EP 11: Elon Musk Buys 9.2% of Twitter, A Deep Dive Into Twitter History, The End of Fast, and Nikita's Best Man Speech

Foreign.

Welcome to the 11th episode of Three Cartoon Avatars. I'm your host, Logan Bartlett, and I am joined again today by my esteemed co host, Nikita Beer and Zach Kukoff. How are we doing, guys?

Surviving.

Just surviving. Nikita, right before we hopped on, you were telling us you're gearing up for a best man speech coming up.

Yeah, I outsourced it completely. I posted it on Fiverr.

Yeah, it's actually Nigerian engineers wrote it for you. Right, we'll get to that one in a little bit here, I think. First topic we wanted to hit today was Elon Musk buying a 9.2% stake in Twitter and joining the board. So it's something people have been talking about all week. The shares of Twitter soared 27% on the news, and it made Elon the largest shareholder. CEO of Twitter, Parag Agarwal tweeted. Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our board. He's both a passionate believer and an intense critic of the service, which is exactly what we need on Twitter in the boardroom to make us stronger in the long term. Jack Dorsey tweeted, I'm really happy Elon is joining the board. He cares deeply about our world and Twitter's role in it. Prague and Elon both lead with their hearts and they will be an incredible team. Elon tweeted and replied, Parag. Looking forward to working with Parag and Twitter board to make significant improvements to Twitter in the coming months. The stake itself was revealed in a regulatory filing, so it came out this week, but it was about $3 billion at last Friday's closing price. He actually started making purchases earlier this year, And I think March 14 was when the bulk of the buying was actually done. Twitter shares are up 50% since then. He's been asking a lot of questions about what Twitter should do and should he build a free speech alternative to it. So I want to break the story into two components for us to talk through. One is what do we make of Elon getting involved? And then the second one is what do we make of. Of Twitter, the actual business today and where they go from here. So, Nikita, do you have. Do you have an opinion about Elon actually getting involved with this investment and joining the board?

Yeah, I mean, it's, it's like obvious, like, Elon's one of the most talented operators, like, in history, but I think a lot of people are missing like, that. He's probably not the best at social. He hasn't done like, Consumer Internet product development since his days at Zip2 and PayPal. And that was like 20 years ago. And the things that he talks about are things that actually probably won't affect the business that much like he is. His most recent grievance was about censorship. But the average Twitter user has never had their tweet censored. Like, how would that, how does that have any material impact to the business? Certainly it's like a virtue, but I don't see how that's like meaningful. And so I think my prediction is that he will try to ham fist like a lot of product decisions that don't necessarily make sense or help Twitter's business. But as like I am a Twitter shareholder, I own quite a bit. And I think despite his influence having a net negative probably on the business, the cult around Elon will likely turn Twitter into a meme stock, at least in the short term. And, and I think like every news story that comes out where it's like, oh, Elon, impact, influence, this or that will probably cause the stock to rally.

Yeah, I agree. I mean, it's interesting, the meme stock status and I think we should talk a little bit about where Twitter is today because there's been a bunch of work and laying foundation for, I think a bunch of changes that are going to that, that we've seen show up in the product over the last little bit and setting the stage for the future. So we'll go there in a second. But Zach, do you think, what do you think Elon's goal here was? Like, is it personal notoriety? Is it actually a pure investment? Is this the ultimate shitpost troll opportunity? Like, why do you think Elon did this?

I mean, let's just zoom out for a second, right? The world of influential billionaires buying media outlets, not exactly a new occurrence, right? Jeff Bezos with Washington Post, the owner of the LA Times, certainly among many, many others, not to mention, by the way, the folks who have become incredibly wealthy by owning media outlets. So from a like, billionaire vanity perspective, Elon buying a large piece of Twitter, joining the board, and then immediately instituting a regime of relatively freer speech and edit buttons doesn't feel like it's out of whack with what the other billionaires we know in the world tend to do. I think a more interesting question, by the way, Nikita, to your point earlier, about the impact on the actual, is there some value, business value in having fair speech, even though the average Twitter user won't be censored? Like, if you think Twitter is driven by Some cadre of power users who feel like they are journalists, probably folks in tech, you know, culture makers, certainly black Twitter among them. Do those people care about this issue other than using it as fodder to score points online? And if they do, does that ultimately impact where the business goes?

I, I don't think they refrain from using Twitter even if they believe that it's not a place of free speech. And so I, I think it doesn't really impact their engagement. It certainly has an impact kind of on the brand associations if, if they're influencers. But to be fair, like, I, I don't think I've ever seen a tweet censored except when Trump was in office. Really? And that seems like a pretty exceptional case.

You've never seen a tweet censored.

I have.

You. Have you seen one that said, like, remove by Twitter?

I can recall the, I mean, the New York Post story about the Hunter Biden laptop, right. Is like the obvious example of something that was reported as misinformation turned out to be true later. Twitter became the arbiter of truth. Like, I can't say that I blame Elon for not wanting Twitter to be the arbiter of truth. And forever it's worth, like, if I had infinite amounts of money lying around and what I cared about was free speech, buying social media outlets or buying a, you know, scary enough stake in social media outlets and using that as a bully stick to force them to allow dissenting speech doesn't feel like the worst use in the world for you. Meg Solana, who I think both you guys know as well, put out a great piece on this earlier this week. But effectively, like, you know, it isn't a lot of the outcry feels like it's less about Elon himself and more about the idea that the folks who've been policing speech quite effectively for quite some time are probably not going to be able to do so in the future.

Well, it's interesting, right? I do think people were struggling with how to react to Elon doing this, right? There was a group of people that have just a very visceral negative reaction to Elon and his involvement in a company that essentially acts as a utility in a lot of ways. Like, there isn't a great replacement to Twitter, right. And so the decisions the company makes obviously have wide reaching, like, political ramifications. They have a ton of just like, impact that, that they, that this single product has on, like, our society at large. And so I think there's reason to be overly paranoid about like what's going on with this service. That said it, it was one of those things it almost reminds me of like when, when Will Smith slapped Chris Rock and that like initial 30 minutes after, no one exactly knew how to react. Right. And, and everyone was kind of paralyzed for like, oh my gosh, well, did Chris Rock cross a line and did well, Will Smith just hit someone on stage, like, that's assault. And everyone's brains like were kind of malfunctioning and they weren't sure where the, the, the party line was of like how they were supposed to react. And so they were just kind of clamoring for like what their raw emotions were. And it felt like in a similar way, this Elon Musk thing you saw people's like, I know I'm supposed to have an opinion here, but I'm not actually sure what that opinion is. And so I'm gonna claim these, these outlandish things about, you know, what the implications for this are when in truth, you know, how much is this actually going to change anything? I'm not really sure. Right. And so it was funny to see everyone's brains kind of break for a few, few, you know, hours trying to figure out how they were supposed to react.

I think they were just trying to find out what the current thing is.

I, I honestly, I, I think so. Right. I think everyone was like, I don't know what the group chat is among like the, you know, the media elite to like get in line for. Okay, here's what we're going to say. But that group chat must have been blowing up trying to get their, the talking points in order to.

Nikita, we gotta stop doing Mark Andreessen jokes on this pod, otherwise he's gonna become the fifth fucking cartoon avatar.

The comments on the Parag announcement, it was kind of funny. They, they had just people like they were extraordinarily angry. Everyone was like, this is the end of Twitter. And I just couldn't help but like, here's like a very talented operator, someone who uses the product. I, I didn't know there was this like anti elon segment on the Internet. Like, I mean, at least as you know. I mean I, I would think that most woke people would like Elon because he's in like how he's impacted the environment. But I, I think the billionaire status just upsets them way too much. Like he made way too much money saving the world.

Well, and there's, there's anti union stuff and there's been accusations of like racism within the company. And obviously he's compared people to Hitler on the platform. And, you know, he called the guy a pedophile. And so no one's perfect.

Okay.

Yeah, yeah.

Like he.

Without the first stone. Logan.

Yeah. Who among us hasn't called, like someone trying to save kids in a, in a cave? A pedophile. Right. Like, I, Yeah, that's where I fall on this. But no, I know there's an anti Elon sentiment, and so it didn't totally surprise me that that was going to be the reaction. But it, it's, it's interesting that like all these people were just sort of clamoring for like, oh my gosh, I'm leaving the platform. They sent to Twitter. Right. And then like an hour later they keep tweeting about how angry they are on Twitter. Right. And it's just like, no one's going to do anything if you're addicted to Twitter, you're going to stay on it. Right. And so who cares if Elon's going to kind of shove a stick in the eye a little bit and poke and prod to move things along? I think that's, that's a great thing. And I don't know, I mean, his calibration on a lot of these things or his product intuition is not going to be perfect, but at least there's going to be like a vocal advocate trying to push change to a product that hasn't had much in the last 15 years.

Yeah, I'm quitting Twitter is the I'm moving to Canada of reactions, right? Like, everyone quits Twitter and comes back two seconds later. No one's moving to Canada no matter who wins the election. That's a well known fact. And so ultimately, you know, it's a little bit, I don't know, it just feels completely disingenuous, people to use Twitter to complain about all of the problems they feel like with Twitter's management.

So I think that's actually an interesting segue though, to the state of Twitter as a business. Obviously, the three of us live on it with regularity and, and so it's something that we, we use and utilize in different, in different ways. I think it's, it's a really interesting moment in time for Twitter. And so I think to some extent, understanding where Twitter is today involves going back to how Twitter came to be. So forgive me a little bit, just to give kind of a quick high level on the company itself. I think, you know, one of the all time quotes was Zuckerberg's quote about Twitter which was, Twitter is such a mess. It's like they drove a clown car into a gold mine and fell in. Like, that was the way he described the business itself, because it's interesting, the actual story. It's almost like they had product market fit from day one. So the quick background here. So Twitter was started out of Odeo. So Odo was a company founded in 2006. It was founded by Ev Williams and Noah Glass. It was a podcasting startup that existed before Apple had podcasting. And so that was their vision. Jack Dorsey was like a junior engineer on the team, and he originally pitched the group an idea for group SMS messaging. Right? That was. That was the original idea. Because the iPhone and apps hadn't come out in a meaningful way. Glass came up with the name Twitter. Right. And so when the. When the iPhone was introduced, they shut down all the podcasting elements of this and Twitter just blew up at an insane scale. And it sort of immediately was in the cultural zeitgeist. And there's stories about, you know, Ashton Kutcher racing CNN to get to a million followers, you guys might remember. But the actual story of the business and product was total chaos. Right? They found product market fit very quickly. But Ev, who was originally the CEO of Odeo, and Jack, who was originally the CEO of Twitter, never actually agreed on what the service was, right. Ev thought this was going to be a news communication dissemination tool. Jack thought it was like a personal status updating, group texting type tool, like. And so foundationally, both the two, you know, kind of principal founders of the business never really agreed on, like, what it actually was. And then it turned into like a total Game of Thrones kind of knife fight. So Jack started out as the CEO, then he was ousted. Ev stepped in as the CEO, Jack stayed on the board. Then Jack kind of led a coup from the board on the inside to put Dis. Dick Costello as. As the CEO. Dick had previously served as the coo. And so then Dick led the company. Dick was an operational, not a product guy at all. And so the original business itself was very much like Jack's kind of lifeblood. And, you know, his blood, sweat and tears went into it. Dick ran it for five years through the IPO, 2010 to 2015. Ultimately, the stock price kind of stagnated. The product wasn't actually innovating. Jack came in in 2015 and served as CEO while also serving as CEO of Square and Block for about six years. And so that's kind of the quick history of it. Now the reason I Say, all of that is one, I think foundational elements of how companies come to be have. Have a ton of importance, as you know, from a culture standpoint, from an innovation standpoint, from, like, what ultimately they execute from a service. And then two, it's important because Jack, when he came in, the product itself hadn't really evolved in the previous, you know, eight years or whatever, and they were sitting on a monolithic piece of infrastructure that basically you couldn't make any changes to the product's code base because everything was tied together right, in a meaningful way. And so what Jack did over the last six years, which he deserves a ton of credit for and is only really starting to show up now, is they did a really good job of, one, changing the culture, but two, deconstructing that monolith and carving off little pieces of the product so that you can innovate without taking down the entire service, right? And so now the newsfeed is its own little application. The. The, you know, the search is its own. DMs are its own. And so the product's been broken up, and so that should lead to more change. And so I give. I give all of that as context. Nikita, like, what do you think makes Twitter actually special from a product standpoint as. As the person that's actually built social apps? And then two, like, what are the issues that they face? Or where do they need to go from here? With Elon's involvement with the groundwork that Jack's left over the last six years, like, where do they need to head?

I think Twitter has evolved a lot over the years. Initially, I mean, it was about sharing, like, mundane facts about your day. And I think the concept of a status was still being developed. And the. The worst description I think of Twitter was early on when they called it microblogging, which I don't think it is. I. I think the better way to describe it is like a global chat room. It has many similar feelings to, like, the early days of, like, IRC and aol, where, you know, you have this very online crowd just chatting. But the. The innovation, I think, was that chat rooms are like a pretty bad hierarchy of information and form factor. And the way that Twitter has structured the content with a following model makes it so that anything you say has, like, the ideal amount of reach and interaction. So that's how I kind of associate it in my mind. But it's a really challenging product to build because it operates on an interest graph, not a friend graph. And there's no way to import that so like with Facebook it was pretty easy. They just would pull in your contacts from email or your phone and then find your friends. But the, this is generally called like in product development is called activation. And Twitter has always struggled to activate their users. And Josh Shellman, you know, he's the, he's, he worked there before on the onboarding process and he talks about this a lot. But the way you become activated on Twitter is you like tune your feed so it's actually engaging and it's not really trivial to do that. Like, I started using Twitter in 2012 and I, well, I created my account in 2012 and I didn't actually start using it until five years later and that was when I became activated.

So one to your point on microblogging versus like global group chat and status updating, like that's actually the tension in a very interesting way of Ev Williams was blogger, right? And then, and then medium and so his whole world was around this like micro blogging and Jack was always around this like status communication follow element in all this. And so I think your point on the interest graph, it's a really good one where Facebook, you're associating with people that you know, Twitter, you're associating with interests. And TikTok's been the one that's gotten this really right in that like the cold start problem. You go in and you just start optimizing like, oh, I like this, I don't like that. Oh, and they build that, that information graph for you of, hey, here's the interest right now it's kind of scary that we don't know what they're actually doing. And it's a Chinese, you know, company and so we can talk about why that's scary. But the cold start problem there is like solved for you. And so the time to value is, is super quick, right? You like get on there and it just starts feeding you interesting information versus and you're not shown the entirety of what people are interested in, right? Or what people are communicating. You're shown a subset that maybe each, each video sits on its own versus Twitter. Like if I want to tweet about Tennessee football and I want to tweet about tech, like you're getting force fed, both of those things. And it's like that's actually, it's based on me as a person, not you and your interests, right? And I think that fundamental problem, it's kind of a machine learning problem that clearly, clearly TikTok solved. And you can tell Twitter's working on it in a meaningful way. But it does lead to. I was looking at the stats. There's been 1.3 billion accounts created on Twitter and 44% of those made an account and never sent a tweet. Right. And that's just kind of a cold start problem.

We are seeing that they're trying to move toward that algorithmic style feed. Like I don't. You guys probably see it all the time. But suggested tweets based off topics, and this is a thing that I talk to with a lot of consumer founders about is they're like, why isn't there an a tick like a TikTok algorithmic Twitter? And I, I think it's not as easy because video content is just inherently more engaging, even if it's the wrong content. And so but Twitter has kind of identified that viral tweets are pretty engaging to almost a universal audience. So I don't know if you see those like humor ones, but they, those resonate and I see them and I think if they start presenting those upfront to users before they've been activated, it can get them to start understanding who to follow and sort of how the product works.

But is there a tension between people who have tuned their feeds really well? Like I find as someone who's probably invested too much time on Twitter that I get frustrated by the suggested tweets coming in because I've spent so much time tuning my feed. So it feels like there's a diminishing return or attention perhaps between showing me enough suggested tweets from a new user such that I get hooked up, but also backing off pretty aggressively when I'm an existing user. Users actually invest the time in my following graph so that I'm not overwhelmed by Twitter's not all that great recommendations. I'm curious like how you think about that tension.

Yeah, I think it's. We might feel frustrated about product decisions that are made in like these news feeds, but most likely the data showed that it increased your engagement. And sometimes it's like a lot of product decisions aren't necessarily like people like to talk about user centric design when as a social app developer, I actually think that's the wrong approach. It should be system centric design, which is every product decision should benefit the network and the system. So maybe they're showing you tweets that of first time users who wanted to get, who need more exposure to be retained. Because right now it's like, you know, you're, you're shouting down a hallway that no one's in if you're, if you have a new account and with, with few followers.

Yeah. And I think they're not optimizing for, for the three of us or they shouldn't be. Right. They have 200 million people on the platform that are active. Facebook has 2 billion. They have the 44% of accounts that are dormant but have been created. Right. Like they need to be solving for. There's kind of three things that they need to be solving for in general to like get this business better than where they are today. One is the user onboarding problem. Right. And we've talked about that interest graph, you know, ability to surface, like hey, don't just follow whatever Ashton Kutcher, let's actually follow venture capital. Right. That's number one. Two is the actual engagement level information. Right. And so that is to Nikita's point, kind of showing those viral tweets that we all enjoy and, and that's like making us actually come back more and more. And hey, I, you know, my tweets actually reaching people in a way that it wouldn't otherwise. And so the system level design, then the third one is more the business one that they've also really sucked at, which is generating revenue on a, on a per user basis. Right. And this was what I found interesting is that they, you know, Facebook has, has the entirety of the world, right. And the entirety of the US on the platform and they generate about $70 ARPU. Right. And so the average income, we've talked about this in the past, but the average income of the Facebook user is not very high because it's everyone, right. The average income of the Twitter user actually this is like a, you know, a sophisticated high earning group in mass. Right. And if you actually look at it, it's $70 ARPU for, for Facebook meta and it's 1750 for Twitter. And so it's just totally upside down. And the reason for that is that Twitter, the only type of advertising that works on the platform is brand based advertising, right. It's like there's no attribution at the bottom of the funnel. There's no like on Instagram. When you get something personalized and surface to you that enables SMBs to close loop target from an e commerce standpoint, like you can't do that. And so I feel like all three of these are the problems, the onboarding, the engagement and the revenue. Like all of these are kind of tech problems that they're now starting to sort through and they all feed on each other. But ultimately you need like the onboarding and the engagement before you can do anything else. Right. And it feels like they're fixing it slowly but surely.

One interesting point that you said though is about how many, like, a lot. A lot of Twitter users are kind of wealthy, coastal elite. And generally when you look at like a social network, when that's your concentration, it usually means that the platform's at the early stages of its growth. Growth. And so like with, you know, Facebook started at Harvard, Instagram started with, started in the coast, now it's spreading to developing countries and stuff like that. But I, I think that is a, that to me is what made me excited about actually opening a position in the company was it felt like it was in the early stages. But despite that, like, despite having these wealthy users, they, it's kind of ridiculous that they haven't monetized them. And I think part of it is like Facebook was this black swan type product where these ads really fit well between friends and family posts. Like seeing a small business next to your, you know, engagement announcement, that wasn't that intrusive. But right now I see like on Twitter, I sometimes see like a developer API ad between shit posting conversation. It just doesn't make any sense. And so I don't think the ads resonate in the places that they are. I think it's. There's potential for them to figure it out because there's, there's certainly other people. Like, there's people extracting a shit ton of value off Twitter and you could see it like throughout the platform. Like anytime there's one of those viral tweets, the first comment is like, buy this crazy light tool or this, like, it's just some wish.com safe for work version.

Yes, that's typically what they're selling underneath.

Yeah, some wish.com garbage. And I've actually learned that there's a whole like network underneath these viral tweets where people are DMing people. Like, anytime you have a viral tweet, you get like a ton of DMs from these affiliate marketers who are trying to sell these wish.com like trinkets. And so it's clear that there's a way to monetize this engagement and other people are taking advantage of it. Certainly you guys have made probably you can directly connect an increase in your net worth to using Twitter. It has, for me, I've gotten tons of business opportunities through dms, through everything. So I think it's, it still feels really early in Twitter's story, even even though it has been around for a decade. But maybe we can consider the last five years just wasted years.

Well, I actually would consider the last five years like the foundational years. And the wasted years were like 2008 to 2016, right? That was like the, the Game of Thrones, warring factions, and now the last fight. Like it almost feels like they just got to the starting line in that they no longer have a monolithic application and they can start carving off some of these features. And it's interesting, like what we're kind of talking about. There's two things that I think are pretty interesting, Nikita, to your point. One is that when we compare this to like Instagram or we Compare this to TikTok, the, the while, while video inherently is more engaging or pictures are more engaging, the machine learning problem associated with NLP on the tech side versus ocr, like the image recognition and all of that on, on like TikTok side and all the different attributes that need to be taken into consideration in a video over the course of like 50 seconds and all the things that maybe inform that video. That's such a much more complicated machine learning problem than like NLP extraction and figuring out like the text in an individual tweet. And so they should be able to get the algorithm tuned. If TikTok can do it, Twitter should be able to do it. The second point that I think is interesting is there clearly is a monetization opportunity that exists at the high end of users, right? And I don't know what the types of things I would be willing to pay for. Obviously TweakDeck, they own and like that's been made free. But there's definitely things that the power users are willing to pay for, right? Or have the capacity to pay for. That is not 5 or whatever the 1750 that they're making today. It's, it's a hundred dollars, it's $200, it's $300 for some of these subscription products that the high end of creators would want to, whatever, make sure 90 of your followers see your tweets or make sure you get like deep level analysis around, you know, the different cohorting of users and all that. Like I know you guys have done stuff where you like have to pull the data of your followers out of Twitter and then like run models to actually figure out like who's following you and their number of followers and all of that stuff, right? If you had that native to it, like we would be willing to pay for it. Anheuser Busch, you know, General Electric, all these different businesses would be willing to pay for it. And so I think these are all solvable problems. And it feels like again, I don't want to give investment advice but it feels like they've laid the foundation for what they can go do and now it's just a question of executing and reactivating a lot of people and then just doing the work that is work. Like the stuff that Facebook's done on the engagement, better targeting, ads, all that stuff like that's just work. It's not rocket science to figure this stuff out. They should be able to do it.

The only thing that makes me kind of skeptical whether they can execute is they have kind of chased these rabbit hole opportunities. And I, I think, you know, NFT profile Pictures was an example where that probably was a big lift and they still, and it probably only impacted a tiny segment of users.

And Elon by the way was super critical of like stop fucking wasting your time on this shit. To his credit.

Yeah. And they, I mean the spaces investment, I mean I, I, it's an interesting product but I think there's just so much low hanging fruit that if you look at a comparable company like Facebook, they, they had just so many teams span up to do all these sort of tests like events, groups and just building the very obvious things. And Twitter's just that type, has that type of product culture where they build what's trendy. Like they'll, they'll look at what's happening like in some cluster in Silicon Valley and then just try to repurpose that on Twitter. And I mean sometimes it works but most often it really just has been like a distraction.

But it feels like even when they try to build what's trendy, it's not working all that well. I was talking to somebody who works at Twitter about the downfall of fleets recently and I heard from this person was that, you know, Jack couldn't care less about fleets, right? And actually it was a product that actually had some interesting, not phenomenal usage. It was an interesting early usage to it but was killed because the CEO couldn't care less about it. Like this is the challenge. If you're going to be a shameless copycat a la Facebook, then you ought to have executive leadership bought into the strategy and pushing those features. If you can't get the CEO of the company, I think Jack did like what, zero or one fleets in the entire time that the feature existed. You can't get the CEO of the company to engage with a feature, copycat or not. By the way, it's probably Like a real challenge to actually get shit out the door that matters. And then you end up shipping things like hexagonal NFT profile pictures where, yeah, maybe the CEO doesn't give a shit, but also it doesn't move the needle, so who cares if he doesn't care?

But at least they can do this. Like, at least they can ship fleets and shut it down. At least they can ship spaces like, you know, we're talking about. This is a very high class problem compared to Twitter's problems of like five years ago. It's like they're experimenting with shit and not all of it's working, but at least they're able to do it right. Which is like, God, we, we literally did not see product changes between 2009 and 2006, 17, whatever it is, minus we went from 140 to 280 characters and they bought tweetdeck or whatever. Like, that was it. Right. And so at least they're like experimenting and trying shit, which makes me optimistic about their ability to get to where they're going because they now have a culture, I think, of innovating and trying new shit.

Yeah, step one is getting stuff out the door. Step two is then making the right judgment call on the stuff you've gotten out the door. They're not there yet, but hey, at least they got to step one, which is actually getting shit out there.

What's crazy to me, by the way, now it's, it's roughly flat. But just to put this in context, their stock price today is the exact same as when it started trading when they went public in 2013. Right. And we're talking at, we're talking like one of the biggest Internet boom markets. The revenue's gone up by 8x over that period of time, and their stock price has stayed flat. They've gone from 40 times revenue to 5 times revenue, which should maybe serve as a little bit of a warning to some of these, like, you know, businesses that are raised at big prices, right. To some extent. Like they're kind of a victim of how much hype they had originally because the business, while a clown car that fell into a gold mine has grown. It's 8x bigger than it was. Right. And so while they've missed a lot of opportunities along the way, all but one year revenue and user growth kept going up. Right. And so all these things are like, about the missed opportunity and about the expectations we all had from it. More than just like pure dumpster fire execution, which I think, you know, is, is a lesson that operators can kind of take today about valuations and expectations and all that stuff. Hey, just want to jump in here and first, thank everyone for listening and second, if you're, if you're enjoying the podcast, I'd ask that you'd like subscribe, rate, review, all that stuff helps with, helps with the rankings and helps us get more listeners. And so yeah, your support's really appreciated and and now back to the episode. So another topic we wanted to hit was Fast and what's happened over the course of the last 10 days. We talked about it a little bit last week when we had Ryan Breslow on. There were, gosh, five information articles I think over the last seven days about the company. The definitive one was written by Kate Clark earlier this week entitled Live Fast, Die Young behind the Fall of a One Click Wonder, which we'll link to in the show notes. Fast for People that Don't know was a one click checkout startup competing with Bolt. They raised $120 million from people like Stripe Edition Index Ventures. They announced that they were last week they, they were trying to raise money willing to do layoffs. Then they said that they had hired a Morgan Stanley to try to run a sale process. This week they officially announced that they were shutting down and that there was going to be significant layoffs of basically the entirety of the company. I think some engineers are going to have jobs at a firm that they're going to be able to go over to. The information reported that the last year the company only brought in $600,000 in revenue. And I guess I've, I've kind of struggled with why this story has garnered so much attention in general. It's been something that you can't really get away from on Twitter and people keep reporting on it. I think the, the debate is hey, is this a feature of Silicon Valley? Hey, an ambitious founder that, you know, selling a vision and, and projecting the way that the world could be in the future. Is it, is it that and failure is a feature of everything we do in Silicon Valley, right? Knowing most startups are going to fail? Or is this highlighting the opulence and excess of Silicon Valley because they were burning $10 billion a month because they were, you know, sponsoring race cars in NASCAR that were driving around that they were, you know, doing retreats in Hawaii and reportedly hiring the chain smokers for, for $1 million to perform private concerts. And so I don't know your guys thoughts on like is this story being over covered and why are we actually talking about this like One startup? Or is this a red herring kind of canary in the coal mine for everything else that exists in Silicon Valley? Zach, what's your opinion?

I mean, listen, first of all, we should celebrate failure in the Valley. I think it goes without saying, like, definitionally, most startups will fail. Logan, you're right. And so we can't have an ecosystem where folks are ostracized for failure. I could not agree with that more. That said, if you build your business in a public facing way and you build in public, and you rely on Twitter and rely on the relatively small world of tech, people who care about Twitter and live predominantly in the Bay Area for distribution, for brand, for awareness, if you live by the sword, you die by the sword. You can't then be shocked if you become the talk of Twitter if things don't go well. And by the way, that's not to say I think everybody involved in FAST will likely have, well, almost everybody involved in FAST will likely have long and fruitful careers, and I hope they do. But it is to say that if you build your brand as, as a Twitter macro influencer, you can't be shocked if you become a topic of conversation afterwards. Even if we think failure is noble and we want to encourage it to whatever extent that's appropriate.

Yeah, I mean it reminded me a lot of. I don't know if you guys remember, but like in 2013 there was a app called Color that raised 50 million from Sequoia and Bain. They ended up just kind of flopping and shutting down and all the engineers just were aqua hired into Apple. It was just a social app that just went nowhere. And I think there's, there's probably many ways to like run a company. One is to have that kind of we're changing the world approach before you have. And sometimes it helps with recruiting, sometimes it, it just is a net negative. Per me personally, I just like operating kind of in the shadows until finding product market fit and then, you know, and then being public about what I'm working on. But, you know, you know, having said that, his personality seems to have rubbed people the wrong way. And because of that I like there were just countless tweets from big tech PMs and you know, classic thread posters lambasting the CEO Dom for all kinds of things. But for the most part these are types of people who had never built something in their lives and they were, you know, railing on him for raising too much money. You're supposed to raise money, especially a good valuation. That's the job of a CEO is to get a great valuation to minimize dilution. He got criticized for hiring contractors in Nigeria. That's part of zero to one product development. Before you have funding, you hire contractors to get some prototype out because it's, it's cheaper. Certainly maybe you want to let them know when you're terminating them. And I think that was where some criticism emerged. But at the end of the day, contractors are temporary workers, so that's just what they sign up for. And then, you know, was he spending too much? Who knows? Like, there certainly are, you know, some decisions that might look dumb in retrospect, but, but everything looks dumb in retrospect when a product fails. So, I mean, you could go through some of them. Like, you know, he paid the chain smokers to, like, a million bucks to perform. But this was also during the highest moment of employee churn in Silicon Valley. It was during. We literally called it the Great Resignation. Maybe that was a way to retain employees. And losing a senior engineer often does cost more than a million dollars, so maybe it made them a tighter team. I don't, I don't think we really know around the intent of a lot of the decisions that he made.

It. It does feel like every. Every so often, we do need to, like there's a sacrificial lamb that exists in Silicon Valley once every year, two years that ends up serving as the, the lionized version of corporate excess and mishandling of, of the startup culture and all of that. And like, I think the way, I guess, what if I were being is as, as onerous as I could be to Dom, the founder, who, by the way, I find his tweets, I find it very shocking that now I'm on the side of defending him in some ways because I find I found his tweets so annoying to the point that, like, I muted him on Twitter. Right. But that said, so what are the main criticisms that, that he did? Right, From a, from a corporate governance standpoint, should he have been burning $10 million a month and flying this close to the, to the sun where it needed to be like, running headfirst into a wall? No. Right. Like, it should have been moderated at some point. Maybe there were layoffs and building Runway. But in his defense, the market did change from December to April. Right. And it's very different looking than it was, you know, when he started raising. Right. And so, yes, that was a mistake. And to your point, like, there's stories about what happened in Australia with his last company and leaving people unpaid and whatever. So clearly Some people are going to have opinions about that. Taking credit from the work of the Nigerian contractors. Clearly people have opinions about that. And it was a level of spending and showiness that I think put people off in general. Right. And so I, I think those are the main criticisms. But we should, we should keep in perspective here that, like, you know, one, there's nothing illegal that we know of today at all, right? There's nothing like fraudulent going on here. He didn't do anything that was like, explicitly nefarious or malicious. Right. It's like it all sort of boils back to this, this character of a personality who sold a vision beyond where he was and then an ecosystem that enabled that. Right. And so we talk about this with, you know, we talked about it a few weeks ago with, with female founders and how they get covered in the media. But in general, there's only two stories, right? It's the rise and it's the fall. And we all, like, we want the nuance to exist and we want to hear about the journey, but not really, right? We want to hear about people fucking crushing it or we want to hear about people driving off a mountain. And like, so if to Zach, your point about if you live by the sword of PR and brand building and all this stuff on the way up, you got to know the flip side of this is ultimately people are going to dance on the grave on the way back down. And so that, like, that's kind of the inevitability. And to some extent I think that they, you know, knowingly or not, uh, if, if you're going to lean into it, you gotta be ready for the flip side of it if, when it doesn't work out well, by the way,

there's also, let's be honest, live by the sword, by the die by the sword is all well and good. There's a big difference between VCs gleefully mocking fast on Twitter, which by the way, leaves, I think, a bad taste, everybody's mouth, right. A lot of people are losing their jobs today. And a lot of good people, like, people who we know are going to be out of work and certainly, and hopefully they'll, they'll be placed in the right companies. But it's a horrible experience for many people. Big difference between that, which is basically pretty abhorrent, and people, Logan, who are making pretty reasonable critiques about his past business practices in Australia in particular. Right. Like, I agree, at some point people, you know, they go from being heroes to villains and suddenly everything they do from, you know, mistreating contractors, eating crackers becomes evidence of their innate evil nature. But some of the storyline stuff he was doing in Australia, at least from what I have seen, and I wouldn't call myself an expert, feels pretty bad, right? Mistreating small business partners, not paying people for services rendered. I mean, and to the extent that people are limiting their critiques to what we know and has been reported and documented, that feels fine and acceptable and actually a healthy thing to do. People making the. You know, I saw 500 variations of that was fast go around afterwards. Like, that feels. And this is no offense anyone tweeted that, but that feels in poor taste.

Well, and there's also a distinction to be drawn between a character that happened to be the founder and CEO that you find annoying and maybe has shady dealings in the past or whatever criticisms you want to levy that. And 500 employees that are going to be out of their job, right? And, like, let's be clear. If you're making a joke about fast, like, that's not dom. That is 500 people that are now unemployed, right? And, like, that's just not fucking cool. And if you're a VC doing it, it's pretty fucking gross, right? It's like, our job is predicated on. On people taking risks and joining companies. And, like, what are you. What are you doing? Like, criticize Dom. Say whatever. He spent too much and he was too showy and too opulent. And that one, by the way, Chainsmoker is getting paid a million dollars to do private gigs. Like, I had no idea they were. They were getting that type of fee. But, like, doing all this stuff, but not. Not separating that from the 500 employees that lost their job. That's kind of where it's like, guys, what are. What are we talking about here?

But even. Even attacking Dom, I really struggle with. Because the. When on Twitter, people, like, latch onto these narratives and become so passionate when there's so much nuance and. And things that aren't being reported. Like, sure, he didn't pay these vendors that he had with his last company, but when a company goes into bankruptcy, vendors are paid, like, paid last. Like. Or you first pay your employees, then you pay the vendor, like, and so. And then they said he tried to sell driver's license data. Maybe, you know, we don't know. Maybe the bankruptcy court said, liquidate all assets, including your data, in the legal way possible. And if that was what his fiduciary duty was, to pay off the vendors, we don't know the actual nuances of each of Those decisions. And I think that that's what I struggle with. And like, people were so passionate about him not giving credit to these Nigerian contractors. In what instance has anyone ever given credit when, when they're building a company to, like, individual employees along the way? It, it rarely happens. Why would it happen for a prototype that was necessary for fun? Like, would he bring it up in the pitch?

You guys don't give credit to your tweet ghostwriters? Like, I don't know, like, what, you know, it's, it's.

Logan, Rashad and Andrew are on the call. I mean, come on, we can at least call them out by name here.

No, I agree. Nikita. I, I'm with you, though. I mean, I. All of these things are, it's a narrative of, like, people are clinging to a bunch of these different. Like that, that NPR article that we're talking about where the unpaid creditors. Like, the article opens with the fact that he bought the domain of an airline and like, basically held. Held it and, and charged them money to purchase it from him. And like, one. We've talked about this. I have a friend that has basically extorted me for my domain. Right. I'm sure you guys have domains that you think are going to be financially beneficial at some point in the future. And so, like, that's the lead of the story is he, he saw an opportunity to buy this domain. And so I, again, there's not nuance given to this in general. And obviously 140 or 280 characters don't lead to the gradient of opinions that people might have about this. But I, I don't know, it just, it feels, it, it feels like it doesn't meet a threshold of materiality to me. I realize he brought a lot of this attention on himself, but it doesn't meet a material out. A materiality threshold of like, fraud of, of scale. Right? Like, we're talking about a business that was valued at $500 million or whatever. We're not talking about like, Theranos at the scale it was. I don't. It just, it's weird that it's gotten this level of attention. Right? We're talking about five information articles in seven days and Business Insider and npr and, and Right.

Things don't have to rise the level of criminal fraud for it to be newsworthy or interesting. Right? Run of the mill. I don'. Mean this in a harsh way, but run of the mill mismanagement is in and of itself an interesting story. The fact that someone burned $100 million plus to get to under a million dollars in revenue is an interesting story in and of itself. Now listen, I have complaints about, you know, press triviality as much as the next person, but that doesn't seem to be what's happening here. What seems what's happening here is somebody who courted the press, raised an inordinate amount of money, didn't get very far with it, which happens. That's okay. Being appropriately covered by the press he so eagerly craved when he was running the business.

Is it appropriately, though? Like, like the. I'm talking about the story being covered, I'm totally fine with. But how many stories have been written in the last six days or seven days on this? It just feels very disproportionate to the business itself. Right? And everyone wants to extrapolate this. I tweeted something about, like, it's the perfect story because every opinion you already had like, this encapsulates it, right? It's like, you don't actually have to change your opinion. If you believe Silicon Valley is excessive and, you know, no corporate governance and all that, this is the perfect example. If you believe there's ambitious entrepreneurs taking risks, this story is the perfect example. And so again, it's not that it shouldn't be reported. I don't. I think this is material to be reported. It's just getting covered like it's Russia versus the Ukraine. And like, you know, this is the end all, be all that exists in our little nook of the world. Right? But like, gosh, I can't. I can't look at my phone without seeing a new article or a new tweet about this story.

Well, first of all, listen, I'm with you that the broader points people try to extrapolate about the Valley range from ridiculous to completely nonsensical. And that's being charitable. But how many companies do you know, raise this much to accomplish this little. Right? Like, think about how many articles came out of the better.com layoffs. Like, I just don't understand why this is disproportionate. But three or four articles and better.com layoffs are not. And by the way, how many other stories are like this that even exists in the world?

I actually think we're going to see more of these stories. I think within. Within a margin of error. There's quite a few fintech companies that have totally not met their expectations and raised at extraordinary valuations. And I think that's actually the more interesting story is how did over the last two years have all of these fintech companies raised at these multiples or like or with zero revenue, I think. But all those companies probably didn't have this very vocal CEO. And so that's why we're latching onto this one example. And it feels exceptional. But at least in private conversations, like with a lot of other fintech companies, they are not. They are all underperforming. Many are underperforming that have raised during COVID

Thank you everyone for joining the 11th episode of three cartoon avatars.

I can't believe people are still tuning in. People know we didn't have a famous CEO on this week, right?

You mean another one besides, besides icky to beer.

I'm sorry, I'm sorry. I should have. I misspoke. We didn't have two famous CEOs on. That's right.

Legendary is like is the word I like to use.

We'll know that for next week.