CW 347: How Twitter Was Born with Nick Bilton NY Times Technology Columnist & Author of 'Hatching Twitter’

Welcome to Creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven't thought of before. And a new slant on investing fresh new approaches to America's best investment that will enable you to create more wealth and happiness than you ever thought possible. Jason is a genuine, self made multimillionaire who not only talks the talk, but walks the walk. He's been a successful investor for 20 years and currently owns properties in 11 states and South 17 cities. This program will help you follow in Jason's footsteps on the road to financial freedom. You really can do it. And now here's your host, Jason Hartman with the complete solution for real estate investors.

Welcome to the Creating wealth show. This is your host, Jason Hartman. This is episode number 347 and after I get through the monologue portion of the show today, we are going to have a guest that I'm, I'm kind of taking out of order. And this wasn't necessarily specifically for the Creating wealth show, but I just thought it was very timely and interesting for you because our guest wrote a book about Twitter and of course Twitter just had their ipo. A lot of us use social media and a lot of us use Twitter specifically. So I just thought it was a very timely and interesting show. So I decided to run that here on the Creating wealth show. So before we do that, let's talk about some real estate investment stuff. And it, it constantly amazes me how we as humans and myself included, sometimes our mind just goes to mush. And I don't know why that happens. I don't know what the psychological principle for it is, but it is certainly true, folks. And I will give you an example. I was just talking with a very nice client of ours the other day and she was looking at purchasing a property, a rental property. And it just didn't make any sense as an investment. And I don't know why someone would necessarily consider this, but I think it is because we have this propensity to view things that are in our own neighborhood. We view it differently than we view a strict numbers based investment. And that is something we have to guard against in our own habits and our own psychology, in our own predispositions. Because we've got to think in an analytical way, always as an investor. And this isn't the way of human beings. Human beings are a emotional creatures, they're sentimental creatures. They just do all kinds of things that really don't make logical sense. We all do this. We all do this every day. Of our lives. So we've got to guard against this habit. So in this example, this particular client lives in Seattle and was looking at a condo in the Seattle area. Now I like Seattle. I think it's a beautiful city, especially when it's not raining.

If you can overcome the rain in Seattle, it is a gorgeous place. The Pacific Northwest is just beautiful. And we haven't done much business up there. You know, years ago I did business in Redmond, Oregon, which was outside kind of like a suburb of Bend, Oregon, the lower priced suburb. But you know, we've looked at Portland extensively. We've looked at, we've done a little bit of business in Redmond and those areas just don't work that well. They're. They're too expensive. And in this example, this was a condo. And you know that I don't like condos. First of all, if you can avoid condos, avoid them like the plague. And the reason for this is that when you have a homeowners association involved. Now I've got to distinguish maybe three types of homeowners associations here. There's the homeowners association light that is a third less filling than your regular homeowners association. Like the famous beer commercial goes for Amstel light. And that is the one where you have a single family home and you have very low homeowners association fees that are maybe 25 to 40 or even $50 per month. Those are usually paid annually where you'll pay three to six hundred dollars per year. Those are fine, no big deal. I mean, I don't love those either. I'm kind of an anti homeowners association person in general, however many people will, and rightfully so disagree with me on this. And that's. And homeowners associations in that realm, we'll call that one the HOA light. Okay. And we're going to move up the.

Spectrum here to the hoas. I don't like, but that one I can tolerate because that one will keep your neighbor from painting his house purple or yellow or some. Well, yellow is not always bad. There are some Cape Cod houses that look pretty cute in yellow, but it'll keep your neighbor from painting his house purple. I guess that's a color nobody ever really should paint their house, right? Or black. Like you wouldn't want a house to be black, right? I don't know if I've seen too many of those. So purple, black, these are the colors that houses probably shouldn't be. Little pink houses, gray, white. Those are, those are house colors. Yellow even. And that kind of thing. So it'll keep your neighbor from painting his house some funny oddball color that just isn't attractive or from repairing their car on big blocks on the lawn. Right. You don't want this type of thing. And that's what I call HOA light. That's acceptable. Now the next step up is an HOA in a condo. And when you have a condo you have these, the common walls and common roofs. And here you start coming into lots of problems potentially with HOAs. So HOA or Homeowners association here is where your dues will typically be. On the lowest end for a condo would probably be $100 a month. And on the highest end for a high rise condo it might be $1,400 per month in a higher end high rise condo, which I wouldn't touch. A high rise condo with a 10 foot pole. Now personally, as you may know, I live in a swanky penthouse in a high rise and I rent it. And I think that's a great deal because of the rent to value ratio and the lack of rent elasticity in high end properties, my place might be worth, and I really don't know what it's worth because it's apartment building and they're all rentals but they were originally designed to be condos. And you know, I'll just take a guess that my place might be worth, I don't know, a million to a million five maybe on a great day in a robust market, maybe even $2 million, I don't know. And my rent is only about 3700 dol. So there I take advantage and I arbitrage the rent elasticity problem that the landlord has to my benefit as a renter because as you know, hopefully by now the quick rule of thumb is that the rent you receive every month should ideally be about 1% of the value of the property. Now in the doldrums of the market, in what people call a buyer's market or a bad market because they somehow put those two together, I don't think that's necessarily a bad market. In fact, I don't know if there really is any such thing overall is a bad market because any market can be made good by proper adaptation. So if you adjust your strategy as an investor properly, a so called bad market, which is known as a buyer's market or and not a seller's market, where a seller's market when prices are rising and there's limited supply and every everything's in favor of the seller, that's Known as a good market. I'm not quite sure how this all developed this way. I guess they thought, I guess the sellers get to make the call and the sellers decide if the market is good or bad. And when it's bad for them, they say it's a bad market or a down market. But it's called a buyer's market and that's kind of good for buyers, right? So these are sort of dumb anecdotal interpretations here. But anyway, where was I? You know, I get off on these tangents. So the rent to value ratio ideally should be somewhere in the, the ballpark, give or take of 1% per month. So to be an extreme simpleton here, and God, I hope you know this by now, people, if you've been listening to the show for any length of time, you've got 346 episodes back. You can go and listen to, you know, if it's a hundred thousand dollar property, how much rent should you get every month? $1,000. A quick rule of thumb. So there you go. That's the ideal rent to value ratio. Now in the bad market in the doldrums a couple of years ago, you as high as 1.4 or maybe even 1.5% per month. So $100,000 investment might yield you $1,400 per month. You can't do that anymore. The rent to value ratios for the owner, for the investor, for the landlord have declined. They have suffered in this so called good market or seller's market because the prices have risen, the rents haven't softened. It's that the prices have gone up. And you know, I'm saying these, all of these things in a very general way. Of course it, it depends where you are geographically. There are specifics and particulars to any situation, of course. So these are general concepts and that's why you need an investment counselor to help you interpret all these things. And that's why we're here. So Jason hartman.com contact us section and get in touch with an investment counselor to help you wade through this in more detail. But back to that 1% thing. So as I recall, in this example, this was a $170,000 condo and our lovely client here was hoping to get about $1,200 per month. Is that a good deal? No, no way. Right out of the chute. It's bad from a cash flow perspective. But then we look at this. We have to add the Homer's association fees. Now in this case, we couldn't quite determine on this phone call A few days ago, whether the homeowners association fees were $300 per month or $300 per year. However, I will bet you because it's a small condo complex with only 30 units, which is another mark against it. I don't like those small condo complexes. They tend to have more problems than the large condo complex. And I'll get to that in a moment. But $300 per month, I think that's what the homeowners association fees were. Okay, I'm really hating this deal now because now what you have to do is not only have the goal of getting about 1% per month so that $170,000 property should rent for $1,700 per month, but now because you have the additional homeowners association expenses lopped in here. Now, granted, because you have the homeowners association, in an ideal world, in a somewhat theoretical way, it will reduce your maintenance cost because they may or may not be responsible for the roof, they may or may not be responsible for the exterior painting, and they may or may not be responsible for landscaping of the front walk up area to your unit. I don't want to say front yard because it's not yours. It's common area if they maintain it. Or at least it's called, what's called restricted common area. And these definitions vary. And you know, every situation is unique and individual. But if you have $300 per month extra in expense, well, what do you have to do? You know, let's say that that reduces, and it may reduce your insurance cost too, but that'll be relatively minor on all of these counts. So say it reduces your overall cost of ownership by $100 per month. Well, the homeowners association is just like the government. You give the government a lot of tax money and only a little bit of it comes back because they take a very large handling fee. And because things that are done by committee and things that are done by the collective are notoriously inefficient, so they take a large handling fee off the top and you only get part of the benefit back. It's a lousy deal. So say that your true benefit from your homeowners association fee of $300 per month only really equates to, and I'm just going to take a guess here, from my experience that that only equates to about a $100 a month actual benefit to you. So the net difference in your increased expense here is now $200 per month. So here we've got an investment that cost $170,000 and will only yield $1,200 per month in rental income. That's bad. But it gets even worse, folks, because now we have to get an extra $200 per month net. So not only should we be getting $1,700 that we would normally get on a nice single family home investment of 1%, but we have to add $200 in net losses due to the homeowners association. Again, just my estimate here. So here we should really be getting $1,900 per month in rent for this $170,000 investment property. This deal sucks. And guess what? It gets even worse. Well, guess what? The cost per square foot is and the bedroom and bath count in this property. Okay, again, Seattle, that area is just too expensive. You can't get a good property there. That will make sense. It's not as bad as, you know, the Socialist Republic of California, but it just, I mean, things in these desirable cities like Seattle and Portland and Los Angeles, which I don't. You know, listen, Los Angeles is my hometown and I would hardly call LA a desirable city. I really do not like LA in almost every way. You know, it's. It's crowded, it's polluted, it's overpriced, it's overrated, it's over regulated. Yuck. Okay, but say it's Newport beach, my adult hometown. Los Angeles is my childhood hometown, where I grew up. Newport Beach, Irvine, Newport beach area, that's my adult hometown as an adult. I lived there for many years. Well, any of these places, they're not going to make sense in a million years from a numbers perspective. San Diego, San Francisco, not even close. These areas just don't work. Any expensive area doesn't work. Unless you're a gambler, unless you're a speculator. If you're looking to get lucky on capital gains appreciation, then, hey, more power to you. But there's a high likelihood you're gonna lose a lot of money too. So this deal, it gets even worse. And here's how it gets worse. The cost per square foot is $257 per square foot. Oh, my God. Remember the risk evaluator that I discovered and invented after 19 years of experience in the real estate business? Took me a long time and I had to buy that property in Georgia to discover this. And I tell that story on a past podcast. If you want to find it, just go to jason hartman.com. in the upper right portion of our website is a little Google search bar. To just search only our site, type in risk Evaluator and find that podcast and listen to it where I explain how the cost per square foot is a huge guard against downside risk. Because if you can buy at or below or even a little higher than the cost of construction, you are limiting your risk. You want to get cheap or free land in the deal and be very close to cost of construction now. True. It probably costs a little more to construct something in Seattle or California or any of these overpriced markets that don't make sense as an investment, only as a gambler. Sure it does. And there are websites where you can look up the construction cost. Of course it, it varies by the spec level of what you're building. All of this is true, but so what? I mean, look, that doesn't get you $257 per square foot for a, for a condo. We want to be buying stuff that's in the under $120 per square foot. That's the most we ever want to Pay, okay, is $120 per square foot. And hopefully we can buy for 70 or $80 per square foot or even less in some cases. Hey look, if you go to Jason hartman.com and you click on properties, you can find properties today that you can buy for 55, $56 per square foot right now, below the cost of actual construction, below replacement cost. Great deal. And they're going to be single family homes. They're going to rent for somewhere in the ballpark of 1% per month, give or take. You're going to be have a wide market because here's what else I didn't tell you about this little condo. It's only one bedroom, one bath. Think how limited your market is there. There. You can only rent to a single person or maybe a couple that wants to live in a little tiny dinky condo versus a three bedroom, two bath or four bedroom, two and a half or three bath single family home. Look at the kind of market options you have there. You can rent to a family with children, with a few children. You can rent to a couple with no children. They call them dinks. Dual income, no kids. You can rent to a single person who just wants to have a home all to themselves. You can rent to a single person who's going to have a couple, three roommates. You can rent to a couple, whether they be, you know, a couple cohabitating or a married couple that's going to have a roommate or two. I mean now, you know, with the economy the way it is, that's more common nowadays. You've got loads of options. You can rent to empty nesters. The kids have left. Left the nest. You can rent to an older person, a younger person, a middle aged person. I mean, look at the latitude of the market you have here versus a one bedroom condo with an extremely limited market. Now Listen, if the one bedroom condo was $40,000, I would think a little bit differently, but not that much differently. Okay? It'd be a much better deal there because at least there the numbers would work. For a 40 or 50 or even $70,000 condo, 1% is 400 to $700 a month. That's achievable. Even if it were $120,000, at least you would be getting 1%. But then you have the homeowners association do problem that I mentioned here, because this is not an HOA light. This is an HOA. Heavy, big obligation here, $300 per month. Okay, so now let's talk about HOAs for a minute. HOAs are like another party that you have to engage with and they do in a limited way, for an HOA light, they do some real good because again, they keep the neighbor from, you know, repairing their car on the lawn. They keep, they keep them from painting the house purple. They keep basic order in a place. Now would I rather have a neighborhood without an HOA that's just a well kept neighborhood? Possibly. Because in HOA, they're just another party you have to deal with and another party you have to keep track of and you have to make sure that you pay your bills because those HOAs have foreclosure rights. And the notorious thing that they do is they send the homeowners association statement to the property address. And guess what? You're an investor and you don't live at the property. And of course you've notified them of this in the past, but they somehow messed up and forgot. And they send the bill to the address of the property and you don't get the bill. And so you, you don't pay the bill because you never received the bill. And then suddenly they send you a letter from their lawyer saying you're very late and you owe them a bunch of late fees and you owe $400 in legal fees too, or they're going to foreclose on your property and somehow they got your address at that point. Hmm, Very suspicious. You know how I know this? Because it's happened to good old yours truly. Don't make the same mistakes I've made, okay? I've, I've gotten into battles with the homeowners associations on a couple of occasions where I've suddenly gotten this letter saying, you know, you owe us a whole bunch of money. And one time I hired a lawyer to fight him and I won't and they back down. So you can negotiate with these HOAs, but you don't want to even go there. You don't want to get to that point. So how do you guard against this? Well, number one, you use the property tracker software and in the property tracker software you set up alerts for yourself. You can even do this on your calendar software too. If you use the calendar on your smartphone or the calendar, you know, you use Google Calendar, hopefully use some sort of electronic calendar to keep track of, of your life. And you can put alerts and reminders in there. But property tracker is great, I love it. And there you set up alerts for when your homeowners association dues are coming due again. You set up an alert for when your insurance policy is coming up for renewal. You set up an alert for when your leases are coming up for renewal, your property management contract is coming up for renewal. All of this stuff you can track in there very nicely. Alright, so back to hoas. Big, small, expensive, cheap. There are all these different things that we look for. I think the HOA Lite is pretty good. I like the HOA Lite where you're just paying 25 to $50 per month. You've got a single family home, you don't have common walls, and you don't fall susceptible to the problems of HOA heavy. Now, hoa heavy, here are some of the other problems. Homeowners associations are notorious for getting themselves into litigation. Is litigation ever something you win? Probably not. Almost invariably in litigation, the only parties who win are the lawyers. You probably already know this. Hopefully you don't know it from actual experience. The common case is someone thinks, oh gosh, you know, I've been wronged, I'm a victim, you know, and they go into court and they sue another party. And it turns out these lawyers, they make it so murky and they just, it takes so much time. The wheels of justice move so slowly that you end up becoming a victim. You know, you're a victim first and in the way that you think you got victimized and taken advantage of and then you're victimized once again by your own lawyer.

Yeah, Just ask anybody who's been in litigation. They will tell you they probably didn't actually win anything except maybe a moral victory. Okay. Which sometimes there's a case for Even that, okay, so we want to avoid this. But homeowners associations get into two types of litigation. Pretty common. One is, and this happens in condos all the time, but it doesn't happen too much in single family home, homeowners association light environments. And what happens here is there are construction defects. And so far as I know, and this may vary state to state, and I may not be aware of it, but what happened in California a lot is all of these condo complexes, they'd be buil nine and a half years later because the statute for construction defect, as I understood it, ran out. And again, I'm not a lawyer, okay? So I'm just telling you my own experience. Ask a lawyer if you want details. But the statute for construction defect would run out at 10 years, and invariably they would find some problem. And some of them were very justified problems. And some they probably, you know, some enterprising attorney looking for another client would convince the HOA that they should sue the developer or sue the builder that built the condo complex. Well, as soon as they get into that litigation, all the lenders that might make a loan in this complex, well, they get scared because you never know which way litigation will turn out. Even if you think you're right, even if you think you have a good case, even if you think you've been the victim, guess what? You can become the victim again because your lawyer will victimize you, and then the other party may still even win, even if you're right. And so the lenders, the banks, they get very leery about lending in condo complexes that are in litigation. So what happens when there's no loans? Well, when there's no loans, there's fewer buyers that can buy in there. And if there's fewer buyers, there's less demand. And if there's less demand, the prices will generally go down. And if the prices go down, you being one of the owners in there, will suffer. Let's talk about another kind of litigation. HOA's face the HOA heavies face this. The HOA lights. They don't face these types of litigation quite as much, although they could, but it's much less common. The other type is when an angry homeowner or an angry group of homeowners in the association will sue their own association from the inside. This is the internal threat. So they will feel that they've been victimized, and they may well have been victimized by their own hoa, their own unchartered government here, which an HOA is like a government. It's like an unchartered government. So they turn around and they sue their own hoa. And now the HOA is in litigation because of some angry homeowner. And hey, that angry homeowner may well be you. Okay? So again, you don't want that because then the same thing happens, potentially. The lenders don't want to lend and the prices go down, blah, blah, blah. It all happens. Okay? Now, small HOAs like a 30 unit condo complex are particularly susceptible to this. Why? Well, just some anecdotal observations. Number one, they don't have a very big budget, so they can't spread the risk if the economy gets bad and someone doesn't pay their HOA dues or several people don't. They have a very limited pool. So say 10 people are in foreclosure in this 30 unit homeowners association. Well, that's one third of the revenue that the HOA is maybe not collecting. And now the HOA could go bankrupt. And if they go bankrupt, then the maintenance of the property suffers. Or what if nobody wants to volunteer and be the president and the treasurer and run the board of the hoa? Well, then the whole community suffers as well. Sometimes you get these egomaniacs on these HOA boards. You know the type, the person who's like a Napoleon type, okay? And they feel that they've just got to exert their power. And you know, these are like nasty people that probably don't have much power in their day job or in other areas of their lives. So they pull this whole Freudian thing and they project it on to the hoa. And they want to be the president that rules with the iron hand. It's Joseph Stalin on the HOA board. And you don't want to deal with this stuff, folks. If you're going to have an hoa, an HOA light is a good type of HOA where, you know, they might provide a common area facility like a pool. They make sure your neighbor doesn't paint their house purple. They're pretty good, okay? They keep the values up. That's the good side of a homeowners association. They are there to keep the values up in a neighborhood. That's what they're supposed to do. They want to maintain the property, the common areas, so you can make money as a real estate owner, as a homeowner in that hoa. So I think the HOA light is just fine. Just be careful, make sure you get your invoices, make sure you pay your bills, and then you'll probably be in Great shape. But again, this lousy little one bedroom, one bath condo for $257 per square foot. Well, it's in Seattle. Seattle is a really desirable area. Yeah, you know, I heard that. Newport beach. And that's a pretty desirable area too by most people's thinking. But it doesn't work as an investment. It only works as a gamble. And you know what? We don't teach gambling. So stay away from gambling. Anyway, enough of my rant on that. That was like almost 30 minutes on that subject. I'm done. Hopefully that makes sense to you and you will follow my sage advice. Alright, couple things. Number one, before we get to our guest here and we talk a little bit about some very interesting stuff on Twitter and you hear all about that. I think you'll really enjoy this interview. Even though it's not very much related to real estate, it is related to kind of the broader economy. Before we get to that, two things. Number one, I am almost out of these Meet the Masters physical products. Remember I talked about that and thank you so much for buying them. I just did another shipment today and gosh, it feels so good to ship off those physical products. But go to jason hartman.com click on Products and you will see the Meet the Masters home study course. The physical product at half the price of the digital product. 247 bucks. It is an awesome deal. The shipping is free anywhere within the continental United States. And get that while they last because I am not going to redo them. This is a closeout and this will be it. They will adorn your bookshelf for years and they look beautiful. So take advantage of that@jasonartman.com and the other thing that I'm going to use the scarcity urgency plea again with you on this one as well. And that is our Meet the Masters live course that is coming up. Meet the Masters weekend that's coming up in January at the Hyatt Regency in Irvine, California. The early bird price, that first level of that has expired and we're going to the next level. And those tickets are selling very, very fast. So I have no doubt that event will sell out. I have no doubt that the room block that we have with the Hyatt for just $119 per night will sell out as well. So get your tickets today@jason hartman.com youm click on events okay. Or you can just go directly jason hartman.com events and register for that and also book your hotel room so you don't end up paying 50, 60, $70 more per night. Just people who think in advance, they benefit in life. So make your plans now and take care of that. All right, enough of that stuff. Let's get to our guest. Hey, by the way, we have so many great podcasts coming up for you, so stay tuned. We got a bunch of great stuff. I interviewed Noam Chomsky yesterday. I know he's a left winger, and that guy, I tell you, some of his stuff really makes sense, but some of it just doesn't make any sense at all. It was so frustrating talking with him, and he kind of cut our interview a little bit short, which was annoying to me. He. He did warn me in advance that might happen because he had another interview, a bigger name. But I was asking him some pretty tough questions and he wasn't making much sense. I. I kind of wonder if he cut that interview short because he was. Felt like he was losing the debate with me or he was gonna lose it, or maybe he really had to go. The world may never know. However, it's interesting, and that'll be coming up as well. Harry Dent's interview, really interesting. That's been published a while back in the members section, but that'll be coming up too, and we just got so much great stuff. I'm really excited to get it out to you. So without further ado, let's get to our guest. He's a New York Times reporter and wrote a great book on Twitter, and I think you'll really enjoy this. So we will be right back with him in just a moment.

It's my pleasure to welcome Nick Bilton to the show. He's the New York Times technology and business columnist and lead reporter for the Bits blog. He's also author of a very timely book entitled Hatching A True Story of Money, Power, Friendship, and Betrayal. Nick, welcome. How are you?

I'm great. Thank you for having me.

Good. The pleasure is all mine. And you're coming to us from Manhattan, New York, so very appropriately.

So. This show won't be published extremely fast, but Twitter's IPO was yesterday, and it opened with a roar starting at, I guess, $26 and immediately going to $45. Tell us about the book and the exciting, timely issues as well. Let's dive in.

Well, yeah, I mean, Twitter stock opened quite dramatically yesterday with a doubling almost in almost minutes. The timing, I think I had an idea that the book was going to come out when the IPO was happening, and I really kind of raced to do that. I have to say, part of it was luck. By Getting it two days before the ipo, but it's been a pretty wild week.

Fantastic. Well, there are four founders, and that's Biz Stone, Evan Williams, Jack Dorsey. Of course, everybody has heard of Jack Dorsey and Noah Glass. I haven't heard of the other three as much, maybe, Noah, I think. But tell us about the issues between them and how the company came to be founded and what happened later.

Yeah, well, it's interesting that you say you've heard of Jack Dorsey and not the other three, and that's actually part of the story in the book. You know, these are four guys, once very close friends, and they built this service and in doing so ended up tearing their friendships apart. Noah Glass and Jack Dorsey were actually the original creators of this idea, co creators of it. And it came after a night of drinking one night and dancing, and they were sitting in a car. And Jack Dorsey had had this idea idea to be able to update your status somewhere, much like you do with your AOL instant messenger, where you can say, I'm away or I'm here. And Noah Glass had the concept of being able to actually take that idea and use it to connect to people. And what he said was to feel less alone. He was going through a very difficult time, getting divorced and other things at the time. And that was the genesis of it. And what happened was Noah was kicked out very quickly, quickly from the company because his ideas did not line up with Jack's. And Evan Williams, the other founder, eventually Jack Dorsey was fired from the company too. And he actually orchestrated a coup to have Evan Williams pushed out. And so it's a very dramatic story of all these people that were once very close friends pushing each other out. And aside for power and control, well.

That'S certainly a familiar story throughout human history. So there's nothing, nothing too terribly unique there. But what ended up happening?

Yeah, what is unique? I think you're absolutely right. You know, this is a story that happens in every business and every company.

And every corporation and every government and every military. Yeah, sure.

But you very rarely hear this about close friends. You know, you have. And that's just something different about the Valley. You know, Silicon Valley is a place where people are friends and they build things together. And so what is different here is that these were people that were. I mean, Jack and Ed and Noah, these guys were all best friends for a time, and now none of them talk to each other. And what happened here, that's also interesting is this is a company that's changed everything. It's changed the Way we communicate, the way we do, politics, religion, everything. And I think that they had this realization that that was the case, and they wanted this to be their idea and their concept. And Jack Dorsey has been credited with. With creating this service. And that's because he went out to the media and said that he was the sole inventor of it. And the reality is, and this is one of the narratives in the book, this was created by a group of people in a room together. It was not one person's idea. And without all of the influence of all of these founders, it would be a very different product today. And without Noah Glass, it probably wouldn't actually even exist.

So who thought of the idea then first? Was it Noah?

Well, they all had an influence in it. So Jack had the idea to be able to update his status, to talk about what he was doing. But there were other services out there that did that already. There was a thing called dodgebowl that existed in New York that was started by Dennis Crowley, who runs the company Foursquare. There was a service called TextMob that had been founded by some guys that are now at mit. There were a dozen other services like that. So Jack had the genesis of it, this germ of the idea, and Noah took it and said, well, let's try to make this be used to connect people, to make them feel less alone. So he layered on the. This conversational aspect, this connection feeling to it. And then you have Evan Williams and Biz Stone, who both worked at Blogger. Evan actually started Blogger, and they came up with the concept of making it feel more like a blog and more like with a stream of tweets and things like that. And then there were other people in the room that are in the story, and they actually were the ones that helped come up with this friendship model that we have today, which is the follower experience. And so without all of those little ingredients, it never would have existed. And one of the things that really happens in the book is Jack Dorsey gets fired in 2008 because he's not doing a very good job running the company. And there's fear that it will go down the tubes. And after that, he is very upset that he's been pushed out, and he thinks it's unjust. And even though the board and Evan Williams had agreed that he should go, so he goes on this kind of media spree to say that he is the complete inventor of Twitter, and he essentially writes everyone else out of the story. He writes Noah's involvement out of the story. He doesn't talk about EV and Biz. And he changes his profile on Twitter to be inventor. And he does so to the ire of the board and the other employees, but yet manages to capitalize on the media frenzy around Twitter.

Yeah, very interesting. Very interesting stuff. So where do they stand now? Are they all. All still owners or what?

Yeah, I think some of them learned some valuable lessons, and some of them did not. Noah Glass learns throughout the book that his original concept is that you can use technology to connect the people that you care about and connect with your friends. And he learns, in the end, he gets treated the worst out of everyone. I mean, he's pushed out of the company, partially from Jack Dorsey, partially from EV. Jack threatened to quit if Noah stayed, and he gets pushed out of the company. And not only that, these people that were his friends stopped talking to him, and he would text message Jack and he would email Jack and just check in and see how he was doing, and they just would not even respond. But what happens is he kind of goes through this very difficult time of trying to deal with that, and he eventually gets to the point where he realizes that the technologies are never going to solve this human connection problem. You actually need humans to be connected. And he learns a very valuable lesson in that respect. Evan Williams also learns a lot of lessons about the way to run a company and to treat people that work for you. And the thing I found really interesting is he has been painted in the media as being a very shrewd and mean CEO that will cast anyone aside. But the reality is, that's not the truth. The truth was that people really loved working for him. He had issues running the company. He. He was slow to make decisions. He sometimes made decisions that were not in the best interest of the business of Twitter, but he wasn't the villain that he was painted to be. And then you have Biz Stone, who is just a really good guy. He's this comedian kind of character in the story, and he's the one that essentially erects the moral fence around Twitter where they make sure that they don't pillage people's privacy like Facebook has, and really cares about the user.

And do you know their percentages now of ownership? I mean, they're not all equal. Yeah, yeah.

Certainly as of after the IPO, Evan Williams has 10.2, I think, or a little over 10% of the company. He is now worth about $2.2 billion. Jack Dorsey has about 5% of the company, which makes him worth about $1 billion. Biz Stone had about 3% in the very early days. But that has dwindled over the years as he sold some of his stock and the stock split and so on as they brought in new investors. Investors and diluted.

He's worth a couple of tens of millions of dollars. And then Noah Glass, who essentially got nothing, may have made a little bit of money from some stock that Evan Williams had given him in the very early days.

Did these guys all go to Stanford?

No. That's a great question actually. This is the non startup. You have these companies that have been Facebook, where there's the Stanford Club, you have Snapchat, the same thing. All these companies where people go to Stanford and they become part of the boys club and they become investors and billionaires and so on. These guys, none of them had degrees at Twitter. They were all college dropouts. They had all come from lower income families. Evan Williams was born in Clarks, Nebraska on a farm in the middle of nowhere. And no one knew what the Internet was. He had this great little story in the book where he figured out what the Internet was and decided that he was going to tell people. And he did so by creating a VHS tape that he tried to sell to businesses where he was on there explaining what the Internet was.

What year was that? That's so funny.

That was in the late 90s. It's a really hilarious video.

He's late 90s. That's pretty late actually.

Yeah, he was. Well, it was like night I think, 96, 97, something like that.

Okay, all right, so mid to late. Yeah, but I mean he didn't even use a dvd. That's funny. Okay, interesting, go ahead.

They all had this entrepreneurial spirit, I think. But yeah, I mean, Noah Glass, his story is fantastic. He was born on a hippie commune. His dad left to go get milk one day and never came back. And Noah was raised by his grandparents and his grandfather was a tough mountain man and, and tried to teach him about standing up for himself and being a fighter. And Noah just wasn't wired for that. And that was why he kind of got pushed out very early on. And he's, I think, the most sympathetic character in the story. And then you have Jack Dorsey, who was a very strange individual. Like when he first moved out to San Francisco, he used to wear a T shirt that he would write his phone number on the front. He had his phone number sewn into the front. And he would walk around San Francisco waiting for people, people to call him.

Very bizarre stuff. He had a nose ring and shabby hair and he was into Grunge punky music and he just went through this dramatic transformation of becoming who he is today, where he's this Steve Jobs kind of look alike, and he's a very different person than he was when he was in his late 20s.

So I'm curious about that whole phone number thing. That's just totally interesting. Who was he expecting to call? Was he looking to pick up girls or just any startup funding experiments?

He did these weird experiments. Another one he did was this is in the book too. He set up an ebay account. He didn't have anything to sell because he was broke at the time, and they were all totally broke at the time. But he set up this ebay account and all he auctioned off was him calling someone and reading them Goodnight Moon, the children's book, which four people actually bid on. He came up with an idea, wants to take people that were programmers and massage therapists and team them up together so that someone would massage you while you were writing programming code. So lots of weird ideas. And I think that this, for me is one of the really interesting aspects of the story is he was in his late 20s with a lot of these things. This wasn't stuff he did when he was 14 or 15 years old. And he. Everyone said he was a great guy, he was fun to hang out with, but he was also kind of strange and unique. And when he got pushed out of Twitter, he went through a transformation and kind of pegged himself as the next Steve Jobs and started using quotes by Steve Jobs and started dressing in a uniform like Steve Jobs and wearing the same glasses. And he kind of created this fictional character of who he is today.

Very interesting. Fascinating. Let's talk about Twitter's influence on the world. I mean, it's been used to overthrow governments, to try and overthrow governments as well as successfully overthrow them. What do you think of Twitter's influence and the way it has spread and what can it look forward to in terms of the future?

You know, it's fascinating. There's these two stories in the book that are several chapters apart that I think really kind of summed it up for me. And one of them was when the south by Southwest Festival in 2007, the Technology Festival in Austin. In Austin. And the founders are there. Noah's been pushed out already, and it's EV and Jack and Biz and this guy Jason Goldman, who was a big influence in Twitter. So they're there and they figured that people would be using Twitter and they set up some screens to help people learn about it. And so on, but they had no idea it would be used to the degree it was. And what happens is they're in bars and they start to see people's phones.

Getting text messages. And that was when people were using Twitter over text. And they would see, they would be like, where are you going? Because everyone would start leaving and they'd say, oh, somebody on Twitter said there's a better party down the street at this bar and they're giving away free beer or whatever it is. And they called this flocking. At the time, some of the bloggers at south by called it flocking. And one thing that I found really interesting was a couple of years later, during the Iranian revolution, it was used in the exact same way you had this flocking where people were organizing protests using Twitter and text messaging. And so just in a two year span, you saw how something was once used to find a free beer and then used to overthrow a dictatorship. And I found that utterly fascinating. And I think Biz Stone, I think, really deserves a lot of the credit and so does Jason Goldman for being the two people that really helped push that kind of philosophy of the service being used to kind of make the world a better place.

So how about the future of it, especially as it relates to, to Facebook? Will Twitter end up possibly being the winner of the social media game or has Facebook just got such a big lead that, I mean, I know they're obviously different, but they are competitors too, the way I look at it.

Yeah, I think that Twitter will continue to be a. Will continue to grow. I think Facebook's going to run into some problems because they're having trouble with teens. Teens don't want to use Facebook anymore. They want to use Twitter and Instagram. Luckily for Facebook, it owns Instagram, but unluckily for Facebook, it does not own Twitter, even though they tried to purchase it several times. As I talk about in the book.

The reality is I think that for a while, for the foreseeable future, you're going to see these two companies grow together.

People are not just going to advertise on Facebook and yes, advertise on Twitter, they're going to advertise on both, both companies and both websites. But eventually I do think that Twitter is going to continue to grow much, much quicker than Facebook will.

I know that Facebook isn't necessarily your specialty, but why are they having such problems with teens? You know, a lot of my friends just, they're really leaving Facebook. They like Twitter better, they like Instagram better.

Because from a teen standpoint, the Teens are leaving because they don't, they can't express themselves, themselves on there. Their parents are on there, their grandparents are on there, cousins, their uncles, their nephews and nieces and everything. So they feel very self conscious and they do very unique things where they don't want the parents to see. So they actually, they'll leave comments and as soon as their friend has liked the comment, they'll delete the comment because they want it to be kind of, they want it to go away, they don't want anyone else to see it. Yet with Twitter they can have private accounts or they can post photos and their parents aren't necessarily on Twitter because it's a little bit more difficult for them to understand. And I think that that's one of the things. But the other thing is Twitter has tried to compete with everyone, right? They have tried to literally take out every company online. They do search, they do social media, they do photography, video, everything.

You mean Facebook? Did you mean to say Facebook?

Facebook, yes, they do everything. And as a result, I think many people don't know what they're supposed to do there. Now, you know, is it a phone book? Is it a, you know, what is Facebook? And whereas Twitter in comparison is a, is a very simple concept. It's a way to share what you're doing, what you're reading or have a conversation.

Do you think much about the way Twitter has changed the news media business? I mean, you're in the media business, obviously, and then you look at Twitter and it's just amazing how what happened to the AP wire? These reporters nowadays, they just use Twitter, don't they? I mean, I don't know. Maybe they don't.

Yeah, no, I mean, I, you know, I have, I've come of age as a reporter at the New York Times using Twitter. Twitter existed when I became a reporter and I actually could not imagine being a reporter without it. And it's kind of ironic because some of the older school people there think it's a burden and they don't like it. They think it's annoying and it's just one more thing they have to deal with. But for me, it's the not only a way for me to capture what is happening and to be able to talk to people in different places and see what they think of certain things to add to stories, but it's also a way for me to share my stories and have a conversation with my readers. And one of the things that's really fascinating, as you see in the book, there are these stories and there are certain stories that didn't make it in. But there are these moments where people are using Twitter to become reporters. Essentially. Reporters used to be the people that would be on the ground and they would go and they write the story. And now the story originally starts with the person who's closest to the news. And I think that that has been really fascinating from a news standpoint.

So as a reporter, do you use the old techniques much? Do you use the wire service or whatever it is that you guys do or did in the past? Or are you really. Is your business centered around Twitter?

It's still involved in everything. I mean, it's not just one thing. It's Twitter, Facebook, Google, you name it. We share it there and we can interact with our users, I think. But Twitter is truly real time and that's something that you can't. No one else does that. Facebook still can't do that because of the way the algorithm is set up for the news feed. It's interesting. I was at Bloomberg the other day doing a TV interview and I ran into someone who I'm friends with, who works there, and he said one of their biggest fears is Twitter. Because what separates the Bloomberg terminals from everything else is that real time information and what Twitter does better than everyone else is real time information. And so interesting to see how those guys are disrupted by Twitter.

Yeah, that's very interesting what you just mentioned. I was actually asking the question though, from a development source. Like when you develop stories, develop sources and find information to create the story, I certainly know you share them there and all that is fantastic. But what about the development of the story? Like the old fashioned guys that you work with that consider it a bit of a burden, like what's this extra thing I've got to deal with? They're developing stories in a different way than you, right? Or do you use the old guy stuff too?

Yeah, of course. I mean, I'm not just sitting in a box somewhere just checking Twitter to see what people are saying. I mean, this book for example, I used, it was hundreds of hours of interviews, thousands of documents that I sifted through and got access to internal documents and emails. It was a result of all of those things and a lot of shoe led reporting, going to places and interviewing people that worked at certain restaurants nearby and so on. But at the same time, I also used Twitter. I went to Twitter to find what people had said and done during the times that they were there at the company. And I used other social media to be able to report this and that's the same way I do things with the New York Times.

All things work to help report the story. And that's how we use them.

Yeah, fantastic. So tell us. This has got to be just a crazy funny story, but talk to us just quickly about Al Gore and I guess in the book you talk about how he got drunk and he tried to buy Twitter back in 2009.

Yeah. So it was in 2009 and Al Gore.

They set up a partnership with Current TV and, and Twitter earlier on in 2008. And he recognized, I think, the power of what this thing was. So he invited Evan Williams and Biz Stone to his house for dinner and a drink and sat there with Joel Hyatt, who was the co creator of Current tv. And they were pitching Evan and Biz to sell them Twitter or at least merge the companies together. And they got the guy drunk and they were cracking jokes and telling stories and Biz Stone was pretty inebriated. And at one point in the evening, Al Gore emerges from the kitchen with a bottle of Patron and they do tequila shots. And so it was a pretty funny story. Of course the Twitter guy said no in the end, but they definitely. And Al Gore is one of them. P. Diddy showed up to the office once with an entourage of folks and tried to buy it. Ashton Kutcher made several attempts to get some revenue along with a number of other celebrities.

Very interesting. That's fascinating. Do you know what Al Gore's offer was?

No, I do not. I didn't get that far to an actual number.

Yeah, that would be probably pretty hard to find out unless you were a fly on the wall in the room.

No, they just didn't, they didn't present a number. It wasn't like let's give you X million. It was more of the pitch of let's figure this out. And they said, said before it even got there.

Sure, sure. Before you go, let's talk just for a moment about marketing, branding, sales, conversion, and how business people are using Twitter to expand their businesses and expand their influence.

Yeah, it's a good question. I think one of the things that you can do with Twitter for advertising is really interesting is you can target people. And I'm actually going to be doing some experiments with this with the book I went to yesterday, I saw sent a tweet and I said, go buy my book. Hatching Twitter. You can go to hatchingtwitter.com and I put a picture of the book cover and actually somebody worked at Twitter messaged me and said, you should make that a promoted ad tweet, which I'm going to do. And I could take that Tweet with the URL hatchingtwitter.com, i can take the picture of the book, all these things and I can promote it to people that are talking about the IPO maybe, or people that are the little live in New York and have the word books in their tweets or something like that. It's a really interesting kind of way to market to people that you really want to reach rather than just hoping for the best that they see something.

Fantastic. Well, Nick Bilton, thank you so much for joining us today. And your website is@nickbilton.com yes, but the book website is hatchingtwitter.com hatchingtwitter.com fantastic. And I am sure you will do very well with a book. Your timeliness couldn't be better.

Yes, thank you so much.

So good for you. Nick Bilton, thanks so much for joining us today. The book is hatching Twitter. Take a look at it, get it on Amazon and all the usual places and really appreciate hearing some of this inside info. It was great.

Yep. Thank you very much for having me. Appreciate it.

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