Has the Silicon Valley Bubble Burst? A Conversation w Jessica Lessin & William Cohan 50:58

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Hi, everyone from New York Magazine and the Vox Media Podcast Network. This is Mad Money with 64% less screaming. Just kidding. This is On with Kara Swisher and I'm Kara Swisher. And I'm Naima Raza, 64%. That is how much Meta's stock price dropped in 2022. Yeah, and that was good, actually. Some of the others were down 80, 90. Apple was sort of the best in around the 20 range, which was considered up.

given how much tech stocks were hit. But yeah, pretty big declines. There's a little bounce back happening right now in the markets because January, people are feeling good, Kara. The stock prices, Bitcoin is up. Yeah, okay, sure. Is that why you're out in San Francisco? No, no, I'm just here because I'm just here. I love San Francisco and it's actually nice. I love the city. I

I'm so glad the tech people have moved out, the jerk ones. And the nice ones are left. So here we are. We're very happy. But tech has had a tough year. Yeah. Like Facebook, I think. Urmetta hired 30,000 people during the pandemic that had to lay off more than 10,000. Yeah. And there's so much happening right now. There's regulation in Europe. Obviously, Apple's privacy tracking has changed advertising business. Activist investors are jumping in. Elliot just, I think, came into Salesforce this week. Mm-hmm.

Layoffs like crazy. Elon's are the most notable, but everybody is doing them. Have you seen tech in such chaos before or does this feel different? It's not chaos at all. No, it's just changing. Okay, so have you seen tech like this before? Yes, yes. It's been much worse. I mean, what's really interesting is, you know, young people who are working here haven't seen this ever happen because...

because it went on for 13 years. But there's been busts, you know, in 2008 was particularly bad, 2001 and 2. I was here for all of them. So no, this is not at all the same. And, you know, there's a little off in spending, I suppose. There's a little bit less venture capital money, a little bit valuations, but this is minor compared to previous ones. I worked at Google for a bit. I almost worked at Stripe, et cetera. I remember thinking,

how cushy the jobs were that they were offering. This is 2012 to 2014, so before what you're calling the frothy years. But Stripe, for example, they paid for dry cleaning. They say there's no such thing as a free lunch, but you could have free buffet all day. Yeah, it's been frothy the whole time. This is not a group of people that suffered even an iota. They get jobs right after things. There's numerous startups that start in the downturns. I don't feel sorry for any of these people, almost in any way. Really? You don't feel sorry?

Sorry for any of these people losing their jobs. No, no, not Kentucky coal people. Yes, I feel sorry for them because they have no alternatives. These people can do startups. There's lots of job opportunities at regular industry. There's lots of studies, but most of them find jobs within three months. And then they have nice severance. Most of them have nice severance.

I feel a little sorry for anybody who's going through a transition, though I think there's like a new thing. Like getting fired, by the way, or getting laid off is a great thing. It's a good opportunity to figure out what you're going to do next. If you're a skilled worker, there's a lot of opportunity. These are highly skilled, highly paid workers. By the way, most of the country is actually there's two jobs for every one person. So that's a really buoyant outlook for most people who don't have this high-level training. And so these people will figure it out.

Honestly, seriously. They don't have a kombucha today. They'll get it tomorrow, and that's the way it is. Your heart has only grown bigger since the surgery. Every cafe here is full up with people with laptops typing away. Drinking $11 smoothies. I'm telling you, it's just fine here. They're just fine.

I share in your bullishness, especially because of AI, especially because of sustainable tech, and also because the markets seem to be rallying. They're saying that the Fed, you know, markets are pricing in an expectation that the Fed isn't going to cut interest rates. The Fed is not saying that they will not do that. But markets are bouncing back.

But this is the big question of today's episode. What is going to happen to tech? And does the stock market, you know, the ebbs and flows, amidst all that noise, what's really going on? That's correct. So we have two guests in to talk about it. You know both of them very well. Jessica Lesson is the founder and CEO of The Information. Yeah, she's amazing. She might have taken over my beat after I left The Wall Street Journal. She actually left and started The Information, which is really great tech news. And not just tech, they've

expanded to media and other things. So just a really great journalist. And she was really early on the subscription. It's an expensive but valuable subscription. She is. She was very early. We did not have subscription at Recode, and I kicked myself. I have not done that, but she's very savvy. She's very savvy. That's okay. I don't feel sorry for you like you don't feel sorry for the tech workers. Okay. So William, and then our other guest is William Cohen. He's a founding partner of Puck

who covers what's really happening on Wall Street. He's a best-selling author, a former senior Wall Street M&A investment banker, and a friend of Pivot. He's great. He's written lots and lots of smart books and was a writer for Vanity Fair. Just really one of my, I just, a go-to person. There's a couple of go-to people about finance and he is at the top of that list and has been really sharp on especially the Twitter stuff and just most recently the crypto stuff. So very excited to talk to him.

So Jessica and Bill Cohen, what are you most interested in learning from them today? That they're not sorry for these people either, which is true. You know who we're sorry for? The people who work in the cafeterias, the people who clean, the people who take care of these little princelings. You know that sorry is not like a zero-sum game and you can have empathy for more than one person. I do not feel sorry for princelings. I'm sorry. I'm just not going to do it. I think the people who work there, though, that's really been hit. And they definitely depended on those companies' work.

staying staffed and coddling these people. So we'll see. What are you most interested in learning today? Most interested in learning about what are the flaws in the system that allowed...

tacked to get as frothy as it got. And particularly, I want to understand the role of venture capital. Because we asked Keith Raboy about it. A VC said to me in 2021 that VC in the 2020s was like banking in the early 2000s, right before the crash. Any idiot could do it. Yeah. Keith kind of agreed and laughed when we asked him about that. So I'm curious if we think that will change. They got out of hand. There's been SPACs. There's been a lot of IPO delays. So curious if that will change and if there'll be more

Doubtful. Doubtful. Okay. Well, let's see what our guests have to say. We'll take a quick break and we'll be back with the panel.

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Welcome, Jessica and Bill. I'm so pleased to have you here. Tech stocks got beat up recently. The FANG stocks lost more than $3 trillion in combined market value in 2022, but they're off to a strong start this year. As of this taping, Netflix is up about 25% to date. Meta, about 18 of the five alphabet has the weakest showing so far this year. They're up about 10%.

Bill, why don't we start with you? What explains the recent rally and then the downturn before that? Well, the rally is probably connected to the downturn. The stocks were probably oversold. I mean, you know, Netflix was considerably oversold. I mean, when you have an army of 220 million people that you can command, you

sort of week in and week out. The fact that you lose a couple million, now they've gained seven million. I mean, so that was being oversold. Now they're laying off people, which of course cut costs, so they'll probably result in greater profitability. You know, let's not focus too much on the poor people who lost their jobs. Let's focus as usual on the bottom line. So, you know, the combination of being oversold and them making cost cuts probably is what's winning the day here. Jessica, what do you think? I agree.

I agree. I think there's a glimmer of discipline when it comes to cost cutting, which was really, and Kara, you know this, I mean, so unusual for these tech companies. I mean, the idea that Google is laying off its prized, highly paid engineers who it used to hoard even during downturns

it is a cultural change. So I think it's a cultural change Wall Street wanted to see, but let's not forget how grim the picture still is overall in terms of how far they've fallen. Yeah, they're still way down from their highs. So talk about that. Were the last 10 years a mirage or is this dip a blip? How do you look at that? I think there's two things. One is just simply macro, um,

As inflation goes up, the growth stocks, which tech have been, are going to get hit harder. And that's happened. I do think there is this existential question of what the big tech companies are going to look like 10, 20, 30 years from now. You know, the business models that made Facebook, Facebook slash meta, Google, Google, even Amazon, which still really isn't making money from its core business.

These questions are kind of catching up with the companies. And so while I think there is still growth, there are a lot of big questions right now. And in this economic environment, Wall Street is really pressuring them. So, Bill, that's an interesting thing that Jessica brought up, this idea of old companies, because now they start to feel old or antiquated or in some way sort of relying on past victories. Right.

Well, you know, they are all trying to reinvent themselves a little bit, right? I mean, Alphabet used to be called Google. Now it's called Alphabet because they're trying to, you know, make it seem like they're into other things besides Google. Their Google technology, which is now under threat from Microsoft and ChatGPT,

So Jessica is absolutely right. I mean, what are these companies going to be when they get out of this incredible growth phase they had when there was cheap money and people were willing to just bet on these companies becoming immensely profitable with high profit margins and valuing them at extraordinary multiples?

But, you know, I think it's also important to, you know, recognize that there's been layoffs. And as Jessica said, there's some, you know, cost discipline. But let's just note that it's kind of modest. I mean, just like Alphabet, you know, in 2018, they had 100,000 employees. In 2022, they had 187. Now they're down to 175,000. So it's up. It's a plus. Yeah, exactly. So that would have been overhiring previously. Well, I mean, yeah.

You can say it's overhiring or you can say there was huge demand for their goods and services and the markets were robust. And I mean, certainly that's what happens on Wall Street. They hire to meet the demand to keep people really churning it out 24 hours a day. And then the easiest thing to cut when the business falls off the- These are software. Go ahead, Jessica, what are you saying?

I mean, I think it's a fascinating question. Everyone's looking at their buddy Elon and thinking, okay, how big do these businesses really need to be, right? That's right. And if Elon for a software company can slash the workforce in half, now Google's not going to do that. But I think what happened, we had this era of the last 10, 20 years where these companies were just minting so much money, they did not know what to do with it.

And they were cut checks to engineers. And I think, and they hired every engineer under the sun. And, um,

There's a real question of what their business models kind of support going forward that I think candidly that they aren't reckoning with enough. Right, right. Because the beauty of their businesses is supposed to be that you don't need, you know, thousands of people to man the trading floors or whatever. I guess you don't need that now either because of technology. But I don't know that they've come to terms with it. But they're watching Elon because he certainly has.

Right, because he's cut back. Now, you could argue about the quality of the product or whatever. You need this resilient system. Do you need to pay them this much and give them all the things that they give them? What's the role that venture capital is in driving up these valuations? Jessica, you and I have covered venture capital for a long time, and they always seem to overpay. There's very little bit of underpaying when it comes to venture capital. I mean, another fascinating thing happening right now is the playbook that has worked in venture capital over the last 10 years was...

just hope that Tiger Global would come in and pay more. The exit market was to these late stage growth investors. And VCs in the early rounds didn't think about the underlying value. They thought, how much is Tiger going to pay? And that game has also come to a crashing halt. And so I'd

think there's actually a real moment of reckoning in VC right now where people are very confused. They're not sure how to value companies. And you see your sort of common FOMO around the hot deals of the moment right now. That would be in generative AI. But I think the bigger question of where the big returns are going to come from, how you price them, no one knows at this moment. And that's also creating some kind of weirdness that's kind of funny to watch.

Bill, when you think about that, does that make tech stocks overvalued? You're both tending to say there's still too many costs for what they're doing right now. Look, I think it depends on each individual company and situation, right, and how far over their skis they got when prices were being driven up.

You know, to me, it's unclear what the, say, what the chat GPT valuation is that, you know, the $10 billion that Microsoft is putting in. But it strikes me that that's probably way over its skis. I mean, everybody would be so excited. You can see that desire to not miss out, that desire to just get in on what might be something hot just never seems to go away. I mean, because chat GPT is probably way overvalued at this point. I mean, it has...

little revenue and no profitability probably. And yet it's probably valued at 30, 40 billion, whatever it is. I mean, you know, 30, 30, 30 billion. I mean, okay. So, you know, a year ago, 20 million in revenue at the end. So yeah. A year ago, FTX was valued at 32 billion today. It's worthless. So,

And you'd think that that message would translate and disseminate it into the wider market. But there's something about human nature, Kara and Jessica, where people just feel like they, and especially if you're in the venture capital business or the private equity business, you get paid to put money to work. You don't get paid to sit on your hands. And you know you're running a portfolio. You know that...

90% of what you're doing or 80% isn't going to work out. And it's going to be the 20% that hit the 10 baggers that are going to carry you. You're touching on something else. And Jessica, I'd love you to comment on this, is the shiny thing. Like now it seems like, yeah, yeah, we're done with crypto. And everyone was, you know, you've been inundated with crypto stuff and telling you how stupid you were not to understand it. Now they've moved on to chat GPT with this. Is it a shiny thing? So, you know, there's certainly this...

There's a lot of hype around AI startups right now. I do think that AI is a platform innovation, to me, kind of akin to cloud in the enterprise transition, right? I think that there will be technology developed that will unleash a lot of

real impact and economic impact for a wide range of businesses over the long term. Now, who controls that, whether the big platforms do, the kind of economic model around that, how quickly that gets open sourced and commoditized, those are huge, huge questions that even the investors in open AI, you know, will privately admit that they have no

idea. And those are the risk factors, but they want the logo or something like that. So I do think it's important to separate. I will say AI feels more like cloud to me than crypto, in part because I just think there is very, very interesting technology. It's also hard to know, though, because so much of the work is being done inside big companies like Google. And

And I think OpenAI has the strategy of being out there because they're not the incumbent. They want to kind of capture hearts and minds. Show off what they're doing. But I think it's very hard to tell what's happening in the oceans beneath. Yeah, it could be very Netscape-y if you remember how flashy Netscape was and then Microsoft just moved in. Can I just say I'm very much against this whole overhyping that goes on across the

the tech, largely tech companies, not only tech companies, because obviously Tesla was completely overhyped as well. But this overhyping that goes on constantly,

year after year after year, cycle after cycle after cycle, driven by venture capitalists, driven by the Wall Street underwriters, driven by research analysts, you know, fear of missing out. It's like one thing after another, things get hyped every single time. And no one ever steps back and said, you know what? All this overhyping game isn't really doing anything for anybody. I agree, Bill. I think there might be a...

you know, certainly a little bit has changed post FTX. Now, I don't think that that big human psychology changes, but I think we reached a peak of bad behavior around that post pandemic when everyone was printing money. You know, you had Sequoia, one of the most well-respected investors in Silicon Valley, plow money into a company that was too risky to operate in the U.S., right? FTX couldn't even operate in the U.S. And Sequoia,

didn't think twice about cutting a check. Now, you know, we're hearing their diligence is way up. You know, LPs are pushing back. I don't think it changes the big picture, but the Valley does go through cycles of kind of accountability here. And we're certainly at a different point. Though I do think Bill's correct, the jazz hands element.

Because if you do say, I don't get it, like I don't get it, like we did with WeWork on Pivot, for example, or crypto, I don't get it. People are like, you're an idiot. You don't understand. Or Theron, we don't get it. So do the people each of you talk to...

Jessica, first, I mean, because I don't think they do. They're just on to the next thing, it seems like to me. Yeah, I mean, tech exceptionalism is still doing quite well in terms of their own minds, right? Yeah, exactly, right. I think, and, you know, we had an interesting piece this weekend about, you know, Marc Andreessen's constant efforts to make himself a media mogul.

right? There's always going to be the Marc Andreassons of the world who think they could do our jobs better, right? So I think that ego is very much intact in there. And that's behind a lot of this disdain for people who ask the questions. And yeah, I think that's there. A little bit to argue the other side, you do need a touch of idealism to set out and build something. And so we don't want to

Totally discount that. And for a different subject, right, the growing sort of disconnectedness of some of these tech elites is still quite strong and I think very sensitive to criticism, as sensitive as ever. Yeah, I always say their planes get bigger and their worlds get smaller. It's sort of like on Succession, if you notice, their worlds are very tight. Bill, how do you look at that? How do you cure it? Because...

Jess is right. You have to have a certain amount of, you know, this pig can fly. I don't care what you say. This is a flying pig. How do you cure it of that and at the same time be like, this isn't really a business. Come on, stop it. Yeah, I mean, obviously there are an amazing number of new technologies and new innovations that we want to nurture and encourage because they really do make a difference and they do change lives. I mean, think about how the internet changed all of our lives.

Like even this conversation, right? I mean, it wouldn't even have been possible to do what we do before the internet. But

there is this corollary to that of, let me assure you, the fragile billionaire ego is alive and well. Like Elon Musk has learned nothing from his experiences over the last year, right? You know, he's testifying in court that, you know, his effort to take Tesla private, you know, he wasn't joking around. He really thought he had the money. You know, he's not contrite. There is just this sort of

part of human nature, part of the hype machine, part of the way Wall Street works, part of the way venture capital works, part of it gets back to incentives. Venture capital firms are rewarded to put money out under investment. Bankers are rewarded to do deals and underwrite securities and take companies public. And, you know, even if it's SPACs, which are a bunch of garbage that everybody knew were garbage, but happened anyway. So you want to try to rein that in with

things that are legitimately new and exciting and are going to make a difference and aren't going to change the world. Yeah, SPACs. SPACs. Remember SPAC? Gosh, we had a SPAC conference, you know. Oh, how that could... Pulling back the curtain on the SPACs. I also wonder, Bill, I mean, I...

It does feel to me a little bit that there's a changing of the guard, particularly in the tech industry. I mean, I think some of these things you mentioned, Elon, going on and on. I mean, he's still clearly important in many ways, more so.

people are tired of it. I think people in tech are tired of it and just sort of who's next, you know, who are the new faces? Who are the new people? Who are the new investors, right? I mean, it's subtle, but I feel it and I think it is important. Now, the economy is doing all right. The regular economy, which is not this one, is doing all right. Unemployment's low. Growth is decent. Even Larry Summers, who is often negative, is talking about a soft landing. Is there

Is there a relationship anymore between the tech industry and the overall economy? Bill, you first. I'm laughing because people used to say, well, is there any connection between Wall Street and Main Street? Is Wall Street the real economy? And people would say, no, of course not. Wall Street is not the real economy. And I keep thinking, yes, Wall Street is a mirror towards the real economy. There is an absolute correlation between Wall

the way stocks and bonds trade on Wall Street, what investment bankers do, capital that's raised, and the real economy. And there is a correlation. There always has been. So is tech a reflection? Look, unemployment is incredibly low. I'm telling you, people are talking about a soft landing. And I love Larry, and he's very insightful. He called inflation right.

But the moment that these cumulative layoffs start adding up and the unemployment rate starts going up,

And you know they say that you know a recession is when your friends out of work a depression is when you're out of work when the unemployment rate kicks up and Young people realize they can't just you know pick any get any job they want or they can't say I'm not going back to the office because I don't feel like it You know and you go find somebody else when it's the news starts tightening nothing focuses the mind at night like an execution in the morning and

So, you know, when when realize you may not have a job or it's going to be harder to find the job you want. Guess what? The locus of power, the shift, the pendulum swings back, swings back to the employers. And that hasn't happened in a while. Once that starts happening, you're going to see a big change in attitude. Jessica, do you see that in the tech companies? You see it a little bit. Yes.

starting to happen. I mean, we reported yesterday that TikTok wants people to work in office now, you know, no more remote work. I think people are managers here really rooting for it, but I don't know that it's happened in full force yet. But in small ways. This episode is brought to you by Shopify.

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All right, let's do a lightning round. I'm going to name a few companies. I want each of you to tell me two things. First, I want to get a general forecast with direction the stock is headed in 2023 or their business, if you don't want to talk about their stock. And second, what should they be focused on? Let's start with Meta, currently selling at about 40% of its all-time high. Jessica, you start. I am

No meta prediction for the next 12 months because I honestly have no idea. I'm waiting to see with earnings. I mean, the trend has been so bad with the ads business. And I think it's still going to hang on that as much as Mark wants it to be a metaverse company. I think they should focus on

Crush in the ads business. I mean, metaverse is important, but they've got to really focus on the core in the next 12 months. Bill? I'm a Scott Galloway fanatic on this one. Why anybody would want to put anything on their face does not improve their cosmetic appearance at all.

I do not understand. And I think this is a major mistake by Mark Zuckerberg. I mean, couldn't happen to a nicer guy, I don't think. So, you know, he's risked it all and he's going to pay the price. I'm not saying one at all about the future of Meta.

All right. I'd say it's a buy because, as Scott and I both agree, it just mints money. It's business. It's ad business. And if he'd focus more on it the minute he does and cut some – if he cut a little bit off of the Oculus stuff, I think the stock would soar. All right.

while everyone's weighing people off, they raised their minimum wage to $22 an hour to nip a unionization movement in the bud, potentially. Each of you. Jessica, start. You know, I don't think you can count Apple out. So I think you have to be positive on, you know, the next 12 months and the business because it's just, and I've been covering Apple for more than a decade and I've always said, what's after the iPhone? And it turns out it's the iPhone and we're kind of slowing, but it's still happening.

But hopefully this year we're going to see, as we've reported, their first AR VR and we've published some renders of it. And I think that's going to be a moment of truth. I do think they're going to face a tremendous amount of pressure across the business. I mean, the scrutiny on the app store that we saw at the end of last year, people turning on it publicly was unlike anything I've seen in covering the company. And so I think there's going to be a lot of noise and a lot of sort of

new kinds of challenges. What should they be focused on then? Regulatory? Yeah. I think they've got to be focused on regulatory because everyone's coming for them and they, you know, that's inevitable. I guess China too, honestly. I mean, that's the other big thing we can't forget. Oh, that, you know, Tim Cook was the savior for creating inroads for them, but he built a dependency that's now, you know, a ball and chain around their leg. They can't get out of it. They're trying to get out of it with India and Vietnam. Go ahead, Bill.

I don't make stock recommendations, but I'm a big fan of Apple. I think Tim Cook is one of the most unheralded CEOs ever. He's created so much shareholder value. Nobody thought anybody could possibly succeed Steve Jobs. He took it over when the company was worth $300 billion. Now it's worth $2.25 trillion. No CEO in history has created that much value.

I don't see anything to stop it. They've created their own talk about their own metaverse, their own universe, their own insular world. And people are devoted to it. And it's incredibly sticky. You know, congratulations, Tim Cook. Which should he be focused on now?

Sounds like his successor. Who's going to follow in that? He should be focused on his successor. They don't really make acquisitions. But he's going to, is it the car, the Apple car? I would think the Apple car would be huge.

success because people love the quality of their products. Okay, so Microsoft, they mostly missed the January rally. Their earnings report just came out. They recorded their slowest sales growth just now, today, in six years, last quarter, but growth in the company's cloud business was slightly better than expected. Shares are up after trading. Jessica, Microsoft.

I'll be bullish, honestly, because Satya's done a very nice job and the business has had a lot of momentum. But cloud, cloud, cloud, enterprise, enterprise. I mean, I think the entanglement with open AI or whatever it is, is because Microsoft has been behind. Microsoft research was not moving as fast as it needed to be. And

And, you know, this is a brutal world where AWS is still very, very dominant. And so I would focus on that. We know they're going to try and focus on consumer, which I kind of say, oh, man, really? Like, aren't you glad you didn't buy Yahoo? Like, you know, they don't want to be IBM. They want to have something new. I mean, that motivated their pursuit of TikTok. So I expect them to make some big moves in consumer. I would advise them to focus on enterprise.

Yeah, I think they've got to be concerned because I don't think their Activision Blizzard deal is going to go through. I think Soch has done a really admirable job. A little rough on the layoffs, but that's always going to be a tough assignment. Just keep on what they're doing. I think they're very well positioned. I would be a buyer of Microsoft assets.

For the long term at this point. Okay. Alphabet, they recently declared a code red after they saw what chat GPT can do, and they just got sued by the DOJ. Thoughts, Jessica? I mean, this is a tough one. I really think it, I'm very curious what's going on in Sundar's head right now, because I tend to believe, and Google still has incredibly smart people, and I'm kind of curious what they're working on.

because we're not sort of seeing it manifest. And they're constrained up the wazoo from a regulatory point of view and maybe have to spin off their ad marketplace business because of the DOJ. So I would say stay focused on cornily innovation and trying to, you know,

build some stuff that can get real traction and that people want to use because that's what they've been best at, but they seem to have, you know, gotten distracted. They feel the most aged of the companies. Bill? Well, I think the threat, you know, the chat GPT threat is overblown. Yeah.

I use Google about a billion times a day and chat GPD about zero times a day. So I don't really see that changing. I think the biggest problem for Google now is cultural. You know, the lifetime employment, the cushy,

the half of the floor. I'm sure you both have been to the Googleplex here in Manhattan. I mean, like half of every floor is gourmet restaurants and salad bars, et cetera. And it's delicious. Let's be clear. And it's delicious. And so you can curl up and take a nap and you can go on your skateboard and you can have a yoga class. All those cultural elements

Have they been shattered by these layoffs? And is that going to change the culture? Is Google still going to be the place that the smartest people coming out of graduate schools and college want to work at? Yeah. No, it's not just the low performers and low earners that got laid off, by the way. Employees with good reviews and big salaries got canned, too. Does that surprise you, Jessica, just as an extra? It was.

bit surprised by it. Yeah. When we reported some of the details of the layoffs, I was. Because again, I mean, back in the day, Larry would have found like six other jobs for those people. Like his whole MO, Alphabet was designed to park senior technical people who wanted pet projects and he didn't want them to leave to do it elsewhere, right? He wanted to keep their people. So yeah, I think it's

It's been a gradual change, but it's certainly one. All right, two more. Amazon, they just launched a subscription prescription drug service, which I might use. Jassy has had some rough road. There's rumors of Jeff Bezos coming back. Jessica?

I'm intrigued by their moves in healthcare, the one medical stuff, one medical acquisition, you know, what they've been doing with prescriptions. I mean, that is a huge market that, you know, go way back. Google has tried to tap, others have. And I think they're taking a different approach with it. And so I am, I don't know that I would put all my eggs in that basket. I think just, you know, Jassy's come in and kind of just like gotten a rain on costs and

cut back some of the freewheeling physical expansion, Alexa. So I think that's a good thing to focus on. But I am intrigued by the healthcare stuff. I couldn't say either way 12 months from now. I think there's got a lot of challenges, but there's some interesting seeds planted for Nextax for sure. Bill?

You know, I have questions about some of their acquisitions, to be honest. I don't think Whole Foods has worked out well. You know, I don't know what they're thinking about with MGM. Did that work out? Is $9 billion later? That's a lot of money. The health care initiative. MGM Plus is coming. MGM Plus. Oh, boy. Just so we need more. Another streamer, Cara. We need another streamer. You know,

Look, if Amazon didn't have AWS, I think we wouldn't be talking about Amazon. So congratulations on AWS. That was incredible. That's been brilliant. And it's stronger than ever. So, you know, good for them. But the rest of it? Yeah, I don't know. All right. Now, last one, Netflix. Reed Hastings is headed out. The ads are headed in. More co-CEOs, et cetera, et cetera. Jessica? I mean...

It's really hard to say. I mean, the competition is so intense and I think they're in a very strong position, but you know, it's getting harder and harder to differentiate. And so I think that's what they have to keep doing. I mean, for better or worse, they're a media company. Everyone wants to be a tech company, better multiples, but like the business moves on the quality of their content. So making sure they can continue to produce hit after hit is kind of the name of the game. And, um,

I would stay really focused on that. I think if they can do that, I'd be bullish. But I think if they lose the content edge at all, you know, they're kind of toast. And, you know, the advertising business is nice and they'll figure it out. They've got a great team kind of working on it. But, you know, it's a hit driven business and they're going to need the hits. Bill? Yeah, I mean, I think their content is sort of in, you

you know, kind of sideways for a while now, you know, um, they've had some great content, but lately not so great. See, I don't really think that content matters quite as much as I think Jessica, uh,

I think what matters to me is the army that they control. 227 million people paying monthly subscription fees bolstered by those that are going to have to start paying when the sharing of the passwords goes away, when they introduce the new tier in advertising.

Bill Ackman. They've got a nice flywheel is what you're saying. They got to thank you. Oh, I'm so glad we use the flywheel analogy. True business podcast. Exactly. Look, you know, Bill Ackman has been an incredible source of narrative richness for me for, for 15 years. Uh,

And he's made many smart moves, many really quite dumb moves. I think, you know, investing in Netflix was smart. Selling after the first quarter of last year's subscription numbers going down was a big mistake. Big mistake. And I wrote that at the time. He should have stuck with it. And the stock has rebounded incredibly. Their numbers have rebounded. So Bill Ackman, nah on that one. But I'm a big Netflix fan and fan.

The army that they control is extraordinary. Mm-hmm. Mm-hmm. It's one of the last things I would leave, I have to say. I actually do think they've had more hits, though, Bill. I mean, Wednesday, they've got—I always find something on there I want to watch. Between them and Disney+, they're the last ones to go, largely because my daughter would murder me in my sleep if I got rid of The Frozen. Okay.

I'm kind of a fan of Apple TV these days and the newest ad. There are some gems there. Anyway, I want to finish up by talking about the overall mood in the Valley. The DOJ and eight states have sued Google, as I said, today. They want to break up their ad tech business. I talked to Tim Wu last week. He worked for President Biden. He made the point that big tech is now under constant government monitoring. But that said, the government's done nothing. This government, the European government, certainly has made a bunch of moves.

What do each of you make of that scrutiny? Does it really matter if nothing ever happens or does it do sort of the Microsoft effect that other things grew because they were sort of throttling them back? Even just the threat of throttling is good for the economy and good for innovation. Jessica? Yeah.

It does matter. I mean, it's certainly going to curb the acquisitions. I mean, right now you've got big tech companies with still with a lot of cash that can't really do anything with it. I mean, Microsoft's the only one who thinks that maybe it can, and I probably agree with Bill on the Activision deal. So I think it's a deterrent to acquisitions, which...

Right now, there's no IPO market either. So there's sort of – VCs aren't cheering that. But in terms of everyday mood though, I mean if I went to a cocktail party tonight, no one would be talking about the DOJ and Google. Like I'd want to talk about header bidding and no one else would want to talk about it, right? Like just no one –

Really cares, right? I mean, they'd rather talk about Jasper or something, right? So, but I think at the senior levels, it does put the shackles on some activity and that should create some opportunities. Bill?

Put I put it in the sort of the same category as trying partners annoyance to Bob Iger right now I mean it takes a lot of activists. Yeah You know his focus has to be on trying to win a proxy fight instead of focusing on you know

You know Disney Plus or whatever it is He needs to or you know the big stars and what they're gonna do and schmoozing with them So it takes mindshare away from what they should be focused on now He's got a focused on his legal battle with the DOJ I don't think anybody wants to focus on a legal battle with the DOJ even though they might be right They might win it like might prevail like Microsoft, you know, it took Microsoft many years to get past that so

I think it would probably be better for them if they could settle it and make it go away. Be better for Bob Iger if he gave Nelson Peltz a damn board seat and made that go away. Nelson Peltz can make a contribution. I'm sure, you know, whatever it is that they settle with the DOJ might make Google better. Instead of fighting it, just get past it.

All right, Jessica, you mentioned IPOs. The information's IPO tracker only lists near-term IPO likely candidates, Mobileye, and TripAction. What do you take away from that? Yeah, I mean, I think right now the market's not, I mean, the window's closed at this very moment. But I think there are a lot of companies chomping at the bit for enough of a rally in the market to get out. And I think all of those companies are kind of in that soup there. Now, the question is going to be, what do they come out at?

And, you know, you've got all eyes are really on Stripe, which is sort of the darling of this era. And, you know, hugely valued about a year or so ago, you know, you would have thought it would be the second most highly valued IPO in history. Right. And if it comes in at 20 billion down from 80 or whatever, right.

you know, that's going to really set the tone. So, so I think everyone's kind of waiting, you know, the paperwork's filed. I agree with Bill, the bankers are going to bank, right? So they're like really chomping at the bit for a window, but you know, it's not this week, it's not next week, but we'll really see. And I think,

VCs like to say, you know, great companies can go public at any time. They'll just go public at a different valuation. But it creates a ton of headaches and they don't really actually mean that. So I think we'll see. And it's a real moment of anticipation right now. All right, Bill, what do you think? Because a lot of VC firms, they held on to stocks last year instead of exiting after taking it public. They generally got burned. Right.

Where is the market for them? Are they rethinking the strategy? Do you think they can make money by holding on after an IPO? And where do you see the IPO market for tech? Well, Jessica is absolutely right. There are no IPOs now, nor should there be at the moment. Somebody will brave it and prove that it can work. Again, I get back to just please, please, please,

Dial back the hype machine when you take these companies public, you know, because you know institutional investors make money the VCs make money the bankers make money the retail investors get burned the Matterhorn like charts that you see after you know these hot IPOs, you know, it's just enough already stop with the hype machine, you know, and

I signed up to buy a Rivian and I'm still waiting on it. It's like two years later, but that entitled me to buy some Rivian stock at the IPO price without the underwriting. So I did it. And, you know, the stock is down 80%. So there you go. Enough with the hype. These things get hyped, hyped, hyped. And, you know, the dumb money like me gets burned. And so I'm tired of seeing the dumb money get burned.

How's your Rivian? My Chevy Bolt is lovely, in case you're interested. I know. I hear you talking about it. Jessica, you have one? I need the SUV. No, no. Chevy Bolt. Go for it. Listen, let me ask you one last question. All right. 2020, I want to know who each of you thinks, in tech, either a company or a person, represented 2022, and who is going to represent 2023. And it may be a company we haven't heard of, a person we haven't heard of. Let's start with you, Bill. Well, I mean, I think...

you know the anti-hero is also the hero of 2022 i mean elon musk for what he did at twitter both uh for the twitter shareholders and to destroy twitter in the space of uh you know seven or eight months is extraordinary i've never seen anything like it uh in my history of uh being on wall street covering wall street

So Elon wins 2022, hands down, just like I guess he won 2021. So essentially a Taylor Swift song, correct? Yeah. Yes, exactly. He's a Taylor. Hey, hi. He's the problem. It's he. Go ahead. And who's 2023? You know, it might be, I think Jessica's on to something. I think the Collison brothers or...

or cousins or whatever the heck they are, are probably going to be the ones, brothers that are going to win 2023. Okay. Jessica? Yeah, I'd say 50-50 on that. Like, I just don't know. And I think like all businesses, you know, Stripe had the huge pandemic run up in their business. And I think have been really affected by the economy. I mean, that's a close coupling to economic activity and payments. So I could see that one either way.

I have to agree on Elon. Who was your 2022 as Elon, the year of Elon? Yeah, for better or worse. Not Sam Bankman-Fried. No, although when you were going anti-hero, Bill, I didn't know which way you were going there. But I've lost track of what Elon is in court talking about on a given day, right? Whether it's autopilot or the SEC. I mean, so like it's been a real period for him. Yeah.

I'm very intrigued by Sam Altman at OpenAI. I don't think this is hyping it because I think that they deserve and need a lot of scrutiny because there's a lot of questions. This was an entity designed as a nonprofit, again, to make sure AI is good for the world. And now it's minting money, but then it's going to go back to being a nonprofit, right? So, yeah.

But Sam has certainly continued to elevate his profile over the years, from an investor and entrepreneur to someone who is as a wheeler and dealmaker right up there to watch. And so I'm really interested to see what happens to him this year. And then, of course, all the big tech CEOs are going to be in the hot seat and kind of

have their moment to either do something cool or sort of step in it again. So it's hard to tell. Yeah, I'm going to make a pick. It's the year of EVs. I think consumers are really focused on EVs, not Tesla necessarily, but the whole market and started to turn their heads towards

these new products. And so I just feel like everyone's, the penny's dropping with a lot of people on wanting to own and get into this market. So that's where I would be spending. I've visited all the car companies recently and I'm really fascinated. Have you been to Rivian? I have not. They're next. They're next on my list. The whole sector, like I'm going to go visit a hydrogen-powered plant.

All this stuff is really interesting to me. Maybe that's 2024. Cold fusion. It's happening. Anyway, thank you so, so much. I really appreciate a really smart conversation and we'll see where it ends up as we move forward. Thank you so much. Thank you. It's all about you.

Man, I should have taken that Stripe offer in 2014. You should have, I guess. We'll see. I don't know. It's gone down from $80 billion. You still do well. It was $1.4 billion, I think, when I got the offer. Whatever. Oh, well. Oh, well. Oh, well. All that free dry cleaning. That's the real thing. I had an offer at Amazon and Google when they started, and I didn't take them, so...

Whatever. Here we are. Here we are. That was great conversation. They had an interesting disagreement where Bill was basically saying Google, you know, still bullish on Google, doesn't like, it doesn't think that ChatGPT is going to really change Microsoft or Bing. Jessica nominated Sam Altman for her person of the year for 2023. Yeah.

Yeah. Which side do you go on? I think it's a game changer. I don't at all. I'm with Bill. I think it's overhyped. Everything's always overhyped. I think it's interesting. It's more interesting than crypto, but that's not a compliment. So I think it's, you know, we'll see. I'll see if consumers like, I'm always, I'm on a consumer's person side, whether it's a business consumer or a regular consumer. I just don't, right now, I think everything's in a stasis that has happened before and that where there hasn't been like really good ideas. And that's why I said,

EVs because there's some really creative stuff happening there and interesting consumer stuff. So, and I think Val, the guy we met in Munich, who's doing helium plane, hydrogen planes, hydrogen, not helium. That's called hydrogen. And we're not going to be doing that. We will not be sending you on that one. No, uh, I just think there's some really interesting stuff being done in energy and batteries and in physical things and materials. I, that's where I'm focused in on, um,

clean air, clean water, clean coal, clean... It's just really, to me, that's where a lot of energy... When I talk to people, those are the people I like to talk to. Everyone else is just a new version of something that has already come before, and that doesn't interest me. Well...

This is an episode about markets and oil and gas is booming these days. So while I think you're right, it does come down to what consumers are willing to pay for. And I think in the case of all things green, it will be about government money and government subsidies. You know, that thing that Silicon Valley thinks is so irrelevant often. Everyone I know is looking at electric. Everyone I know. And there's not rich people. It's like, I'm going to think of an electric.

car. I'm just saying the shift has happened. The shift is happening. And so even gas and gas companies are investing in this stuff too, just the way meat companies are investing in plant meat. Soon my mom's going to get her flying electric car. Okay, good. That'd be great for you. I don't want her driving anything, especially not that. Anyways, it was a great conversation. I'm feeling more or less, how are you feeling? More or less bullish after that conversation on Silicon Valley or the same?

I don't care. I just cover it year after year. You know, years ago, Steve Case was... You don't care? You know, Steve Case one time was talking about AOL, and he goes, he goes, you don't care if it survives or does well, do you? I go, I don't care. Either way is good for me. I don't care. I'll write the up, I'll write the down. I don't care.

All right. Can you read us out, Cara? Yes, absolutely. Today's show was produced by Naeem Araza, Blake Nishik, Christian Castro-Russell, Rafaela Seward. Special thanks to Hayley Milliken. Rick Kwan engineered this episode. Our theme music is by Trackademics. If you're already following the show, you get an IPO. If not, it's a Twitter job for you. Good luck.

with that. Go wherever you listen to podcasts, search for On with Kara Swisher and hit follow. Thanks for listening to On with Kara Swisher from New York Magazine, the Vox Media Podcast Network, and us. We'll be back on Monday with more.