Episode 20, 20/20 Vision, A person with 20/20 vision can see what an average individual can see on an eye chart when they are standing 20 feet away. What if he had twenty five vision? That would mean you can see things at 20 feet. Most people can't see until they're standing five feet away are better known as an eagle eye.
My father true story used to take me golfing with him because I could see unbelievable clarity around that little white ball and find it for him. I would save him money. That is the only time we got to spend time together is I had the vision of a bird. True story. Let's soar like an eagle. Let's compare our vision and not absorb what is actually going on. Roll the tape. Let's party like it's 1999. Think of me as a podcast or formerly known as Prince.
Go, go, go.
In today's episode, we speak with Tim Wu, a professor of law, science and technology at Columbia University, author and contributing opinion writer for The New York Times. He's also known for coining the term net neutrality and writes about private power, free speech, copyright and antitrust. Tim will discuss big tech and what we can learn from the House Judiciary Antitrust Subcommittees hearing. Oh my God, could I be more excited? So there's a bunch going on this week.
Let's try to break it down. Big Tex antitrust hearing falls during a busy earnings week. Alphabet, Apple and Facebook, Spotify, Shopify, PayPal, Comcast and Boeing are among the companies releasing their latest quarterly earnings this week. Boeing, who knows what's going on? There are Comcast peacocke to Peacocke. I think that thing makes no sense to Goldilocks strategy. Trying to have your cake and eat it, too, is resulted in an offering that kind of is very squishy and hard to tell.
What makes sense. PayPal, I assume, is just going to continue to blow anything. Contactless payments. You got to think that that industry is accelerating. Shopify oh my gosh.
Most innovative company in North America of the last decade. But wow, they they're just going crazy. The stock is just gone. That Spotify love Spotify. Spotify was my stock pick of the year, I think for two thousand and eighteen I picked it up one fifty a year later was a one thirty and now it's up about two fifty to sixty. So finally getting some of the love that Spotify deserves Facebook, I'm sure they'll continue. Facebook has what I would argue is the most elastic, resilient advertising base in the history of mankind.
AMD the chip company. I think I know nothing about them. Apple look for them to I would argue again have very strong earnings, although you could see a hit and run. I wonder if people are delaying their purchase cycle on an alphabet. Google continues to be, in my opinion, will start to show signs that their business is coming, coming back. What has happened here in general? What is going on here? Tesla is also going to be recording its second quarter earnings and its qualified for inclusion in the S&P 500 index.
Why is that a big deal? Well, it's sort of a it's sort of a moniker of success. You're considering the five hundred most important companies in the world to be included in the S&P 500. Companies must be U.S. based trade on the New York Stock Exchange, NASDAQ or Chicago Board of Exchange have a market cap of at least eight point two billion report, four consecutive quarters of profit, according to U.S. generally accepted accounting principles. Tesla's market cap is almost three hundred billion.
It's much different than other disruptors at this point. Both Google, Facebook and Apple had substantially more earnings profits when they reached this point. So Tesla has kind of set a new benchmark for how a disruptor gets to a third of a trillion in value. The stock was up nine percent on Monday, but dropped three percent after Bernstine. Analysts call Tesla's current valuation mind boggling.
I've been saying that, and every time I say that, the stock goes up. So I'm not going to say that Tesla's overvalued. And if they sold every car in the world for the next ten years, they still couldn't justify this valuation. Just not going to say it, just not going to say what's going on here. Stock market valuations or your stock prices are kind of a function of the numbers in the narrative. And that is the actual performance, the top line growth in the amount of money you're able to hold on to in terms of profits or EBITA, the growth, et cetera, and then the narrative.
And that is what is the vision? What is your reputation? What is the marketplace, emotional reaction to your ability to be your potential to be one of these incredible companies over the next ten or twenty years that reshapes an industry and maybe develops monopoly power. And what I see happening is that the narrative or that you are a disruptor, a visionary, has overwhelmed any sense of analytics. If you think about what's happening here, and I think it started in nineteen ninety seven investment letter, I think Steve Jobs kind of turned it into showmanship.
He was sort of, you know, what was in Barnum and Bailey, who was the circus guy who just knew how to entertain people with these product releases. And this has gone just crazy. Now who does this hurt? It obviously helps someone like Tesla or Elon continues to be seen as a disruptor, a visionary constantly in the news for both good and bad behavior. We see Bezos continue to kind of outline this incredible vision. Who does it hurt?
I've been thinking a lot about Pinterest. I wonder if Pinterest gets out of covid alive. And that is I think their CEO is a thoughtful, smart guy. And I don't think there's any room for him in a twenty first century disruption economy. I don't think he's nearly obnoxious enough. And quite frankly, I don't think he's a visionary. And probably the new skill set for a CEO in addition to operational and financial competence, is your ability to create this sort of compelling P.T. Barnum like vision that you have to shape this narrative.
It's become more about brand and expectation. It's become more about. Promise, then performance, if you will, I'm only halfway through the news, but something just popped into my mind, which I think is really important, and that is I think the Nasdaq is a dangerous metric because it gives us the cold comfort and the illusion that our society is actually doing OK or even that the economy is doing OK. And it's not it's just not something like 10 stocks responsible for 99 percent of the recovery since March lows.
But also, I think another word, another word is really damaging and giving us cold comfort and is a bit of a head fake and calling on a comorbidity of ours.
And that is our optimism. What does that word? Vaccine. It seems as if we're all waiting around for vaccine. And so we have decided that our as Americans, we always like a silver bullet technology innovation solution to everything that 008 don't worry because our silver bullet is coming in the form of a vaccine. But here's the problem. Fifty percent of Americans say they don't want to take the vaccine, so let's assume we're able to get to a vaccine, which I don't think is a foregone conclusion, and we're able to distribute it.
We're able to figure out the supply chain if 70 percent of the people are willing to take it, take it. We're at thirty five percent of the U.S. population, according to Dr. Fauci. We need somewhere between 70 and eighty five percent to get the herd immunity. And this is what I just think it's just so fucked up about our approach to this crisis. And it is a crisis. We need to go on a war footing and stop giving speeches and start giving speeches.
The way we are behaving, the way we are approaching the enemy right now would be tantamount to saying in nineteen forty four, look, we're in a race to the bottom and we were in a race to the bottom. We were trying to figure out who could split the atom first, such that we would have a nuclear device and we knew whoever got there first was going to win the war. If Hitler got there first, he would have dropped one on London and said, OK, unconditional surrender.
Maybe we would have cut a deal with them and said, OK, you get Europe, we hold on to America, or, you know, who knows what would have happened.
But he he and they the axis powers would have won if Tokyo of Japan had gone to the bomb and they weren't working on it. My understanding is that we're working on it. They would have won, but we got to it first and we won. But we didn't stop building be twenty four super flying super fortresses. We didn't stop manufacturing Bradley tanks. We didn't stop sacrificing and sending our young men and women into harm's way overseas. And it feels as if here we've decided, all right, it's a race for the vaccine.
So we're not going to fight the enemy. We're not going to devote nearly the amount of resources to fighting the enemy, whether it's funding the CDC or education around distancing our education around the benefits of a vaccine or providing people with resources such that they can so they can severely distance. It's more about, OK, how do we find a cure for rich people? How do we give loans to small businesses? There is some money, according to the new Republican sponsored extension, the program that will give people some relief.
But it feels as if we're fighting the wrong war. It wasn't about in World War Two. How do we protect the economic livelihood of small business owners? It was how do we have all hands on deck to fight the enemy, regardless of whether or not we get to the vaccine, i.e. the bomb. So I don't I'm worried that this vaccine or this notion of our American like embrace of a silver bullet, innovation, science like innovation like solution is going to solve the problem.
This is our enemy. We need a war footing. We need to, in my view, go into what I would call the great distancing, and that is provide every family with the resources necessary to severely distance for 14 days. How would we do that?
How would we do that? I would suggest that the largest corporations adopt all the households that consist of their employees. I would suggest that people in the top 10 percent of income earning households who recognize greatness is in the agency of others want to serve something bigger than themselves would adopt households that need help. So a single mother that lives in a small place and doesn't have the resources really to distance severely for her and her kids, that we adopt those households or individuals or corporations adopt those households.
And you come up with a plan, your groceries, your Netflix, your online therapy. If your kid's struggling and we have planned walks enforced by local law enforcement where you get to go outside and take walks.
But other than that, there's no deliveries, there's no going anywhere. There's no going into stores. There's no going to church. You are at home severely locked down for 14 days. Why wouldn't we stop believing the enemy is or the real fear here is in the Nasdaq goes down or rich people are not as rich. Why wouldn't we employ citizenship and sacrifice and devote all of our resources to ensuring households could lock down for 14 days? Why? Because it's NPIs.
Non pharmaceutical interventions is how we are going to beat this thing. Relying on a vaccine is dangerous in the same way that believing the Nasdaq's isn't in any way reflects health on our economy. And the silver bullet notion that a vaccine is going to save us is cold comfort and could be dangerous. OK, so I'm supposed to talk about the time I searched for something online and didn't want others to know about what I was searching for it, that's called to search for me.
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Welcome back. This is super exciting for me, which gives you sort of insight into how lame my life is, but this guy is a hero of mine, a professor. Tim Wu is a professor of law, science and technology at Columbia University, author and contributing opinion writer for The New York Times. He and Tristan Harris were asked to testify in front of a congressional committee on commerce. I was actually asked to testify along next to them and I couldn't do it because I had a previous commitment on the West Coast.
But I remember thinking that I had to kind of my emotions where I was really proud that I was in the same company as them or invited to be in the same company as them. And I was exceptionally intimidated because Tristan is just an incredible work around the biological features or addictive qualities of big tech and professor who in my opinion, is sort of the clear blue flame thinker around antitrust. He wrote a book called The Curse of Bigness. This is the kind of the kind of book that I think you even if you have no interest in it, you read it.
It's a very short read. And it just just makes all kinds of sense and gives you insight into business and what happens when businesses become too big and our need to oxygenate the marketplace and how regulation coordinates with antitrust. Anyways, here is our conversation with a role model of mine. Professor Tim. Well, Professor, where does this podcast find you? Ann Arbor, Michigan. Ann Arbor. What's the deal? That's wait, that's Michigan.
Not clear what's going on. My wife's family's here and nothing nothing that interesting state of play.
Give me the hearings are supposedly where it's what is it? It's about four thirty seven on Wednesday. Give us the state of play. What have been the surprises for you around today's testimony?
I don't know if I'm surprised. I think Bezos is getting a beat down of I think he's the one is surprised. It was sort of expected. I think that Zuckerberg would get some heat. I think it was expected that you'd have the sensor conservative movement going. But I think Amazon is just getting a lashing, you know, whether and Bezos not liking it. That's the big takeaway I have here. The second thing I'll say is I also feel that Zuckerberg has got some heavy blows on his acquisitions of Instagram in particular.
Obviously, they have a lot of docs that not everyone else has seen and I haven't seen. And in terms of strengthening the legal case, I'd say that the Facebook interrogation has done the most. Yeah.
Didn't he basically acknowledge that he was one of the reasons you purchased Instagram was to cauterize a competitor?
Yeah, that was a Jerry Nadler line of questioning. And, you know, I think some people say, OK, so he spotted this promising company and bought them, in fact, a bunch of them. What's the big deal? But the antitrust laws since Time Standard Oil suggests that buying your competitors is is illegal. Now, Instagram, the argument goes, wasn't a direct competitor at the time, but they were certainly a nascent competitor. So I think that spells trouble.
And, you know, made me wonder why the FTC hasn't filed a complaint already.
And what about the other moment I thought was sort of telling or could come back to haunt the respective individual and company? Was Bezos acknowledging that Alexa products are sometimes sold below cost? You see that as an issue?
Yeah, that is trouble for them. I selling below cost is always a red flag for predatory pricing. Yeah, I really think Amazon cut it quite a few times. Another thing, they, they got caught on last year. I was actually testifying last year and sitting in the second row when they asked Amazon's lawyer, do you treat your own products any differently than third party products? And, you know, do you ever rely on information that you have?
And he said, no, absolutely not. We treat them exactly the same under oath. The Wall Street Journal published a series of investigations suggesting that wasn't true. And when when Bezos cut those questions, all he could say is, well, we have we're investigating it. And I thought that came off as pretty bad. It's not necessarily an antitrust violation, but it is lying in front of Congress. And I just say, I think the big question that comes out of this policy question comes out of this hearing is like, well, what do we do when the monopolist starts eating up all of their competitors on their platform?
What happens when they run the platform? But then have you invite you over for lunch and then have you for dinner? That's the big question as I see it.
Give us the state of play around antitrust. Let's back up. So there's we're in sort of that consumer harm phase of antitrust. Does antitrust need to change to address? Monopoly power and abuse is taking place right now. I think the answer is it depends on the company. So I think in my view, Facebook and Google are in the biggest trouble in terms of establishing antitrust law. Facebook, through its internal program of eliminating all its most dangerous competitors through acquisitions, cloning and denying access.
And Google's due to activities that didn't really come up much in this hearing, but the case surrounding its domination of online advertising. Those cases can proceed under traditional antitrust. And I expect for sure the Google case complaint to be filed this year. Facebook may depend on who wins the election, but to answer your question more fully, the stuff that people are complaining about with Amazon. Essentially, that the big guy undercutting its competitors, cloning its competitors. That stuff is not clearly illegal under the current antitrust laws.
In fact, there is a law if you're willing to go in the weeds of Robinson Patent Act, which is supposed to protect smaller retailers against larger ones. It has been basically disembowelled, unenforced for decades. So there's a whole bunch of questions around retail, around platform retail, which you would need to either amend the antitrust laws or start enforcing this old 1930s law in a different way to do something about. I know it's a bit complex, but that is the fuller answer.
Everyone talks about.
Brand Dizon. Is that where we need to go back to that? It's more about what you're going to forget more about this. I'm going to explain the difference between sort of borak and brand design and consumer harm versus channel power.
Yeah, I mean, there's sort of two views of what the antitrust law is about. One, I think an older view associated with Louis Brandeis, associated with the progressive era, even associated with Woodrow Wilson at some stages, suggests that the antitrust laws were a reaction to power, private power and the domination of industries by large monopoly players. And the point of it was basically to keep a check on private power, both for the reasons of helping consumers against such big companies, but also smaller sellers, also to protect the political system, to protect democracy.
The newer tradition, the Burkean Chicago school tradition, 60s and 70s onward says that there's just one point of antitrust law keep prices low. It's like the price chopper law. And as long as prices are not raised in an obvious way, the antitrust law doesn't give a damn. You know, that law cares that if two competitors agree to fix their prices. One hundred dollars a hamburger. But basically anything else that doesn't care about that latter tradition has been dominant basically since the George W.
Bush administration, the Obama administration didn't do too much about it. And that's where we are.
So underlying this is this big historic struggle between Bork and Brandeis, as you alluded to, just a lot of it come down to how you define price, if you will, or the externalities, the costs we pay from this sort of monopoly power.
Yeah, I mean that we live in an age where everyone wants everything to be quantified 100 hundred years ago. They just get up there and say, look at Standard Oil is a monopoly. Look what they did to their competitors. Look at I bribed congressmen. You know, we passed this law to eliminate Monopoly, break them up. So that was sort of more of a hundred years ago. I think we live in a culture in a time where people want things to be quantified, less lawyerly, more economic.
But I think, as you suggested, you can do it. You just have to care about something more than the price paid by a home consumer. I mean, just just to stay on this for a second, know the fact that Facebook has a monopoly on social network advertising, actually does raise prices for advertisers. And if you can measure other stuff, you know, maybe like, you know, decreased privacy protections, maybe those should be considered harms, too.
I mean, the basic point is this laser focus on one thing. Are you paying a cent more for a product because of this merger? Whatever that approach has failed.
So I'll put a thesis out there. We've one of the key steps of tyranny is when private power over runs the government. And it feels as if we've been overrun through a mix of the FTC and the DOJ are outgunned, more than one hundred full time lobbyists from Amazon and most elected officials. And maybe today we saw some of that. The worm is beginning to turn, are infected with what I call this gross idolatry of innovators. But having these monopolies, unlike monopolies of the past, where it feels like we have sort of a proud legacy of antitrust, having that kind of loss, the script around your domain, I'd say, you know, the antitrust enforcers are very focused on technocratic cases trying to get things right.
I think my view is that an antitrust law and democracy have always been pretty closely linked. If you look at the fifties and that was a time of the most serious antitrust enforcement in Europe and the passage of new laws in Europe, a lot of it was a reaction to the rise of fascism in the thirties. And they said, look, I mean, the real danger here is when you have this alliance between government and monopoly, I mean, there is a real unstoppable power.
And that is the thing I'm most worried about. You know, I care about prices. I care about little companies, but I really care about concentrated power and. What it means, particularly when you see Stazi partnership between government and Monopoly in that direction, clearly lies authoritarianism and further on from that full on fascism.
So part of my talk track was literally parroted plagiarise stolen from you. And that is that a key step to tyranny. And I got this from your book, The Curse of Bigness is when government no longer is a countervailing force to private power. But a coconspirator. Can you speak more specifically about what happened in the 30s and if and what echoes we're hearing now?
Sure. You know, I've actually done more research on this topic and other people are, too. If I can just mention this. The international version of the Curse of Bigness is much more focused on the Japanese and German stories. And I think we really need to relearn the lessons of Japan and Germany and what they let happen. You know, they were pretty much OK with the idea of big companies running government in collaboration with the without elected. But the government officials that was cool in Japan in the nineteen twenties and thirties, the major conglomerates even had their own political parties and they sort of took times being turned being a power.
There was no lines between government and private power and Germany. They had this extraordinary confidence that they had solved things in a way better than Americans by promoting cooperation and cartels. And everyone's going to be friends and we'll put this all together. And, you know, both those ended pretty disastrously. I don't think we need to explain why. But what's the link? What happens? How does it play out? How do you go from from corporations being too involved in government to just outright fascism and the ugly places?
Walk us through some steps and see what happens.
Yeah, it's a good question because I do think there is a difference just between having a bunch of private companies and obviously tipping over into full fascism.
So if you look at the German example, there is this key moment that I'll focus on in German history where Adolf Hitler had been elected, at least with a he didn't have a majority, but a plurality of support, but he was starting to weaken. And there is every chance he could have been one of these sort of one term wonders. And in his hour of greatest need, the concentrated German economy, the heavy industry decided made a joint decision that actually they were done with democracy and they needed a strong leader like Hitler who was going to bring Germany back to greatness.
So when you have corporations powerful enough that they can influence and support and save a figure and promote a strongman to power, often one who ironically, Hitler ran against, you know, Monopoly and said, you know, I'm here for the common man and these companies are too powerful, but at the same time made it clear that with him in charge, it would be a good environment for the profitability, for the future prospects, for the global expansion of German monopoly.
That is the key moment is when they decide that they're on that side. You have something similar and it often, frankly, follows an economic shock, like a terrible economic shock, like the Great Depression. People are upset. They want something, they're desperate. There's economic misery everywhere. That's when people turn to the strong solutions. And when you have powerful companies taking the side of the authoritarian leader, that's the moment it all switches. And there is we're not there in the United States.
There are other countries that might be closer to that point. But I think it is an ever present danger for every country that calls itself a democracy or even just calls itself a country to watch a switch of allegiance from one of the major corporations to the autocrat.
It feels to me as if there's this unholy alliance between Trump and Facebook. It feels as if it's basically they've said, you can weaponize my platform and you'll keep your kind of DOJ and FCC hands off of Facebook. You know, I might be paranoid. Does that mean I'm wrong? Do you see the same thing? No, I don't.
I think it's transparent what Facebook is pursuing. In fact, I have it on good authority that Mark Zuckerberg didn't like to, but he was interested in another one of my books, The Master Switch, and fascinated by the way in which AT&T, the telephone monopoly, managed to insulate itself against antitrust, which was they agreed and asked to be regulated and promised the government they'd be good and decided to cooperate and therefore ensure a sort of seventy. Year long monopoly while everybody else was getting broken up, and I think there's no question that Zuckerberg sees cooperation with government as the key to the long term survival of Facebook, whatever that means.
And there's also no question to me that Zuckerberg will do almost anything to ensure his long term survival.
And if you look into your crystal ball giving, given what happened today and you had to try and play out or guess what the roadmap might be, how this might all unfold, who do you think gets their turn at the woodshed first? Does anything happen pre-election? Who's most likely to get antitrust action? What do you see happening? Sure.
So here's what I think. I think you will see a complaint filed against Google this year before the election, probably in September, maybe in October by the Trump Justice Department alleging monopolisation. Also, the Texas AG playing a major role in that one Facebook. I think that the FTC has built a case. I think they're sitting around trying to decide what to do. And the agency has been conservative. So I think they're going to leave this for the election to decide if Biden wins, depending on who's appointed.
I wouldn't be surprised to see a complaint filed in that case. Amazon, I think that there will be legislation I don't know if anyone has a handle on what it would be trying to prevent or change how Amazon treats its third party sellers. I don't know if that will go anywhere.
On the other hand, there are a lot of people who really hate the way Amazon is treating people who want something done. Finally, Apple got a lot of private lawsuits coming at it, but they among them, you know, they're actually the most valuable by market cap. They seem to be ducking stuff pretty well. So that's how I see this playing out over the next nine months or so. In the case of Apple, doesn't Allegan antitrust not only encourage competition, but at the same time it ideally unlocks value within that company?
You break up AT&T in the seven, baby bells end up being worth more. And I've never fully understood how you would apply antitrust. Isn't Apple more about regulation and antitrust?
I mean, the big what does the big breakup look like for Apple? A little less clear. What market do they dominate? That's usually defined as an apple market, i.e. people who won't buy anything but Apple. So if you break up Apple, it's because you care about size, period. You just don't think that big companies, even if people like them. I actually don't. Even though Brandeis sort of came close to that view, I don't share that view without more conduct.
Yeah, I don't see the value. On the other hand, some of these other guys like Facebook, you know, Facebook, maybe we're going to ask this next. They're pretty much the most obvious target for a breakup. It's not hard to see how you would do it. And Google is an interesting case, too, whether you choose regulation, OK, don't treat people better in advertising or whether you say, listen, we want you to just be search and not mess with everything else neat.
The whole ecosystem. You know, there is an idea this is slightly different than antitrust tradition that says you got to have a couple of essential services. Maybe search is one of them, but don't let those people own everything or control everything. I mean, that's the approach we took with telephones. We're like, all right, you get to have the telephone system. But that doesn't mean you get to, like, build your own radio network on top of the telephone system or have your own broadcasting system.
AT&T had its own broadcasting system. I don't know if you knew that. Not well known fact, but that's a very different approach and maybe the right one for a company like Google.
So one of the things I love about your writing is that you not only talk about the law, but you you you provide the context. You set it in the context. Are you taxonomies it in history when you look at the intersection between effective or ineffective antitrust and good or bad things taking place in a society which firm, if you wanted to think about, you know, good for the Commonwealth, which firm do you think poses the greatest threat? Branxholme?
That's a good question. In terms of historic tendencies, I hate to beat a dead horse, but I think Facebook has been the most dangerous of the companies. They're just so close to the influence over politics and electoral outcomes that it's undeniable. Second, Amazon I don't see as a political danger, but I do see them as a danger. It's less of an antitrust issue, but to essentially the structure of American business. We really have one company selling everything in the whole country.
What does that mean for local economies? What does that mean even for physical economies? They're the second most dangerous just for the idea of a way of life that has concentrated power. And then Google and Apple, I guess, are third and fourth in I. There's things about Apple, which I don't like, but I guess I've mellowed on them. I think they have a product that they do have product a lot of people like. And, you know, if you want to pay that much for them, they're sort of like the world's biggest version of BMW or Mercedes Benz, maybe often too much on them.
Google has this bad expansionist tendency, having exhausted all the revenue in search advertising, they kind of go around trying to colonize stuff, which I think is bad for the Internet ecosystem, bad for entrepreneurs, but that's a little bit different than for the state of the republic.
Tim Wu is a professor of law, science and technology at Columbia University, is also an author and a contributing opinion writer for The New York Times. He is known for coining the term net neutrality and also writes about private power, free speech, copyright and antitrust. He joins us from Ann Arbor. Professor Wu, stay well.
Keep Rockin the Real World. You are a gangster and a role model.
Well, it's been a pleasure to finally talk with you. I don't know why we didn't talk earlier in a while, but, you know, these things happen.
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Welcome back. It's time for office hours, the part of the show where I answer questions about the business, world trends, career advice and more, if you'd like to submit a question, please email a voice recording the office hours at Section four. Dotcom, first question. Hi, Scott.
This is Rory here in Dublin. First of all, I want to know if you're still dining out on your Twitter prediction. And my question really is around Twitter and the subscription idea. How do you think it would work? Who would pay? What would they pay and what would they see?
Thanks a million, Rory. From Dublin. You sound like the guy I'd like to kind of split up or grab a Guinness with. My guess is Guinness, if you're in Ireland, is not considered great beer the same way Ireland is not considered great beer, the same way that Budweiser, if you're from the US, is not considered a great beer. Interesting thing we have we are genetically predisposed to mixing the gene pool. It's not a good idea to mix your gene pool with people who are close to i.e. family.
So some interesting studies about kibbutzes in Israel, beer, kibbutzes. Fifteen hundred kids, almost none of them got married to each other. But the kibbutz a couple of miles down the road, a lot of marriages, a lot of back and forth, because we have this natural, very healthy predisposition to mixing the gene pool that extends to the romance products and things like alcohol, food, cars that if they're foreign, if they're from outside, if they're that sexy stranger, we are attracted to it.
We want to interact with it. We want to mate with it, if you will. So as a result, Budweiser is considered a premium beer in Europe. Heineken is considered shitty beer in the Netherlands. And but wait, it's that foreign strange European blonde dude over here and we're very drawn to it. The foreign notion kind of comes through the desire to mix the gene pool anyways. Rory, I don't know how I got there. OK, so let's talk about Twitter.
So their user base rose 12 percent. Their usage was up something like thirty four percent, but revenue was down nineteen percent. Which means which means when you think about this and this is OK, a couple of words first here in mind. Second, we're blown. It means monetization per user for Twitter is off something like forty percent. They're getting forty percent less monetization per user. What does that mean? It means their business model is broken. It doesn't work.
So how it's subscription. How would the move to subscription work. One, it doesn't have to be the biggest part of their business if it just gets to one percent of the revenue. But it's growing faster than the core business. The markets will respond.
Why see above narrative versus numbers Rori?
And that is, if we move to a subscription model, it's the fastest growing part of our business. The narrative can change and we can start to attract that to capital such that we can pull the future forward.
Oh yeah. Future Miyamoto Scott. Anyways, Jack Dorsey said in his earnings call last week that he was considering subscription models.
Why? Because they've been listening to the dog. That's right. That's right. More to come on that. More to come on that. But anyways, how do they do it? I think it's pretty basic and it kind of takes too complex. The first is anyone less than 10000 followers. It's free ten to fifty thousand, ten bucks a month. Fifty thousand to 500000, 50 to 100 bucks a month. I'm in that category have approximately a quarter of a million followers.
Take me a long time to get there. And I'm disappointed.
I would have thought that the dog's genius would get me, I don't know, something like David Hasselhoff, like territory a two or three million followers. But that's neither here nor there. I should pay one hundred bucks a month. And then and then if you get the Kanye or Elon or I'm trying to think of famous people right now, that is huge followings or Kendall Jenner and you have tens of millions of followers, I think you pay 10000 bucks a month.
And by the way, I think it's worth it. I still can't figure out how Twitter makes money. I never see any ads. This is a tremendous platform, both in terms of your influence you garner and your ability to monetize that influence. I would happily pay and so would most people. So you just move to a user base driven revenue model and then I think he could have Nicias. I think you could curate some of the most influential people and things like politics or finance and then create distinct or discrete revenue or discrete streams, news streams that are highly curated and then charge people for access to those streams.
There's probably another dozen ideas that they should pilot and then they pick two or three. And as long as they get to one percent of revenue, which would be about seven million dollars a quarter, and that business is growing fast and their core business boom, I think you see Twitter at one hundred dollars a share and that's why I own Twitter.
I purchased it about thirty bucks, wrote the board. I mean letter. It popped a thirty nine. They didn't respond to me. So I sold, went back down, started advising a hedge fund, about two billion dollars worth of stocks. I bought some stock at about thirty three. It immediately went down to twenty eighteen. I thought, oh god, I hate this business and I. Myself, but I think that all the time that has something to do, a Twitter stock, and now it's back to about thirty six or thirty seven.
But trust me on this one, Twitter just gets to ten million dollars a quarter in subscription revenue shows any kind of motive for this.
And boom, shama lama that's let's pull out the good stuff that champagne and cocaine for El Paro this thing goes to a hundred bucks a share. Rori from Dublin. Let's connect over a beer or something else the next time you are in New York or I am and I am dying to go to Dublin anyway. Thanks for the question. Next question Papaji.
My name is Hamid from Nigeria. I fell in love with you after reading before great work and I really love your podcast. So I have a question. I'm involved with a startup with my co-founder. But the challenge is that my co founder has been unable to make any of the financial commitments very low cost and love bands. We have to do more people, but perhaps because he is from a fairly advantaged background, you can't contribute in any way to an overdose.
Is this a red flag? He started feeling bad and he's thinking maybe he should leave, says he's unable to make the commitment. But I think there's long term value that he will bring to the table. But not now, but because it's early stages, we need to assess. Oh, that's right. Now, what do you think we should do? Thank you. Thanks, Amede. Thanks for the question and thanks for your kind words. So I've always had until recently, I've always had co-founders and most successful companies.
Although one person usually gets the credit, they have co-founders, whether it's Paul Allen and Bill Gates, you know, Steve Jobs and Wozniak. And usually it's a marketer and kind of the face of the company who gets a disproportionate amount of the credit and then an operations person, a programmer or somebody who kind of knows the nuts and bolts of the company.
And there really is a whole that's greater than the sum of its parts. And your ability to recognize your partner's strengths speaks well to your business maturity. Now, as it relates to the notion, if one founder doesn't have the capital that the other founder has, that doesn't mean it's the end of the partnership. The way I would look at it is there's common stock and there's preferred stock. Common stock is what is given to the employees in exchange for their commitment of their time.
And you both should split that. You put aside a pool for other employees. But whatever is there for the founders, if you will, the founding employees, you guys split that. However, however, the company is going to need some capital as a startup to get going. And if you contribute the majority of that, you come up with maybe some sort of valuation for the company and maybe ask some outsiders what realistically would be sort of a valuation range for a small company just getting started in Nigeria.
And they might say, OK, realistically, this company is worth, I don't know, a quarter of a million dollars. I'm pulling that out of the air. I don't know what kind of company it is. And if you come up with that first 25 or 50 thousand dollars to get the company going, then you get 10 percent of the company. A preferred stock preferred stock means you get your money back first. It has advantages, sometimes better voting rights.
But you get that, quite frankly, you're the you're the investor. And so I think there's absolutely a way around this. Also the key to any partnership and I think this is from business and I think it's true in marriage, is one being generous because you will have a tendency, a natural tendency to overestimate and inflate your own contributions and minimize there. So the best partnerships are ones where you not only appreciate each other, but you have transparency on a regular basis.
You sit down and year your grievances, but you always try to come to that partnership with a spirit of generosity. Congratulations. Best of luck to you. Keep keep us abreast of your progress and I hope you and your partner figure things out.
Next question. Hey, Profaci, this is Michael from Tempe, Arizona. Long time listener, first time caller. You've been speaking a lot about how the pandemic is a catalyst for much needed disruption within the education space. One of the more interesting topics you discuss is micro certification. As an I.T. professional, I've had to take various Kampia or eight of US certifications to level up in my career. It's easy to envision a future where marketing or sales positions require more granular certification than a wide ranging bachelor's degree.
My question what are your thoughts on the bootcamp industry?
Startups like App Academy and Lamda School are offering technical training programs, and the publicly traded to you has been partnering with universities directly to run similar programs. Do you think this model of NATO specialization is the next big thing? Also, what are your thoughts on an independent education program like Lamda School compared to two years university partnership model? Thanks in advance.
Thanks for that, Michael from Tempy. OK, so micro certification, you touched on it. Few things, they're the primary benefit or the primary value add of a university diploma or the education, whatever you call it. There's there's the education, right? You actually do learn stuff. There's the networking, there's the experience. And then but more than anything, more than anything, it's the certification. And that is the majority of the return on investment of three hundred eighty thousand dollars, which will cost you to go to Yale for four years, is received when you are admitted, and that is for the rest of your life, having that certification that you graduated from Yale and even more importantly, even more importantly, they got into Yale, will yield millions of dollars in benefits now because education is figured out a way to have a cartel, because university administration has figured out a way to raise their compensation much faster than inflation, thereby passing on extraordinary tuition costs, playing on the hopes and dreams of middle class America.
Tuition has exploded and a lot of those Tier two brand certifications are no longer worth the money. And we're coming to that realization in covid-19. It is really the certification.
So if you can build these kind of micro brands that any due diligence shows that if this person took this class and coding or comedia, by the way, I'd never heard the word comedia and I'm sure everyone else has. And I said, know what I mean? But that kind of micro certification, I think there's a big field in it. What's interesting what's interesting here is I wonder if we move to. A system where your certification is going to be a function of where you get in, and that is can you see kids getting into Harvard, Yale, Stanford, MIT to some of the best schools and then not going and just putting on their resume that they were admitted to Harvard, but they didn't go because it feels as if the new kind of idols are the profile of the true disruptors in our society or someone who goes to Harvard decides that it's not worth their time.
But anyways, I wonder if we end up with some sort of certification or all kinds of testing to say this individual, regardless of the formal education, is certified in X, Y and Z. I think that's probably where we're moving. So let's talk a little bit about boot camp and to business. When I reported the global coding bootcamp, market size is expected to grow by almost half a billion dollars in the next four years. Why? Because they're cost effective.
The typical cost of coding boot camp ranges between 5000 bucks and twenty thousand. Proview, my online education startup, where we're doing basically to experience what we're trying to offer, 70 percent of an elite MBA elective at 10 percent of the price. And by the way, I'm a capitalis, it's a for profit company, but anyone that's interested in taking this one of these classes can apply for a scholarship. And just to give you some insight, it's unlikely you won't get it.
We don't turn anyone away for not being able to afford taking a class. But anyways, back to to you at the Academy Lamda School, all off for kind of Fifty Shades of Grey. What they have done is they've taken advantage of the fact that there is the innovator's dilemma in universities, and that is we are paid not to innovate. And that is the people who have the power, mostly tenured professors, that, as they reach the most unproductive years, are awarded lifetime employment and make hundreds of thousands of dollars a year, plus expenses for increasingly little productivity.
And in order to justify that, we've created a cartel, we've raised prices faster. They want to use every weapon of mass entrenchment not to disrupt themselves. So what's happening this fall? I have 400 students, why do I have foreign students, I typically have 160. Why do I 160? Because the room to 60 and the and management center only holds one hundred and sixty kids. But since I am teaching all online, as I have told them, I am not stepping back on campus until there's a vaccine.
I now have four hundred students. So as before, universities had a 30 80 year old at 30 percent of the instructors were teaching 80 percent of the students. It's about to go to ten ninety, meaning that the vast majority of faculty are no longer going to be really at any value around teaching. They're going to be relegated to the research. The majority of tenured professors get by with this sort of peanut butter and chocolate cocktail of being B plus lectures and B plus researchers.
But when they immediately go to F teachers, because everyone can take the professor they want and they're not limited by the actual physical space, which will create a flight to quality, then there'll be a lot of pressure on tenured professors to actually produce research that is relevant. And they don't like that kind of accountability. They don't like that kind of pressure. So for the last decade, you have seen incredible resistance to technology, incredible resistance to anything that upends the status quo.
And I think that is about to be flipped on its head. Look for the mother of all disruption and one of the largest industries in the world to take place in the next few weeks as we realize that people are not returning to campus or they shouldn't return to campus, we're going all remote. And it makes no sense to pay fifty eight thousand dollars for what is effectively a streaming video service to cost five thousand eight hundred times what Netflix costs. Think of it.
At the end of the day, these streaming video platforms are nothing but organizations that spend billions of dollars on intellectual property and content and distributed over broadband for anywhere from five dollars if your Apple TV to twelve dollars if you're Netflix. Well, Harvard effectively is a streaming video platform charging fifty eight thousand dollars a year. Now, granted, you get a much better certification. It's worth it. But what if you're a second tier school? What if that certification doesn't mean a lot?
What you pay forty eight thousand dollars. So that streaming video platform? I don't think so. So some of these micro certifications, there's unbelievable opportunity and in certification. So whether we call micro certification or something else, but that is kind of where the real return is. And I think you're going to see a boom boom in that industry.
Michael from Tempe, Arizona, a real innovator in the space, a real innovator, Arizona, just a an innovative place in general. I'm not sure where I'm going with that. So I'll end with. Thank you for the question, Michael. We love your questions. Please email us a voice recording at office hours at Section four Dotcom.
Algebra of happiness, what role do substances or addiction or activities play in your life or activities that are somewhat addictive? The general litmus test for people around whether or not they have a problem as if they're living under a bridge or they feel physically addicted to something. And that is the wrong litmus test. The majority of alcoholics, something like eight or nine and 10 alcoholics are functioning alcoholics and that is not living under bridges.
They're still able to make a living. They're still able to put on a facade that things are going just fine, but they are struggling or that is their life is not as good as it could be. And again, the litmus test isn't that you have a shitty life. The litmus test is could your life be better? And something I encourage my kids do. When I said kids, I mean my students look at all the things you ingest, whether it's shopping, e commerce for night video games, marijuana, alcohol, x, whatever might be.
What are the things where you get some sort of titillation or Namu and what role do they play in your life? And by the way, I am absolutely not a teetotaller. I love to drink. I think I'm a better version of me with alcohol, but I like to think that I take decent or conduct a decent audit of everything I do and decide when it's time to dial it down. When I moved to New York to become an investment banker for Morgan Stanley every night I would go downtown and get shitty drunk with what felt like other very successful people.
And I realized after about a year of that nonsense that I would generally be just less shitty at a bunch of things, whether it was my workouts or maintaining relationships or just being better at work. If I didn't drink as much, I didn't stop drinking, but I decided I would drink less. By the way, since then I've gradually toggled my way back to drinking a lot. But that's neither here nor there. Take stock, do an audit of all the things in your life you ingest and decide.
Would you generally just be a little less shitty at some things if you smoked a little bit less pot and try and allocate some of that time, energy, money, whatever it might be, to something that you think if I did a little bit more of this, I'd be a little bit better, but take stock of the real substances, play in your life and recognize that addiction addiction isn't a litmus test. A litmus test is what can you do?
What can you do less of such that you can have more specifically, more of life, more of relationships, more physical activity and more of self. Our producers are Caroline Schaefer and Andrew Burrows, if you like what you heard, please follow, download and subscribe. Thanks for listening. We'll catch you next week with another episode of the show from Section four in the Westwood One podcast network.