A Hard Fork in the Road: FTX’s Unraveling and Elon’s Loyalty Oath

The balance sheet contains an apology, the in-house coach is concerned that company executives are “undersexed” and billions in customer funds remain in jeopardy. The wreckage at FTX goes from bad to worse. Plus: Elon’s “extremely hardcore” plan for Twitter 2.0.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Your agents can talk to each other. They still can't think together. That's the gap Outshift by Cisco is closing. Outshift is Cisco's incubation engine, building the internet of cognition, shared intent, shared memory, and guardrails that allow agents to work together from anywhere. Open source protocols and code. A system for intelligence that scales. Read the paper and experience the demo at outshift.com. That's O-U-T-S-H-I-F-T.com.

• 0:32Kevin Roose?

  If the total collapse of FTX has had one silver lining, it is that I now have more conversation starters with polyamorous people.

• 0:41Casey Newton?

  Yeah, I mean, I think they just mainstreamed polyamory in a huge way.

• 0:44Kevin Roose?

  Which could come in handy in San Francisco, to be quite honest.

• 0:52Kevin Roose?

  I'm Kevin Roose, tech columnist at The New York Times.

• 0:55Casey Newton?

  And I'm Casey Newton from Platformer.

• 0:57Kevin Roose?

  And you're listening to Hard Fork. Today on the show, we've got a continuation of Nightmare November. We've got new details on the collapse. Do you like that?

• 1:06Casey Newton?

  Wait, I didn't know we had started to call it Nightmare November.

• 1:09Kevin Roose?

  I just made that up. Is that good?

• 1:10Casey Newton?

  Yeah, I like that. I mean, like, for the companies we're talking about, it is absolutely about a nightmare.

• 1:14Kevin Roose?

  Great. Nightmare November continues. We've got new details on the collapse of FTX and an update on Twitter's meltdown.

• 1:28Kevin Roose?

  So Casey, when we last talked about FTX and the collapse of Sam Bankman-Fried's cryptocurrency empire last week, we were in a very different place. The company had not yet declared bankruptcy. It was looking like it was going to, but there were still a ton of questions about what was actually happening at the firm. Why did it seem to be missing all this money? What was Sam Bankman-Fried doing, trying to raise emergency funding? What was going on with Binance, which was maybe going to acquire FTX and then backed out and said it wasn't going to acquire FTX? So since last week, so much more has happened on this story.

• 2:04Casey Newton?

  Yeah, I mean, so when we last leapt off, my thought was, at least based on what we knew at the time, that maybe this SBF character had just kind of gotten over his skis, had made a couple innocent mistakes and was now courting disaster because he had been outflanked by a rival. And I feel like what we learned over the past few days was that it does not really seem like these mistakes were all that innocent.

• 2:28Kevin Roose?

  Right. I mean, one person I was talking to this week put it this way, said this story just changed from crypto Lehman Brothers to crypto Enron, because it now appears that based on what we know, FTX has been engaging in extremely deceptive behavior, that it's lost billions of dollars of customer money, and that there is going to be a lot more investigations and potentially charges coming out of this situation.

• 2:54Casey Newton?

  And streaming services, documentaries, memes.

• 2:57Kevin Roose?

  Yeah, there are going to be at least two docu-series competing on Hulu and Netflix about this in several years. So before we really get into the details, let's just say up top, like what we know and what we don't know. So here's what we know. We know that there was a massive shortfall in the FTX balance sheet that extended just beyond a simple accounting error, right? This is not somebody fat fingering an Excel spreadsheet and like oops accidentally like taking some money from one, you know, account into another account. And so what happened last week was that there had been a run on FTX essentially, that customers had all tried to withdraw their money at once, but there wasn't enough

• 3:40Kevin Roose?

  money in FTX to pay out all those customers. But there's sort of two flavors of crisis that you can have if you are a bank or a bank-like entity. You can have a liquidity crisis, which basically means I don't have enough stuff that I can sell right now to get the money to pay my customers, but I could at some point in the future. You know, maybe I have some bonds or some, you know, some investments. They're not liquid, but I have them, they're there, and at some point in the future, I will be able to sell them and pay back my customers. I just don't have them right now.

• 4:12Casey Newton?

  Right. It's real stuff.

• 4:13Kevin Roose?

  That is not what happened at FTX. FTX had a solvency crisis, which is the far worse kind of crisis, which is that it's not just that you don't have immediately sellable assets to pay back your customers, it's that your assets don't exist, or they've lost so much value that they no longer outweigh your debts. So that's one thing we know. This was not just a simple accounting error. There is a shortfall of It's been reported $8 billion, possibly as much as $10 billion. We know that customers cannot get their money out of FTX right now. There are potentially more than a million people who may be counted as creditors in this bankruptcy proceeding because they have money locked up at FTX. Very sad, horrible situation.

• 4:56Kevin Roose?

  I've been talking to some people who have their money just locked away in FTX. In some cases, like a big chunk of their net worth is locked up.

• 5:02Casey Newton?

  Oh, man.

• 5:03Kevin Roose?

  And there are hedge funds who have said that they are locked up and can't get their money out for customers. So billions of dollars that are just stuck in sort of purgatory because this company is now bankrupt. So we know that a lot of the assets that FTX was claiming to have when it was going out and trying to raise emergency funding were basically imaginary internet money. They were coins that had little or no value, that weren't actually liquid, and that weren't worth nearly as much as FTX was claiming they were.

• 5:37Casey Newton?

  This is truly, to me, like, the most shocking part of this whole story, was that most of their balance sheet was just magic beans.

• 5:42Kevin Roose?

  We will get to the magic bean balance sheet in just a minute. But while we're still on the things we know, we know that the US Securities and Exchange Commission and the Justice Department are both investigating FTX right now. No one has been arrested or formally charged with crimes as of Wednesday morning, but they are hot on the case. And depending on what they find, Sam Bankman-Fried and other FTX executives may well be looking at criminal charges. That would not be a crazy outcome here. One more thing we know is that FTX, some of the reason that it was missing customer money is because it had lent that money to Alameda Research, which is the hedge fund

• 6:26Kevin Roose?

  that is affiliated with FTX, also started by Sam Bankman-Fried, and that Alameda Research had basically taken customer money from FTX and used it to fund its bets. Not a good thing.

• 6:38Casey Newton?

  This seems like highly unorthodox, and I'm hoping it will be illegal.

• 6:42Kevin Roose?

  Yeah, it's not not illegal.

• 6:46Kevin Roose?

  And if you did this as a, you know, Wall Street traditional stock brokerage or exchange, that kind of co-mingling of customer deposits with your prop trading shop would be very illegal.

• 6:57Casey Newton?

  All right.

• 6:58Kevin Roose?

  So what we don't know is exactly how much money is missing. We know it's a lot. We know it's, you know, at least $8 billion and possibly more than that, but we don't know the exact number. We also don't know exactly when and why FTX started using customer money to fund trading at Alameda Research, and we don't know exactly what Alameda Research did with that money. We also don't know how much of that money customers may get back as part of this bankruptcy proceeding. It could take a long time. They could only get, you know, a fraction of what they put in. And fun fact, the guy who is overseeing all of this is the same guy who saw Enron through its bankruptcy. His name is John Ray. He's an experienced restructuring lawyer.

• 7:43Kevin Roose?

  And as of a few days ago, he is the new CEO of FTX. And he actually said in a bankruptcy filing for FTX this week, quote, "Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," end quote. And remember, he was in charge of Enron.

• 8:07Casey Newton?

  Wow.

• 8:08Kevin Roose?

  So given that that's what we know and what we don't know, let's just go through the chronology a little bit. So what happened after we taped last week is that we found out a lot more about what FTX actually had on its books. And we know that because as part of its attempt to rescue itself, to get emergency funding that would allow it to continue to operate, it sent around a balance sheet.

• 8:32Casey Newton?

  And my understanding was that this balance sheet was not well received by the financial community.

• 8:37Kevin Roose?

  No, it was not. That's an understatement. You know, I've looked at a couple of balance sheets in my day. Like, usually they are pretty boring documents. But this balance sheet is one of the craziest things I've ever seen. And I actually, I want to show you this because it is so ridiculous. So here, open this link.

• 8:53Casey Newton?

  Okay. All right, I'm looking at it.

• 8:55Kevin Roose?

  So the first thing I want to draw your attention to is that on the top, in the first row of this Excel spreadsheet, it says, "Note: All of these are rough values and could be slightly off. There is also obviously a chance of typos, et cetera. They also change a bit over time as trades happen." Now, I want to posit as a general rule that if your balance sheet starts with an apology, it's not a good situation for you.

• 9:21Casey Newton?

  Also, if it starts by telling you that none of the information contained therein is accurate.

• 9:25Kevin Roose?

  Right, right. A fortress balance sheet does not typically begin with, "We're kind of making this up." So then we go into the actual balance sheet, and it's not really a proper balance sheet. It's basically just a list of, "Here's all the stuff we own. Here's how much it used to be worth, and here's how much it's worth now." It basically says that FTX, if you just sort of strip away all of the apologies and weird stuff, it has about $900 million in assets that it can easily sell. Liquid assets. It has $9 billion of liabilities. So about a 1 to 10 ratio. It's not good. We're not in a good place. It also says that the company's biggest asset

• 10:07Kevin Roose?

  was $2.2 billion worth of something called Serum. Now Serum, to me, I had never heard of it before. It sounds like something the villain in a Marvel movie would keep his retirement fund in. Like, ah, yes, Venom. He's a major player in the Serum market. But it is, in fact, a cryptocurrency, and it is something that FTX invented. It is their decentralized sort of exchange cryptocurrency. And although it was claiming that these crypto coins were worth $2.2 billion, the actual market value of Serum as of Saturday was $88 million.

• 10:44Casey Newton?

  These were magic beans.

• 10:45Kevin Roose?

  These were magic beans that were not worth basically anything. So the other thing that I want to draw your attention to on this balance sheet is in row 23.

• 10:56Casey Newton?

  Ah, yes.

• 10:57Kevin Roose?

  It's an entry that is separate from the rest of the balance sheet. And it says, hidden, poorly internally labeled fiat at account. Minus $8 billion. Anyone who has ever looked at a balance sheet, any corporate auditor, any accountant is looking at this and just like their jaw is on the floor. You do not have in a normal balance sheet, a cell that says, hidden, poorly internally labeled account. That is not a thing that normal companies have.

• 11:31Casey Newton?

  What does it even mean?

• 11:33Kevin Roose?

  It means it's, it's basically the accounting speak for oopsie. It's, it's oopsie minus $8 billion. So then just two rows below that, there's a note ostensibly from Sam Bankman-Fried himself that says, there were many things I wish I could do differently than I did, but the largest are represented by these two things. The poorly labeled internal bank related account and the size of customer withdrawals during or on the bank.

• 11:59Casey Newton?

  By the way, I think it's very funny to see somebody who's just been through a solvency crisis say, one thing I'm really sorry about is that the customers came and took all their money back. Like, obviously they took their money back. Look at this balance sheet.

• 12:09Kevin Roose?

  Right. So then we get some reporting over the weekend and into this week about what FTX has been telling its own people about what happened and what created this $8 billion hole. And we know from reports in The Times and other places that there was a meeting among employees of Alameda Research, this hedge fund, at which Caroline Ellison, Alameda's CEO, basically explained that Alameda had taken out loans and had used FTX's customer funds to make payments on those loans.

• 12:46Casey Newton?

  I mean, come on. Like, there's no way that anyone involved in that could have thought that was a good idea, right?

• 12:51Kevin Roose?

  Yeah, I mean, anyone who has spent any time in any kind of trading operation knows that this is not okay. This is not what happens. So now we start understanding a little bit more about what actually happened at FTX to create this giant hole in the balance sheet. It appears that around the time that the crypto market crashed this spring, that Alameda Research lost a bunch of money for reasons we still don't quite understand, but they were in a hole, they needed money immediately, and to plug the leak, they quote unquote borrowed customer deposits from FTX.

• 13:26Casey Newton?

  That does seem really important to sort of pause on because this is the context for this whole disaster, right? Is that last year crypto did nothing but go up and to the right, and a lot of folks, myself included, thought like, okay, here we go. Crypto is here to stay. And then, starting this spring, the whole thing starts to fall into the ocean, and one by one, it started taking firms down with it. And at first, those firms were really small, but then you get to November, and now FTX, one of the biggest of them all, gets caught up in the whole thing, too.

• 13:55Kevin Roose?

  Yeah, and around this time, FTX was seen as sort of the most stable ship in the storm. It was the one that was bailing out other crypto companies. If you remember, it bought a couple of troubled crypto companies and sort of said like, we are going to use our money to sort of restore faith in the crypto ecosystem. And Sam Bankman-Fried actually explained this strategy onstage in July in an interview with Matt Levine, who is a columnist at Bloomberg and writes a great newsletter called Money Stuff. We can play this clip if you want.

• 14:30Casey Newton?

  Yeah, let's hear it.

• 14:31Speaker 03

  So, okay, of the calls we might get, the best case is when they have about zero left, right? And, you know, they're like, look, we need a buffer here so that we can like definitely pay salaries without dipping into customer funds, like, you know, and we're like, that makes sense.

• 14:46Speaker 03

  Right. And in those cases, like what we would tend to do is like, okay. Because otherwise they would. Well, depending on the company, right? Otherwise, maybe they would declare bankruptcy, or maybe they would dip into customer, whatever.

• 14:59Kevin Roose?

  Okay, so he's basically saying that these other crypto companies, the ones that we're gonna rescue, they're coming to us when they have $0 left. They need some capital and we can sort of bail them out so that they don't have to do anything crazy or irresponsible, like dip into customer funds. We now know that by this time, FTX was doing exactly that itself. I've talked to some folks close to FTX and some other people who sort of knew what was going on there. People are largely pretty scared to talk. Either their lawyers have told them, like, don't say anything, or they're embarrassed that they believed

• 15:43Kevin Roose?

  in SBF and FTX. They're sort of like, you know, sort of ashamed that they thought he was, you know, this effective altruist, do-gooder philanthropist guy.

• 15:53Casey Newton?

  I mean, I will say, if I worked for the FTX corporation, you called me, I would not pick up the phone under any circumstances. You're going straight to voicemail, Ruus.

• 16:00Kevin Roose?

  Wow, brutal. So, but as it turned out, there was one FTX employee who did call me back, and it was not who I expected.

• 16:08Casey Newton?

  Who was it?

• 16:09Kevin Roose?

  His name is George Lerner. He is a psychiatrist. According to one profile of Sam Bankman-Fried, he is Sam Bankman-Fried's longtime therapist.

• 16:21Casey Newton?

  Okay.

• 16:21Kevin Roose?

  And he, for the past year, has worked at FTX as its in-house performance coach.

• 16:27Casey Newton?

  Hmm.

• 16:27Kevin Roose?

  So, a lot of like, trading firms now have in-house performance coaches who are usually like psychiatrists or mental health professionals of some kind who go in and like, basically help the people like, plan their careers and manage stress and, you know, basically they're like the in-house therapist. So, Dr. Lerner basically tried to explain a lot of the culture of FTX, but in a way that kind of raised more questions than it answered.

• 16:53Casey Newton?

  Yeah, I would love to hear about the culture of FTX.

• 16:55Kevin Roose?

  So there's been a lot reported over the past week about rumors of rampant stimulant abuse at FTX and people taking tons and tons of Adderall and other stimulants to work long hours and focus more and be more productive. I asked him about that. He said basically like, yeah, there are some people with ADHD who may take Adderall at the firm to treat it. And he's written some prescriptions for people at the firm. But he said it's basically like, no more so than other tech companies.

• 17:26Casey Newton?

  I'm not sure we have a baseline stat for like how much Adderall is being done at tech companies.

• 17:32Kevin Roose?

  Well, there was a front page article in the New York Times about a nationwide shortage of Adderall. So someone is taking a lot of Adderall. I don't know whether they're in the tech industry or not, but there does seem to be a lot of that going around. So that's one thing he said. I also asked him about this polycule business.

• 17:49Casey Newton?

  This is our Urban Dictionary definition of the week.

• 17:52Kevin Roose?

  It is a group of non-monogamous people who are in relationships with each other and may or may not live together.

• 17:58Casey Newton?

  Yeah, a group of polyamorous folks.

• 17:59Kevin Roose?

  Or as we call it in San Francisco, a house.

• 18:06Kevin Roose?

  So there were rumors and reports that all the executives at FTX were living in this house together, that a lot of them had been in relationships or were in relationships, and that essentially they were all just having giant orgies. And Dr. Lerner said essentially, it was way less cool than that. He said to me, quote, "If anything, they were undersexed." And then he told me that in their spare time, these people did not actually have orgies. They played board games and chess.

• 18:34Casey Newton?

  Wait, let's just take a pause on that. So let's imagine that you work at the FTX company. You've recently found out, let's just say that you weren't involved in the scam or the fraud, assuming there was a scam or fraud, and you've just found out that your company was involved in one of the greatest financial scams of all time. People are calling your boss the millennial made up. And then you pick up the New York Times and you read that your in-house psychiatrist is telling reporters that you're a bunch of undersexed nerds. What is even happening?

• 19:00Kevin Roose?

  I don't know, man.

• 19:02Casey Newton?

  And my therapist, I would be so mad at him. I would never forgive him.

• 19:06Kevin Roose?

  Yeah, I would, I would be similarly upset if my therapist were going around giving interviews. But he basically said, like, this is an incredibly sad time for employees. A lot of them had moved to the Bahamas from big cities and taken a big risk and were now feeling like they had to go home or figure out their next move. He described it as sort of a place that was very insular. People worked long hours. They tended to hang out with people from the company. They didn't really have social lives outside the firm. They wouldn't like go out. They would just spend like extremely long hours in the office.

• 19:43Kevin Roose?

  We'll be right back.

• 19:44Speaker 00

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• 21:22Kevin Roose?

  Casey, have you seen the Sam Bankman-Fried DMs?

• 21:27Casey Newton?

  They are unhinged.

• 21:30Kevin Roose?

  There are not that many stories that I read where I physically have to get up from my computer and take a walk around the room to like calm myself. This was one of them. I could not believe what I was reading. Okay, so this was published by Vox on Wednesday afternoon. And it is basically a series of Twitter DMs between Kelsey Piper, who's a reporter for Vox, and also sort of adjacent to Sam Bankman-Fried's universe in some way. She's an effective altruist, he's an effective altruist. They know each other. Sam Bankman-Fried would later say that he never meant these DMs to become public and that he considered Kelsey a friend.

• 22:12Kevin Roose?

  But they are public, they are published, and they are juicy. So let's read excerpts from these Twitter DMs. I will read the parts by Kelsey Piper from Vox, and if you wouldn't mind reading the parts from Sam Bankman-Fried.

• 22:29Casey Newton?

  And are you saying that because you think I'm an untrustworthy person?

• 22:31Kevin Roose?

  I just think you'll do a better job with it.

• 22:33Casey Newton?

  All right, let's give it a shot.

• 22:35Kevin Roose?

  All right, so here I am. I'm Kelsey. This is our Twitter DM conversation.

• 22:39Casey Newton?

  Okay.

• 22:40Kevin Roose?

  You said a lot of stuff about how you wanted to make regulations, just good ones. Was that pretty much just PR too?

• 22:46Casey Newton?

  There's no one really out there making sure good things happen and bad things don't. Usually there's only one toggle, do more or do less. Yeah, just PR. Fuck regulators. They make everything worse. They don't protect customers at all.

• 23:00Kevin Roose?

  So that's number one. Keep in mind, this is coming from a guy who has spent much of the last year just cozying up to regulators. And here in two words in a Twitter DM, he is basically just saying, just kidding, fuck regulators.

• 23:13Casey Newton?

  Yeah, and he used a curse word. And that's not going to sit well with these regulators.

• 23:17Kevin Roose?

  They do not like cursing at the CFTC.

• 23:21Casey Newton?

  Also, by the way, can I just say, very funny to me that he says of regulators, "They don't protect customers at all." You know who else isn't protecting customers at all lately? The guy who was lending out their deposits to his hedge fund.

• 23:31Kevin Roose?

  100%. All right, number two. You were really good at talking about ethics for someone who kind of saw it all as a game with winners and losers.

• 23:40Casey Newton?

  Yeah, heh heh, I had to be. It's what reputations are made up to some extent. I feel bad for those who get fucked by it, by this dumb game we woke Westerners play, where we say all the right shibboleths and so everyone likes us.

• 23:53Kevin Roose?

  Oh, man.

• 23:54Casey Newton?

  It's giving Shakespeare.

• 23:57Kevin Roose?

  I mean, this one is just, to me, like, the most insane of the DMs because it's just admitting that this whole philanthropic reputation, this connection with the effective altruism movement, like, he's basically saying this was just PR.

• 24:13Casey Newton?

  It was a facade.

• 24:14Kevin Roose?

  Yeah.

• 24:14Casey Newton?

  And, we should say, an extraordinarily effective one, right up until the bottom dropped out.

• 24:19Kevin Roose?

  Right, and like, to the extent that the Vox vertical, where this was published, Future Perfect, was actually a recipient of philanthropic money from Sam Bankman-Fried. This is the part of Vox that he and his foundation funded. And it's frankly, like, if I'm a person who is into effective altruism, which, you know, a lot of people in Silicon Valley are, like, this one, to me, is the one where I'm just, like, throwing my computer across the room. This was a guy who was seen as a leader of this movement and this whole earn-to-give philosophy, where you make as much money as possible so that you can give it away. He's basically saying, like, yeah, all that, it was just a lie. Okay, the third and final one, and this is really the coup de grace.

• 25:00Kevin Roose?

  There's a whole complicated exchange in which Sam Bankman-Fried essentially admits to Kelsey Piper that everything that people have been saying about FTX using customer deposits to fund risky bets at Alameda Research is true. He confirms that there was what he called, quote, "messy accounting," and he tries to explain sort of how this all got so out of hand. And then there's this last exchange. Let's, let's read this one out. So- Kelsey says, what's next? What's your plan?

• 25:33Casey Newton?

  I have two weeks to raise $8 billion. That's basically all that matters for the rest of my life.

• 25:40Kevin Roose?

  So keep in mind, Sam Bankman-Fried is not the CEO of FTX anymore. He has no role at this company. The company has declared bankruptcy. And in these DMs, Sam Bankman-Fried is essentially saying it was a mistake to declare Chapter 11 bankruptcy. I'm still going to try to save this company by raising $8 billion in two weeks. And I gotta say, if Sam Bankman-Fried at this point is able to raise $8 in the next two weeks from investors, I would be very impressed. No one is giving this guy money.

• 26:14Casey Newton?

  Well, okay, so Kelsey sort of makes a similar point to him, right? And says, I have no idea how anyone could possibly pull that off. And he says, well, a month ago, I was one of the world's greatest fundraisers. Now I'm the fallen wreckage of one. But there's a thing about being fallen. There are people who know what that's like and who want to do for someone else what nobody did for them. And that is like poignant and yet also impossibly naive, right?

• 26:38Kevin Roose?

  Right. He is under investigation and a US House committee this week said it plans to hold a hearing about all of this. SBF, he is no longer in any position of authority at FTX. And actually, shortly after this piece came out, FTX itself actually tweeted out essentially, we don't know this guy. Like, we, like, he does not represent the firm. We do not endorse his views and he is not in control of this company. And, you know, I think in some ways, like, that's just a reaction to kind of how dramatic this has all been as it's unfolded.

• 27:14Casey Newton?

  Yep.

• 27:14Kevin Roose?

  But I think we should also just take a moment and just acknowledge that this really, really sucks for a lot of people. It's not only hitting the customers of FTX who trusted Sam Bankman-Fried with their money, in some cases, you know, a big chunk of their money and are now unable to get it. But it also affects a lot of philanthropies and charities who got money from Sam Bankman-Fried, groups doing things like pandemic preparedness and AI safety. Real groups that were counting on this money that are now going to have to find a way to make do without it, it's just going to have very big, very sad ripple effects. And I just think it's like worth ending on that note that like this may seem like

• 27:55Kevin Roose?

  it's just a, you know, made for TV, financial drama, but it has real stakes for a lot more people than the typical crypto blow up.

• 28:05Casey Newton?

  Yeah, I think that's right. Long after we've sort of like forgotten about some of the wilder details of this story, there will be real people who are still suffering the consequences of everything we've just described.

• 28:16Kevin Roose?

  So because this is now a bankruptcy proceeding, we're going to start to have some legal processes unfold. So creditors will have to be identified. There will be attempts to claw back some of the money that was lost. I will just say that the bankruptcy of Lehman Brothers, which happened in 2008, just resolved this year. So we could be looking at many, many more years of trying to get investors' money back.

• 28:40Casey Newton?

  We could be talking about this bankruptcy on Hard Fork for 14 years.

• 28:45Kevin Roose?

  God forbid, but I do, I do think we should commit to a 14-year run of this podcast.

• 28:52Casey Newton?

  I'm in.

• 29:03Kevin Roose?

  We'll be right back.

• 29:10Speaker 00

  AI spend is growing fast, but most businesses still can't see exactly where that money is going. Ramp gives businesses visibility and control across AI providers with real-time guardrails by team and model, helping ensure spend goes to the highest ROI areas. Stop guessing where your AI spend is going. Get started with Ramp. And if you're new to Ramp, you can get $250 off at ramp.com/hardfork. Go to ramp.com/hardfork. Ramp.com/hardfork.

• 29:42Speaker 05

  Ripple has been powering modern finance for a decade. It's not our first trip around the blockchain, and it won't be our last. We're leading the charge to bridge the gap between existing financial systems and the future of finance. You can have it all. Legacy, stability, and digital innovation. Systems that work with your other systems. Because with the right partner, the question isn't crypto or traditional finance. The question is simply, why choose? A new standard of modern finance. It's happening with Ripple. For informational purposes only. Availability of products can vary. May be provided by different Ripple entities.

• 30:15Speaker 04

  Today's AI builders need infrastructure that scales with their ambitions. Iron is a vertically integrated AI cloud platform, delivering data centers, compute, and software for AI training and inference, underpinned by its expansive portfolio of land and grid-connected power in renewable-rich regions globally. Iron's AI cloud gives direct access to Nvidia GPUs, scalable from hundreds to thousands. For builders, that means direct access to AI compute, rapid scaling, and predictable pricing. Iron, AI cloud for the next big thing.

• 30:49Casey Newton?

  Kevin, let me just read you this email real quick. Subject line: A fork in the road.

• 30:55Kevin Roose?

  We love a fork.

• 30:56Casey Newton?

  Going forward, to build a breakthrough Twitter 2.0 and succeed in an increasingly competitive world, we will need to be extremely hardcore. This will mean working long hours at high intensity. Only exceptional performance will constitute a passing great. It goes on from there. What you need to know is that this email came from Elon Musk. It was directed to the employees who remain at Twitter. And it came with a deadline. There's a link to a Google form in here. And if you're willing to commit to those extremely intense, extremely hardcore, long hours, you have to click on the form. And anyone who had not done so by 5:00 PM Eastern on Thursday was to be automatically laid off

• 31:41Casey Newton?

  and to receive three months of severance. Elon concluded by saying, whatever decision you make, thank you for your efforts to make Twitter successful.

• 31:49Kevin Roose?

  What does that even mean? Like, I saw this email, and I was just like, what does it mean? Like, I pledged to be extremely hardcore? Like, you click the Google form. What is it like? You automatically get like twice as many projects? Like, what does it mean to be extremely hardcore at the new Twitter 2.0?

• 32:07Casey Newton?

  Here's what we know. When Elon Musk bought this company, he had people in his ear telling him this workforce is too big. It is lazy and they just sit around all day. And most of the engineering talent there isn't any good. And so for Elon, job one was figuring out who is the good engineering talent at this company? And I'm going to get rid of almost every other person, right? And to signal the fact that it's serious business around here. Elon has been in that office for many hours. He's sending out emails in the middle of the night. He's really trying to signal that the new Twitter is a 24/7 operation and it demands total commitment.

• 32:49Casey Newton?

  Now, at the same time, if you work at Twitter, you've just gone through a hellacious transition. You've just saw half of your colleagues or more disappear. And you've gotten very little communication from the top during that entire period, right? And so I think most of the Twitter employees that I've spoken to would say that it has already been an extremely hardcore few weeks. And it's kind of unimaginable what a more hardcore work experience would look like.

• 33:16Kevin Roose?

  Right. I mean, to me, I saw this email and my first thought was this is a loyalty oath. Like, he is not actually telling people that their jobs are going to be different after they click yes on this Google form to avoid being laid off. What it's basically saying is like, I'm on board with you as the boss and I will do what you say.

• 33:36Casey Newton?

  I think that's exactly right. And it ties into one of the most important things that happened at Twitter this week. So you may have seen that on Twitter Elon was sort of musing about why, in his opinion, the service was too slow. And he started throwing around some technical terms. He talked about how the app is doing more than 1,000, in his words, poorly batched RPCs, which are remote procedure calls.

• 34:02Kevin Roose?

  Hate when my RPCs are poorly batched.

• 34:04Casey Newton?

  Yeah. It sort of almost doesn't even matter what RPCs are, but they're basically just, you know, ways for software systems to talk to each other, I think it's fair to say. And one of his engineers quote tweets him and says, "I've spent about six years working on Twitter for Android and can say this is wrong." Elon responds, "What have you done to fix that?" And so this engineer, whose name is Eric, responds with a very polite, detailed thread about what they have done up to date, and talks about what he thinks they might need to do in the future. He then makes some snarky comments to people replying to him, and a little while later, he gets fired. And this triggers a wave of firings within Twitter. So on Tuesday, I woke up to news that overnight, at least a couple dozen, it seems, employees

• 34:48Casey Newton?

  were fired for either comments they had made on Twitter, or comments they had made in Slack that were criticizing Elon and his new team. In some cases, it seems, employees were just fired for retweeting their coworkers who were critical. And so it really did become the start of this purge of the company based entirely on loyalty to Elon and his vision.

• 35:10Kevin Roose?

  So these people, it seems, were not being fired because they had, like, slacked off at their jobs, or because they hadn't, you know, written enough code or something. Their crime, essentially, was talking back to Elon in either a public forum or in front of their coworkers on Slack.

• 35:24Casey Newton?

  Yeah, and of course, the most common response I get to this is, "Well, look, if I criticized my boss at my job, I would get fired too." And I think it's an important thing to say, right? Most of us, we do need to be really careful the way that we talk to our bosses. But it's also important to note that, at Twitter, the culture up until now has been very different. They had this mantra internally, "Communicate fearlessly to build trust." And under the leadership of CEO Jack Dorsey, people would constantly have these really kind of gnarly debates, both internally and on Twitter, where they would talk about how they thought the service ought to improve. And so some of these people who got fired are in there saying, "I apparently, you know, was fired for violating company policies." That's what the email they received said. And yet, they don't know what those policies were.

• 36:06Casey Newton?

  So, you know, when I look at that, I think that seems like a misstep to me, because I think a lot of those people are essential to the way that Twitter runs. But I think if you start from the position of, "I need to ensure maximum loyalty to me at all times," this is a thing that you would do. And the thing that I've been hearing, as I talk to people inside Twitter, is that Elon has become quite paranoid. He thinks that the remaining- Team there may try to sabotage the site, like might try to bring it down or just sort of do something else to thwart him. And so he's become determined to root out any sort of insurgent elements that-

• 36:41Kevin Roose?

  He thinks there's a Twitter deep state?

• 36:42Casey Newton?

  Yes, 100%. And so this is part of the move to get rid of that deep state.

• 36:47Kevin Roose?

  Wow. So do you get a sense that all of these firings, you know, getting in arguments with Twitter employees on Twitter, is this sort of working to, I don't know, bring the company's employees along on his vision? Or is it just alienating them and pushing them into, you know, secret side channels?

• 37:06Casey Newton?

  Well, you know, I should say, I may have a distorted view. I think if you're super happy with the way that Elon is running the company, you're probably not reaching out to talk to me. At the same time, I have never heard in my entire tech reporting career from more people inside a tech company just sort of reaching out to me around one story and saying, this is terrible.

• 37:25Kevin Roose?

  Yeah, it also, it's just becoming increasingly clear that Elon Musk, for all of his other, like, talents, and I should say, like, the guy is clearly talented. He has built several companies, like, he clearly has gifts at some things. The guy is a bad boss. I think if you heard this story, and it was not about Elon Musk and Twitter, if it was just like your friend who said, you know, who worked at, I don't know, an insurance company or something, and he was telling you about his boss who was, you know, going through Slack and looking for people who were, you know, not sufficiently deferential to him and firing them on the spot, who was going through and, you know, making jokes

• 38:05Kevin Roose?

  about how poorly run your service was, who was saying like publicly that like all of your work was too slow and nothing worked as it was supposed to, like, your natural response would be like, wow, that guy sounds like a really mean boss. And like, I'm sorry that you work for that guy.

• 38:21Casey Newton?

  Yeah. And I think a major theme that has emerged over the past week is that Elon will discuss some aspect of the service online, or he'll talk about a change that he wants to make, and the team will either tell him publicly or privately, it doesn't quite work like that, or if you do this, this bad thing will happen, and he- Does it anyway. To give you one example, you may remember that when they rolled out the new Twitter Blue, as we talked about last week, people had a field day impersonating brands and, you know, costing the company millions of dollars and like lost advertising revenue. And I got ahold of this document from November 1st, where his trust and safety team had laid out, if you do it this way, here's what people are going to do. People are going to impersonate brands, right? We're going to have a great deal of difficulty identifying

• 39:05Casey Newton?

  those things. And I'm told he was briefed on this document directly. They launched anyway. They had this big disaster and they wound up having to sort of roll back the launch. So when I see that, I think like, that's bad boss behavior. If you have a team that has a lot of expertise around a subject and you just ignore them at every turn and they constantly turn out to be right, and then you keep firing them, like, I sort of think that that only leads in one direction. And speaking of firing people, we should say that another thing that happened this week is Twitter lost a lot more people. They had about 5,500 contract employees. Most of those worked on content moderation, so keeping Twitter safe. And over the weekend, those people went to log into their Twitter

• 39:50Casey Newton?

  and Slack to just check on work, and they found that their credentials no longer worked. They had just been cut in the middle of the night, often, with very little explanation. And those people's healthcare ended two days later. So I heard from managers inside that said, I had people who were working on really complex projects related to child safety, for example, and those people are just totally gone. So, once again, there's now a gaping hole in Twitter where some real expertise used to be.

• 40:17Kevin Roose?

  Yeah. I've been thinking a lot about this piece that my colleague Joe Bernstein wrote a few weeks ago about Elon Musk and sort of his social circle. And one of the things that came out in that piece is that Elon is very eager to be liked. He wants to be liked, and not only does he want to be liked, he wants to be thought of as funny. There's this passage in the piece that was talking about how he's cultivated all these comedy writers as friends and like, tried to be like, to be one of them, essentially. And he's particularly obsessed with Nathan Fielder. I don't know if you, did you read this?

• 40:52Casey Newton?

  Yeah, I did.

• 40:52Kevin Roose?

  So like, he's obsessed with Nathan Fielder and has invited him to a bunch of parties and like, basically spends a lot of time trying to make him laugh and like, very badly wants to be seen as like, part of the, the like, cool funny crowd in Hollywood. And what's happening at Twitter now strikes me as like kind of a version of that where it's like, if you don't think I'm cool and funny, you're fired. Like, that's essentially what he's saying. And it just does not seem like the way that you should run a big social media company.

• 41:23Casey Newton?

  Yeah, I agree with you. And yet I think there's this flip side where in addition to wanting to seem funny, there's this real viciousness to him, right? So, you know, he was taking criticism for firing some of these employees who had been critical of him. And he responded on Twitter saying, I would like to apologize for firing these geniuses. Their immense talent will no doubt be of great use elsewhere. So, just kind of dripping with sarcasm. And later, he replied to a post from the notorious Libs of TikTok account that mocked another fired engineer who had criticized him. And Musk tweeted, "A tragic case of adult-onset Tourette's." I think that's pretty gross.

• 42:07Casey Newton?

  And it's hard for me to imagine working for someone who is not only going to fire so many people, but to also mock them on their way out. It's just, it's really grim.

• 42:25Kevin Roose?

  So, OK. There's also been a lot going on outside the company's walls. So, how has all of this resonated with advertisers?

• 42:34Casey Newton?

  Well, believe it or not, it's not going great.

• 42:37Kevin Roose?

  Pepsi doesn't want to be a part of the Elon Musk loyalty oath purge?

• 42:42Casey Newton?

  No. And as a matter of fact, the Omnicom Group, which is one of the biggest advertising companies in the world, advised their clients to pause all spending on Twitter. So, that's going to have a significant effect. Group M, which is another big advertising company, told its clients that it had elevated the risk on Twitter, and it's now considered a sort of high risk when it comes to brand safety. I've also reported that within Twitter Slack, ad execs are talking about steep hits to their revenue because people are just so afraid to buy ads on Twitter right now.

• 43:18Kevin Roose?

  I want to ask you about this theory that I've seen floated on Twitter in the last couple of days, which I really don't know what to make of, but it's kind of this theory of Elon Musk as kamikaze pilot, essentially that he is trying to

• 43:32Kevin Roose?

  Bring the site down, that he's trying to bring Twitter down, that he's trying to basically collapse the business because he's got all this debt now from the acquisition. And if he can drive down the cost of that, if he can essentially make that debt worthless, then he can buy it back from the banks that financed his acquisition, giving him even more ownership of Twitter and even more control of it.

• 44:03Casey Newton?

  Yeah. So, look, one, ultimately only Elon knows Elon's mind, but I would say, based on what I've observed in my own reporting, I think people who believe that are underestimating Elon Musk's self-confidence, right? This is somebody who thinks he's a really smart guy. He knows that he was very successful at Tesla and SpaceX, and he believes that Twitter ultimately should not be that hard of a problem to solve. So I think he believes that if you sort of take this company almost all the way back down to zero in terms of the number of employees it has, build it back up and implement all of his ideas, then Twitter will be very successful. At the same time, from the outside view, outside of Elon's

• 44:44Casey Newton?

  head, I would say, if you wanted to destroy Twitter, I don't know that you would go about it much differently than Elon is going about it.

• 44:51Kevin Roose?

  Hmm.

• 44:52Casey Newton?

  You know?

• 44:52Kevin Roose?

  Yeah. I mean, I'm trying to think what you could do. You could like turn off, I mean, you could just turn off the site.

• 44:57Casey Newton?

  Yeah, you could skip all the way to the end and just unplug it. But like, short of that, getting rid of all of the top talent, ignoring everything your people are telling you, rush out features without understanding the potential impact, cause a massive brand safety crisis, fire all your content moderators. I mean, these are all things that I would do if I were trying to destroy a social network.

• 45:18Kevin Roose?

  So if Elon Musk really is tanking this company, and it's just a matter of days or weeks until something irreparable has broken about Twitter, what does that mean? Like, should we all be setting up, you know, I've seen people like setting up Mastodon accounts and like posting links to their LinkedIn pages. And it seems like people are kind of like... Treating this like kind of the last day of summer camp. Is that realistic? Should we all be thinking about what does life look like after Twitter?

• 45:50Casey Newton?

  I mean, first of all, I want people to stay calm. There's no reason to post to LinkedIn. You know, that's really a sort of break glass in case of emergency measure. And we want to save that, you know, for when it's really needed most. But look, I have to say that as someone who thought as wild as these times are, Twitter will muddle through because Twitter has always muddled through. The events of this past week have caused me to start to envision a world without Twitter, or at least a world where Twitter is no longer at the center of media and politics.

• 46:23Kevin Roose?

  Yeah. I did download my Twitter data. There's a thing where you can archive your Twitter data. And I did do that just because I had the thought like, if this all goes away, like, there could be a run on Twitter data, like, sort of like there was on a run on FTX, like, where so many people are trying to download their old messages and stuff that

• 46:44Casey Newton?

  There's like, there's a trustee who spends 14 years trying to get your old tweets back.

• 46:50Kevin Roose?

  All I want is my likes. I don't care about my tweets. But I do think there is this question of like, what happens if Twitter goes down? Where do we all go? Where do journalists go? Where do politicians go? Sort of what pops up to replace it? And I genuinely don't know the answer to that. It's hard for me to imagine a world without Twitter. And yet, you know, we may have to.

• 47:16Casey Newton?

  I don't know the answer to it, but here's what I believe. I think what Twitter discovered is that there probably ought to be a space where people go and can say what is happening in the world. And that place should kind of court the people who are vying to set the day's agenda. So that's going to mean journalists, it's going to mean politicians, it's going to mean celebrities, and it's going to mean average people who just kind of want to show up and have some fun and comment on world events, right? Obviously, Twitter is not the only place where that happens today. Reddit exists, Discord exists, Instagram exists, right? But I can't help but wonder. If Twitter declines, will we see something that is even more Twitter-like than any of those things come along and try to fill its place?

• 48:00Casey Newton?

  You know, usually if you're an entrepreneur and you came to me and said, I want to do like another version of Twitter that's basically just like Twitter, I would say, don't bother, it already exists. I'm more open to that pitch now. I sort of feel like if you wanted to give it a shot, I don't know, I'd sign up for an account. I'd probably post some stuff there. If it were easier to use than Mastodon, I'm all the way in.

• 48:17Kevin Roose?

  Yeah, I tried to set up a Mastodon account and it was just a total disaster. It took me like half a day. I'm still not sure I successfully did it. I don't really know what I'm doing on Mastodon.

• 48:28Casey Newton?

  It's, you know, neither do I. And every time I think about like having to read a Mastodon explainer, like I want to go lie down. You know, I feel like I've got enough on my plate. That's just like one thing I'm not ready to do.

• 48:37Kevin Roose?

  Yeah, maybe I'll save that for my next vacation. I'll finally figure out Mastodon. I will say that, so Donald Trump this week announced that he is running for president in 2024. I will say the thought of doing another presidential race involving Donald Trump with Twitter in its current form just makes me exhausted just thinking about it. I saw a tweet while Trump was making his announcement that saying this guy on Twitter can either mean Elon or Donald Trump now. There's sort of two main characters and it feels a little overwhelming frankly to have two permanent main characters on Twitter. I'm not sure that we can handle that. So if for that reason alone, I think we all should be thinking about where we're diversifying our social media presence.

• 49:22Kevin Roose?

  I for one am planning to go big on TikTok as we've said.

• 49:31Casey Newton?

  We'll be right back.

• 50:08Speaker 05

  Ripple has been powering modern finance for a decade. It's not our first trip around the blockchain, and it won't be our last. We're leading the charge to bridge the gap between existing financial systems and the future of finance. You can have it all: legacy, stability, and digital innovation. Systems that work with your other systems. Because with the right partner, the question isn't crypto or traditional finance. The question is simply, why choose? A new standard of modern finance. It's happening with Ripple. For informational purposes only. Availability of products can vary and may be provided by different Ripple entities.

• 50:41Speaker 04

  Today's AI builders need infrastructure that scales with their ambitions. Irene is a vertically integrated AI cloud platform, delivering data centers, compute, and software for AI training and inference, underpinned by its expansive portfolio of land and grid-connected power in renewable-rich regions globally. Irene's AI cloud gives direct access to Nvidia GPUs, scalable from hundreds to thousands. For builders, that means direct access to AI compute, rapid scaling, and predictable pricing. Irene, AI cloud for the next big thing.

• 51:15Kevin Roose?

  That's it for this week. Thank you to everyone who has sent us questions so far for our upcoming Mailbag episode. If there's something else you want to know about any of the topics we've covered or the future of the tech industry, please send them to [email protected]. Thank you also to all of our new followers on TikTok. They are clamoring for us to do Dance, Casey. I'm not sure if we can give that to them, but it depends how many people ask for it. Please follow us at Hard Fork, and if you like the show, leave us a review.

• 51:47Kevin Roose?

  Hard Fork is produced by Davis Land. We're edited by Paula Schuman. This episode was fact-checked by Caitlin Love. Today's show was engineered by Sophia Landman. Original music by Dan Powell, Alicia Baetup, and Marian Lozano. Special thanks to Hannah Ingber, Nell Galogly, Kate LaPreste, Shannon Busta, Mahima Shablani, and Jeffrey Miranda. See you next time.

• 52:33Speaker 00

  AI isn't just opening new business opportunities, it's changing the way businesses get work done. The questions they ask, the decisions they make, and the routine tasks they can hand off. And nobody understands that better than NetSuite. That's why they put together a free expert guide you need to grab today. Aligning for the agentic era, how AI is changing everyday work. Download it and you'll see exactly how AI is reshaping work across every part of your organization and how to make sure you come out ahead. Get your free guide at netsuite.com/NYT. netsuite.com/NYT.