SPEAKER_00: all right everybody it is thursday june 9th jason has a family event today so uh i got to choose and you know there was only one choice to make deirdre brosa from cnbc to chop up the news SPEAKER_03: deirdre thanks for coming on thank you so much for having me i mean molly i've just wanted to chat with you anyways you got that jason guy out of the way we're ready to go out of the way i know SPEAKER_06: you know i love you jason by the way i should say that jason we miss you buddy desperately SPEAKER_09: not right this second though this week in startups is brought to you by indochino indochino makes custom fitted suits shirts and casual wear at affordable prices shop for your next best look or book a virtual style consultation at indochino.com right now you can get 50 off any purchase of 399 or more by using code twist at checkout vanta compliance and security shouldn't be a deal breaker for startups to win new business vanta makes it easy for companies to get a sock to report fast twist listeners can get 1 000 off for a limited time at vanta.com twist and our crowd our crowd helps you invest early in pre-ipo companies alongside professional vcs if you're interested in investing you can join our crowd for free at o u r c r o w d dot com slash twist i'm very excited SPEAKER_13: because you know it's always a little awkward when we have to talk about elon musk with jason because of the homie situation so let's start with this breaking news as of i think this morning maybe late last night that twitter plans to comply with elon musk's demands for data uh elon musk had had basically been threatening to walk away from the twitter deal saying that twitter's refusal or inability to count its bots was a material what did he say it was material information that could affect the deal price and then all of a sudden the texas attorney general SPEAKER_16: coincidentally starts investigating twitter over its bot situation so the maximum pressure campaign seems to have worked what are you thinking what are you thinking what are you thinking about this situation i mean do you think that twitter because all along twitter has been saying SPEAKER_21: this is really hard we can't aggregate this data yeah so now has twitter been exposed SPEAKER_03: i mean there's just so many twists in this i feel for the employees we were just talking about this as we ended the show as i jumped off tech check and what i said i'm interested now that elon musk is going to have access to this data which by the way other companies have had access to this data not just twitter but it can sell this data for people and companies to sift through and pick out what they want is elon musk going to be able to find something that no one else has um he's been able to do things that no one else has and then my co-anchor john fort he countered he said of course you can find something through that much data he's going to find something to build his case to not do this deal so you know it's true i maybe i'm more optimistic i don't want to play the jason role here but i think that elon musk sees things that other people don't so um maybe he'll find something that was previously undiscoverable that could be good or bad if you believe he wants to get this deal done SPEAKER_27: and i guess that's a crucial question does he want to a lot of folks think he doesn't well and i SPEAKER_28: guess there's there are sort of two parts to that which is does he want the deal at all or does he want SPEAKER_13: the deal at a lower price and that seems to be yeah possibly maybe he wants to walk away maybe he's just sort of like this is not this is more than i bargained for and i'm not interested in doing this after all this passing phase if you will but it seems more likely that what's happened is twitter is now trading well below yeah the five fifty two five five four twenty whatever amount that he whatever SPEAKER_28: joke amount that he offered fifty four twenty fifty four twenty thank you number at the back right i SPEAKER_13: know i was like where does the weed go in this calculation um and so maybe it's a it's to get a SPEAKER_34: better deal well so it's not surprising that he wants a better price um the fact that this is elon SPEAKER_03: musk and it's twitter and it's such a big story we all focus on every little twist and turn but you know what also happened recently molly um toma bravo right the private equity firm that announced it had plans to acquire anna plan a certain price quietly adjusted that anna plan agreed to it but they're now getting a little bit of a discount so it's not just elon musk the markets are moving so quickly we cover this every single day valuations are getting more and more attractive um we're all focused on elon musk because he made such a splash with this should the twitter board accept something in the middle they probably don't have to because of the way elon musk went about this he's just so brash and he announced this and he said he didn't need to do due diligence so SPEAKER_13: the position he's in he's put himself in oh a hundred percent and and we should be super clear that he actually has no legal right to cancel this deal right he has signed a contract and actually the contract probably even says something along the lines of you signed a deal that said you weren't going to do any diligence so you are not in fact entitled to diligence but because it's elon musk who one of our our noties referred to the other day as like a sovereign state you know he can apply this maximum pressure in public he can move a gigafactory to texas and then all of a sudden have the texas attorney general investigating twitter over a bot problem which i would argue is not among the top priorities for texans in terms of enforcement mechanisms um and and so it doesn't actually SPEAKER_36: matter i mean i guess that's the question doesn't matter anymore what contracts say SPEAKER_03: exactly well let's remember that tesla one of the most successful companies of our generation in the world at the moment one of the biggest market caps has not spent any money on marketing or communications right elon musk has been able to work twitter and this public persona to build one of the greatest companies that we currently have is he applying that sort of same playbook to what he wants to get out of twitter um it feels like it is it going to backfire this time i guess that's what makes this such an exciting story for us right and of course we should acknowledge like SPEAKER_36: the in the elephant in the room which is that it's all all journalists are on twitter yeah of course SPEAKER_13: like of course journalism is going to cover this to the ground because it's not just his playground SPEAKER_03: it's ours well molly let me ask you there's been so much discussion of the employees during all of this as well i think i started i said i feel for them they're in this limbo but they've kind of always been in limbo what an interesting company throughout the last decade to cover twitter right i mean it's gone through so many transitions you had jack dorsey go back what do you think they're thinking right now i mean i hear a little bit of it from sources of course but is this so different than what it's been through over the last decade yeah i i don't think so right i mean i guess SPEAKER_13: this sort of existential uncertainty is probably new what happens if musk comes in and buys this and takes it private and changes everything but certainly the number of identities that twitter has been through remember when it was the arab spring and it was sort of like going to be the savior of freedom and liberty across the room because it was going to sign across the world shining sunlight in every corner and then it was moribund before the 2016 election it was really like on the decline and then trump in the 2016 election really were a huge i think shot in the arm for twitter um like i will never forget les moonvez of cbs saying trump is terrible for america but he's great for cbs he was great for for twitter too and then all of a sudden it's in the eye of the disinformation maelstrom SPEAKER_03: what's the saying molly if you live long enough live long enough as a hero that you become the villain i'm sure i'm getting that wrong if someone can correct me but i often get my basically something like that exactly like that the sentiment um that's what happens with twitter right yeah you talk about the arab spring and how it was the savior and it was going to bring information and a voice to everyone around the world and now it's the target of disinformation we're kind of seeing the same thing i don't know actually are we seeing the same thing happening to elon musk he's done such amazing things with with uh tesla with so with his other companies so now he's really changing in the public view as well and it's really hard to figure out what's motivating him here is he bored is this his yacht that's bigger than jeff bezos is is that why he wants twitter why else does he want it yeah i don't SPEAKER_13: know i mean i do think that there is a lot of credence to the idea that it's just passion that it SPEAKER_28: literally is the product that he loves and the product that he has been able to so effectively use SPEAKER_13: i mean if you had the most effective marketing arm to your point on earth and you could own it i guess SPEAKER_03: why wouldn't you it's interesting too when this whole saga started we talked a lot about how twitter's board is basically non-existent on twitter they don't really use it yeah why haven't they been using it experimenting with it it's funny they've just let sort of elon musk run amok and do what he does um and it doesn't feel like there's been any increase in engagement not that they necessarily should they're focused on the financials of this deal some would argue that that is a better thing to focus on but it does go back to what i think jason might say here is letting someone run the company who loves it and that's what it comes down to i guess at what price SPEAKER_58: they have their fiduciary duty to get it for the price that elon musk said he was going to buy it for SPEAKER_13: right i mean i think you hate to make a prediction where musk is concerned run a musk yeah am i right SPEAKER_62: listen weddings are fully back this summer as i'm sure many of you know whether you're the groom in the SPEAKER_63: wedding party or you're a guest you gotta look great everything's gotta be tight and if you want to look great you gotta use indochino just like i do they make high quality custom fitted suits shirts casual wear and more with indochino you can customize everything suits and shirts to chinos and bomber jackets at surprisingly affordable prices you can get your entire wardrobe personalized to your style and taste without spending a fortune i did this i bought a bunch of suits before i went to italy last year and i had a wonderful experience you do every little piece to your exact measurement and you can customize all the details like the lapels the monograms the statement linings i love so much your pockets and indochino suits start at just 429 dollars and shirts from just 79 what an amazing deal i was blown away by the process by how affordable it was and the quality of the suit so if you've got a big day coming up getting the perfect look is very simple with indochino get 50 off any purchase of SPEAKER_64: 3.99 or more by using the promo code twist at indochino.com and that's going to let them know that SPEAKER_36: you're a fan of this week in startups i feel like there is no universe in which he pays the original bid for twitter and i don't think he even wants to is there a universe where this doesn't go to court SPEAKER_03: forever and then you have the court looking at the data that what is that 500 million tweets a day and this just ending up in the legal system for so long i just i don't see that happening because SPEAKER_13: it's no good for twitter you know i keep sort of quoting matt levine on this one who has written about the fact that on the one hand there is the letter of the law there's an existing contract it affords no rights to due diligence material impact and material breach is incredibly hard to prove and there's a billion dollar breakup fee and all that is in writing and it's incontrovertible except that on the other hand you have elon musk and who the hell is going to want to sue elon musk why would you do that right it's nothing but downside for twitter so most likely he's going to get what he wants i'm sure it is demoralizing for some employees and thrilling for others and it it's it's like the most SPEAKER_76: annoying soap opera that i wish i could stop watching i i completely agree molly what is your SPEAKER_03: do you love twitter or hate twitter or is it both i mean this is a question that we are constantly sort of debating within cnbc right you're on tv every day and you see the comments rolling you're SPEAKER_78: on a podcast you're on youtube every single day what would you want to see improve i mean i SPEAKER_13: definitely don't understand why that product has not gotten better my theory about twitter is that because everyone was so hands-off in the beginning because there was this sort of like it's it's all free speech all the time none of the issues that have broken twitter now like bots and brigading and harassment and spam all of the issues that were making twitter you know difficult for a segment of the population that was never listened to women of color primarily gamer gate for example when we all decided that gamer gate was like not a thing and didn't enforce any rules around harassment and brigading and spam and bots twitter really did become over the years totally unusable and then they had to sort of like go too far in the other direction to try to correct it and so people who had never been even a little bit moderated in terms of their content lost their collective and i think it's been a failure all along of moderation that has now made it a complete flashpoint the like center of the culture wars and so twitter is like simultaneously the best and the absolute worst i mean i remember years ago wanting to wanting to round up a panel for south by southwest and get like marty baron and uh mark thompson the new york times guy or you know what's his butt dean bouquet and the guy from so okay post gerald baker and be like why are you letting your journalist be on twitter because it's so clear that twitter has become the assignment desk for media and that fear of getting yelled out on twitter is materially changing what we report and it would be a lie to say that it doesn't it does SPEAKER_03: twitter it's it's this place where um i'm always very aware that um within you know five seconds you tweet something out that could be the difference between being fired and not you have to be so so careful with how you use it but i'm torn i mean and we've had this conversation on tech check as well um do you moderate do you take people like former president donald trump off the platform and then there's this whole segment of the population that maybe thinks something's being hidden from them right or do you allow them to make up their own minds it was interesting um we had someone on that said though that this prominent vc who said that she was blocked by elon musk on twitter so if he can block someone that's not free speech either and there's this constant push and pull i am i was hoping at the start of this that we we could see what elon musk was going to do here if he was going to make it open source how that would even work what a fascinating experiment now i fear that we're never SPEAKER_88: going to get that opportunity because this is going to be tied up in litigation for years and years SPEAKER_13: i know because i agree with you i would love to see the data on the bots like i'm with elon on that one i want to see the data on the bots i want to know if shadow banning exists i want to know if SPEAKER_16: there's some email chain that says we verify this person and not this person what if it's not all that SPEAKER_41: exciting what if i'm sure it's not that's a sad thing like yeah the majority of twitter users are just sort of they're silent they're just going on to look of course you're going to hear bots because they're SPEAKER_03: the loudest but there's so many people on twitter who just use it to follow people and don't actually SPEAKER_16: do their own tweets i know everything is so much more banal than you think it's going to be when it comes out in discovery i'm sure this is reporting on it all along the way it is so yes to answer your question more succinctly love slash hate yes like there isn't anywhere else where you can get such SPEAKER_13: direct access to information on the ground and that's the part like i want to like cut through all of the journalists on my feed and get to the people who are actually telling us in real time what's happening that was like the magic right but somehow it all still got mediated by bots and journalists and vcs and you know there still is like information gatekeeping on twitter that when you can strip that away it's magical you can't get that information anywhere else SPEAKER_56: i mean i had a i had a scoop a few weeks ago and i thought i looked at and i thought okay i could SPEAKER_03: put this on the cnbc website but within the you know 20 minutes it takes me to do that someone else could get this scoop and report it twitter was the fastest most effective way to do it but that's something that we're at cnbc constantly navigating as well how do we direct people to our site make SPEAKER_38: sure that cnbc is getting credit for this while matching the speed the velocity of twitter yeah it's SPEAKER_13: i know it's impossible it's impossible um i we only have a short time with you and so even though we could probably talk about twitter all day it's not good for us or america so let's let's talk about a really big business story that happened while everybody else was talking about ios 16 updates and what's going to happen on your home screen um apple is moving into the buy now pay later space with its new apple uh apple pay later service and will handle lending internally so mark urban at bloomberg just for background reported that apple has now decided to manage all of the aspects for buy now pay later it's going to be its own underwriter which of course it can do because as of last quarter apple had 51 billion dollars in cash and marketable securities for comparison the kind of 200 billion i think they've got 200 billion dollars i thought yeah 51 billion is SPEAKER_28: that just oh yeah yeah they've got nearly 200 billion overall i think they may have added in last quarter SPEAKER_13: 51 billion dollars in cash thank you guys okay so just to be clear the 51 billion that i mentioned before was apple's cash and short-term marketable securities at the end of the last quarter so presumably money they could spend now if you include the long-term securities of the additional 141 SPEAKER_36: billion that's where you get that 200 billion dollars in total cash but either way the only other the SPEAKER_13: other major buy now pay later player a firm has had to partner with cross-river bank to underwrite loans on its platform so apple is in this phenomenal position where everybody has been asking what are they going to do with this cash and we were like maybe they'll buy disney or tesla and turns out they were like no we're gonna go big boy here and be a bank i love the way that you just framed that SPEAKER_120: like that's where the real money is right like they're not messing around they're not acquiring anything SPEAKER_16: they're just opening up the balance sheet to consumers i mean this is bananas how from your SPEAKER_03: understanding will this work for apple so i am fascinated by this story i used to cover fintech and there's always sort of been the elephant in the room which is the big tech giants when would they really push into financial services they have the users they have the credit card payments information apple has 1.8 billion devices many users on its apple pay program um it's so interesting i don't think that this is just about buy now pay later i think this is setting the tone for apple to become a full-fledged as you called it bank or at least offer financial financial full-fledged financial stack so maybe this is just the beginning but you're getting into lending and it's so notable that they're already working with goldman sachs and mastercard on their credit card offering but they're doing this themselves they created this wholly owned subsidiary and as you said molly they're going to be lending from their balance sheet from their massive cash pile um three things going for it which makes this so interesting and so powerful is that apple vertical integration fintech flywheel that now is getting going supported by the services business which has been growing so much so one they've got the low cost of customer acquisition right all of those devices and the people that are using apple wallet two they've got that low cost of capital which we've talked about 200 billion dollars on the balance sheet third data and underwriting apple has you know been collecting payments information from their users through the app store through buying an iphone or a computer whether you miss sort of a payment or you can't make a payment your credit cards decline for something on the app store they can use all three of those things to become quite a formidable player i think in SPEAKER_124: the space listen when you're a founder it's fun to trade your craziest stories with other founders recently balloon ceo amanda greenberg one of my portfolio companies told me how vanta's sock to solution helped her 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slash twist once again vanta.com twist for a thousand dollars off it's very interesting on a SPEAKER_13: number of fronts one uh not least of which is one imagines that this will start to open up all up to even more antitrust scrutiny even though the antitrust play here is not obvious right apple itself is only barely a majority in the united states in terms of um penetration i think it's like 51 is apple in the us which is not quite monopoly levels and they're certainly not going to be a monopoly in banking however they become this like incredibly powerful force in terms of this sort of what does future antitrust law look like does it look like sheer power and integration of every single thing SPEAKER_03: that a consumer does right it's already fighting these battles but there's been so little evidence especially here in the us that regulators are going to get anything done that used to be my biggest point why wouldn't amazon or facebook or apple um or google go into banking because they don't want to further spur the regulators but i mean it's been years that we've been talking about regulation markets don't care investors don't care consumers don't care other companies developers they do care but hasn't made a difference regulators cannot get their act together at least in the us europe SPEAKER_88: a little bit more yes but it's still moving into these areas because i think it can yeah absolutely SPEAKER_16: and then that raises this sort of other question about apple moving into not just finance but SPEAKER_13: buy now pay later which you know is arguably well i guess this is the question is it good for consumers like for example we've seen recently that the us consumer is still spending so everybody's like yay the economy is going to be fine as long as we're buying crap which is such a delightful way to measure health um however we're seeing that consumer credit after declining pretty significantly during the pandemic is now starting to rise so people are buying but they're buying with debt and then increasingly they're piling on these buy now pay later payments and there's been some research SPEAKER_36: that says at least one in four uh consumers have have missed a buy now pay later payment you know SPEAKER_03: i'm i'm torn on this we just spoke to max levchin earlier this week on tech check and i asked him this this question i said there's no real upside for consumers to use buy now pay later doesn't help them build credit and it could get flagged to you know the credit authorities that they missed a payment so there's only downside for your credit score on the other hand i don't know if you know this molly i'm canadian i've been living in the us for about six years now when i first got here despite my credit history in canada it didn't matter i could not get a credit card i still have issues six years later it has been so difficult for me to build credit when i moved here six years ago i really could have used a buy now pay later and i think that there's just this general distress especially among a younger consumer to get in with the credit card there's some surprise along the way i'm not saying that that's not the case of buy now pay later but there's less sign up um and as there's less upside for buy now pay later there's a lot of downside with a credit card as well if you don't understand exactly how it works i don't really like that argument is that we should be protecting consumers by not offering buy now pay later they have overwhelmingly shown us that that is what they want especially millennials and gen z so why not offer it to them in a good in a safer way and i believe there's both companies doing this i think a firm will actually is willing to deny consumer if they don't think that their credit worthiness is good enough they're going to say we're not going to issue this loan apple starting small with a thousand dollars um so there's a right way of doing it but then there's all these other companies that have jumped on the bandwagon and will probably issue SPEAKER_137: a bnpl loan no matter what the credit worthiness of the customer right i mean there's the one argument SPEAKER_36: that this could be troublesome for apple's brand because finance is one of the least trusted industries right among consumers that's why you see this rise in neobanks who are basically like yeah we're not SPEAKER_13: trying to screw you like everybody else but on the other hand apple really does to your point have an opportunity and a firm also to be really transparent with the terms and apple really is SPEAKER_03: and do it better i am it was so funny over the last summer my six-year-old got some you know christmas money was still sitting at our desk you know six months later but i walked into a bank this was in canada and um i said okay is there anyone here like my six-year-old is right here he wants to open a bank account in my mind i'm thinking here you go i'm giving you a customer for the next like 50 years who will get a mortgage in 30 years um all of this stuff and there was two people in their you know offices with their door shut and i could see they were doing nothing they were doing nothing they were just sitting there kind of puttering around and you know the teller said you need to make an appointment i'm like i can see they're not doing anything like and they said no you still need to make an appointment i said well you know my son's you know off camp right now we can do this right now said no so i said oh this is just so frustrating this is what i don't want to introduce them too there's a way of doing this better and to me opening up a square cash or a paypal account SPEAKER_125: or a chime account um for him just seemed like a better option at the time absolutely and you could SPEAKER_13: a hundred percent see where apple's going here right they started because if you look back to all of the times that apple has had to work with someone else's restrictions up to and including when they launched the iphone and it was exclusive on at&t and at&t was setting the terms because smartphones were not as popular as they are now and you fast forward to a time when apple has probably led the charge on phone unlocking and then now is letting consumers figure out how to buy their you know iphones directly from apple on what is effectively a subscription service like they've slowly carved away that carrier power and will almost certainly do the same thing for traditional finance like i could imagine a time when apple's like thanks SPEAKER_36: mastercard we appreciate you getting us off the ground here but we're done we're going to disrupt SPEAKER_125: you we're actually going to be the new payments rails it's going to happen on apple devices so visa and SPEAKER_145: mastercard you're not needed anymore right it's possible consumers will be like a little crazy super SPEAKER_21: thanks remember when every other interest rate was basically zero and your credit card was still SPEAKER_13: charging you 26 to 30 percent during a pandemic so disrupt away an app doesn't rush into things right and SPEAKER_34: that's why i think this is so interesting like i said when i covered fintech there was always the SPEAKER_03: threat of big tech doing this bank of facebook bank of apple amazon moving more into this um the fact that it's happening now and kind of slowly still just with buy now pay later but maybe as a first step in getting that full financial stack that's what i think is so interesting about this and molly too i was wondering because if you asked me a few years ago who would have done this first um i would have thought it would be amazon right and it was kind of curious to me that amazon was partnering with a firm to do buy now pay later when they could do it themselves yeah i i am also surprised there was a lot of reporting the balance sheet right and amazon is in a tricky position they have a physical core e-commerce business with a huge logistics network so they don't have the kind of cash that SPEAKER_152: apple does they do not have 200 billion dollars i think what do they have 40 50 billion so good yeah SPEAKER_28: not enough and they wouldn't have to underwrite their own i mean that's just sort of classic apple style SPEAKER_13: to be like yeah we're going to vertically integrate our financial um product too but i remember amazon i was trying to remember actually as you're talking because there was reporting that they were going to start opening some rudimentary banking services yeah even in their amazon stores i think walmart was doing the same thing i mean this is sort of like it does feel like this is the money printing dream SPEAKER_28: in some ways right for companies it's like man if we could just figure out how to crack finance like yes SPEAKER_03: here's the question though so apple is not taking deposits so we can't quite say that apple is a bank until it's taking deposits until it has a bank charter do you think that's the next step or that SPEAKER_13: be just too much i guess that raises the question of why would they right now they can if they can underwrite their own lending if they can do buy now pay later and still sort of like trade with that SPEAKER_59: balance sheet and maybe a little bit of our money i don't know do they need to i guess is the SPEAKER_03: question anthony noto who's the soap ico he was on our air i think it was just a few days ago and i asked him what differentiates yourself from the others they do have a banking charter and he says that does make their financials a lot better um and that protects them when you're entering a downturn when credit gets more expensive when interest rates are rising so it's interesting um but remember walmart tried to get a bank charter many many years ago um square has one now as well you should mention them um who knows it becomes more regular but you could see the regulators really SPEAKER_161: sorting up and saying hold on a second yeah i feel like that's just that's just red meat right like SPEAKER_13: that's just waving the flag in front of the bowl at this point this is at least they can sort of still say like there are plenty of intermediaries between us and the consumer all around the world SPEAKER_63: tech companies are innovating and driving returns for investors and our crowd is an investment platform that analyzes many of these companies across the global private market then they select startups with the greatest growth potential and they bring them to you from personalized medicine to cyber security to robotics and quantum computing and so much more in state-of-the-art labs startup barrages and anywhere in between our crowd identifies innovators so you can invest when growth potential is greatest early our crowds accredited investors have already invested over 1 billion dollars in growing tech companies and many of their members have benefited from their 46 ipos or exits and let me tell you something investing early is what it's all about you're going to want to read those deal memos and make a great decision you're going to learn so much by signing up for our crowd so you can truly diversify your portfolio by investing early in innovative private market companies at our crowd join the fastest growing venture SPEAKER_165: capital investment community right now at ourcrowd.com twist once again that's o-u-r-c-r-o-w-d.com twist SPEAKER_36: ourcrowd.com twist well in our last five minutes um let's let's compare and contrast because i know you talked about this on the show today facebook has officially changed its ticker to meta yeah so on the SPEAKER_13: one hand you have apple saying we're going to keep doing what we're doing revolve around the sun that is the iphone and add on an incredibly profitable layer of finance and warren buffett is like yes please i'll take seconds thirds and fourths helpings of that and then you have buffett's like i get this this i understand the meta right i got this let's see make a ton of money done on the other hand you have meta which is now officially right cheryl sandberg is leaving as of today the ticker has gone from fb to meta is all in on this story about how they're going to spend unlimited amounts of money building an unproven business model that will come to fruition in 10 to 15 years thoughts on thoughts on this move SPEAKER_03: it's interesting that you put them side by side because the metaverse right this is eight years out we started the show by the way check check this morning on this exact question asking is facebook a value or growth stock both the people one vc one wall street analyst on our show both of them said value stock it isn't that such an indignity for facebook or meta now when they're trying to build the next generation of technology um and they feel that they have to talk about it so much yet the venture capital community and wall street are both saying no this is a value stock it's not going fast enough the valuation is down it's not going to grow um and then you've got apple which you know we know that it has ar vr ambitions but it's not talking about honestly molly i was a little disappointed earlier this week when we didn't get more on its vision for the metaverse or for for ar and vr um but with an apple it doesn't need to because you know they're working on it behind the scenes they're going to give you something that you weren't expecting like its own bank like its own lending facility right right um before it gives you some pie in the sky idea doesn't mean that apple's not going to get there but they are in a different position they don't need to talk about it like facebook has this is the point that my co-anchor john fort made today apple has such a has done such a good job vertically integrating that now this financial flywheel seems so obvious seems so lucrative can you say that about facebook i mean they tried right to make a phone not really are they they haven't made their own chips in the way that apple has so there's just no vertical integration there they have to look to something completely new and grow this vision of a metaverse which by the SPEAKER_52: way a lot of folks are skeptical yeah well and rightfully because even even if it arrives even if SPEAKER_36: it is executed properly by meta it's five to ten years out right like the the idea of completing this vision in under a decade is unlikely but i wonder if this is somebody made the point to me recently that SPEAKER_13: in some ways this is a narrative problem by facebook like you look at how good apple is at controlling SPEAKER_36: the narrative apple is like we're going to keep selling you iphones at absurd margins we're going to sell accessories at absurd margins and we're going to tack on finance which i'm pretty sure everybody knows SPEAKER_52: makes a lot of money and then meta is out here and facebook remains a money printing machine what are its margins like 90 great point thank you makes so much money and there's nothing there's nothing that suggests that they will not continue to make that amount of money but they're out here SPEAKER_03: telling this like crazy story about a thing that's 10 years away hold on hold on is there anything that doesn't suggest they're going to make continue to make money some would argue that that is actually that is the fundamental problem with facebook why they have to talk about the metaverse because tick tock has proved to be such a formidable competitor and it's taking ad dollars away that yes it makes so much money and it will for the kind of foreseeable future but if we're entering a recession and ad dollars are the first thing to get cut while it's facing all of this competition SPEAKER_41: from the likes of tick tock maybe that poor story is at risk it might be although facebook continues SPEAKER_13: to grow i think overseas phenomenally right so it's it's declining in the united states but it still is picking up hundreds of millions of users and even if the again like even if the advertising base declines somewhat it's still like a 90 margin so it's it's hard to imagine you know it's not going to be a situation where facebook is not making yeah absurd amounts of money even if it might be like a little less than they were before so it's very possible that if you were making a narrative choice what you would try to do is say we're competition's great for everybody stay away regulators we're still making you know tons of money in india and indonesia and we're picking up users all over the world and it's a 90 margin and we're using some of that to invest over here but don't worry we'll SPEAKER_03: tell you about it when it's ready it's a good point and also it may be more believable that facebook can copy tick tock with reels like it did snap with stories i mean they did it before they just were copying and they got the user so yes i think that that maybe is the more bullish case but molly it gets back to our conversation right i mean if this is about a narrative and cheryl samberg was the one being put out there to tell that narrative or take the fall who's doing that now we talked about this with jason last time zuckerberg doesn't really talk to media do you think he has to put himself SPEAKER_13: out there more how can they fix that narrative i mean heaven help us if mark zuckerberg puts himself out there more because he is not gonna fix it let me tell you that he is not gonna fix it maybe maybe SPEAKER_184: so maybe the narrative becomes a reality i i want to try mark zuckerberg can come talk to us yeah come on come on the show come on either version come on both next week we'll do like a crossover show SPEAKER_36: it'll be amazing all right speaking of which dear dr bosa cnbc you are the best i know you have things to SPEAKER_03: get you are the best molly this is so fun let's do it again tell jason that he can address my warriors ticket to one market where we broadcast and molly i'll see you courtside outstanding it's going to be SPEAKER_92: a great day go warriors okay thank you guys so much and what do we call them nodies nodies nodie gang SPEAKER_36: thank you for having me today take care talk to you soon all right thanks again to deirdre who is awesome and the awesomeness rolls on because next up we have an interview with kalshi co-founder and ceo tarik mansoor remember kalshi has built the first regulated predictions market so if you like SPEAKER_13: the predictions that we make on the show you're going to like this one because this is the kind where lots of people are betting on event contracts to uh help us well to make money and also though provide an accidental data stream that might just tell us the direction that the world is going in a lot better than economists are it's a perfect pairing with cnbc's uh deirdre and you're gonna SPEAKER_61: love it stick with us hey molly you know what i love to do oh oh yes i do gamble the man loves to gamble i love it i love it it's my chosen profession angel investing and now it's yours place bets SPEAKER_192: try to make the best decision you can and reap the reward and you know it's uh some people will call it wagering some people call it gambling some people call it investing um and one of the really interesting concepts uh in poker is people do prop bets proposition bets i bet you can't hit a three pointer okay what odds will you give me okay just a cold three pointer we put the basketball in your hands you don't get to warm up you just shoot three okay that's okay so that's the proposition it's a prop bet right and prop bets are a lot of fun like i've seen crazy profits there was a prop bet um that in the next 10 days you bicycle from los angeles this poker game in los angeles to vegas and you have 24 hours to do it uh and you have to do it in the next 10 days and it's 10 grand and so people make these crazy bets and sometimes people have done the research on them sometimes they're setting somebody up somebody's a ringer right yeah other times you know it's it's just interesting to make a bet on who's going to win the democratic primary now if a lot of people do this it can the prop bet can turn into a prediction market because you'll be at the table and somebody will say well you know the hits 30 to 40 percent of their three pointers but they're in a game and there's defense but they're also super qualified ah i think you have a 15 chance of hitting this i'll lay seven to one odds so you put up a thousand i'll put up seven thousand if you miss you give me a thousand if you hit it i give you seven thousand so you you lay odds right and laying odds and doing that just makes you really crisp right it makes your thinking clear because you're putting skin in the game i love this concept of as a way of looking at the world that's how i look at the world what are the chances if i invest in this company you know it's going to pay off at some some ratio but yeah the thing that i love is prediction markets and prediction markets there were a bunch of them 10 20 years ago in trade was one they're fraught with a lot of legal issues uh but apparently people are starting to work them out and i don't know if you've ever seen like you'll have 538 put the odds on a presidential election right or who's going to win the nba finals at the start of the year or the start of the playoffs and then um you know a prediction market might have a slightly different so you're like well who do i go with there were a lot of people who thought trump was going to win in the prediction markets but maybe some other people you know who were professionally predicting didn't think he would right as a perfect example so it can be deltas between a prediction market yep and what experts say and then what you think and this is just a great way to triangulate so if i forced you to bet on something you'd really be more thoughtful yeah uh so today we have one of these SPEAKER_199: new markets emerged and i was like well let's have this conversation because i think it's an important SPEAKER_36: one so maybe you could queue up who's our guest today yeah this is super interesting and i am very excited to have a conversation about probabilistic thinking in the context of all of that and then also SPEAKER_13: oh my god you can do this it's legal tarik mansoor is the founder and ceo of this new company called kalshi welcome which lets you bet on what are called event contracts it's the first uh betting market that we know of betting market company to be fully regulated by the commodity futures trading commission on the show that's the legal part and you're betting on swaps whose payout is dictated by the outcome of event of events so exactly what you were saying one current example on the site is will the average new cove 19 cases in the united states be greater than 200 000 by SPEAKER_36: september 22nd 2022 which we know will be if we keep having conferences yeah kalshi ceo as we like to Jason Calacanis: call them super spreaders as we like to tell them uh ceo and co-founder tarik mansoor of kalshi welcome SPEAKER_13: to the show did i say that right kalshi that was great that was great thanks for having me jason SPEAKER_206: molly very excited to be here so thanks for coming yeah tell us um why uh what what does your uh prediction market do how does it work and how do you make money as the company uh that provides this service so so how does it work and then how do you make money classic entrepreneurial questions yeah SPEAKER_209: absolutely i mean i think the way we we've thought about it the way we always describe it is we're building something like the new york stock exchange for events for a new asset class right the same way that you buy stocks where the underlying is a company you buy futures where the underlying are tangible things like oil and metals we're like how about we take things that have economic value like covet or economics or the outcome of you know political or geopolitical events and create a market where people can get exported to that right and the way to structure that is actually quite simple it's looks like a prediction market it is prediction market and what what we do is we structure these swaps um that essentially pay out one dollar if an outcome happens and zero if not and so you can buy these swaps buy buy or sell them at any price between zero and one and that price that you're entering the trade at um is the probability right if you're buying 40 cents of the dollar you believe that there's a 40 chance that the outcome is going to happen and if you want let's say you buy well brexit happened by the end of the year you buy it 40 cents you can wait till you see if the outcome happens or you can exit your position like you do with any options or swaps trading uh before maturity let's say the price moves to 70 you can exit at 70 and you make your 30 cent on the dollar profit um so yeah that's the sort of fundamentals uh kalshi i mean as you said jason molly there's been a lot of trials for this idea of like how do you get explorative and if you're interested i can talk about the origin story uh and the thing that has been kind of difficult for his face is regulation and kalshi has spent three years and we're the first fully regulated exchange at a federal level how do you make money how do we make SPEAKER_212: money so that's a great question so we take transaction fees very simple sort of exchange business model the same way that cme and new york stock exchange take fees essentially SPEAKER_206: where are those fees if i were to bet ten thousand dollars in this you know uh bet about the covid uh number of cases of 200 000 by a certain date so i bet i bet that 10 000 and i win and i guess somebody on the other side bet and lost um you have to balance out those two sides um i'm assuming uh so how much do you make and how much do i make so if i won the bet and it was 50 50 SPEAKER_192: i would theoretically get back 10 000 right it was it was even odds correct so if this was trading at 50 cents am i correct and that's even odds so i bet 10 i would theoretically get 10 but i'm sure there's a vig in here uh that's how you make money so what is the vig the vigorous the the tape yes SPEAKER_209: absolutely so um the average fee it depends on the price at which you're entering at you know if you're entering at 50 versus 10 it's different prices but the average fee across all prices is one percent it tends to average a little bit less because actually things are not usually at 50 50. um and so yeah you would take like you know you're in ten thousand you pay a hundred dollars out of that to the exchange now the thing that's very important here is that you are trading against other like other traders other funds the same way like it's a central limited order book so you actually go and tell the exchange i want to buy let's say ten thousand dollars or ten thousand SPEAKER_212: contracts at 50 cents that's what i'm willing to pay the same way that you do for a share of apple and then someone else might be willing to sell at 50 cents and then there's a transaction got it SPEAKER_220: but i can't just put a market order in where i say i'll just bet ten thousand at 50 but if it but just fill ten thousand you don't do that right no actually you could do a market or is a great SPEAKER_209: question uh as long yeah and it will get filled at whatever price is basically available got it so if you just SPEAKER_192: you're absolutely certain that this covet thing's gonna spread you're david friedberg you're the sultan of science you've got a theory and you're like listen i know this is happening i'll just keep betting till the cows come home they you know or you just have great conviction you could buy at 50 and then 45 and 40 and fill the order like that but you need to have people on the other side got it what happens if you don't get enough people on each side because then that can screw you up right if you don't have enough action on both sides what if everybody just wants to bet the warriors or everybody wants to bet cove it's going coming back with a you know a fury and 200 000 was too SPEAKER_220: it was a it was a bad bat and it just boom nobody wants to take the other side what happens yeah it's SPEAKER_204: a great question and and you know uh you mentioned probabilistic thinking that's why you know i love your twitter jason i mean it's people that think probabilistically which tends to be traders i mean SPEAKER_209: that's how we started a company it's it's traders if a lot of people believe covet is not going SPEAKER_212: to or is going to happen everybody is on the same side the price is going to move from 50 to 90 95 99 and those people are okay buying the 99 um outcome because they consider them to be bonds you're getting five three four percent yield over the next few weeks uh that is relatively you know you can call SPEAKER_209: it risk-free you know 99 of the cases you're going to get that yield but the interesting part is that you know and this is kind of the common idiom in prediction markets and traders is like you know one percent is not zero percent a hundred percent is not 99 there are traders for example back in uh june they have bought a yes on one percent on whether we're going to get back get another covered SPEAKER_212: wave that is actually even worse than 2020. those traders 100x yeah it's basically people buying tail risks and people that know how to evaluate these tail risks and if they go to a decimal so could it be SPEAKER_199: 99.9 and be we're working on that it's funny the limitation right now is the banking system the SPEAKER_229: banking system doesn't have centisense so uh that's something we're working on but we're getting there SPEAKER_36: god i really want to start a band called centisense um tell me tell me what made you want to do this SPEAKER_16: you know i'm looking at your background you were at mit you were at palantir you were a quantitative SPEAKER_36: trader at citadel like is this for you because you're super passionate about this type of trading and you think it's really fascinating like jason or were you also just like people are gonna do this like crazy because they cannot help themselves and it will rain money at the end yeah i mean i think i'll SPEAKER_209: give you the origin story so i think um definitely a market's fanatic i mean i love markets i just like love the concept of you know everything has a price and you know when i was trading at goldman other places we always used to play this game called make a market so it's like you what is the probability around i don't know kim and trump are going to get out of north korea to deal and then we'd make markets and then buy a certain odds and then trade sort of with each other but the more interesting thing that happened is so when i was goldman 2016 and that summer i was working on this exotics desk it was this equity exotics desk and all the flow i'm talking 90 of the flow was about get us exposure to brexit or let us allow us to hedge exposure to brexit that was institutions that was a very legitimate flow we're talking billions of dollars and what we would do is we bundle these kind of weird swaps and options and put them all in one bundle sell it to them as a good proxy but not actually what they were looking for and it was very expensive uh sometimes it was like 40 premiums i was like okay what if they just trade directly on the event i mean that's what they want to do anyways why are they doing it indirectly then i worked at citadel and that's also some of the things that we were doing so taking exposure like macro macro backs macro trades and but doing it via swaps or options and directly and so the more we thought about it the more we like i mean this makes perfect sense you know just getting exposure to specific events and you know the more we looked into it the more realized okay actually this doesn't exist because of the regulatory piece and we're naive enough at the time to uh to essentially go through the regulatory piece and that was great i mean that was you know we're in retrospect that was a phenomenal sort of process because previously SPEAKER_36: just to clarify like previously this has only existed as sort of las vegas line betting well yeah i mean i SPEAKER_204: think they're saying like a few kind of as as jason mentioned a few like unregulated that tried and then SPEAKER_209: you know got shut down by regulators because you know this is not like uber this is financial SPEAKER_212: instruments people get hurt if it's not done well um and you know maybe a few crypto trials and and things like that but nothing in that kind of fully regulated you know properly vetted uh uh uh uh way SPEAKER_239: at a scale at a scale of a proper exchange uh so yes how do you pick which bets go on the site SPEAKER_240: and then i guess the follow-up is can a customer place a bet up there like a prop bet you know i've i've been talking to people on the show we've made bets about vetoes vertical takeoff and landing when will a SPEAKER_192: consumer be able to buy a ride from manhattan to jfk or laguardia or newark let's say you pick those three new york major newarkers when will somebody be able to pay for a ticket and in the same day take a veto you know ride uh you know um from manhattan to a major new york airport like that's like an incredible bet to me right and we just pick a year and then you say i love this one i think maybe SPEAKER_212: we should put it on the i actually you know i'm sure the market team is listening so i think they will have them sort of put it up so yes customers can can suggest markets um and i mean the way we SPEAKER_209: have a whole process regulatory process we need to vet sort of all these markets and the way to think about them is they are markets right they get a ticker right apple has a ticker and it's listed on the new york stock exchange it's the same thing here it gets a ticker it's reported uh all of that and then people are essentially trading on this market uh now you know the mix is like we look at what is top like what are the top risks today that people are worried about the things are on the news people are what are people thinking about and then two is we um essentially follow whatever like members are asking for and actually this is actually very well within the types of markets that we love putting up in the exchange because there's yeah people that want to speculate and express their views on that market but there might be also people that want to hedge or ensure themselves about this SPEAKER_192: taking longer than expected or these types of things so in that way if i have some risk in my business i don't know i produce a certain crop uh or i need oil for my business because i run a private jet company uh whatever it is um i could make a hedge here i could bet the opposite of what i'm experiencing in my day job in my business as a hedge to try to pay if oil prices go up it screws my business so i'm going to bet i guess in that case that oil prices would go up and make money from that that would then if i lost money in my day business would make up for that lost i mean it's a very sophisticated thing to do i think crazy but people are already doing this kind of stuff with commodities i believe like if you were in the if you had some um problem in your business i think actually airlines do airlines actually do this do they buy these kind of things because i know they can buy credits they could buy oil in advance and make a contract with somebody to buy oil at a set price for the next five years or three years and they give the money in advance i guess and people agree on a set price SPEAKER_246: but are people doing that kind of stuff and what's a what's a great example of it yeah absolutely yeah SPEAKER_209: i'll talk to a few so i mean i think one absolutely airlines do this that's one of the biggest you know that they are one of the most natural use case for oil futures and that's how the future market really developed to that scale great you know grain farmers do this for grain futures um and uh SPEAKER_212: the the the thing with these you know i totally agree with you people are doing this it is not predominant it's not something that normal individuals and small businesses are used to SPEAKER_209: but normal individuals and small businesses are more used to insurance which actually our type of markets are a little bit more structure like insurance because it's like kind of an event that could happen that could hurt you and if that event hurts you now you have a position that can sort of offset um that hurt that you know risk your bottom line that you get so one of the things that our traders are doing on the platform right now we have this market up is about student loan forbearance you know people have a ton of student loan exposure and they have a lot of exposure on whether the white house is going to sort of extend those student loans or not right and so on average you know the average sort of us students right out of school they have like thirty thousand dollars of debt in student loans so what they can do is like if they actually have to repay that they put on a position on cal sheet and if they end up getting hit by that thirty ten to thirty thousand dollars by a certain decision by the white house they get compensated by that trade on cal sheet essentially um and that is a perfect type of hedge that you know uh some of our traders are doing currently on the platform uh there's a lot of things around the economy like whether the feds are going to raise interest rates you can imagine how many people are you know exposed to these types of things other things around tax bills you can hedge SPEAKER_204: your some of some of your tax exposure down the line um and a variety of other things um and so let me think SPEAKER_249: that through if i bet that taxes were going to raise in california and i bet and i thought my if it did SPEAKER_206: raise my exposure would be ten thousand dollars uh and if i could find a trade on there and i bet hey uh i bet that it's going to raise by whatever ten thousand dollars i know and i win that bet i win ten SPEAKER_246: thousand dollars and i pay ten thousand more in tax so it kind of cancels out because i was able to make SPEAKER_204: that bet exactly so you're essentially buying insurance you're saying like i'm going to pay whatever market price is to enter this contract so i will pay today like a thousand dollars to get SPEAKER_209: ten thousand shares of the income tax it's actually currently on them on them on our on our exchange right now if you know the government does it actually increase taxes in such a way that your exposure now you have to pay ten thousand extra in taxes that is fully offset by the payoff from SPEAKER_16: the market your ten thousand shares and then to dig a little deeper i could potentially if i'm the airline or the person who's going to get hit by the tax thing you're saying as a consumer of this product i can suggest this bet if it doesn't already exist on your platform what happens after that like it sounds i mean i can't just list it directly it's not a gofundme situation so what is SPEAKER_36: the vetting that occurs after jason is like oh i'm a little worried about this taxing you know SPEAKER_223: what would be a cool thing to bet on is this yeah so it's absolutely a great question so i think we SPEAKER_209: there's two pieces there's one is this market going to be liquid enough and build enough volume right if if it's something that's very esoteric for one person it's usually very difficult to listen on the exchange because they want the liquidity there needs to be something and that's also the things that we really that matter to us is risks that are pretty predominant and prevalent for a variety of people and businesses and so that's one thing that we evaluate if it is profound and predominant okay we can listen we can build liquidity for it and build volume for it then it goes through regulatory process where we vet a variety of different things and this is very very crucial part of the process because we want to make sure it's not readily what we call from regulatory assignment readily susceptible to manipulation right this is a financial instrument right and the same way that stocks you have a lot of safeguards run inside against insider trading and a lot of other things we have safeguards around insider trading here making sure it's not manipulable making sure that someone cannot just control the outcome make money off of it and so that's a lot of analysis we do on the data so what is the data source what are we going to use this is a government reputable agency is it a private source do we have the right licensing agreements and right restrictions on how they use that data or how they input it and then it goes to other things like making sure it has economic utility can be used for hedging and you guys mentioned right like this is you know one of the main things about our contracts is they are not betting or gambling or anything like that and because historically the line and how it's been defined is you know financial SPEAKER_204: instruments sure people speculate people speculate on stocks people speculate on grain futures and it's important part of markets but at the end of the you need these financial instruments because they SPEAKER_240: have economic utility so i guess in this example of like a veto taking a vertical and takeoff landing SPEAKER_192: human flight from jfk to jfk from you know or to la guardia probably would be more apt from you know manhattan uh you would want to make sure that somebody didn't buy a veto sneak it onto a pier land have their friend give them 100 bucks and take them there to win the bet right that would be a perfect SPEAKER_220: example of market manipulation and you would have to say a major company like uber or jobe does a flight and you could actually make the bet tight so there's some rigor here in constructing the bet or the SPEAKER_222: wager or you know prediction here is that is that how you solve it like for that that's absolutely SPEAKER_204: correct i mean there's a variety of kind of use cases and it also depends on the different types of markets um but a lot of it is really checking what the data source and like what we call the source SPEAKER_209: agency the the body that basically determines that outcome and making sure they have you know integrity around the process and how that outcome is determined and oftentimes if it's not a public agency uh because public agency already have a lot of rules around don't trade on things like for example in the bureau of labor statistics you cannot trade ahead of the release of the inflation or jobs numbers so those are really safe to use uh because right there's a lot of restriction on that but if it's a private we actually have data licensing agreements where we enter into agreements where they have to prohibit their employees from trading for example anyone that's around the data source from SPEAKER_217: trading same thing as kind of the rules that you have around insider trading and that's really important SPEAKER_192: to make sure that there's market integrity so in that example if you were going to do joeby or uber's veto program you'd want uber and joeby to agree that their employees aren't going to place these bets because they have an impact on it and so in my case if we did a weight bet hey jacal's going to weigh more or less than he does on this date you know a year from now can he keep the weight off and everybody wants to bet on that which would be hilarious i wouldn't be able to bet on it as the person who would be determining the outcome but everybody around me could and they could send me donuts you know every day absolutely that's correct yeah but don't do it yeah what's your burden of SPEAKER_16: enforcement and to what extent does this slow down you know the number it's interesting because like SPEAKER_36: in some ways you're a volume business you presumably want to list a lot of contracts and have a lot of volume and liquidity but it sounds like because you're adhering to regulations that allow your business to exist it might slow you down a little bit yeah absolutely SPEAKER_209: actually i see it as a very positive very very positive forcing function to actually build volume in the long term not necessarily in the long term because if you see a lot of if you you know pop out a lot of markets and there's like a lot of issues in these different markets and things like that what happens like people might trade them but they start trading them in very little amounts so the example that actually jason mentioned it's a very interesting fun uh potential trade but at the same time people won't put very legitimate and serious money there you know people are not going to do a ten thousand dollar trade on that because the first thing that's going to come to mind is SPEAKER_212: you know jason can just determine that outcome single-handedly um and that's risky so in some ways actually the markets that tend to be the most successful are the ones that truly are safe from manipulation insider trading and a variety of other things um and so it actually pushed us to words the right balance of like how many markets you push build proper volume in them and get them SPEAKER_209: to sort of get to escape velocity um uh because they are safe and you know safeguarded against a lot of the fraud on the question of burden it's full the exchange has a big big burden of enforcement essentially you know so you see in the new york section all the time like goldman sachs trader charged for insider trading we have the same thing we have our surveillance systems we've built in-house over three years vetted by the regulator they check all sorts of weird patterns they match with kyc of all investigative team and then those get referred it could be a fine all the way to criminal SPEAKER_262: prosecution actually well and we just saw that right that people think like the doj and like the sec SPEAKER_206: are going to let people play games in crypto and here we go you know somebody at um you know as i predicted give myself credit for that prediction yeah uh the the person at openc who was front running the market the doj was like yeah that's a crime and they're like but it's crypto it doesn't it's not SPEAKER_205: a stock and the doj was like yeah we don't care still we could we we catch people when they commit SPEAKER_206: crime do bad stuff yeah so i guess everybody's wondering uh in crypto web3 land like well isn't this on the blockchain why aren't you doing this i guess it's because you don't want to go to jail SPEAKER_209: like you want to do it legitimately look i mean i think my my view is you know i mean there's a lot of interesting parts for it i i just don't see any meaningful today at least any SPEAKER_212: meaningful benefit uh other than if you wanted to skirt regulation which is very much not in line with our ethos uh and it's literally what you said i mean look crypto can be great the thing is like any financial instrument can be a weapon of mass destruction if done done poorly you know there's a lot of scams in crypto and financial industry more broadly and you saw what happened with luna i like SPEAKER_209: we are very big believers in regulation if you want to build a business that's sort of built to withstand the test of time that you know is going to be around for decades not for a year and then SPEAKER_192: you know you get in trouble and people have made prediction markets and gambling markets in crypto i've been pitched on a number of them have any of them reached any reasonable traction uh and are people doing prop bets on them one-to-one bets whatever and what do you think of that space what would you tell your friend if they were going to participate in those uh in terms of protecting themselves from manipulation from scams yeah there's a lot of actually crypto based you know SPEAKER_209: i think there's a few that pop up a week now and it's like calcium crypto or other types of things i mean i think it's kind of pretty consistent it's like this is a financial instrument it's a swap it's a future and option however you want to call it a financial derivative essentially and history has shown that when these things are done and without the oversight of a regulator without proper safeguards and customer like for customer protection market integrity people end up getting hurt and we're seeing this in crypto right now it is always and the reason is because people love making money right and if you give someone the ability to make money with full control they start building scams and ponzi's and all these different things um and so i'm actually pretty excited about the crypto space getting regulated i think it's going to actually allow bitcoin crypto to achieve its full potential in a regulated and safe way so that's what i would say i think you know SPEAKER_272: the regulated alternative is always probably better for people can cheat there's a number of people Jason Calacanis: who will try and cheat they're gonna cheat well you talked about the the um cftc approval ensuring SPEAKER_36: that kind of long-term success right and the volume that you will need to be successful it also gave the stamp of approval that led sequoia to invest in you like there are a lot of signals right that that regulation consent is that true that sequoia only made its investment after you got that SPEAKER_209: regulatory approval that is correct i mean i think we had we had talked to alfred uh lynn from sequoia at the time he actually had done a phd around similar things to prediction markets way you know way back when he was going to go through it so it's a market that has always fascinated him and he's seen kind of over the years the unregulated piece of it i remember he just it was very simple it was like one time it's like regulation it's like that this is financial markets regulation and we were already working on the regulatory piece because from day one that's what we wanted to do and i told him okay we'll we'll come back to you when we get that so that was definitely SPEAKER_204: pretty much a very very large piece uh of the investment yeah and and how many people are SPEAKER_192: participating in the largest market you know that you have right now or the largest you know trade SPEAKER_260: what's the scale of this right now is it hundreds of people thousands of people is it millions of dollars hundreds of thousands of dollars what what's the scale of the business today yeah skills SPEAKER_209: yeah so i think some of our largest market so we're really focusing on what we call like i would say like traders today options traders and day traders people that are used to kind of the idea of trading and they understand it you know cash is a little bit sophisticated if kind of someone who has never traded before uh even though we're doing a lot of learning and education to get there to those traders i mean they trade quite a bit uh they you know they they're pretty serious about and professional about their trading and so often that's not our biggest market we're talking thousands of traders you know we have millions of dollars trading from our biggest markets um our markets you know obviously like happen on like sometimes daily and weekly basis so there's like kind of this refresh uh but you know you have things like economics like feds so far it's you know i've been trading like millions of contracts um we had some of uh uh you actually you post the volume right yeah we post SPEAKER_204: volume and and transaction numbers yeah so today fed interest rates is that is there uh coveted way you can see inflation these are some of the markets that are kind of featured for today Jason Calacanis: um tell us about your raise history because we touched on that briefly but there have been big SPEAKER_36: bets made on your success right your series a was 30 million dollars at 120 million dollar post what is the big long-term bet here is it just that everybody's going to want to do this and by SPEAKER_209: everybody i mean i assume institutions right yes i think the the way yes but yes to everything volume institutions i mean the long-term vision is we want to build uh an exchange a platform where that that sort of dominates the size of classes has a class of events you know the same way that cme has dominated interest rate swaps uh and general types of commodities ice is very big on on energy uh futures we want to sort of dominate events um and the way that we see it is events are very relatable more relatable than a lot of the other asset classes that are traded everywhere people understand politics covet economics things are around them and two they impose a lot of risks SPEAKER_212: to the system it's very real right and and you know when brexit happened a ton of people got hurt and they didn't know how to sort of insure themselves or hedge themselves same thing with SPEAKER_209: covet and so the idea is like we basically get to a point where institutions and businesses are using this in their kind of normal financial planning on a yearly basis same thing with individuals where they're like okay i'm going to hedge my volatility my exposure to the future i'm going to make my future future more certain by reducing my volatility with respect to all these events uh and so this is sort of the big um vision the second thing that comes out of vision and jason you mentioned this something that i particularly love i feel like racial markets or these types of markets are attacks on bull i don't want to mention this on global last time which is the idea like a lot of people just SPEAKER_212: say all sorts of stuff polls and all these different things when you have money on the line when you're actually trading on your belief the market tends to be more truthful like pricing is truth you don't lie SPEAKER_16: when you're putting money on the line and that's very exciting yeah to sort of follow up on that we had a conversation recently where we were you know where i was ranting as i often do about the SPEAKER_13: fact that we run so much of our policy on what economists say yes and economists are wrong all the SPEAKER_36: time with almost no accountability for that it's like wow they don't even read or collate their own reports and so i wonder like do you see a world where ironically like crypto this is the type of SPEAKER_13: tool that could decentralize economic information and pricing signals in a much more accurate and SPEAKER_289: reliable way 100 i mean we're already seeing that world unfold so one thing one piece of data SPEAKER_209: we have forecasted uh the inflation numbers uh more correctly than bloomberg is economist survey which is the you know the the state of the art seven out of the last eight times uh and um we're SPEAKER_222: already seeing when you say you the market of people playing placing bets i'm better for SPEAKER_212: cutting i will never get the market i don't know i have no idea but you know i trust the markets for the markets the markets forecast the probability has been more accurate in seven out of the last eight SPEAKER_209: times and we're already starting to pick up in press and tv we're asking us and asking some of our like people on the team to come and just show the market forecasts because people are starting to trust them and that's very very exciting to me because and one thing that you pointed for example with economists the way they make their predictions there's this kind of herd mentality thing where SPEAKER_212: like they all kind of group the same predictions because you know if they're right they're right but if they're wrong no one wants to be wrong alone so they kind of tend to always converge towards SPEAKER_209: the wrong version whereas again if you tell them put your money on where your mouth is put your money on SPEAKER_192: the line things are going to be very different it's really interesting to look when you when you have a prediction market for the fed interest rates or for inflation there is a time and then there's also an amount so if you were to look at the fed interest rate you know you say hey the fed interest rate at the june 2022 meeting will be greater than one percent 99 say yes then you drop down to 1.25 and you get to 95 say yes so okay that's where things start to break but then you get to what greater than 1.5 molly and it's like six percent say yes that's going to happen you go to inflation um not as an abrupt because it's not as predictable right and so you look at something like hey the uh inflation rate being greater than you know uh i guess the this is the increase in inflation being greater than four percent point four percent in may so that would be the increase from the previous month or from the previous mark right yes yes so whatever the beat was in april if you say hey greater than point four percent more than that it's 91 cents now you drop down to point six and all of a sudden it drops down to 80 cents and so you kind of can like triangulate you know and being going up point eight percent i guess month over month here it's down to 33 cents so you really start to get a sense of like what people think like inflation is going to be increasing um and it looks like on the SPEAKER_260: order of the consensus is 0.5 point six percent correct yes so it's really interesting when you start thinking about this for our discussion molly like as a starting point to your point like who are you SPEAKER_206: going to trust people placing the bet with skin in the game or economists whose job it is ultimately to appease the person who gave them their job yeah like to stay employed you know and this is the problem like who what is the motivation of the people at the fed right it's is it to keep their job is it to be independent critical thinkers like if their net worth was based on the bet they'd be making a different bet yeah uh and you know what they did in 2010 and what they're doing now it SPEAKER_260: doesn't seem to match to your point molly like maybe the best decision making uh process well and SPEAKER_128: it looks like you are drawing conclusions here too right you've got a now a fed interest rates forecast SPEAKER_36: powered by calcium like tell me about how you're doing some of those data insights and how you it is SPEAKER_247: that a product in the future yes absolutely i mean the the idea what we did with this and we're actually SPEAKER_209: launching a new inflation dashboard as well it's like you know people have bloomberg that gives the bloomery economic surveys and that's 29 000 a year like how about we just make this public and let SPEAKER_212: everyone see what the market is forecasting in real time and the other really important thing is if you see there's a scroll bar we let people see how the forecast has evolved over time so if you can take it from today till this is how the people's expectation have moved based on what the fed is saying over time about where are we going to land right and this is incredible how i mean how the economy SPEAKER_39: has evolved right and this is a revolution this is a revolution and i'm here for it yes i'm very excited SPEAKER_262: economists yeah yes yes it's really interesting if you if you move the slider like you're saying you can see you know if you go back a couple of days uh if you go back into november december i guess is that SPEAKER_310: if i were to move this is march one so if you go back all the way back with the slider this is the SPEAKER_260: exercise so this is march yes and this is predicting going forward into november december of 2022 SPEAKER_192: correct correct so from the month of march in the beginning of the month people thought november december would be at one percent yes and they think now 2.75 so over march people i guess are SPEAKER_212: believing what the fed is saying yes exactly because at the time you know the the language was still very dovish and inflation is transitory and the problem is russia and now the language has SPEAKER_204: changed and you can see how we could have avoided this you know this could have been a lot smoother SPEAKER_192: than what it looks like right now for those of you not who are listening to this if you use spotify for video or youtube you can watch the video or if you search on uh your podcast player for this SPEAKER_260: weekend service video you can download the video version we have a video rss feed so that's available to you youtube.com this weekend but there's a slider uh on this um you know prediction of the fed funds rate it has a really powerful yeah yeah it's really powerful to see the consensus change over time SPEAKER_204: we're doing the same for inflation and a variety of other things we might do some things around like you know the belief around how bad the recession is going to be is it going to be recession stagflation SPEAKER_209: is it going to be depression and see how can a market is going to evolve and that perception is going to evolve over time a variety of these different things and i think this is very important because it's the first time we're going i mean at least myself you know from a professional summer it's first time i'm going through kind of a proper bubble eruption and a potential crisis and it'd be interesting to see how the public sentiments evolve throughout these crises and have SPEAKER_204: a kind of on the record public record like public record and audit of how that sort of evolved over time SPEAKER_36: here's a crazy bet molly found tell them about this bet you found uh yeah i i'm definitely all in on the interest and inflation and the recession conversation but what i really think is amazing is SPEAKER_190: apparently 87 percent of buyers do not think that we are going to land anybody on the moon for 2025 SPEAKER_289: what is this nasa has been late they've been they've been sort of missing a lot of deadlines consecutively and this is what's so interesting because you know on the news it's like oh we're SPEAKER_204: doing great and you know government is launching but nasa has been missing most of their deadlines and traders were not going to put money without research they do their research they know what's going on they look at the state of our technology everything and right now they're passing it at ten SPEAKER_36: percent i mean exactly what you're saying that's like a larger this points to a larger question right like it's super fun to ask whether we're gonna whether we are going to send someone to the moon but the real question here is what is nasa doing where is that money going what does it say about the state of american innovation what does it say about privatized space flight like if you infer SPEAKER_13: from this that you should buy spacex you know you've had a really contextual complicated conversation based on a pretty funny headline yes agreed yeah love it i think i think i'm buying no SPEAKER_260: yeah i would pay ten to one that they don't get there i mean that's basically the odds right now SPEAKER_331: right yes but you're paying ten to one or whatever uh that they don't get there well to molly's point SPEAKER_209: i mean one thing i would say is the interesting part of markets at the end of the even for stocks market is kind of this idea of price estimation or price spacing right like you're getting a lot of different traders to go and research and drag you know bring information out they figure out SPEAKER_212: how to do they model it they do their own research and then they bring it all into a market and it's all getting aggregated to one single price that beautifully and elegantly sort of SPEAKER_209: aggregates all this kind of valuable information that we're drawing out of the world and i find SPEAKER_334: that really really exciting i love that you can bet on the new york city high temperature in june i know june 2nd or tsa check-ins that's a great one better than meteorologists which is also SPEAKER_36: i will say as a climate investor i'm also very interested in all of the stuff you have in there SPEAKER_260: about temperature and rain like it's i mean i would like to make a bet on china invading taiwan if you think about what economic insanity that would cause yes if china took action against taiwan our portfolios everybody's retirement the economy would go down 50 or something like SPEAKER_206: yes you could actually define i don't know how you define a war with taiwan but military action who would be your source who's your oracle i think is what the in smart contracts they call it an oracle yes in web3 who's the oracle that china invades taiwan the new york times you know congress saying SPEAKER_341: it's an act of war the president might say it how would you define that one yeah it's a great question SPEAKER_217: so if if we were to do it would be something around the government the u.s government but but SPEAKER_209: there's a big but so this is one of the things we're regulatory there's a few things that we do not touch war violence terrorism assassination and then we also do not touch and this is funny uh we can get back to it onion futures because onion futures is the only uh vegetable where you cannot trade SPEAKER_212: derivatives on uh it's illegal in the u.s i can tell you that story but so anything around um violence SPEAKER_204: kind of violence we cannot do because that can incentivize um and death can place a bet and then SPEAKER_262: just be like you know what i'm gonna make a ton of money when i have a taiwan we would not like that SPEAKER_204: to happen so so those types of things we avoid that seems like a good rule but can we go back to the SPEAKER_347: onions onions yes yes yeah i can't let that one just slide by onions though so in the previous SPEAKER_348: century two brothers on onions yeah yeah so onions only vegetable you cannot trade derivatives it's SPEAKER_209: actually in dot frank it's illegal to trade derivatives on onions um and the reason is because in the in SPEAKER_212: last century two brothers actually cornered the onion market so what they did is like a lot of people put on short cells and what they did is they short squeezed it they bought all the onion supply in the market and got a lot of people to go bankrupt and at the time you know i think the solution was SPEAKER_255: like it's a problem that is endemic to onions instead of the conclusion being it's a problem that's annoying to human beings you know human beings right so they buy all the onion farms they SPEAKER_192: corner the market on or buy all the onion supply and then they crash the price of onions SPEAKER_204: i do the price there's a lot of shorts people that were short they needed to rebuy the onions at some point to basically satisfy their shorts got it got it yeah and then they controlled the SPEAKER_59: full supply so they were like these are expensive i really i mean it is beautiful to me it is so human SPEAKER_13: nature to then make are you guys familiar with the simpsons episode where an asteroid is coming for earth and they sort of barely escape destruction by the asteroid and they're like let's make sure that never happens again let's burn the observatory like like we're just gonna make a one-off law about SPEAKER_39: onions and that'll fix human nature like what the hell i mean it is oh that's delightful what i like SPEAKER_260: about what you're doing and think as we as we get ready to wrap here is you know human nature um is to SPEAKER_206: try to get an edge right right so if you're a farmer you want an edge to produce more per acre if you're an entrepreneur or you're a podcast or you want an edge to get better guests you everybody's looking for an edge right we're performance driven creatures we're competitive that is innate in what SPEAKER_192: we do that is why capitalism as an operating system tied to democracy two forms of competition has resulted in the greatest uh country in the history of humanity the united states that's why we keep winning i hate to get all maga here no triggering anybody but listen there's a reason why we win so big here and it's because competition we accept the reality of competition now if you allow people to be competitive in an unregulated market it's going to result in cheating correct it's going to result in a lot of problems uh because humans can't stop themselves most humans cannot stop themselves or some percentage of humans can't stop themselves depending on how cynical you are or how much you believe in people's better angels people are going to try to get in and i've seen it at the poker table i've seen people we had this discussion with a bunch of poker players they said if somebody keeps exposing their cards at the poker table in other words you know they're they're looking at their two cards their whole cards and you can see it i always tell people protect your cards i can see your cards and SPEAKER_206: if i'm in a hand i don't want to play that hand i will ask the dealer like you know if it's a home game i saw his cards can we just mock everybody's cards there's been no action yet right or i'm out of the hand but you know if i've seen their cards and i have much better cards what are you supposed to do there it's like an ethical issue i would rather just tell the person and somebody said to me the right thing to do is and i disagree with this but i understand where they're coming is you tell them one time they don't protect the cards after that it's on them yes yeah and i understand that i i SPEAKER_220: disagree with that i'm going to tell them every time i can still see your cards i can still see your SPEAKER_206: cards but some people are like listen if that's the edge they want to give me i'm taking it and there was a case of phil ivy uh you know considered one of the top poker players he had found a deck of SPEAKER_192: cards specific deck of cards that had been cut a certain way so that um if you were to look at the cards you could look at the edge it's called edge sorting and he found this edge where he went to casinos to play baccarat i think it was and he said i want an asian dealer i want to have this type of room this temperature and he gave them a bunch of conditions these conditions were done to obscurify what he was actually doing and then he said i want the cards placed and then i want them SPEAKER_206: turned twice like you know because gamblers are suspicious and when you're a big gambler you can say whatever you want it when you go to the table i want a dealer who's this height i want this music playing and they will do whatever you want so he gets this all set up and he hits a london and a an atlantic city casino for 10 million dollars each or something to that effect and uh it turned out he had found an edge in the cards that told him the the probability of a face card it gave him a super edge he won um and so then they sued he couldn't go to jail but they didn't SPEAKER_260: have to pay i think was the outcome and this was a huge question mark and because it was the casinos losing people said he was well within his right to find that edge and to exploit it and i said no it's unethical should be ashamed of himself for doing that i don't care who it is you know like a casino or an individual you shouldn't that's not the right edge but the people were doing this also with roulette there was a whole roulette scandal and i think it was the 70s or 80s somebody had gone and recorded every roulette spin before they had the digital links they just recorded everyone in their memory they would you know then write in a book and they found out for whatever reason the alignment was off on a series of wheels in monte carlo uh somewhere in europe and they exploited that and they took down the house for millions of dollars and it took them a long time to figure that out so SPEAKER_36: anyway but yes clearly the man loves gambling but tarik this is so interesting so great just anyway SPEAKER_365: great stories i don't know if you can't wait to disrupt all of economics with you let's go let's go and no assassinations please is there anything else that's a no-no he said assassinations wars David Friedberg: we are betting would you bet on debts from covet i think that's fair game well we have stayed away SPEAKER_289: from it generally speaking uh it's you know covet is kind of a little bit of a different like you SPEAKER_209: cannot actually manipulate covet that that would not work uh and if you did actually try to spread covert that would be significantly i mean it would be obvious to be you know it's a kind of a different thing it's pretty serious yeah it's about great futures i mean you could do like manipulate great features by burning a bunch of farms but but you know i mean yeah that's that's a lot so i think that those are some of the kind of thresholds that we look at i mean just to kind of wrap up to your point i mean i think the whole point and this is what excites me we are believers in kind of information like the thing i love about couch is like you can get an edge by gaining information SPEAKER_212: we see some of our traders kind of finding correlations in traffic lights and kind of like things around the economy and how much you know density there's just like crazy things are being brought in i find that very beautiful and i think the very important thing as you mentioned is like there needs to be a set of rules ground rules of how this marketplace is going to function otherwise it ends up being all cheating and that's what i love about cfc this year sec they've done a great job over the years at figuring out what the rules of derivatives and securities markets need to SPEAKER_204: be um to make the game fair to make it fair and and reasonable and for everyone to be able to participate on equal grounds uh so yeah we're very excited working very hard to make this a reality SPEAKER_222: wow and elections i guess you're going to do that for sure right SPEAKER_204: we can't comment on on specific markets in the future uh but essentially speaking working on SPEAKER_374: i mean you're doing biden's approval rating right so yes or that's starting soon it's already there SPEAKER_204: by an approval is on the on the on the we do it on a weekly basis and people are doing a great job on forecasting the approval and it's been great to see kind of how it's evolved over time as well SPEAKER_13: amazing yeah kalshi.com k-a-l-s-h-i.com tarik months or thanks so much for the time this is tarik thanks for coming please come back yeah yes we'd love that maybe during the election cycle SPEAKER_260: who knows if you had an election prediction market maybe if there were any reason it did exist i don't SPEAKER_205: know to come back then it could be really interesting timing i do this all the time while i just it's so obvious to me the product roadmaps that i they spoil people's launches but SPEAKER_386: i can't i can't help myself all right listen great job we'll talk to you soon thanks for having David Friedberg: me thanks a lot take good care thanks if you are a founder of a pre-series a company you haven't raised that series a yet which is really hard well we wanted to invite you to founder university this SPEAKER_165: is a two-day intensive course it takes place on june 13th and 14th it's remote it's free we limit the number of people who can come we asked you to apply and this virtual workshop is free for founders and helps you understand how to fundraise and pitch how to hire great people how to build a world-class product how to execute on your sales and marketing and some growth techniques as well the launch team and i have been doing this for a long time it has been amazing for us to get to know founders and that's why we do it of course we want to help folks as many as possible that's part of our mandate but really our mandate at launch here at this week in startups and you know the syndicate which is where we invest we meet and invest in companies is we want to back builders and so we use these events as a way to get to know you and if you're building something and we see you're credibly building something interesting in the world well then we want to invest in you so truth be told every time we do found a university a half dozen of those people we wind up funding in the next year or so so it's a great way for us to spend time with entrepreneurs um we're gonna be joined by a lot of experts uh my friend becky degraw uh who's my attorney uh from wilson cincini uh we'll be speaking at the event fitbots co-founder jesse will be speaking marlo ceo mary fox will be speaking so we get a bunch of our portfolio companies who have been crushing it and who have learned a lot and we've seen that they are qualified builders we have them come speak at the event so you see how we do things here at this week in startups and launch and the syndicate we like to create a flywheel we invest in people who come out of found university some number of them really crush it and become world-class companies and it's not guaranteed you have to do the work folks the ones who do then we have them speak at a later found university so a lot of the great companies we've met came to a founder university they got to know us they learned something it was worth their time and that's really what we do with the agenda we try to make it worth your time to take two days off work uh essentially now it's remote so you can consider it your weekend even though it's taking place around the week um you consider it professional development and if you learn one or two important things about running a company fundraising growth hiring well those one or two things we'll pay for those two days i am absolutely certain of it now you have to apply again so you can register at founder.university yes it's a great domain name so go to founder.university and sign up we also have a course called angel.university if you want to invest in the companies and you think the philosophy i've explained here about how i invest in companies and have invested in over 300 of them if you think this is an interesting um way to meet startups early help them and invest in them well you can read my deal memos as we invest in new companies and you can join us on that adventure and i do this through a course called angel university that has raised close to 200 000 dollars for charity and you can sign up for angel university at angel.university we do it four times a year great program and it's just me and my partner mike savino talking about uh how we pick companies how we evaluate them how we diligence them how we source them like finding university is a source of investment and deal flow for us and uh that three or four hour course actually i think it's more like four or five hours is well worth your time all the proceeds from angel university go to charity and again over 175 000 i think at this point it's gone to charity we're very proud of that work and founder university is free but you do have to apply and we do pick people who have built a little bit of something so we're looking for you to have some skin in the game we have a founder university 12-week program which you can also see at founder.university we'll be starting our third cohort shortly and you can apply for that program if you have not started building or you're very early stages haven't incorporated yet you're nowhere near the series a you're kind of in the solo or co-founder situation and you're just starting to build maybe maybe you've incorporated maybe you have it and that's a 12-week course and that's another great one that we do so please join us founder.university and if you want to invest in these great companies angel.university