#148 with Jack Smith - How r/WallStreetBets is Beating Wall Street, Taboola's Billion-dollar Payday, and How Grayscale is Printing Money

Mm. I feel like I can rule the world, I know I can be what I want to Uh I put my all in it like my day song On a roadless travel, never looking back What's up? We got Jack here. Jack Smith.

How are you, man? Good. How are you guys? So spoke at Hasakan where I met him Years a years ago. started this company called Vungle, which sold for like what, seven hundred and fifty million dollars is like an ad thing.

Which we're actually gonna talk about today. started ship, which raised a lot of money, got a lot of hype. And what happened to that? Went to zero. Went to zero.

So you win some, you lose some, but you you won a major one. The reason why you are here is because we want to talk about Tabula. At least I do for a second. But before we get into that Sean, you invited me to the thing called Apex, right? That's right. And you did it all wrong. Yeah. So okay, we talked about it on the podcast. Apex is like a supposed to be like a digital masquerade party. So you're supposed to show up, you pick a a new name, that's your mask. Nobody knows who you really are.

And then you come in and it's kind of like it's a private group. But nobody has a real name, so you can kind of the idea is you speak more freely. But of course Sam first joins the thing like two weeks late, then he's like, What's Apex? As if we didn't talk about it. No, well, I knew we talked about it, but I I hadn't used it before. So he joins and then he uses his real name and then he goes on and says, Hey guys, it's Sam. Uh what's up? I'd love to hear your feedback. Like it's a fucking Facebook group. Which we already also have. The reason I did it was I was browsing it'cause I I didn't bother to actually look. But I was looking now. There's only like five hundred members.

People were saying like nice stuff, that's great. Some people were saying really mean stuff. Is that crazy? Yeah, dude. That's what it's supposed to be. That's the juiciness of uh Sadonomous.

platform, let them say what they want. Someone said a thread, who do you like better, Sean or Sam? And they just shit on Both of us for like the stupidest. Yeah. It's okay getting negative feedback. They did like some mean stuff, or I'm like, why does that even matter? But don't you just want to know what's actually in people's minds? Like I love knowing what's actually in people's minds, even if it is like It's some random point or it's really mean. It's like that's the stuff you never hear. Like There's positive there's compliments, there's constructive feedback, and then there's just

The shit people really think about you. So this is the way to see the shit people really think about you. Do I tell a story about using a pogo stick a lot? You did it once. I think it's because you have all these like random skills slash hobbies, and so each time it's a different one, it'll be like I can dunk, I can skateboard, I can run a pogo stick, I used to run track, like you always have like a thing like that. So that's what they were making fun of. Someone made fun of me for like he's like I get it. You sell hot dogs and you're good at the pogo stick. Yeah, I thought that was hilarious. Me too. That was a funny one. That that was a that was a good one. That was a good Uh that was a good way to make fun of me. that's a group for the podcast listeners. I think this app can take off. So it's an app

That I discovered called Apex That It lets you host this these types of private masquerades, these type of private groups. I got invited into one that was super interesting. So then when I was telling that story, I was like, Oh, we'll we'll make one for this this group for listeners and and we'll put the the link in there. And then it got hundreds of requests and I was like, dude, I'm not gonna go through and approve all these. Cause to get in the door, you have to link your like I made it where you have to show social ID like At the beginning. And then after that you can't see who's who, but like at the beginning you could just make sure that they're not like bots or spam. The developer who made the app, he went I was like, Can you just auto accept all these people? And he just went and did that. So so now there's like a few hundred people in the group. Did you guys see um do you know the Belagie Gi.

Yeah. Yesterday he tweeted he's got a thesis that in twenty years you won't know what most people actually look like. Because on the internet everything will just be anonymous. I believe that. So first I'm pretty sure in my that first group that I got invited to, I'm pretty sure Bology's in there. You can kinda tell when people talk'cause They say some ideas that really, you know, and he's such an original thinker that like if he's saying it, it's either somebody just parroting what he says or it's him. And I know he's friends with some of the people who who started the group. So I think that is him. But he's been saying this for a while. And actually just yesterday, I went back and I watched maybe five different YouTube talks of his because I went for a hike and I just put his YouTube talks on.

From back in twenty thirteen, he has two like big ideas. So one of them is what you're talking about, which is separating you know your real identity from your work identity and your public social media identity. So he basically thinks the way that we treat like our social security number, that's how we're gonna treat our real name and face. It's not gonna be something you give out unless you have to, and you use that to like create accounts, and those accounts have their own usernames. So when you go to work, you're not gonna be Jack Smith with your face. You're gonna be maybe you're called like, you know, Growth Guy thirty-three, and you're growth guy thirty-three, you work, you know, for some company, and when you show up on Zoom calls. You're not gonna show your face. You're gonna show like an avatar or something so that you can

Basically have a separate identity and he called this Five, six years ago'cause he's like He's like social media is turning into a a mob and people are gonna start getting he didn't say the word canceled, but he was like describing cancel culture. He's like You can just say something on Twitter. And you could lose your job for it. That was your personal opinion and your free time on your social media, and that's affecting your career. He's like, So these things are all gonna split.

Your communications name is gonna be one, your work identity is gonna be another, and then your real thing is gonna be like your social security number. Do you remember last week or a few weeks ago, a few months ago, where we shar that Kevin Sistrum like selling Instagram for a billion dollars all being d not all, but a negotiated be a text message like messenger or something. Right. And then leaked. Yeah. Yeah. Jack and I I know do this. with our friends and I guess what I'm getting is do you I don't know if you do this, Sean. I know me and Jack do this. Do you have friends?

Who you rarely or if ever have met, but you consider one of your closest friends and you only communicate via A texting version. Yes. I have people like that that I met on Twitter, then I went to Twitter DMs, and then I went to like iMessage or or Signal, and you know, they've called me before and like you know, I've hung out with them either zero times or one time in my whole life. Which is weird, by the way, right? It's a weird thing. So just to add to that, like um as you were saying that Balaji called this six years ago or whatever.

Well actually I had read this book. last summer that it was written in nineteen eighty one and it basically describes this concept where this is like pretty much even before the internet and stuff. It's called true names. And basically the concept is that your most valuable thing even beyond your social security number is your true name. And these people live

they basically spend all their life in virtual reality and their friends They have no actual idea who they are. And even though they're friends, like If they want to get real power over someone is when they find out what their actual name and identity is. And these guys then are like

Because they're like so powerful and stuff and then so it's pretty Interesting that yeah, even like thirty years ago this guy was predicting this. Do you guys think this is Because Balogy's a uh he's a futurist, right? So first of all, everything he says, I think of him like somebody who literally is a time traveler. Like he comes back in time and he says something to me and I'm like Okay, even if I don't understand this, this is just what the future is. I just don't know if it's five years, tw ten years, twenty five years from now. He's crazy, not necessarily a bad way.

But I think he predicts a lot of stuff and he's definitely right sometimes, but Those types of people are are probably wrong more than right. Sure, sure. I'm not saying he's right all the time. That's not what I mean to say. I mean the things he says they sound so foreign to today because they're he's he focuses on the future and like kind of like the deep future and the radical future, not like small incremental changes, but like what would the big shifts be? And there's one school of thought which is like you're never wrong. You're just early for a lot of these predictions, like your guy who wrote this book in nineteen eighty one, right? Like You're wrong until you're right for a lot of these big ideas. Uh, like the idea of Bitcoin, this universal currency, that's actually been around for a while.

And then it was wrong until it starts to become right. I believe in it. Did you guys read the book American Kingpin? The one about the Silk Road? I haven't read it, but I've yeah, I'm familiar with it. It's awesome. So you you should read it. It's awesome. It's so fun. But anyway, Silk Road was a multi billion dollar enterprise. All of his employees, obviously, because they couldn't reveal who they are, they were only like identified by like usernames and they had no idea who they were and they paid each other. And I was reading about it. It was a pretty harmonious work like it was like a good work environment and it was only username based. And people got paid. And

They had meetings. It was incredibly fascinating. So yeah, I buy into it. Did I tell you about the conversation I had with one of the early developers of The Silk Road, one of those guys? No. What? He listens to the pod and he reached out and he's uh he's like, Hey, this is who I am, confirmed his identity. And he's like, I was, you know, one of these people. If you Google my username, you'll see all these articles about me. He's like, I just You know, and so I I can't say too much, but like I talked to this guy for a while, fascinating guy. I can't say too much, but basically he was a fan of the podcast. Uh okay, so I'll tell you something crazy, and I gotta ask him what I can say. We might have to just delete this.

Oh, if we cut it out, just know if you're coming back in right now in the recording. We just talked about some crazy shit that we had to cut out. Sorry. Here's what I want to talk about. This is not that interesting on the surface. But I figure Jack could give us some intel uh perspective. So

Tabula. You, Sean, you told me you don't find it to be that fascinating. Neither do I, to be honest. I think that it's kind of like a shitty not shitty. I wouldn't enjoy working there. But basically it's like those small square thumbnail ads at the bottom of a CNN article. And it says like uh

Eighty year old still looks like he's fifty, here's how. And you click and it goes to an article that explains why this supplement is great and then s of small percentage of people buy it. The company just filed to go pu Oh no, they did a spAC. Which is uh obviously all the rage. But they released some numbers.

And so they do about a billions in revenue. three hundred and fifty million of which they actually get to keep. So they pay out a billion to the publishers and they get to keep thirty five percent of that. So they have thirty five million dollars in revenue. Hundred and something million dollars in EBITDA. So These are crazy profitable businesses, only valued at two and a half billion dollars, I think. So not valued like crazy high yet.

The reason why interests me is Vongle. I don't know. I'll let Jack say if he wants to say any numbers. Uh was like Kinda like that too. And then Sean, your f uh, what's his name? Um Furcon.

one of Sean's best buds who've been on the podcast started a company that's probably even bigger than Bungle and Tabula combined. These are crazy fascinating to me because like they kinda seem like um These ad tech businesses, they kinda seem like magical a little bit. Like it's hard to very hard to make. Magical money printers. Yeah, Jack, what do you think? Well, I don't know if it's necessarily hard to make. But what makes you think that it's hard to make sense? I guess we talk about a lot of basic ideas. We talk a lot about direct to consumer stuff. So like Gym Shark.

Or something that just just a slightly better marketing. We don't talk too much about software. We talk about uh collectibles, like it's mostly like hard goods. I just think that there's something a little mystical about an ad network because A like as is online is one of the biggest industries there is. B, it's like always in the background, but be kind of it's kind of forgotten. And C Some big players control it. It's just

I don't know, you don't agree with me that it's a little bit like mythical, like not you know what I mean? Like it's there's some mysterious bit about it that a lot of people who aren't insiders have no idea how it works. I think it is quite unique in terms of it's one industry where it's very easy to make sizable revenue. Right.

there was a number of other companies started around the same time which also got to hundreds of millions in revenue. So advertising I think is a way that you can make uh sizable amounts of revenue. It was actually harder to raise venture capital funding for it though. Because Like venture investors are like, Oh hate appetizing and

For whatever. Tell the story really quick. about how you actually got the came up with this idea for for Vungle? Well, basically we were starting we were working on a different idea, which was really shitty idea. It was basically an app store Where Every app would have a video showing what it did instead of just screenshots.

So it was cross platform app store. And then the idea that this was not really going anywhere. And we were at this incubator called Angel Pad, and there was basically just about four or six weeks till demo day. So we just had to come up with a business idea.

And so in the space of two weeks we basically just prototyped uh six different business ideas. I created fake landing pages for each one. And just try to sell them. The main takeaway that I had from this incubator is that the guy told us, Hey I want you to go and call twenty of your prospective customers.

So for us that was app developers. And he said don't pitch them. Like don't try and sell. your idea. Just ask them what is your biggest challenges. in your day to day life. And so we called these guys and they were like, Hey, we're engineers. We know how to build an app, build a game, but we don't know how to get users for this.

So then we were like, Okay. Let's try out like six different ideas. So one of them was like how to get reviews, like get on app review sites and stuff. And we tried selling it for like we were like, Hey, look, this is normally gonna cost a hundred and fifty dollars. We'll give it to you for like twenty dollars. And people told us like, Oh yeah, love this idea, it's great, I'll sign up as soon as I get home. We got a zero sales. Like people were just telling us the idea is great, they didn't actually want to sign up.

try it out all these different ideas and then actually serendipitously went into a meeting with an investor And we wanted to record the meeting. So we're like, Hey, is it okay if we just record this? opened this like sound recorder app.

And it started like auto playing on full volume like some video for Coke. Like we're trying to close it up, but the fuck. But then we actually just thought like, Hey, wait a minute. What if we had videos like this, but like advertising other games and other apps? Instead of like coke stuff.

And so we went to those protected customers who said, Hey, what if you could have like a movie trailer for your Apple game? shown inside of other apps or games, like fifteen seconds. People were like, Oh, I love this. I want to be your first custom. Put me down for like five thousand dollars, ten thousand dollars ad spend as soon as you're ready to launch. I want to be the first customer. So they were throwing money at us. So then we knew that.

Right, this is a good idea. But actually when we told the guy running the incubator that we had come up with this idea. He was quite early on at Google and stuff. Basically he said to us like I just went on a whiteboard and I was like Yeah, it's kind of in the past week, kind of this is what I how I think

mobile advertising and advertising works, like you kind of have games that wanna get users and these other games will wanna get paid, so we can show ads in there. The guy basically stood up and he just like slams his hands on the table, he's like You guys don't have a clue about advertising. You just look this up on Google in like the past week. There's people at Google. And Facebook ads who have like 10 years' experience in this, and you think that you can disrupt this because you just Googled this like five minutes ago.

And then so actually I remember one day just like being in the toilet and then just like late at night because we stayed late in the street. Okay. Actually there. Like at one AM in in this shared office space, everyone else had gone home and I'm just by myself and I'm thinking like We did what you told us to do. We went and spoke to the customers and asked what their pain point is. He was trying to push us to a bit different business idea. And so we We actually just like had to basically stand up to him and then we said, Hey, listen, I know you really want us to go in this direction.

If you do this idea, you're not gonna get a single dime of funding. this idea sucks and you have no experience in it, you've done what you're doing. And we said this in We really do value your advice, but We followed what you said and we think there's a pain point here, so we're gonna go with this.

Um and then he We kind of make fun of him like a few days later about that. But actually at the time as well He introduced us to another company in the space. And I remember we were meeting with the founders, we'd just come up with the idea, and the founders like, Oh yeah. So um Yeah, uh okay. So what what technology are you using to power this? Are you using like RTMS or like the Vivi bit? And with like I have no idea what.

you're talking about. But actually it gave us a refreshing perspective because we could just think about things from the needs of those app developers. When it sold, wh how big was it? When it sold, I don't know the exact numbers, but hundreds of millions in as you described it, Taboola like gross income. and then you pay out let's say like forty percent of whatever of the money goes to the publishers and so you keep sixty percent so in the hundreds of millions of revenue.

There's a a tweet I put out the other day that's like one of these fortune cookie tweets, but I think it's true, which is if you if you want to know how something works, you ask experts. If you want to know how something is gonna work. You ask a beginner, basically, right? So so the idea is that experts can describe how things already work, but they're not great at describing how things could work or should work in the future. And that's where the beginner's mind really helps. So one thing about so Tabula works because they go at the bottom of Who knows, hundreds of thousands of websites. They must get like a billion impressions a month. I don't know what it is, but it's a lot. One thing that you and I had always discussed was we're like

We should create a tabula for email. And there is something almost like that, live intent. I think it's pretty shitty. But with the rise of email, I wouldn't call it the rise of email, but uh it's it's popular right now. What's holding someone back from making this work for email, you think? Lack of impressions or what? Email's obviously been around a long time. Maybe if I was to look for opportunities and maybe you wouldn't be looking at email. You could

often maybe look at like more emergent platforms like Clubhouse. For example There's no monetization around that, right? 'cause email it's just been around a long time, I guess, but it that doesn't rule it out. Maybe one of the bits is that Email obviously is an open protocol.

But it's somewhat closed in terms of the only tracking that you have is if someone views an image and stuff. And then the kind of trend is to like block those things, you know, like hey. app like blocks all the track open tracking and blocks like images and stuff. So that's like one limitation. But yeah, you could do it. I guess the main bit was size of email newsletters and how many can you sign up. And probably the impressions it's going to generate is still a lot smaller than Tabula can because Taboola has the whole Internet. as a target market. And you guys had mobile apps, which was

New and gonna be huge. Because the thing is like m most ne email newsletters their numbers that they report are probably kind of fake, right? I mean like I have ten million subscribers. How many of them actually read it? So there's an equation for any ad business. It's I'm just making this off the top of my head, but I'd have to think about but like value is equal to number of people. multiplied by the quality of people. A twelve year old is not gonna be the same as like a sixty year old hiring doctor. So quality times quantity times the amount of page views that you get per person.

I mean, it was that about right? Well, I mean, again, you can't say you can't generalize that a twelve year old is not as valuable as a six year old surgeon because actually, like in games, that could be the most valuable user is a twelve year old with their mum's credit card buying FIFA. Game pack. Stuff. But basically the way we saw it is um how can you make the most money for

the publisher and that is by providing the most value. For the advertiser. Volume, you said. Value. Value. Which is D which's a low cost per click. No. No, so this is the thing. Like funkled to differently as well, is it was one of the first ones

the first advertising places to Ignore that. So how the industry was before it was kind of done As you're saying, like It was charged like T V ads, C PM. cost of people that watch this.

And when we thought about it, we were like Wait, this app doesn't care how many people see their ad. They just want users. And so we were one of the first to charge CPI cost per install. So we were like, hey, it doesn't matter if like ten people watch the video.

Or like a hundred thousand. Just pay us a dollar every time someone installs something. So I think you need to abstract. What does the advertiser actually want? They don't want clicks they don't want Impressions.

If they're D to C, they want sales. They want Revenue. That that's all they care about. layered on top. They're like false metrics that kind of abstract.

Or they have to do calculations to compute their core metric. Is there anywhere in the ad space that even remotely interests you now, or are you completely over it? People also said to us when we've started, like, Oh, how did you get interested in the ad industry? We were never interested in advertising. We were just solving a problem that we observed as the most compelling problem in the mobile app industry. We were interested in mobile apps. We launched twelve to eighteen months after the iPhone app store had launched. We so we got perfect timing in a high growth market. I actually had read about iPhone apps in a Gartner report. People kinda shit on Gartner reports, but actually that's where I saw these trends, like hey, mobile apps, iPhone apps are exploding. And this was the biggest problem in that industry. So

It's not that. I find advertising interesting or I'd be searching for an advertising business. I would be searching for what are the emerging industries and trends and what are the biggest problems in that. It might be that advertising is a big problem in that industry, but I wouldn't you know, be searching for an advertising. Solution. What's the next mobile apps? I don't know, right? That's the challenge. It's like once in a decade. You mentioned Clubhouse. I guess we haven't talked about it too much. Sean and I, I think actually this could be a good story. So our friend my I don't know if

how Sean you got looped into him, but Narendra is there's this guy named Narendra who's a friend of mine He listens to the podcast and thus became friends with Sean and he has us all on a group thread. And he texted me a link to Clubhouse. I think I was like user like four hundred. And I like logged in and I was like, This is so stupid.

I hate this. It's just a bunch of Silicon Valley people. It's so lame. Naranja, this is dumb. And he kept telling Sean and I No, this is cool. It's gonna be a thing. And like anytime controversial something he goes, guys log in, like listen to what these guys I was like, Oh my God, I don't want to be part of this. This is so dumb. Well, he kinda called it. Well, there's news, right? So they just raise money at a billion dollar valuation. Probably less than a year since like launching their test flight. So that's kind of amazing. Sam, do you still think it's stupid or you have revised your pay? Well, obviously I'm I'm wrong. No, for you. To you, is it do you like it now or do you not use it? I don't like it. Jack, do you like it? I don't use it. I thought no one would like it, and objectively I'm wrong. I knew people would like it because

We had built Blab and Blab was so similar to Clubhouse. And there's differences, right? Like, you know, there was no pandemic happening at during Blab where people like needed to connect kind of like The whole world, you know, my mom does Zoom calls with her family now, right? Like so everybody w search for some digital solution to talk to other people. So that was different. Uh we were also, you know, video and clubhouse's only audio. And that's, you know. Could be a difference. We saw very similar things, which is that like Some group of people, the Narendos of the World, they will make friends with a whole bunch of like semi strangers who they start to get along with on the platform. And then a bunch of inside jokes emerge, and then this habit forms where they start every night, eight pm, they just want to see what's going on. They get the notification that four people are talking and then they they join in and Oh shit, four hours have flown by, six hours have flown by, and like I'm still in Clubhouse and like wow, this is kind of addictive. And um

I still don't think this is gonna work. In fact I was Debating a friend. I have a friend who's um an investor in a bunch of social companies that were like the big winners, right? Like the I can't say what companies will give him away, but like, you know, many of the multi billion dollar social networks. And I said, You know, are you a believer? He said, I I said, Would you invest at this valuation?'Cause I think investing in a billion dollar valuation is I wouldn't do it right now. The first round was at a hundred million dollar valuation. I also wouldn't have done that. He said, Yeah, I would. It's a you know asymmetric bet, meaning Small chance of uh of success, but the success would be so huge it's still the right bet to m take. And I was like, Yeah, but you can kinda talk yourself into that for like any social product, right? Sure. If the social product if Apex works, it's gonna be massive. But if it doesn't, it's you know, you just lose your size of your bet.

He's like, Yeah, but like this has a bunch of things that might actually work and I was like Cool. I think I'm just too jaded. So my own failure with Blab has made me think that this can't work. And I think that's kind of a dangerous position to take. We hit four million, right? We had four and a half million when we shut it down. Those weren't all active. That was like total users within and it was I think sixteen months uh after we started four million users and I think on a monthly basis we had four hundred thousand active. That's why we knew this is not gonna work because Ten percent of your user base.

being active every month is too low. And we also knew that like The problem with some of these apps is it would be one thing if everyone was using Clubhouse with their friends. Right. If we were using Clubhouse to shoot the shit, because oh, Sam's in Austin and Jack's in somewhere else, and Sean's in California, you know, we need the Clubhouse to bring us together. That will grow like crazy because everybody will invite their friends or their family to the app. The app will grow like crazy and it'll be super sticky. But apps like Clubhouse and what Blab did was The fun was meeting a whole bunch of new people that you were hanging out with. Now The problem with that is that doesn't scale because you're not bringing your friends to the network. You're coming to the network to make friends. That's why Narendra likes it. He made a bunch of friends. Like if you go on and see the rooms he hangs out with, I bet you those are people he's never met in real life. Like they're cool people, they're people who has things in common with, but they were not his IRL friends. And so because of that, you don't grow virally.

Because people aren't bringing their own friends. And then it's also not sticky for most people, because most people will have the reaction you had, Sam. You go in. And you're like If you don't immediately find a live chat room that's interesting to you. And Also, you don't have like the time and the bandwidth'cause it's like there's no editing, right? So it's

It's gotta be like good right away and get to like something that hooks you. Otherwise you're gonna bounce. And you do that three times, you're gonna be like, Why am I opening this app? I should just open Instagram. Every time I open Instagram, the top photo on my feed is On point. It's awesome. Even if that photo was taken three days ago, but the algorithm knows this is juicy. You're gonna You're gonna get some dopamine hit of like pleasure or or laughing or whatever from this photo. And here's the next photo, next photo. So that's the thing that those apps have that. Apps like Clubhouse and what killed Blab, they don't. So I would still be betting

heavily against it. No, that's not a cool position to take'cause like who you know what's the fun in rooting against a startup? Like there is no market for me to go short the startup or bet against it because Everyone's like, Yeah, duh, like It's hard to build the next Twitter, but like Maybe that's gonna be it. Remind do you guys remember Meerkat? Yep. Yeah. That was just as trendy as this, right? I think part of this valuation is just the market environments for funding at the moment. So I mean Meerkat would probably have raised a billion dollar funding at when it its peak as well. So I think it's just too early to call it. I do agree with what you're saying, Sean, that

what I don't like about it at the moment and what I think will be a challenge is that all of the content is ephemeral. Like it just disappears, right? Other places, as you said, Instagram, Twitter, this content is like evergreen. Like I can see a tweet from like six years ago, maybe Balaji sent out that thing six years ago and I can like it and resurface and it's evergreen content and they're getting more and more content all of the time. This they need to make sure the content is a star at every minute of the day. Which it won't be, right? So this is the thing. I went to a brunch. I think you were there, Jack, actually, those James Courier brunches that he used to throw, the NFX brunches. I went to one of them while we were working on Blab and he was one of the lead investors of Meerkat. He was one of the guys who helped Meerkat figure out what it was gonna be. And I talked to him, I was like, Man, I was like, We're hitting this problem. American's hitting this problem like everybody on the outside thinks this space is so hot, but all of us on the inside are fucking panicking because we know how hard this is to get users to stick around when it's live, unpredictable content. And he was like, Yeah, he's like he drew this like diagram with his hands. He goes, Think about it this way.

Every network, every app that you're gonna open has to be interesting. So there's like this interestingness scale. You gotta be high on the interesting scale. He's like in YouTube has this problem, Instagram has this problem, Pinterest, Facebook, everybody's trying to show you something interesting. And they have like millions and billions of photos to pick from, but they're you know, they're gonna show you something interesting and the algorithm uh does that. The problem with Meerkat and Blab and all you guys is Then you cross section that with something that's super interesting, that's happening right now. And that right now problem, the evergreen problem you're talking about. It doesn't make the problem two X harder or four X harder. It makes it like two million times harder. And that's the main problem. That's the r one reason that. Really, Twitch is the only live network.

That has worked. Unless you count live TV, which I guess is a you know a different sort of outlier with like highly premium produced content. And so Twitch is the only one where it's users creating content live and it actually works. And one of the reasons why is because When you're streaming a game The person could kinda just come in whenever there was no beginning, middle, and end of a conversation. You just hop in, they're playing the game, and you're gonna leave whenever you want. And the streamer stays live for like eight hours straight. You know, so the interesting people are online for eight hours a day. Because playing a game is easy. You can actually do it for eight hours. Whereas talking on Clubhouse for eight hours would be impossible to be interesting for eight hours. And so that's the problem with absolute clubhouse. And that's why like the fundamentals to me don't make sense. I think the valuation and all the stuff is for people who don't really understand what's happening at uh like how hard this type of network is to make. I don't know. Like the valuation I'm not that concerned about. I did see another tweet someone

a Google. asked Eric Schmidt when he was CEO, I don't know if you saw this, at the time they bought YouTube, he's like, Did we buy YouTube for the right price? People are saying it's a bit expensive, like one point five billion or whatever. He said, No, we definitely didn't buy it for the right price. It was either way too cheap or way too expensive, ask me in 10 years. So I don't think this one billion matters. It's a binary bet. It could get massive. YouTube was already working. YouTube was already massive. It just might have died because of the you know, all the copyright uh lawsuits that they were getting hit with. Instagram was pretty early.

When it got bought by Facebook and stuff, right? I mean Not as early as this, but Instagram was also sticky, and again, the like fundamentals of Instagram, you could see why that would work. You knew that. People viewing photos on a feed, you know, that works. Oh, these guys have done it well on mobile, and they're like faster than Facebook on mobile. They they sort of built Facebook for mobile. And so Facebook buying them made sense. I haven't seen the data, so maybe I'm wrong. Maybe maybe Clubhouse has some amazing retention metrics that have defied the odds of all the other Others of us who have tried something similar.

I doubt it. I think stuff points towards it not working. I'm just saying they're not judging the valuation. based on data probably too much at this stage, right? It's it's like, oh wow, this seems that this is a big opportunity thing. That means if it becomes a ten billion dollar company, you only ten extra money. And I think that you the risk reward there is so far off that, you know, to me this is an example of investors You know, just wanting to be the one who gets the hot girl at the dance. Uh, you know, like Clubhouse is a name everybody knows and you can sort of talk yourself into it. Like becoming a ten billion dollar company is no fucking joke. You know, like I think Snapchat when they went public were What, ten or twenty, like Max. Um, and that was ten years in. Not to shit on him because seems like a great guy in some of his writings about growth he's growth expert, but Andrew Chen has had a couple of big bet failures, like he joined Andrewson a couple of years ago. His big bets are things like Atrium

Which like died like twelve months later, like I can't remember his alphabet, but some of them have like died. Yeah, yeah. And I think he was also in Secret, which was like probably the last big social app to do this was Secret, where Secret comes out. It's in a small number of people's hands. It's super interesting. And uh the tech guys love it. And you know raised at a hundred million dollar valuation, boom, just like Clubhouse did. It didn't get to that next one at the billion. Yikak did, but Secret didn't. And then both of those died because of kind of fundamental problems which were around, you know, like you know, fully anonymous networks. What's interesting to me is like I just don't really invest much in consumer apps because I just don't get it. And I think what is highlights that the most to me is that Sequoia.

And um I can't remember the other firm, but They are investors in WhatsApp. like the biggest consumer exit of all time. They're also investors in things like Secret. So if these guys that have massive teams, they're looking at all the data, they're going to the board meetings of WhatsApp, they have all of these data points, if even them Can pick a consumer app that like implodes like twelve months later.

How am I gonna be able to pick the winner? We talk a lot about a lot of cool stuff on here But we never really talk about the social network uh Like these like poppy fun things. And is that would you say it's because you Do you just hate that now? Because you see No, no. So I'm not like I'm not I I don't hate it. I am

probably too scarred by it. So like I'm I'm scarred by a diplomat where I would never go try to build another social app. I think it's like just in terms of The risk reward ratio. I guess there's just so many better ways for me to have success than to try to be the the genius who catches lightning in a bottle, you know, the lottery ticket winner who really comes up with the next Snapchat, the next Instagram, the next Pinterest, whatever, right? Like I would love it, but Damn, that's hard. And there's just so many other ways where I have a much higher chance of success. So I would do it again. But I love thinking about it. I love talking about it. I love using these apps. I try all of them, right? Like I enjoy them and actually enjoy using Clubhouse sometimes. I actually thought that the the real value of Clubhouse was for anybody who was on it during the first like three to five months, you could meet Every single interesting person in tech or even like Hollywood. Like I had conversations with NBA players on there. I had conversations with, you know, Scooter Braun. I had conversations with uh you know from from from kind of like Justin Bieber's manager, all the tech people were on there. The VCs who again, I tweeted this yesterday.

You can't get a meeting with these guys if you try to schedule them. Their EA will say, you know, they're booked till March. How's the third week of March for you? And then you have to fake also being busy and be like, let me check, even though you know you have, you know, you don't schedule the three months out. And then that guy will be on Clubhouse for three hours that night, you know, shooting the shit and doing nothing. So like It was the best way to build your network and build your kind of friend group and one even one connection that came out of Clubhouse could really change the trajectory of your life because All the people on it early on were heavy hitters. And then now as it gets kind of like more opened up to more people'cause they want more users and now You know, they send me a message that says, You have thirty invites. It's like, okay, they're trying to juice growth. They're trying to try to accelerate growth. Now that value is gone. So I don't think it's that interesting anymore.

So I I know Jack has to leave probably pretty soon. Sorry, Sam, I was just gonna say like if there was anything else you wanted to talk about with the Taboola thing, there was one or two points I had in it. Also kind of felt like you should mention GameStop today. I don't know if you've been following it, but the craziest Yeah, go for it. Explain what's going on for people who don't know. Uh well with GameStop, I saw a chart saying that trading volumes for stocks are approaching. Basically If a game stop.

Blackberry. And like some of these other junk. What the professional investors would say are like junk. The fundamentals like these are dying stocks. Like GameStop is like a Pokemon card store basically at the moment. It's dying. Uh so hedge funds were basically saying, Hey, we're think you should sort this stock like the numbers of trash people on Reddit in this group Wall Street Bethany club together And they were like, Hey

Let's just screw these hedge fund guys and let's just pump this stock. Now GameStop, the guy, this other act the the founder of Chewy had become an activist investor like six months ago just saying, Oh, I think I can improve them. He invested seventy five million. It's gone to over a billion. In six months. The stock was up.

At one point over like a hundred percent. today alone. Like if you look at the stock chart, it just went up, like down, it's a twelve hundred percent gain, seventeen hundred percent gain. Well I mean like a hundred plus percent today alone because everybody is like just buying like options calls that expire on Friday because basically what happens is all these people shorted the stock. But then if the stock goes up, they kind of have to cover their short positions because everyone's pumping this one stock, basically treating the stock market like game. Kind of funny to see, but like, yeah, is approaching like dot com bubble levels of stuff because people were posting like really scientific sounding stuff in on the Reddit group, like oh yeah, this is called like a quantum short freeze where there's not enough stocks and in this like

They basically were chatting shit. If people even knew they were changing shit in the comments they were like you formatted your post very professionally with like bullet points. Uh sounds legit, I'm in. Right. And then they're posting screenshots that these put in like a hundred thousand dollars buy orders. So it's kind of like the dot com thing where everyone was just buying stock any stock that's Now everyone's buying, oh, someone's shorted a stock. Let's let's just pump it.

Like the hedge fund people were saying short this, let's just buy that. Do you think that this is all from Robin Hood that these people are using? Like Blackberry, et cetera, like even they're putting out announcements like we have no material news while our stock is up forty percent today. Because even though Robin deduces you'd think like, Oh, wait. They maybe don't have as much money as hedge funds. So how can they move the stock so much? It's because they're all buying. crazy leverage options. They're buying options that expire on Friday, which means that you can essentially move the needle of the stock.

just by putting in like one dollar, you can move it massively because you're basically doing a game of roulette. You're like, hey, yeah, I know I'll lose all my money, but I have a small chance of winning. So basically they can increment, they can move the stock much more because they're just buying these super risky, crazy options because they don't give a shit if they lose all their money. So it is Robin Hood, it looks like to me. It's so crazy what Robin Hood has become. I actually can't stand it. It's funny. Yeah. But I definitely am sorry. I'm gonna I feel kinda sad for people because I think it's gonna mess up a lot of people. Yeah, it's funny, scary. I actually had a funny story. So uh three days ago, I uh I'm in this psych chat group and I posted, I said, Hey, who's got hot stock tipped for me? I I feel like gambling. And I told I I said, I got a hundred K, I'm gonna gamble.

Yeah, give me give me some give me your recommend best recommendation. And so people were just r uh responding. There's there's like six, seven people in this group. They were like uh you know this because of this back because of this reason you could just speculate on this and you know just funny things and uh Greg Eisenberg who's been on the pod uh a couple times he goes oh I think GameStop still has a 20x to go and I actually didn't know what was going on with GameStop at the time. This was probably I think the first day of the pump like when it was like Fifty or something like that. And uh I looked at it, I was just like, What is he talking game stop? I just thought he was like, you know, just referencing some again, some obscure old dead thing as whatever. And so anyways, I picked one, I put an RK into it. And then fucking GameStop has been up. I think I would have had like seven hundred thousand dollars or something crazy if I had literally just taken his like his joke recommendation to be serious. It was crazy. Yeah, it's

It's messed up. It's funny. funny meme. Yeah, it's it's wild how and so is there something I actually don't know, is there something when the short cover their position that boosts the stock more because they had to cover? Is that why it's like double pumps? Yeah, because when you cover a short, you have to buy the stock. at any market price. So these guys One of the analogies had is like actually Warren Buffett said that he doesn't like shorting a stock because then he's like you can't sleep at night. Because here's an analogy. Let's say X stock is um GameStop is ten dollars. If I buy the stock

I kind of have infinite upside, right? Like it could go to a hundred thousand or whatever. But if the stock goes bankrupt, I only lose my ten dollars. I have a cat downside. But if I short the stock. I actually have a capped upside.

I can only make a certain amount. If it goes to zero, I only can make ten dollars. But then If it keeps going up, I actually have an unlimited upside. That's why on Robinhood or any of these platforms you have to have special permissions to s short a stock because you actually can lose an infinite amount of money the capital that you assign to that trade. I was just looking at Tesla's short position. So at one point Tesla was the most shorted stock in the market. Uh, and then Tesla stock obviously has gone insane. And so just in the last

Uh, what is this? So this is the last actually is is the short position up? I think there might be a larger short position. So uh January of twenty twenty, it was twenty five million of short interest, and now and at the end of the year it was sixty million. So so even Even with the the massive run up and people certainly covering their positions, it looks like the short position is still huge against Tesla, which It's interesting. It makes sense to me. I mean it could be new people buying in, you know, like Tesla at an all time high. Let's have new people come in, but the people that shorted it before, if their hedge fund is a billion dollars and they put a lot of money to this. If the socks gone up ten X.

They Could have lost 10x their money. So they need to get out of the position at any price. And that's what kind of creates somewhat of a spiral that the price could keep going up as shorts. have to cover. One more uh little thing. I don't know how much time you have, Jack, but are you paying attention? I do need to jump off that. Okay, one minute. Uh okay, maybe we can't do this one minute. All right, I'm just gonna give you the short version of it. Actually let's do this one. I'll do I'll do a shorter one. Are you familiar with grayscale BTC? Uh yeah. Grayscale. So Jack, explain grayscale to Sam real quick. I mean I'm not Totally familiar with it, but the stock ticker is

is GPT C and I believe that it's just like a derivative of Bitcoin. at like a premium. So it's kind of like an ETF for Bitcoin. It that's b ETFs of Bitcoin are not legal, so these guys have launched something else so that institutional people can buy it without having to create an account on Kraken or something. So the guys who started Grace, I think one of them was the former co founder of Coinbase, I believe. Yeah, Barry Silver's involved. Maybe I got it wrong. Maybe he's doing a separate one, but basically, you know, the Winkle Voss and and others have been trying to start a Bitcoin ETF to make it easier for a normal investor to go into e Trade. and buy into Bitcoin without having to figure out how to hold it or figure out how to start an account on Coinbase or whatever else. And it just keeps getting rejected. And I think Jack, last time you were on, you mentioned an idea like this. You were like, why doesn't somebody create a Bitcoin index fund like just Do it in the Middle East. Do it somewhere else that's like just not on the US, you know, on the NASDAQ. Well, I think I was saying that my friend is doing it in the Middle East. Oh, not my friend, a guy I had known. Right. And so Grayscale, I mean, it's been trem so crazy successful. So basically this thing has grown like crazy. So they now have twenty four billion in assets under management as like a

pretty new thing. They are buying some sick amount of Bitcoin. I think they hold over three percent of all Bitcoin now. And the crazy thing is if everybody who's buying the Bitcoin from there is buying it at a premium because they have not only like a management fee of two percent, they literally they just trade at a higher price than their underlying Bitcoin holdings. So you're paying a premium for that convenience. And I just think this is like one of the like Like these guys are gonna make the guys in charge of this, you know, probably gonna make over a billion dollars doing one of the simplest simplest in terms of like they didn't build a product. They didn't invent Bitcoin. They probably had to do a lot of regulatory work though, because otherwise someone else would have done it. I think they paid some lawyers basically to say, Hey, how could we do this? And uh yeah, let's go ahead and listen this and and see what happens on the you know on the OTC. And uh I just think it's it it's insane that it's trading it. I don't know what the premium is. I believe it's I do need to jump now, guys, but

This was super fun as always. So all right, thanks for coming, Jack. Take care, guys. Thank you, Jack. Sean, I want to bring one more thing up to you. Okay, I'm also supposed to jump in. Yeah, let's do it. Oh well, really quick, Andreessen Horowitz. Yeah. So they Andreessen Horowitz is um regarded as one of the best, maybe the best V C firm out there. By people in the know it's not w it's not the best, but it is definitely tier one. But it has um A brand name that is it's like uh who knows what's better Princeton than Harvard, but it's like it has that say uh it has that name. So they got popular because they had podcasts. My friend just texted me, Maggie, who's the head of content at Nerdwallet, you know, a multi-hundred million dollar business. And she just got recruited and hired there. So I love this idea that they're doing. They're building out their media

arm. I don't know if that makes money. I think it does. There might be ads on it. Pretty interesting. What do you think about this? So I don't think they have a a media business today. I think they put out content just like most VCs do. They have podcasts and stuff to like Be thought leaders so they get better deal flow. But now they're like, No, why do we need to go to the Wall Street Journal when we want to write an opinion piece? Let's just make a media company and we will write opinions into that. And like, let's actually blow this thing up. I think this is a really smart idea. Kind of a no-lose situation. Like they have multiple billion dollar plus funds. So the media business. doesn't need to be a big business for them for this to add value to that. No, it could easily pay for itself, though. Just what they have now, it would pay for itself. And so I think that it will I think it will be successful, uh, you know, financially, but at a

a scale that's for them for probably pretty small, but the impact and the influence and the ability to like dictate their own terms and not be beholden to the media and having to like play nice with journalists and do all this stuff. They're like, no, we'll just be the journalists. Why not? And this has already been a trend, right? Like Mark Andrewson on Twitter will get, you know, millions of impressions. But I think it's smart of them to go straight into the media business and compete. And I love how the media people are all so upset about this. Yeah, it's stupid for anyone to be upset about it. I can't stand that. It's awesome. I can't stand the elitism of people like gatekeeping around who can and cannot share their opinion who can and cannot have quote news or be a quote journalist. I think it's awesome. I'm on board. I think it's great. By the way, I think this is a a general trend for VC, which is that not this is not exactly the case for Andreason, but it's a good example. VC is gonna shift, I think, to businesses that startups need.

That Happen to invest. have basically the have a venture arm. So I'll give you an example. Have you ever heard of Tusk Ventures? No. So there's a guy, I think his name is Bradley Tusk. He's like a kind of a uh a big dog in the like kind of like lobbying world, uh kind of like the legal political world. So he was an early investor in Uber, Airbnb, and you know a handful of other really big winners because He was the guy who was helping them go into cities, lobby with the cities and and get, you know, their kind of like new product, you know, like Airbnb or Uber was a new idea, get it through with governments. And so he was a service provider that they would normally pay for for their servant for for their Their startup.

And he was like, Yeah, but I'm a venture investor. So if you want me to work with you on this, let me invest. And so this guy's made a killing on Airbnb and Uber and these other guys. And I think the same thing is gonna happen for lawyers, like every startup today. goes to one group of people for investment and another group of people for legal services. Uh somebody, and you know, maybe it's me, somebody's gonna go buy a law firm and be like, hey, here's what we're doing. We're cutting prices down to the bare minimum. We're gonna be ultra client friendly. And we're gonna just invest off we're gonna we're gonna raise a fund out of this legal you know, this law firm to invest in all the companies that we work with that that that we do this for. I think it's a good idea. I think legally, I think you can't do that for a law firm, but I understand your point. I think but they take equity right now in some startups. Some do. They take the set of cash, they take equity. I don't think they have owners, do they? Yeah, partners. Yeah, there's like a partner. Yeah. The other thing that that works there is like recruiting. So every startup wants to recruit engineers. So instead of being a recruiting firm that makes all your money, your business model is give me twenty percent of the first year salary, it's gonna be A business model that is basically like I will do the recruiting for you, but we invest in your company. We reinvest and then we are your recruiter firm at cost. I'm on board with this. I think it's great. Although I would wanna I've never taken money from any of these big guys. I would want to ask them.

Do you actually use the services they provide? It's different from oh I'm Andrews and Hurwitz and we have some marketing people on staff to being like, No, we're a badass ad agency with a venture arm. You know, we are a badass legal firm with a venture arm. We're a badass recruiting firm with a venture arm. I think it's a different thing. And I think Found are gonna start taking that because they're gonna be like, Hey, I get two for one here. Yeah, like it was kinda like that uh Reed who came on. Reed? What's the YouTuber guy's name? Uh yeah, yeah, yeah. Mr. Beast Manager. Yeah, that's right. Uh yeah, that's that's a good example. Cool, I got a jump. Uh so I'll see ya. See you.

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