WEBVTT - The Last Time Investors Really Got Excited For Tech Infrastructure 0:00:00.120 --> 0:00:02.840 Hey, there, don't go just yet. We want to tell 0:00:02.840 --> 0:00:05.880 you about a new series from our colleagues here at Bloomberg. 0:00:06.160 --> 0:00:07.440 It's called Levetttown. 0:00:07.840 --> 0:00:10.680 It's about a technology that's moving faster than the law. 0:00:10.960 --> 0:00:13.360 About dozens of young women in a New York suburb 0:00:13.360 --> 0:00:16.840 who discover manipulated photos of themselves on a porn website. 0:00:17.040 --> 0:00:19.960 Told there isn't much the police or anyone else can do, 0:00:20.160 --> 0:00:23.799 they decide to fight back, joining a global battle against 0:00:23.800 --> 0:00:26.920 deep fakes. Please note the trailer for the show you 0:00:26.960 --> 0:00:34.560 are about to hear features adult themes. 0:00:30.280 --> 0:00:39.720 Why Five years ago this was a vast checkerboard at Potato. 0:00:39.320 --> 0:00:41.000 Farms on New York's Long Island. 0:00:41.479 --> 0:00:45.520 Today this is Levittown, one of the most remarkable housing 0:00:45.560 --> 0:00:46.760 developments ever conceived. 0:00:49.159 --> 0:00:55.680 Livettown, new York, America's first suburb, row after row after 0:00:55.840 --> 0:01:03.680 row of cookie cutter homes, the picture of the American dream. 0:01:03.800 --> 0:01:08.960 But recently, underneath the facade of perfect order, a group 0:01:09.000 --> 0:01:13.920 of young women found themselves in an AI fueled nightmare. 0:01:15.000 --> 0:01:20.760 Someone was posting photos of many of the girls that 0:01:20.800 --> 0:01:21.880 we had gone to school with. 0:01:22.520 --> 0:01:26.839 There was one picture of me in a bathing suit, 0:01:27.080 --> 0:01:32.319 and I didn't have a bathing suit on anymore. It 0:01:32.400 --> 0:01:36.520 was just me naked, well not me, but me with 0:01:36.720 --> 0:01:40.240 someone else's body parts that looked exactly like my own. 0:01:42.360 --> 0:01:46.040 Over the last few years, rapid breakthroughs and machine learning 0:01:46.319 --> 0:01:49.320 have made it a lot easier and cheaper to make 0:01:49.440 --> 0:01:53.640 real looking photos or videos, pretty much anything you can 0:01:53.680 --> 0:01:57.279 think of, But innovation comes at a price. 0:01:57.960 --> 0:02:00.360 I felt gross, I felt I don't need to take 0:02:00.400 --> 0:02:00.920 a shower. 0:02:00.960 --> 0:02:03.400 I felt like I wanted to cry, I wanted to 0:02:03.440 --> 0:02:06.520 throw up, I wanted to scream. 0:02:06.880 --> 0:02:10.200 This is a story about a technology that is moving 0:02:10.360 --> 0:02:14.840 faster than the law, where everyone is a suspect, even 0:02:14.880 --> 0:02:15.600 your neighbors. 0:02:16.280 --> 0:02:18.160 It was always in the back of my head, like, oh, 0:02:18.200 --> 0:02:21.000 it's someone that I know, But how do you find 0:02:21.040 --> 0:02:23.799 out who that someone is when you know so many 0:02:23.880 --> 0:02:28.480 people from school, soccer, all these things. 0:02:32.000 --> 0:02:35.600 What we discovered in Leavertant led us on a winding journey. 0:02:35.960 --> 0:02:37.520 I just always had in the back of my mind 0:02:37.639 --> 0:02:42.800 that any of them could be the one. Through the 0:02:42.919 --> 0:02:46.080 darkest corners of the Internet, they call it an arms 0:02:46.160 --> 0:02:51.040 race between law enforcement and technology, and it's just we're losing. 0:02:51.680 --> 0:02:52.959 We are absolutely losing. 0:02:53.440 --> 0:02:53.639 Well. 0:02:53.760 --> 0:02:58.200 Online vigilantes and enterprising detectives are joining forces. 0:02:58.639 --> 0:03:01.200 If you're given prey, you want to go and get it. 0:03:02.880 --> 0:03:07.359 In this story, the victims flip the script, band together 0:03:07.880 --> 0:03:15.840 and fight back alongside some unexpected global allies. I'm Margie 0:03:15.880 --> 0:03:18.000 Murphy and I'm Olivia Carvill. 0:03:18.400 --> 0:03:23.480 This is Levittown, a new podcast series from iHeart Podcasts, Bloomberg, 0:03:23.680 --> 0:03:28.240 and Kaleidoscope. Listen to Levittown on Bloomberg's Big Tape podcast. 0:03:28.639 --> 0:03:32.639 Find it on the iHeartRadio app, Apple Podcasts, or wherever 0:03:32.680 --> 0:03:33.280 you get your. 0:03:33.200 --> 0:03:55.200 Podcasts, Bloomberg Audio Studios, Podcasts, Radio News. 0:03:57.400 --> 0:04:00.880 Hello and welcome to another episode of the Odd Lots podcast. 0:04:00.960 --> 0:04:03.200 I'm Jill Wisenthal and I'm Tracy Alloway. 0:04:03.280 --> 0:04:06.120 Tracy, as you know, I am a sucker for any 0:04:06.280 --> 0:04:11.400 conversation that involves reminiscing about the dot com bubble or 0:04:11.440 --> 0:04:13.960 the telecom bubble, really anything in the late nineties when 0:04:13.960 --> 0:04:15.640 that came of age as a young man. 0:04:16.160 --> 0:04:18.080 Well, that makes sense. I think a lot of people 0:04:18.160 --> 0:04:21.320 tend to do that. I like just bubbles in general. 0:04:21.440 --> 0:04:23.920 I do not put a time period on my bubble 0:04:24.000 --> 0:04:26.159 interest any bubbles all the time. 0:04:26.480 --> 0:04:27.240 Let's do it. 0:04:27.440 --> 0:04:30.039 One thing that I think is really interesting about that 0:04:30.160 --> 0:04:33.200 time period is obviously you know it was a bubble, 0:04:33.600 --> 0:04:36.120 but I think right now, obviously people are really curious 0:04:36.120 --> 0:04:38.200 about the AI build out, and that really was the 0:04:38.320 --> 0:04:41.840 last time the late nineties when there was a specific 0:04:42.040 --> 0:04:45.920 costly capax tech infrastructure part of the story because at 0:04:45.920 --> 0:04:48.800 that time it was the telecom bubble, everyone laying all 0:04:48.839 --> 0:04:51.760 the broadband to power the high speed internet that we 0:04:51.839 --> 0:04:55.719 have today. It's not a perfect analog, but it's something 0:04:55.760 --> 0:04:57.479 that I've wanted to talk about and probably want to 0:04:57.480 --> 0:05:01.880 talk more about on the show just because of Yeah, 0:05:01.920 --> 0:05:04.039 some of the parallels to what we're seeing right now. 0:05:04.120 --> 0:05:07.720 Right it is the analogy that everyone uses, primarily because 0:05:07.720 --> 0:05:11.080 of that big, expensive capital buildout that you just mentioned. 0:05:11.480 --> 0:05:15.560 I will also say, the telecoms bubble, it's kind of 0:05:15.640 --> 0:05:18.600 mixed up with the Internet bubble, right or people tend 0:05:18.680 --> 0:05:23.799 to mix your Yeah, and actually it was different anyway, 0:05:24.000 --> 0:05:25.240 So we should talk about that. 0:05:25.160 --> 0:05:26.159 Too, totally. 0:05:26.160 --> 0:05:28.520 Well, I'm really excited. Tracy and I were recently down 0:05:28.640 --> 0:05:31.720 in Washington, d C. Where we recorded a live show 0:05:31.760 --> 0:05:33.440 and you've already heard some of them if you've been 0:05:33.440 --> 0:05:36.480 listening to the podcast, but this was a really fun 0:05:36.640 --> 0:05:39.520 little chat that we had. We spoke with Blair Levin. 0:05:39.560 --> 0:05:42.800 He's currently a policy advisor at New Street Research, but 0:05:42.839 --> 0:05:45.280 he was actually the chief of staff at the FCC 0:05:45.560 --> 0:05:48.080 in the late nineties and to who's involved in some 0:05:48.120 --> 0:05:52.120 of the deregulation that gave rise to all of the 0:05:52.160 --> 0:05:55.599 telecom bubble build out, all of the telecom build out. 0:05:55.760 --> 0:05:57.279 Then he went to work on Wall Street, so he 0:05:57.360 --> 0:06:00.800 really had like a front row seat the story that 0:06:00.839 --> 0:06:02.920 we're talking about. And so take a listen to our 0:06:03.000 --> 0:06:13.080 chat with Blair. People do forget that, like they talk 0:06:13.120 --> 0:06:16.040 about the Internet bubble, but it really was like it 0:06:16.120 --> 0:06:18.640 started or at least a huge party with the telecom 0:06:18.880 --> 0:06:19.200 It was. 0:06:19.160 --> 0:06:21.159 A dual bubble. That is to say, there was a 0:06:21.200 --> 0:06:25.479 bubble relating to Internet applications, but there was also a 0:06:25.520 --> 0:06:29.400 bubble related to telecommunications infrastructure. 0:06:29.480 --> 0:06:32.200 So other people could debate whether there is an AI 0:06:32.400 --> 0:06:34.920 bubble happening right now, but there is certainly an AI 0:06:35.000 --> 0:06:38.520 boom in terms of infrastructure spending. We talk all the 0:06:38.520 --> 0:06:42.040 time about data center buildout, et cetera. Arguably, I mean 0:06:42.080 --> 0:06:44.159 it's been going on for a while. Arguably, the sort 0:06:44.160 --> 0:06:47.960 of the catalyst, the moment that it captivated captivated everyone 0:06:48.360 --> 0:06:51.479 was the release of chat GBT in late twenty twenty two. 0:06:51.839 --> 0:06:55.640 What was the moment or what was the catalyst in 0:06:55.800 --> 0:06:59.360 the late nineties that suddenly got people so excited about 0:06:59.360 --> 0:07:01.560 building out te broadband infrastructure. 0:07:02.040 --> 0:07:05.120 It was a release of Netscape, an operating system that 0:07:05.680 --> 0:07:08.760 caused people to understand what the Internet could actually be, 0:07:08.960 --> 0:07:14.520 and of course had existed previously, but with Netscape, Silicon 0:07:14.600 --> 0:07:18.000 Valley got very excited, Wall Street got very excited, and 0:07:18.440 --> 0:07:21.000 a few political leaders like Al Gore, who was then 0:07:21.080 --> 0:07:24.480 Vice President, got very excited because he had always wanted 0:07:24.480 --> 0:07:28.480 the information Highway to connect the child in Carthage, Tennessee 0:07:28.520 --> 0:07:30.920 to the Library of Congress. Right now there was really 0:07:30.960 --> 0:07:32.120 a vehicle that could do it. 0:07:32.320 --> 0:07:34.480 Joe knows a lot more about this topic than I do. 0:07:34.520 --> 0:07:36.280 But one thing I do know is when people start 0:07:36.360 --> 0:07:40.080 age Joe, when people talk about the telecomps bubble, I mean, 0:07:40.080 --> 0:07:42.440 the thing that comes up is the Telecommunications Act of 0:07:42.520 --> 0:07:45.360 nineteen ninety six. It goes almost like hand in hand, 0:07:46.120 --> 0:07:48.720 walk us through the connection there. Why does the Act 0:07:48.840 --> 0:07:51.400 get the blame for a lot of this enthusiasm or 0:07:51.440 --> 0:07:52.640 the credit or the credit. 0:07:52.920 --> 0:07:58.440 Yeah, Look, so I think people have to understand back 0:07:58.480 --> 0:08:02.640 in nineteen thirteen us to do a little history's doing 0:08:02.720 --> 0:08:05.920 history back in nineteen thirteen, the government essentially allowed AT 0:08:06.000 --> 0:08:09.240 and T to continue its monopoly. If Andrew had been there, 0:08:09.280 --> 0:08:12.720 maybe he would have opposed it, but he wasn't there, 0:08:13.080 --> 0:08:15.960 and that continued until it was broken up. And then 0:08:16.520 --> 0:08:18.480 once it was broken we had the long distance guys 0:08:18.560 --> 0:08:20.960 and you had the local guys. And the local guys 0:08:21.000 --> 0:08:22.760 wanted to get in the long distance business, and the 0:08:22.800 --> 0:08:24.720 long distance guys wanted to get in a local business, 0:08:25.040 --> 0:08:26.920 and the cable industry wanted to get into both of 0:08:26.960 --> 0:08:29.880 their businesses. And so during the eighties and early nineties 0:08:29.880 --> 0:08:32.160 there were a lot of efforts to say, instead of 0:08:32.200 --> 0:08:37.280 having one judge in charge of the whole thing, let's 0:08:37.480 --> 0:08:41.760 do this differently. And the key idea and one embraced 0:08:41.760 --> 0:08:45.160 really on a bipartisan basis, but really seen clearly by 0:08:45.160 --> 0:08:48.640 Gored by the chair Red Hunt, was right, now, we 0:08:48.720 --> 0:08:52.320 have these analog networks that are protected and they just 0:08:52.480 --> 0:08:56.720 offer a single service. You have analog video coming over cable, 0:08:57.120 --> 0:09:01.520 you have analog voice going over the copper net. Wireless 0:09:01.760 --> 0:09:04.640 was kind of a protected thing. Long story, but there 0:09:04.640 --> 0:09:07.640 were only two wireless providers, so less than ten million 0:09:07.679 --> 0:09:10.640 people used wireless services, and the idea of the ninety 0:09:10.679 --> 0:09:12.880 six Act in a way was let's blow this all 0:09:12.960 --> 0:09:16.360 up by making everything go digital. That was the key 0:09:16.360 --> 0:09:19.080 because once they're digital, they all compete with each other. 0:09:19.640 --> 0:09:21.880 We didn't express it quite that way, but that was 0:09:21.920 --> 0:09:25.320 the real idea behind it, and I would argue, you know, 0:09:25.360 --> 0:09:27.240 you can say it was a success or it was 0:09:27.280 --> 0:09:30.920 a failure. But for those of us, I'm showing my age. 0:09:30.920 --> 0:09:32.640 I was a ten year old kid in nineteen sixty 0:09:32.679 --> 0:09:35.360 four stood in line for two hours in New York 0:09:35.400 --> 0:09:38.400 at the World's Fair to watch, you know, a video 0:09:38.480 --> 0:09:41.320 conference that was like three bucks a minute. Well we 0:09:41.400 --> 0:09:43.360 all do you know? I do this with my grandkids 0:09:43.400 --> 0:09:46.640 for free now. So I view it as a success. 0:09:46.880 --> 0:09:50.360 You know that basically by going digital, we have faster, cheaper, 0:09:50.400 --> 0:09:54.040 better communications through competition than we've ever had. 0:09:54.679 --> 0:10:01.360 What specifically did that telecom deregulation a lit wow such 0:10:01.520 --> 0:10:05.880 that we got this incredible boom in laying fiber, laying 0:10:06.080 --> 0:10:07.520 copp or whatever it was. 0:10:08.679 --> 0:10:11.040 It gave the FCC a lot of authority, though that 0:10:11.120 --> 0:10:14.120 authority was challenged and we did lose a case at 0:10:14.120 --> 0:10:16.520 the Court of Appeals where the States challenged it because 0:10:16.600 --> 0:10:18.960 they wanted to have the power, But then the Supreme 0:10:18.960 --> 0:10:21.520 Court gave the power back to the FCC, But it 0:10:21.559 --> 0:10:23.960 gave the FCC a lot of authority to do things 0:10:24.160 --> 0:10:26.240 which are not commonly recognized but turn out to be 0:10:26.360 --> 0:10:29.680 very important. For example, one of the most important things 0:10:29.679 --> 0:10:33.160 we did was wireless number of portability. People didn't think 0:10:33.160 --> 0:10:35.520 about it at the time, but the question was who 0:10:35.559 --> 0:10:37.400 owns your phone number? Do you own the phone number 0:10:37.520 --> 0:10:40.040 or does the company on the phone number. If Verizon 0:10:40.080 --> 0:10:42.920 owned your phone number, you would never leave them, and therefore, 0:10:42.960 --> 0:10:45.319 no matter how many competitors do you have, there really 0:10:45.360 --> 0:10:50.000 wouldn't be competition. Another very big one goes to a 0:10:50.120 --> 0:10:54.840 very obscure thing, which are called access charges. So you're 0:10:54.880 --> 0:10:57.679 on one network and you call a different network, what 0:10:57.720 --> 0:11:02.720 does network two charge Network one complete that call. The 0:11:02.760 --> 0:11:05.960 most important thing for wireless was when we said to 0:11:06.000 --> 0:11:09.440 the wireline guys, who had you know, we're connecting completing 0:11:09.520 --> 0:11:12.160 ninety five percent of the calls. You have to charge 0:11:12.200 --> 0:11:16.160 your real cost, not you know, not ten cents a minute, 0:11:16.320 --> 0:11:19.079 but your real cost is zero to connect. And then 0:11:19.200 --> 0:11:22.640 suddenly big plans started to come in and wireless really 0:11:22.720 --> 0:11:26.400 took off, here's another one. In ninety five, before the 0:11:26.440 --> 0:11:29.840 Act was passed, the Bell companies were trying to say 0:11:30.200 --> 0:11:34.000 to Congress, we really need to charge access charges to 0:11:34.120 --> 0:11:37.840 this new dial up internet thing. And we said to 0:11:37.880 --> 0:11:39.680 Steve Case, we had a meeting with him. We said, 0:11:39.679 --> 0:11:43.840 you know, here's what's going on on Capitol Hill. They 0:11:43.880 --> 0:11:46.400 want you to charge you like five cents a minute. 0:11:46.640 --> 0:11:48.920 Imagine what that would have done to AOL. Though I'm 0:11:48.920 --> 0:11:51.720 not sure people in the audience can remember able remember 0:11:52.440 --> 0:11:54.720 they've read about it. Yeah, it was kind of like 0:11:54.800 --> 0:11:59.520 back in Genesis. But in any event, Steve Case got 0:11:59.559 --> 0:12:03.160 the message. If I recall correctly, within forty eight hours, 0:12:03.240 --> 0:12:06.720 there were four hundred thousand emails hitting the hill, not 0:12:06.840 --> 0:12:09.480 the charge access charges, and we were able to continue 0:12:09.480 --> 0:12:13.040 that thing. So there were obscure things. We weren't breaking 0:12:13.120 --> 0:12:15.800 up monopolies in the way that the government is currently 0:12:15.800 --> 0:12:18.520 thinking about doing with Google, but rather by saying we're 0:12:18.520 --> 0:12:23.959 going to create competitive position, competitive situations by looking at 0:12:24.200 --> 0:12:27.600 what is essential and then making sure that those are 0:12:27.640 --> 0:12:41.960 not barriers in the competition. 0:12:45.440 --> 0:12:49.560 Okay, so people think they have an entry point into 0:12:49.600 --> 0:12:53.880 that market, there's deregulation, there's potentially more competition for new players. 0:12:55.120 --> 0:12:59.160 Why did investors want to fund what seems like a 0:12:59.320 --> 0:13:03.520 very ex expensive undertaking so badly? And here I have 0:13:03.559 --> 0:13:05.120 to say the one thing I do know about the 0:13:05.120 --> 0:13:08.160 telecoms bubble. I used to be a capital markets correspondent, 0:13:08.200 --> 0:13:11.440 talk to a lot of old school bond investor guys. 0:13:11.600 --> 0:13:14.760 It was funded with a lot of debt. Yeah, and 0:13:14.760 --> 0:13:17.120 if you ask some of those old school guys about 0:13:17.160 --> 0:13:20.520 like the big moments in their career, it's okay, the 0:13:20.559 --> 0:13:23.520 two thousand and eight financial crisis, but easily like the 0:13:23.559 --> 0:13:26.600 two thousand and one telecoms crash, which was huge for 0:13:26.679 --> 0:13:29.920 the bond market. Why were people so eager to pour 0:13:30.040 --> 0:13:30.839 money into this? 0:13:31.760 --> 0:13:33.880 So first of all, you have to understand that at 0:13:33.880 --> 0:13:37.920 the beginning of any new, really big thing, there was 0:13:37.960 --> 0:13:41.000 in the early nineteen hundreds a lot of money going 0:13:41.000 --> 0:13:43.559 into car companies, and in the seventies there was a 0:13:43.600 --> 0:13:46.880 lot of money going into computer companies because people see 0:13:46.960 --> 0:13:51.319 what the opportunity is. So in the case of telecom 0:13:51.720 --> 0:13:56.160 what happened was we were deregulating and in increasing this 0:13:56.280 --> 0:13:59.840 digital competition at the same time that the market understood 0:14:00.240 --> 0:14:04.280 that the future is not these copper networks that the 0:14:04.360 --> 0:14:08.160 old AT and T local exchange carriers had but big 0:14:08.280 --> 0:14:13.000 fiber digital networks, And at that point in time, MCI 0:14:13.559 --> 0:14:17.439 and other people were saying digital traffic is grow, is 0:14:17.520 --> 0:14:23.200 doubling every quarter. Turned out it was every year, which. 0:14:23.080 --> 0:14:24.040 Is a hard difference. 0:14:24.360 --> 0:14:27.400 But if you're an investor and you believe one thing 0:14:27.440 --> 0:14:29.280 to be true and it turns out the other thing 0:14:29.360 --> 0:14:31.760 is true, you can make a really big mistake. And 0:14:31.800 --> 0:14:34.920 they made some mistakes. But I think you know, there's 0:14:35.000 --> 0:14:38.520 a difference between what happened with the big networks and 0:14:38.560 --> 0:14:41.400 what happened to pets dot com. Right, pets dot Com 0:14:41.360 --> 0:14:44.400 went under. Investors loft money and that's what was the 0:14:44.480 --> 0:14:47.000 end of it. But those networks which were built with 0:14:47.080 --> 0:14:49.400 that debt and then had to be refinanced. And I 0:14:49.400 --> 0:14:51.040 remember there was a famous I think it was a 0:14:51.240 --> 0:14:55.600 Forbes cover about a company called Quest which was building 0:14:55.760 --> 0:14:58.920 about these yeah w right and they ended up buying 0:14:58.920 --> 0:15:03.040 an old ilec, an old phone company, and everybody thought 0:15:03.040 --> 0:15:05.800 it was genius, and that the cover story was making 0:15:05.840 --> 0:15:08.280 money at the speed of light, and everybody kind of 0:15:08.360 --> 0:15:11.440 was buying off on this. Well, those networks still exist, 0:15:11.920 --> 0:15:15.320 and those are the networks which actually made Google and 0:15:15.480 --> 0:15:18.840 Facebook and others lots of money when they bought them 0:15:18.840 --> 0:15:20.800 on the cheap years later. 0:15:20.960 --> 0:15:25.600 Okay, so you have this environment of deregulation in the 0:15:25.720 --> 0:15:29.560 nineties during the Clinton administration, you have this sort of 0:15:29.600 --> 0:15:32.760 realization that the Internet is going to be a big deal. 0:15:33.240 --> 0:15:37.200 You have these inflated claims. In retrospect, turns out it's 0:15:37.240 --> 0:15:41.000 still incredibly fast, but doubling every year is not quite 0:15:41.000 --> 0:15:43.760 the same as doubling every quarter. What was the first 0:15:43.800 --> 0:15:47.800 cool breeze that came in? When was the first moment 0:15:48.480 --> 0:15:52.000 from a telecom perspective where it's like, Okay, maybe we're 0:15:52.040 --> 0:15:54.520 not quite so exciting because what people are wondering about 0:15:54.560 --> 0:15:57.000 with AI is there going to be something? So far 0:15:57.240 --> 0:16:01.240 we haven't seen any of the major plays forms, the 0:16:01.280 --> 0:16:04.560 major hyperscalers. They were like massively pulling back on KPAX 0:16:04.640 --> 0:16:07.200 or whatever. But people are looking out for that moment. 0:16:07.360 --> 0:16:10.200 What was the first sort of like what's going on here? 0:16:10.600 --> 0:16:13.240 So in a way you're thinking about there was a 0:16:13.320 --> 0:16:16.000 kind of a false moment with AI, with deep Sea 0:16:16.240 --> 0:16:18.400 where there was that moment where maybe a stock went 0:16:18.440 --> 0:16:21.560 down hugely one day, but then people started to think, yeah, well, 0:16:21.600 --> 0:16:23.400 wait a minute, we're still going to need the chips, and. 0:16:23.560 --> 0:16:27.160 Why large everyone is still despite the market sell off. 0:16:27.120 --> 0:16:29.800 No one is actually like changing either investment commitments. Yeah, 0:16:29.800 --> 0:16:32.440 though there were lots of smaller companies that are not 0:16:32.520 --> 0:16:34.920 public because going public is different than it was in 0:16:34.960 --> 0:16:37.320 two thousand, so we don't really know what's going on 0:16:37.440 --> 0:16:42.760 with them. But I would say somewhere, actually, where I 0:16:42.800 --> 0:16:47.200 would place it was the day after Time Warner made 0:16:47.800 --> 0:16:50.520 probably the worst deal of all time and bought AOL. 0:16:51.280 --> 0:16:54.200 That's when people like me started to go, wait a minute, 0:16:55.360 --> 0:16:59.600 someone who's really smoking something here, and that really doesn't 0:16:59.600 --> 0:17:03.360 make sense because you know, from our perspective, AOL was 0:17:03.760 --> 0:17:06.520 kind of an obsolete company because broadband was coming on, 0:17:06.920 --> 0:17:09.480 and in a broadband world, the logic of AOL was 0:17:10.040 --> 0:17:14.320 not right true. And then then the application started to fold, 0:17:14.320 --> 0:17:16.320 and then about a year later, a lot of the 0:17:16.400 --> 0:17:18.080 data network started to fold. 0:17:18.720 --> 0:17:20.760 So one of the things I remember from I think 0:17:20.760 --> 0:17:24.280 it was Jason Callicanus when we interviewed you, was he 0:17:25.280 --> 0:17:28.679 pointed out something interesting about a lot of the latest startups, 0:17:28.720 --> 0:17:32.000 which is the it's not that they couldn't necessarily make 0:17:32.119 --> 0:17:35.679 money in the good years. It was that investors weren't 0:17:35.840 --> 0:17:40.040 asking them to. Investors wanted them to grow as quickly 0:17:40.080 --> 0:17:43.439 as possible, grow market share, the sort of network effect 0:17:43.480 --> 0:17:46.600 that we were talking about earlier. And then suddenly, you know, 0:17:47.119 --> 0:17:49.600 investors start saying, actually, you need to monetize this, and 0:17:49.640 --> 0:17:51.760 you need to kind of show us where the money is. 0:17:51.880 --> 0:17:54.480 And so that change in behavior means that now there's 0:17:54.520 --> 0:17:57.120 pressure to be cash flow positive. Was there a sort 0:17:57.119 --> 0:18:00.640 of similar moment or similar change in investor behavior aware 0:18:00.680 --> 0:18:03.240 it didn't become about growth and the build out, but 0:18:03.280 --> 0:18:06.000 it became about actual reality and monetization. 0:18:06.720 --> 0:18:10.919 Well, again, I would distinguish between the networks which can 0:18:11.000 --> 0:18:13.119 run for a while, but they can't run forever, and 0:18:13.200 --> 0:18:16.600 the applications. I do remember Eric Schmidt Reid and I 0:18:16.600 --> 0:18:19.439 had ben with them shortly after he became CEO of Google, 0:18:19.480 --> 0:18:25.000 and he said, ubiquity first, monetization later. That works in 0:18:25.040 --> 0:18:28.200 an advertising model, It does not work in a lot 0:18:28.200 --> 0:18:32.800 of other models. And one of the challenges for network 0:18:32.840 --> 0:18:35.639 folks is how do you build this network which is 0:18:35.640 --> 0:18:38.560 supposed to last for thirty years or fifty years or whatever, 0:18:39.400 --> 0:18:41.640 and not run out of money before the revenue start 0:18:41.680 --> 0:18:44.720 coming in. And we saw this with various wireless companies, 0:18:44.760 --> 0:18:48.479 and we saw it with fixed terrestrial wired companies. And 0:18:48.520 --> 0:18:51.119 it's interesting because if you look at what the world 0:18:51.119 --> 0:18:54.440 looked like in two thousand, a lot of the companies 0:18:54.480 --> 0:18:57.280 on the network side are the same. It's the cable companies, 0:18:57.280 --> 0:19:00.840 it's the wireless companies, and it's the traditional les, but 0:19:00.920 --> 0:19:03.760 they've changed their business model. But when you look at 0:19:03.760 --> 0:19:07.240 the device companies and the applications companies relative to two thousand, 0:19:07.400 --> 0:19:08.920 totally different set of companies. 0:19:09.160 --> 0:19:11.000 What were the Selex the cles? 0:19:11.080 --> 0:19:13.600 What were so the sea lex were the competitive local 0:19:13.640 --> 0:19:17.840 exchange carriers And the idea was, as one Wall Street 0:19:17.840 --> 0:19:21.320 analyst said, they are the construction companies for the long 0:19:21.359 --> 0:19:24.440 distance company. Because the idea was the long distance companies? 0:19:24.920 --> 0:19:26.360 Would Congress really envisioned? 0:19:26.400 --> 0:19:27.640 I forgot about long distance? 0:19:27.720 --> 0:19:29.880 Yeah, here it go. Yeah, as most people as well, 0:19:29.920 --> 0:19:33.680 you should. But when I was in college again back 0:19:33.680 --> 0:19:36.200 in the days of Genesis, you know, we stood in 0:19:36.280 --> 0:19:39.919 line to call our parents because it was really expensive, 0:19:39.960 --> 0:19:42.760 and we would call and talk for thirty seconds, just yes, 0:19:42.800 --> 0:19:45.280 I'm okay, talk to you later by you know. And 0:19:45.320 --> 0:19:47.560 now has anyone paid a long distance? Is there anyone 0:19:47.560 --> 0:19:48.960 here paying a long distance? Bell? 0:19:49.080 --> 0:19:49.199 No? 0:19:49.240 --> 0:19:52.240 Of course not. It was all a matter of regulatory 0:19:52.359 --> 0:19:56.000 arbitrage back in those days. But the idea I think 0:19:56.000 --> 0:19:58.840 of the act was that there would be three competitors. 0:19:58.840 --> 0:20:02.679 You would have the cable guys, the incumbents, and the 0:20:02.720 --> 0:20:07.040 long distance guys. Everybody knew that the incumbent local exchange 0:20:07.080 --> 0:20:11.399 carriers could easily go into long distance, So the challenge was, 0:20:11.840 --> 0:20:14.720 how do we create a path for the long distance 0:20:14.800 --> 0:20:20.240 guys to essentially build out new networks that'll be superior 0:20:20.320 --> 0:20:22.200 networks and then they'll come be with the old guys 0:20:22.200 --> 0:20:24.320 who have the advantages of incumbency, and the cable guys 0:20:24.400 --> 0:20:27.560 are going to get into this business. Wireless was not 0:20:27.640 --> 0:20:30.320 really seen as a competitor now it is, and there 0:20:30.359 --> 0:20:33.760 are again a lot of regulatory reasons. Spectrum auctions played 0:20:33.800 --> 0:20:36.800 a big role in that kind of stuff, and we 0:20:36.840 --> 0:20:40.359 had a plan. Now that plan was reversed by the 0:20:40.440 --> 0:20:43.640 Republican chairman of the FCC, Michael Powell, very good guy, 0:20:44.160 --> 0:20:47.640 and he basically had the view that that's really it's 0:20:47.720 --> 0:20:50.960 not going to work. The other problem, which is kind 0:20:51.000 --> 0:20:54.679 of something you can't legislate around. Bob Allen, who is 0:20:54.720 --> 0:20:57.800 the CEO of AT and T, was shall we say 0:20:57.960 --> 0:21:03.080 my age as to the young whipper snappers of SBC 0:21:03.440 --> 0:21:06.560 at Whitaker or Ivan Seidenberg of what was then called 0:21:06.640 --> 0:21:10.840 nine X. And in the middle of just after the 0:21:11.200 --> 0:21:13.280 kind of the law passed, we're in the middle of saying, 0:21:13.480 --> 0:21:15.439 here's how we're going to make it so that the 0:21:15.480 --> 0:21:18.439 sea Lects can build these networks for eighteen t to 0:21:18.480 --> 0:21:22.560 eventually buy and blah blah blah. Alan tries to merge 0:21:22.560 --> 0:21:28.200 with SBC because he wanted to retire. And people have 0:21:28.280 --> 0:21:32.000 forgotten this little episode, but it showed up on the newspaper, 0:21:32.000 --> 0:21:34.320 and a couple days later, my boss, Breetheind gave a 0:21:34.359 --> 0:21:38.119 speech at Brookings saying such a deal would be unthinkable. Actually, Alan, 0:21:38.520 --> 0:21:40.520 we were trying to figure out what to do. Alan 0:21:40.600 --> 0:21:43.560 gave a speech saying such a deal would not be unthinkable, 0:21:43.960 --> 0:21:47.680 which gave us the open You say, oh really and 0:21:47.720 --> 0:21:49.800 read who was a former anti trust lawyer just went 0:21:49.840 --> 0:21:53.840 through this, you know, very intense anti trust analysis why 0:21:53.880 --> 0:21:57.000 we cannot let them merge. Eventually they did merge and 0:21:57.040 --> 0:21:59.760 that was the end kind of of the sea Lect dream. 0:22:00.440 --> 0:22:03.760 This is great and Joe loves reminiscing and war stories. 0:22:03.800 --> 0:22:05.760 As he said, so I got to ask, what was 0:22:05.800 --> 0:22:09.000 the craziest thing in retrospect that you saw from this era? 0:22:10.920 --> 0:22:14.720 Oh gosh, you know what was crazy about it? But 0:22:15.000 --> 0:22:19.920 totally wonderful was and this will sound odd, Congress gave 0:22:20.000 --> 0:22:25.639 us ridiculous deadlines. Ridiculous deadlines, and a Republican guys said, 0:22:26.240 --> 0:22:28.879 you know, Blair, we gave you deadlines. You're never going 0:22:28.960 --> 0:22:31.040 to meet them, and then you're going to be so screwed. 0:22:31.440 --> 0:22:35.399 I said, thank you. That great, But Reid understood that deadlines, 0:22:35.480 --> 0:22:37.760 particlally if you're like a chief of staff, are a 0:22:37.800 --> 0:22:40.199 great thing. So the day after the Act passed, we 0:22:40.240 --> 0:22:43.520 had all the lobbyists in. We had here's all the rulemakings, 0:22:43.600 --> 0:22:46.199