Episode Transcript
[00:00:00] Speaker A: Foreign.
Hello, welcome to the Car Like I See it podcast. I'm James Keys and in this episode of Call It Like I See it, we're going to react to the collapse of FTX and consider how what led us to this point may have been less about crypto and currency and more about humans and currency.
And later on, we're going to discuss this Live Nation antitrust controversy that has apparently been brought to a head by people upset about the failure of TicketMaster, which since 2010 has been owned by Live Nation, to be able to successfully execute a rollout of ticket sales for Taylor Swift's upcoming ERAS tour.
Joining me today is a man who, even though many of you are just now learning about it, has known about Wakanda forever.
Tunde. Ogonlana Tunde, I know you have your supply of heart shaped herb, so you ready to roll, right?
[00:01:14] Speaker B: Yeah, but remember, we're not allowed to talk about that stuff.
[00:01:20] Speaker A: You're right, you're right. I might have to edit this out now. We're recording this on November 21, 2022. And for our first topic today, we want to take a closer look at the recent collapse of ftx, the cryptocurrency exchange. Now, it's been all over the news, all over podcasts, all over everything.
And so we didn't want to necessarily, we're going to recount, you know, the, the what, so to speak, as much. Some of that'll be weaved into the conversation. But we wanted to take more of a bigger picture look and almost a historic look as far as how what has happened and the whys of what has happened, what that says about what's going on in our society, what lessons we may have been able to learn from the past and so forth. And really if you look at the, just the basics of it, how you go from, how can you go from a crypto exchange that was recently, a couple of weeks ago, one of the more most well known and prestigious ones, to now being, you know, having collapsed, being, and having filed for bankruptcy protection and out there saying it owns its, owes its 50 biggest creditors nearly $3.1 billion. So that's just, that's quite a fall. You fell through the floor. So Tunde, just looking at the collapse of FTX and what we know now, what stands out to you as far as far as how it's unfolded, you know, or, you know, the hows, the whys and you know, how things really seem to happen so fast, you know, with this.
[00:02:45] Speaker B: Yeah, it's interesting. I mean there's not one thing that stands out. I think there's several.
And this, it's interesting as we're recording this now, I mean, things are still coming out. So I'm sure that a year from now we could look back with a little bit more clarity. But I think that what, what, what sticks out to me first would be this isn't the first time we've seen something like this. Just, you know, in our kind of goings as humans, right, this idea of a boom, something's going well, people get euphoric and get into it and then there becomes some cracks and fissures and then there's a collapse of a major player.
And so that reminds me of maybe a Lehman Brothers. It could remind me of, you know, other types of bankruptcies. Bear Stearns comes to mind back in the financial crisis. But then there's other things that stick out to me that, you know, the main protagonist, let's call it that way. If this were a play, Sam Bankman Fried, who was the founder and CEO of ftx, he seems to me more like a character like Elizabeth Holmes from Theranos. We're kind of coming from this prestigious pedigree, was able to kind of maybe wow people and they overlooked maybe their regular due diligence because you get a.
[00:04:10] Speaker A: Lot of benefit of the doubt. Yeah, exactly. In hindsight, when you're like, man, they believed all that with very little paper behind it.
[00:04:19] Speaker B: And we'll get into that. But yeah, the idea. Both his parents are law professors at Stanford and he's a physics degree graduate from mit. So I think him walking into the room, people may have had their guard down as opposed to had he been from Western Michigan University or Florida State. Right. That they would have been like, oh, well, so let's, let's check him out a little bit deeper. And then the last.
[00:04:42] Speaker A: Well, also, but particularly with what he's talking about, which is, you know, something that is new, something that everyone doesn't feel like when they walk into the room, that they have a really good handle on all of it. And so you're more inclined a lot of times to take certain kinds of people's word on it or people that look a certain way.
[00:04:59] Speaker B: No, I agree. And that's what I mean by had it been me going up there from Florida International University, you know, you know, just the regular guys who'd studied business talking about crypto stuff, people might have scrutinized me a little more. But because this guy was an MIT guy from, with a physics degree and then he was a Trader at a hedge fund after, after leaving mit, I think people did kind of get wowed by that and maybe didn't ask a lot of questions or that should have been asked.
[00:05:25] Speaker A: Play that out a little further. If you said something that didn't sound right, then they would be inclined to think that you didn't know what you were talking about. If he said something that didn't sound right, they would be more inclined to think that they didn't know what he was talking about. You know, like it's just kind of. It's a reverse kind of, of how our brains are processing that. But go ahead, go ahead. I know you got one more.
[00:05:44] Speaker B: Now you got me regretting I didn't go to mit, so screw you.
My life could have been a lot easier.
No. And then the last one was kind of the last thing that's, that's kind of stands out to me. What this reminds me of a little bit of the famous tulip mania story. For those that aren't that familiar, we'll discuss it in a little bit. But it's basically the first recorded euphoric boom and bust, which was in Holland and in the 1500s and there was basically a run on tulip bulbs. And it's a famous case driven by speculation.
[00:06:22] Speaker A: You know, driven by speculation. It's going to be big, it's going to be bigger. It's going to be bigger. Going well beyond the utility of tulips to a valuation that is all, you know, well, 99% speculation.
[00:06:34] Speaker B: Yeah, it's like a combination of. And I'm sorry, It was the 1600s, mid-1600s, but it, for me, just to finish it off, it was a combination of several of those things that I felt like this was.
[00:06:46] Speaker A: Yeah, I wanted to. I have something, you know, real, real specific on this that really stood out to me on it. And it's similar to what you're saying there, but with this, the FTX piece, and I had mentioned this to you offline. The thing that stood out to me the most is that FTX is a crypto exchan, cryptocurrency exchange, meaning that is where you go. That type of business is where you go put your money in it and then they provide an interface for you to buy and sell and trade. Cryptocurrencies, Various cryptocurrencies, not necessarily a cryptocurrency offered by ftx, but just any of them, you know, like it, whether it be like FDR's FTX, there's Coinbase, there's different types of exchanges. Which if you take that to like the, the parlance that people are more familiar with, that's like a fidelity, you know, like where you can go, you give them your money and then it's I want to this or like forget about the service that may be offered in terms of actually selecting what to buy for you, but just saying, hey, you know, put your money here, buy this, buy that, buy this, buy that. And for them to have to seek bank to collapse and have bankruptcy protections, what that means is that they were doing something funny with people's money. You know, like, and so like to me, like that's actually that gets into something that's. While FTX itself dealt with cryptocurrency. And I think crypto is going to take a hit because of this. What they were doing seemed to be closer to, and we don't know 100% of what happened and what they were doing. But what we do know, if they don't have people's money anymore, if they were accepting people's money, and the people would say, okay, buy this, buy that, you know, here's the what, here's what you're supposed to buy. And then they're supposed to leave that alone until the person says they want to sell it again, that somehow they would take the money, take the instructions and either not buy the stuff, do something else with the money, or buy the stuff and sell it. Maybe some, they were doing other stuff with people's money. And that is not something that, that you can't do that. Basically, you know, like there's laws in place to stop, you know, people doing that in other areas of the world, basically. But with crypto, I guess the regulation hasn't caught up to it. Or maybe it has caught up to it, but there was just again less scrutiny as far as what was going on. But it really comes across to me as, I hate to say it like this, but just kind of run of the mill fraud. Like, here, give me your money, I'm going to do this with it. And then you just do something else with it. And then if it's gone, it's like, oh yeah, I just don't have your money anymore. I know you gave me money to buy groceries. I went and bought some alcohol, I drank the alcohol and I'm done. Like that's what a guy on the street can do to you.
[00:09:12] Speaker B: That sounds like fraud.
[00:09:13] Speaker A: Not for $30 million or billion dollars or whatever it would be, not for $3 billion. But it just sounds like, just like to me, and that's what it boils down to. And understandably, there's more going on to that, but drilling down to the real core, that's what you really see here. Because, man, we'll talk about. They had other businesses that were, you know, under same kind of ownership and very closely linked, uncomfortably closely linked, that were into more speculative things. But in exchange, when you give them their money, they're not giving them their money to speculate with it. They're supposed to just be, you know, here, here's we bought it, now it's here until you want to sell it or do something else with it. And they weren't doing that.
[00:09:52] Speaker B: Yeah, no, it's.
I mean, look, that's. What you just said is. Is the definition of fraud telling a customer base or clients, however you want to call it, that you're doing one thing and doing something else? And I think, you know, you bring up a few good things, you know, in terms of.
This is a new asset class and a new marketplace, so to speak. Crypto in general, it's been slow to be regulated because the people that are in charge of doing things like regulation aren't even sure what this is. You know, is it a currency, like it's called, Is it a commodity? Is it a security?
What type of asset is it? So how do you regulate it? And I think so, in a sense, yes, as a newer industry and a newer medium of finance, let's call it.
[00:10:43] Speaker A: That.
[00:10:46] Speaker B: The regulators, like they are normally with new things and new developments and technologies, are slow to catch up to all of the ways not only it can be used, but abused as well.
[00:10:57] Speaker A: However, and the abuse usually comes before the regulation because you see how people are abusing stuff and then you regulate to prevent that stuff.
[00:11:06] Speaker B: Yeah. And I think. But that's where this one's a little bit interesting because, you know, in all fairness, what we just said is accurate. But then what you also said is accurate, which is if you, if you know, in the simple explanation you give, right.
If I was 10 years old and my mom gave me money to go to the store to buy milk and bread, and I came back with a bunch of Snickers bars and so. And a couple of snacks, or even.
[00:11:29] Speaker A: Worse, you had a bunch of empty Snickers wrappers.
[00:11:32] Speaker B: Yeah, there you go. Whatever it was, if I didn't come back with what I was sent there for, I get a spanking, Right? That's. You learn kind of fraud one on one at a young age if you're raised in the right household. And that's Remember, the fraud doesn't have to have a reason. I could have been a good kid that just couldn't control my impulse in the store. But the thing is, I didn't follow the instructions. And so what you're saying is, even though crypto is a new asset class, we're still trying to figure out what is it in terms of how to regulate it and all that. There's still some basic business principles in this country that are still legal and illegal. And so if you have people depositing money into one thing, let's call it the FTX exchange, and FTX has it on writing that we're not going to use customer funds for anything other than letting it sit there and be used by the customer themselves. And then they go and they try and buy a bunch of coin and other things to try and fill up their own holes behind the scenes, then, yeah, that's fraud. And so there's, there's still some regular regulations that don't have to do with crypto that they violated. But then, yes, the, the idea of crypto is going to be brought into. And I think, like you said, I think this will have maybe a short term negative effect on crypto because it's going to definitely chill out a lot of big investors and we'll get into who invested with FTX behind the scenes. But this is an inflection point because this is either going to be the moment where crypto gets cleaned up and becomes something over the next 10, 20 years that's still around, but it's regulated and it's cleaner, or this could be the beginning of the real death knell where people then just shy away and say, I'm going to go back to using regular money and not believe that this is some sort of store of value as I thought it was. So I think this is an interesting moment for crypto as an asset class.
[00:13:27] Speaker A: Yeah, I mean, that's. To your point. The people who are really into crypto actually should look at this as the opportunity. Like, look, we need to get regulation in here because you don't want that. And just to make that point even more clear, like if, if this was like the, the other company that's mentioned a lot with the FTX is the, the Alameda Research and they were an investment house. And so if they took, take your money and say, we're going to take your money, we're going to invest into things, it may work, it may not. You know, you may end up with nothing, you may end up with 10 times your money. And that's the disclosure then, that if they end up with no money, then it's not like they, they, they sold you something they weren't doing. And one of the things you mentioned to me and we were talking about this week is that, and with stocks and stuff, the, you know, like, the way what happened here, the setup and how it unfolded here, was something that was outlawed at, back in like 1929. Like, they were like, yo, we can't do this with stocks and securities and so forth. So actually, this is a lesson that in other contexts we've already learned when you have these two closely held, and people have talked about this, whether there's a conflict of interest there to have the Alameda and the FTX kind of operating under one roof, so to speak, doing different things. Because the temptation is so great. Because here's what we don't know. And I mean, we know that because of the bankruptcy filing, that money that was placed there, that was supposed to be held there, isn't there anymore. We don't know if it was premeditated. Was the plan all along, like, hey, we're going to get people to put this, their money in this exchange, and then we're going to gamble with it. We're going to do all this stuff. And then while the crypto market is exploding, it was a good bet, you know, their owner, you know, SBF is, what he goes by was up to. He was worth, you know, what was it, $30 billion or.
[00:15:09] Speaker B: 30 billion or so?
[00:15:11] Speaker A: Yeah, like, and he's, you know, he's 30 years old.
[00:15:13] Speaker B: You know, he was the richest person in the world at his age at that point.
[00:15:18] Speaker A: And so while, if, while the crypto market was exploding, if that. Again, we don't know if this was premeditated because the other alternative, I'll say in a second, but if it was, if it was premeditated, like, I'll take this money that people, you know, and then I'll just make all these other bets with their money grow and then I'll just kick the money back to them after I've doubled it or tripled it or 10, you know, brought it up in order of magnitude, you know, so we, it could have been that or it could have been stock. Like a year ago last November, the, the, the crypto starts, starts going down. It tops out and starts going down.
But since then, interest rates have started going up. It's harder to borrow money. The company in general, you know, the, the Alameda or whatever else they were doing might have started getting A pinch and that temptation then is it like, man, I got this, all of this money sitting here in this exchange and it's just me, I control both. It, well, me, my, my small group controls both of these. Why don't I just take a little bit from here and try to make some money back and then I'll replace it all back, you know, kind of like the whole, you know, you, you, you, you break something in your mom going back to 10 year old kids, you break something in your mom's kitchen, you try to clean it up so that it's not all over the floor when your mom gets back. We don't know it either way. It's illegal, but we don't know it. Like how deep was the deception, you know? But either way, again, the setup almost, we, we know, you know, from dealing with human beings and dealing with marketplaces like this, that that setup is one that cannot be allowed to be maintained because either the temptation is too great or the fraudsters see that as that golden ticket.
[00:16:50] Speaker B: Yeah, I mean, I think at this point it doesn't matter which one it was because the outcome is the same. Which is. There's an estimation. No, I mean, there's an estimation that around a million Americans basically all wiped out when this happened. And it made me think of Things like the 1929 stock market crash which led to the Great Depression over the following decade. And what I thought was luckily, because think about it, crypto. Well, let me just put it this way. Bitcoin as one type of cryptocurrency last year when it peaked out in the high 60 thousands. They say the market cap, which is the size of all the crypto coins out there multiplied by the price of crypto at the time had peaked at around 3 trillion and around. Now as we're recording, is that all.
[00:17:41] Speaker A: Coins or just, just to clarify, just, sorry, does that just Bitcoin.
[00:17:45] Speaker B: Okay, yeah, Bitcoin only. Sorry, not crypto, but bitcoin the then. Now as we're recording bitcoin being at around, you know, the high teens, I think 16, 17,000, roughly the market cap or the value of all bitcoin combined is around a trillion dollars.
And juxtapose that with that nice big word against, let's say the U.S. treasury bond market, which is estimated to be at about 100 trillion and probably all the wealth combined in the stock market, say the US Capital markets, in terms of the stock exchanges, it's probably roughly around 60 trillion, 70 trillion. So the idea is that we're lucky that crypto is in an infancy where this type of fraud and collapse didn't bring down our whole system because what happened in the crash of 29 was it was the banks doing basically what FTX and Sam Bankman Fried were doing, which is playing all these games. Like people don't realize that one thing that led to the crash of 1929 is number one, there was no disclosure rules on securities, you know, stocks basically and bonds. There was really no rules in that game. And then number two is banks were taking customer deposits. So you. And I think we got a money in our checking or savings and they were taking that money and speculating in the stock market with it. So what happened is as a percentage of the. Of like Americans, obviously way more people as a percentage of a population have money in checking and savings accounts than they do, let's say just in some slice of things like cryptocurrency or even specifically ftx. So I think we're fortunate that this wasn't something that happened at a larger scale. But it's interesting that because it goes back to your point about the human element, right, that we have something called cryptocurrency, which is basically traded as if it is a commodity or security. But yet no one has really scrutinized not only the regulation from kind of the customer standpoint on the surface, but as you're saying this behind the scenes stuff. Cause I'll kick it back to you. But one thing I'd like to do is as we go through this is describe the relationship with Almeida and how that all worked because that's where really to me a lot of the, the only term I can think of is fuffery.
That's the only word I can think of. And I'm sorry, but that is like the only setup.
[00:20:24] Speaker A: If something goes wrong with Alameda, then it's such an incentive, it's such a temptation to use the money in ftx. Like I said, we don't know if it was premeditated. That was always the plan or whatever.
[00:20:34] Speaker B: But that's the part I say that the result's the same, right? Whether it's premeditated or not. The fact they did this means that.
[00:20:40] Speaker A: Which is why it can't be allowed. It ends up being the same result if, if you're tempted to do it or if you, if you're just a trickster and you plan to do it. But. And I want to distinguish, you know, again in terms of even. Like, as you pointed out before, pre1929, like banks are allowed to take some of the money that we, that we deposit. I mean, the whole, the whole concept of a fractional banking system is that the bank, a bank can take your deposits and they don't have to keep 100% of that money at the bank. They can use some of that. And which is why they pay you interest rate. You know, like, they pay, they, they make more than they pay you in interest rates. Obviously that's the nature of the business. But there's disclosure rules. And all you get to know, like all this has happened. FTX didn't tell, didn't even tell people they were doing that. You know, like they, this was all happening in a black box. But the thing that I wanted, and I want to get to the idea of, you know, like, because you mentioned it a couple times, and I think it's a very important point in terms of what crypto and cryptocurrency is, because cryptocurrency, the terminology itself suggests that it's a currency, like a US Dollar or a Swiss franc or something like that. And meaning you hold that and you exchange that for goods and services. But the way it's used commonly right now, cryptocurrency itself, as you pointed out, is more like a commodity or an investment, a security. It's like, I'm going to buy some of this and then it's going to become worth more in the future. And so therefore I am buying it as an investment, as you know, to speculate on its increase in wealth, which is where you get that tie in to tulip mania and so forth that you mentioned earlier. But the thing with that, and I think just briefly, the reason that is cryptocurrencies, crypto, the way I understand crypto, and this is why I've kind of, I haven't gotten involved in it to the same degree as many other people, is because, although I kind of understand what's going on is because I understand it, the crypto cryptography is used, you know, for the ledger purposes. It's, it's a ledger basically to say, okay, we can keep track of who has what where in a way that people can't corrupt. But it's public, but it doesn't have to be something. A bank has a ledger. When you deposit money, they write down as your money, and therefore they can keep everything straight as far as who owes what and everything like that. Well, crypto allows you to do that through software, through a software and code type of setup, through cryptography. And so therefore I didn't it didn't jump off the page to me as an investment, so to speak. The reason people think of it as an investment a lot of times is because they look at them as finite. They look at it as a, there are a finite number of bitcoins that will ever be mined. And so therefore, if you can get your hands on one of those or 10 of those, then if there's a finite number and more and more people want them, then, you know, supply and demand is going to grow in value. But ultimately, to your point, these kind of conflicting messages in terms of what it actually is versus what people are using it for brings to confusion in terms of regulation, brings to confusion in terms of even the use of it as a currency. You pointed out to me just the other day, El Salvador, which had been trying to incorporate bitcoin as their national currency, abandoned the effort. And the reason is you can't have, and you've pointed this out in many shows, you can't have a currency that everybody's using where the value fluctuates like that. Like the whole point of your Federal Reserve and all this stuff is to try to keep a kind of standardized value. And so what do you see, you know, like, as we're seeing with ftx, but just the bigger industry, what's going on with crypto? Where do you think we're going with our, in our society as far as crypto as a currency, as an investment, as a utility? You know, what do you think? Where are we going with this thing?
[00:24:19] Speaker B: This is where, like, because I think that's what the system is going to have to figure out is what is crypto? Because you're right, is crypto currency? Well, we already got currency in the form of dollars and yens and Swiss francs and British pounds and all that.
[00:24:34] Speaker A: And we know how to regulate them and we know how to do exchange rates for them and balance that stuff. But the whole point of crypto, people don't want on any of that regulation.
[00:24:43] Speaker B: Well, and that's what I was going to get at is, well, let me save that for a second because one could say it's currency, like we just mentioned. One could say it's a commodity like gold. Like, is it, Is there a use for something? And, and I, I, I look at gold as the most similar to me for it, because other than the fact it doesn't corrode, so it's used in semiconductor chips, there's not much utility use of gold other than human beings have agreed that they like it, that it's Got a certain value because it looks nice as jewelry and all that. But again, I joke with people and say, if I was Tom Hanks in the Castaway movie, if you. If I was stranded on an island, gold would be the last thing I want. I'd want some steel, you know, aluminum, copper, some other metal that's. That's stronger than, you know, I can make weapons and hunt with and all that. So crypto, to me is kind of like gold, where there's not much utility for it other than what collectively humanity thinks it's worth. And that goes back to what you said. And maybe it's like a security, because people will only keep buying it if they think it'll go up in the future.
Let me say this, though. I separate that of what cryptocurrency is from what you talked about. The technology of cryptography through the blockchain. That's a technology that can be used for many things that might have a totally separate life and ecosystem going forward.
[00:26:04] Speaker A: And most likely will, you know, like that will. There's a utility there that we're just scratching the surface on. This is like one of the first things that they say, okay, well, here's the utility of it. We can do currency with it, but.
[00:26:14] Speaker B: There'S going to be other things 50 years from now. There may be no cryptocurrency, but the blockchain could be everywhere in our existence. Right. So that's why I do think crypto in general is different, because it has much more underlying moving pieces than something like, you know, just an idea for a new company or a startup. Right?
[00:26:31] Speaker A: Yeah.
[00:26:32] Speaker B: And so I think that, to me, that's why I say I'm not sure what crypto is because it's. It has several different avatars right now. But if you were to tell me. Well, and I want to say this because I was asked an interesting question doing a presentation to a group last week with, you know, under my regular advocation of being a wealth manager, financial planning type of guy. And I was. I was saying how crypto is unregulated. It's still pretty risky, you know, that way. And somebody asked me a question. They said, well, didn't the stock market start off the same way?
And I said, no. I said, yeah. Did this stock market start off with less regulated than it is today? Then yes, I'll answer that. Yes. But the stock market started off as something different because there's a reason why they call it the capital markets. The whole idea of issuing stock and the modern form, you can look at the Dutch East India Company 500 years ago, the idea is you're issuing shares of a company to people in exchange for their investment, to capitalize the company so that it can go out and transact business to make more money to pay back shareholders over time.
[00:27:42] Speaker A: And usually in the old dividends and.
[00:27:44] Speaker B: Yeah, through dividends, exactly. And under their regular exchange way, people also hope that their share price increases. But the idea is that if I go buy shares of AT&T or Apple or Philip Morris, for example, those are three different companies doing three different things. One selling E cigarettes, the other's got phones and services like that, and the other is Land, Fibernet and giving you ISP services through the Internet and all that. But I know that each of those companies actually do something that provide a service that someone else is paying for. Right? So that means the company itself is going to keep operating as long as people buy cigarettes. Philip Morris stays in business as long as people pay. When I have Internet service and all that, AT&T and cell phone service stays in business as long as people want a nice phone with different services and features on it. Apple stays in business. So that's where I'm saying that that's what I said to this person. That's different than crypto, because people throw money into crypto, but there's no underlying business or value in that way. That's why I say it's like gold. You can't do anything with gold other than have a nice piece of jewelry. And that's because we all agree that.
[00:28:54] Speaker A: Or exchange value like gold coins had been done historically, or silver, you know, like in that sense. And I mean, that's a good point. I think that as you lay that out, though, I think that's the answer to the question like, it's not simply a currency, it's not simply a commodity. You know, it's not simply a security. It's all of the above. Because the way it's defined, I think, is by how it's used, you know, and so because it's used in that way now, the problem is, is that we know how to regulate. We as a society know how to regulate all of those individually. But the regulation for this is going to have to account for the fact that it is doing all of those. And that's where that's the answer we don't have yet, so to speak, is how do you regulate something that in part is doing all of those? And I think you, you really laid it out good in terms or, you know, you did a Good job laying it out, I should say, in the sense that from the utility standpoint, it's not there yet in terms of the value that's again, goes back to that tulip mania example that you gave or reference that you gave at the very beginning. Like the values that we're seeing far outstrip the utility that has been demonstrated thus far. Now, that's not to say that the utility won't be there someday. And that's why it's a business of speculation right now, is because it's the, the hope that the business that you're on the front end and the business, the utility will get there someday on things that have yet to be discovered or that are, that have been discovered but are still in their infancy. And that's highly possible. You could even say it's probable, but you still don't know. And this is where you get into all. You don't know where the winners and the losers are going to be. You know, there would have been a lot of like if you go to, well, just if you go to the dot com, you know, if you were in the, in the mid-90s and you were betting on a bunch of dot coms, there were a lot of them you could have bet on and missed the Amazon, you know, like. But if you would have hit Amazon, you would have been, you would have been all good. But there were 10 other ones, you know, on proportionally.
[00:30:45] Speaker B: Well, let me jump on it because you're going right where I was going because I said, you know.
[00:30:48] Speaker A: Well, let me say one other thing and I'll kick it back to you because the other thing I wanted to mention though is I've mismented this a couple of times that you get the problems, then you get the regulation. And so that's the tie you have to look at here is this type of stuff is going to happen for us to figure out how to regulate these type of businesses or these type of, the businesses that engage in this because the leaks are ongoing. The leaks are ongoing with the stock market and securities and so forth and they still constantly considering new regulations and so forth. Like Great Depression was, you know, 90 years ago and we still had the Great Recession and you know, we had to figure out other things we had to do then, you know, so the idea of a problem popping up is going to, it's going to happen, you know, and that's. And so when it happens, though, you have to have hopefully the right kind of leadership that can step in and look at what needs to happen is From a regulatory standpoint, to prevent that from happening again and any other kind of forward thinking things we can look at without overly stifling the business itself. But go ahead.
[00:31:40] Speaker B: Yeah, no, because I was just going to follow up immediately on the, on the idea of kind of comparing it to the dot com bubble of 20 plus years ago, because that's one thing I've also seen and it's very different. Like I said, that's why I said the blockchain technology, I think survives this. I don't know if cryptocurrency as a quote unquote store of value does, because you made a great point when you said how we used to use gold coins as humanity.
[00:32:10] Speaker A: Yeah.
[00:32:10] Speaker B: And the whole point is used to. Now we use paper money. And so the idea.
[00:32:15] Speaker A: We don't even use paper money that much, by the way, you know, now.
[00:32:18] Speaker B: Yeah, well, I mean, the point is just because I know people have said, oh, because there's only ever going to be 21 million bitcoins minted, that means the price has to keep going up. And that's why. No, it doesn't. It only goes up as long as people collectively think there's a value to it. You know what I think of my Barry Bonds rookie card and my Bo Jackson rookie card. Remember when everybody liked baseball cards?
[00:32:38] Speaker A: Yeah.
[00:32:38] Speaker B: And I remember when those were worth a few hundred bucks a couple years after I bought them. I thought I was the man. If I go look right now, they're worth five bucks.
[00:32:44] Speaker A: Hey, man. Because not that many trading cards are coming back, man. Trading cards are coming back.
[00:32:48] Speaker B: They all come back.
[00:32:49] Speaker A: Just hang in there. No, no, hang in there.
[00:32:52] Speaker B: The Fed already killed them. With the rising rates, all that. That whole collectibles sector is in the toilet. Yeah.
[00:32:57] Speaker A: Oh, it's already going back down.
[00:32:59] Speaker B: Just like watches and things. Yeah. The collectibles are gone. Yeah, it's over. No more cheap money out there. But, but then, but, but getting back to the tech collapse, because you're absolutely right. The Internet was new.
Everybody thought it was gonna be the next, you know, hot sauce and it became the casino, you know, and the tech stocks and all that. You had a similar thing where you had a lot of companies that didn't actually do anything yet. They just were speculative ideas and people were throwing money at them assuming that they were just going to work out. And then one day people woke up and realized, holy crap, we threw a bunch of money at companies that aren't doing anything and literally don't have a business model. And I think that's a very similar thing to what's happened here and to your point, because I'm saying that doesn't mean I'm poo pooing crypto or this idea. I think we're being very clear that we don't know what the future holds. Because you make a great point. The Internet still exists and there's still a lot of good companies that, you know, a lot of people have made money on in the last 20 years. And so that could happen with crypto. It may not, but I think that it's just an interesting inflection point we're at because what appears to be the issues that caused FTX's decline are issues that have already been seen when dealing with marketplaces and money. Yeah, yeah. And so that's why it's not a surprise to me, you know.
[00:34:21] Speaker A: Yeah, yeah, it's, but it's always, and this is, I think this was one of your truisms or one that you had pulled from somewhere else. But when that tide comes in, basically, you know, you see, you see the, the, the, the, the dead body, so to speak, and that was this environment right here, you know, where you have the higher interest rates, where you have the values of cryptocurrencies going down, led to this, which exposed what FTX and Alameda were doing. And now we're at a collapse. And then we can, from those ashes, though, we can figure out, ideally as a society, what type of regulations need to be in place so that this doesn't, this won't happen to, you know, however, how many million Americans did you say that like?
[00:35:00] Speaker B: It's 1 million. And that's, that's why this is important just to finish up here is, you know, I also learned that there was one pension in there, the Ontario Teachers Fund.
[00:35:10] Speaker A: Yeah.
[00:35:11] Speaker B: And so again, this does affect real people. Right. Like that you just had a pension fund that had a stake, maybe, you know, obviously they didn't have their whole stake in there, but they're, whatever percentage they had in there is worth zero now because they're gone now.
[00:35:23] Speaker A: Yeah. You know, and gambling, they weren't saying, in their minds, they weren't saying, hey, let's go invest in something that's very risky. They were like, hey, we'll put our money in an exchange and buy a couple of cryptocurrencies, you know, and they would be down right now, no matter what, depending on when they bought, but they wouldn't be wiped out. But for ftx doing, as you said, things that we've seen businesses do in when, when the regulatory environment allows them to have these temptation filled setups, these setups where you start covering losses in one place and a risky place with, with gains or with money that you have in a place that's not supposed to be risky. So. But I want to, I want to keep moving though. Get to the second topic. Now. We've seen it's not new, the idea of antitrust scrutiny on Live Nation Entertainment. Live Nation Entertainment is the result of a merger between Live Nation and Ticketmaster.
But it does seem to be being brought to a head right now because there are a lot of angry people about the. Just briefly, Taylor Swift is doing a new tour. Taylor Swift is incredibly popular and they were doing a rollout of tickets like they were the pre, certain people were able to buy in the pre order phase and then there was subsequently coming a regular general order phase and the pre order phase was supposed to be limited and basically they screwed it all up. There were way too many people in the pre order, more than they were authorized. And this was, you know, Ticketmaster, you know, division of Live Nation Entertainment. And right now you have a lot of angry people saying, well, how did this happen? And then the people who have been pointing and saying, hey, this, this is a monopoly. We shouldn't let these people, this company operate like that are all pointing and saying, hey, we told you guys, you can't have a monopoly in this sense. So just looking at this controversy and the Taylor Swift ticket fiasco, what, what stands out to you in terms of either how we got here from the standpoint where one company like this can sink something so big, or the reaction that we've gotten and now everybody's upset and saying, hey, we in America believe in markets. How did this happen?
[00:37:28] Speaker B: I know. Well, if you say it that way, then I'll say probably lobbying got them to where they, they were, where they became a monopoly because they, they're able to make, make people, you know, the actual people who are supposed to look at these things look the other way.
[00:37:43] Speaker A: Well, and you said, I want to just throw this in real quick because you said it before and I think it's just such a good point, like of course the businesses want to become a monopoly, like they all want. They are, they're fat and happy. They want, they don't want competition. We all like other people to have competition. We like the people who are giving us goods and services to be competing. But when it's us, we're like, hey, nah, I'm good. I'll be the only One, I must.
[00:38:05] Speaker B: Be the only honest capitalist out there because I'll be like. Because I own a business, a small business and I don't want competition. Like, that was fun when I was in my 20s. Like, you know, hey, wake up.
[00:38:16] Speaker A: When you were the one trying to get a piece.
[00:38:18] Speaker B: Yeah, when I.
[00:38:18] Speaker A: You needed the competition.
[00:38:19] Speaker B: Now, now I'm old and tired, man. I'm not trying to. I just want. I just want a gravy train. Literally. I just want money. Pork, foreign and that's it. I want all the customers, but it's the content. I want it nice and easy.
[00:38:28] Speaker A: When you were, when you didn't have a piece, you wanted competition because that would be your way to get a piece.
[00:38:33] Speaker B: Exactly.
[00:38:33] Speaker A: Not a piece. It's like, no, I don't want somebody coming for my piece.
[00:38:36] Speaker B: Yeah, exactly. Well, couldn't we take this conversation into so many other socio.
Well, let's keep going. We could have 10 different conversations on 10 different topics about that.
[00:38:48] Speaker A: Market economics.
[00:38:49] Speaker B: Yeah, we'll keep it on Annie Trust and the FTC for now.
But no, it's a great point because what intrigues me about this story too is normally we're hearing this in areas or let's say this sectors of the economy or specific businesses that. Because a lot of things are polarized now with what side of the political spectrum one is on. So we know that a lot of industries have, whether it's a monopoly, oligopolies, things like that. But depending on who brings up the argument or who's complaining about it, usually have another side, let's call it that can kind of quickly shout them down or at least get people's minds muddied on the topic.
[00:39:37] Speaker A: Well, no, to your point, just, just briefly, a lot of. We've talked about this a lot of times people will look to their side to determine how they should feel about certain things.
[00:39:47] Speaker B: Yeah.
[00:39:47] Speaker A: And the side, the polarization of the sides almost means a lot of times people will take adversarial positions even if you know, like whether how strongly they believe it or not, they'll take an adversarial position because they just don't want the other side to be right.
[00:40:00] Speaker B: Yeah. And so there's a few actual industries that. And some also have a quasi like regulatory support to be monopolies just because I guess it was either. They're so unique. So for example, like sports teams are exempt from certain monopolistic regulations. So for example, the NFL is a cartel and they are a monopoly. Right. I mean you and I.
[00:40:24] Speaker A: And they have antitrust Football leagues, they have antitrust problems, you know, like.
[00:40:27] Speaker B: Exactly. So that's an example. Things like utilities, public utilities, banks in a certain way, you know, you and I can't just go out there, compete with JP Morgan or Wells Fargo right now, their size.
[00:40:39] Speaker A: And so there are barriers of interest, entry confuse, you know, like the, the, the that point with the barrier of entry point. But it's still, it's still a part.
[00:40:47] Speaker B: Of the point that.
[00:40:48] Speaker A: Still part of the.
[00:40:49] Speaker B: Yeah, there, there are, there are unlike let's say a deli or a sandwich shop where there's, you know, thousands of different ones owned by different people out there and all that. There are industries where there's only a few players and they're pretty big. But it seems like ticketing and buying tickets for shows is actually apolitical and will piss everyone off when they feel like they get screwed. So and so maybe. And so it's like, it's funny, right? Because like you said, those who are now like the politicians now who are all railing, oh, we told you, we told you is like this is their entry point. They've been waiting for something to just get the public's attention about this.
And that's the thing why it's interesting that it is.
It's like when we talk on various shows about conspiracy theories but we use usually the flat earthers as a reference point because we know that most people have accepted the earth as round. So it's easy to make an example of people that think a certain way because it's kind of a non threatening example when you talk about flat earthers. And I feel like this Ticketmaster thing is like that's a non threatening way to talk about monopolies because you're not going to self any other industry that might be funding you if you're a politician.
[00:41:58] Speaker A: Hey man, like Taylor Swift is bringing American together. Americans together, man. Well, you know, interesting on the issue of market.
[00:42:05] Speaker B: I don't know anything about Taylor Swift and I don't dislike. I'm just not the.
[00:42:09] Speaker A: Now you're not in the demo, man. You're not in the demo. Neither one of us are in the demo.
[00:42:13] Speaker B: No, but I'm laughing because I'm like, isn't she the one that Kanye west with the first public fool of himself when he, when he went up on stage and grabbed the microphone and said, you know, when Taylor was winning an award and Beyonce, he said, oh, Beyonce should have won. So she's the first one that alerted us to Kanye being crazy. And now she's alerting us to monopolistic tendencies through ticketing organizations. This young lady is pretty spectacular.
[00:42:40] Speaker A: Well, what she does, apparently, is she has other people reveal themselves because she didn't do anything to have Interesting. She didn't do anything to have to chase her.
[00:42:49] Speaker B: You took my joke and you elevated it to actually something tangible.
[00:42:54] Speaker A: She's the light that reveals people or companies or whatever for who they are.
[00:43:00] Speaker B: So now I should pay her some respect and actually try and listen to her music, is what you're saying?
[00:43:04] Speaker A: Well, I mean, I don't know. I mean, you're not in the demo, so I don't know if that's. That's what you're gonna. You know, that the direction you go, but you can still pay the respect and say, hey, you know, like, that's the level of popularity. You know, hey, there's a lot that can come from that. But I want to say this because I want to mention. I want to. You. You brought some broad concepts in. I want to fill in some more of those. You know, our. Our system is based on competition. You know, a market, any kind of market system. Anybody talking about free markets and stuff, a lot of times they're full of shit. Because people that talk about free markets, a lot of times the two things they miss are free market requires an informed consumer because the consumer needs to make choices. And it also requires healthy competition. And so the healthy competition piece is because the idea is behind it is that, okay, well, if you have competing businesses, they will work to make their products or services better, and they will work to make their products and services cost less because they're competing with each other for informed consumers, you know. And so in this instance now, in some, we have as a society, as, you know, just an economic community understood. As you pointed out, in some industries, whether like an airline, like, people aren't going to just up and start airlines or something like that, or you said national banks and stuff in other cases, like a utility or something like that, we have identified that in certain places it's not feasible to have a lot of competition. Generally speaking, the rule of thumb is, is that the less competition there is in something, the more regulation there is. Because if without the competition, we know we don't have the pressure to make your products or services better. And we know we don't have the natural pressure to keep your costs low as possible. And so when you don't have either of those pressures, that's where regulation is supposed to step in and make sure that quality is kept high and price is kept low. And, you know, within what's feasible. So in this instance, when you have the Department of Justice looking at it, you know, I know that there's been a few Democratic congressmen that have been pushing for this for years, but now, you know, like, it's. Oh, yeah, the Department of Justice is looking at it, and there's some, Some headway on this. It goes in one of those two directions. Now, maybe it is the most efficient to have a single ticketing, you know, major ticketing organization or operation for the United States or whatever. Maybe it is, maybe it isn't. But the people who look at these kind of things have to look and they have to apply some scrutiny. It can't just be by default, like, oh, well, they just did it, so we just let them do it. There has to be scrutiny and determine whether do they need to be broken up or does there need to be. There's a regular level of regulation need to go on this to prevent this type of stuff from happening, to make sure that their fees aren't exorbitant and so forth. So, yeah, it's revealing what's happened, you know, from the standpoint that the people who have been pushing for this, the people who have identified this as a problem now have the floor, so to speak. They now have the public. It's no longer abstract. That's why the last point I would make is that a lot of times these issues when we're talking about antitrust, like, I'm a. A high. A high market competition guy, which is. There's a level of irony to that because I'm a patent attorney and patents are one area where competition, where the government endorses the elimination of competition. But, you know, it's one of those things that when you're looking at the markets, when you're looking at competition, it's something we need to all be looking at all the time, so to speak, if we want the best. And, you know, this is an opportunity, this is a good thing because it's put. Putting a flashlight on what a supposed monopoly is doing, and hopefully we can get to a better place from that.
[00:46:21] Speaker B: Yeah, and I think that's. That's something we lose sometimes with the way that I think our kind of rhetoric and discourse just. And the public sphere over the last few generations, I'd say the last 40 years, this idea that regulation, any regulation is bad and that. And that, you know, just everything needs to be left alone and free markets and all that. And the thing is that I look at it kind of like an Ecosystem, right? Any ecosystem needs a healthy equilibrium, if we can put it that way. Whether that's your body, right? We talk about do shows on salts and sugars, or if you smoke too much cigarettes or you have too much to drink, you can throw your equilibrium off. We could talk about the environment of the earth. And that's those who believe that climate change is being driven by human activity. They're making a complaint that human beings are artificially throwing off the equilibrium of the earth.
And here we could talk about the ecosystem of capitalism if left alone, with no regulation at all. And we've joked about this, you end up basically with a third world country. You could look at Somalia and Afghanistan and countries like that where just the person with the biggest gun and the most money just makes all the rules and takes everything from everyone else and there's no. And everyone else is poor. And so if we want to have the kind of society like you mentioned that allows for entrepreneurs, for small businesses to then grow into medium sized businesses, to then grow into larger businesses and to be kind of what we would consider healthy, then there needs to be some level of regulation. And I think, you know, this antitrust laws are a great example of that because they began really in the late 1800s, early 1900s, when you had what was called the Gilded Age. And you know, names that everyone will recognize like Rockefeller and Carnegie and the Vanderbilts. And you know, you had a series of laws from the Sherman act of 1890, Clayton act of 1914, and the Federal Trade Commission act of 1914 that began this type of environment that said you can't get too big.
And I think not. You know, just piggybacking on the spirit of the first part of our discussion on the technology side, I think we're back to that era, not only with Live Nation, but certain companies like an Amazon, one could say, right? Are they a tech company, are they a retail company, are they a grocery store chain with Whole Foods? Right. Are they a cloud computing company that's selling their services to the Defense Department? So you're right. At what point are they too big to fail and too big to. They're stifling competition?
[00:49:05] Speaker A: Well, too big, yeah. Too big for a market stiff system like it becomes.
[00:49:08] Speaker B: Yeah.
[00:49:09] Speaker A: And that's the thing I wanted to like and I'm glad you said that because it's the perfect setup. The, it's free markets. We have a free, you know, a market system. Whether, you know, how, how free the market is depends on the context, how much, you know, how much competition is There and then capitalism on top of that. But the thing is, and this is to your point, free markets are not self sustaining. And your capitalist system, capitalism has winners. And you know what winners do in capitalism? They try to stifle their competition. They're trying to get the competition out. They're trying to, you know, let me buy up the competition of Facebook.
[00:49:42] Speaker B: Apparently I'm the only guy that would admit that, but everybody else does it.
[00:49:45] Speaker A: With their action, you know, but like Facebook buys up Instagram, Facebook, like they, they're like, oh, we're gonna, we have some competitors, we're gonna try to knock them out this way, knock them out that way. So when you have like the, the winners in a market and a capitalist market system will try to eliminate the market and just be the only ones, that's the natural course, so to speak. So it's not self executing. You need regulation, you need in order to make these things self sustain. And that was the lesson that was learned, as you pointed out in the times of the Sherman Antitrust act and the early 1900s, claytonite and all that. Like, it was okay, yeah, if we just let this go, we're going to end up as like, there's going to be the natural. I always say that the eventuality of capitalism if it's completely unregulated is you'll have one person or one group, one small group that just has all the resources, you know, and that's oligarchy. Like it's like, you know, our plutocracy even. Like, it's like, well, remember. And so. Well, let me just say you don't actively break them up from time to time. It's not going to happen constantly, at all times. If you don't actively break them up from time to time though, that's what you end up with. And to your point, they were broken, you know, it's been broken up over time and we may now be having to be an entering in a period where they've coalesced to the point where we probably need a streak of trust busting.
[00:50:54] Speaker B: The other thing, because you make a great point about the lack of desire for competition and even thinking about things like Facebook buying Instagram and WhatsApp and all these things, you're right.
At some point, if no one were to come in and say you can no longer acquire things because now you're too big. I mean, I know Facebook has some issues now, but a year ago when they were at their absolute peak financially, they could have started buying up a lot more stuff and maybe we only have one company to deal with. And I think that's where the public, by the way, they would have.
[00:51:29] Speaker A: They would have.
[00:51:30] Speaker B: And that's where this goes back to Live Nation, because the public, I think, doesn't understand a lot of times because of the culture of the rhetoric of deregulate, deregulate, deregulate, that if you allow one player to come in, what happens? And you stifle real competition. They don't have an incentive to, like you said, do things like maybe improve their products or keep their prices in line because they don't have competition. They don't have some competition either pushing them to get better because the competition's making a good competitive product or forcing them to keep their prices in line with maybe what the market can bear. And so that's where we get back to Live Nation. Just circling it. Back where apparently, since their purchase, Ticketmaster's purchase of Live Nation, that created a conglomerate that controlled not only 80% of ticket sales in the United States for live shows, because that's only one part of the issue of the monopoly. The other is what they call the stack that they started buying everybody in between. So they started buying venues, they started buying the servicing stuff in between. And so they're making money all up and down the chain, and no one else is able to eat. No other businesses can come in.
[00:52:42] Speaker A: Yeah. And then they're going to send all of the business to their own, like a complete vertical integration, basically, when they're going. Right, yeah, we need to call. Let's send it to ours, not any of these others.
[00:52:51] Speaker B: Yeah, correct. And then. And also the other issue I remember hearing about was then artists that didn't play their venues, they wouldn't sell tickets to those venues that weren't there. So it was forcing, let's say, the artists to have to comply with only playing in their venues. And so all that is monopolistic because you're, you're, you're stifling competition. You're forcing customers to have to pay higher fees. Because even if there's a. Like if you and I won the Powerball tomorrow and we wanted to start a ticketing company and a service company like this, you and I couldn't compete even if we had a billion dollars because these guys are so entrenched and so.
[00:53:27] Speaker A: Well, no, it's not because they're so entrenched. It's because they would take active measures to make it so that we wouldn't be able to compete.
[00:53:34] Speaker B: They would say, okay, that's where I was going People are going to even.
[00:53:36] Speaker A: Sign contracts and they wouldn't be. Do business with us.
[00:53:38] Speaker B: Yeah, and we could offer artists maybe more money. We could offer lower ticket sales, and there'd be a way that the venue might say, well, we can't have you because we already signed an agreement with Ticketmaster, Live Nation, you know that, and.
[00:53:50] Speaker A: If we do business with you, they're gonna stop doing business with us and we can't afford type of thing. And that's how people use that market power to stifle competition. And so, yeah, I mean, it gets to a point where in any such situation where that's the only entity that's strong enough, once it gets to that point, to do anything about it is the government, basically. And so that's where we are now. And. But you're seeing, basically, when you see this, you're seeing kind of a normal ebb and flow of things, you know, like in terms of businesses coalesce and then the government has to step in and kind of break them all up. New industries form and then things coalesce again or whatever. You know, they go back 30 years, you know, almost 40 year. I guess almost 40 years at this point is, you know, they had to break up AT&T, you know, in terms of the. All the baby Bells and stuff like that, from that, because, you know, even that being, you know, quasi utility, it was like, was just too much power for them to be able to be the only phone operator, you know, more or less. And so this is the normal ebb and flow of things. I think the big takeaway from here is that we, we are, we're grateful for Taylor Swift as the shining light, basically, that exposed.
[00:54:53] Speaker B: Forcing people to show themselves.
[00:54:55] Speaker A: Yes, yes, that expose, she exposes this stuff. And if we're smart, we're going to pay attention when Taylor Swift exposes this.
[00:55:02] Speaker B: But, you know, it's an interesting point, as you say, about AT&T and the Bells. You know, it usually works out honestly, even for shareholders long term when companies are forced to break up, because, you know, I wish I was alive to own AT&T stock when they were forced to break up, because then you would have had four separate phone companies around the country.
[00:55:20] Speaker A: And, you know, and then over time, like you said, they're going to compete, build themselves up.
[00:55:24] Speaker B: Correct.
[00:55:25] Speaker A: Eventually they merged back into just a couple of them, you know, but ultimately, you know, like that competition is what, you know, again, everybody talks about free markets or, you know, everything like that. Market economies. That's what we need, competition. You need competition. You need informed consumers, you know, you need both. And without one of them, you don't really have a market system, you know? So, yeah, that's kind of the big takeaway here. I want to get out of here, man. You know, we appreciate everybody for joining us on this episode. I'll probably like I see it, subscribe to the podcast, rate it, review it, tell us what you think, share it with a friend. Till next time, I'm James Keys.
[00:55:57] Speaker B: I'm Tunde Lana.
[00:55:58] Speaker A: All right, we'll talk to you next time.
