship with the listener now
like apple is
starting to uh make it possible to do
like
a paid element of the subscription so
right if you're listening with apple and
you want to pay for like bonus episodes
you can do that but it's just one
platform
so there are others out there like super
cast that make that possible but yeah
look i i mean i wrote a story about this
recently i think podcasts are a massive
massive opportunity that are just
starting to hit their stride and you
have only 107 million americans that
listen to them
leaving about 200 million plus that have
yet to make it in
and over time i think there's going to
be podcasts that appeal to everyone and
they will largely replace the radio so
um i would expect it to go in all
different directions what are your
favorite podcasts these days
i mean i listen to the daily pretty
religiously okay uh
i listen to uh pivot so that's a half
that owns a half hour of your your day
every day yeah so i have this routine
where like i'll go for a run and then
pick up a coffee
and on the way home listen to the daily
okay so
i would say probably three out of five
or three to four out of five
shows i'll listen to what you do on the
run music
yeah i also listen to podcast but it's
not it's not a spoken word podcast
and uh i think i've admitted my edm love
on this show before so i have no problem
saying it again
it's the above and beyond uh okay mix
they put on every week it's two hours
so it gives me two good runs and then
there's another dj i listen to it gives
me another hour
so yeah so i don't know what is this
okay you listen to kara
karen scott on uh on there right and
then just a smattering of others
i like the realignment i don't know if
you listened to them before uh
sagar and jenny marshall koslov they
have like really interesting
conversations about politics and tech
uh and come to it from like i don't know
not they don't do the traditional
talking points
which to me is great trying to think
what else basically anything else that
people suggest
you know i've also gotten into some of
these narrative podcasts
there's one that i listen to that
actually apple produced called the line
have you heard of it
no it's about the marines uh
in iraq that killed that isis member and
took a picture with the dead body
wow oh man it's amazing six parts
the guy gets access to the marines you
know both the guy who was on trial
and the members that turned him in and
it just
tells a story in a way that i think you
could only do on a podcast
so okay yeah where do you think it's
going
i don't know i i recently fell for i
fell hard for a new podcast
i don't think it's that new though maybe
i'm just new to me i'm late
smartlist you know oh yeah that's fun
that's hilarious
it's just it runs on there it's sort of
like drive time radio
yeah actually but i just that's right
it's like
a show it's like they're like a fun gang
um
they're pretty pretty fun guests and um
you know it's sort you sort of listen
for the guests but not even you sort of
listen for them
and yeah the banter is amazing yeah so
i've enjoyed that recently
i'm trying to think what else i've been
listening to i'm a daily listener
um i try to get into freakonomics radio
i listen to that more and more um
oh you know what's great but for the
sound design
actually more than anything um and it
actually may give
uh luminary a chance this new chapel
uh podcast oh yeah i've heard about it
it is that's good
pretty extreme just like i know some
people love it some people hate it
but the just as somebody in the business
how they did it
is pretty i mean first of all he's great
but just the
the production of it is extraordinary
for me now i've
also talked to people in the podcast
space for like oh it's overproduced is
this not
i yeah i don't have any um yeah
religious beliefs about the way to
produce a podcast if it sounds good if
it's compelling
i'm all for it so i should give that
chappelle show a try
um what kind of mic do you use this is a
scarlet mic
i don't know much about the technology
but
i did the land of the giants podcast for
recode about google
and they shipped over a scarlet and i
shipped it back and then ordered one on
amazon
so i was watching the new bo burnham
special and i saw the same mic in it
so it must be okay okay is it good the
bubble burner
oh the bo burnham special yeah you
should watch it okay it
like perfectly encapsulates the madness
of
being inside for a year and you see him
just sort of have like this pretty witty
kind of fun
uh skits in the beginning and then it's
just this descent
i'd be curious to hear what you think
about it it's a wild one
yeah i'll i'll go watch it thank you for
having me
thanks for being on great having you
andrew see you soon
thank you nick guateny for doing the
editing red circle for hosting and
selling the ads appreciate it very much
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next wednesday