SPEAKER_00: Hey, everybody. Hey, everybody. It is Wednesday on the most insane Newsweek of all time. And thanks for making the show pop in the rankings. Uh, we just a lot to talk about a lot of things going on in the world. And today will be no difference. This first story is going to be a story that captures the public's imagination for the next two or three years as this goes to trial complain. This is great bonkers cannot wait to wait to

SPEAKER_05: watch this show on Hulu. It is one of the craziest financial stories since Bernie Madoff, Archegos capital owner, Bill Wang, getting arrested today, along with his chief financial officer on allegations that he hid billions in risks from banks

SPEAKER_06: and then caused massive losses, including I believe $20 billion

SPEAKER_07: of his own money in two days. It's bonkers. And this is a level

SPEAKER_00: of fraud and detail that you shouldn't understand. And we're going to go into detail about how these frauds occur and some theories, but yeah, this, this is a crazy, crazy case. And the

SPEAKER_10: crazy is not limited to public markets. It's happening in private markets as well. Molly, the one click checkout startup

SPEAKER_08: bolt founded by our pal friend of the show, Ryan Breslau, who, uh, you remember, uh, said the entire industry is run by the mafia here. It's all against him. It's all a conspiracy. Not only is YC against him and venture capital and stripe. It also turns out forever 21 and their parent company are against them. Their largest customer is suing them claiming they lost a hundred million dollars in lost revenue because both software is terrible. And, uh, they're kind of

SPEAKER_13: accusing them of securities fraud because they're saying that bolt claimed when they raised money, that they were being used by brands that, uh, forever 21 parent company didn't even own yet.

SPEAKER_15: It's a hot mess. It's a hot mess. It's a good, let's just say it's one of those, uh, lawsuit filings that you like to read word for word.

SPEAKER_00: It's, uh, this one's gonna, gonna be the gift that keeps giving. This is gonna get uglier before it gets cleaned up. It's my prediction.

SPEAKER_15: It's a fun day in business stories. I'll tell you what

SPEAKER_23: crazy is on the menu. Crazy is on the menu. It's also earning season, Google, Microsoft, and meta. We got all of them. Google and Microsoft,

SPEAKER_05: we're gonna go the deepest on they reported earnings for the first quarter of 2022. We dug up the interesting points from those. And yeah, no, we're not talking about that one story

SPEAKER_07: today. Not at all.

SPEAKER_27: And one has a 30 PE, one has a 20 PE and one has a 12 PE price to earnings ratio. We'll explain why each of them has that. Also, Apple is finally allowing people to repair their own goddamn iPhones and equipment. The right to repair has been embraced by

SPEAKER_22: Apple. Good move, Apple. It's arrived and more good news. GM rolling out an EV Corvette for those of you who get tired of us drooling over cars. Well, this isn't your day. And we got to go

SPEAKER_29: to the track with those EV Corvettes. Shout out to my friends

SPEAKER_00: over at Chevy. Molly and I will do an entire episode on the electric Corvette. Get us on the track. We will absolutely give you air time to get behind the wheel of that car. It's gonna be a

SPEAKER_38: great show. Stick with us. Please stick with us all. Vroom,

SPEAKER_40: vroom. Vroom, vroom.

SPEAKER_39: This week in startups is brought to you by Syvatar. Implementing cybersecurity for your startup can feel overwhelming and expensive, but it doesn't have to be that way. Syvatar is startup friendly, fully managed, all inclusive cybersecurity subscriptions. Twist listeners get their first two months free at syvatar.ai slash twist. Odoo Odoo is a fully customizable and fully integrated suite of business apps that lets you build and scale your stack as you build and scale your business. Your first app is free forever. And right now Odoo is offering $1,000 off your first implementation pack at odoo.com slash twist. That's O-D-O-O dot com slash twist. And Coda. Coda is the all-in-one doc for teams. If you've got a stack of niche workflow tools or if you're buried in docs and spreadsheets, Coda is the doc that brings it all together. Startups can get a $1,000 credit at coda.io slash twist. I am obsessed with this story and I just

SPEAKER_22: cannot believe the twists and turns that we're about to go through

Jason Calacanis: today. And I know you think that I'm talking about Elon Musk in Twitter, but not yet. Not yet. Not yet. Craziest month in tech

SPEAKER_46: ever. Ever since the iPhone launch. Phenomenally, that story has been

Jason Calacanis: replaced by news today that Bill Hwang of Archegos Capital has been and the CFO of Archegos Capital have been arrested for concealing

SPEAKER_05: billions of dollars of leverage that led to the firm Archegos Capital collapsing last March. Now, we're going to have to catch you up because this is a beast. I don't know if you were paying attention last March when Archegos Capital sort of abruptly all of a sudden burst onto the scene losing $100 billion in something like two days. Bill Hwang himself lost $20 billion of his personal fortune at that point when Archegos got a margin call in 2021. So, Bill Hwang was what is known as a tiger cub. He formerly worked at Tiger Management, not Tiger Global for its original founder Julian Robertson. At the time, it was reported that Archegos was trading billions of dollars on over 5x

SPEAKER_47: leverage. Okay, we should explain what leverage is. Yes, please. And we should

SPEAKER_49: explain what a margin call is. So many things. We're going to have so many things to explain. So leverage. I'll do leverage. Yeah. Is if you have, if you're a

SPEAKER_27: trader and you have a billion dollars, they might let you trade $2 billion worth of stock because the stock has some inherent value. And then they can margin call you if the stock goes down and you have to cover it, they force you to sell it. So if you had a bill, you know, a billion dollars in Google shares, and then you said, I'm going to lever this up, I'm going to borrow money against it. I'll buy another billion in Google shares. Now, if Google is going up, now you're making twice as much money.

SPEAKER_08: Right. So people are allowed to use leverage. And I think this was a little controversial with Robin Hood having leverage in their product, rich people have had leverage for since time for for a long time. And obviously these big funds because the underlying asset has some value. Now a margin call is when you are using this leverage, but the stocks are going down and at a certain point, a trigger goes off. And the bank who's giving you that leverage and loaning you that money to to against your stock holdings, at a certain point, they have the custodial ownership of your shares. And they just start selling them. That's liquidating them. That's when you get liquidated on a margin call. And normally people are allowed to have 234 x leverage. And this is, you know, something that is quite normal and effective for people if they want to be aggressive.

SPEAKER_57: And you know, and an up market, it doesn't matter in a down market, boy, does it ever keep going.

SPEAKER_05: Right. So it's sort of a form of debt, right? I mean, leverage is debt, they're borrowing against

SPEAKER_58: it's a loan, right? There we go. And then a margin call is like, hey, we want our money back, we're a little get we're getting a little squirrely. We'd like you to go ahead and reach to top up that

SPEAKER_62: account, put it back, right? If you don't buy it, you could you if you if you did go down, like,

SPEAKER_64: let's say you had 1 billion in Google, you've now bought another billion, you have 2 billion, and it goes down 25%, you now have 1.5 billion, you could come up with 500 million in cash, right? So some people in a company might have a big war chest over here, and they'll levered up on their investments, but they have some cash over here, where they can liquidate some other asset, a home,

SPEAKER_05: a business or something to cover it, right? Yep. According to the SEC complaint, uh, that is part of the sort of pile of evidence against Bill Wang. At its peak, Archegos Capital was managing 36 billion dollars with 160 billion dollars of exposure, four and a half times leverage. So just spending, like they say in Top Gun, his mouth was writing checks that his body could not get that his portfolio

SPEAKER_00: could not cash. And so if this was you put 36 billion dollars as a down payment on a bunch of real estate, right? And then you had this other, whatever that would be, the difference would be 124.

SPEAKER_08: If this other 124, and you considered it a mortgage, okay, well, you have the underlying asset that has been appraised to have a certain value. So if you just think about it in the mental model as like a building, they bought the, uh, the Sears Tower or something, and the bank could take the Sears Tower. Here in the Sears Tower might not change in terms of its value that often, whereas stocks can change

SPEAKER_05: quite rapidly as we've learned. Mm-hmm continue. So Archegos at its peak again, essentially trading on a hundred to one leverage on a massive scale. And, and here's where it goes wrong, made some bad bets, built up huge positions that we'll talk about later in some bad bets. When the firm imploded, it caused billions of dollars in losses for wall street in a single day. I mean, it was just, in fact, evidently, uh, you and the besties covered this in real time on the all in episode 28 as it

SPEAKER_07: was happening. Cause it was, it was a, it was a day. It was a big deal in the finance industry,

SPEAKER_64: but obviously it takes a long time to build a case. And so the sec, I guess was building a case, but what's really crazy about this is he only had like 1.5 billion in assets back in March of 2020. So that 36 billion he was managing and then got the 160 billion of exposure. I think it was eventually. They found out he actually had $1.5 billion of actual capital. So he was at a

SPEAKER_27: hundred times leverage. And how that occurred is what I think this case is really about. He was doing some sort of fraud here to get even more leverage. The swaps, which will, yeah, we'll, we'll explain

SPEAKER_77: the swaps in a minute, but yeah, it sounds like everybody's following us. I think you're following

SPEAKER_47: is maniac did like very complicated 10 mortgages on top of one house. Yeah, is what we're about to

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SPEAKER_05: So on the day it happened, Credit Suisse lost five and a half billion dollars. Morgan Stanley lost a billion UBS, Switzerland's largest bank, lost 774 million. So on Wednesday today, as we're recording this, Bill Wang and his former CFO were arrested and charged with what the New York Times calls, quote, orchestrate orchestrating a stock manipulation scheme that relied on them masking

SPEAKER_06: and concealing the enormous risk the firm had taken on. They face racketeering, conspiracy and wire fraud charges. Yep, that's where they get them. Get them on that wire fraud. Get them on the

SPEAKER_64: wire fraud. Got them on that. The racketeering is great though. That means it was more than one person or I think it's two or more people planning to do a crime is like when they get you on

SPEAKER_85: racketeering. It's multiple people conspiring to commit the crime. Interesting. Yeah, I love the

SPEAKER_86: racketeering. It's just racketeering. It's got a great sound to it. It's like wire fraud. What did

SPEAKER_87: you do? You sent a wire you weren't supposed to you, you move some money around but racketeering,

SPEAKER_89: it's like you shaking something up. Right? I like I like a good racketeering and conspiracy. It always

SPEAKER_91: it also sort of suggests that we have no idea right but it also sort of suggests like there's a there's a possibility that others could go down like maybe and anybody who knew wire fraud. Yeah,

SPEAKER_93: I mean I you could commit wire fraud today. Anybody can commit wire fraud but to racketeer

SPEAKER_95: run a conspiracy that's that's an elite level. In the now immortal words of producer Nick wire fraud is chump racketeering is big boy. It is very big boy. All right, well here's that on a t-shirt.

SPEAKER_05: These are the crazy quote, right? The SEC complaint says from at least March 20th to March 2021, March 2020 to 21, Wang purchased on margin billions of dollars of total return swaps. This is where you

SPEAKER_23: come in to explain what the hell the total return swap is, which it seems like Archegos kind of invented.

SPEAKER_27: Okay, so these things I don't fully understand. These are like when people start doing derivatives and

SPEAKER_08: stuff and make weird synthetic trades but these swaps basically allow investors take large positions while posting very little capital up front basically borrowing from investment banks who buy the shares on their behalf for a fee. So there's a lot of fees associated with this and then these swaps also allow them to remain anonymous uh because the shares are being purchased by the banks not the firm

SPEAKER_10: and so when you do that you could be pumping your stock that you already own. So what was happening here is he was buying the stock on margin building these big positions and then also doing these swaps

SPEAKER_08: and so he was trying to prop up his trades according if I'm understanding this breaking news correctly.

SPEAKER_04: Mm-hmm I think so.

SPEAKER_22: Yes, it also seems to have allowed him to build the the the mechanism of the swap seems to have allowed

SPEAKER_03: Archegos to build up massive positions in individual stocks that they didn't have to report. Right, which drove up the prices. Which drove up the prices.

SPEAKER_111: Which is the market manipulation that's I think that's the big crime here. Okay.

SPEAKER_03: Yes, that in theory is is him basically the problem here and it's funny because we have some you know

SPEAKER_05: very educated noties who are like this is just what happens on wall street and the banks love this and they were getting the fees from the swaps and it was all great. It seems to be that the allegation is in fact in hiding the amount of risk because then when it all blew up it blew up in the on the order of billions and billions. There's a whole complicated thing about short squeezes that they would do this is where they're accused of sort of trying to manipulate the market.

SPEAKER_64: Yep, and a short squeeze, uh, you know, pretty, but we saw this with GameStop, etc. There's a small amount of shares available. Everybody starts buying them.

SPEAKER_27: Nobody sells them. The price starts going up. The person has to cover as they cover their short. They have to buy the share, give return it to the person they were borrowing it from because they're betting that it goes down by covering.

SPEAKER_08: They're increasing the price. So it's very painful, which is in fact, what might be happening to Bill Gates with his shorting of say Tesla, which if he shorted at 300 a share and it ran up 1200, maybe it's at 900. Now, whatever it's at, we'll get to that later. I suppose, you know, that can just become problematic because if you cover your buying, which is, you know, uh, making the price go up. Right. Almost universally. So, uh, this is just crazy stuff.

SPEAKER_05: I mean, it's bonkers. It's just bonkers. And the, the quotes from the sec filing are just absurd, right? Wang's goal was to induce other traders, such as short sellers or other market participants to observe active trading in an upward price movement at the share prices of certain issuers, blah, blah, blah. One of the most con, the other reason that I find this fascinating is that one of the most concentrated positions that Wang held was in biocom CBS, uh, uh, my former parent company. Yes. And I had a lot of questions. I mean, cause so there are so many fascinating things about this, not least of which is the fact that this is like a family office with very little oversight that, that Bill

SPEAKER_75: Wang himself, like archegos means like Greek God or child of light or something or leader. And he would have lots of prayer.

SPEAKER_64: Well, yeah. Did you ever watch the videos of him talking about Jesus? No. Like whenever anybody's like making videos of themselves talking about Jesus, instead of like just going to church and like just quietly, you know, being dedicated to your religion, like it gets really weird, but this Viacom stuff was really gnarly. It's wild. Yeah. The sec alleges. Yep. That Wang tried to induce a short squeeze on Viacom 19 different times. And he would do this before the markets open. This drove the price of Viacom CBS from 40 bucks a share to 97 at its peak valuation around March 19th, 2021. So that means Wang had a $10 billion stake in the media firm, um, which would have been

SPEAKER_08: 17% of the company of Viacom's peak market cap during the run up. And then Viacom announced a $3 billion secondary, uh, share sale, which led the stock dropping 20%. And then he himself basically got squeezed. Yeah. So that stock collapse all the way back to 40 triggered the original margin calls. So he was playing really dangerous games. And, uh, this feels like I'm trying to remember the scale of the Madoff, uh, fraud.

SPEAKER_00: Yeah. Is gonna look, I think, smaller than this. And actually with the Madoff stuff, when they look at the money put in, not the fake gains,

SPEAKER_64: but if you just look at the money put in, I think people generally netted out to what they had put in. So there was enough there in the markets going up with Madoff that people kind of, you know, if you put in a hundred thousand of your retirement, you might've gotten your hundred thousand back

SPEAKER_00: or something like that from what I, I had read, but, um, you didn't get any of those gains. So if he was perfectly getting you 12% a year or whatever it was, and you thought you had 400,000, you didn't get the 300,000 in fake gains. Mm-hmm. Uh, so who knows what the total size of this is because it's all these synthetics. So who knows what reality is here? Right. Um, but he's going to jail forever. Um, I mean, this might be a die in, uh, jail kind of situation. And you have to wonder where these banks who are letting him make all these bets,

SPEAKER_64: uh, in cahoots, or were they turning a blind eye?

SPEAKER_132: Mm-hmm.

SPEAKER_64: Or were they victims? Right. And I think that's where this is going to get gnarly because how do you not know what's going on here?

SPEAKER_27: If you work at a bank that's loaning him and giving him margin and giving him leverage, come on. Yeah. Like you must know what's going on. On the good side, we've had a number of bad actors and sketchy situations in the market over

SPEAKER_08: the years. And the market seems to be able to absorb something like this every, you know, number of years.

SPEAKER_05: Uh, I mean, the market did 100% just shake it off, which is pretty remarkable because I think on that actual day, it was, it seemed like it could, uh, kick off, uh, you know, a cascade. One of the other, the, the director of the sec enforcement division called this a house of cards. We allege that Wang and Archegos propped up a 36 billion dollar house of cards by engaging in a constant cycle of manipulative trading, lying to banks to obtain additional capacity, and then using that capacity to engage in still more manipulative trading. But the house of cards could only be sustained if that cycle of deceptive trading lies and buying power continued uninterrupted. And once Archegos buying power was exhausted and stock prices fell, the entire structure collapsed, allegedly leaving archegos counterparties billions in trading losses. It is fascinating.

SPEAKER_141: Again, I'm going to point out that a lot of our noted gang is like, this doesn't sound illegal at all.

SPEAKER_00: Well, this kind of leverage is illegal. You can't have this kind of leverage put on a hundred to one, whatever it winds up being. And for good reason, there are rules around leverage. I don't know the exact ones and there's supposed to be safeguards around this. We were supposed to have that because of the real estate bubble that burst in, you know, that, uh, during the great recession. So there's supposed to be some here, but people can always lie. You know, like sometimes you're supposed to, if you take out a, a home equity line to like

SPEAKER_64: ostensibly pay for college or redo your kitchen and bathrooms, but then you use it as the down

SPEAKER_27: payment on a second home, but you say it's your primary residence. So you get the better treatment and people have done all that kind of stuff in mortgages.

SPEAKER_64: And that's what happened during the mortgage crisis. The policing and, you know, the, um, diligence, dare I say, uh, got very weak because everybody

SPEAKER_27: was making money and it was like, well, this is a great party. And it's like, well, yeah, you're, you really shouldn't drink that much. And maybe you shouldn't imbibe so many of those substances.

SPEAKER_08: Like, but it's a great party, right? Why not drink? Let's do more shots. And then all of a sudden somebody passes out and gets alcohol poisoning.

SPEAKER_57: Like sometimes the party gets a little too crazy and that's apparently what was going on over there is they, these guys just went nuts. Yeah.

SPEAKER_13: And they just have to wonder like what, I mean, Molly, what's enough? Like you're a billionaire. You, you're making so much money. What, what does the incremental one to 10 billion get you?

SPEAKER_146: Like, what does it get you? I mean, that's just about winning, right? That's just about winning.

SPEAKER_13: Maybe or some, this person's a sociopath. Like what is it? What are they, what's the goal here? You're gonna billion dollars. You have a plane. Yeah.

SPEAKER_10: You can buy any steak you want. Yeah. You can go on any vacation you want. I just what I don't understand about people who get really rich and then do dangerous, crazy stuff that puts them in jail forever. Mm hmm.

SPEAKER_27: That's the thing. That's crazy.

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SPEAKER_05: It also pointed out and I'm just sort of fascinated by this as a side note, even though this isn't necessarily our show. But this speaking of rich people like this also pointed out the fact that this was a family office and family offices have very lenient rules around reporting. It's their money. Despite it's their money, but it's a $6 trillion asset class. It's like two or three times the size of like private equity or something like something bananas like that. So it's a market moot empirically massively market moving amounts of money that effectively, I think one person on Twitter said have regulations that could fit on a post it.

SPEAKER_27: And listen, if you're a family office, it's your money, you don't have LPs, you know, we have LPs, or we do a syndicate, other people are participating. You know, if it if it was just my I always often often think about this, which is kind of was the theme of Axe Capital during the first couple of seasons of billions was was he a better investor when he invested his own money and was going crazy and would take crazy bets? Or was he a better investor when he was being staked by other folks because he felt like he would be more focused because he had somebody to answer to where he might feel guilt about the pension fund that he was investing money on behalf of and a lot of capital allocators have to deal with this. And I wonder sometimes like if I am I being too conservative because I have other people's money? Am I doing too much diligence? Am I, you know, turning down deals that maybe are not tight enough for me to want to syndicate to people? But if it was just me, I would make the bet because okay, I know what I can lose.

SPEAKER_159: Yeah. And I've chosen to be very thorough in my process as you've learned in your first four months here.

SPEAKER_62: Congratulations on your first syndicate deal being 2x oversubscribed, I believe. 2x. It's bonkers. Yum, yum, skis. Yum, yum, skis. I mean.

SPEAKER_161: Now we just got to get the founder to take the extra money.

SPEAKER_162: I know. Yeah, I mean, that's a good, that's a good VC Sunday school that we're going to have to. Yes. We have more money for you. Would you like to take it? Put a pin in there.

David Friedberg: No, I would like to take all the risk of not having an extra million dollars.

SPEAKER_49: It's fine. But it is interesting though, because

SPEAKER_05: yes, in the, in the mo, at the most basic level of family office, is just investing a person's money, but these family offices, first of all, they're just an exploding category. It's like there are more and more and more of them over the last decade. Increasingly are of a big enough scale that they're operating like Archegos. So they're interacting with banks just the way that a hedge fund would or a financial, a regulated financial institution would in terms of, you know, taking on leverage and being subject to margin calls.

SPEAKER_23: All the same financial behaviors of a bank, but with none of the oversight, this is going to like change the way wall street works. This is going to change.

SPEAKER_00: Maybe, maybe. And maybe like, I always think these regulations are short-term and then they get loosened up in my experience. Like when people forget. Well, currently there aren't any stills.

SPEAKER_150: Well, here's the thing. You would, you would think if this is your family office, the ramification of losing your entire family's net worth and going to jail would be enough of a safeguard to prevent you from doing crazy. But apparently not for this maniac. So then the question becomes Molly, do you create a bunch of rules for the 998 family offices that want to preserve capital for generations to come and are acting or good actors or for the two maniacs who decide YOLO, let's risk it all in the name of Jesus.

SPEAKER_06: I think you have those rules to protect the person whose money is being invested.

SPEAKER_05: Like this, Bill Wang doesn't have a fiduciary duty because there aren't any rules. Like it's his money.

SPEAKER_06: If I were rich enough to have a family office and somebody managing a decade in a decade, I will want there to be rules on the person who's investing that.

SPEAKER_47: Yeah. And you will, you will sign every trade.

SPEAKER_27: So it would be as if you were in this example, your bill, very true. You're behind and you're signing every rule that comes across your desk. So that's probably why they don't feel there has to be rules.

SPEAKER_57: It would be like, do you need to have rules for people to go play poker? Like, okay. Or, or better sports.

SPEAKER_175: You're so with the notice on this. You're just like, yeah. Well, no, I, I do think this is a sociopath, a crazy person.

SPEAKER_08: I think the banks are the ones who are not doing their work. That's where I think this is going to lie. Cause you, you know what? You can't stop every crazy person from doing crazy stuff. Like I know crazy people when I lived in LA who were actors or directors or in the Hollywood set and they would make some big payday for their TV show or movie. And then I'd watch them lose it at the poker table over two months. And then they go do another movie and watch them lose it at the poker table. I'm like, I think you want to put that money away. Like who's watching your money? Like this is crazy. All right. So just a little addendum here. When you put a swap like this on a total return swap, they're called TRS is from what I understand with a prime broker, you have to send them your full risk profile.

SPEAKER_13: So they know what other risks are happening. Okay. So the theory here is Wang lied to them by faking the reports.

SPEAKER_08: And then that's why the CFO was arrested. So they, to my point earlier, I think I was talking about like, how did the banks let this happen?

SPEAKER_57: In all likelihood, the TRS, the total return swap, you needed to show the other risks and they

SPEAKER_08: didn't, which to my analogy of like, maybe somebody got a second mortgage or multiple mortgages on the same house.

SPEAKER_56: People were doing crazy stuff like that during the dot com, I'm sorry, the real estate boom. So that's what these swaps are. Right. All right.

SPEAKER_07: Speaking of crazy. Yeah, I've got to wrap this up, right? Yeah, we do. We can do this all day. Let's move on.

SPEAKER_05: We're having like a little bit of law Twitter today. We're just having fun with reading allegations. Bolt. Bolt is in the news again. And then no.

SPEAKER_182: Is that Ryan Breslow's company? Yeah, it is. The mafia company? Here we go.

SPEAKER_05: It is Ryan Breslow's company, which, which everything that ever went wrong at Bolt was because Stripe and the Silicon Valley mafia stood up competitors to take them out. They never did a single thing wrong, except for maybe this one thing.

SPEAKER_184: Maybe this one thing. Okay, here we go. Yeah.

SPEAKER_05: Bolt is being sued by its largest customer for failing to deliver on its product promise and maybe allegedly committing some light securities fraud.

SPEAKER_185: Light. Light.

SPEAKER_05: Light. Bolt is being sued by Authentic Brands Group, ABG, which is the parent company of retail brands that you have heard of, Forever 21, Reebok, Brooks Brothers. Huh. The lawsuit is really fundamentally about Bolt's mobile integration with Forever 21. Got it. The lawsuit alleges that Bolt failed to deliver on promise technology, lost Forever 21 over 150 million dollars in sales. A lot of money. And here are some fun quotes from the article describing the lawsuit. Bolt has utterly failed to deliver on the technological capabilities that it held itself out as possessing.

SPEAKER_188: Hmm.

SPEAKER_05: ABG described the integration with Forever 21's mobile app as, quote, disastrous. Whoa. And claimed it resulted in significantly fewer customers making purchase. Like, I think they're actually saying people would have made purchases. But Bolt screwed them. But Bolt screwed them. The suit said that because of these technical issues, only two of the company's brands, Forever 21 and Lucky Brands, are using the software. And it goes on to allege potential securities fraud. Okay.

SPEAKER_194: So they made a claim or something?

SPEAKER_05: Apparently, according to this legal complaint, Bolt, they say, raised funding at increasingly high valuations by consistently overstating the nature of its integration with ABG's brands, to suggest it had more customers than it did, and to convince investors to bankroll additional growth for the startup.

SPEAKER_197: We talk about this a lot. You've heard me talk about this with founders privately, never overstate any metrics,

SPEAKER_10: never massage the data, never exaggerate, never spin.

SPEAKER_08: The data is the data presented as such, perhaps even be conservative and give disclaimers, unaudited data, you know, uh, but if you're selling the security and you make a claim, the person who bought that securities, if the claim is later found to be not true, and you did that on purpose, or not on purpose, uh, you could be in a world of hurt, a world of hurt.

SPEAKER_199: My God, the moral relativism and the notie gang founders spin all the time. It works. Okay. Well, hold on a second. Let's define spin. Let's define spin.

SPEAKER_27: So there is spin as in our vision is to someday be able with one drop of blood to test for 200 different, uh, diseases and, uh, uh, you know, uh, to do, to put to 200 different blood tests. Mm-hmm . That is our goal. It's our mission. It's our North star. Today, we can test if you have hepatitis with one drop of blood. And that is the start of our journey from one to 200. Now that is enthusiasm. That is, you know, uh, excitement. It's a, it's a audacious, big hairy goal. Mm-hmm . Totally permissible. Mm-hmm . Because if I invested, you told me you got hepatitis and your test is as good.

SPEAKER_08: And if just to unpack it even more, if I said our hepatitis test in our trial is showing extreme promise. Mm-hmm . We're at 86% of efficacy of other tests in the market. Again, 86% efficacy with one drop of blood versus a vial of blood within with a, you know, a needle and having to draw a full vial of blood. Mm-hmm . And you could do this ultimately at home someday if we can get FDA regulations. All of those things I say have qualifiers in them. They're exciting. They're game changing. Mm-hmm . But there's a reality here. So if they lied to investors, you know, who would know? Forever 21 would know. Mm-hmm . Because they might have said, and I'm just speculating here based on my 11 years investing in 300 companies. So take it for what it's worth. I do not have inside information. Secure speculation. My guess is somebody said, how many people made it to the checkout page? How many were integrated? Therefore, we have those customers. So, you know, 100,000 people this month got to the checkout page. So, and they created both accounts for them, right? Yeah. Because they cookied them. Now, do they really have both accounts? Did they actually check out? They could say, you know, we now have 100,000 customers and nobody has the definition of customers. So that's when you start getting into funny business and fun with numbers. And you've seen this when you've been on calls with me. And somebody says, we, I say, how many customers have? They said 97. I say, great. How many paying customers do you have? They say zero where they're on trials. And I say, oh, okay. So you have 97 people doing free trials. And I don't admonish the founder. I just clarify for myself. But in that instance, the founders kind of committed securities fraud. If I were to invest and think they were 97 paying customers, because these were customers, not trials or users. So always, always, always, always be 100% ethical and moral and conservative when sharing your metrics, because investors know these are works in progress. Right. But I'm not surprised. People is what I'll say here.

SPEAKER_23: Definitely do do this, right? I'm not discounting the fact that people do this and they say things are their customers

SPEAKER_05: when they're not their customers or they're like, they want them to be their customers or whatever. But if you do that, and then your stuff does not work. And then the company that is angry at you because they allege that you lost them $150 million in sales is like, I'm sorry, wait a second. You told investors that Reebok, a brand that ABG had not even acquired yet.

SPEAKER_06: Oh, is using your software. Oh, because of your deal with ABG.

SPEAKER_93: If that's true, that's a crazy smoking gun. Wait a second. Oh, so that's being claimed as well. That is being claimed as well.

SPEAKER_27: I did my whole like theory here. But this is if this is true, that they said they had Reebok as a customer and put them on the customer slide and ABG, the parent company had not bought them yet. That would be knowingly misleading investors if it was true. Yeah. In which case those investors could go back and say, I want my money back. I want damages. I want more shares. I would have valued the business taking Reebok out. If that was one of your top four customers, I would want a 25% discount on my investment.

SPEAKER_57: I want 25% additional shares. Yeah.

SPEAKER_03: So that would not be spinning. Bolt responded.

SPEAKER_05: This is the part where we should say Bolt responded by saying that ABG's claims are without merit and that this was an attempt to renegotiate their deal. They also said that any of these alleged implementation issues were not evidence of a failure of Bolt's technology and that in fact, ABG's complaint that they essentially said it was user error. ABG's complaint doesn't show anything more than typical technical issues that arise while implementing a product like this, let alone that Bolt failed to solve them where technically practical. And then here's a really interesting nugget in the lawsuit, which states that ABG has the rights to purchase up to 5% of Bolt for $29 million, which would be worth $500 million at Bolt's current valuation. So Bolt's new CEO, not Ryan Breslow, his successor, Maju Kuravila had the following quote. It's clear that authentic brands group has confidence in Bolt's future as they are fighting to own a meaningful percentage of our business.

SPEAKER_47: The plot thickens.

SPEAKER_00: So maybe they didn't want to let them buy those shares or something, or they want to renegotiate that I'm talking about Bolt. Yeah. Um, but that's super complicated.

SPEAKER_64: It is not, um, it is not uncommon for, uh, a strategic to ask to be able to invest or for

SPEAKER_27: a company that wants to land that strategic to give them warrants to buy those shares. So at the time, 5% for 29 million might have been a great deal.

SPEAKER_00: And these could be warrants, what a warrant is, is you have the right over the next 10 years. Typically it could be five, but I would say 10 typically to buy up to 5% of the business for $29 million.

SPEAKER_27: At the time, the business might've been worth 20 times, uh, 30 million, which would be 600 million. So they said, yeah, you can pay 29 million. You don't get the shares for free companies worth 600 million right now. Incredible valuation at the time. Probably you can buy up to 5%. That's a free option in case the company becomes worth 20 times more. And when it is worth 20 times more, they can buy those, uh, shares even without giving the money and then just take the difference in the share price, et cetera.

SPEAKER_00: So there's all interesting ways to do that. So, uh, fascinating, uh, it is, I don't think it's, I mean, it's very possible.

SPEAKER_05: It's not quite as clear cut as it seems, you know, when you read the, like the, it's fun to read lawsuits and they're always, um, there's always two sides. And they're always really juicy.

SPEAKER_162: Well, I think that's three sides. Yeah, exactly. So it's in my version and the actual reality and the actual reality. Yep. Exactly.

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SPEAKER_49: Quick breaking news. Okay, here we go. Breaking news. Yeah, I think this breaking news. Well, okay. So the news is that Meta. Just say Facebook.

SPEAKER_227: I mean, I'm not going to call them Meta until they have 100 million people using that every day.

SPEAKER_05: Facebook. The Facebook. The Facebook has reported earnings. Q1 revenue up 7% year over year. Net income down 21% year over year. Okay. Meta stock up 14% in after hours trading.

SPEAKER_23: Evidently, the expectations were super low because everyone hates them. But I also have to wonder if some of the news about Twitter has got investors thinking,

SPEAKER_05: well, Meta is going to be the social network of last resort for all those angry liberals.

SPEAKER_07: All 0.1% of them. They're all going to Instagram.

SPEAKER_08: The 0.1% who have left for Canada. I mean, I do know one person who left for Canada when Trump won. Do you know anybody who left for Canada?

SPEAKER_237: Literal Canada? Oh, wow.

SPEAKER_238: I know somebody who moved to Canada.

SPEAKER_239: They were considering it because they wanted to have a, you know, a different lifestyle than America. They were in New York City. A good friend of mine.

SPEAKER_27: I won't say who, but he left and, uh, he just felt, you know, the US politics was dysfunctional. He was like, and then he also wanted a different lifestyle and he also did the arbitrage. He had raised money in Silicon Valley and New York and then moved to Canada to

SPEAKER_08: deploy it and was getting, you know, all the tax credits and lower cost of living. It was a pretty savvy move. Wow.

SPEAKER_242: Um, so it wasn't really just that. It was like, yeah, a lot. Yeah.

SPEAKER_27: But I mean, the, here's the thing about Facebook, the expectations were incredibly low. 7% year over year means the business is not contracting.

SPEAKER_57: It's growing. The income going down makes sense because of the, uh, headwinds of what's happening with, uh, Apple and, uh, making lookalike audiences and tracking of individuals, arguably the best advertising business lookalike audiences or technology since Google search.

SPEAKER_00: So, and they're also pouring money into this, um, you know, into the headsets and everything like that. So maybe people are thinking it's bouncing along the bottom.

SPEAKER_64: It's PE is 12.7 right now. So that makes them a really good deal. I know.

SPEAKER_87: I think this is like buying a tobacco company or something.

SPEAKER_162: You may want to hold your nose and just buy it. Uh, it's buying a tobacco company and lots of different, that's a very apt metaphor.

SPEAKER_64: I knew people who, you know, were climate folks and, you know, obviously did not believe in cancer, kind of hard to be pro cancer, uh, and be anti environment, but they had a juicy,

SPEAKER_00: they made lots of their money through investing in those, those plays. I, it's pretty cynical, but the cynical play would be it's 12 PE and it could go to 25 again.

SPEAKER_129: So yeah, you might double your money.

SPEAKER_22: You never know, um, quickly Google and Microsoft also reported earnings yesterday after the

SPEAKER_05: markets closed. So we can, you've probably seen some of that news, but we'll break a little bit of it down with our special flavor.

Jason Calacanis: A little flavor here. Google is a bigger story. And I think this again is so interesting compared to meta because Google reported it's always like kind of fine. Earnings. Yeah, it's pretty good. Yeah. Yeah. It was actually like pretty good. Yeah.

SPEAKER_05: But yesterday after the markets closed, Google was down as much as 7% at one point. It's down about 3% today. Yeah.

SPEAKER_253: So year over year, it's 3% year to date.

SPEAKER_49: What is it? About 20% over 20%.

SPEAKER_05: So that's a $400 million loss in market cap just since January 1st. And that is on these numbers. Total revenue up 23% year over year on a major number on a major number, $68 billion. That was, and wall street hates this. It was less growth, 11% less growth compared to the year prior net income was $16.4 billion down

SPEAKER_75: about 8% year over year.

SPEAKER_64: So yeah, tiny tick down.

SPEAKER_00: And you know, if you look, it's really interesting to watch, uh, what's happening with YouTube and, um, search people don't realize this, but YouTube is at 6.86 billion around up to 7 billion. And, um, searches at 39.5 billion rounded up to 40. Uh, and what you're seeing is, you know, YouTube is a very significant portion of the revenue,

SPEAKER_64: but they missed on YouTube by 500 million. Yeah. Um, and so ad revenue is actually down quarter over quarter from Q4, which is not uncommon because of the big push to spend money during the holidays. Uh, but is uncommon for Google, which, you know, so that that's a seasonality thing, but

SPEAKER_00: Google has been such a juggernaut. Uh, their cloud business, 5.8 billion, I think 45% year over year. So that's great. Their other bets are meaningless 440 million.

SPEAKER_05: The, the YouTube miss is interesting because YouTube is sort of trying to find its way as a

SPEAKER_23: tick tock in the world of tick tock, right? Which is short and super fast moving. And YouTube had leaned heavily into longer form content to put more ads in there. Now they're admitting that the growth of, of shorts, YouTube shorts, which is now averaging over 30 billion views daily. Is it really? Wow. That is going crazy.

SPEAKER_258: We need to do more shorts.

SPEAKER_05: We definitely do. It's for, I mean, it's, that's four times higher those views as a year ago. Wow. But they're saying, yeah. And we even have a clip if we want to play it. The growth of shorts has had a negative revenue impact on YouTube. Okay.

SPEAKER_259: The ads don't work as well.

SPEAKER_261: The ads don't work as well. And they can't get as many in there because it's only however long. All right. Let's listen. How many seconds? 24 seconds.

SPEAKER_262: Question. We're experiencing a slight headwind to revenue growth as shorts viewership grows as a percentage of total YouTube time. We are testing monetization on shorts and early advertiser feedback and results are encouraging. And the team is focused on closing the gap with traditional YouTube ads over time. So we're excited about the new opportunities with shorts, but a slight headwind.

SPEAKER_243: Yeah. So I can explain that. Here's what's happening. It's a new format. The new format is growing.

SPEAKER_27: Advertisers are always a couple of years in terms of the content format. Then the creators, the creators are the avant garde. They're making these short clips. They understand how to make it in a tall format as opposed to a landscape. All the ads in the world are made for TV format landscape. Now you're asking some creative agency. Okay. I need somebody to look close up to the camera. I need you to make these really hard cuts and make them look like, you know, whatever, and you need to make ads that work in that format. Well, it's going to take them a couple of years for these agencies to figure out how to sell soap or a movie. You know, like, how do you sell a Marvel movie in a standup? Well, I've seen Marvel ads or other ads for TV shows or Netflix in Tik Tok and in that format.

SPEAKER_10: They look because they're like trying to pan or do this stupid stuff because a beautiful Marvel film is not meant to be shown in portrait. It's meant to be shown in landscape, but people are not turning their phone sideways, you know, on Tik Tok or in this format.

SPEAKER_27: So yeah, it's, this is just an adjustment period. And so I think it's a short term pain in terms of advertising because more users are using this. It's going to be a long term gain because maybe that format could be even more effective. Yeah.

SPEAKER_05: Oh, I think so. It's a long term gain in terms of competition because clearly Tik Tok has shown that people just want to like, burp burp burp burp, just turn this through tons and tons and tons of short videos.

SPEAKER_08: Have you watched enough Tik Tok to get the warning where the person's like, hey, you're a piece of shit. You've been listening. You've been watching too many Tik Toks. You need to go to bed. No, that's a thing.

SPEAKER_56: I know producer Rachel's gotten this. Producer Rachel, have you? I don't know if she's on the show today. Maybe she's out. I don't know. Producer Rachel?

SPEAKER_270: Oh, a hundred percent. A hundred percent.

SPEAKER_183: So wait, really? It'll come and warn you and be like, whoa, whoa, Pina, you gotta go to bed. First thing pops up. You can come on air, producer Rachel.

SPEAKER_29: Yeah, come on and tell us about this. Yeah, a person will pop out. I told you to be camera ready, everybody.

SPEAKER_276: I am. I'm good. We're going to go. Okay, okay, okay. There's no hoodie.

SPEAKER_29: No hoodie.

SPEAKER_64: Okay, so wait, it's 1am. Take me through it. How, what's the longest you've been watching Tik Tok after midnight?

SPEAKER_00: How many minutes before they give you this warning and tell you, listen, you need to make better life choices or choices, Rachel?

SPEAKER_278: It used to be somebody that would go like, stop.

SPEAKER_280: And like, it like really, really abruptly stops you. Right. And it's like a part, like it looks like it would be a normal Tik Tok. And the first time it happened, it's kind of jarring. The longest I was ever on Tik Tok, that was during the pandemic. Um, and I was doom scrolling and it was like two or three in the morning. And I've gotten to the point too, where it's that person has popped up like multiple times. It's like an hour that you have to be on a consistent, but I deleted Tik Tok since then had a Tik Tok break and redownloaded it. And now I don't have any notifications. Don't get that person anymore. But I think it was 20, 20. Right.

SPEAKER_50: Where I saw that. I've had it happen. And yeah, it is, uh, it is like a, a, a feeling of shame, Molly. I can't even imagine. It's like you've wasted 45 minutes of your life.

SPEAKER_214: You could have been sleeping. You could have been crisp for work tomorrow.

SPEAKER_27: You could have spent time with your children. You could have read a book. Instead for 45 minutes, you've been watching garbage and you can't remember one of these videos. They've done nothing to enhance your life in any way.

Jason Calacanis: Is it so sad that now I want to try it? Like now I want to see if I can trigger the person to tell me. It's pretty good. This is what I mean when I say I'm a sleep achiever.

SPEAKER_23: I've never had this happen because bedtime is serious business. Am I out?

SPEAKER_111: I gotta delete Tik Tok and all my social media is in, in another couple of weeks,

SPEAKER_57: because I'm going to start the, the finish in the book. And I'm taking a major break. I'm just going to put buffer on my phone so I can post out, but not actually load the apps. So I had buffer. It's like a third party app. Buffer is a really cool third party app, a free commercial for them, but it's like 10 bucks a month. It will let you post like five places at once. It was like poster risk, Gary Tan's first company. Thank you, Bruce Rachel. And so poster is very cool. You could email an address and it would put the photo on your Tumblr, your Instagram and your Twitter and your, you know, WordPress blog.

SPEAKER_08: Now with poster risk, you can like have five different Twitter handles, LinkedIn. So if you wanted to say like, Hey, I'm going to be in New York next week.

SPEAKER_57: You post it through buffer. You put a time, you can schedule it or you can just do it live. And then it posts it to everything. So you don't need to have the app. You just post from buffer, but you don't load the app.

SPEAKER_04: So you don't consume. So yeah, everybody needs to take a break from these services at some point. They're not healthy.

SPEAKER_57: I would like to have like the ability to set a limit for myself. I guess you can do that.

SPEAKER_00: But oh, so just back to YouTube for a second, Molly, as we wrap that up and Google, here's my theory.

SPEAKER_64: A lot of people plowed money into Google during this like recent downturn

SPEAKER_27: because it's a safe haven. And you know, over the last year, it's basically trading at the same price now. And if you look at the five year chart, you know, like, yeah, they wiped out a year of like crazy the last year of growth,

SPEAKER_00: but it's still trading at an amazingly, uh, uh, great. It's still at 20, 20 PE for a predictable company. So if we look at Facebook, 12 PE, you look at Google 20 PE. It tells you the story. People are much more bullish on, um, Google long-term Google long-term and they search is not optional.

SPEAKER_05: I mean, this is like, I've been waiting to be proven right. And maybe I never will be long-term, but I have been saying for years that if one of those two things were going to go away, it would be the one that's optional and search is not. And fundamentally is, you know, if Google is sticking to organize the world's information

SPEAKER_23: and they're going to provide search and content around that, like that's not optional, but yelling at your anti-vaxxer anti on Facebook is.

SPEAKER_57: I don't need Facebook.

SPEAKER_08: I log in like every one or two months and I'm just always disappointed when I get there.

SPEAKER_57: Um, and if you look at, uh, Microsoft, it's trading at a 30 PE ratio right now. Um, and they're up 11% over the year. They're down 15% year to date. Um, and maybe we just give a quick capsule of their results, which have been fantastic.

SPEAKER_05: Yeah. I mean, Microsoft proving that business software is also not optional. Uh, let's see. So Microsoft also, I want to jump right to the Azure to the cloud business because we noted that Google's cloud business is $5.8 billion, right? That grew 45% year over year. Yep. Microsoft's cloud revenue is $23.4 billion. Oh, go figure.

SPEAKER_00: And more focused, right? They have inroads into businesses. Google has inroads into advertisers. That tells you everything.

SPEAKER_23: Yeah, absolutely. Azure and other cloud services increased 46% year over year.

SPEAKER_05: The $19 billion of that revenue was from intelligent cloud up 26%. LinkedIn revenue was up 34% year over year in our biggest sponsor.

SPEAKER_07: I believe. Let's go LinkedIn. We love LinkedIn, the silent storm. Just getting her done. Talk about a great purchase.

SPEAKER_00: I mean, is there anybody who has made a better series of purchases than Microsoft over the last couple of years? Like, let's go through it. Right? LinkedIn.

SPEAKER_308: So we got LinkedIn. GitHub, minecraft. Minecraft was, and they're doing it now.

David Friedberg: Activision.

SPEAKER_108: Mm hmm.

David Friedberg: We said Minecraft. Didn't they buy another big gaming studio as well? I mean, and they bought Skype. That was kind of sideways.

SPEAKER_141: Oh, right. They bought the Elder Scrolls game studio. They've been buying a lot of game studios, like quieter, smaller ones. So, so smart.

SPEAKER_00: Um, and, uh, yeah, fantastic. Congratulations. Microsoft and Microsoft training at a 30 P E ratio. So when you look 30, 20, 12, Microsoft, Google, Facebook,

SPEAKER_27: how do you interpret that Molly? Well, you interpret as stability and predictability of that revenue, which you absolutely pointed out. If you had to list those three for a business person, Microsoft is essential. Yep. The cloud, et cetera. And for video gamers who are into that world, essential, hard to live without Google, very hard to live without. I don't think I can live without YouTube at this point. I don't think I can live without search. Of course I've tried all the other search engines. It's disappointing. Eventually. Although I will say, um, I have been pleased with using other platforms

SPEAKER_64: for writing content. So I do think like the office suite and some of those things I see young companies are, you know, going from office to Google, from Google to notion,

SPEAKER_08: Coda, Grammarly, I think Grammarly has got to play to actually not just correct your grammar, but I, I told them like, why can't I edit a document in Grammarly kind of love their interface? Um, I would love to make that my hub of, you know, documents, um, but they don't have multiplayer.

SPEAKER_00: Uh, so yeah, I, I think you nailed it. Facebook completely fungible and not essential. If you told me Facebook and Instagram were shutting down tomorrow, I'd be like, okay, can I download my pictures?

SPEAKER_183: Uh, I have them all probably on my phone and my, you know, already, but yeah, maybe I could. So that is so funny that you say that. Cause that is the only reason I haven't downloaded Facebook.

SPEAKER_319: Cause I just can't be bothered trying to figure out or turn it off.

SPEAKER_05: Right. Like I don't, I'm sorry, turn it off. I still have it, but they make it impossible to download my fricking photos. And there's a lot of them that in there that aren't anywhere else. I know there's a way, but I can't be bothered to figure it out. And I still occasionally use Instagram. So I haven't deleted the account.

David Friedberg: That's the only reason. This is what I do when I'm on Facebook.

SPEAKER_27: I look at my main feed and anybody in my main feed who I haven't had a meal with or talk to on the phone.

SPEAKER_08: You know, had a real conversation with in 10 years or five years. I just unfollow them. I unfriend them and I try to unfriend like 50 people in my feed.

SPEAKER_27: So my feed actually starts to look a little bit better. Cause I was in the era when all these things came out. One of the reasons I became more well known is I put an intern full time for 10 bucks an hour on literally going into my social media accounts and following everybody. And just people were like, Oh, Jason Calacanis found me.

SPEAKER_57: Who's that? It's like, I don't know. I have to follow him back. And it was like a really good technique at the time. Thanks guys. But, uh, yeah, there's all.

SPEAKER_326: It's not like I can't find out.

SPEAKER_06: It's that I don't have eight minutes to go and do it.

SPEAKER_13: It's like 20, look at how many steps it is. It's like, go here, hit settings, go to here, do this. And then we're going to maybe.

SPEAKER_319: Open your permission and download this and then deselect all and then click on the photos and videos and then choose the range. And by the way, this is posted in.

SPEAKER_239: And bang your hand with the hammer three times, break your knuckles.

SPEAKER_23: And then, yeah, it's the last step requires you to switch to available copies. By the way, I guarantee this was published in January. I see, I'm sure that Facebook has changed that already to make it simpler for me.

SPEAKER_05: Yeah, yeah. And they put a blog post about how it's going to be easy. However, Nick makes a really good point that Facebook's most influential product, the only product in the arsenal that might not be optional for people is WhatsApp.

SPEAKER_23: That is true.

SPEAKER_57: Yeah. Billings of users. Yeah, I it's, uh, yeah, WhatsApp has got a global phenomenon. I agree. Yeah. You know, and they had that thing where it was a dollar a year. Remember that like little device that had a dollar a year? Uh, they were charging people or something. No. Uh, yeah, WhatsApp had done an experiment. They had 600 people paying a year or something. What's their way of like getting people to put money in there for the wall? It's okay.

SPEAKER_08: Hey, I saw people dunking on Manscaped.

SPEAKER_56: Uh, and I hear Manscaped ads on Nick Fan TV, my favorite YouTube channel, uh, to talk to long suffering Nick's fans. Shout out to CP, the franchise.

SPEAKER_08: Uh, this company is a consumer company. Mm hmm.

SPEAKER_267: Uh, and people were saying it's not making any money, but there was a kind of a debate on Twitter. Walk us through Manscaped, which makes male grooming products.

SPEAKER_319: I'm just one of those ones where like Nick put in a bunch of math and I'm hoping we can

SPEAKER_05: explain it for people. They were a Manscaped released, uh, it's Q4 and 2021 full year earnings on Friday style note. I always referred to companies in the singular because the company is an entity, not a they. Okay. It's an it. Got that. That's true. The pronoun. Um, the consumer grooming brand Manscaped disclose some key revenue statistics. For example, it has grown quickly since it's launched in 2016 now claims 5 million men have bought its products revenue increased from 65 million in 2019 to $210.7 million in 2020. And then some more $297 million in 2021.

SPEAKER_341: So a triple and then a 50% increase.

SPEAKER_06: Yeah. So like slowing down, but big numbers. Got it. Slowing down. Yeah.

SPEAKER_05: So we don't know, uh, the number of employees increased from 49 in December 31st, 2019 to 199 at the end of last year, 2021. In 2020, Manscaped's gross margin was 50% ish, but apparently its margin is falling.

SPEAKER_00: The amount is an interesting note though, just back of the envelope, they have 200 employees

SPEAKER_08: and they're making almost 300 million. They're making 1.5 million employee, which, uh, is like think two and a half times what

SPEAKER_27: Twitter makes per employee just in terms of efficiency, not to dunk on anybody, but they're making revenue per employee. Now, again, it's a physical product. So it has less margin than software, yada, yada, but that's pretty, uh, you know, strong on a

SPEAKER_07: per employee basis.

SPEAKER_05: Yeah, no, pretty good. And then, uh, the gross margin fell some in 2021 Q4, when you may recall there were lots of supply chain things fell to 44%, which again, on hardware, it doesn't seem that terrible. Right. To me, this could be a result of increased manufacturing and shipping costs that we saw across the globe and could be for Manscaped's new product launches. The supply chain issues. And supply chain issues.

SPEAKER_349: Yes. We all had that. Yeah.

SPEAKER_05: But here's where it gets sort of interesting. And this is the part where people start dunking. Like none of this seems like a giant red flag on its surface. However, then we dig in and discover that Manscaped's $315 million net loss was driven by about $310 million in stock-based compensation costs. Right. And they accounted for the stock-based compensation in their adjusted EBITDA, which they claimed was breakeven at $5.1 million. Okay. So let's dig into, this is like when we were invented community EBITDA. It's not that bad. Okay.

Chamath Palihapitiya: We need a new way to define community, Rivka. Why not have pictures in the S1? That's why we did it. That's why we put the pictures in the S1 because nobody's done it. Nobody's done it.

SPEAKER_195: That's why we did it. Adjusted EBITDA. We would have been profitable, Rivka, if we did not have to pay people.

SPEAKER_356: Stock options.

Jason Calacanis: So many stock options. So people on Twitter were calling out Manscaped for this terrible adjusted EBITDA calculation.

SPEAKER_05: I don't understand. I don't have a problem with it. Is this funky accounting or does it matter?

SPEAKER_27: I don't think it's funky accounting. Listen, if you're you give people stock based accounting and that is not the actual nuts and

SPEAKER_00: bolts of the business, right? That's to get people to incentivize them to stay at the company and to bring in talent. I guess ultimately on an accounting basis that is coming out of the other shareholders.

SPEAKER_27: Um, but I think looking at the actual, um, spending and profitability of the business is what's important.

SPEAKER_57: The growth rate, the revenue per employee, et cetera.

SPEAKER_08: So, and sometimes these are like, uh, large balloon payments that happen to executives during IPOs, et cetera. So you could have like the CEO got a hundred million dollar grant or a fifth, you know,

SPEAKER_57: the CFO got a $25 million grant. So usually you net those out to understand the actual business.

SPEAKER_08: Not, not a terrible business is what I would say. Um, so congrats. Yep. We'll find out over the next couple of earnings, if they're just paying King's ransoms, uh, and diluting the cap table by giving so many shares to the employees.

SPEAKER_57: And that's really what it's about. If you own 10% of this business, if you were ahead, if you were like an endowment or some big, you know, fidelity or something, you own 10% of the business.

SPEAKER_13: Yeah.

SPEAKER_08: Well, if they give 20% of the business to the employees, you now own 20% less shares. If they were doing that every year kind of sucks, right?

SPEAKER_57: Because you've got a headwind of more shares are being issued to the employees. Now, if they're issuing them to better employees who have better results, maybe you take the 20% hit on the amount of shares out there in their dilution, because the business is growing 50% a year and they got great people, you know, in those seats. So you'll find out over time if they overdid it with the stock comp.

SPEAKER_47: Yep.

SPEAKER_05: We shall see. All right. Well then two little news, lightning round news items that I think are super interesting that we can't leave for tomorrow. And one of them is that Apple is finally acting on its right to repair. Oh, explain what a right to repair is. So right to repair is the idea that if you buy something, you should be allowed to fix it and a company should make parts and manuals available for you to be able to pick or get fix your gadget instead of saying only authorized repair shops can fix this.

SPEAKER_23: And you can, if you open it up, you'll void the warranty. Apple has been the worst offender here. Horrible.

SPEAKER_75: So up to and including making proprietary screws that require proprietary screwdrivers is I'm not making that up.

SPEAKER_05: So Apple announced that it would start a right to repair program. Everybody was really skeptical and now it's happening.

SPEAKER_06: They're issuing actual iPhone parts and tools, right? Which can be purchased by anybody. You can fix your phone and put a new battery in it when the battery dies.

SPEAKER_57: Or if you don't live within, you know, the distance of an Apple store, you know, somebody could set up shop in their garage and fix your phone for you. This is the way it should be. Yeah.

SPEAKER_08: Uh, let people fix it if they want to. It's better for the, I mean, I really think it's better for the environment. So if Apple's going to talk the talk, they got to walk the walk and they do walk the walk

SPEAKER_13: when it's convenient to them, which is, oh, we're not going to give you your charging brick be in your headphones anymore because we know you already have those. It's better for the environment. Also happens to be better for our margin. Exactly. Because you're going to buy a new one for $29. Then you have to do some things that are worse for your margin. Like letting me order a kit to fix my screen instead of going to the store and paying you

SPEAKER_08: a hundred bucks and I can do it myself for 50. A hundred percent.

SPEAKER_375: And then one last piece.

SPEAKER_27: Good for, I say good for Apple. I wish they didn't have to do it under pressure. Um, and then I understand some people don't want people screwing with their technology or some things you shouldn't do. So there could be some things that like, maybe you can't take your camera or the battery apart

SPEAKER_64: because, and be under warranty because you're going to break because it's not possible because it's glued together or something, but swapping out the battery is obvious.

SPEAKER_150: Remember when you, remember when you could buy an extra battery for your Blackberry? I'd buy three extra batteries and I keep them charged in my backpack. I never had a dead battery.

SPEAKER_05: You know, now when you could put a freaking SD card in your freaking phone instead of paying Apple $300 a megabyte or whatever they're charging.

SPEAKER_380: Yes, that's something Apple.

SPEAKER_172: Hey, you know what crazy EU to my friends in the crazy EU, right?

SPEAKER_27: There's something crazy for you to do. Force them to use a USB C and to have an SD card. Yes. Do it. Do it.

SPEAKER_07: And I got to order my iPhone from Europe and ship it here to have those two features. Oh my God, I totally would. And then finally, speaking of you ordering stuff.

SPEAKER_06: Last bit of good news. What's that? Chevy's making electric Corvettes. What?

SPEAKER_27: I am so drooling over that. But and one more thing for Apple for the punch list. And you can clip this and give it to somebody can clip this. Yes.

SPEAKER_87: And go ahead and re aggregate this. Hey, Tim Cook. It's Molly and J Cal.

SPEAKER_00: Congratulations, yada, yada. We love you, Tim Cook. Great products. We spend a king's ransom on your stuff every year.

SPEAKER_10: Three things. Number one, SD cards. Number two, USB C on the iPhone ASAP. Number three. I've bought so many lightning cables with you that will go in the garbage at some point.

SPEAKER_13: How about free dongles or a $1 dongle that lets you plug the lightning into that little dongle little tiny thing on the tap and changes your lightning into a USB C. I've bought these on Amazon from third party sellers and you keep breaking them and turning them off exactly that Molly. I was taking my little anchor charger that was USB C to lightning and then bringing this little dongle

SPEAKER_08: with me one cable to unite them all or I'd have like the double that I have and the triple. Yeah, I would keep these extra ones. So when I wasn't when my iPhone was fully charged, I could turn my lightning cable into a USB C.

SPEAKER_06: And they keep breaking it and they keep breaking it. I mean, it's unacceptable. It's unacceptable.

SPEAKER_73: Tim, get on a standard and stay on the standard or let us use a dongle Tim and just produce it yourself or here's a genius idea for you.

SPEAKER_13: Apple, when you sell us a lightning cable, do what anchor did attach to it a little dongle with the USB C. Now, if you own an iPad and an iPhone, I could bring one cable with me or with my kids,

SPEAKER_239: they could do their old iPad, which uses lightning and the new iPad, which uses the USB C. In other words, save the goddamn environment. You guys are so green.

SPEAKER_13: If you're not going to do it, stop blocking other people from doing it or just do it yourself.

SPEAKER_05: Yeah, you there's enough margin and enough premium pricing in these products. If you're going to charge like two to $7,000 for a laptop, you don't need to be nickel and diming us. Yeah, stop nickel and diming us.

SPEAKER_214: Fix the cables and use the standard. Use the standard. I can't wait till they make the iPhone USB C. Yeah, that's going to be delightful.

SPEAKER_05: I mean, literally, I know that you have solved this with the little anchor thing, but I still can't believe that it's three different cables to charge my phone, my watch, and my laptop because now I have the mag safe on the left. Like, I'm like, are you kidding me?

SPEAKER_07: Yeah, it's good. Are you kidding me? Just USB C everything. Get it together.

SPEAKER_27: Get it together. All right. And then on the Corvette, pull up the Corvette. Stay away from me, please. An orange or here we go.

SPEAKER_00: Here's a video of the electric one. They're going to make a hybrid from what I understand. Then I'm going to full electric. And, you know, listen, I want to get a roadster 2.0. That's going to take a couple of years. I understand. Yeah, but the Corvette was my first love as a car. I mean, I had a 73 Mustang Grande 351 Cleveland. I love that car. But then I had a Corvette C6 in yellow convertible. That was my dream Los Angeles car. And I really would love to own a Corvette again in my life. But I refuse to buy a car that's not electric. Yeah. That's the promise I made to myself. No more non electric cars. Yeah. And so I want to buy a Jeep Wrangler or a Cybertruck when those are available.

SPEAKER_13: And if Corvette, you know, never makes an electric car, I would consider it.

SPEAKER_08: I'm a Tesla guy, but I would, I would love to have a Corvette for a couple of years and, and go through another midlife crisis. Beautiful.

SPEAKER_99: Absolutely beautiful. Like get it done, get it out, get it done.

SPEAKER_00: And this is, I tell you why this is so important. Corvette fans are like loyalists. Like they're like BMW for life fan kind of situation or Audi people like they're nutcases. And so this is bold.

SPEAKER_08: Like this is like the last muscle car to fall to EV. Like they did the Mustang. They screwed that up because they didn't make it look like a Mustang, but Corvette saying, Hey, it's a Corvette. It looks like a Corvette. It's the same as the other one. And we're going to make it electric. You know what? The performance of this Corvette is going to be bonkers. And hey, you may even be able to have a trunk or some room for stuff.

SPEAKER_06: Right? Because you can have a front.

SPEAKER_05: I'm not saying that I stone cold smoked, uh, an obnoxious Dodge Charger getting onto the Bay Bridge last night, but I'm only saying that once in a while when you

SPEAKER_06: put that EV torque to work, it just brings a smile to your Corvette.

SPEAKER_302: Let me just show this to Molly. Show the Corvette stingray, uh, 2023 Z06.

SPEAKER_57: Just, oh, if you can show it in orange, this thing is making the, uh, supercar world lose their mind again because this thing is under a hundred grand and it's better than a Lamborghini.

SPEAKER_171: I know it's the affordable supercar. Yeah. My, my kid and I talk about it all the time. Look at that.

SPEAKER_04: It's gotta be the 2023 one. That's not the 2023, you know, thing. Um, and you want the stingray specifically, but anyway, you'll, you'll see some photos coming

SPEAKER_62: up here for our notice and this Z06, it looks like the, just a crazy looking car. It is so gorgeous.

SPEAKER_428: Yeah. That's the car I want so bad.

SPEAKER_62: Yeah. Look at that.

SPEAKER_430: Oh, I'd imagine that an electric, like zero to 60 in that. Going to LA in that summer, the summer Tahoe, summer Tahoe car. I want to get a convertible one.

SPEAKER_214: I mean, the thing is a beast. Look at those flares with the air intakes. I mean, it's just.

SPEAKER_27: What those air intakes do is not just cool down the engines, everything. It creates grip. So it pushes the car down onto the road.

SPEAKER_295: Oh, I loved my Corvette. Can't wait.

SPEAKER_436: All right. This has been a great show. Thanks everybody for tuning in.

SPEAKER_438: Hey everyone. Producer Nick here. I want to tell you about the SaaS syndicate. If you're a founder of a SaaS company with a product and market, our investment team wants to talk to you. Head over to the syndicate.com slash SaaS, S-A-A-S to apply to raise from the SaaS syndicate. And you can join Jason's syndicate of over 9,000 accredited investors at thesyndicate.com.

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