WEBVTT - Start Ups and Shut Downs 0:00:04.400 --> 0:00:07.800 Welcome to Tech Stuff, a production from I Heart Radio. 0:00:12.080 --> 0:00:14.640 Hey there, and welcome to tech Stuff. I'm your host, 0:00:14.800 --> 0:00:17.760 Jonathan Strickland. I'm an executive producer with I Heart Radio 0:00:17.840 --> 0:00:22.160 and I love all things tech. And in a recent episode, 0:00:22.400 --> 0:00:25.840 I talked about funzy schemes and how you know that's 0:00:25.840 --> 0:00:30.720 an old scam that gets refreshed by enterprising con artists 0:00:30.800 --> 0:00:35.920 every so often, with recent examples centering on cryptocurrency, and 0:00:36.040 --> 0:00:39.599 that actually got me to thinking about startup culture and 0:00:39.640 --> 0:00:43.600 how some startups appear to be sincere, but maybe they're 0:00:43.600 --> 0:00:46.880 too ambitious to really work in the real world, and 0:00:47.000 --> 0:00:49.519 some seem like maybe they were just smoking mirrors the 0:00:49.720 --> 0:00:52.959 entire time. So today I thought we'd go through some 0:00:53.080 --> 0:00:57.000 of those types of startups and talk about the world 0:00:57.120 --> 0:01:00.639 of startups in technology and why it can be so 0:01:00.720 --> 0:01:03.440 risky to invest in them. Now. There are a lot 0:01:03.480 --> 0:01:07.560 of common elements among startups in general, not just in tech, 0:01:07.959 --> 0:01:10.760 and a lot of what we see frustrates me because 0:01:11.200 --> 0:01:13.640 you would think that by now people would learn their 0:01:13.760 --> 0:01:17.240 lesson when it comes to hype machines. Right, we should 0:01:17.240 --> 0:01:20.640 all be pretty familiar with the hype cycle, and you 0:01:20.640 --> 0:01:24.200 would think with familiarity we would be more resistant to it, 0:01:24.280 --> 0:01:26.680 and yet we're not. And I include myself, and that 0:01:26.880 --> 0:01:30.280 I get caught up in hype too, even as I 0:01:30.319 --> 0:01:34.200 recognize that there's a pattern here that just doesn't hold up. 0:01:34.600 --> 0:01:38.080 But I guess we have enough long shots that do 0:01:38.200 --> 0:01:43.240 payoff that keep people figuratively and literally invested. I mean, 0:01:43.440 --> 0:01:47.639 what if the next opportunity pays off and you didn't 0:01:47.760 --> 0:01:50.240 get in on the ground floor, you just missed a 0:01:50.320 --> 0:01:54.960 huge payout. So I guess I can understand the tendency, 0:01:55.080 --> 0:01:58.520 but it also reinforces the general truth that humans as 0:01:58.520 --> 0:02:02.600 a rule are really bad at stuff like risk assessment 0:02:02.880 --> 0:02:06.240 and understanding the odds, which, hey, you really you just 0:02:06.320 --> 0:02:08.920 have to look at the fact that you know lotteries 0:02:09.000 --> 0:02:12.000 are a thing to know that that is true. There's 0:02:12.000 --> 0:02:16.640 a general philosophy amongst startups that goes something like move 0:02:16.720 --> 0:02:21.040 quickly and break things. That taking big chances is encouraged 0:02:21.080 --> 0:02:24.440 because you know, while you're more likely going to fail, 0:02:25.360 --> 0:02:28.119 you'll learn a lot in the process, and that means 0:02:28.160 --> 0:02:30.560 you'll actually have a better chance at success next time. 0:02:30.560 --> 0:02:33.800 We learn a lot through failure, or you might find 0:02:33.800 --> 0:02:37.080 that quote unquote breaking what was previously considered to be 0:02:37.120 --> 0:02:40.520 a best practice leads to you finding an even better 0:02:40.600 --> 0:02:44.160 way to do things, but it can also create the 0:02:44.200 --> 0:02:47.280 perfect climate for someone to engage in a little snake 0:02:47.320 --> 0:02:50.960 oil peddling, because in a world where seemingly anything is possible, 0:02:51.440 --> 0:02:54.400 there's no such thing as impossible, and that means you 0:02:54.440 --> 0:02:56.840 can get money for stuff that just plane don't work. 0:02:57.520 --> 0:03:01.480 The current reigning champion of that model is Theopos, which 0:03:01.840 --> 0:03:05.120 I have covered extensively in the past, but for a 0:03:05.200 --> 0:03:09.800 quick overview, Elizabeth Holmes, Stanford dropout and a big fan 0:03:09.840 --> 0:03:13.240 of Silicon Valley leaders like Steve Jobs, set out to 0:03:13.280 --> 0:03:15.840 create a company centered on a new kind of blood 0:03:15.880 --> 0:03:19.920 analysis device, and the idea is alluring. Imagine a machine 0:03:20.080 --> 0:03:23.520 about the size of a desktop printer that could analyze 0:03:23.520 --> 0:03:26.519 the tiniest drop of blood and run more than a 0:03:26.600 --> 0:03:30.800 hundred fifty tests on that sample. The machine presents a 0:03:30.840 --> 0:03:35.320 comprehensive but easy to understand report on that sample and 0:03:35.360 --> 0:03:39.800 thus gives the administrator insight into the patient's current state 0:03:39.840 --> 0:03:42.800 of health and also pointing out any indicators that you 0:03:42.840 --> 0:03:45.120 know might suggest the patients should be on the lookout 0:03:45.160 --> 0:03:49.800 for future complications. It could help patients be more proactive 0:03:50.080 --> 0:03:53.920 and choose new lifestyle routines to live their healthiest lives. Heck, 0:03:54.160 --> 0:03:57.440 once the cost of making the devices declined enough, it 0:03:57.520 --> 0:04:00.920 could potentially be something the average can shumer purchases for 0:04:00.960 --> 0:04:04.360 their own home, and thus informing the average person about 0:04:04.400 --> 0:04:07.520 their own health before they go to say their annual 0:04:07.640 --> 0:04:11.560 check up, people would make more informed decisions about their health. 0:04:11.800 --> 0:04:14.760 They would be able to have better conversations with healthcare providers. 0:04:15.120 --> 0:04:19.520 It would really democratize healthcare. And that is a heck 0:04:19.680 --> 0:04:22.320 of a sales pitch, and from the business side, it's 0:04:22.320 --> 0:04:25.360 easy to see how it could be a freaking gold 0:04:25.440 --> 0:04:30.160 mine because the healthcare industry is already a multi trillion 0:04:30.720 --> 0:04:34.800 dollar market. Holmes was confident and she was convincing. And 0:04:35.240 --> 0:04:38.200 over the past two decades, we've seen technology do stuff 0:04:38.240 --> 0:04:41.400 that you know, three decades ago would seem impossible. The 0:04:41.440 --> 0:04:44.680 Internet alone was a huge revelation, and now we can 0:04:44.720 --> 0:04:47.080 carry de vice in our pockets that less access at 0:04:47.080 --> 0:04:50.640 wherever we are. So it's mundane today, it's it's commonplace. 0:04:50.720 --> 0:04:54.279 But thirty years ago it would have seemed bonkers. And 0:04:54.360 --> 0:04:58.200 so it's not really surprising that investors rushed in to 0:04:58.320 --> 0:05:00.880 get in on the ground floor. Of homes this enterprise, 0:05:01.400 --> 0:05:04.960 the return on investment would be unbelievable. It could be 0:05:05.000 --> 0:05:07.080 as if you were able to travel back to the 0:05:07.120 --> 0:05:10.560 mid nineties when Apple Stock was trading below five dollars 0:05:10.560 --> 0:05:12.880 a share, and you bought up a ton of it 0:05:12.920 --> 0:05:15.279 because you know how much it's going to grow in 0:05:15.320 --> 0:05:18.520 the future when Steve Jobs comes back. It helped that 0:05:18.600 --> 0:05:22.680 most investors had little, if any understanding about the technology 0:05:22.720 --> 0:05:26.320 involved in blood analysis. That's something that you'll remember is 0:05:26.360 --> 0:05:29.560 a red flag when it comes to stuff like Ponzi schemes. 0:05:30.160 --> 0:05:33.279 In this case, Farness wasn't so much a Ponzi scheme 0:05:33.360 --> 0:05:35.800 as it was a company centered around an idea that 0:05:35.960 --> 0:05:40.960 was just not really realistic. More knowledgeable experts in the 0:05:41.040 --> 0:05:45.760 area of blood analysis had warned that Holmes's goal was unattainable, 0:05:45.960 --> 0:05:49.120 that the technology just, you know, it's not there to 0:05:49.200 --> 0:05:51.920 do something as comprehensive as what Holmes had in mind. 0:05:52.440 --> 0:05:56.120 But the investments just kept pouring in, and if it 0:05:56.160 --> 0:05:59.880 had just failed, the company had just ultimately had to say, 0:06:00.000 --> 0:06:02.640 you know what, we tried, it didn't work, We're sorry. 0:06:02.720 --> 0:06:04.920 Our story would really just be about how a lot 0:06:04.960 --> 0:06:07.679 of people got excited about an idea, but the idea 0:06:07.760 --> 0:06:10.800 just didn't pan out. But of course it gets worse, 0:06:11.120 --> 0:06:13.760 and that's because over at Therapness there were a lot 0:06:13.760 --> 0:06:17.599 of shady things going on. There were teams legitimately trying 0:06:17.640 --> 0:06:20.280 to get the technology to work, but in the meantime, 0:06:20.320 --> 0:06:22.560 the company was playing a kind of a shell game 0:06:22.600 --> 0:06:27.040 with investors and v i p s. So, according to reports, 0:06:27.560 --> 0:06:30.000 when such a person came in for a tour of 0:06:30.000 --> 0:06:33.520 the facility, they would get their finger pricked and submit 0:06:33.560 --> 0:06:36.560 a tiny blood sample in this little bitty capsule and 0:06:36.600 --> 0:06:39.120 that would be fed into a Theonos machine. But the 0:06:39.160 --> 0:06:41.560 analysis would take a couple of hours. So instead of 0:06:41.600 --> 0:06:44.320 just you know, waiting around, the v i p would 0:06:44.360 --> 0:06:47.360 go on a tour, maybe they'd grab lunch with Theoroness 0:06:47.360 --> 0:06:52.040 executives or something. Meanwhile, other staff would rush in retrieve 0:06:52.160 --> 0:06:56.080 the blood sample from the Theonis device diluted and then 0:06:56.120 --> 0:07:00.120 submit that diluted sample to a traditional blood analysis machine 0:07:00.440 --> 0:07:03.880 that had been bought from an established company. In other words, 0:07:04.040 --> 0:07:07.320 they were relying on devices that were not built by 0:07:07.360 --> 0:07:10.760 Saronis to do the actual analysis. Then they would rush 0:07:10.800 --> 0:07:14.160 the completed analysis back to the meeting room, and then 0:07:14.200 --> 0:07:16.480 the team would behave as if the Tharonis device had 0:07:16.520 --> 0:07:19.280 done all the work the entire time. It was a 0:07:19.280 --> 0:07:23.440 particularly flashy version of the old Turk automaton chess player. 0:07:23.760 --> 0:07:26.120 You know, the thing you're looking at is not the 0:07:26.160 --> 0:07:30.920 actual thing that's doing the work. Sarais eventually crumbled after 0:07:31.000 --> 0:07:34.120 insiders began leaking what was going on to others and 0:07:34.200 --> 0:07:39.160 journalists began publishing expose s about the company. Holmes is 0:07:39.280 --> 0:07:42.760 one of the executives who happens to be waiting trial 0:07:42.920 --> 0:07:46.200 for multiple charges of fraud, and the name Sarah Knows 0:07:46.520 --> 0:07:51.880 is forever associated with words like hoax and scam. Now, 0:07:51.920 --> 0:07:55.120 just to be clear, I don't know if it was 0:07:55.200 --> 0:07:58.240 a scam from the beginning. I suspect that, you know, 0:07:58.360 --> 0:08:01.680 in the very earliest days, Holmes was sincere in her 0:08:01.680 --> 0:08:04.760 belief that she can make this work, and her engineers 0:08:04.880 --> 0:08:07.760 certainly tried to get the technology to measure up to 0:08:07.840 --> 0:08:11.600 the vision. But somewhere along the way people started to 0:08:11.640 --> 0:08:14.560 fudge results or rely on alternative methods to make it 0:08:14.560 --> 0:08:17.560 seem like things were working way better than they really were, 0:08:18.000 --> 0:08:22.080 and once they went down that path, they were committed. Now, 0:08:22.240 --> 0:08:26.360 other companies are legit, but the people running them might 0:08:26.400 --> 0:08:30.520 not be and that also is a big problem. So 0:08:30.600 --> 0:08:32.400 that seemed to be the case with a company that 0:08:32.480 --> 0:08:35.240 once upon a time was called Mozito, but for some 0:08:35.280 --> 0:08:39.360 reasons that will soon become a parent now calls itself definitive. 0:08:39.800 --> 0:08:43.760 So let's talk about what this company's purpose is beyond 0:08:44.040 --> 0:08:47.079 making its founder a whole lot of money. The original 0:08:47.160 --> 0:08:50.679 focus of Mozito was to do something pretty great. I 0:08:50.720 --> 0:08:53.800 think so many of us have used mobile devices to 0:08:54.000 --> 0:08:56.840 pay for stuff. You have some sort of digital wallet 0:08:56.960 --> 0:08:59.000 that's tied to either a credit card or a bank 0:08:59.040 --> 0:09:02.760 account or some mothers stash of cash. In a transaction, 0:09:02.960 --> 0:09:05.520 the mobile device interacts with a merchant's point of sale 0:09:05.960 --> 0:09:08.120 and the data zings back and forth, and soon the 0:09:08.160 --> 0:09:11.040 appropriate amount of money goes from your stash to the 0:09:11.040 --> 0:09:14.120 merchant stash, which is, you know, pretty simple idea. But 0:09:14.240 --> 0:09:18.359 there's an enormous population of people who don't have bank accounts. 0:09:18.800 --> 0:09:22.280 Mozito estimated that two and a half billion people have 0:09:22.520 --> 0:09:26.320 access to cellular technology, but they do not have an 0:09:26.360 --> 0:09:30.280 account with a bank or a credit union. So mobile payments, 0:09:30.320 --> 0:09:33.880 while incredibly useful, are not within the grasp of everyone. 0:09:34.320 --> 0:09:36.280 And so the company saw a space that it could 0:09:36.280 --> 0:09:40.000 potentially fill creating a technology that would allow people who 0:09:40.040 --> 0:09:44.439 are unbanked or underbanked to use mobile payments, which is 0:09:44.480 --> 0:09:47.480 a pretty noble goal giving people a lot more options 0:09:47.520 --> 0:09:51.000 when it comes to making transactions, and that attracted a 0:09:51.000 --> 0:09:54.520 lot of investors. And that brings us to the company's founder. 0:09:55.080 --> 0:09:58.280 So the founder of Mozito was a guy named Michael Liberty, 0:09:58.400 --> 0:10:01.839 whose name is pretty fitting we're gonna see. He first 0:10:01.960 --> 0:10:05.120 established the company in two thousand seven in Dallas, Texas. 0:10:05.559 --> 0:10:08.040 The fact that Mozito traces its history to two thousand 0:10:08.040 --> 0:10:11.360 seven is already pretty impressive because that's the same year 0:10:11.360 --> 0:10:14.040 that Apple launched the iPhone, So it was a pretty 0:10:14.120 --> 0:10:17.480 visionary move. Liberty was able to get a lot of 0:10:17.520 --> 0:10:20.760 investors for his company, raising money in multiple rounds of 0:10:20.800 --> 0:10:25.240 investment funding. The company relocated from Dallas to Austin, Texas 0:10:25.320 --> 0:10:28.640 in two thousand twelve, and by two thousand seventeen, Liberty 0:10:28.720 --> 0:10:32.520 himself would step down from the company and relocate to Florida. Essentially, 0:10:33.000 --> 0:10:36.080 he had grown the business. He was not leading it. 0:10:36.240 --> 0:10:38.040 He was he had founded it, but he had other 0:10:38.080 --> 0:10:41.560 executives in charge of running the thing, and he kind 0:10:41.559 --> 0:10:43.760 of said all right, my work year is done, and 0:10:43.800 --> 0:10:48.120 stepped away and went to Florida. However, investigators with the 0:10:48.240 --> 0:10:52.920 Securities and Exchange Commission or SEC were interested in some 0:10:52.960 --> 0:10:55.280 of those investments that were supposed to be going to 0:10:55.360 --> 0:10:59.200 Mozito because the numbers didn't seem to add up, and 0:10:59.240 --> 0:11:03.560 the investigation indicated that Mr Liberty had taken the liberty 0:11:03.640 --> 0:11:06.520 of moving some of that cash around so that would 0:11:06.600 --> 0:11:10.079 ultimately fill his own pockets rather than go to funding 0:11:10.120 --> 0:11:13.880 the company. With most of the shenanigans taking place between 0:11:14.040 --> 0:11:18.199 and there were signs of the shell companies all designed 0:11:18.240 --> 0:11:21.080 to obfus skate where the money was going. There was 0:11:21.200 --> 0:11:24.240 a practice of money laundering, which is when you mix 0:11:24.320 --> 0:11:28.320 illegally obtained cash with cash from legitimate businesses in an 0:11:28.360 --> 0:11:31.000 effort to hide the fact that you've got filthy lucre 0:11:31.080 --> 0:11:35.280 on your hands. Ultimately, Liberty was charged with fraud, with 0:11:35.320 --> 0:11:38.400 prosecutors saying he had stolen more than fifty million dollars 0:11:38.440 --> 0:11:42.560 to fund his own millionaire lifestyle, complete with mansions and 0:11:42.679 --> 0:11:45.840 private jets. He also served a prison sentence for a 0:11:45.960 --> 0:11:49.400 different infraction. He pled guilty to charges that he had 0:11:49.480 --> 0:11:53.080 violated campaign finance law in two thousand eleven and was 0:11:53.120 --> 0:11:55.040 sentenced to four months in prison and a fine for 0:11:55.120 --> 0:11:58.360 one hundred thousand dollars in seventeen. And there were other 0:11:58.520 --> 0:12:02.840 SEC investigations into activities beyond the ones I just described. 0:12:03.520 --> 0:12:08.560 Now the company Mozito wasn't included in these charges. It 0:12:08.600 --> 0:12:12.280 appeared as though everything at the company was pretty legit, 0:12:12.679 --> 0:12:15.160 but there was a lot of turnover in the executive 0:12:15.160 --> 0:12:19.160 suite of leadership, which probably didn't look too good to investors. 0:12:19.600 --> 0:12:23.840 In Scott Sandlin stepped down as the CEO, and for 0:12:23.880 --> 0:12:28.240 more than a year, Mike Love served as interim CEO, So, 0:12:28.280 --> 0:12:31.000 in other words, this company went for more than a 0:12:31.080 --> 0:12:34.280 year without a permanent CEO. In fact, it was thirteen 0:12:34.280 --> 0:12:37.040 months before the company had a new official CEO with 0:12:37.120 --> 0:12:41.320 Todd Bradley, but then Bradley quit in seventeen along with 0:12:41.440 --> 0:12:45.840 chief financial officer Scott Ellison. The Forbes reported that Mosito's 0:12:45.880 --> 0:12:49.479 website kept both of those men listed on their executive 0:12:49.559 --> 0:12:52.559 leadership websit page, you know, for a few months afterward, 0:12:53.240 --> 0:12:56.520 which seems more than a bit sus So that probably 0:12:56.920 --> 0:12:59.559 didn't look too good from the outside, and that might 0:12:59.600 --> 0:13:02.880 explain and why the leaders of Mozito decided to reincorporate 0:13:02.920 --> 0:13:06.120 and change the name of the company definitive. You don't 0:13:06.160 --> 0:13:09.120 want to be another therapist after all. While the company 0:13:09.200 --> 0:13:11.079 may not be a scam, that doesn't mean it's a 0:13:11.160 --> 0:13:14.400 viable business either. There have been numerous articles written about 0:13:14.400 --> 0:13:17.679 how the company, throughout its history had found itself scrabbling 0:13:17.720 --> 0:13:22.719 to keep things going, mostly through additional rounds of investment. Now, personally, 0:13:23.040 --> 0:13:24.880 I hope that the company is able to get its 0:13:24.880 --> 0:13:27.200 feet on the ground because I think the service is 0:13:27.280 --> 0:13:30.160 valuable for all those populations who don't have access to 0:13:30.160 --> 0:13:33.960 bank accounts. It's just unfortunate that this appears to be 0:13:34.000 --> 0:13:37.199 a very difficult service that can be done profitably. When 0:13:37.240 --> 0:13:39.800 you think about it, it kind of makes sense. Most 0:13:39.840 --> 0:13:42.840 of the transactions you would imagine would be pretty small, 0:13:43.320 --> 0:13:46.920 and so any transaction fee you would take would be 0:13:47.160 --> 0:13:50.000 pennies on the dollar, So you would need a lot 0:13:50.280 --> 0:13:52.800 of them in order to make a profit. You would 0:13:52.800 --> 0:13:56.080 have to really be operating at our huge scale, and 0:13:56.120 --> 0:14:00.280 getting that huge scale is tough. As for Liberty, he 0:14:00.440 --> 0:14:03.400 was awaiting trial for those charges I mentioned when on 0:14:03.520 --> 0:14:07.320 January nine one, we learned that he was one of 0:14:07.360 --> 0:14:11.359 those lucky individuals to receive a presidential pardon from outgoing 0:14:11.400 --> 0:14:16.560 President Donald Trump. Interestingly, reporters have sometimes referred to Liberty 0:14:16.679 --> 0:14:20.560 as Trump but with a main accent. That's main as 0:14:20.600 --> 0:14:24.240 in the state in the northeastern United States. Now, it's 0:14:24.280 --> 0:14:28.160 possible we could put Mozito infinitive in the same general 0:14:28.200 --> 0:14:31.360 category as thereins, in the sense that it may be 0:14:31.480 --> 0:14:35.600 that the actual central idea for the business could be untenable. 0:14:35.960 --> 0:14:39.200 Now I don't know if that's true. I'm no financial expert. 0:14:39.360 --> 0:14:42.000 Perhaps if you could get the operations up to scale, 0:14:42.040 --> 0:14:47.240 maybe it would all work fine. I don't know. I mean, granted, pennies, 0:14:47.440 --> 0:14:50.680 if you've got enough of them, do amount to dollars. 0:14:50.720 --> 0:14:54.480 So there is that. Well, we're gonna take a quick break, 0:14:54.720 --> 0:14:56.880 and when we come back, we'll talk about some more 0:14:56.920 --> 0:15:00.880 startups that have had big problems. But first let's take 0:15:00.920 --> 0:15:11.960 that break. Similar in some ways to the Mozito story 0:15:12.000 --> 0:15:14.360 we listen to just before the break is that of 0:15:14.480 --> 0:15:18.040 bow tie, which is actually spelled b O u X 0:15:18.080 --> 0:15:21.440 t I E. And just to be clear, this is 0:15:21.480 --> 0:15:25.840 not the current bow tie by that spelling, which based 0:15:25.880 --> 0:15:28.680 on what I'm looking at at my screen right now, 0:15:29.120 --> 0:15:31.920 that's some sort of company that sells TikTok views and 0:15:32.040 --> 0:15:35.560 video shares in order to artificially boost the performance of 0:15:35.600 --> 0:15:39.160 TikTok videos, which is just plain lame. It's straight up 0:15:39.200 --> 0:15:42.320 there with companies that used to sell Twitter Twitter followers, right, Like, 0:15:43.040 --> 0:15:45.200 that's something that's fallen out of favor over at Twitter 0:15:45.480 --> 0:15:48.840 because Twitter has done multiple cullings of bought accounts, so 0:15:49.640 --> 0:15:52.760 those have largely been white clear of the platform. But 0:15:53.080 --> 0:15:56.040 we're seeing that same sort of practice spread to platforms 0:15:56.080 --> 0:15:58.880 like TikTok. If you're an influencer and you're trying to 0:15:59.120 --> 0:16:05.720 sell your you know, big following to various sponsors, maybe 0:16:05.760 --> 0:16:09.920 you're engaging in some of these uh, unethical activities in 0:16:10.000 --> 0:16:12.680 order to convince those sponsors. Hey, a lot of people 0:16:12.680 --> 0:16:15.640 watch my stuff. But no, no, no, I'm talking about 0:16:15.680 --> 0:16:18.520 a different bow Tie It was a company founded by 0:16:18.560 --> 0:16:22.800 an entrepreneur named Renato Libric. The idea was to create 0:16:22.800 --> 0:16:27.440 a digital platform for gift cards and loyalty cards. Librics 0:16:27.520 --> 0:16:30.880 bow Tie company offered users the ability to purchase digital 0:16:30.920 --> 0:16:33.840 gift cards to all sorts of major merchants and then 0:16:33.880 --> 0:16:37.280 customize them with graphics and messages before sending them off 0:16:37.320 --> 0:16:40.200 to family and friends. So it was a neat way 0:16:40.480 --> 0:16:43.240 to create a sort of personalized experience, which I think 0:16:43.280 --> 0:16:45.720 helps take some of the stigma out of, you know, 0:16:45.760 --> 0:16:49.760 the whole gift card thing. And being digital, it should 0:16:49.760 --> 0:16:53.800 be relatively easy to redeem those gift cards with online accounts, 0:16:54.000 --> 0:16:56.840 making it less likely that they would go unused. I mean, 0:16:56.920 --> 0:17:00.440 just a year ago, c NBC reported that American possessed 0:17:00.480 --> 0:17:04.000 more than twenty one billion with a b dollars worth 0:17:04.040 --> 0:17:07.320 of unused gift cards in store credit. By the way, 0:17:07.359 --> 0:17:10.159 that's kind of why merchants love gift cards. There's a 0:17:10.160 --> 0:17:12.480 good chance they'll never have to redeem them, and the 0:17:12.520 --> 0:17:16.840 profit margin is ridiculous. Now, with bow Tie, it doesn't 0:17:16.880 --> 0:17:19.920 sound like Librick was trying to funnel cash to himself, 0:17:20.200 --> 0:17:23.560 which sets him apart from folks like Michael Liberty. But 0:17:23.680 --> 0:17:27.560 he did forge signatures and produce false documents to make 0:17:27.600 --> 0:17:30.560 it seem as though bow Tie was worth far more 0:17:30.760 --> 0:17:33.440 than its true value in an effort to convince more 0:17:33.440 --> 0:17:37.240 investors to pour money into the venture. So in that respect, 0:17:37.640 --> 0:17:40.359 I guess that bow Tie is kind of similar to 0:17:40.400 --> 0:17:43.040 the bow tie of today. So the bow tie of 0:17:43.080 --> 0:17:46.879 today is all about inflating TikTok numbers, and Libric was 0:17:46.920 --> 0:17:50.439 all about inflating the apparent value of bow tie. So 0:17:51.119 --> 0:17:54.240 there's more going on there than I originally thought. Well, 0:17:54.280 --> 0:17:57.320 perhaps Libric was just desperately trying to get some momentum 0:17:57.400 --> 0:18:00.840 going with the hope that once things were really moving, 0:18:01.000 --> 0:18:03.119 he'd be able to stick to the straight and narrow. 0:18:03.720 --> 0:18:06.960 But he was caught out. Towards the end of ten 0:18:07.119 --> 0:18:09.840 Librick was found guilty of wire fraud and sentenced to 0:18:09.920 --> 0:18:12.560 thirty six months in prison in order to pay out 0:18:12.600 --> 0:18:15.280 more than one and a half million dollars in restitution. 0:18:15.880 --> 0:18:18.040 Based on what I've read, I would say that this 0:18:18.080 --> 0:18:20.880 is another case where someone had an idea that sounded 0:18:20.920 --> 0:18:24.080 pretty good, proved to be harder to pull off profitably 0:18:24.240 --> 0:18:27.360 than was first anticipated, found it difficult to get enough 0:18:27.400 --> 0:18:31.040 investments to stay afloat, and then resorted to illegal means 0:18:31.080 --> 0:18:34.440 to cover the bills. Now, one person whose name has 0:18:34.480 --> 0:18:37.439 to come up when you're talking about grandiose start up 0:18:37.520 --> 0:18:41.720 ideas is Elon Musk. One of the numerous ideas Musquez 0:18:41.840 --> 0:18:45.080 championed is that of the hyper loop. So, in short, 0:18:45.160 --> 0:18:48.120 a hyper loop system, at least on the original design 0:18:48.520 --> 0:18:52.960 would involve trains traveling inside tubes, and inside those tubes 0:18:52.960 --> 0:18:55.240 you would pump out most of the air to be 0:18:55.400 --> 0:18:58.679 very low air pressure, almost a vacuum, and that cuts 0:18:58.720 --> 0:19:02.160 way down on wind resist sense. In addition, the trains 0:19:02.240 --> 0:19:06.000 would not travel with wheels on a track. Instead, they 0:19:06.000 --> 0:19:09.520 would travel atop air bearings. Essentially, a cushion of air 0:19:09.600 --> 0:19:12.959 would keep the trains afloat above the inner surface of 0:19:13.000 --> 0:19:17.080 the tunnel. Electro Magnets would provide the propulsion to accelerate 0:19:17.240 --> 0:19:21.400 and decelerate the trains, which, with such reduced friction, would 0:19:21.400 --> 0:19:24.440 be able to travel at incredible speeds like essentially the 0:19:24.480 --> 0:19:28.320 speeds that you would see aircraft travel. One startup that 0:19:28.359 --> 0:19:33.520 formed after Musk's proposal was Hyperloop Technologies, founded by Shervin 0:19:33.680 --> 0:19:39.280 Pishavar and former SpaceX engineer Brogan Bam Brogan. The story 0:19:39.320 --> 0:19:41.879 of that company is way too long for this episode, 0:19:41.920 --> 0:19:46.600 and it involves tons of scandals and also mergers and 0:19:47.080 --> 0:19:51.080 name changes and some seriously ugly in fighting, and Pischavar 0:19:51.200 --> 0:19:54.000 would step down in the wake of sexual harassment charges, 0:19:54.359 --> 0:19:58.040 which he maintains was all a smear campaign. The company 0:19:58.080 --> 0:20:00.399 is still around today. In fact, it's the one that 0:20:00.520 --> 0:20:04.120 conducted a successful test with people aboard a hyperloop capsule 0:20:04.280 --> 0:20:07.480 back in November of twenty but the company would change 0:20:07.480 --> 0:20:11.280 its name from Hyperlop Technologies to Hyperloop One to Virgin 0:20:11.359 --> 0:20:15.400 hyper Loop one, and now it's just Virgin Hyperloop. Anyway, 0:20:15.440 --> 0:20:17.760 the company I wanted to cover is the one that 0:20:17.840 --> 0:20:22.520 Brogan bam Brogan would found after leaving Hyperloop one. So 0:20:22.640 --> 0:20:25.240 bam Brogan and a couple of other executives all left 0:20:25.320 --> 0:20:27.560 hyper Loop one at the same time and filed a 0:20:27.640 --> 0:20:31.520 lawsuit against their former employer. They alleged that the company 0:20:31.520 --> 0:20:38.720 had violated numerous agreements and abandon its fiduciary responsibilities, and worse, 0:20:38.840 --> 0:20:43.080 they alleged abuse and threats, and the company would file 0:20:43.119 --> 0:20:47.240 a countersuit against those former executives, alleging that they had 0:20:47.240 --> 0:20:50.000 attempted to rest control of the company away from the 0:20:50.119 --> 0:20:53.640 leadership team and the board of directors, essentially that they 0:20:53.640 --> 0:20:57.160 were planning a coup. Both parties would settle their lawsuits 0:20:57.200 --> 0:21:00.720 out of court in sixteen, and Bam Brogan then founded 0:21:00.760 --> 0:21:05.040 a competing hyper loop company called Arrivo. He and a 0:21:05.080 --> 0:21:09.480 couple of other colleagues formed Arrival in two thousand seventeen one. 0:21:09.520 --> 0:21:13.960 Co founder Andrew Leeu had previously worked with a construction 0:21:14.000 --> 0:21:17.800 company called a Calm a e c o M. Another 0:21:17.840 --> 0:21:21.160 co founder was Jaden Smith, who, like dam Brogan, had 0:21:21.200 --> 0:21:24.880 previously worked with SpaceX. He had also previously worked with 0:21:25.080 --> 0:21:28.840 the CIA. Now, the hyper loop design is an interesting 0:21:28.960 --> 0:21:32.639 and innovative one, but it also will require a ton 0:21:32.920 --> 0:21:36.040 of money to make it a reality. Musk was first 0:21:36.080 --> 0:21:39.520 talking about the idea way back in and we're still 0:21:39.520 --> 0:21:43.720 in the experimental and testing stages in one and that's 0:21:43.760 --> 0:21:46.159 just get to a point where we're confident that the 0:21:46.200 --> 0:21:49.560 technology is a viable one for the purposes of transporting 0:21:49.600 --> 0:21:53.920 people and cargo quickly and safely. After that, you've got 0:21:53.920 --> 0:21:57.080 the daunting task of actually securing the legal rights to 0:21:57.200 --> 0:22:01.600 build out routes between different destinations. That includes everything from 0:22:01.640 --> 0:22:06.600 securing permission from various local governments and environmental agencies, to 0:22:06.680 --> 0:22:12.320 the actual construction and more. It's time consuming and really expensive. 0:22:12.920 --> 0:22:16.400 Perhaps for that reason, Arrival dumped the idea of going 0:22:16.440 --> 0:22:19.840 the hyperloop throughout entirely, so instead it would go with 0:22:19.880 --> 0:22:24.919 a more established technology, that of magnetic levitation. Maglev trains 0:22:24.920 --> 0:22:28.200 have been around for a while. The technology is well understood, 0:22:28.240 --> 0:22:32.119 it's proven to work, we use it today. And essentially 0:22:32.280 --> 0:22:35.959 you've got magnets of similar polarity in the tracks and 0:22:36.160 --> 0:22:39.959 under the trains, and since similar polarities repel one another, 0:22:40.359 --> 0:22:42.880 like when you try to push the north pole of 0:22:42.920 --> 0:22:47.280 two different permanent magnets together, the train will hover over 0:22:47.400 --> 0:22:49.639 the track. You no longer have to deal with the 0:22:49.680 --> 0:22:54.080 friction of wheels against rails or anything like that. The magnets, 0:22:54.119 --> 0:22:56.960 by the way, can be permanent, they can be electro magnets, 0:22:57.080 --> 0:22:59.320 or they can be a combination of the two. On 0:22:59.400 --> 0:23:02.880 top of that, Arrival wasn't planning on and closing its 0:23:02.880 --> 0:23:06.040 tracks and tunnels, so there would be no low pressure 0:23:06.080 --> 0:23:10.280 track system with Arrivo, which again would significantly cut down 0:23:10.320 --> 0:23:13.640 on construction and operation costs, though it would also mean 0:23:13.720 --> 0:23:16.320 that the trains would have encounter some air resistance when 0:23:16.320 --> 0:23:19.160 traveling down the tracks, so these would not be able 0:23:19.200 --> 0:23:22.080 to go at the wicked fast speeds of the proposed 0:23:22.160 --> 0:23:25.800 hyper loop trains. The company had planned to build a 0:23:25.840 --> 0:23:29.399 test track out in Colorado, but Arrival was having a 0:23:29.440 --> 0:23:32.600 lot of trouble getting investors on board, perhaps the fact 0:23:32.680 --> 0:23:35.399 that they were no longer pursuing the more ambitious and 0:23:35.880 --> 0:23:39.960 inarguably more risky hyper loop design. Or maybe it was 0:23:40.000 --> 0:23:42.960 because of the very messy and very public breakup between 0:23:43.000 --> 0:23:46.600 the Arrival founders and hyper Loop One, maybe that had 0:23:46.680 --> 0:23:49.840 left kind of a stain on things within the company. 0:23:49.960 --> 0:23:53.399