WEBVTT - The Enshittifinancial Crisis: Part One

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<v Speaker 1>Zone Media.

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<v Speaker 2>Hello and welcome to Better Offline. I'm your host ed

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<v Speaker 2>zechron That's right, folks, I am back. It's well. We've

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<v Speaker 2>gone past the Yes, you've had your Steve Burke episodes,

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<v Speaker 2>as ever by the merchandise, subscribe to the newsletter. It's

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<v Speaker 2>all in the notes, and you are here for the

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<v Speaker 2>first of a multi part series about the final and

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<v Speaker 2>terminal stage of in shitification, when the companies that turned

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<v Speaker 2>on their individual users, then turned on their business customers

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<v Speaker 2>finally turned on the markets and investors themselves. Now, it's

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<v Speaker 2>important to start this with a point, and that's a

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<v Speaker 2>good friend of mine once told me that the more

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<v Speaker 2>I learned about finance, the more pissed off I'd get.

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<v Speaker 2>And I cannot think of anyone who has made a

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<v Speaker 2>more egregious understatement in my life. I've spent the last

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<v Speaker 2>two years basically teaching myself economics and all of this

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<v Speaker 2>good stuff that I find genuinely really interesting. It's enriched

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<v Speaker 2>my life, and it's also driven me a little insane.

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<v Speaker 2>As I'm sure any of you are well aware, the

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<v Speaker 2>more I learn, the more frustrated I get. Because I'm

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<v Speaker 2>not a genius by any extension. I don't even know

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<v Speaker 2>if I think I'm that smart, but like this stuff

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<v Speaker 2>is just sitting there, you can see it. There are

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<v Speaker 2>many other people writing, like Edward grayso Junior Molly what

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<v Speaker 2>of course, I'm Brian Merchant as well. Like these people

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<v Speaker 2>have dug into these types of things, but nevertheless the

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<v Speaker 2>mainstream they're kind of missing something. And this four part

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<v Speaker 2>is about that. And it has of course a companion

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<v Speaker 2>newsletter where I will have most of the links that

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<v Speaker 2>you'd usually see in the link document. I feel like

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<v Speaker 2>nobody likes that document anyway, so I'm going to find

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<v Speaker 2>a better way of doing things. But let's get to it,

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<v Speaker 2>because there's this echoing melancholy to this entire era. And

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<v Speaker 2>we're watching the end of Silicon Valley's hypergrowth epoch, and

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<v Speaker 2>I'd say it's a horrifying result of fifteen plus years

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<v Speaker 2>of steering the tech industry away from solving actual problems

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<v Speaker 2>and only really looking for eternal growth. Everything's more expensive

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<v Speaker 2>and every tech product has gotten worse. Also that every

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<v Speaker 2>company can I quote do AI whatever the fuck that means.

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<v Speaker 2>We're watching one of the greatest wastes of money in history.

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<v Speaker 2>All this people are told that there just isn't the

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<v Speaker 2>money to build things like housing, or provide Americans with

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<v Speaker 2>universal health care or better schools, or create the means

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<v Speaker 2>for the average person to accumulate wealth in any way,

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<v Speaker 2>shape or form. The money does exist. It just exists

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<v Speaker 2>for those that want to gamble. Private equity firms, business

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<v Speaker 2>development companies that exist to give money to other companies

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<v Speaker 2>that are risky. Yet regular people are too risky. Venture

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<v Speaker 2>capitalists and banks that are getting desperate and need an

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<v Speaker 2>overnight shot of capital from the federal reserves, overnight repurchase

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<v Speaker 2>facility or discount window do worrying indicators a bank stress

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<v Speaker 2>I need to get into in the future. No, no, no,

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<v Speaker 2>The money does not exist for you, or me or

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<v Speaker 2>a person. Even money is for entities that could potentially

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<v Speaker 2>funnel more money into the economy, even if the ways

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<v Speaker 2>that these entities use the money are reckless and foolhardy,

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<v Speaker 2>because the system's intent on keeping entities alive incentivizes it.

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<v Speaker 2>We are in an era where the average person is

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<v Speaker 2>told to pull up their bootstraps, to work harder, to

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<v Speaker 2>struggle more, because, as Martin Luther King Junior once said,

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<v Speaker 2>it's socialism for the rich and rugged free market capitalism

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<v Speaker 2>for the poor. The free market is a fucking con

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<v Speaker 2>When you or I run out of money, our things

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<v Speaker 2>are taken from us. We receive increasingly panicked letters with

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<v Speaker 2>bigger fonts. We get phone calls and texts and emails

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<v Speaker 2>and demands. We are told that all will be lost

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<v Speaker 2>if we don't work it out somehow, because the financial

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<v Speaker 2>system is not about an exchange of value, but whether

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<v Speaker 2>or not you can enter into the currently agreed upon

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<v Speaker 2>con By letting neoliberalism and the scourge of the free

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<v Speaker 2>market's rule, modern society has created the conditions what I

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<v Speaker 2>call the Hitter financial crisis, the place at which my

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<v Speaker 2>friend Cory doctor owned Star of CS twenty twenty six

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<v Speaker 2>and history and shittavation meets my own rot economy thesis

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<v Speaker 2>in a fourth stage of in shitification. Now, I'm going

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<v Speaker 2>to quote an explanation of what in shittification is from

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<v Speaker 2>The New Yorker and Shertification unfoults in three phases. First,

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<v Speaker 2>the company is and I quote good to users, drawing

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<v Speaker 2>people in droves as funnel traps through Japanese beetles with

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<v Speaker 2>the promise of connection or convenience. Second, with that mass

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<v Speaker 2>audience consolidated, the company is and I quote good to

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<v Speaker 2>business customers, compromising some of its features so that the

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<v Speaker 2>most lucrative clients, usually advertisers, can thrive on the platform.

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<v Speaker 2>This second phase is the point at which say, our

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<v Speaker 2>Facebook feeds filled with ads and posts from brands. Third,

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<v Speaker 2>the company turns the experience into and I quote again

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<v Speaker 2>a giant pile of shit, making the platform worse for

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<v Speaker 2>users and businesses alike, in order to further enrich the

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<v Speaker 2>company's owners and executives. Now, I'm going to give you

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<v Speaker 2>a more direct example and kind of bridge on some

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<v Speaker 2>of the things said there. Facebook was at one point

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<v Speaker 2>a huge, free platform much like Instagram, that offered fast

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<v Speaker 2>and easy access to basically everybody you knew. It acquired Instagram,

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<v Speaker 2>of course, in twenty twelve to kill off a likely competitor,

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<v Speaker 2>and overtime would start making both products worse. Clickbait notifications

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<v Speaker 2>a mandatory algorithmic feed that deliberately emotionally manipulated hundreds of

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<v Speaker 2>thousands of people and stoked massive political division, eventually becoming

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<v Speaker 2>full of aislop and videos. Also that Meta could continued

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<v Speaker 2>to sell billions of dollars of ads a quarter Burkyle

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<v Speaker 2>Chaker of The New Yorker. The Facebook's feed, now choked

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<v Speaker 2>with AI generated garbage and short form videos, is well

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<v Speaker 2>into the third act of in shitification. The third stage

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<v Speaker 2>is critical in it's when the company also turns on

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<v Speaker 2>its business customers. A Marketing Brews story from September of

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<v Speaker 2>twenty twenty four told the tale of multiple advertisers who

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<v Speaker 2>found their campaign switching to different audiences, wasting their money

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<v Speaker 2>and getting questionable results. A New York Times story from

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<v Speaker 2>twenty twenty one described companies losing up with some seventy

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<v Speaker 2>percent of their revenue during a Facebook ants outage. Another

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<v Speaker 2>from twenty eighteen described her meta then Facebook deliberately hit

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<v Speaker 2>issues with its measurement of engagement on videos from advertisers

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<v Speaker 2>for over a year. That's their pivot video, and more recently,

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<v Speaker 2>metas ads tools started switching out top performing ads with

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<v Speaker 2>AI generated ones. In one case, Targeting managed thirty to

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<v Speaker 2>forty five with an AI generated Grandma, all without warning.

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<v Speaker 2>The advertiser Meta doesn't give a shit because investors and

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<v Speaker 2>analysts don't give a shit either. I could say cell

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<v Speaker 2>side analysts here too, and those are the ones that

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<v Speaker 2>they are trying to get eat to buy a stock.

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<v Speaker 2>By the way, but based on every analyst report I've

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<v Speaker 2>read from a major bank or hedge round about a

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<v Speaker 2>tech company, I truly think everybody is complicent. In November

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<v Speaker 2>twenty twenty five, Reuters revealed that Meta projected in late

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<v Speaker 2>twenty twenty four the ten percent of its annual revenue,

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<v Speaker 2>which was sixteen billion dollars at the time, would come

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<v Speaker 2>from advertisements for scams or band goods. Mere weeks after,

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<v Speaker 2>Meta announced the ridiculous twenty seven billion dollar datacent A

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<v Speaker 2>debt package, one that used deep accountancy magic to keep

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<v Speaker 2>it off of its balance sheet despite Meta guaranteeing the

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<v Speaker 2>entirety of the loans. It's completely insane and what would

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<v Speaker 2>think this would horrify investors For two reasons. One, metas

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<v Speaker 2>business is both supporting and profiting from organized crime, and

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<v Speaker 2>at ten percent of its revenue, it's also kind of

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<v Speaker 2>dependent on it. And also number two, Meta is using

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<v Speaker 2>deliberate and in citious accounting tricks to act like a

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<v Speaker 2>dead decenter that is paying to build and will be

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<v Speaker 2>the sole tenant of is somehow an off balance sheet operation.

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<v Speaker 2>One will be wrong. Morgan Stanley said in mid December

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<v Speaker 2>that is one of the handful of companies that can

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<v Speaker 2>leverage its leading data distribution and investments in AI and

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<v Speaker 2>raised Morgan Stanley's target seven hundred and fifty dollars with

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<v Speaker 2>a one thousand dollars a share bull case, meaning like

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<v Speaker 2>they think, if things go well, it will be a

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<v Speaker 2>one thousand dollars a share. Web Bush raised Metas priced

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<v Speaker 2>nine hundred and twenty dollars in Bank of America staunchly

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<v Speaker 2>held firm at eight hundred and ten dollars, which is

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<v Speaker 2>one hundred dollars more than where we are today. I

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<v Speaker 2>can find no analyst commentary on Meta making sixteen billion

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<v Speaker 2>dollars on fucking fraud because it doesn't matter to them,

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<v Speaker 2>because this is the rot economy and all that matters

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<v Speaker 2>is number go up. This is this is going to

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<v Speaker 2>be It's going to be a tough four part of folks.

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<v Speaker 2>I'm on my blood pressure is going to go through

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<v Speaker 2>the fucking reality such as whether there's any revenue in

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<v Speaker 2>AI or whether it's a good idea that Metas spending

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<v Speaker 2>seventy billion dollars this year on capex even though the

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<v Speaker 2>product generates no revenue. And by the way, if you

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<v Speaker 2>say to me metas ai ads play that whole story

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<v Speaker 2>is nonsense, and I love for it for but they

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<v Speaker 2>got it wrong to They are using bullshit metrics. They're

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<v Speaker 2>not proving anything anyway. None of this matters to analysts

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<v Speaker 2>because stocks are thoroughly inextricably inshitified, and analysts don't even

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<v Speaker 2>realize that it's happening, or if they do, they're just

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<v Speaker 2>really craven and horrible fucking people that deserve to not

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<v Speaker 2>have a job, let alone the job they currently have. Now,

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<v Speaker 2>let's go back to the whole in shitivigation thing. The

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<v Speaker 2>stages of inshitification usually involve some kind of Devil's deal,

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<v Speaker 2>which I actually think handalysts are in them. But let's

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<v Speaker 2>get going. In stage one, things are good for the users.

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<v Speaker 2>The platform is three. Things are easy to use, and

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<v Speaker 2>thus it's really simple for you and your friends to

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<v Speaker 2>have become dependent on it. You don't really trade anything

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<v Speaker 2>quite yeah, than the fact that you're going to use

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<v Speaker 2>this easy, good platform that people like and all your

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<v Speaker 2>friends are on. In stage two, things become bad for

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<v Speaker 2>customers but good for business customers. The platform begins forcing

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<v Speaker 2>users to do profitable things like show them advertisements by

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<v Speaker 2>making search results worse, such as with Google, or while

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<v Speaker 2>making it difficult to migrate to another one, either through

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<v Speaker 2>locking in your data or the tacit knowledge that moving

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<v Speaker 2>platforms is hard and your friends are usually in one place.

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<v Speaker 2>Take Instagram, for example. No one's leaving Instagram right now

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<v Speaker 2>because there is no other competitor. Kind of by design,

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<v Speaker 2>Businesses sink tons of money into the platform, knowing that

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<v Speaker 2>users are unlikely to leave and make good money buying

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<v Speaker 2>ads against the populace that increasingly stays because it has

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<v Speaker 2>to as there are no other options. In stage three,

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<v Speaker 2>things become bad for consumers and businesses, but good for shareholders.

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<v Speaker 2>The platforms begin to deteriorate to the point that usability

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<v Speaker 2>is pushed to the brink, and businesses who are now

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<v Speaker 2>dependent on the platform because monopolies have pushed out every

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<v Speaker 2>alternative platform to advertise or reach customers on, begin to

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<v Speaker 2>see their product crumble, all in favor of shareholder capital,

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<v Speaker 2>which only cares about stock value of net income and diebacks.

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<v Speaker 2>You've probably seen where we go in, folks. We're now

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<v Speaker 2>entering in certifications stage four, where businesses turn on shareholders

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<v Speaker 2>and listen. Investors have become trapped in the same kind

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<v Speaker 2>of loathsome platform players, consumers and businesses and face exactly

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<v Speaker 2>the same kind of punishments through the devaluation of the

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<v Speaker 2>stock itself. Where platforms have prioritize profits over the health

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<v Speaker 2>and happiness of users or business customers, they're now prioritizing

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<v Speaker 2>stock value over literally anything, and have, through the remarkable

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<v Speaker 2>growth of techtogs in particular, created applicated and thoroughly whipped

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<v Speaker 2>investor and analyzed sect that never ask questions and always

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<v Speaker 2>celebrates whatever the next big thing is meant to be.

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<v Speaker 2>And I hate to dunk on one guy, but go

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<v Speaker 2>look up Daniel Newman on Twitter if you want to

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<v Speaker 2>see what I mean. Someone just winky and every fucking

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<v Speaker 2>thing that a company says like what in videos going up?

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<v Speaker 2>These people are very popular and people make stock decisions

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<v Speaker 2>based on what they say. They're a problem and the

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<v Speaker 2>value of a stock is not based on whether the

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<v Speaker 2>business is healthy or its future even certain, but on

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<v Speaker 2>its potential price to grow, and analysts have, thanks to

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<v Speaker 2>an incredible run of tech stocks going on over a decade,

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<v Speaker 2>being able to say I bet software will be big

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<v Speaker 2>for most of the time going on CNBC or Bloomberg

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<v Speaker 2>and gladly repeating whatever it is that a tech CEO

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<v Speaker 2>just said, all without any worries about responsibility or the truth.

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<v Speaker 2>And I just want to say, any analyst who might

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<v Speaker 2>hear this, I'm taking a lot of screenshots. I've been

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<v Speaker 2>taking screenshots for several years. And this is because big

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<v Speaker 2>tech stocks and many other big stocks, if I'm honest,

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<v Speaker 2>have made their lives easy as long as they don't

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<v Speaker 2>ask questions. Number always seems to be going up for

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<v Speaker 2>software companies, and all you need to do is provide

0:11:54.679 --> 0:11:57.040
<v Speaker 2>a vociferous defense of the next big thing and come

0:11:57.120 --> 0:11:59.840
<v Speaker 2>up with a smart sounding model that justifies eternal growth.

0:12:01.440 --> 0:12:04.720
<v Speaker 2>This is entirely disconnected from the products themselves, which don't

0:12:04.760 --> 0:12:07.719
<v Speaker 2>matter as long as, like I've said, number go up.

0:12:08.040 --> 0:12:10.480
<v Speaker 2>If net income is high, meaning profit, and the company

0:12:10.600 --> 0:12:12.959
<v Speaker 2>estimates it will continue to grow, then the company could

0:12:13.000 --> 0:12:15.000
<v Speaker 2>do whatever the fuck it wants with the product it

0:12:15.080 --> 0:12:17.839
<v Speaker 2>sells or the things that it buys. Software has eaten

0:12:17.880 --> 0:12:20.559
<v Speaker 2>the world in the sense that Andresen Mark Andresen who

0:12:20.559 --> 0:12:22.920
<v Speaker 2>wrote it. Of course, God is wish with investors now

0:12:23.000 --> 0:12:26.600
<v Speaker 2>caring more about the intrinsic value of software companies rather

0:12:26.640 --> 0:12:30.520
<v Speaker 2>than the businesses or the products themselves, and because that's happening,

0:12:30.600 --> 0:12:32.800
<v Speaker 2>investors aren't bothering to think too hard about the tech

0:12:32.840 --> 0:12:37.000
<v Speaker 2>itself or the deteriorating products underlying these tech companies. Because

0:12:37.080 --> 0:12:40.040
<v Speaker 2>these guys have always worked it out, and these companies

0:12:40.040 --> 0:12:43.360
<v Speaker 2>have always managed to keep growing. As a result, nobody

0:12:43.400 --> 0:12:47.440
<v Speaker 2>really looks too deep. Minute changes to accounting in earnings

0:12:47.440 --> 0:12:50.480
<v Speaker 2>filings are ignored, Egregious amounts of debt are waved off,

0:12:50.600 --> 0:12:53.320
<v Speaker 2>and hundreds of billions of dollars of capital expenditures are

0:12:53.320 --> 0:12:56.199
<v Speaker 2>seen as the new AI revolution versus a big, huge

0:12:56.200 --> 0:13:00.480
<v Speaker 2>waste of money. By incentivizing the rot economy, may stocks

0:13:00.480 --> 0:13:02.840
<v Speaker 2>disconnected from the value of the company beyond net income

0:13:02.880 --> 0:13:06.280
<v Speaker 2>and future earnings guidance. Companies have found ways to enshitviy

0:13:06.320 --> 0:13:09.560
<v Speaker 2>their own stocks, and shareholders will be the ones to suffer,

0:13:09.720 --> 0:13:12.080
<v Speaker 2>all thanks to the very downstream pressure that they've chosen

0:13:12.120 --> 0:13:16.920
<v Speaker 2>to ignore for decades. You see, while one might correctly

0:13:17.000 --> 0:13:19.640
<v Speaker 2>say that the deterioration of products like Facebook and Google

0:13:19.679 --> 0:13:22.559
<v Speaker 2>Search was a sign of desperation, it's important to also

0:13:22.600 --> 0:13:25.400
<v Speaker 2>see it as the companies themselves orienting around what they

0:13:25.440 --> 0:13:28.560
<v Speaker 2>believe analyst and investors want to see you can also

0:13:28.600 --> 0:13:31.320
<v Speaker 2>interpret this is a weakness, but I see it another way.

0:13:31.720 --> 0:13:35.440
<v Speaker 2>Stock manipulation and a deliberate attempt to reshape what value

0:13:35.480 --> 0:13:38.480
<v Speaker 2>means in the eyes of customers and investors. If the

0:13:38.480 --> 0:13:40.320
<v Speaker 2>true value of a stock is meant to be based

0:13:40.360 --> 0:13:42.760
<v Speaker 2>on the value of its business cash flow and earnings

0:13:42.800 --> 0:13:45.640
<v Speaker 2>and of course future growth, a company deliberately changing its

0:13:45.720 --> 0:13:49.120
<v Speaker 2>products is an intentional interference with value itself, as are

0:13:49.200 --> 0:13:52.559
<v Speaker 2>any and all deceptive accounting practices used to boost valuations.

0:13:54.080 --> 0:13:56.960
<v Speaker 2>But the real problem, well one of them, is that

0:13:57.040 --> 0:14:01.600
<v Speaker 2>analysts don't well, they don't seem to analyze, not at

0:14:01.679 --> 0:14:04.959
<v Speaker 2>least if it goes against market consensus. That's why Goldman

0:14:05.040 --> 0:14:07.600
<v Speaker 2>Sachs and JP Morgan and Futureroom Group and Gartner and

0:14:07.640 --> 0:14:10.080
<v Speaker 2>Forester and McKinsey and Morgan Stanley all said that the

0:14:10.120 --> 0:14:13.240
<v Speaker 2>metaverse was inevitable because they do not actually care about

0:14:13.280 --> 0:14:18.080
<v Speaker 2>the underlying businesses themselves, just their ability to grow. On paper. Now,

0:14:18.080 --> 0:14:20.520
<v Speaker 2>I'm just going to click through to the FUTUREO Groups thing.

0:14:20.600 --> 0:14:24.480
<v Speaker 2>Let's see contemplating market criticism of Zuckerberg's metaphors focus. Now,

0:14:24.480 --> 0:14:27.520
<v Speaker 2>this is a really funny piece because you read it,

0:14:27.960 --> 0:14:30.680
<v Speaker 2>analysts take in some parallel universe, Zuckerberg will be credited

0:14:30.680 --> 0:14:33.680
<v Speaker 2>as an entrepreneurial hero and an executive willing to invest

0:14:33.680 --> 0:14:36.280
<v Speaker 2>in something big in order to create something bigger. Unfortunately

0:14:36.360 --> 0:14:38.920
<v Speaker 2>for Zuckerberg, he lives here with us, in this universe,

0:14:38.960 --> 0:14:41.640
<v Speaker 2>where fifteen billion dollars in investment so far has created

0:14:41.640 --> 0:14:44.800
<v Speaker 2>a nerdy, cyber wasteland that few people seem interested in visiting.

0:14:45.200 --> 0:14:48.480
<v Speaker 2>The numbers are undeniably ugly blah blah blah blah blah,

0:14:48.480 --> 0:14:50.320
<v Speaker 2>and of course we would have hoped for more progress

0:14:50.360 --> 0:14:53.040
<v Speaker 2>blah blah blah. Meta's most deadly sin in managing the

0:14:53.080 --> 0:14:55.400
<v Speaker 2>Metaverse initiative is nothing to do with adoption metrics of

0:14:55.440 --> 0:14:57.840
<v Speaker 2>the money that has been allocated to these efforts, Rather

0:14:57.880 --> 0:15:01.080
<v Speaker 2>metas failure stems from its inability to commutne his vision properly.

0:15:01.440 --> 0:15:03.920
<v Speaker 2>It's an ironic twist, giving the company's heritage and creating

0:15:03.960 --> 0:15:08.360
<v Speaker 2>social media platforms designed to help billions of people communicate. Well,

0:15:08.400 --> 0:15:11.320
<v Speaker 2>why this was written to defend the Meta Us, and

0:15:11.360 --> 0:15:13.560
<v Speaker 2>I just want to be clear. The defense appears to

0:15:13.560 --> 0:15:16.400
<v Speaker 2>be give zuck a chance. Now. The met of us

0:15:16.480 --> 0:15:19.520
<v Speaker 2>is quite fucking dead, I should be clear. And many

0:15:19.520 --> 0:15:21.920
<v Speaker 2>of you have emailed me about this, and I'm kind

0:15:21.920 --> 0:15:24.680
<v Speaker 2>of calling one person out because I see these cell

0:15:24.760 --> 0:15:28.560
<v Speaker 2>side analysts as genuinely harmful to society. I think people

0:15:28.600 --> 0:15:32.960
<v Speaker 2>going out there and misleading well in articles. Actually, let

0:15:33.000 --> 0:15:34.920
<v Speaker 2>me take in a side here. You're going to love this.

0:15:34.920 --> 0:15:36.880
<v Speaker 2>This is not in the script, Matt, I apologize. But

0:15:38.240 --> 0:15:41.720
<v Speaker 2>analysts have two customers. They have investors, and then they

0:15:41.760 --> 0:15:45.480
<v Speaker 2>have you cell side analysts. They've burpen fart on CNBC

0:15:45.600 --> 0:15:47.480
<v Speaker 2>or Bloomberg and they say, hey, I will be big.

0:15:47.720 --> 0:15:50.440
<v Speaker 2>Then behind the scenes they have a completely set different

0:15:50.480 --> 0:15:52.800
<v Speaker 2>set of institutional investors they give the real info to.

0:15:53.320 --> 0:15:55.680
<v Speaker 2>That should bother you. You ever read an analyst and an

0:15:55.720 --> 0:15:58.760
<v Speaker 2>article and be a little bit suspicious. I like Guiluria

0:15:59.040 --> 0:16:02.120
<v Speaker 2>of D A. Davidson, except even gil just raised the

0:16:02.320 --> 0:16:05.160
<v Speaker 2>target for core Weave. Nothing has changed. Things have actually

0:16:05.200 --> 0:16:07.680
<v Speaker 2>got worse with the economics. But because the bullshit of

0:16:07.720 --> 0:16:11.600
<v Speaker 2>the markets exist, analysts are tweaking things in public in private.

0:16:11.640 --> 0:16:13.280
<v Speaker 2>I don't know what they're saying because you need to

0:16:13.280 --> 0:16:15.440
<v Speaker 2>pay well, I think tens of thousands, if not more,

0:16:15.440 --> 0:16:20.600
<v Speaker 2>to get those reports. Anyway, that all aside, regular retail

0:16:20.680 --> 0:16:24.120
<v Speaker 2>investors are the first to get in shitifed in stage four.

0:16:24.760 --> 0:16:27.640
<v Speaker 2>And by the way, if you ever need proof that

0:16:27.720 --> 0:16:30.000
<v Speaker 2>none of these people actually give a fuck about value,

0:16:30.080 --> 0:16:32.600
<v Speaker 2>it really was the metaverse and the seventy seven billion

0:16:32.600 --> 0:16:34.880
<v Speaker 2>dollars that Mark Zuckerberg burned on it, and they create

0:16:34.920 --> 0:16:37.880
<v Speaker 2>little revenue or shareholder value and burned all that money

0:16:37.880 --> 0:16:40.800
<v Speaker 2>without any real explanation as to where it went. No, really,

0:16:40.840 --> 0:16:44.240
<v Speaker 2>does anyone know where the money went. Seventy seven billion

0:16:44.280 --> 0:16:47.120
<v Speaker 2>dollars went Nowhere? You think it went into fucking glasses?

0:16:47.160 --> 0:16:51.400
<v Speaker 2>Are you crazy? Even if they made hundreds of thousands

0:16:51.440 --> 0:16:55.000
<v Speaker 2>of those glasses and they took ohn't no five billion

0:16:55.040 --> 0:16:58.440
<v Speaker 2>dollars for Oryan and the meta rabads that I'm still

0:16:58.440 --> 0:17:01.400
<v Speaker 2>having trouble working out where this cat. When I think

0:17:01.480 --> 0:17:04.000
<v Speaker 2>one day we're going to find out, I think we're

0:17:04.040 --> 0:17:06.960
<v Speaker 2>going to find out something dodgy happened there. But nevertheless,

0:17:07.000 --> 0:17:08.840
<v Speaker 2>the street didn't give a shit about the metal us

0:17:08.880 --> 0:17:12.719
<v Speaker 2>because metas existent ads business continued to grow, same as

0:17:12.760 --> 0:17:14.840
<v Speaker 2>it didn't give a shit that Mark Zuckerberg burn those

0:17:14.840 --> 0:17:17.760
<v Speaker 2>seventy billion dollars on Capex, even though we also don't

0:17:17.800 --> 0:17:21.520
<v Speaker 2>really know where that's going either. In fact, that really

0:17:21.560 --> 0:17:24.560
<v Speaker 2>is the story of the GPU era. We don't know

0:17:24.640 --> 0:17:27.600
<v Speaker 2>where the money is going. These companies don't tell us anything.

0:17:27.880 --> 0:17:30.000
<v Speaker 2>They don't tell us how many GPUs they have, or

0:17:30.040 --> 0:17:32.920
<v Speaker 2>where those GPUs are, or how many of them were installed,

0:17:33.119 --> 0:17:35.720
<v Speaker 2>or what their IT load capacity is, or how much

0:17:35.760 --> 0:17:38.040
<v Speaker 2>money they cost to run, or how much money they

0:17:38.080 --> 0:17:40.719
<v Speaker 2>even make. Why would we Why would we know that?

0:17:40.920 --> 0:17:43.080
<v Speaker 2>Analysts don't even look at earnings beyond making sure they

0:17:43.119 --> 0:17:46.160
<v Speaker 2>beat on estimates. They've been whipped trained for twenty years

0:17:46.160 --> 0:17:47.800
<v Speaker 2>to take a puddle deep look at the numbers, to

0:17:47.840 --> 0:17:50.600
<v Speaker 2>make sure things vaguely look okay, look around at their

0:17:50.600 --> 0:17:52.960
<v Speaker 2>peers and make sure nobody else is saying something bad,

0:17:53.200 --> 0:17:55.960
<v Speaker 2>and go on and collect fees, and go on fucking CNBC.

0:17:56.720 --> 0:17:58.760
<v Speaker 2>And the same goes for hedge funds and banks propping

0:17:58.800 --> 0:18:01.680
<v Speaker 2>up these stocks rather than ask meaningful questions and demanding

0:18:01.880 --> 0:18:05.560
<v Speaker 2>even more meaningful answers. In the last two years, every

0:18:05.640 --> 0:18:08.920
<v Speaker 2>major hyperscaler has extended the useful life of its servers

0:18:08.920 --> 0:18:11.080
<v Speaker 2>from three years to either five and a half or

0:18:11.119 --> 0:18:13.560
<v Speaker 2>six years, and in simple terms, this allowed them to

0:18:13.600 --> 0:18:17.240
<v Speaker 2>incur a smaller depreciation expense each quarter as a result,

0:18:17.280 --> 0:18:21.040
<v Speaker 2>boosting their income. To explain, really simply, when you'd depreciate something,

0:18:21.080 --> 0:18:24.120
<v Speaker 2>you say, Okay, the useful life for this is six years,

0:18:24.160 --> 0:18:26.240
<v Speaker 2>and I'll spread the cost of that across six years.

0:18:27.240 --> 0:18:29.280
<v Speaker 2>Or in this case, you'd probably say three years for

0:18:29.320 --> 0:18:31.760
<v Speaker 2>a GPU, but no, they've just said, due to the

0:18:31.760 --> 0:18:34.000
<v Speaker 2>magic of math, it's six So they get to spread

0:18:34.000 --> 0:18:36.560
<v Speaker 2>it out for longer and claim it's more useful for longest.

0:18:36.560 --> 0:18:38.480
<v Speaker 2>They don't have to do an impairment, which is when

0:18:38.480 --> 0:18:42.760
<v Speaker 2>you admit the real cost of something anytime soon, it's wank.

0:18:42.960 --> 0:18:46.280
<v Speaker 2>Nobody seems to cares. Nobody seems to cares. I'm keeping

0:18:46.320 --> 0:18:49.320
<v Speaker 2>that anyway, Those who were meant to be critical and

0:18:49.440 --> 0:18:52.200
<v Speaker 2>listen and investors sinking money into these stocks had effectively

0:18:52.240 --> 0:18:54.359
<v Speaker 2>no reaction, despite the fact that meta used by the

0:18:54.400 --> 0:18:57.359
<v Speaker 2>Wall Street Journal this adjustment to reduce this expense is

0:18:57.400 --> 0:18:59.480
<v Speaker 2>by two point three billion dollars in the first three

0:18:59.560 --> 0:19:04.160
<v Speaker 2>quarters of five. This is quite literally disconnected from reality

0:19:04.320 --> 0:19:06.600
<v Speaker 2>and done based on internal accounting that we are not

0:19:06.800 --> 0:19:10.960
<v Speaker 2>party two. Every single tech firm buying GPUs did this

0:19:11.320 --> 0:19:14.080
<v Speaker 2>and benefited to the tune of billions of dollars in

0:19:14.200 --> 0:19:17.399
<v Speaker 2>decreased expenses, which bump their revenues, and analysts thought it

0:19:17.440 --> 0:19:19.480
<v Speaker 2>was fine and dandy because number went up and they

0:19:19.560 --> 0:19:24.439
<v Speaker 2>don't fucking care. Shareholders are now subordinate to the shares themselves,

0:19:24.480 --> 0:19:26.560
<v Speaker 2>reacting in the way that the shares demand they do,

0:19:26.840 --> 0:19:29.960
<v Speaker 2>being happy for what the companies behind the shares give them,

0:19:30.040 --> 0:19:32.600
<v Speaker 2>and analysts, investors, and even the media spend far more

0:19:32.720 --> 0:19:36.240
<v Speaker 2>energy fighting the doubts than they do showing these companies screwtiny.

0:19:36.880 --> 0:19:40.320
<v Speaker 2>Much like the user of vineshitivied platform, investors and analysts

0:19:40.320 --> 0:19:42.760
<v Speaker 2>are frogs in a pot, the experience of owning a

0:19:42.880 --> 0:19:47.320
<v Speaker 2>stock deteriorating. Since Jack Welch and General Electric talk corporations

0:19:47.520 --> 0:19:49.600
<v Speaker 2>that the markets are run with the kind of simplistic

0:19:49.640 --> 0:19:53.920
<v Speaker 2>mindset built for grifter exploitation, and much like those platforms,

0:19:54.040 --> 0:19:57.440
<v Speaker 2>corporations have found as many ways as possible to abuse shareholders,

0:19:57.640 --> 0:19:59.520
<v Speaker 2>seeing what they can get away with, seeing how far

0:19:59.560 --> 0:20:01.760
<v Speaker 2>they can put things as long as the numbers look right.

0:20:01.880 --> 0:20:05.560
<v Speaker 2>Because analysts are no longer working in any sort of

0:20:05.680 --> 0:20:10.280
<v Speaker 2>rational headspace, nor are they looking for sensible ideas. Let

0:20:10.280 --> 0:20:13.040
<v Speaker 2>me give you an example I've used before. Back in

0:20:13.160 --> 0:20:16.920
<v Speaker 2>November nineteen ninety eight, Windstar Communication signed and I quote,

0:20:17.040 --> 0:20:20.320
<v Speaker 2>a two billion dollar equipment and finance agreement with Lucent

0:20:20.400 --> 0:20:23.680
<v Speaker 2>technologies where Windstar would borrow money from Lucent to buy

0:20:23.720 --> 0:20:26.399
<v Speaker 2>stuff from Lucent or to create and I shit you

0:20:26.440 --> 0:20:30.600
<v Speaker 2>not one hundred million dollars in revenue over five years. Now,

0:20:30.680 --> 0:20:32.560
<v Speaker 2>We're going to go even further back in time now

0:20:32.960 --> 0:20:36.600
<v Speaker 2>to December nineteen ninety nine, to a piece in Barns

0:20:36.920 --> 0:20:39.960
<v Speaker 2>called in nineteen ninety nine tech ruled. Allow me to

0:20:40.040 --> 0:20:45.359
<v Speaker 2>quote a few paragraphs from itm ha, Okay, here we go.

0:20:45.840 --> 0:20:49.200
<v Speaker 2>George Gilbert, who manages the Northern Technology Fund, predicts the

0:20:49.240 --> 0:20:52.480
<v Speaker 2>web centric worlds of consumer services and software will fare

0:20:52.520 --> 0:20:55.600
<v Speaker 2>well next year two. A lot of people are increasing

0:20:55.600 --> 0:20:58.480
<v Speaker 2>their access to the Internet, says Gilbert, and e commerce

0:20:58.480 --> 0:21:01.000
<v Speaker 2>and business networking are very hi high priorities for the

0:21:01.040 --> 0:21:05.320
<v Speaker 2>Fortune one hundred. Lawrence Yorke, leading portfolio manager of the

0:21:05.400 --> 0:21:10.720
<v Speaker 2>Www Internet Fund, is bullish on semiconductors, telecommunications, and business

0:21:10.800 --> 0:21:14.080
<v Speaker 2>to business or B two B e commerce software, but

0:21:14.119 --> 0:21:17.600
<v Speaker 2>he's wary of online retailers that model won't work long term.

0:21:17.640 --> 0:21:21.119
<v Speaker 2>He asserts his top B to B picks AREBA and

0:21:21.160 --> 0:21:25.680
<v Speaker 2>official payments in wireless. He likes Windstar, CNA and Anet Communications,

0:21:25.720 --> 0:21:30.080
<v Speaker 2>which went public earlier this month. So what do you

0:21:30.119 --> 0:21:32.680
<v Speaker 2>think Larry's scoreboard is do you think Larry did well?

0:21:32.760 --> 0:21:36.320
<v Speaker 2>Did he do badly? Let's find out anet bankrupt. Windstar

0:21:36.560 --> 0:21:40.520
<v Speaker 2>horribly bankrupt, had to sue loosened while Sienna survived. It

0:21:40.600 --> 0:21:43.400
<v Speaker 2>had spent over a billion dollars to acquire other companies,

0:21:43.400 --> 0:21:45.639
<v Speaker 2>all in stock, of course, only to see its revenue

0:21:45.680 --> 0:21:48.440
<v Speaker 2>dwindle basically overnight from one point six billion dollars to

0:21:48.480 --> 0:21:51.760
<v Speaker 2>three hundred million dollars as the optical cable industry collapsed.

0:21:52.600 --> 0:21:54.840
<v Speaker 2>Now one would have been able to work out that

0:21:54.880 --> 0:21:56.800
<v Speaker 2>Windstar was a dog, or that all of these companies

0:21:56.840 --> 0:21:58.359
<v Speaker 2>were dogs, if you were to look at the numbers,

0:21:58.400 --> 0:22:00.520
<v Speaker 2>such as how much they made versus how much they

0:22:00.520 --> 0:22:03.520
<v Speaker 2>are spending and the demand for their services. I mean,

0:22:03.680 --> 0:22:06.560
<v Speaker 2>I just put out a premium piece about the dot

0:22:06.560 --> 0:22:09.240
<v Speaker 2>com bubble that I'll inevitably turn into a long one

0:22:09.320 --> 0:22:14.040
<v Speaker 2>like this. But basically the signs were all blatant and obvious.

0:22:15.520 --> 0:22:18.160
<v Speaker 2>But instead analysts, the media and banks chose to pump

0:22:18.240 --> 0:22:20.840
<v Speaker 2>up these stocks because the numbers kept getting bigger, and

0:22:20.840 --> 0:22:24.439
<v Speaker 2>when the collapse happened, rationalizations were immediately created. There were

0:22:24.440 --> 0:22:27.520
<v Speaker 2>a few bad apples Enron, windsty WelCom. The fiber was

0:22:27.600 --> 0:22:30.320
<v Speaker 2>useful and thus laying it was worthwhile and otherwise everything

0:22:30.400 --> 0:22:33.080
<v Speaker 2>was fine. And just to be clear, some of those

0:22:33.119 --> 0:22:35.920
<v Speaker 2>statements were true. It doesn't mean that any of these

0:22:35.960 --> 0:22:38.320
<v Speaker 2>companies should have existed or that this growth should have

0:22:38.320 --> 0:22:41.920
<v Speaker 2>happened at that speed. The problem in everybody else's mind

0:22:41.960 --> 0:22:43.920
<v Speaker 2>at the time was that everybody had got a bit

0:22:43.960 --> 0:22:47.360
<v Speaker 2>distracted and some companies that weren't good would die. All

0:22:47.400 --> 0:22:49.280
<v Speaker 2>of that loss money was only a problem because it

0:22:49.280 --> 0:22:51.840
<v Speaker 2>didn't pay off. This was a misplaced gambler. It taught

0:22:51.840 --> 0:22:56.840
<v Speaker 2>tech executives one powerful lesson earnings must be good without

0:22:57.000 --> 0:23:01.240
<v Speaker 2>fail by any means necessary. Otherwise nothing else matters to

0:23:01.280 --> 0:23:04.679
<v Speaker 2>war Stream. I mean companies, look, Lucent did this, WinStar

0:23:04.800 --> 0:23:07.680
<v Speaker 2>did this, Global Crossing did this. Outright frauds like Enron

0:23:07.760 --> 0:23:10.040
<v Speaker 2>did this. They proved it again and again and again.

0:23:23.880 --> 0:23:27.920
<v Speaker 2>It's all about incentives. A sel side analyst that tells

0:23:27.960 --> 0:23:30.200
<v Speaker 2>you not to buy something is a problem. A journalist

0:23:30.200 --> 0:23:32.280
<v Speaker 2>that is skeptical or critical of an industry in the

0:23:32.320 --> 0:23:34.880
<v Speaker 2>midst of a growth or hype cycle is considered a hater.

0:23:35.240 --> 0:23:38.359
<v Speaker 2>And god don't I fucking know that analysts that do

0:23:38.440 --> 0:23:41.679
<v Speaker 2>not sing the same tune as everybody else are marginalized, mocked,

0:23:41.800 --> 0:23:45.800
<v Speaker 2>and aggressively policed, and I don't fucking care. Stop being

0:23:45.840 --> 0:23:48.560
<v Speaker 2>fucking cowards. If you're an analyst listening to this, stop

0:23:48.600 --> 0:23:51.600
<v Speaker 2>being a fucking coward. Go read the fucking numbers, man,

0:23:51.720 --> 0:23:54.120
<v Speaker 2>I've been doing it. I'm reading the numbers. I'm reading

0:23:54.160 --> 0:23:56.200
<v Speaker 2>them to you on this episode. Go read the numbers

0:23:56.640 --> 0:23:58.600
<v Speaker 2>as a reason that people want to fucking talk to me,

0:23:58.800 --> 0:24:01.119
<v Speaker 2>as a reason that only the same fucking people want

0:24:01.160 --> 0:24:03.959
<v Speaker 2>to talk to you. You're useless. You're fucking useless. If

0:24:03.960 --> 0:24:07.560
<v Speaker 2>you're still saying this is a big My frustration I'm

0:24:07.640 --> 0:24:10.560
<v Speaker 2>going off topic again, is that people are going to

0:24:10.600 --> 0:24:13.520
<v Speaker 2>get hurt here. Retail investors who believe what they read

0:24:13.560 --> 0:24:15.840
<v Speaker 2>in CNBC and Bloomberg about the AI bubble are going

0:24:15.840 --> 0:24:19.199
<v Speaker 2>to get hurt. And the cowardice is what's going to

0:24:19.280 --> 0:24:23.159
<v Speaker 2>hurt them. Now, the dot com bubble was actually a

0:24:23.200 --> 0:24:25.960
<v Speaker 2>great time to start reevaluating how and why we value

0:24:25.960 --> 0:24:28.120
<v Speaker 2>stocks the way that we do. To say, hey, wait,

0:24:28.440 --> 0:24:30.679
<v Speaker 2>that two billion dollar deal will only make one hundred

0:24:30.720 --> 0:24:33.560
<v Speaker 2>million dollars in revenue. That's a pretty big minus frieto

0:24:34.160 --> 0:24:36.760
<v Speaker 2>or this company spends five dollars for every dollar it

0:24:36.800 --> 0:24:39.920
<v Speaker 2>makes that's not good. But nobody, it appears, remained particularly

0:24:39.960 --> 0:24:42.560
<v Speaker 2>suspicious of the tech industry or a stock market that

0:24:42.680 --> 0:24:47.480
<v Speaker 2>was increasingly orienting itself around conning shareholders. And because shareholders, analysts,

0:24:47.520 --> 0:24:50.520
<v Speaker 2>and the media are refused to retain a single shred

0:24:50.600 --> 0:24:54.000
<v Speaker 2>of suspicion. Leaving the dot com era, the media never

0:24:54.080 --> 0:24:58.840
<v Speaker 2>actually subsided. Financial publications still found themselves dedicated to explaining

0:24:58.840 --> 0:25:03.120
<v Speaker 2>why the latest type cycle. Journalists still found themselves told

0:25:03.160 --> 0:25:05.479
<v Speaker 2>by editors that they had to cover the latest fad,

0:25:05.640 --> 0:25:09.200
<v Speaker 2>even if it was nonsensical or clearly rotten. Analysts still

0:25:09.200 --> 0:25:11.680
<v Speaker 2>grabbed their swords and rush to protect the very companies

0:25:11.840 --> 0:25:15.199
<v Speaker 2>that had spent decades misleading them and would continue to

0:25:15.200 --> 0:25:18.640
<v Speaker 2>do so for decades more. Much like we spent years

0:25:18.640 --> 0:25:21.479
<v Speaker 2>saying that Facebook was a good deal because it was free,

0:25:21.760 --> 0:25:24.440
<v Speaker 2>analysts and investors say tech stocks are great to hold

0:25:24.520 --> 0:25:27.080
<v Speaker 2>because they keep growing, even if the reason they keep

0:25:27.119 --> 0:25:30.320
<v Speaker 2>growing was a series of interlocking monopolies, difficult to leave,

0:25:30.359 --> 0:25:34.040
<v Speaker 2>platforms and impossible to fight traction and pricing, all of

0:25:34.080 --> 0:25:40.160
<v Speaker 2>which have an eventual cell by date. Now get emails

0:25:40.160 --> 0:25:42.840
<v Speaker 2>over this, I realize and pearl clutching over the amoral

0:25:42.920 --> 0:25:46.359
<v Speaker 2>status of capitalism the stock market. But hear me out,

0:25:46.760 --> 0:25:49.240
<v Speaker 2>what if we're actually in a fifteen to twenty year

0:25:49.280 --> 0:25:53.800
<v Speaker 2>long knife catching competition. What if all anybody has done

0:25:54.000 --> 0:25:57.040
<v Speaker 2>is look at cash flow, net income, future growth guidance

0:25:57.080 --> 0:25:59.760
<v Speaker 2>and called it a day. A lack of scrutiny is

0:26:00.200 --> 0:26:02.640
<v Speaker 2>these companies to do effectively anything they want, but ref

0:26:02.680 --> 0:26:06.080
<v Speaker 2>to warrisome questions like will this ever make it profit?

0:26:06.200 --> 0:26:09.560
<v Speaker 2>Or where's that money going? What if we basically don't

0:26:09.600 --> 0:26:11.920
<v Speaker 2>know what the fuck is going on? What if all

0:26:11.960 --> 0:26:15.440
<v Speaker 2>of this is utterly senseless? And then we get to AI,

0:26:15.560 --> 0:26:19.760
<v Speaker 2>which has accelerated the incentification of the stock market. Now,

0:26:19.800 --> 0:26:21.960
<v Speaker 2>as I wrote back in twenty twenty four, the tech

0:26:22.000 --> 0:26:24.639
<v Speaker 2>industry is run out of hypergrowth ideas, facing something I

0:26:24.760 --> 0:26:27.720
<v Speaker 2>called the rock coom bubble. In simple terms, they're only

0:26:27.800 --> 0:26:30.200
<v Speaker 2>doing AI because they do not appear to have any

0:26:30.200 --> 0:26:33.280
<v Speaker 2>other viable ideas to continue the rock economy's eternal growth

0:26:33.280 --> 0:26:36.600
<v Speaker 2>at all costs. Fandango, I think I'm just going to

0:26:36.640 --> 0:26:40.640
<v Speaker 2>go with fan Dango there yet, because growth hasn't slowed yet. Analysts,

0:26:40.680 --> 0:26:42.520
<v Speaker 2>the media, and other investors are quick to claim that

0:26:42.560 --> 0:26:45.000
<v Speaker 2>AI is paying off, even if nobody has ever said

0:26:45.000 --> 0:26:48.760
<v Speaker 2>how much AI revenue is being generated, or in some cases,

0:26:48.800 --> 0:26:51.600
<v Speaker 2>such as Salesforce, they can say nearly one point four

0:26:51.640 --> 0:26:54.760
<v Speaker 2>billion dollars of annualized recurring revenue, which sounds really big

0:26:54.800 --> 0:26:57.200
<v Speaker 2>until you realize a company with ten point nine billion

0:26:57.240 --> 0:27:00.320
<v Speaker 2>dollars in revenue or quarter is boasting about making less

0:27:00.320 --> 0:27:02.760
<v Speaker 2>than one hundred and sixty million dollars in revenue in

0:27:02.800 --> 0:27:05.680
<v Speaker 2>a month on something that has likely cost them billions

0:27:05.720 --> 0:27:09.800
<v Speaker 2>to spin up. Nevertheless, because Salesforce set a new revenue

0:27:09.840 --> 0:27:13.160
<v Speaker 2>target of sixty billion dollars by twenty thirty, which may

0:27:13.160 --> 0:27:16.160
<v Speaker 2>as well be in one thousand years at this point,

0:27:16.359 --> 0:27:20.199
<v Speaker 2>that stopped. It jumped four percent. It doesn't matter that

0:27:20.240 --> 0:27:22.720
<v Speaker 2>most agent forced customers don't pay for the service, or

0:27:22.720 --> 0:27:26.080
<v Speaker 2>that AI isn't really making them any money, let alone profit,

0:27:26.160 --> 0:27:29.200
<v Speaker 2>or really anything but number go up. Look ed, Number

0:27:29.280 --> 0:27:35.040
<v Speaker 2>go up. I'm an ape, I'm a buffoon. Number higher, yay.

0:27:36.680 --> 0:27:39.159
<v Speaker 2>The era we live in is one of abject desperation,

0:27:39.280 --> 0:27:42.320
<v Speaker 2>to the point that analysts and investors and shareholders by extension,

0:27:42.520 --> 0:27:45.920
<v Speaker 2>will take any abuse from management. They will allow companies

0:27:45.920 --> 0:27:47.800
<v Speaker 2>to spend as much money as they want in whatever

0:27:47.840 --> 0:27:50.439
<v Speaker 2>ways they want, as long as it continues The charade

0:27:50.480 --> 0:27:53.040
<v Speaker 2>of number go up, or charade for my British users.

0:27:55.200 --> 0:27:56.960
<v Speaker 2>Let me spell it out a little more though, using

0:27:57.040 --> 0:28:00.919
<v Speaker 2>the earnings of various hyperscalers as an example. According to

0:28:00.920 --> 0:28:03.960
<v Speaker 2>its latest quarterly filings, Microsoft spent thirty four point nine

0:28:03.960 --> 0:28:06.679
<v Speaker 2>billion dollars on capital expenditures, the most of any of

0:28:06.720 --> 0:28:09.440
<v Speaker 2>the big four hyperscalers, followed by Amazon with thirty four

0:28:09.480 --> 0:28:12.280
<v Speaker 2>point two billion, Googled with twenty four billion, and Met

0:28:12.320 --> 0:28:15.879
<v Speaker 2>with nineteen point three seven billion dollars. The common mantra

0:28:15.960 --> 0:28:18.440
<v Speaker 2>is that these companies are spending all this money on GPUs,

0:28:18.720 --> 0:28:21.560
<v Speaker 2>but that doesn't really match up with invidious revenues. In

0:28:21.680 --> 0:28:24.359
<v Speaker 2>Video's last quarterly earning, said that four direct customers made

0:28:24.440 --> 0:28:26.960
<v Speaker 2>up more than ten percent of revenue, twenty two percent,

0:28:27.119 --> 0:28:30.479
<v Speaker 2>fifteen percent, thirteen percent, and eleven percent, representing no more

0:28:30.520 --> 0:28:33.040
<v Speaker 2>than twelve point five four billion dollars out of fifty

0:28:33.080 --> 0:28:35.360
<v Speaker 2>seven billion dollars of revenue. And as you look back

0:28:35.359 --> 0:28:39.120
<v Speaker 2>through earlier quarters, you see the discrepancies grow. Where exactly

0:28:39.200 --> 0:28:42.440
<v Speaker 2>is this money going? In Microsoft's latest earnings first quarter

0:28:42.480 --> 0:28:45.440
<v Speaker 2>fiscal year twenty twenty six, it said that nineteen point

0:28:45.440 --> 0:28:48.120
<v Speaker 2>three nine billion dollars went to additions to property and equipment,

0:28:48.120 --> 0:28:50.400
<v Speaker 2>with roughly half of its total kapek spent on short

0:28:50.440 --> 0:28:55.120
<v Speaker 2>lived assets, primarily GPUs and CPUs. A quarterback additions to

0:28:55.160 --> 0:28:57.680
<v Speaker 2>property and equipment were sixteen point seven four billion dollars,

0:28:57.680 --> 0:28:59.960
<v Speaker 2>with roughly half of that spent on long lived assets

0:29:00.040 --> 0:29:02.640
<v Speaker 2>that will sport monetization over the next fifteen years or beyond.

0:29:03.240 --> 0:29:07.280
<v Speaker 2>What does that mean? Who fucking knows? I looked, I

0:29:07.320 --> 0:29:09.720
<v Speaker 2>went and I looked. I read every fucking analyst report

0:29:09.800 --> 0:29:12.800
<v Speaker 2>I could about that sorry souder bitch company, Microsoft, and

0:29:12.880 --> 0:29:15.720
<v Speaker 2>I could not find one person who went in what

0:29:15.840 --> 0:29:19.200
<v Speaker 2>Q three was? H Q four f y twenty twenty five?

0:29:19.320 --> 0:29:21.040
<v Speaker 2>Can find a single one of them that even found

0:29:21.080 --> 0:29:25.640
<v Speaker 2>that weird? Like, I don't know those of you got kids.

0:29:25.960 --> 0:29:29.600
<v Speaker 2>If they're like I did my homework, you probably want

0:29:29.600 --> 0:29:32.640
<v Speaker 2>to check, right, Yeah, But if they're a company with

0:29:32.720 --> 0:29:35.400
<v Speaker 2>like a four trillion dollar market cap, no problem, mate,

0:29:35.400 --> 0:29:37.640
<v Speaker 2>were all good? Oh you're public. I know I could

0:29:37.680 --> 0:29:40.760
<v Speaker 2>probably ask more, but I'm not gonna. But let's assume

0:29:40.840 --> 0:29:43.560
<v Speaker 2>that Microsoft is in Vidia's biggest customer every quarter. Those

0:29:43.600 --> 0:29:46.960
<v Speaker 2>pseudonymous customer a from Nvidia's earnings that it mentions in

0:29:47.000 --> 0:29:50.160
<v Speaker 2>its mandatory sec filings spent twelve point five billion dollars

0:29:50.200 --> 0:29:52.800
<v Speaker 2>within video at thirty four point nine billion dollars in

0:29:52.800 --> 0:29:55.280
<v Speaker 2>total cap ex spending from Microsoft, and before that ten

0:29:55.320 --> 0:29:57.360
<v Speaker 2>point seven billion dollars out of twenty one point four

0:29:57.360 --> 0:29:59.960
<v Speaker 2>billion dollars and in the court before that seven billion

0:30:00.040 --> 0:30:02.840
<v Speaker 2>out of twenty two point six billion. If we guessed

0:30:02.840 --> 0:30:05.360
<v Speaker 2>them up based on a split of various models of

0:30:05.440 --> 0:30:08.920
<v Speaker 2>nvidious Blackwell GPU systems and in earlier quarters older models,

0:30:08.920 --> 0:30:11.600
<v Speaker 2>that works to like four hundred and fifty seven megawats

0:30:11.640 --> 0:30:13.680
<v Speaker 2>of by t load for the first quarter, three hundred

0:30:13.680 --> 0:30:15.920
<v Speaker 2>and ninety one mega what's for the fourth quarter of

0:30:15.960 --> 0:30:18.800
<v Speaker 2>twenty twenty five, and two hundred and sixty three megawats

0:30:18.800 --> 0:30:22.280
<v Speaker 2>for the third quarter of twenty twenty five. So has

0:30:22.360 --> 0:30:26.640
<v Speaker 2>Microsoft built that many data centers one point one one

0:30:26.680 --> 0:30:30.320
<v Speaker 2>gigawats of data centers? Apparently? It claims it added two

0:30:30.400 --> 0:30:32.480
<v Speaker 2>gigawads of data centers in the last year, but such

0:30:32.480 --> 0:30:34.760
<v Speaker 2>an Adella claimed in November that Microsoft had chips an

0:30:34.800 --> 0:30:36.920
<v Speaker 2>inventory it couldn't installed, you to a lack of power.

0:30:37.560 --> 0:30:40.280
<v Speaker 2>In any case, where did those tens of billions of

0:30:40.440 --> 0:30:44.840
<v Speaker 2>dollars of where they go? We know there are finance leases,

0:30:44.880 --> 0:30:48.240
<v Speaker 2>which are basically just loans. What are they form more GPUs?

0:30:48.280 --> 0:30:53.280
<v Speaker 2>What's the actual output of the expenditures? Now, I previously

0:30:53.360 --> 0:30:54.840
<v Speaker 2>wrote in this script that we have no idea, but

0:30:54.840 --> 0:30:57.120
<v Speaker 2>I actually found out to an extent. So this will

0:30:57.160 --> 0:30:59.560
<v Speaker 2>be a future episode because it's a whole separate thing.

0:30:59.640 --> 0:31:03.400
<v Speaker 2>But the way that these these big companies, the hyperscalers

0:31:03.400 --> 0:31:07.520
<v Speaker 2>are doing it is they're actually threading their GPUs through Taiwan.

0:31:07.600 --> 0:31:11.400
<v Speaker 2>There are companies like on High Precision Corporation Limited, which

0:31:11.440 --> 0:31:15.720
<v Speaker 2>is better known as fox Conn, Quanta Computing, Wistron, we

0:31:15.840 --> 0:31:20.520
<v Speaker 2>wi In. There are others too. Nevertheless, these are big

0:31:20.600 --> 0:31:25.560
<v Speaker 2>Taiwanese server companies that buy the GPUs from Nvidia and

0:31:24.480 --> 0:31:27.920
<v Speaker 2>then then they ship them to Microsoft or Meta or

0:31:27.960 --> 0:31:33.600
<v Speaker 2>Google or Oracle. Nevertheless, why am I the person who

0:31:33.600 --> 0:31:36.360
<v Speaker 2>went and find that out? Why am I the guy?

0:31:36.440 --> 0:31:39.840
<v Speaker 2>I'm a I'm just a fella, I'm just one dip

0:31:39.880 --> 0:31:43.320
<v Speaker 2>shit with Google. What the fuck am I the guy? Well?

0:31:43.880 --> 0:31:46.200
<v Speaker 2>The answer might be because well, I have a theory,

0:31:46.480 --> 0:31:48.920
<v Speaker 2>and it's the analysts and investors are in an abusive

0:31:48.960 --> 0:31:53.480
<v Speaker 2>relationship with tech stocs. It is fundamentally insane that Microsoft meta,

0:31:53.560 --> 0:31:56.040
<v Speaker 2>Amazon and Google have spent seven hundred and seventy six

0:31:56.080 --> 0:31:59.000
<v Speaker 2>billion dollars in capital expenditures in the space of three

0:31:59.080 --> 0:32:02.440
<v Speaker 2>years and more so that analysts and investors, when faced

0:32:02.480 --> 0:32:06.000
<v Speaker 2>with such egregious numbers, sit back and say, ooh yeah, baby,

0:32:07.200 --> 0:32:09.640
<v Speaker 2>ooh yeah, they're building the infrastructure of the future. Baby,

0:32:09.680 --> 0:32:13.240
<v Speaker 2>we love this. Analysts and traders and investors and reporters

0:32:13.240 --> 0:32:16.120
<v Speaker 2>do not think hard about the underlying numbers, because doing

0:32:16.160 --> 0:32:19.080
<v Speaker 2>so immediately makes you run headfirst into a number of

0:32:19.120 --> 0:32:21.320
<v Speaker 2>worrying questions such as where did all the money go,

0:32:21.640 --> 0:32:24.200
<v Speaker 2>will this payoff? And how many fucking dupus do they

0:32:24.280 --> 0:32:28.040
<v Speaker 2>actually own. Analysts have, on some level become the fractional

0:32:28.080 --> 0:32:30.920
<v Speaker 2>marketing team for the stocks they're investing in. When Oracle

0:32:30.960 --> 0:32:33.680
<v Speaker 2>announced this three hundred billion dollar deal with open Ai

0:32:33.760 --> 0:32:36.720
<v Speaker 2>in September, when that open Ai does not have the

0:32:36.880 --> 0:32:39.480
<v Speaker 2>money to pay and Oracle doesn't have the capacity to fill,

0:32:39.800 --> 0:32:43.520
<v Speaker 2>analysts heaved and stammered like horny teenagers seeing their first boob.

0:32:44.040 --> 0:32:48.560
<v Speaker 2>Now I'm gonna quote see MBC here and do some artistic,

0:32:48.960 --> 0:32:53.200
<v Speaker 2>some editorializing. John Defuki, Sorry, John Defucci, I guess I'm

0:32:53.200 --> 0:32:56.520
<v Speaker 2>not fixing that From Googenhem Security said he was blown away.

0:32:56.800 --> 0:32:59.800
<v Speaker 2>T d Cohen's Derek would called it a momentous quarter,

0:33:00.080 --> 0:33:04.120
<v Speaker 2>and Brad Zelnig of Deutsche Bank said, who kind of, Oh,

0:33:04.160 --> 0:33:06.600
<v Speaker 2>we're in shock in a very good way. There's no

0:33:06.680 --> 0:33:10.000
<v Speaker 2>better evidence of a seismic shift happening and computing than

0:33:10.040 --> 0:33:13.280
<v Speaker 2>these results that you just put up. Selnic said on

0:33:13.320 --> 0:33:16.360
<v Speaker 2>the earnings call, adjusting his trousers, that trouser thing was

0:33:16.400 --> 0:33:20.680
<v Speaker 2>an addition. That's a parody anyway. These are the same

0:33:20.800 --> 0:33:24.120
<v Speaker 2>people that retail and institutional investors rely upon for advice

0:33:24.160 --> 0:33:26.720
<v Speaker 2>on what stocks to buy, all acting with the disregard

0:33:26.760 --> 0:33:28.600
<v Speaker 2>for the truth that comes from years of never facing

0:33:28.600 --> 0:33:32.440
<v Speaker 2>a single fucking consequence. Three months later, an oracle has

0:33:32.440 --> 0:33:34.880
<v Speaker 2>lost basically all of the stock bumpets sought from the

0:33:34.880 --> 0:33:38.960
<v Speaker 2>open aideal, meaning that any regular person, any retail investor

0:33:39.000 --> 0:33:41.760
<v Speaker 2>that yoloed into that trade because say, I don't know,

0:33:42.000 --> 0:33:44.520
<v Speaker 2>Analysts from major institutions in the media said it was

0:33:44.560 --> 0:33:47.520
<v Speaker 2>a good idea, and news outlets didn't ask questions. Well,

0:33:47.520 --> 0:33:50.600
<v Speaker 2>they got their asses kicked. They lost everything, and please

0:33:51.000 --> 0:33:53.760
<v Speaker 2>spare me, Oh they shouldn't trade off of analysts. Bullshit.

0:33:53.960 --> 0:33:56.120
<v Speaker 2>That's the kind of victim blaming that allows these revered

0:33:56.120 --> 0:33:58.760
<v Speaker 2>fuck wits to continue fighting out these meaningless calls and

0:33:58.800 --> 0:34:02.680
<v Speaker 2>making money doing so. In reality, we're in an era

0:34:02.760 --> 0:34:06.960
<v Speaker 2>of naked, blatant, shameless stock manipulation, both privately and publicly,

0:34:07.120 --> 0:34:09.239
<v Speaker 2>because a stock no longer refers to a unit of

0:34:09.320 --> 0:34:11.200
<v Speaker 2>ownership in a company so much as it is a

0:34:11.280 --> 0:34:14.520
<v Speaker 2>chip at a casino where a house constantly changes the rules.

0:34:15.080 --> 0:34:17.880
<v Speaker 2>Perhaps you're able to occasionally catch the house showing its hand,

0:34:17.920 --> 0:34:19.839
<v Speaker 2>and perhaps the house meant for you to see it.

0:34:20.560 --> 0:34:23.960
<v Speaker 2>Either way, you are always behind because the people responsible

0:34:23.960 --> 0:34:26.759
<v Speaker 2>for buying and selling stocks at scale, under the auspices

0:34:26.800 --> 0:34:29.120
<v Speaker 2>of knowing what's going on, don't seem to know what

0:34:29.120 --> 0:34:33.080
<v Speaker 2>they're talking about, or don't care to find out. You

0:34:33.120 --> 0:34:36.560
<v Speaker 2>want examples, I'll give you some fucking examples. June in tomorrow.

0:34:37.320 --> 0:34:39.920
<v Speaker 2>I love doing this show. I love doing these episodes.

0:34:40.440 --> 0:34:51.360
<v Speaker 2>Catch you then, thank you for listening to Better Offline.

0:34:51.480 --> 0:34:53.920
<v Speaker 1>The editor and composer of the Better Offline theme song

0:34:54.000 --> 0:34:56.640
<v Speaker 1>is Matosowski. You can check out more of his music

0:34:56.640 --> 0:35:01.239
<v Speaker 1>and audio projects at Mattasowski dot com t O s

0:35:01.280 --> 0:35:05.360
<v Speaker 1>O W s Ki dot com. You can email me

0:35:05.400 --> 0:35:08.000
<v Speaker 1>at easy at Better Offline dot com or visit Better

0:35:08.040 --> 0:35:10.479
<v Speaker 1>Offline dot com to find more podcast links and of course,

0:35:10.520 --> 0:35:13.640
<v Speaker 1>my newsletter. I also really recommend you go to chat

0:35:13.680 --> 0:35:16.319
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0:35:16.360 --> 0:35:17.480
<v Speaker 1>go to our slash.

0:35:17.200 --> 0:35:20.319
<v Speaker 2>Better Offline to check out I'll Reddit. Thank you so

0:35:20.440 --> 0:35:23.879
<v Speaker 2>much for listening. Better Offline is a production of cool

0:35:23.920 --> 0:35:26.719
<v Speaker 2>Zone Media. For more from cool Zone Media, visit our

0:35:26.760 --> 0:35:29.759
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