1 00:00:04,400 --> 00:00:07,800 Speaker 1: Welcome to Tech Stuff, a production from I Heart Radio. 2 00:00:12,039 --> 00:00:14,840 Speaker 1: Be there and welcome to tech Stuff. I'm your host, 3 00:00:15,000 --> 00:00:18,520 Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio 4 00:00:18,560 --> 00:00:21,079 Speaker 1: and a lot of all things tech, and I want 5 00:00:21,120 --> 00:00:24,080 Speaker 1: to start this episode with a little bit of a story. 6 00:00:24,600 --> 00:00:29,480 Speaker 1: Back in January, I attended ce S with a small 7 00:00:29,520 --> 00:00:33,040 Speaker 1: team of audio and video crew. This in itself was 8 00:00:33,080 --> 00:00:36,239 Speaker 1: pretty unusual, as in the previous years I had just 9 00:00:36,760 --> 00:00:39,440 Speaker 1: gone to c e S all by myself. I was 10 00:00:39,479 --> 00:00:42,040 Speaker 1: shooting a ton of videos every day, both for How 11 00:00:42,080 --> 00:00:46,360 Speaker 1: Stuff Works, my former employer, and the Forward Thinking video series. 12 00:00:46,400 --> 00:00:48,920 Speaker 1: But one thing that caught my eye while I was 13 00:00:48,960 --> 00:00:53,040 Speaker 1: there was a concept car called the f F zero one. 14 00:00:53,920 --> 00:00:58,200 Speaker 1: The car looked super sleek, really futuristic, kind of a 15 00:00:58,240 --> 00:01:02,720 Speaker 1: mix between a spaceship and the Batmobile. The cockpit could 16 00:01:02,800 --> 00:01:07,040 Speaker 1: hold one whole person, had a glass roof and racing 17 00:01:07,160 --> 00:01:10,760 Speaker 1: bucket style seat, had a fin that extended from the 18 00:01:10,840 --> 00:01:13,840 Speaker 1: back of the cockpit along the length of the rear 19 00:01:13,880 --> 00:01:18,200 Speaker 1: of the car. And yeah, it was a crazy looking thing. 20 00:01:18,319 --> 00:01:20,800 Speaker 1: Rather than a steering wheel, it had a steering yoke 21 00:01:21,319 --> 00:01:24,360 Speaker 1: and you would plug a smartphone into the center of 22 00:01:24,360 --> 00:01:27,600 Speaker 1: the yolk. And it create a little display there. Likewise, 23 00:01:27,600 --> 00:01:31,119 Speaker 1: the dashboard had, you know, several digital displays built into it, 24 00:01:31,480 --> 00:01:34,040 Speaker 1: and it had kind of this sleek wrap around appearance. 25 00:01:34,240 --> 00:01:36,200 Speaker 1: To get in and out of the thing, the cockpit 26 00:01:36,280 --> 00:01:38,759 Speaker 1: would open along the top and you have to kind 27 00:01:38,760 --> 00:01:41,880 Speaker 1: of scrabble over the side again, kind of like a 28 00:01:41,959 --> 00:01:46,039 Speaker 1: race car. And according to the reps who were talking 29 00:01:46,120 --> 00:01:49,640 Speaker 1: up the concept car to the attendees, uh, the the 30 00:01:49,720 --> 00:01:53,680 Speaker 1: idea was this vehicle could if it were operational it 31 00:01:53,840 --> 00:01:57,160 Speaker 1: was not, it could go from zero to sixty miles 32 00:01:57,200 --> 00:02:01,720 Speaker 1: per hour or arounds per hour in about three seconds, 33 00:02:02,120 --> 00:02:04,880 Speaker 1: and it would have a top speed of two hundred 34 00:02:04,880 --> 00:02:08,840 Speaker 1: miles per hour or about two kilometers per hour or 35 00:02:08,880 --> 00:02:11,960 Speaker 1: maybe even more. And it had a total output of 36 00:02:12,080 --> 00:02:16,000 Speaker 1: one thousand horsepower. The approach this company was taking was 37 00:02:16,120 --> 00:02:21,119 Speaker 1: pretty interesting too. The chassis, the representatives explained, was kind 38 00:02:21,120 --> 00:02:25,320 Speaker 1: of a modular thing, and an electric motor would provide 39 00:02:25,320 --> 00:02:27,960 Speaker 1: the power needed for the drive train with a motor 40 00:02:28,000 --> 00:02:31,200 Speaker 1: position near one of the four wheels, and you could 41 00:02:31,280 --> 00:02:34,799 Speaker 1: add electric motors and batteries to the chassis to boost 42 00:02:34,800 --> 00:02:38,840 Speaker 1: the vehicle's performance. So the F zero one that we 43 00:02:38,840 --> 00:02:41,360 Speaker 1: were looking at, the one that was on display was 44 00:02:41,400 --> 00:02:44,840 Speaker 1: to have four motors, one for each wheel, which would 45 00:02:44,840 --> 00:02:49,359 Speaker 1: give the car such impressive specs, well, impressive theoretical specs, 46 00:02:49,400 --> 00:02:53,320 Speaker 1: because like I said, it wasn't actually operational. The car 47 00:02:53,480 --> 00:02:56,720 Speaker 1: was pretty much checking all the boxes for a concept car. 48 00:02:57,040 --> 00:03:02,720 Speaker 1: It was sleek, beautiful, technologically advanced, and absolutely impractical. But 49 00:03:02,840 --> 00:03:07,119 Speaker 1: concept cars are not meant to be production vehicles. Their 50 00:03:07,240 --> 00:03:10,560 Speaker 1: platforms for showing off different ideas, and some of those 51 00:03:10,600 --> 00:03:15,320 Speaker 1: ideas might find themselves in slightly more modest vehicular designs 52 00:03:15,320 --> 00:03:18,760 Speaker 1: in the future. The modular chassis was really the selling 53 00:03:18,760 --> 00:03:22,079 Speaker 1: point for the company. With that approach, you could theoretically 54 00:03:22,200 --> 00:03:26,320 Speaker 1: use the same basic chassis for lots of different models 55 00:03:26,360 --> 00:03:30,280 Speaker 1: of vehicles. A simple city vehicle might only need one 56 00:03:30,320 --> 00:03:33,040 Speaker 1: electric motor it's not going to get a super high 57 00:03:33,040 --> 00:03:36,840 Speaker 1: speed and just needs to be efficient, and suv that 58 00:03:36,880 --> 00:03:39,600 Speaker 1: could go off road might need all four electric motors 59 00:03:39,680 --> 00:03:43,040 Speaker 1: to provide the torque necessary to go over the terrain. 60 00:03:43,760 --> 00:03:46,640 Speaker 1: But with this you know, business model, the company could 61 00:03:46,640 --> 00:03:51,360 Speaker 1: potentially be extremely nimble when it came to producing different vehicles, 62 00:03:51,400 --> 00:03:54,760 Speaker 1: assuming that it could actually get things off the ground. Now, 63 00:03:54,800 --> 00:03:57,080 Speaker 1: the name of the company showing off this car was 64 00:03:57,120 --> 00:04:00,560 Speaker 1: New to me, it was Faaraday Future and had only 65 00:04:00,600 --> 00:04:03,600 Speaker 1: been around for a couple of years, quietly working on 66 00:04:03,640 --> 00:04:06,680 Speaker 1: the design. Everyone at ce S could see that the 67 00:04:06,760 --> 00:04:09,520 Speaker 1: company was aiming to compete with Tesla for the future 68 00:04:09,520 --> 00:04:12,120 Speaker 1: of electric vehicles that you know, had a lot of 69 00:04:12,200 --> 00:04:17,000 Speaker 1: style to them. But today's episode isn't just about Faraday Future. 70 00:04:17,240 --> 00:04:20,480 Speaker 1: In fact, it's more about the man who provided a 71 00:04:20,480 --> 00:04:23,839 Speaker 1: lot of the financing to Faraday Future for several years, 72 00:04:23,839 --> 00:04:26,599 Speaker 1: a man who was running other businesses at the same 73 00:04:26,640 --> 00:04:30,120 Speaker 1: time while also taking on the full time job of 74 00:04:30,200 --> 00:04:35,200 Speaker 1: avoiding creditors in China, and a lot of what we'll 75 00:04:35,320 --> 00:04:37,880 Speaker 1: learn will sound really familiar to those who listened to 76 00:04:37,880 --> 00:04:41,160 Speaker 1: my earlier episodes about Ponzi schemes and so so on. 77 00:04:41,200 --> 00:04:43,880 Speaker 1: Although I want to be straight with you guys here, 78 00:04:44,160 --> 00:04:48,600 Speaker 1: while the various incarnations of this man's businesses have been 79 00:04:48,640 --> 00:04:52,560 Speaker 1: described as kind of being Ponzi schemes, I think that's unfair. 80 00:04:52,640 --> 00:04:56,200 Speaker 1: I think it's different, um, and I'll get to why. 81 00:04:56,520 --> 00:04:58,880 Speaker 1: But today we're going to explore the story of the 82 00:04:58,960 --> 00:05:03,719 Speaker 1: bankrupt billion an air entrepreneur, jiahuit Ting. He was born 83 00:05:03,839 --> 00:05:07,000 Speaker 1: in the north of China in the Shanshi province, it's 84 00:05:07,040 --> 00:05:09,800 Speaker 1: a place filled with historic buildings dating back more than 85 00:05:09,839 --> 00:05:12,320 Speaker 1: a thousand years. In fact, that has more historic buildings 86 00:05:12,360 --> 00:05:15,719 Speaker 1: than any other province in China. The main industry in 87 00:05:15,800 --> 00:05:19,160 Speaker 1: Shanshi is coal mining, so it sounds like a really 88 00:05:19,240 --> 00:05:23,440 Speaker 1: unlikely spot for a billionaire tech entrepreneur to emerge, but 89 00:05:23,560 --> 00:05:29,239 Speaker 1: that's kind of what happened. Jahuiting studied finance and administration 90 00:05:29,320 --> 00:05:32,440 Speaker 1: while he was in school, and at twenty two years old, 91 00:05:32,440 --> 00:05:35,159 Speaker 1: he got a job working tech support for the province's 92 00:05:35,240 --> 00:05:38,880 Speaker 1: tax office. But he wasn't there for a year before 93 00:05:38,960 --> 00:05:43,279 Speaker 1: he quit his job to found his own technical consultant company, 94 00:05:43,320 --> 00:05:46,680 Speaker 1: and he became something of a serial business startup guy. 95 00:05:47,360 --> 00:05:49,720 Speaker 1: As then he founded a lot of companies, and all 96 00:05:49,760 --> 00:05:53,719 Speaker 1: this stuff gets really complicated and intertwined with one another, 97 00:05:53,800 --> 00:05:57,120 Speaker 1: which is one of the running themes and running problems 98 00:05:57,320 --> 00:06:01,040 Speaker 1: of this story. I'll try to stick with one company 99 00:06:01,080 --> 00:06:03,400 Speaker 1: as much as I can for the sake of simplicity 100 00:06:03,440 --> 00:06:06,640 Speaker 1: before switching to another, but as you'll learn, there's some 101 00:06:06,680 --> 00:06:10,200 Speaker 1: crossover going on here that makes things really messy. However, 102 00:06:10,279 --> 00:06:14,480 Speaker 1: let's talk about his first company. It was two thousand 103 00:06:14,560 --> 00:06:20,799 Speaker 1: two and Jiah formed a wireless telecommunications company called Sinotel Technologies. 104 00:06:21,480 --> 00:06:24,279 Speaker 1: It's a bit challenging to pull up a lot of 105 00:06:24,440 --> 00:06:28,279 Speaker 1: really detailed information about companies in China, but from what 106 00:06:28,400 --> 00:06:31,240 Speaker 1: I can gather, the company started off as being a 107 00:06:31,400 --> 00:06:35,200 Speaker 1: handset distributor, so essentially it was in the retail business 108 00:06:35,240 --> 00:06:38,200 Speaker 1: of selling phones that were made by other companies in 109 00:06:38,240 --> 00:06:43,880 Speaker 1: the Chinese market. This business evolved significantly. In two thousand six, 110 00:06:44,160 --> 00:06:47,680 Speaker 1: cin Hotel formed a subsidiary company called x Bel Union 111 00:06:47,720 --> 00:06:52,400 Speaker 1: Communication Company Limited, which was a wholesale distributor for electronic 112 00:06:52,440 --> 00:06:57,360 Speaker 1: parts and systems for telecommunications companies. So now his clients 113 00:06:57,400 --> 00:07:01,799 Speaker 1: weren't just you know, the average citizen, but actual telecommunications 114 00:07:01,839 --> 00:07:04,960 Speaker 1: companies themselves. By two thousand and eight, the company's main 115 00:07:05,040 --> 00:07:09,200 Speaker 1: business was quote the provision of network infrastructure solutions to 116 00:07:09,320 --> 00:07:13,200 Speaker 1: tell cos, which involved the design, installation, and enhancement of 117 00:07:13,280 --> 00:07:16,760 Speaker 1: indoor and outdoor wireless coverage so as to provide or 118 00:07:16,880 --> 00:07:21,120 Speaker 1: enhance wireless signals for mobile users end quote. Now to me, 119 00:07:21,720 --> 00:07:25,040 Speaker 1: that sounds like the company was helping big telecommunications companies 120 00:07:25,080 --> 00:07:29,480 Speaker 1: in China build out infrastructure like cell towers and signal boosters, 121 00:07:29,520 --> 00:07:32,280 Speaker 1: but I could be wrong about that. In two thousand 122 00:07:32,280 --> 00:07:36,120 Speaker 1: and seven, the Singapore Stock Exchange began listing Sin Hotel 123 00:07:36,200 --> 00:07:39,480 Speaker 1: Technologies on that market, and it would trade at a 124 00:07:39,480 --> 00:07:43,640 Speaker 1: few cents per share for years until fifteen, when Jah 125 00:07:43,680 --> 00:07:47,720 Speaker 1: and his sister in law gen Wrong offered to buy 126 00:07:47,720 --> 00:07:51,560 Speaker 1: outstanding shares at nine point eight Singapore cents per share 127 00:07:51,840 --> 00:07:53,920 Speaker 1: in an effort to take the company off the public 128 00:07:53,960 --> 00:07:58,080 Speaker 1: market and return it to being a privately owned company. 129 00:07:58,680 --> 00:08:01,600 Speaker 1: Ja hinted at this possible ability in the two thousand 130 00:08:01,720 --> 00:08:05,400 Speaker 1: fourteen annual report for Sin Hotel, and that report stated 131 00:08:05,440 --> 00:08:08,320 Speaker 1: that CINATEL had been facing a few challenging years in 132 00:08:08,320 --> 00:08:12,400 Speaker 1: a row. According to Jah's letters to shareholders, CINATEL was 133 00:08:12,440 --> 00:08:16,640 Speaker 1: seeing lower revenues, resulting in a net loss for the company. 134 00:08:16,760 --> 00:08:21,600 Speaker 1: His explanation was that the Chinese telecommunications companies were cutting 135 00:08:21,640 --> 00:08:26,680 Speaker 1: back on costs, so CINATEL was making fewer sales because 136 00:08:26,720 --> 00:08:32,960 Speaker 1: telecommunications companies weren't budgeting for their services anymore. And in addition, 137 00:08:33,120 --> 00:08:37,120 Speaker 1: Jah said that the telecommunications companies weren't really great at 138 00:08:37,200 --> 00:08:41,560 Speaker 1: keeping up with payments or as he said quote in addition, 139 00:08:41,720 --> 00:08:44,839 Speaker 1: we experienced a longer collection cycle as our tel co 140 00:08:45,040 --> 00:08:48,920 Speaker 1: customers delayed payment due to their internal restructuring process end 141 00:08:49,000 --> 00:08:52,679 Speaker 1: quote so it wasn't looking so hot. So what was 142 00:08:52,760 --> 00:08:55,000 Speaker 1: up with the move to take the company private? Again, 143 00:08:55,840 --> 00:09:00,920 Speaker 1: we frequently focus on private companies going public. Going public 144 00:09:01,000 --> 00:09:03,839 Speaker 1: can raise an enormous amount of money for a company, 145 00:09:03,840 --> 00:09:07,520 Speaker 1: but it comes with its own costs. Being publicly traded 146 00:09:07,600 --> 00:09:11,360 Speaker 1: means having to follow more regulations and meet expectations of 147 00:09:11,360 --> 00:09:15,200 Speaker 1: financial analysts. It also means having to disclose stuff such 148 00:09:15,200 --> 00:09:18,920 Speaker 1: as revenue, costs, profit or loss. And if your goal 149 00:09:19,200 --> 00:09:21,400 Speaker 1: is to get some bigger company to swoop in and 150 00:09:21,440 --> 00:09:24,160 Speaker 1: acquire your company, that is way easier to do with 151 00:09:24,200 --> 00:09:28,720 Speaker 1: a privately held organization than a publicly traded one. In 152 00:09:28,720 --> 00:09:33,560 Speaker 1: this case, Jaw was also facing another tough reality. Sinotel 153 00:09:33,720 --> 00:09:38,000 Speaker 1: shares had lost value for three straight years. The Singapore 154 00:09:38,000 --> 00:09:41,080 Speaker 1: Exchange put the company on a watch list, meaning that 155 00:09:41,160 --> 00:09:44,280 Speaker 1: it was actually in danger of being delisted from the market, 156 00:09:44,600 --> 00:09:47,040 Speaker 1: which would also be a huge blow. All right, so 157 00:09:47,080 --> 00:09:49,920 Speaker 1: I'm gonna switch gears for now, but Cinateel will pop 158 00:09:50,040 --> 00:09:52,760 Speaker 1: up again. Before we get to the end of this episode, 159 00:09:53,160 --> 00:09:56,320 Speaker 1: I want to talk about another company that Jaw founded 160 00:09:56,400 --> 00:09:59,600 Speaker 1: in two thousand four, so two years after he founded Cinateel. 161 00:10:00,160 --> 00:10:03,760 Speaker 1: This one was called Leshai Internet Information and Technology a 162 00:10:03,920 --> 00:10:07,719 Speaker 1: k A. L t V l E t V. This 163 00:10:07,800 --> 00:10:10,640 Speaker 1: company would be the one that would turn Jaw into 164 00:10:10,720 --> 00:10:13,800 Speaker 1: a billionaire, though then itself is something I'm going to 165 00:10:13,880 --> 00:10:18,160 Speaker 1: have to explain more a bit later because it's complicated. 166 00:10:19,000 --> 00:10:22,640 Speaker 1: The early core business of lead TV was streaming video. 167 00:10:23,040 --> 00:10:26,320 Speaker 1: Three years before Netflix would offer a streaming video platform, 168 00:10:26,840 --> 00:10:30,520 Speaker 1: Jaw was doing it with Lee TV. The service partnered 169 00:10:30,559 --> 00:10:33,840 Speaker 1: with Chinese film and television companies, and in time job 170 00:10:34,040 --> 00:10:38,200 Speaker 1: would launch a sister company called le Shai Holding Beijing 171 00:10:38,240 --> 00:10:41,800 Speaker 1: as the source for media that would then publish over 172 00:10:41,880 --> 00:10:44,760 Speaker 1: at Lee TV. So, in other words, he started making 173 00:10:44,840 --> 00:10:48,800 Speaker 1: original series and films very much the way Netflix would 174 00:10:48,880 --> 00:10:52,760 Speaker 1: later on. The service has multiple ways for customers to 175 00:10:52,920 --> 00:10:57,200 Speaker 1: watch content, so there are subscription models like Netflix, but 176 00:10:57,280 --> 00:11:00,920 Speaker 1: there are also add supported versions kind of like Hulu, 177 00:11:01,160 --> 00:11:04,680 Speaker 1: and there are pay per view options. For the first 178 00:11:04,679 --> 00:11:08,280 Speaker 1: few years, it was hard to get customers. According to 179 00:11:08,320 --> 00:11:12,040 Speaker 1: the Verge, it quote wasn't particularly popular in China for 180 00:11:12,160 --> 00:11:15,640 Speaker 1: most of its existence end quote. But when that popularity 181 00:11:15,679 --> 00:11:19,280 Speaker 1: did take off, things really started to get hectic. Exactly 182 00:11:19,320 --> 00:11:22,640 Speaker 1: when that happened is still kind of beyond me, as 183 00:11:22,679 --> 00:11:25,880 Speaker 1: finding information about Chinese companies here in the US is 184 00:11:26,000 --> 00:11:29,120 Speaker 1: really really tricky, and many of the sources I found 185 00:11:29,600 --> 00:11:33,520 Speaker 1: didn't always seem entirely reliable. So rather than include something 186 00:11:33,559 --> 00:11:36,720 Speaker 1: that's just you know, poorly sourced or wrong, I'm just 187 00:11:36,760 --> 00:11:40,280 Speaker 1: gonna say I don't know when it really took off, 188 00:11:40,920 --> 00:11:44,760 Speaker 1: but certainly by fourteen, the same year when CINATEL was 189 00:11:44,840 --> 00:11:49,280 Speaker 1: in big danger, Jah had reached billionaire status thanks to 190 00:11:49,480 --> 00:11:53,160 Speaker 1: Lee TV. Jah had ambitions of heading up an entire 191 00:11:53,240 --> 00:11:57,760 Speaker 1: conglomerate worth of businesses. When Lea TV began to perform well, 192 00:11:57,800 --> 00:12:00,440 Speaker 1: he began looking at ways to expand in to other 193 00:12:00,559 --> 00:12:05,080 Speaker 1: tech fields like smartphones and smart TVs and eventually cars 194 00:12:05,880 --> 00:12:09,319 Speaker 1: Leshi Internet Information and Technology would hold its I p 195 00:12:09,480 --> 00:12:13,680 Speaker 1: O on the Chinese stock Market in and spoiler alert, 196 00:12:13,880 --> 00:12:18,040 Speaker 1: last year, the Chinese Stock market delisted the company as well. 197 00:12:18,120 --> 00:12:21,200 Speaker 1: Learn things have just not gone so well for all 198 00:12:21,240 --> 00:12:25,280 Speaker 1: these organizations over the last few years. Jaw's vision was 199 00:12:25,320 --> 00:12:28,880 Speaker 1: that he was going to create an empire, or more accurately, 200 00:12:29,000 --> 00:12:33,280 Speaker 1: an entire ecosystem. The goal was to control the hardware, 201 00:12:33,640 --> 00:12:37,320 Speaker 1: the software, and the content, making a sort of one 202 00:12:37,360 --> 00:12:40,520 Speaker 1: stop shop for all your tech needs. And so he 203 00:12:40,600 --> 00:12:44,760 Speaker 1: formed a brand called Lee Echo with the Echo standing 204 00:12:44,800 --> 00:12:48,640 Speaker 1: for ecosystem or ecosystem if you prefer. The parts of 205 00:12:48,679 --> 00:12:56,640 Speaker 1: that ecosystem included smartphones, TV, electric vehicles, sports content in general, 206 00:12:57,080 --> 00:13:02,040 Speaker 1: online finance, and cloud or internet tech chnology. Now, depending 207 00:13:02,040 --> 00:13:05,440 Speaker 1: on which source you're looking at, Lee Echo became the 208 00:13:05,520 --> 00:13:09,439 Speaker 1: all encompassing brand name, or it existed kind of side 209 00:13:09,440 --> 00:13:12,600 Speaker 1: by side with other Jia enterprises. It's a bit hard 210 00:13:12,640 --> 00:13:15,599 Speaker 1: to suss out. And making this even more difficult is 211 00:13:15,640 --> 00:13:19,120 Speaker 1: the fact that sometimes one of jaws companies would purchase 212 00:13:19,200 --> 00:13:23,160 Speaker 1: a division from a different one of his companies. So, 213 00:13:23,240 --> 00:13:27,720 Speaker 1: for example, sin Hotel Technologies had as a subsidiary a 214 00:13:27,760 --> 00:13:31,800 Speaker 1: company that was called x Bell Investment. The purchasing party 215 00:13:31,960 --> 00:13:37,600 Speaker 1: of that particular division was drumroll please, Lee Echo. Now. 216 00:13:37,720 --> 00:13:41,559 Speaker 1: That happened in when Sinotel Technologies was going through that 217 00:13:41,720 --> 00:13:45,079 Speaker 1: rough patch of consecutive annual losses that I talked about earlier, 218 00:13:45,360 --> 00:13:48,400 Speaker 1: and so part of the way Jaw offset the enormous 219 00:13:48,400 --> 00:13:51,040 Speaker 1: amount of money that the company was hemorrhaging at the 220 00:13:51,080 --> 00:13:54,040 Speaker 1: time was to sell off a subsidiary to one of 221 00:13:54,080 --> 00:13:57,160 Speaker 1: his other companies, to bring in some cash and shift 222 00:13:57,200 --> 00:14:00,359 Speaker 1: the money around a bit, and most importantly, to maintained 223 00:14:00,400 --> 00:14:04,000 Speaker 1: control of that subsidiary, just under a different corporate structure. 224 00:14:04,679 --> 00:14:08,200 Speaker 1: And this kind of illustrates how things are a bit 225 00:14:08,440 --> 00:14:12,040 Speaker 1: wild west way out east. We have to remember that 226 00:14:12,280 --> 00:14:16,880 Speaker 1: prior to nineteen seventy six, China's economy was entirely dominated 227 00:14:16,920 --> 00:14:21,080 Speaker 1: by state run enterprises. As China was and is a 228 00:14:21,120 --> 00:14:25,040 Speaker 1: communist country where the state owns the means of production. 229 00:14:25,520 --> 00:14:28,720 Speaker 1: But maud Ze Dong, the chairman of the Communist Party, 230 00:14:29,040 --> 00:14:32,360 Speaker 1: died in nineteen seventy six, and since that time the 231 00:14:32,440 --> 00:14:37,680 Speaker 1: country has gradually embraced some aspects of capitalism, with a 232 00:14:37,720 --> 00:14:41,960 Speaker 1: sort of uneasy relationship between the government and private enterprise. 233 00:14:42,480 --> 00:14:46,200 Speaker 1: Many companies are largely or entirely owned by the government, 234 00:14:46,640 --> 00:14:50,000 Speaker 1: and since the Chinese government has taken a more hands 235 00:14:50,040 --> 00:14:54,040 Speaker 1: on approach in private enterprise within the country, probably because 236 00:14:54,080 --> 00:14:57,760 Speaker 1: of a healthy fear that without direct control, these companies 237 00:14:57,760 --> 00:15:01,360 Speaker 1: could get powerful enough to challenge government authority. And I 238 00:15:01,400 --> 00:15:06,520 Speaker 1: can't imagine where they got that idea anyway. The reason 239 00:15:06,640 --> 00:15:09,800 Speaker 1: I mentioned that is the financial industry in China is 240 00:15:09,840 --> 00:15:13,600 Speaker 1: a bit more loosey goosey than in western nations, and 241 00:15:13,640 --> 00:15:16,600 Speaker 1: part of that is because of the tenuous balance between 242 00:15:16,640 --> 00:15:21,920 Speaker 1: capitalism and communism. This fragile arrangement includes how companies raise 243 00:15:22,040 --> 00:15:25,400 Speaker 1: money from investors and secure loans, and all of that 244 00:15:25,480 --> 00:15:27,960 Speaker 1: will be really important for the rest of our story. 245 00:15:28,360 --> 00:15:31,440 Speaker 1: So after we take a break, I'll talk more about 246 00:15:31,600 --> 00:15:35,400 Speaker 1: the Chinese stock market, because that's going to play a 247 00:15:35,440 --> 00:15:38,880 Speaker 1: pivotal role in how jaws fortunes have fared over the years. 248 00:15:39,200 --> 00:15:42,040 Speaker 1: And I'll talk about jazz companies and how they became 249 00:15:42,120 --> 00:15:44,880 Speaker 1: something like a shell game with Jaw attempting to keep 250 00:15:44,920 --> 00:15:47,120 Speaker 1: all the shells moving to hide the fact that you know, 251 00:15:47,200 --> 00:15:49,960 Speaker 1: none of them actually had a p underneath them. If 252 00:15:49,960 --> 00:15:51,920 Speaker 1: you don't know what I'm talking about, the classic shell 253 00:15:52,040 --> 00:15:55,480 Speaker 1: game is when you have like three nutshells and a 254 00:15:55,600 --> 00:15:58,800 Speaker 1: single dried p and you put the P under one 255 00:15:58,800 --> 00:16:01,040 Speaker 1: of the nutshells, and you shuffle them around a bit, 256 00:16:01,040 --> 00:16:02,640 Speaker 1: and you ask your mark to pick which of the 257 00:16:02,720 --> 00:16:05,520 Speaker 1: nutshells has the P under it. Except you ditch the 258 00:16:05,560 --> 00:16:09,760 Speaker 1: p ages ago you're no sucker. That's what marks are for. Well, 259 00:16:09,800 --> 00:16:11,960 Speaker 1: when we come back, I'll talk a bit about how 260 00:16:12,040 --> 00:16:16,600 Speaker 1: Jaws companies were kind of doing this, whether intentionally or otherwise, 261 00:16:16,880 --> 00:16:19,760 Speaker 1: and how Faraday Future comes into the picture. But first 262 00:16:20,200 --> 00:16:30,120 Speaker 1: let's take a quick break. I mentioned a bit before 263 00:16:30,120 --> 00:16:33,080 Speaker 1: the break that I would explain about how Jacques became 264 00:16:33,160 --> 00:16:37,360 Speaker 1: a billionaire and how it's complicated. Well, the reason it's 265 00:16:37,360 --> 00:16:40,960 Speaker 1: complicated is because a lot of jaws wealth is tied 266 00:16:41,040 --> 00:16:44,160 Speaker 1: up with his stock ownership of his various companies, like 267 00:16:44,160 --> 00:16:47,560 Speaker 1: how much of the companies he personally owns, which means 268 00:16:47,600 --> 00:16:50,680 Speaker 1: the amount of wealth he has depends in large part 269 00:16:50,920 --> 00:16:54,760 Speaker 1: on the value of those companies and by extension, the 270 00:16:54,840 --> 00:16:58,400 Speaker 1: stocks of those companies. So let's talk about the Chinese 271 00:16:58,520 --> 00:17:02,720 Speaker 1: stock markets. The Shanghai Stock Exchange traces its history to 272 00:17:02,760 --> 00:17:05,880 Speaker 1: the nineteenth century, but that history also has a big 273 00:17:05,920 --> 00:17:09,159 Speaker 1: old gap in the middle. After the Communist Revolution in 274 00:17:09,240 --> 00:17:13,000 Speaker 1: China in nine, the stock exchange went by by for 275 00:17:13,240 --> 00:17:17,919 Speaker 1: about four decades. It would reopen in along with it 276 00:17:18,040 --> 00:17:22,840 Speaker 1: came a new stock exchange called the Shenjen Security Exchange. Alright, 277 00:17:22,880 --> 00:17:26,640 Speaker 1: so we all know about the stock market, I'm guessing, 278 00:17:26,800 --> 00:17:29,479 Speaker 1: but let's kind of go over some basics. We know 279 00:17:29,560 --> 00:17:32,280 Speaker 1: that you can buy shares or stocks in the company, 280 00:17:32,320 --> 00:17:36,880 Speaker 1: and that these stocks ostensibly reflect the value of that company. 281 00:17:37,000 --> 00:17:40,040 Speaker 1: But let's dive into that a little bit further. So 282 00:17:40,160 --> 00:17:42,960 Speaker 1: a share is, when you get down to it, a 283 00:17:43,119 --> 00:17:46,240 Speaker 1: piece of ownership of a company. So if a company 284 00:17:46,240 --> 00:17:50,160 Speaker 1: were to issue one hundred shares and those shares represented 285 00:17:50,240 --> 00:17:53,720 Speaker 1: one of the ownership of the company, and then you 286 00:17:53,800 --> 00:17:56,719 Speaker 1: bought one of those shares, you would own one percent 287 00:17:57,040 --> 00:17:59,800 Speaker 1: of that company. If you had bought ten shares, you 288 00:17:59,800 --> 00:18:02,480 Speaker 1: would own ten percent of that company, and so on. 289 00:18:03,160 --> 00:18:06,840 Speaker 1: When the company makes a profit, it distributes that profit 290 00:18:06,920 --> 00:18:10,560 Speaker 1: among shareholders, and it could do so in cash, which 291 00:18:10,560 --> 00:18:13,240 Speaker 1: means you would get a payment equivalent to your percentage 292 00:18:13,240 --> 00:18:16,160 Speaker 1: of ownership of the company. So if you owned one 293 00:18:16,200 --> 00:18:19,240 Speaker 1: percent of the company and the company generated a profit 294 00:18:19,280 --> 00:18:22,000 Speaker 1: of one thousand dollars that it was going to distribute 295 00:18:22,000 --> 00:18:24,760 Speaker 1: to its shareholders, boom, you would get a ten dollar 296 00:18:24,920 --> 00:18:28,919 Speaker 1: check and you keep the stock. So as long as 297 00:18:28,960 --> 00:18:32,399 Speaker 1: the company is making a profit, so do you. Another 298 00:18:32,440 --> 00:18:35,960 Speaker 1: way that companies can pay out profits is in share dividends. 299 00:18:36,400 --> 00:18:39,399 Speaker 1: This is when a company, instead of sending out cash, 300 00:18:39,880 --> 00:18:43,720 Speaker 1: pays its investors with additional shares of stock. So let's 301 00:18:43,760 --> 00:18:46,280 Speaker 1: say you had ten shares in the company and you 302 00:18:46,320 --> 00:18:48,919 Speaker 1: get a ten percent dividend because the company has hit 303 00:18:48,960 --> 00:18:51,480 Speaker 1: a profit. Then the company pays it out and shares. 304 00:18:51,880 --> 00:18:55,040 Speaker 1: Now you've got eleven shares. You get an additional share 305 00:18:55,080 --> 00:18:58,040 Speaker 1: because of that dividend. A company might do this in 306 00:18:58,119 --> 00:19:00,399 Speaker 1: order to keep more of its own cash on hand, 307 00:19:00,560 --> 00:19:03,960 Speaker 1: so it's giving you extra ownership of the company rather 308 00:19:04,000 --> 00:19:08,240 Speaker 1: than you know, doling out cash. But this also comes 309 00:19:08,240 --> 00:19:10,960 Speaker 1: with the danger of diluting the stock. There are a 310 00:19:10,960 --> 00:19:13,760 Speaker 1: couple of other methods for distributing profits, but that's enough 311 00:19:13,800 --> 00:19:18,040 Speaker 1: for us right now. The stock price itself is supposed 312 00:19:18,080 --> 00:19:22,640 Speaker 1: to reflect the value of the company. Hypothetically, it reflects 313 00:19:22,680 --> 00:19:25,200 Speaker 1: the amount of money we expect that company to make 314 00:19:25,240 --> 00:19:28,280 Speaker 1: in profits over a given amount of time, and the 315 00:19:28,320 --> 00:19:31,119 Speaker 1: more likely the company is going to rake in profits, 316 00:19:31,760 --> 00:19:34,840 Speaker 1: generally speaking, the higher the share price, or the more 317 00:19:34,920 --> 00:19:37,760 Speaker 1: shares of stock the company will issue. One way to 318 00:19:37,840 --> 00:19:40,760 Speaker 1: keep stock price down so that the average person can 319 00:19:40,760 --> 00:19:45,119 Speaker 1: still invest is to issue more stocks. Because the value 320 00:19:45,119 --> 00:19:47,439 Speaker 1: of the company is supposed to remain the same. You 321 00:19:47,520 --> 00:19:50,200 Speaker 1: can't double the value of a company by doubling the 322 00:19:50,280 --> 00:19:52,800 Speaker 1: number of stocks out there. Instead, if you double the 323 00:19:52,840 --> 00:19:56,640 Speaker 1: number of stocks, then the price of individual stocks will 324 00:19:56,720 --> 00:19:59,440 Speaker 1: be cut in half, so that the value of the 325 00:19:59,440 --> 00:20:03,520 Speaker 1: company and being preserved. This is a very very basic 326 00:20:03,600 --> 00:20:06,480 Speaker 1: way of explaining this. So if you take the number 327 00:20:06,480 --> 00:20:09,760 Speaker 1: of stocks that a company has issued out, and you 328 00:20:09,880 --> 00:20:13,440 Speaker 1: take the price per individual share of stock, and you 329 00:20:13,520 --> 00:20:16,359 Speaker 1: multiply those together, you get yourself a rough estimate of 330 00:20:16,440 --> 00:20:19,680 Speaker 1: the value of a company. But here's the thing. This 331 00:20:19,760 --> 00:20:23,359 Speaker 1: doesn't always match up with reality. For example, the recent 332 00:20:23,480 --> 00:20:26,680 Speaker 1: Game Stop story comes to mind. The stock price has 333 00:20:26,720 --> 00:20:30,120 Speaker 1: been all over the place. It was around twenty dollars 334 00:20:30,160 --> 00:20:32,800 Speaker 1: before the Wall Street Mets crowd really jumped on it, 335 00:20:33,160 --> 00:20:35,920 Speaker 1: and then it hit around five hundred dollars per share 336 00:20:36,040 --> 00:20:39,000 Speaker 1: at its peak. But as I record this, the price 337 00:20:39,119 --> 00:20:42,360 Speaker 1: is now around sixty four dollars per share, and that's 338 00:20:42,359 --> 00:20:45,720 Speaker 1: a pretty wild ride. And obviously we all know the 339 00:20:45,800 --> 00:20:49,960 Speaker 1: Game Stops value has not changed that dramatically that quickly. 340 00:20:50,320 --> 00:20:54,280 Speaker 1: That would be impossible unless Game Stops executives were to say, hey, 341 00:20:54,280 --> 00:20:57,680 Speaker 1: it turns out the land we purchased, complete with mineral rights, 342 00:20:58,200 --> 00:21:00,679 Speaker 1: is sitting on top of a literal gold mine, and 343 00:21:00,720 --> 00:21:04,480 Speaker 1: then later said, also, it turns out that any percent 344 00:21:04,520 --> 00:21:07,960 Speaker 1: of that gold has disappeared. So while a stocks price 345 00:21:08,040 --> 00:21:11,280 Speaker 1: is supposed to reflect the value of a company, sometimes 346 00:21:11,359 --> 00:21:14,360 Speaker 1: it's more accurate to say that it reflects the perception 347 00:21:14,560 --> 00:21:18,399 Speaker 1: of a company's value, which is something that can change quickly. 348 00:21:18,640 --> 00:21:21,560 Speaker 1: The actual company value when you really get down to it, 349 00:21:21,600 --> 00:21:24,159 Speaker 1: doesn't change that fast, but our perception of it can 350 00:21:24,240 --> 00:21:28,320 Speaker 1: change very quickly. So if enough people jump on that bandwagon, 351 00:21:28,640 --> 00:21:31,560 Speaker 1: it can boost the stock performance even more and you've 352 00:21:31,560 --> 00:21:36,199 Speaker 1: got yourself speculation going on. That's when investors aren't necessarily 353 00:21:36,240 --> 00:21:39,880 Speaker 1: so much interested in investing in a company long term 354 00:21:40,000 --> 00:21:42,840 Speaker 1: because they believe in it. They're more interested in kind 355 00:21:42,840 --> 00:21:44,919 Speaker 1: of placing a bet that they're going to get a 356 00:21:44,920 --> 00:21:48,560 Speaker 1: big payoff by buying stocks low and selling them high, 357 00:21:48,640 --> 00:21:51,680 Speaker 1: because that's the other way you make money from stocks. 358 00:21:51,960 --> 00:21:54,800 Speaker 1: You can make money by holding onto stocks and just 359 00:21:54,920 --> 00:21:58,600 Speaker 1: collecting dividends, or you can make money by selling off 360 00:21:58,800 --> 00:22:01,160 Speaker 1: shares of stock that you will own if you got 361 00:22:01,160 --> 00:22:04,000 Speaker 1: in when a company is doing really well and the 362 00:22:04,080 --> 00:22:06,920 Speaker 1: share prices have grown, or your number of shares has 363 00:22:07,000 --> 00:22:10,920 Speaker 1: increased dramatically, or better yet both, then you can cash 364 00:22:10,960 --> 00:22:14,160 Speaker 1: out and pocket the profits. Now, the reason I explain 365 00:22:14,359 --> 00:22:16,240 Speaker 1: all of this to you is because we have to 366 00:22:16,280 --> 00:22:20,560 Speaker 1: remember the stock exchanges in China were very young when 367 00:22:20,640 --> 00:22:24,120 Speaker 1: Jah was making these companies, and the opportunities to invest 368 00:22:24,240 --> 00:22:27,240 Speaker 1: in stuff in China and to profit from it were 369 00:22:27,359 --> 00:22:31,600 Speaker 1: rare before that. Happened. Investment represented a way of getting ahead, 370 00:22:31,840 --> 00:22:36,160 Speaker 1: something that otherwise wasn't much of an option in China. 371 00:22:36,320 --> 00:22:40,119 Speaker 1: In two thousand eight, the entire world was plunged into 372 00:22:40,280 --> 00:22:43,159 Speaker 1: an economic recession. Now, don't worry, I'm not going to 373 00:22:43,240 --> 00:22:46,320 Speaker 1: go into all the reasons why that happened. But China 374 00:22:46,440 --> 00:22:48,280 Speaker 1: was no exception, and there was a bit of a 375 00:22:48,320 --> 00:22:51,399 Speaker 1: reckoning in the Chinese stock market. And one of the 376 00:22:51,440 --> 00:22:54,080 Speaker 1: things that Chinese government did was to take a very 377 00:22:54,280 --> 00:22:58,200 Speaker 1: bold approach to promoting the stock market. So the idea 378 00:22:58,400 --> 00:23:02,520 Speaker 1: here was that China as a nation would benefit from 379 00:23:02,680 --> 00:23:06,920 Speaker 1: a robust stock market. So the messaging wasn't really, hey, 380 00:23:07,119 --> 00:23:09,560 Speaker 1: invest in the stock market and make money and improve 381 00:23:09,640 --> 00:23:13,800 Speaker 1: your situation, which is a much more kind of individualized approach. Now, 382 00:23:13,960 --> 00:23:16,920 Speaker 1: the message from the Chinese government was, let us push 383 00:23:17,040 --> 00:23:20,280 Speaker 1: China to glory by investing in these companies, which will 384 00:23:20,359 --> 00:23:23,560 Speaker 1: elevate us all and push China to its rightful place 385 00:23:23,680 --> 00:23:27,879 Speaker 1: in world powers. Kind of a more patriotic perspective and 386 00:23:27,960 --> 00:23:32,159 Speaker 1: one that reflected the communist philosophies, which is not necessarily 387 00:23:32,200 --> 00:23:34,920 Speaker 1: a bad thing, mind you, but it's very different from 388 00:23:34,920 --> 00:23:37,480 Speaker 1: how we perceived stuff like the stock market here in 389 00:23:37,520 --> 00:23:40,240 Speaker 1: the West, where it tends to be more about specific 390 00:23:40,280 --> 00:23:44,520 Speaker 1: companies and increasing the wealth of investors. The messaging was 391 00:23:44,560 --> 00:23:47,520 Speaker 1: going out to the entire population of China, and so 392 00:23:47,560 --> 00:23:51,520 Speaker 1: the Chinese stock markets saw a flood of new investments, 393 00:23:51,560 --> 00:23:55,760 Speaker 1: mostly coming from individual investors. Now that's in contrast with 394 00:23:55,960 --> 00:23:59,879 Speaker 1: most other stock markets, where the individual investors represent a 395 00:24:00,040 --> 00:24:03,359 Speaker 1: more modest percentage of the overall trades on the market. 396 00:24:03,840 --> 00:24:07,840 Speaker 1: Most of the trading is going between big investment companies 397 00:24:07,880 --> 00:24:12,280 Speaker 1: dealing in thousands or millions of transactions. In China, the 398 00:24:12,400 --> 00:24:17,000 Speaker 1: drive was overwhelmingly coming from the common Chinese citizen. But 399 00:24:17,119 --> 00:24:20,080 Speaker 1: many of those investors didn't have very much savvy when 400 00:24:20,119 --> 00:24:23,560 Speaker 1: it comes to analyzing a company's value and making good 401 00:24:23,600 --> 00:24:27,840 Speaker 1: investment decisions, and so there was a trend for well 402 00:24:28,080 --> 00:24:32,200 Speaker 1: trends in which investors would jump on bandwagons for certain companies. 403 00:24:32,520 --> 00:24:36,239 Speaker 1: The increased buying activity would push stock market prices up, 404 00:24:36,240 --> 00:24:39,760 Speaker 1: which encouraged more people to jump on board under the 405 00:24:39,960 --> 00:24:44,200 Speaker 1: perception that these companies were skyrocketing and value and there 406 00:24:44,240 --> 00:24:48,800 Speaker 1: was a general move toward over valuing companies. So it 407 00:24:48,880 --> 00:24:51,680 Speaker 1: was pushing the stock price to the point where the 408 00:24:51,760 --> 00:24:55,479 Speaker 1: market valuation of a company was much higher than the 409 00:24:55,520 --> 00:24:59,880 Speaker 1: company's actual value. So let's say you're someone like Job 410 00:25:00,160 --> 00:25:03,720 Speaker 1: who owns a large percentage of shares in various companies 411 00:25:03,760 --> 00:25:07,000 Speaker 1: that you have founded and you currently run, and as 412 00:25:07,080 --> 00:25:09,760 Speaker 1: that stock price goes up, the value of all those 413 00:25:09,800 --> 00:25:15,120 Speaker 1: shares increases and you become a billionaire, at least on paper. Now, 414 00:25:15,160 --> 00:25:18,520 Speaker 1: your assets are not liquid, meaning you don't actually have 415 00:25:18,760 --> 00:25:22,280 Speaker 1: all that cash on hand to you know, buy stuff. 416 00:25:22,600 --> 00:25:25,600 Speaker 1: But your wealth, as represented in the ownership you have 417 00:25:25,800 --> 00:25:28,320 Speaker 1: in these companies that are doing well in the stock market, 418 00:25:29,080 --> 00:25:32,520 Speaker 1: is real, and you might make some pretty extravagant purchases 419 00:25:32,560 --> 00:25:35,600 Speaker 1: for yourself. But the question is, then how do you 420 00:25:35,880 --> 00:25:39,160 Speaker 1: make these extravagant purchases if you don't actually have all 421 00:25:39,240 --> 00:25:41,760 Speaker 1: that cash on hand. Well, one way to do that 422 00:25:41,920 --> 00:25:46,359 Speaker 1: is to secure loans against the wealth that you have 423 00:25:46,640 --> 00:25:49,760 Speaker 1: on paper that collateral. So you go to a financial 424 00:25:49,760 --> 00:25:53,400 Speaker 1: institution and you say, I want to borrow X million dollars, 425 00:25:53,560 --> 00:25:56,159 Speaker 1: and because I own X million shares of stock, you 426 00:25:56,200 --> 00:25:59,000 Speaker 1: know I'm good for it plus interest, And the financial 427 00:25:59,000 --> 00:26:02,440 Speaker 1: institution says, yes, Mr Jah, let me sign the check. 428 00:26:03,200 --> 00:26:05,639 Speaker 1: I think you can see where I'm going here, Because 429 00:26:05,680 --> 00:26:08,399 Speaker 1: the same is true for big businesses in China. The 430 00:26:08,440 --> 00:26:13,200 Speaker 1: businesses with their overinflated values would secure loans in order 431 00:26:13,240 --> 00:26:16,760 Speaker 1: to expand operations, and there was a real danger that 432 00:26:16,840 --> 00:26:19,520 Speaker 1: these companies would over extend themselves and when it came 433 00:26:19,560 --> 00:26:22,320 Speaker 1: time to pay back the loans, they would be in trouble. 434 00:26:22,720 --> 00:26:25,760 Speaker 1: That right there is called foreshadowing. But I want to 435 00:26:25,760 --> 00:26:28,520 Speaker 1: cover a couple of other points about the Chinese market. First. 436 00:26:29,200 --> 00:26:33,480 Speaker 1: One regulatory body that China has is called the Chinese 437 00:26:33,600 --> 00:26:38,359 Speaker 1: Security Regulatory Commission or c s r C, which in 438 00:26:39,240 --> 00:26:43,720 Speaker 1: began to ease up on restricting certain market practices, both 439 00:26:43,720 --> 00:26:47,120 Speaker 1: of which are acceptable but can also get out of control. 440 00:26:47,560 --> 00:26:50,480 Speaker 1: And one of those is called trading on margins or 441 00:26:50,520 --> 00:26:54,119 Speaker 1: buying on margin, which is where you borrow money in 442 00:26:54,200 --> 00:26:56,800 Speaker 1: order to buy shares, and if the shares go up, 443 00:26:57,080 --> 00:27:00,000 Speaker 1: you can sell them off or you know, earn dividends, 444 00:27:00,160 --> 00:27:02,200 Speaker 1: and then you pay off the loan you took out 445 00:27:02,600 --> 00:27:07,280 Speaker 1: while keeping anything extra over the loan plus interest. So 446 00:27:07,400 --> 00:27:10,520 Speaker 1: let's say a stock costs ten dollars, but you only 447 00:27:10,560 --> 00:27:13,520 Speaker 1: have one dollar, so you put your one dollar in 448 00:27:13,600 --> 00:27:16,480 Speaker 1: a margin account as collateral, and you get a loan 449 00:27:16,560 --> 00:27:19,600 Speaker 1: for ten bucks. Then you use the loan ten dollars 450 00:27:19,760 --> 00:27:24,080 Speaker 1: to buy your stock, while your one dollar, that's your money, 451 00:27:24,119 --> 00:27:27,000 Speaker 1: sits in that margin account. And let's say that the 452 00:27:27,040 --> 00:27:29,720 Speaker 1: stock price doubles to twenty dollars and you decide to 453 00:27:29,760 --> 00:27:32,240 Speaker 1: cash out, So you go back and you pay off 454 00:27:32,280 --> 00:27:35,240 Speaker 1: your loan plus interest, and you get your one dollar 455 00:27:35,359 --> 00:27:38,840 Speaker 1: collateral back, so you keep whatever is left after you've 456 00:27:38,880 --> 00:27:42,240 Speaker 1: paid off the loan plus interest. So let's say that 457 00:27:42,440 --> 00:27:44,440 Speaker 1: it was just a dollar and interest, so you had 458 00:27:44,440 --> 00:27:46,920 Speaker 1: to pay back eleven dollars, and you've got to keep 459 00:27:47,040 --> 00:27:50,600 Speaker 1: nine dollars from the increased stock price plus the one 460 00:27:50,640 --> 00:27:53,479 Speaker 1: dollar you had in collateral, so you just made nine bucks. 461 00:27:53,960 --> 00:27:56,679 Speaker 1: But if the stock price were to go down, well, 462 00:27:57,240 --> 00:28:00,199 Speaker 1: now you have that ten dollar loan to pay off us. 463 00:28:00,240 --> 00:28:04,600 Speaker 1: The financial institution has your original one dollar in collateral, 464 00:28:04,920 --> 00:28:10,040 Speaker 1: and that's their's, and now you're in debt. Yikes. The 465 00:28:10,119 --> 00:28:13,040 Speaker 1: other practice the c s r C began to allow 466 00:28:13,080 --> 00:28:16,119 Speaker 1: in twosen was short selling, which I've talked about a 467 00:28:16,160 --> 00:28:19,800 Speaker 1: lot with the Game Stop story, but essentially, this is 468 00:28:19,840 --> 00:28:21,919 Speaker 1: when you bet that a stock price is going to 469 00:28:21,960 --> 00:28:25,880 Speaker 1: go down, not up, so you borrow shares that are 470 00:28:25,960 --> 00:28:29,560 Speaker 1: not yours there from some other investor and you sell 471 00:28:29,760 --> 00:28:33,359 Speaker 1: those borrowed shares at whatever the current market price is, 472 00:28:34,000 --> 00:28:36,760 Speaker 1: and you wait, though how long you wait depends upon 473 00:28:36,760 --> 00:28:39,720 Speaker 1: the nature of the loaned shares and the agreement there, 474 00:28:40,160 --> 00:28:42,720 Speaker 1: and you watch for the price to go down. Now, 475 00:28:42,760 --> 00:28:46,080 Speaker 1: at some point, you've got to buy back those borrowed 476 00:28:46,120 --> 00:28:48,440 Speaker 1: shares because you have to return them. They're not yours. 477 00:28:48,840 --> 00:28:50,480 Speaker 1: You have to return the shares to the person you 478 00:28:50,560 --> 00:28:54,280 Speaker 1: borrowed from, and hopefully the stock price will have gone down, 479 00:28:54,480 --> 00:28:57,400 Speaker 1: which means you're buying back the shares for less money 480 00:28:57,440 --> 00:28:59,680 Speaker 1: than you sold them for and you get to pocket 481 00:28:59,680 --> 00:29:02,720 Speaker 1: that there. Friends, So if you sold a borrowed share 482 00:29:02,760 --> 00:29:05,040 Speaker 1: at ten dollars and you bought it back when it 483 00:29:05,120 --> 00:29:07,960 Speaker 1: was at five dollars, you would have earned five bucks, 484 00:29:08,160 --> 00:29:10,560 Speaker 1: and you would return the borrowed share to the investor 485 00:29:10,640 --> 00:29:14,719 Speaker 1: you took it from. Now, there's nothing inherently wrong with 486 00:29:14,880 --> 00:29:17,720 Speaker 1: short selling, though it does sound like you're rooting for 487 00:29:17,800 --> 00:29:21,160 Speaker 1: a company to do poorly. Sometimes it's just that a 488 00:29:21,200 --> 00:29:25,000 Speaker 1: company is doing poorly and you have the chance to 489 00:29:25,200 --> 00:29:28,280 Speaker 1: make some money off of that. But market pressures can 490 00:29:28,360 --> 00:29:32,600 Speaker 1: make the challenges that corporations face way worse. So let's 491 00:29:32,600 --> 00:29:35,440 Speaker 1: say a company stumbles a little bit, and there's a 492 00:29:35,440 --> 00:29:38,960 Speaker 1: big rush to short sell, and that snowballs and makes 493 00:29:39,000 --> 00:29:42,000 Speaker 1: the share price go even lower, or, as is the 494 00:29:42,000 --> 00:29:45,080 Speaker 1: case here in the West, you've got these big influential 495 00:29:45,160 --> 00:29:48,040 Speaker 1: hedge funds that may attempt to game the system a 496 00:29:48,080 --> 00:29:51,080 Speaker 1: little bit to push stock prices down in order to 497 00:29:51,120 --> 00:29:54,200 Speaker 1: benefit wealthy investors at the cost of the company and 498 00:29:54,240 --> 00:29:58,480 Speaker 1: the company's employees. Short Selling can be a legit strategy, 499 00:29:58,640 --> 00:30:01,160 Speaker 1: but it can also be harmful. But then again, so 500 00:30:01,280 --> 00:30:05,280 Speaker 1: can speculation, which is on the flip side of the coin. Anyway, 501 00:30:05,560 --> 00:30:10,640 Speaker 1: the Chinese market was incredibly volatile, with people short selling 502 00:30:10,760 --> 00:30:13,240 Speaker 1: and a lot more buying on margin, and all the 503 00:30:13,280 --> 00:30:16,320 Speaker 1: elements were there for a major catastrophe, which came to 504 00:30:16,400 --> 00:30:19,960 Speaker 1: a head in the summer of when the Chinese stock 505 00:30:20,040 --> 00:30:25,040 Speaker 1: market bubble burst. For months, stock market volatility was even 506 00:30:25,120 --> 00:30:29,960 Speaker 1: more pronounced in China, and companies saw massive losses. Among 507 00:30:30,080 --> 00:30:33,160 Speaker 1: them were companies like Jaws. And it couldn't have come 508 00:30:33,280 --> 00:30:36,720 Speaker 1: at a worse time. I'll explain more after we take 509 00:30:37,040 --> 00:30:47,280 Speaker 1: this break, all right, So we know that jaws ambitions 510 00:30:47,320 --> 00:30:50,640 Speaker 1: included creating an entire ecosystem of products that would have 511 00:30:50,720 --> 00:30:54,920 Speaker 1: heavy integration with one another. To do that, his companies 512 00:30:54,960 --> 00:30:58,880 Speaker 1: needed to expand beyond their core businesses, and that meant 513 00:30:58,920 --> 00:31:03,720 Speaker 1: securing very loans against Jah's own wealth and the well 514 00:31:03,800 --> 00:31:07,440 Speaker 1: doing of those companies in order to either acquire other 515 00:31:07,480 --> 00:31:10,480 Speaker 1: companies that were in those businesses or otherwise build out 516 00:31:10,480 --> 00:31:14,600 Speaker 1: facilities so that Jah's own company could do it. And 517 00:31:14,680 --> 00:31:18,360 Speaker 1: the Lee Echo brand would extend to all sorts of products, 518 00:31:18,400 --> 00:31:22,480 Speaker 1: including phones and televisions, and these were real products. It 519 00:31:22,560 --> 00:31:25,320 Speaker 1: wasn't just ambition. It's not like Jaw was running a 520 00:31:25,360 --> 00:31:28,479 Speaker 1: scam or anything. He really was trying to do what 521 00:31:28,560 --> 00:31:32,280 Speaker 1: he wanted to do, and the company was selling stuff, 522 00:31:32,400 --> 00:31:37,840 Speaker 1: just not in huge numbers. So, for example, in Lee 523 00:31:37,920 --> 00:31:41,880 Speaker 1: Echo sold three million televisions, which does sound like a 524 00:31:41,880 --> 00:31:45,880 Speaker 1: big number, but the more established Chinese TV companies were 525 00:31:45,920 --> 00:31:49,000 Speaker 1: selling twice as many as that, And when you consider 526 00:31:49,200 --> 00:31:52,760 Speaker 1: the population size of China, you also realized that three 527 00:31:52,800 --> 00:31:56,240 Speaker 1: million is really a drop in the bucket. That expansion 528 00:31:56,520 --> 00:31:59,600 Speaker 1: of his companies trying to do way more stuff wasn't 529 00:31:59,640 --> 00:32:02,400 Speaker 1: just the suite of products that Jia wanted to produce, 530 00:32:02,840 --> 00:32:07,200 Speaker 1: but also extended beyond the borders of China itself. One 531 00:32:07,280 --> 00:32:12,080 Speaker 1: market the company got into was India, In early lee 532 00:32:12,080 --> 00:32:16,880 Speaker 1: Echo entered the Indian smartphone market, launching five super phones, 533 00:32:17,000 --> 00:32:20,440 Speaker 1: which is what the company calls smartphones, and also some 534 00:32:20,520 --> 00:32:24,920 Speaker 1: smart TVs with the promise of content streams and other services. 535 00:32:25,680 --> 00:32:29,320 Speaker 1: As part of this aggressive marketing strategy to disrupt the 536 00:32:29,440 --> 00:32:33,080 Speaker 1: established smartphone market in India, the company was selling these 537 00:32:33,080 --> 00:32:36,080 Speaker 1: products either at cost or maybe even at a loss, 538 00:32:36,440 --> 00:32:38,800 Speaker 1: the idea being that while lee Echo would take a 539 00:32:38,880 --> 00:32:42,000 Speaker 1: hit on hardware sales, the company would make up for 540 00:32:42,040 --> 00:32:45,959 Speaker 1: that with service subscriptions, which isn't that different from how 541 00:32:46,040 --> 00:32:50,320 Speaker 1: companies like Microsoft and Sony will sell game consoles. They 542 00:32:50,360 --> 00:32:53,160 Speaker 1: sell them more or less at cost, so they're not 543 00:32:53,280 --> 00:32:55,960 Speaker 1: making the money off the hardware because the real money 544 00:32:56,080 --> 00:32:59,280 Speaker 1: is in the games or software side of things. The 545 00:32:59,320 --> 00:33:02,120 Speaker 1: company and now it would build out a seven million 546 00:33:02,160 --> 00:33:05,680 Speaker 1: dollar manufacturing facility in India with the goal of producing 547 00:33:05,720 --> 00:33:09,400 Speaker 1: two hundred thousand smartphones per month. But lie Echo was 548 00:33:09,400 --> 00:33:12,440 Speaker 1: trying to do this in India before the country had 549 00:33:12,480 --> 00:33:17,480 Speaker 1: really established a content infrastructure and culture there, so the 550 00:33:17,520 --> 00:33:22,000 Speaker 1: paid content model wasn't really established in India in general. 551 00:33:22,800 --> 00:33:25,160 Speaker 1: That means that the company wasn't really making any money 552 00:33:25,160 --> 00:33:28,480 Speaker 1: in India yet, and it really needed to hold out 553 00:33:28,560 --> 00:33:31,280 Speaker 1: for the long game for things to turn around to 554 00:33:31,560 --> 00:33:36,160 Speaker 1: establish this paid for content kind of culture, and there 555 00:33:36,200 --> 00:33:39,240 Speaker 1: was no guarantee that that was ever going to happen. Meanwhile, 556 00:33:39,560 --> 00:33:42,560 Speaker 1: the financial crisis back in China was putting a real 557 00:33:42,640 --> 00:33:46,920 Speaker 1: squeeze on Lie Echo, and so in one year after 558 00:33:47,080 --> 00:33:50,840 Speaker 1: getting into India, Lee Echo largely pulled the plug, laying 559 00:33:50,840 --> 00:33:53,600 Speaker 1: off more than eighty percent of all employees in India. 560 00:33:53,920 --> 00:33:56,240 Speaker 1: While he was trying to muscle into the Indian market, 561 00:33:56,320 --> 00:33:59,760 Speaker 1: Jiah was also taking aim at America. So all these 562 00:34:00,000 --> 00:34:02,760 Speaker 1: areas kind of take place in the two thousand fourteen 563 00:34:02,840 --> 00:34:06,600 Speaker 1: to two thousand eighteen time frame. The official entry into 564 00:34:06,640 --> 00:34:09,520 Speaker 1: India was around two thousand sixteen to two thousand seventeen. 565 00:34:09,800 --> 00:34:13,960 Speaker 1: Aiming at America would begin around in a more secuitous 566 00:34:14,000 --> 00:34:18,040 Speaker 1: way in sixteen, in a more direct path. So I'm 567 00:34:18,040 --> 00:34:20,399 Speaker 1: going to start with the direct path first, even though 568 00:34:20,440 --> 00:34:25,120 Speaker 1: that happened later in sixteen, Lee Echo announced it would 569 00:34:25,120 --> 00:34:28,239 Speaker 1: acquire the company Video, which is the largest of the 570 00:34:28,320 --> 00:34:32,239 Speaker 1: United States based television manufacturers, and it was going to 571 00:34:32,320 --> 00:34:36,080 Speaker 1: do so for the princely sum of two billion dollars. 572 00:34:36,760 --> 00:34:39,640 Speaker 1: This would let Lee Echo get into the American TV 573 00:34:39,800 --> 00:34:43,759 Speaker 1: market without having to establish its own relationships with retailers 574 00:34:43,880 --> 00:34:47,880 Speaker 1: and with forming a manufacturing center, and all of that 575 00:34:47,960 --> 00:34:51,560 Speaker 1: sounds like a fairly solid idea. Only one problem. The 576 00:34:51,600 --> 00:34:54,240 Speaker 1: fact that lie Echo was falling apart back in China 577 00:34:54,560 --> 00:34:57,480 Speaker 1: from an economic standpoint meant that it really didn't have 578 00:34:57,560 --> 00:35:00,080 Speaker 1: the cash to throw around for an acquisition like this. 579 00:35:01,080 --> 00:35:04,560 Speaker 1: Jacques had secured so many loans based on his personal 580 00:35:04,560 --> 00:35:08,439 Speaker 1: ownership of Lee Echo stock and had really overextended way 581 00:35:08,480 --> 00:35:11,520 Speaker 1: too far, and it became clear that the two billion 582 00:35:11,560 --> 00:35:16,320 Speaker 1: dollar acquisition deal just wasn't viable. In a year after 583 00:35:16,360 --> 00:35:19,880 Speaker 1: the company's had announced this deal, it all fell apart 584 00:35:19,960 --> 00:35:24,480 Speaker 1: and Visio wasn't acquired after all. Video sued Lee Echo 585 00:35:24,600 --> 00:35:28,160 Speaker 1: for sixty million dollars in damages as a result, and 586 00:35:28,200 --> 00:35:30,840 Speaker 1: among the charges was one that stated that Lee Echo 587 00:35:31,000 --> 00:35:35,600 Speaker 1: executives knew about their company's finances and how they were 588 00:35:35,640 --> 00:35:39,080 Speaker 1: in severe trouble when they first proposed the acquisition, meaning 589 00:35:39,120 --> 00:35:42,760 Speaker 1: that the executives were trying to lay railroad track down 590 00:35:42,960 --> 00:35:46,479 Speaker 1: after the train had already been derailed. That case would 591 00:35:46,520 --> 00:35:50,319 Speaker 1: ultimately get settled out of court in ten and the 592 00:35:50,480 --> 00:35:53,720 Speaker 1: terms of the settlement remained private. Oh and then Visio 593 00:35:53,800 --> 00:35:57,040 Speaker 1: went to court again in twenty nineteen, claiming that Lee 594 00:35:57,080 --> 00:36:02,040 Speaker 1: Echo violated the terms of that settlement, although the terms 595 00:36:02,080 --> 00:36:05,960 Speaker 1: themselves still remain private, and Physio sought out a judgment 596 00:36:06,000 --> 00:36:09,600 Speaker 1: against Lee Echo, but not against Jiah for reasons that 597 00:36:09,640 --> 00:36:14,440 Speaker 1: will become clear shortly. Okay, but what about that circuitous 598 00:36:14,520 --> 00:36:18,000 Speaker 1: route that I mentioned that happened in Well, this is 599 00:36:18,040 --> 00:36:21,360 Speaker 1: what finally brings us to Faraday Future, that car company 600 00:36:21,400 --> 00:36:24,520 Speaker 1: that showed off the concept car I saw on. The 601 00:36:24,560 --> 00:36:27,759 Speaker 1: company operated in stealth mode for about a year and 602 00:36:27,800 --> 00:36:32,200 Speaker 1: in began to release little teasers of videos that seemed 603 00:36:32,239 --> 00:36:34,840 Speaker 1: to indicate it was positioned to be a Tesla killer, 604 00:36:35,200 --> 00:36:39,520 Speaker 1: taking aim at the other upstart electric car company marketing 605 00:36:39,600 --> 00:36:42,879 Speaker 1: you know, fancy electric vehicles to customers. Also fund with 606 00:36:42,960 --> 00:36:46,520 Speaker 1: Tesla and Faraday if you happen to know the origins 607 00:36:46,560 --> 00:36:49,960 Speaker 1: of those names, and another fund side note, Tesla didn't 608 00:36:50,040 --> 00:36:54,719 Speaker 1: post an annual operating profit until January twenty twenty, and 609 00:36:54,760 --> 00:36:57,640 Speaker 1: that was operating profit. That's not the same as annual 610 00:36:57,680 --> 00:37:00,880 Speaker 1: profit after due factor and all the other opponents. So 611 00:37:00,960 --> 00:37:04,040 Speaker 1: my point here is that Tesla, a company that launched 612 00:37:04,080 --> 00:37:07,600 Speaker 1: in two thousand three, went nearly two decades before having 613 00:37:07,600 --> 00:37:10,920 Speaker 1: a year that posted an operating profit. So it's a 614 00:37:10,960 --> 00:37:16,560 Speaker 1: steep klimb, is what I'm saying. Anyway, in Nick Sampson, 615 00:37:16,680 --> 00:37:19,440 Speaker 1: who had formerly worked as an engineer for Lotus for 616 00:37:19,480 --> 00:37:22,920 Speaker 1: ten years and then at Tesla for two co founded 617 00:37:23,000 --> 00:37:26,919 Speaker 1: a new car company that being Faraday Future. The other 618 00:37:26,960 --> 00:37:30,640 Speaker 1: co founders were Tony Knie, who was an executive with 619 00:37:30,719 --> 00:37:35,279 Speaker 1: Lotus China before becoming a senior vice president of Lee 620 00:37:35,480 --> 00:37:39,279 Speaker 1: TV and heading up efforts to develop the electric vehicles 621 00:37:39,280 --> 00:37:44,040 Speaker 1: over in that company, and then Ja Hua Ting, who 622 00:37:44,120 --> 00:37:47,880 Speaker 1: was funding the whole thing back in China. Lee Echo 623 00:37:48,160 --> 00:37:51,160 Speaker 1: in the form of Lee TV, had already started exploring 624 00:37:51,200 --> 00:37:56,600 Speaker 1: electric vehicles, including autonomous vehicles the Lee c Pro car 625 00:37:56,719 --> 00:38:00,919 Speaker 1: that's l E capital S capital E capital e uh. 626 00:38:01,040 --> 00:38:03,440 Speaker 1: That one made a cameo or was supposed to in 627 00:38:03,480 --> 00:38:08,279 Speaker 1: Transformers five. In fact, when Jah wanted to unveil the 628 00:38:08,400 --> 00:38:11,200 Speaker 1: Leasy pro at a special event in San Francisco, and 629 00:38:12,760 --> 00:38:15,200 Speaker 1: he wasn't able to do it because the company really 630 00:38:15,200 --> 00:38:17,920 Speaker 1: only had two of the vehicles made at that point. 631 00:38:18,360 --> 00:38:21,680 Speaker 1: One was in London about to try and star and 632 00:38:21,719 --> 00:38:24,719 Speaker 1: Transformers five, and the other one got damaged on its 633 00:38:24,719 --> 00:38:29,840 Speaker 1: way to San Francisco. So it's somewhat confusing that jab 634 00:38:30,040 --> 00:38:34,560 Speaker 1: who was showing off the LEAs pro in, was also 635 00:38:34,719 --> 00:38:39,040 Speaker 1: bankrolling another electric vehicle company in the form of Faraday Future, 636 00:38:39,640 --> 00:38:42,400 Speaker 1: and that an executive from Lead TV was one of 637 00:38:42,440 --> 00:38:46,160 Speaker 1: the other co founders of Faraday Future. It was almost 638 00:38:46,200 --> 00:38:49,880 Speaker 1: like he was entering a market to compete against another 639 00:38:50,000 --> 00:38:53,680 Speaker 1: company he was already in charge of. Like it's weird man, 640 00:38:53,920 --> 00:38:56,200 Speaker 1: And I'm not even touching the fact that he also 641 00:38:56,280 --> 00:39:01,200 Speaker 1: invested in another electric car company and reportedly started to 642 00:39:01,320 --> 00:39:05,560 Speaker 1: make decisions that were harmful against that company in an 643 00:39:05,600 --> 00:39:08,960 Speaker 1: effort to not have it compete against his companies. That's 644 00:39:08,960 --> 00:39:14,160 Speaker 1: a whole other can of worms. But the two companies 645 00:39:14,280 --> 00:39:18,160 Speaker 1: would make things even more weird. Patent applications for Faraday 646 00:39:18,160 --> 00:39:22,719 Speaker 1: Future technologies included illustrations that had Lee Echo logo designs 647 00:39:22,760 --> 00:39:26,600 Speaker 1: incorporated in them. While the companies admitted that there was 648 00:39:26,640 --> 00:39:29,520 Speaker 1: an agreement to share i P between the two entities, 649 00:39:29,880 --> 00:39:34,440 Speaker 1: they maintained that they were totally separate companies, or sometimes 650 00:39:34,440 --> 00:39:36,800 Speaker 1: that they were two companies in a very tight aligned 651 00:39:36,840 --> 00:39:41,000 Speaker 1: strategic partnership. The communication was muddled and it raised a 652 00:39:41,080 --> 00:39:43,560 Speaker 1: lot of questions, and along with those questions were some 653 00:39:43,640 --> 00:39:47,080 Speaker 1: about Jia's role. Officially, he was nothing more than a 654 00:39:47,160 --> 00:39:51,720 Speaker 1: major investor bank rolling Faraday Future and Americans startup looking 655 00:39:51,760 --> 00:39:55,920 Speaker 1: to disrupt the automotive industry. But former Faraday Future employees 656 00:39:55,960 --> 00:40:00,400 Speaker 1: would speak to the press, almost always anonymously, to reveal 657 00:40:00,480 --> 00:40:03,200 Speaker 1: that Jah was much more hands on with the company 658 00:40:03,200 --> 00:40:07,520 Speaker 1: than anyone would admit in public. Before its debut at 659 00:40:07,600 --> 00:40:10,600 Speaker 1: c e S, the company had already announced plans to 660 00:40:10,640 --> 00:40:14,920 Speaker 1: open up a one billion dollar manufacturing facility in Las Vegas, Nevada. 661 00:40:15,400 --> 00:40:20,439 Speaker 1: By July, those plans were scuttled because by then Jah 662 00:40:20,600 --> 00:40:23,000 Speaker 1: was in some pretty serious hot water back in China, 663 00:40:23,320 --> 00:40:25,880 Speaker 1: and he wasn't doing so great in the United States either. 664 00:40:26,400 --> 00:40:29,200 Speaker 1: Lee Echo had purchased a large amount of land from 665 00:40:29,280 --> 00:40:33,040 Speaker 1: Yahoo in June two thousand sixteen for two hundred fifty 666 00:40:33,200 --> 00:40:36,360 Speaker 1: million dollars as part of this overall strategy to have 667 00:40:36,560 --> 00:40:40,279 Speaker 1: Lee Echo and Faraday Future kind of share resources. But 668 00:40:40,520 --> 00:40:42,799 Speaker 1: less than a year later the company had to sell 669 00:40:42,920 --> 00:40:46,080 Speaker 1: off all that land as the financial struggles back in 670 00:40:46,160 --> 00:40:49,200 Speaker 1: China were really coming to a head. Lee Echo sold 671 00:40:49,239 --> 00:40:52,200 Speaker 1: the real estate to a different Chinese company for two 672 00:40:52,280 --> 00:40:55,600 Speaker 1: hundred sixty million dollars, so hey, at least they sold 673 00:40:55,640 --> 00:40:57,920 Speaker 1: it for more than they bought it. Though when you 674 00:40:57,920 --> 00:41:01,160 Speaker 1: factor in all the costs associated with owning that much 675 00:41:01,280 --> 00:41:04,520 Speaker 1: land in Santa Claric, California for that amount of time, 676 00:41:04,560 --> 00:41:07,800 Speaker 1: I think they probably didn't net much of a profit. 677 00:41:07,840 --> 00:41:10,040 Speaker 1: In the end, they may have just broken even. But 678 00:41:10,440 --> 00:41:12,960 Speaker 1: what the heck was going on back in China? So 679 00:41:13,040 --> 00:41:16,719 Speaker 1: remember I said Jaw was bankrolling Faraday Future and all 680 00:41:16,760 --> 00:41:19,880 Speaker 1: these expansions for his other companies, and how he was 681 00:41:19,920 --> 00:41:23,360 Speaker 1: doing that by taking out loans against his considerable stake 682 00:41:23,560 --> 00:41:26,960 Speaker 1: in those companies. Well, the loans had come due and 683 00:41:27,000 --> 00:41:29,800 Speaker 1: the Chinese stock market had dealt a pretty big blow 684 00:41:29,840 --> 00:41:33,800 Speaker 1: to Jah's own wealth, and Jaw did something fairly radical. 685 00:41:34,239 --> 00:41:37,960 Speaker 1: He didn't pay back the loans. The Chinese government was 686 00:41:38,040 --> 00:41:40,560 Speaker 1: demanding that he returned to China to pay off the 687 00:41:40,640 --> 00:41:44,400 Speaker 1: various loans he had taken out, and Jiah's response was 688 00:41:44,800 --> 00:41:48,400 Speaker 1: eventually to step down as CEO of the Lee Echo 689 00:41:48,520 --> 00:41:53,200 Speaker 1: companies in the Chinese government ordered all his assets in 690 00:41:53,280 --> 00:41:58,440 Speaker 1: China frozen. Jaw relocated to the United States, with his 691 00:41:58,520 --> 00:42:01,759 Speaker 1: explanation amounting to there at a future needs me, and 692 00:42:01,800 --> 00:42:05,279 Speaker 1: he became CEO of the company in two seventeen and 693 00:42:05,320 --> 00:42:08,600 Speaker 1: sold off most of his shares to a company called 694 00:42:08,680 --> 00:42:12,120 Speaker 1: ever Grand Group, which is a Chinese real estate company, 695 00:42:12,160 --> 00:42:15,160 Speaker 1: but he stayed on as CEO of Faraday Future and 696 00:42:15,200 --> 00:42:19,840 Speaker 1: retained a good percentage like thirty of the company. Meanwhile, 697 00:42:20,200 --> 00:42:23,080 Speaker 1: the creditors in China were demanding he returned home to 698 00:42:23,120 --> 00:42:26,160 Speaker 1: face the music. The House of Cards was falling down, 699 00:42:26,560 --> 00:42:29,680 Speaker 1: Lee Echo was hitting a low point. Lee TV was 700 00:42:29,880 --> 00:42:33,640 Speaker 1: shown to be stagnating as well. Faraday Futures was struggling. 701 00:42:34,000 --> 00:42:37,359 Speaker 1: Jaw was on a debt blacklist back in China. At 702 00:42:37,400 --> 00:42:40,080 Speaker 1: one point he sent his wife and his brother I believe, 703 00:42:40,120 --> 00:42:43,040 Speaker 1: to China to try and settle debt issues because he 704 00:42:43,080 --> 00:42:46,200 Speaker 1: wasn't going to go in person, which didn't reflect well 705 00:42:46,200 --> 00:42:49,440 Speaker 1: on him, and as I understand it, his wife subsequently 706 00:42:49,440 --> 00:42:53,120 Speaker 1: filed for divorce. Though I cannot say that that particular 707 00:42:53,560 --> 00:42:58,400 Speaker 1: decision was, you know, pivoting on this, this choice to 708 00:42:58,440 --> 00:43:00,879 Speaker 1: send her to China instead of him self. I don't 709 00:43:00,960 --> 00:43:04,839 Speaker 1: know the details for it. He is pretty private about 710 00:43:04,840 --> 00:43:07,399 Speaker 1: his personal life, so I don't know what all that 711 00:43:07,560 --> 00:43:11,640 Speaker 1: is about. Fairy Future was not faring any better. Allegations 712 00:43:11,640 --> 00:43:15,560 Speaker 1: from partners ranged from charges of wrongful termination to failure 713 00:43:15,640 --> 00:43:19,600 Speaker 1: to payback debts. One case came from Miles Bernal, who 714 00:43:19,640 --> 00:43:23,239 Speaker 1: said he was hired to manage some very expensive mansions 715 00:43:23,760 --> 00:43:27,120 Speaker 1: that were bought through a shell company called ocean View Drive, 716 00:43:27,400 --> 00:43:31,120 Speaker 1: which was owned by you guessed it or du Jah. 717 00:43:31,239 --> 00:43:35,000 Speaker 1: He said that he was wrongfully terminated by the company 718 00:43:35,040 --> 00:43:38,080 Speaker 1: and that he witnessed many cases of Jahn and his 719 00:43:38,200 --> 00:43:43,000 Speaker 1: team co mingling finances from Faraday, from ocean View Drive 720 00:43:43,160 --> 00:43:45,600 Speaker 1: and from other sources, as well as making use of 721 00:43:45,640 --> 00:43:49,839 Speaker 1: company assets for personal reasons and more. Again, those are 722 00:43:50,080 --> 00:43:55,560 Speaker 1: his allegations. Meanwhile, Faraday Future was losing top talent, including 723 00:43:55,560 --> 00:43:57,720 Speaker 1: people who are brought on board to try and wrestle 724 00:43:57,800 --> 00:44:01,839 Speaker 1: the company's financials into something a little more straightforward and transparent. 725 00:44:02,360 --> 00:44:06,480 Speaker 1: Stefan Krauss, who came from BMW, would serve as the 726 00:44:06,560 --> 00:44:10,040 Speaker 1: chief financial officer for a relatively short while, but he 727 00:44:10,040 --> 00:44:13,360 Speaker 1: found it impossible to do his job because Jaw wasn't 728 00:44:13,400 --> 00:44:16,279 Speaker 1: listening to his advice, so Krauss left the company in 729 00:44:16,320 --> 00:44:19,880 Speaker 1: twenty seventeen, though Faraday Future would say that he had 730 00:44:19,920 --> 00:44:22,160 Speaker 1: actually been fired from the company. So it all depends 731 00:44:22,200 --> 00:44:25,719 Speaker 1: upon whose point perspective you believe, and according to a 732 00:44:25,719 --> 00:44:29,960 Speaker 1: lot of journals and magazines. It was only ever grants 733 00:44:30,040 --> 00:44:34,080 Speaker 1: two billion dollar investment that kept Faraday Future afloat. But 734 00:44:34,640 --> 00:44:37,760 Speaker 1: job messed that up too, because, according to the Verge, 735 00:44:38,200 --> 00:44:41,719 Speaker 1: jab prematurely spent eight hundred million dollars of that two 736 00:44:41,760 --> 00:44:44,920 Speaker 1: billion dollar investment. As soon as he received the eight 737 00:44:45,000 --> 00:44:48,719 Speaker 1: hundred million dollar installment, ever Grand then said, jah, dude, 738 00:44:48,760 --> 00:44:50,799 Speaker 1: you gotta knock that stuff off. We won't give you 739 00:44:50,840 --> 00:44:53,840 Speaker 1: the rest of this investment unless you agree to distance 740 00:44:53,920 --> 00:44:58,320 Speaker 1: yourself from Faraday Future. And then in the two parties, 741 00:44:58,560 --> 00:45:01,879 Speaker 1: jaw and ever Grand would argue over which of them 742 00:45:02,000 --> 00:45:05,879 Speaker 1: was violating their agreement the most. It was bad enough 743 00:45:06,080 --> 00:45:10,759 Speaker 1: that Nick Sampson himself resigned in October, which must have 744 00:45:10,880 --> 00:45:13,319 Speaker 1: hurt because he was one of the co founders after all. 745 00:45:13,600 --> 00:45:15,880 Speaker 1: He sent a letter to employees that the company was 746 00:45:16,000 --> 00:45:20,479 Speaker 1: quote effectively insolvent end quote which must have hurt even more. 747 00:45:21,040 --> 00:45:24,520 Speaker 1: The company was laying off our furloughing employees quickly as 748 00:45:24,560 --> 00:45:29,960 Speaker 1: corporate resources dwindled. Evergrand and Faraday eventually settled their differences, 749 00:45:30,000 --> 00:45:33,720 Speaker 1: but it meant that Evergrand drastically reduced its investment, didn't 750 00:45:33,719 --> 00:45:35,920 Speaker 1: give over any more of the two billion dollars, and 751 00:45:35,960 --> 00:45:38,200 Speaker 1: it reduced the amount of stake that it agreed to 752 00:45:38,320 --> 00:45:41,960 Speaker 1: take in the company. Faraday began to sell off assets 753 00:45:41,960 --> 00:45:45,799 Speaker 1: to try and keep above water, including their company headquarters. 754 00:45:46,360 --> 00:45:49,040 Speaker 1: With the thousands of employees now reduced to just a 755 00:45:49,080 --> 00:45:52,479 Speaker 1: few hundred of them, and investors now wherey of Jaw 756 00:45:52,719 --> 00:45:56,600 Speaker 1: at long last, weren't eager to help bail him out. Ultimately, 757 00:45:56,880 --> 00:46:00,440 Speaker 1: the company entered into a restructuring plan, and Jaw formed 758 00:46:00,480 --> 00:46:03,800 Speaker 1: a trust with the purpose of paying off those debts. 759 00:46:03,880 --> 00:46:07,160 Speaker 1: So his Faraday Future assets were placed within this trust, 760 00:46:07,600 --> 00:46:12,239 Speaker 1: the idea being that the trust would oversee the repayment 761 00:46:12,360 --> 00:46:15,239 Speaker 1: of loans. But his past mistakes were really catching up 762 00:46:15,520 --> 00:46:18,640 Speaker 1: and various courts were freezing his assets because of his 763 00:46:18,719 --> 00:46:22,080 Speaker 1: failure to pay, so he had less to leverage in 764 00:46:22,120 --> 00:46:26,280 Speaker 1: an effort to repay his debts. Jaw was effectively forced 765 00:46:26,320 --> 00:46:29,920 Speaker 1: to resign as CEO of Faraday Future. He was replaced 766 00:46:29,920 --> 00:46:34,080 Speaker 1: by Carston Breitfeld. Jaw still owns a massive amount of stock, 767 00:46:34,160 --> 00:46:37,000 Speaker 1: but he no longer leads the company, at least not 768 00:46:37,160 --> 00:46:41,440 Speaker 1: in name, and in October two thousand, nineteen, Jab filed 769 00:46:41,480 --> 00:46:46,680 Speaker 1: for personal Chapter eleven bankruptcy. The bankrupt billionaire. See by 770 00:46:46,680 --> 00:46:49,320 Speaker 1: that time, he had a massed about three point six 771 00:46:49,440 --> 00:46:53,360 Speaker 1: billion dollars in debt in China, and as I mentioned earlier, 772 00:46:53,600 --> 00:46:56,120 Speaker 1: his wealth is mostly tied up with shares in various 773 00:46:56,120 --> 00:46:59,560 Speaker 1: companies that had taken a pretty massive hidden value, and 774 00:47:00,000 --> 00:47:03,440 Speaker 1: a lot of those assets were frozen by various governments 775 00:47:03,480 --> 00:47:06,680 Speaker 1: around the world, and he wasn't swimming in cash. In 776 00:47:06,719 --> 00:47:10,040 Speaker 1: other words, Jaw's argument was that he really needed his 777 00:47:10,120 --> 00:47:13,200 Speaker 1: creditors to give him some slack so that Faraday Future 778 00:47:13,280 --> 00:47:15,600 Speaker 1: could hold an I p O and go public, at 779 00:47:15,600 --> 00:47:18,600 Speaker 1: which time Jaw's steak and Faraday would give him the 780 00:47:18,640 --> 00:47:21,560 Speaker 1: money he would need to pay off his creditors. But 781 00:47:21,840 --> 00:47:24,640 Speaker 1: if the creditors didn't let him do that, he would 782 00:47:24,680 --> 00:47:28,080 Speaker 1: be forced to liquidate all his assets and pay pennies 783 00:47:28,120 --> 00:47:30,960 Speaker 1: on the dollar, giving each creditor far less than what 784 00:47:31,120 --> 00:47:35,719 Speaker 1: he actually owed them. In late January twenty one, Faraday 785 00:47:35,719 --> 00:47:38,640 Speaker 1: Future announced a plan to go public through a merger 786 00:47:38,719 --> 00:47:43,400 Speaker 1: with Property Solutions Acquisition and sp a C or special 787 00:47:43,440 --> 00:47:47,280 Speaker 1: purpose acquisition company. I mentioned these in an earlier episode 788 00:47:47,280 --> 00:47:50,800 Speaker 1: of Tech Stuff, But it's a company that exists solely 789 00:47:50,880 --> 00:47:53,880 Speaker 1: for the purpose of buying out a private company to 790 00:47:53,960 --> 00:47:56,840 Speaker 1: take it public so that the private company doesn't actually 791 00:47:56,880 --> 00:47:59,720 Speaker 1: have to go through the I P O process, which 792 00:48:00,120 --> 00:48:02,400 Speaker 1: sounds shady on the surface of it, but it is 793 00:48:02,480 --> 00:48:06,480 Speaker 1: totally legit. And considering how fair day futures prospects have 794 00:48:06,600 --> 00:48:10,480 Speaker 1: been entangled with jaws financial problems, it might be the 795 00:48:10,560 --> 00:48:13,600 Speaker 1: only way to get fair day future as a publicly 796 00:48:13,640 --> 00:48:16,880 Speaker 1: traded company. And it could also mean that jaws shares 797 00:48:16,880 --> 00:48:19,200 Speaker 1: in the company will be good and he can follow 798 00:48:19,200 --> 00:48:21,680 Speaker 1: through on his promise to pay back creditors since all 799 00:48:21,719 --> 00:48:24,480 Speaker 1: his stake is essentially held in trust for that purpose. 800 00:48:25,120 --> 00:48:28,920 Speaker 1: And so here we are. I had started to research 801 00:48:29,000 --> 00:48:31,640 Speaker 1: this more as a story about Faraday Future, which I 802 00:48:31,680 --> 00:48:34,840 Speaker 1: think I might still do at some point, maybe a 803 00:48:34,920 --> 00:48:36,640 Speaker 1: year down the road, to kind of see how this 804 00:48:36,800 --> 00:48:40,080 Speaker 1: shift to being a public company will go for a Faraday. 805 00:48:40,120 --> 00:48:43,800 Speaker 1: But as I learned more about jaws background, I became 806 00:48:43,840 --> 00:48:46,560 Speaker 1: fascinated and wanted to dive more into that. I think 807 00:48:46,560 --> 00:48:48,799 Speaker 1: there are a lot of lessons to be learned here, 808 00:48:49,120 --> 00:48:53,120 Speaker 1: including how fast trends and stock markets can have disastrous 809 00:48:53,160 --> 00:48:58,480 Speaker 1: consequences not just for individual investors, but also for business leaders. 810 00:48:58,880 --> 00:49:02,120 Speaker 1: Jaw never would have found himself in a predicament that 811 00:49:02,200 --> 00:49:04,120 Speaker 1: he was in if if it hadn't been for such 812 00:49:04,239 --> 00:49:07,960 Speaker 1: rapid inflation and the value of the companies he founded. 813 00:49:08,480 --> 00:49:10,640 Speaker 1: Though it's kind of hard to feel badly for a 814 00:49:10,680 --> 00:49:13,840 Speaker 1: billionaire who allegedly spent most of his time in huge 815 00:49:13,840 --> 00:49:17,239 Speaker 1: mansions in California while avoiding creditors, But just to be 816 00:49:17,480 --> 00:49:20,360 Speaker 1: entirely fair, it's a remarkable thing to be a business 817 00:49:20,480 --> 00:49:25,600 Speaker 1: leader and to see your business explode in value, and 818 00:49:25,760 --> 00:49:29,320 Speaker 1: it would take a very level head and a pretty 819 00:49:29,400 --> 00:49:34,279 Speaker 1: stable financial environment to be able to, you know, to 820 00:49:34,840 --> 00:49:39,840 Speaker 1: navigate those waters responsibly. And I think that the various 821 00:49:39,920 --> 00:49:44,759 Speaker 1: situations in China just meant that that was exceedingly hard 822 00:49:44,800 --> 00:49:49,040 Speaker 1: to do. So I don't know job personally. I don't know, 823 00:49:49,560 --> 00:49:52,719 Speaker 1: you know, whether or not his decisions were all made 824 00:49:52,719 --> 00:49:54,960 Speaker 1: on good faith. It seems like a lot of the 825 00:49:54,960 --> 00:49:58,239 Speaker 1: earlier ones certainly were. I don't know for sure. That's 826 00:49:58,239 --> 00:50:01,600 Speaker 1: just the impression I get, but it definitely turned into 827 00:50:01,640 --> 00:50:04,120 Speaker 1: a big message. Actually, the more I was researching this, 828 00:50:04,280 --> 00:50:07,439 Speaker 1: the more I was like, I feel like investors don't 829 00:50:07,440 --> 00:50:10,080 Speaker 1: really do a lot of homework before they start pouring 830 00:50:10,120 --> 00:50:14,080 Speaker 1: billions of dollars of investment into things, and that in 831 00:50:14,160 --> 00:50:17,799 Speaker 1: itself is a big problem. But that wraps up this 832 00:50:18,000 --> 00:50:22,120 Speaker 1: story of that particular entrepreneur. I'm sure we will follow 833 00:50:22,239 --> 00:50:25,080 Speaker 1: up on his adventures in the future, but I wanted 834 00:50:25,120 --> 00:50:27,520 Speaker 1: to kind of cover someone who was, you know, a 835 00:50:27,560 --> 00:50:30,920 Speaker 1: complete mystery to me before I started researching this episode. 836 00:50:31,360 --> 00:50:34,040 Speaker 1: And if you guys have suggestions for future topics I 837 00:50:34,040 --> 00:50:36,520 Speaker 1: should cover on tech stuff, whether it's a person in tech, 838 00:50:36,880 --> 00:50:40,280 Speaker 1: a company, a trend, a specific technology and how it works. 839 00:50:40,880 --> 00:50:43,360 Speaker 1: Let me know the best way to do that is 840 00:50:43,400 --> 00:50:46,720 Speaker 1: over on Twitter. The handle I use is text stuff 841 00:50:46,960 --> 00:50:51,200 Speaker 1: HS double and I'll talk to you again really soon. 842 00:50:56,200 --> 00:50:59,239 Speaker 1: Tex Stuff is an I Heart Radio production. For more 843 00:50:59,320 --> 00:51:02,720 Speaker 1: podcasts from my Heart Radio, visit the I Heart Radio app, 844 00:51:02,840 --> 00:51:05,960 Speaker 1: Apple Podcasts, or wherever you listen to your favorite shows. 845 00:51:10,520 --> 00:51:10,560 Speaker 1: H