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Anyway, congratulations. Let's focus on us. We are the best technology podcast. I'm not going to go back to that.
I'm even more at someone in a line, a buffet line, in another country pointed at me and said, Podcast is Addy. They listened to her and I was thinking about it. I wish I had a better answer. I actually think, well, I'm curious what you think, but I do think that podcasting increases my relative level of attractiveness more than yours.
Wait, wait, no. No, I think I'm more attracted to the podcast. Can I finish? I said relatively speaking, only because in its very base, I think men get turned on with their eyes and women get turned on with their ears.
Now, I don't know how this plays out in the gay community and I don't even go there because I'll say something stupid. They say stupid, yeah. But you don't need to say that before I say it. I'm just saying.
You don't need to say it in unison with me. It's kind of silent. I've always said, I've always said a young man, if you can make a woman laugh, eventually she's going to want to kiss you. Anyways, I think podcasting makes me the zaddy.
Daddy. It's just going to make you rich. It's just going to make you a pioneering vanguard. I was at a party last night for Jen Psaki.
She's launching her show and the photographer was like, pictures. It's a great woman named Shannon. We appreciate all our people. We appreciate all the fans.
And we try to do better and better. And we're going to win it every year. That's our plan to do that. We're winning all the awards.
That is our plan. Well, you know what they say about pioneers? Not on your face or else on your back. But enjoy it.
Enjoy what you can't. No, no, there's some arrows in my back. Anyway, I'm so glad to have beaten all the other people. I'm kind of the Angela Bassett School of Winning.
Remember when she lost the supporting actors at the Oscars, she had a face Angela. She deserved an Oscar, by the way. She deserves one. And so you know how most when you lose the Oscar or you lose an award, you have that face like, yay, for the winner.
She was not having it. She was, I love Jamie the girls. She was like, she was like, yeah, fuck that. Like, you had a fuck that look.
So I'm so happy to beat all the others. That's how I feel about these things, including some other tech podcasts that we don't like. So today, we have so much to talk about. We have a Silicon Valley Bank rescue.
OpenAI releases the new version of chat GPT, chat GPT4. That writes better dad jokes than Scott Galloway ever could. But first, the latest in the government's fight with TikTok is sort of heating up, even though it was heated up before. The Biden administration is telling social apps, Chinese owners to sell their stakes or face a ban in the US.
They're sort of doubling down. The company responded saying a sale wouldn't address security risks any more than what they've done, actually. The promise is to spend over a billion dollars to safeguard programs for US data. However, Bloomberg reports that TikTok is considering separating from bite dance as a last resort, if the existing security plan is not approved.
I think this is going to be a spin off. There was some investment last week, a value made it slightly less than it was. But tough situation here. What do you think is going to happen, Scott?
Well, we've been saying this. And so far, it's playing out as we had initially speculated. And that is the only thing after member negotiation is one to make it win, lose or get emotional and two show a willingness to walk away. And the willingness to walk away with respect to the government's position is we are serious.
We're going to ban you. And I think it's finally looking like the CCP in bite dance are like, man, this shit's getting real. They probably are going to ban us. And there's bipartisan support for the first time around an issue.
And on the eve of the banning, they're going to figure it out because there's somewhere between 200 billion and a trillion reasons to figure it out. If TikTok has banned it, it has to come off of the Google and Apple app stores. I mean, that takes that valuation. That is a existential decline in value.
And I think the CCP and bite dance and everyone involved would just love to just keep on trucking the way things are. But when it becomes clear, that's not going to happen. I think they're going to either figure out things that security protocols satisfy the administration or they're going to spend it. I think they will.
This is the government's coming to play. They have to. I think it's over because I think they thought the US would back down. They're between 100% and there's very little pushback actually.
There's a little bit, but it's not a good being for China right now in Washington. It's not a thing. And it's very, when I say bipartisan, everyone, no one's going to blink here on this thing. And that's what the Chinese had counted upon.
The other thing is the inability to put US products in China, similar products, not being able to be there. They don't have a whole lot of legs to stand on in that regard. And the argument that it's going to be just to say, that might be true with the stuff they're putting in. It might be just to say, but it doesn't matter.
They're not going to get away with it without being a US company. And then at the last minute, I don't know if China will do it. It looks like, given all our other aggression between the two countries, I don't know if they want to look like they gave up something. That would be the only.
If they were to let this happen and have it be banned now, I mean, the chill around the internet economy in China. And Xi Jinping still has to bring millions of not tens of millions of people out of poverty. Otherwise, there's probably revolution. And to take your national champions and literally kneecap them, I mean, not even kneecap them, take them behind the shed and shoot them.
What's this going to do when it's like, okay, you're telling me I can build an unbelievable company and you refuse to, you know, for what seems- Why would you do anything? Right. Yeah. Yeah.
Why would you start a company there? What? So I think that they're going to, I think they're going to figure it out. And that figuring it out, well, as you've said, will either be a spin or some sort of additional certainty or regulatory scrutiny.
I don't think additional certainty will work now. I think it could have. And also, they've taken the right off the ball of the business. It's all about this and not about anything else.
And so, Reels is doing better. You know, I think a lot of people, I was talking to, I was at this NBC dinner and like, they were talking about it and nobody wanted to put their stuff on TikTok. Suddenly, right? Even though it's super popular, like, oh, really just in the last 90 days.
Think about how much it's pivoted, how much the brand and the kind of issues surrounding it have pivoted. That Chinese, the balloon did not help. You know, it's kind of the perfect storm of bad things for them, but- I say they're not going to be on, but they will spin. And then all the rich US people will get rich.
Chinese will get rich. And this is covering up the shame part, like, that they got made to do this. That's the part I'm still not figuring out. But they'll keep arguing it until the last minute and then they'll do it.
Also, the year of sufficiency continues. That is cutting another 10,000 jobs will end up spending billions in restructuring costs. Not as far as that's what it costs when you cut lots of jobs. Mark Zuckerberg told employees to expect cancellations of lower priority projects and overall flattening of the organization.
He loves the word flattening. Medistock, again, is up 6% following the new Scott. What a great suck choice you made. Zuckerberg also noted the company should prepare for this economic reality to continue for many years.
It may or may not. The economy may get better, but he's decided he wants to flatten things. You've said layoffs are the beginning. What about the many years apart?
I just think he wants to get back to basics. The value in growth companies have just discovered ossempic and it's firing people. They're literally, wait, you're telling me I can take this pill called layoffs. I can work with HR.
I can say, OK, identify. Have our top managers identify the bottom performing 15% of their staff. Get those lists and then fire 15% of them. I mean, think about it.
If you have, call it 30% operating margins, which is unbelievable, you can either cut a dollar in expense or grow your top line by $2.5. And over the last 24 months, which has become increasingly clear, is it's easier to cut $8 in expense than it is to create an incremental $2.5 in revenue. So this is the strategy that keeps on giving. And on the announcement of this cut, their stock goes up, what?
$25 billion. And again, we've said this, the most impactful business strategy of 2023, in terms of actual on the ground, what's happening is an AI is in supply chain. It's that every CEO of every tech company is like, we've been stuffing calories down the throat of this thing. There's fat everywhere.
Let's fire 10, 20, 30% of our staff. I mean, Salesforce announces layoffs. Boom, record earning stock way up. It's the math here is so clear and present that everybody, Vox, we laid off 7% of our staff and the value of the company probably went up.
This is a natural healthy part of the cycle. It's not to say it doesn't impact a rock people's worlds. But when it started, whenever it started six months ago, we said it's just starting. It's literally just starting.
They do have even more so more than companies like Vox, but a lot of these tech companies have people you don't know what they do. Honestly, they just hired hire and then they do sort of projects. Google's the most famous for this, obviously, you know, and they made fun of it on the show, Silicon Valley, up on the roof, resting investing essentially. Why are you guys still coming in?
Rest and vest. Oh, because in order to fully vest your options, you've got to wait until your contracts are out. I get a... You catch on slow.
You'll fit right in here. But there's a lot of projects that you're like, what? Like, huh? Like, why?
All the time. And so I think, you know, I don't... Efficiency is really hard. And if you're someone like Mark Zuckerberg and you look around and now you start off at the small place and now you have this ridiculously large insane headquarters that people aren't going to probably.
They have kind of a cool headquarters down south. You're probably going, what do I need this for? And you want to simplify, simplify, simplify. I don't know.
It's also a psychic thing, I think, for these people. They realize they've gotten like fat and not happy. Actually, fat and unhappy. Well, it's incentives.
Companies don't operate for profits. They certainly don't operate for societal good. They operate to get the stock price and the compensation of senior managers up. That is the tale of the wags of dog across corporate America.
And if it's reporting metrics that show growth and lower profitability, then we will manage to that. If it's showing pivoting from growth to profitability, like Netflix will do that. Because at the end of the day, the people get to make the decisions are focused on their own self-interest, which is a key component of capitalism. And their self-interest are linked to the stock price.
And so the strategy to jure right now, and for a while, it's going to be okay. The market believes any announcement around layoffs is going to flow straight to the bottom line and the consumer and the end customer isn't going to miss these people at all. A company I started was acquired by a big company. And what became clear to me about two days into the earnout is you know what they wanted me to do?
Fucking nothing. Specifically, they didn't want me to compete. All of a sudden, I was out of every strategy meeting, not really doing anything. And I'm like, I'm not pulling my weight here.
And it's like, it became clear, we're going to pay you a shit ton of money just to not go out and compete with us. And take that times a million. That's what's happened in Silicon Valley. And by the way, it's super expensive and wasteful.
And I think right now they're saying, okay, we were going to let you rest and vest. We're not really doing anything. We'll take the risk that you might start to competitor your out. Here's two, three months severance.
The psychology has shifted. And that's the correct way to go. Now, listen, the stock is way up. Let's just say, but it's high was $376 in change in September 2021, a little less than two years ago.
Now it's 196. So it's not back where, you know, that's what it's, I think it's maximum high was then. Yeah. You have a care.
It's almost doubled. It's almost doubled since they started firing people. It has. No, that's what I'm saying.
That's what I'm saying. Fire people stock doubles. I get that. But I'm saying it's not where it was.
And it's sort of it actually is where it is oddly enough. It's a little less than 2018. It's kind of getting back to 2018 numbers. Because it really went down to $90 to share crazy in November.
November, four months ago was it $90 now it's $197. Crazy. What has happened since November and now? Is it the metaverse has taken off?
No. The only thing that's happened between November and now is 20,000 people have been fired. And the stock's doubled. Yeah.
Is there another stock you pick? Because Tesla's up seems to be sort of staying in the same arena, things like that. I've said one of my predictions of my 2023 deck is that Amazon, the big guys, Amazon, Alphabet, Meta, Apple, see their revenues, their revenue goes slow down and have their most profitable quarters in history towards the back end of this year. Because they're all going to do something they haven't done in 15 years.
They're going to cut costs. Yeah. Well, we'll see Amazon still bumping along the bottom. But go ahead.
But they're going to they're just going to find entire departments, entire business lines, entire regional offices that when they close them and they let those people go. No one notices. I think every company and I hate to acknowledge it, but I think every company in the world is every tech company at least is like, wait, check this. Wait, you're kidding me.
Musk laid off 80% of the workforce in about four months and granted he did it. He did it poorly, but the company's still there. The product's still there. I would put that off to the side because in this case, Facebook is still operating well.
Yeah, they're still growing. We don't know what the cost of what he's done at Twitter is until we know what the cost of what he's done at Twitter is, but they're still making great products. They're not screwing up. It's not breaking down.
We'll see. I don't know about it for years, but I think he's just putting that in their heads to get them acclimated to the new reality. Anyway, let's get on to our first big story. Scott, the government took your advice and also Bill Coens.
All the depositors with Silicon Valley Bank are safe. Now the question, who's to blame? There are accusations that panicked. All caps tweets from VCs helped cause the bank rums.
Those are my accusations and others too, by the way. And critics are zeroing in on a 2018 law that weakened oversight of Miss Side Banks. Although that might be a little overstated too. In that story, Dodd-Frank passed in response to the global financial crisis.
The act for spending banks was more than $50 billion in assets to pass annual stress tests. In 2018, Congress up that number to $250 billion had bipartisan approval. And then that's what some people are blaming. Meanwhile, Wall Street Journal columnist wrote that the bank was distracted by diversity demands, which was an inane, woke bank thing.
Wall Fox News pushed a bogus claim. And the bank donated tens of millions of dollars to Black Lives Matters. It didn't. But that's not really the point.
And let me just say, I have to say, as Andy Gasler wrote this insane idea, like some of his stuff, but boy was this stupid. He popped it in at the bottom of just a sort of basic article about what happened. You have diversity efforts. One, because it's the right thing to do for society.
When you wake up and everyone on your board and every senior manager is one demographic, that's just not good for society. All right? But in addition, the shareholder driven reason to do it, not the societal reason, which is enough on its own, is that the key to risk management, the key to innovation, is diversification of thought. And when you have people from the same background, all saying, no, interest rates would never go up this fast.
No, we should take these kind of risks. You all end up barking up the same tree and you all end up stupid. So diversity not only matters from a demographic standpoint, the reason why companies benefit from people with different backgrounds is they're likely going to have a different set of experiences and a different viewpoint that will result in better decisions. So diversity is not only the right thing to do.
It's the smart thing to do. You don't want, as a CEO, it is your job to make sure not everyone is telling the same fucking thing every day. But you know what? They just like that.
Let me just, they just like it. But nonetheless, that article was fucking nonsense. He's definitely. He's definitely.
That was whatever. It was a big talking point that all over the place is ridiculous. It's just fucking ridiculous. But also, quite frankly, on the far left, they were publishing pictures of the chief risk officer and demonizing these people.
And they shouldn't have done that either. Agreed. Although I think the right did distinguish itself for nonsense on this one more than others. So after our emergency pod, what do you think?
What do you think of the situation? I'm fascinated by this and I have a lot to say about it. All right, go for it. Well, the first is, people's narratives often shaped by their own personal incentives.
I want to be transparent. I'm either the founder of a director or an investor in four companies that had low tens of millions of deposits at Silicon Valley Bank. And none of us got our money out. And the majority of us didn't even try.
And by the way, that might have been the wrong thing to do. It did look for a certain amount of time on Friday, according to The Washington Post, that Janet Yellen and some of the regulators in DC were saying, we're not sure we're comfortable with bailing out depositors, supposedly. But when I heard from the CEOs and the venture capitalists, I mean, this is what just, I am a bit in a mix here. And what I saw going on in my experience was the following, distinctive what you're reading about or what you would think if you just were on Twitter.
Every DC of my companies that I'm involved in, ranging from general catalysts and Andreessen Horowitz, immediately called the CEO and said, you're covered, you're fine. If there's a problem with liquidity, which may or may not happen, we'll do what's required. Don't worry about payroll. There wasn't a sense of hair on fire panic.
I mean, it just wasn't there. In addition, and I tweeted about this, I wasn't worried. And maybe I should have been. But all I did, and I think what you needed to do to realize that all paths led to them backstopping depositors is the following.
In the last 10 years, there have been 73 bank failures. 72 have had their depositors guaranteed in the 73rd with such a small bank that if you lost more than $250,000, it gives you an 800 number to call where I think they figure out a way to get your money back. In sum, I looked at this and I'm like, every bank that depositors get bailed out. Whatever you want to call it, backstop, bailed out, guaranteed.
They don't get it out. Because they own the treasuries. If it bailed out, it would mean they don't get anything in return. But go ahead.
Well, my point is whatever the nomenclature is, the shareholders got wiped out, the unsecured debtors got wiped out, and every bank failure for the last 10 years, the depositors get 100 cents on the dollar. So I was my attitude as key calm and carry on. But what I would also say is to the VCs who pulled their money out, that's their right. You have the right to pull your money out.
You are allocating risk and capital for fiduciaries. So if you believe there's a chance that this company is going to be impaired for whatever reason, it is your right to pull it out. I think there's going to be investigations on how they pulled it out. I think that government's got to look into it.
Was it coordinated in any way? Or are there any kind of anything? And I think they should be investigating this entire thing, even if it may be just a regular bank run, and the money wasn't in a fire sale of treasuries and as simple as that. But they definitely should be looking about the mechanics of how it ran.
Because this was unusual and that people had so much online ability to create both the run itself very quickly and also to create fear-mongering. And so they have to look at this thing in a new fresh. This is the first time I've ever seen so much fear-mongering going on. They created a problem.
And I agree with you. We on Saturday, we were like calm the fuck down because everybody, because the government is working at it. I was talking to some government officials recently, some high ranking ones. And the only question is what is wrong with them?
What do they think we were playing pickleball all weekend? Like, of course they were moving on this. And I think even if Janet Yellen and the others that initially didn't know what to do, I think they were trying to figure out what to do over the weekend and what was the best thing. And they were bringing in all kinds of opinions and quieter Silicon Valley people like Reid Hoffman and others contributed in that way.
They helped them figure it out, not just Silicon Valley people, but all kinds of people. And so calm the fuck down was really, and they didn't even understand what the screaming was about. They understood that they needed to act. But it was kind of ridiculous.
And I think they should look into that. I do think they should. Well, I'm writing about it for this week's Immersion of Malice. There's two kind of, I'm trying to find what's original or there's an insight here.
And I have two major things. One is brand and one is bifurcation. And the reason why this has gotten so much attention and the reason why this has been kind of a societal polemical with a lot of people thinking, all right, I'm uncomfortable with what's happened here, is that if this bank had been called first agricultural of Iowa, it would have been no problem. We're here to shore up.
We're here to show deposits are back by 100 cents on the dollar. But what you have is the brand that has fallen for this fastest in the last six months is the one musk's brand. The brand that has fallen to second furthest is the brand Silicon Valley. And there's a general sense that you have a group of very fortunate and very talented people to take a lot of risk with their own capital and other people's capital and they capture all of the upside or the majority of the upside and the weaponized government to ensure that, if you're a founder or VC of a company, your first 10 million or 10 times your investment is tax free.
That's literally a law, right? That they capture so much and more of the upside relative to other entrepreneurs that capture upside. In addition, and this is what angers people, is that the downside risk, specifically the externalities are born by other people. That when you create a social media platform and you capture hundreds of billions of upside and there's externalities, that it's parents, teenage daughters that pay the price.
That when you gamify with VC money, you gamify investing that young men become addicted. And again, parents and young men pay the price. When you finance a ride-hailing company that is not profitable, but you capture tens of billions of dollars in upside, it's union workers and contractors who no longer get worker benefits because of a 120 million dollar proposition that's passed by the industry that they pay the price, that other people are constantly paying the price for the downside risk here. And then when you have this bank called Silicon Valley Bank and some of this is unfair and lacks nuance.
But the way I think America, the American public sees it as, all right, you guys created your own bank. What do you know? It was super risky to your benefit. You got venture debt, you got low mortgages.
And then when shit gets real, and by the way, many of you have been saying the government should just get out of the way that we know best, that you're the great regulator, you're the great handicap or you hamstring us, just get out of the way and let us run. And then when shit gets real and all the risk you've been taking starts to cost a lot of money, you're starting sounding the alarm that the government who you've been saying should get the fuck out of the way needs to show up right now. And that they're negative, they're probably stupid. To me, it reminds me of election tonight.
It's like, you've been hammering with the government for a long time and you're still doing it when they're actually probably doing just what you want, right? That was the part that was particularly interesting. So the first is brand. The second is bifurcation and that is there are now two tiers of banking being formed.
One, if the depositors had not been bailed out, that that march towards two tiers would be a stampede. Specifically, there's going to be smaller regional banks that service people, 250,000 left FDIC insured, and then there's going to be the big banks that are bulletproof and are just more much bigger balance sheets. There's just going to be a massive leaking of capital to those banks. We have created a two-tier banking system.
It's going to happen more slowly now, but it's definitely going to happen. We've also in Silicon Valley created two tiers of venture capitalists. And that is there are venture capitalists like Reed Hoffman, Herman Teneja, who tried to get a group of VCs together, Kleiner, Lightspeed, General Catalyst to say, we support the bank, we're here, we're not panicking. They were trying to facilitate an acquisition by making the asset more attractive to make the governments, you know, expenditures here lower.
They were trying to be good citizens. Reed Hoffman was working with Nancy Pelosi and Governor Newsom to keep the White House informed. There were people behind the scenes who are venture capitalists who see that we play a larger role in society. And then there's another group of people that I call venture catastrophists.
And what they see is that there's a large element of our society in the media, which subscribes to catastrophism. And catastrophism is a belief that the world is shaped by a series of unpredictable, short and violent global events that reshape the world. And that it's 9-11 and Pearl Harbor and FTX that shape the world. In addition, these venture catastrophists recognize that in an attention economy, you can be famous for being famous and you can monetize your fame.
So the temptation to catastrophize is huge. And they go on Twitter and say, these are exact quotes. You should be terrified. All caps chaos will ensue.
All caps. On Monday, there are lines around banks. Some people get their money out. Most do not.
That does not help. No, it does not. They did. They thought they helped and they took a lap that you know, the real here here is a read-off and not these people.
Let me just we had Bill Cohen on and I thought he characterized it correctly. He talked about the idea that betting on this zero interest rate policy was stupid, Colossally stupid, as he said that this bank did. And so he talked about that. And he goes, and that would have been stupid enough, but probably not fatal unless another thing happened.
And that was something nobody could anticipate or imagine large news people aren't wired to imagine the unimaginable. This is the asshole theory. For whatever reasons rumors started circulating Silicon Valley ecosystem and Silicon Valley bank was in financial trouble and some depositors decided to take their money out immediately. There was a total meltdown in confidence.
We'll see why that happened, right? But I think the assholes theory are correct and you're calling it the catastrophists. Yeah, but I think they're just assholes and they do not care what they break as long as they can get theirs. And that's what they're like.
And they also like to shoot at anybody on the way down. You know, whatever they're doing is always someone else's fault. They're the ultimate victims and everybody's stupid. Everybody's stupid with them.
And you know, I had a back and forth with these people you're quoting from this week. And I'm like, you know, I don't agree with you. And they called me vitriolic. I was like, are you kidding me?
Like you're the like winners of the vitriolic Olympics here, people. But they don't they have to insult and demean and then get theirs. And that and there's a very they're right. There's two different kinds of venture capitalists now.
There's two different kinds of people, those who want to constantly rag on people and act like victims and talk about catastrophe. You're right. And some that are just let's fix this. Let's let's have some solutions going here.
Well, it comes down to like what kind of leader do you want to be? What kind of business person you want to be? What kind of citizen do you want to be? And I think there's a lack of citizenship and more of a survivalist mentality.
And that is I'm going to build a bunker. Yeah, they have bunkers. All these people most of these people, there's a there's a thick vein of the survivalist mentality. And the government are suckers.
I'm going to sell my analytics into the CIA and NSA, where I'm going to get you, I'm going to gamify you to get as many subsidies as possible, where I'm going to give money to a ton of Congress people to lower my taxes. I'm the government is there to kind of be abused and used, but they're idiots and I have no respect for them. And then I'm going to start mixing potions in my backyard that might result in amazing things. I take risk, I innovate, I come up with all sorts of cool stuff.
Occasionally, there's a fire from the shit I'm mixing in the backyard. And I immediately start saying the whole state is going to burn a lot, and I get angry and start posting the government when the Coast Guard doesn't show up on time with the fire department dumping flame retardants that cost the taxpayers when I need government. Government or idiots and I want to be a survivalist until I can either sell shit into them or I need them right now. And it comes down to, I was thinking I was talking to a class, they want to use a case, and I'm like, what kind of leader do you want to be?
And quite frankly, to be blunt, what kind of man do you want to be? Do you want to be the guy in the foxhole that when she gets real assesses the situation calms everyone down? The person with the biggest sack here, who was the biggest man around all of this? His name is Janet Yellen.
She wasn't panicking anybody, she was talking to people. When I was a business school professor Yellen was a professor there, I can't think of more capable hands for the economy to be in the hers. And she's like, who do you want to be? Do you want to calm everybody down, assess the situation, make thoughtful, purposeful decisions and get to the right decision by talking to a lot of people?
Or when the first bullet flies over your head, do you want to start screaming? We're all dead. The world is ending. That doesn't help.
But when they do that, it's part of their game. They're in the background. They're playing another game that you don't even know to advantage themselves. They're really low some people.
They're just low some. I'm going to, speaking of government, this Dodd-Frank Act, I do think a little bit of blaming on this too is early. It's not clear it would have helped. And I think if it was at the same levels, could this have been avoided, maybe, maybe not.
And of course, not just Elizabeth Warren, Josh Hawley tweeted that it's time to bring back Glass Stigall, the law that puts limitations on banks investing depositors funds. I mean, it is not a time to overregulate and it's also not a time to underregulate. Let's listen to this Warren idea about banking. Banking should be boring.
Anybody who wants to take a lot of risk and make a lot of money should not be in banking. I can't agree with her. I don't think that's true. I don't think that's true either.
The basis, one of the pillars of our society is a banking system that loans out money and invests more than it has to grow the economy. It's kind of how you create money and how you create growth. And you put in place certain standards. So there's a meltdown everywhere.
Or recklessness with loans. That's happened. This bank was brought down for two reasons. An unprecedented increase in interest rates and poor risk management at the bank.
And a bank run. Yeah, and a bank run. 100% that some people arguably contributed to unnecessarily for fame in Forre. So they can, who was the guy in there was a cop in 1984, the plan of the bomb under the bus.
So he could take credit for it. He got the feeling on Twitter that these people were actually hoping for a bank run. That they were taking some pride. It was like Sean Freud times a million here.
But the government did exactly what it was supposed to do. It came in. It backed the deposits. It said, sorry investors.
You lost all of your money. It may not even cost them that much money. And we're going to see in the banking system, essentially, and I mean, this has been a giant kind of stress test for the US. The problem is the stress test is going to start to wave across the world.
And I think a lot of banks aren't going to shore up as well. Yeah, credit squeeze. The Saudi National Bank said it wouldn't shore up the finances of credit suites where it's largest shareholders. The Swiss national bank did offer.
So things calmed down again. Internationally, you have to you have to calm and get confidence back. The shares of all the banking sector down. That doesn't really matter with the shares cost at all.
But it still creates havoc. What's really interesting is what's going to happen to this bank. And I just, from what I've been told, they tried to sell it, but they didn't quite get what they wanted. I thought that was smart enough to sell it over the weekend.
You don't want to do like a too quick a sale if you're not getting what you want and have to, you know, take a lot of things. There's an auction happening right now for this bank. And we'll see who gets it. 100%.
There's real value there. Yes. Yeah. And so there will be, there will be an auction to sell the bank and carefully.
And the question is who gets it? Who gets the bank? Whether they trade it as you guys talked about to a big important bank like Goldman Sachs or JP Morgan. But there's a lot of other candidates or someone else.
And that'll be interesting to see if they're able to sell this bank. Another just brief point that was, I thought, illuminating. So a group of venture capitalists, I'll call it old school venture capitalists, the Kleiner Perkins, the General Callist put out a statement saying we support the bank and they were trying to be helpful. That statement was more interesting or was more illuminated in terms of who was not, who was clearly called and said we're not putting our name on that.
And the question is, do certain venture capitalists have an incentive to see the banking system in the US dollar unravel because of their investments in crypto? They want to bank themselves. Guess who needs a bank? Well, I'm not even saying banking themselves.
I'm saying, okay, we have raised and invested tens of billions of dollars in web three token and Bitcoin related assets. Do we really not want banks to fail? Do we not want to see the US banking system and the US dollar really take a hit? Because what would happen to the value of our crypto based investments?
Bitcoin's up. Bitcoin is up about, I think 20 plus percent. And so it comes down to incentives. And that is, is this community consistently figuring out ways to capture all of the upside of risk while again, socializing the downside?
And are there incentives to really be good citizens? Are they kind of hoping that things unraveled? Are they agents of chaos? Oh, of course, they want to see it all burn.
I'm telling you, I have said this over and over again. Let me read finally from Edward Onway, so junior who's been on pivot before, he's in one of our quarter review episodes. He wrote the following on slate. It's not obvious to me why venture capitalists should be so in control of what tech gets funded, who designs it, how it gets developed, why it gets deployed and where the returns go.
We can and should explore alternatives to the privately run VC system, prioritizing tech, the degrees and commodifies is more of our life, gambles on these developments with other people's money. And the blink of an eye causes regular panics that threaten to up in life for countless people. I got to say, he has a point that the house burners really are not good citizens. Well, everybody got to the same place that they needed a back to depositors, but they did it.
They did it holding their nose because they're like, these are the first people who ship host government. These are the first people that say government to stay out of the way. And then the first to scream the government needs to be here. I mean, when shit gets real, it's just sort of, it's really kind of unseemly.
They should be ashamed of themselves. They really should. And we have to move along. But we're going to quick break.
We come back, chat GPT gains the power speaking of a very powerful technology that again, the government's not in charge of, but these guys are the power of sight. We'll take a listener's question. We'll be right back. Hey, I'm AppiShel, comedian, writer and floating head.
You may or may not have seen on your 4U page and I'm starting a brand new podcast. Wait, wait, don't swipe away. It's called That Sounds Like A Lot as in that feeling when you check your phone in the morning, you read three headlines and you immediately think, Oh, that sounds like a lot. I can't deal with all this.
But guess what? I can do it with it. And I'm going to get into it every Friday. I'll break down whatever chaos is happening in the world.
Then I'll sit down with a comedian. You can be progressive and not be like fucking annoying. Maybe an actor. They got communism is going too far.
You go, why? Because the Sadie Hawkins did happen. Maybe a filmmaker. Since leaving that show, I'm challenged sparing.
I just got to hang out and try to do the one with the charmed line. Could be a politician. Basically anyone who responds to my cold DMs. We're recording the whole thing in a beautiful studio.
So yes, you can watch it on YouTube or you can listen wherever you get your podcast. This is not the place to get the news, but it is the place to feel a little better about it. That sounds like a lot part of the Vox Media Podcast Network. So we are 250 years into this American experiment.
And I say it's going okay. I give us like a C plus. There is no perfect past. But there is also no exclusively negative past because humans are going to human.
That's what we do. I think the story of America is the struggle of people who have not been included in the promise of America to expand those principles to include more people. What's going to determine the next 250 years of America? And how do we write a new social contract that can give us the democracy we deserve?
Okay, so I'm just going to be a jerk here because I'm a historian. So we have to have a prologue explaining, you know, we the people. Okay. You know, I just don't remember it from Schoolhouse Rock.
We the people that go into the former for a FQD and establish justice. What is it? Insure domestic tranquility? So you're talking about a foundational document.
So I'm building a document that will protect American democracy. That's this week on America, actually. Scott, we're back with our second big story. AI is getting smarter, at least.
That's what the AI says. Open AI released chat GBT for this week. The upgrade adds a few new bells and whistles. The reviews are mixed, but better.
Users can now ask the chat box to analyze images. That's kind of cool. One example of what created a recipe from a photo of possible ingredients. The new bottle is performed better on academic tests, passing several AP exams, but not English, but of course it can be used for gimmicks and gags.
One user told the bot to make as much money as possible and a budget of $100 a chat GPT pitch and affiliate marketing sites, themed around eco-friendly products. One of them, of course, told jokes, which I thought was funny. I don't know if you saw that making dad jokes. It was a one Madonna joke, but many people report there's still flawed, it can generate text that's wrong and has hallucinations.
It can't do much in the future. It's not good in the future. So anyway, this is just up the game and the sort of arms race between open AI slash Microsoft, Deep Mind, Oh by Alphabet and what Meta is doing and Amazon also in Apple. So there's also been an enormous amount of funding into AI for startups.
So there's going to be a lot of startups happening and it'll benefit lots of people here as the computing goes up. So what do you think of this latest situation? I think this technology is incredibly exciting. I think it's going to result in a lot of short-term anxiety, but medium and long-term prosperity.
I mean, I'm thinking somebody might is probably working on now some sort of large language model or some sort of AI that takes numbers instead of words and does mock stress tests on each of the 8,000 US banks and then sells them back that research and says to the model, look at every number here, look at every word before the number, categorize the risk of the word before the numbers and mortgage-backed security is a treasury. What is the duration and train this model and feed and data sets from publicly disclosed documents and start doing private stress tests and then go to these banks and go, we've done a private stress test and we've identified your 11 points of weakness, would you like that report? The number of businesses that could be started using this technology can make you giddy if you really start thinking about it. So I'm just super excited.
I think it's really, I'm glad America's in front here. Yeah, it is. It's like the early internet. I think there's a reason to worry about where it goes and whose hands it is.
And one of the things that the complaints, Open AI had shared plenty of benchmark and test results for GPT4 as well as some intriguing demos but offered essentially no information on the data used to train the system. It's energy cost or specific hardware, it's not really open. And so some people thought that, you know, it's essentially a for-profit experience going on here. But Open AI is chief scientist.
This is from the Verge expanded saying, Open AI is the reason for not sharing more information about chat GPT4. Fear of competition, fears of receiving self-evident on a competitive front. It's competitive out there. GPT4 is not easy to develop, but it's pretty much all of Open AI working together for a very long time, produces this thing.
And there are many companies who would want to do the same thing. So from a competitive side, you can see it is a maturation of the field. Well, I'm not surprised. Another example, take every press release issued by every publicly traded company, correlate it with stock movements and figure out what terms, what phrases, what messaging results in the greatest stock increases.
I mean, and start advising people if you're Edelman, incorporate AI into your advice. What messaging? Huh, that's interesting. Are you starting like a lot of companies right now?
Scott Galloway? I'm investing a lot of companies that are, the way I think of this is, processing power came along. And if you didn't figure out a way to incorporate processing power into whatever business you're in, you didn't keep up with the competition. When the web came along, or it's e-commerce, people don't remember.
Weems to Noma wasn't selling anything online for a while. Ermez and Chemel refused to sell things online. So with these technologies, whoever adopts them, fastest and really leverages them and puts them to work outperform the rest. So every company needs to be thinking about whether your communications firm, whether your health services, whether you're consulting firm, how do I use this unbelievable technology to inform my product and my service delivery?
I think the services business, my God, if I was Edelman, I know Richard I B, I have some sort of AI model that says in general, we find that this type of phrasing and language around this type of situation results in the lowest hit to your stock price. I mean, they're not even thinking about this. You know that they're not all the regular people aren't for sure. But it's going to be super exciting and some will and it'll inspire others to start thinking about it.
I think it's really, really cool. All right. So what do you think the words are Microsoft is laid off in entire team of AI ethicists? Is it that kind of stuff the inappropriate conversations are there, the opportunity to cheat and to trick is much higher?
How do you balance that against, I think one of the things that we didn't do with the internet was think about the bad things. And I know you think the media is negative, but it was such a cheerleader for the internet at the beginning and cheerleader for social media until far too late. So is there, how do you incorporate these worries and their legitimate worries into being excited about the companies? Well, one, I mean, just some basics.
I'm really hoping that that AI is more subscription based than attention based because I find that attention based models just lead to terrible places. It could have gone that way many years ago. I'm telling someone about that. The other thing is I hope that there are regulatory bodies formed that have real teeth and early hit somebody really hard that produces propaganda about mRNA vaccines that ends up creating misinformation.
And I don't know, I don't know how it impacts 230. I don't think they're protected. Which is awesome. Which is awesome.
Because if you think about it, all of these technologies have been in that good for the world. But the problems were not, if we had better regulation and held them accountable, we just wouldn't have as much so far. I think you're 100% right on the advertising part. If we at the beginning had been able to have subscription or a payment system, micro payment system, totally different ballgame.
In terms of climate change, there's been three big puffs into the atmosphere. One is the suburbanization of America, the second is the industrialization of China. And I would argue that the bigger puff into the atmosphere is coming out of Palo Alto. And that is an attention based economy, a lack of appreciation for what it means to be citizen in terms of who could potentially incur the downside of these enormous risks we're taking.
We don't pay attention to that, and we create an attention based, these attention based monsters that create depression, division. And that is inhibited and basically totally hamster on our capability to deal with everything from carbon emissions to every other thing. The biggest coal fire plants in the world aren't in Kentucky or Shenzhen or in Palo Alto. Right.
No, I would agree. But I want to address the most important issue of all, which is dad jokes. TPT-35 had, this is tell me a novel joke about singer Madonna. The answer was why did Madonna go to the bank to get a material loan?
That's not very funny. Tell me a novel joke about singer Madonna for GPT-4. Why did Madonna study geometry? Because she wanted to learn how to strike a pose in every angle.
Scott, they are still funny with you. But you're still, you're not clearly not a pro. What you have to do is say, tell me a dad joke in the voice of Richard Pryor, in the voice of, and it'll give you, you can ask them to tell you a dad joke in the voice of Scott Galloway. I have enough content out there now that it'll make slightly, slightly off-color, like inappropriate dad jokes if you ask it to do it in my voice.
But you can do it in the voice of George Carlin, in the voice of a lawyer, in the voice of Vice President Harris. This is not a good development. We need a lot of stuff. It is intoxicating how exciting this is.
But whether it's globalization or outsourcing or the web, you have to have regulators thinking really hard around, okay, how could this go really bad and put in place early some guardrails? Yeah, this is interesting. There was one person was showing me there. I've been looking at a lot of the studies that you can have someone call your phone and you speak like your kid answers and says hello who's there?
They can take that and make a voice of it using this stuff and then call you and say, Mom, Dad, I need my social security number. And it says, we're having kidnapped. This is the kind of stuff they can do quick. Hopefully what we've learned, hopefully the immunities are when open AIs lobbyists are in Washington saying this would hamstring the community that the senators and congresspeople say, you know what, that dog's not going to hunt again.
Anybody who's producing misinformation that reduces or damages national security, health-related issues results in the prosecution and persecution and violence against vulnerable communities, you are liable and we're coming for your eyes. Lawyers, lawyers, I do think 230 does not apply to these people. That's a good thing. I've always talked about liability and privacy legislation.
Can do a lot of good things and for this. And it's good for them too for him to have some structure around that. It's better rather than making their own decisions because you know what the decisions they make will be because they're rather self-interested as their most people. I'm going to go on it today and ask dad, Joe, and Scott Galloway's voice and I shall bring it back for us.
Our next show. Okay, Scott, let's pivot to a listener question. You've got to keep the leaf. I'm going to be a mailman.
You've got mail. This question comes from Alec in New York City. He writes, Hi, Karen Scott. What are your thoughts on the rise of the new gambling and betting industry?
It seems like it's impossible to escape news and advertisements from this industry with all new casinos opening in city centers like New York. Isn't it just another ticking bomb that will disproportionately affect young men? No, everything with young men is so interesting. They come to Scott to ask this question.
So, Scott. I'm really torn on this, Karen. I don't I think as the bottom line is, I don't know how you all are gambling and it doesn't make sense when it's just a quest for certain geographies or certain communities. It's not 30 states have legalized and Washington City.
I can see the arguments both way. I think what we have to do is I almost I don't want to say be more thoughtful parents or incorporate into I think it would help to have certain what I'll call non-STEM based classes at in high school. I think I think people should be taught in mating dynamics. What's it called like the behavior self-force?
Well, okay, how do you approach a person that you're romantically interested in while making them feel safe? This is how relationships form. This is what it means to be a good partner. I think this would be helpful for kids in their teenage and informative years.
I think it's important to say this is what's happening in your prefrontal cortex. And by the way, as a young man, you are more vulnerable to gamification, the results in gambling, the results in addiction. And by the way, gambling more than any other addiction has a greater suicide rate. And the reason why is because you can go down a rabbit hole and no one knows.
If you're addicted to meth, people figure it out pretty fast and they intervene or they try to intervene. You can lose your house, your parents' money, and be hundreds of thousands of debt with gambling, and nobody knows. And so you decide there's no way out. There needs to be education.
I know that's a bad answer. I think parents have to be very aware of these dangers, especially with young men. Yeah, no, and they don't do well. They don't do well.
There's interesting statistics. According to debt.org, more than 20% of compulsive gamblers end up finding for bankruptcy. And over $7 billion in legal bets on Super Bowl 2022, according to the American game news. I mean, people love it.
People say addiction is a good one. It's a huge thrill. I mean, to a certain extent, in the stock market, you get a little bit of that thrill. And I don't know, I don't understand how you suppress it or age-gate it.