Oculus

Ben & David transcend the barriers of “real” reality, and dive into Facebook and Mark Zuckerberg’s geek-eutpoia vision of the future of gaming, social, and maybe even the entire internet: strapping goofy-looking goggles to your face. Is VR for real this time or are we living through another Virtual Boy https://en.wikipedia.org/wiki/Virtual_Boy moment? Tune in to find out! Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC Topics covered include: Oculus’s origins in 2010 as a twinkle in the eye of the then-17 year old VR wunderkind, Palmer Luckey, who started by prototyping VR headsets in his parents’ garage in Southern California Palmer’s time interning at USC's Institute for Creative Technologies https://en.wikipedia.org/wiki/Institute_for_Creative_Technologies, and chronicling of his own VR efforts in the Meant to be Seen 3D http://www.mtbs3d.com/index.php internet forumsLegendary game developer John Carmack https://en.wikipedia.org/wiki/Institute_for_Creative_Technologies’s own interest in virtual reality, his intersection with Palmer on the MTBS3D forums, and how he acquired and popularized one of Palmer's first early prototypes of the Oculus Rift (which was literally held together with duct tape http://www.theverge.com/2012/5/30/3052191/doom-3-bfg-edition-announced-for-the-fall-we-try-it-with-john!) by demonstrating it onstage at E3 2012 https://www.youtube.com/watch?v=kw-DlWwlXHo How former Scaleform cofounders Brendan Iribe and Michael Antonov teamed up with Palmer after E3 to create the company Oculus VRThe newly-formed Oculus’s wildly successful August 2012 Kickstarter campaign https://www.kickstarter.com/projects/1523379957/oculus-rift-step-into-the-game, including video endorsements from both Carmack and Valve founder Gabe NewellOculus’s subsequent venture capital fundraisings, and catching the attention of Facebook and Mark Zuckerberg Facebook’s acquisition of the company in March 2014 for $2.3BThe Zenimax lawsuit filed against Oculus and Facebook following the acquisition Valve (home of the most incredible company handbook of all-time http://www.valvesoftware.com/company/Valve_Handbook_LowRes.pdf) and Gabe Newell’s subsequent pivot from supporting Oculus to launching their own competing VR efforts with the Vive Team changes at Oculus post-acquisition Followups: SNAP: still a public company https://www.google.com/finance?q=NYSE%3ASNAP&ei=EUftWLDeBYeJUceOr9gE Hot Takes: Intel’s $15B acquisition of Mobileye (with reference to Ben Thompson’s analysis of the deal and Smiling Curves https://stratechery.com/2017/intel-mobileye-and-smiling-curves/) The Carve Out: Ben: Kara Swisher interviews the Pod Save America team at SXSW https://art19.com/shows/pod-save-america/episodes/ec7a330f-0489-46ec-b27e-b8e61a65daa7David: Adam Gopnik asks Are Liberals on the Wrong Side of History? http://www.newyorker.com/magazine/2017/03/20/are-liberals-on-the-wrong-side-of-history

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

• 0:00Ben Gilbert?

  Hey Acquired listeners, Ben here. You'll notice for the first eight minutes or so of the episode, my audio quality isn't the greatest, but bear with us, it'll be crystal clear for most of the episode. Thanks. Is ocular and occluded from the same root?

• 0:15David Rosenthal?

  Uh, I don't know.

• 0:17Ben Gilbert?

  I don't know either.

• 0:17David Rosenthal?

  Anyway.

• 0:18Ben Gilbert?

  That feels right, because I think that's their logo, right?

• 0:22David Rosenthal?

  It's an eye, yeah.

• 0:23Ben Gilbert?

  Yeah, alright. I concede.

• 0:36Ben Gilbert?

  Welcome back to episode 35 of Acquired, the podcast about technology acquisitions and IPOs. I'm Ben Gilbert.

• 0:44David Rosenthal?

  I'm David Rosenthal.

• 0:45Ben Gilbert?

  And we are your hosts. Today's episode, we are covering the Facebook acquisition of Oculus, a much requested episode by a lot of our listeners in the Slack and one we've gotten a lot of email about. So we've now got enough distance from the acquisition that there's a lot more to come, but we feel comfortable covering it.

• 1:06David Rosenthal?

  No doubt about that. And we thought now would be a good time to do it, given some of the themes we talked about on the Snap IPO episode, that this would be a good counterpoint, a sort of different approach to a camera company.

• 1:21Ben Gilbert?

  Indeed. So before we dive in, we have some incredible listeners that leave some great iTunes reviews. And sometimes they're even a little host deprecating, but we love them all the same, as long as they're five stars and they help us grow the show. So as we mentioned a couple of episodes ago, if you leave one that we think is worth reading on the air, we're going to go ahead and do just that. So one we've got from Daniel X is an emoji review, which is trophy, bag of money, unicorn, which I think is quite appropriate. And this one, this one's a little, I had trouble parsing it at first, and then I was like, oh, I see what they're doing. The subject is, yep, yep. And the description

• 2:04Ben Gilbert?

  is, that's one of my favorite phrases Ben uses. Oh, man. Yeah. And super interesting are up there, too. So now I'm going to be incredibly self-conscious every time I use those phrases. And thank you so much.

• 2:17David Rosenthal?

  We love you just the same, Ben.

• 2:18Ben Gilbert?

  And the username on that one is Active Users. So thank you to all the Active Users out there that really appreciate my catchphrases.

• 2:26David Rosenthal?

  That's great.

• 2:27Ben Gilbert?

  All right, moving on, I'm happy to leave that behind. But what the point we're trying to make is leave us iTunes reviews. Helps us grow the show. We love it. And hopefully, if you're creative, then we get to share it with the rest of our audience. Speaking of the rest of our audience, we've got a Slack. So join us at acquired.fm. You can join the over 500 of us that are in talking about tech, M&A, and any news that comes up between episodes. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF. Then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 3:10David Rosenthal?

  Yep, your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 3:31Ben Gilbert?

  Right, and that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 3:53David Rosenthal?

  In half, which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 4:11Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off. And just tell them that Ben and David sent you. Now, onto the episode. David, can you take us through the acquisition history and facts?

• 4:45David Rosenthal?

  I will, as always, Ben. So, we pick up our story of Facebook's 2014 acquisition of Oculus, the virtual reality company, in 2010, when a 17-year-old homeschooled kid in Long Beach, California, named Palmer Lucky, was taking, he'd been homeschooled for his education up till then, and he was taking some classes at Cal State Long Beach, and he had a problem. And his problem was that he loved video games, and he loved PC games in particular,

• 5:25David Rosenthal?

  and he loved them so much that he had created this massive setup at home, where he had six monitors, and he just wanted to get as immersed into the games he was playing as possible. But even with all these monitors, it still wasn't good enough. He wanted to get deeper into the game. When I was writing this, I was thinking about the EA Sports tagline, "Get in the area, it's in the game."

• 5:54Ben Gilbert?

  I think I read somewhere, he had the largest collection of HMDs, head-mounted displays, of currently existing or hacked-together hardware in the world, before he set out to build Oculus?

• 6:05David Rosenthal?

  Yes. So, well, his problem was he wanted to literally get into the game. And so, lots of kids, myself included, wanted to do that when I was 17. But Palmer actually did something about it. So, he went over to USC, and USC has this thing called the Institute for Creative Technologies, which is a lab that was created there in 1999, and it was actually funded by the Department of Defense. And the idea is that in LA, they would combine sort of, you know, the resources of USC, a major research university, kind of all the special effects technology in Hollywood

• 6:49David Rosenthal?

  and the video game industry, which is, has a huge base in LA. And they'd use it to, to build advanced training and simulation technologies. And what that meant in practice was virtual reality.

• 7:01Ben Gilbert?

  Yeah, I mean, it feels like a great thesis to me. And it's funny thinking about funded by the Department of Defense. Boy, oh, boy, have we seen that, that as a tech theme over and over again in a lot of these companies.

• 7:11David Rosenthal?

  Yeah.

• 7:12Ben Gilbert?

  Either the companies themselves, or the research labs they come out of, or, you know, even the history of Silicon Valley and, and the importance of, of how the semiconductor came to be.

• 7:21David Rosenthal?

  Yeah. So Palmer, a 17 year old kid in, in Long Beach, he talks his way into getting a part-time job at the ICT at USC. And he's working on a team that's, that's trying to design cost-effective virtual reality. But he still, he still, he wants to move faster. So in his parents' garage, he starts hacking away with basically like components from smartphones, trying to make the device that's really going to achieve his dreams, which is be able to play video games in virtual reality. And, and at the same time, he's, he's, you know, on the internet natively, as, as all kids are back then and these days. And he hangs out in, in forums online.

• 8:06David Rosenthal?

  And in particular, at this one forum called the Meant to Be Seen 3D Discussion Forum, which is, I don't know if it was the largest, but it's certainly a very active internet forum dedicated to trying to create virtual reality devices at the time.

• 8:22Ben Gilbert?

  Yeah, man, forums were like, that's where everything happened back in the day.

• 8:25David Rosenthal?

  Totally. It's like, it's like back in, you know, the, the more things change, the more they stay the same, right? The original like, you know, Netscape and ARPANET days.

• 8:37Ben Gilbert?

  Yeah. And I mean, anybody like, but predating forums or, you know, mailing lists and Usenet and like, it's just a constant reinvention of the same thing. People see community, internet's incredible for community, revision, revision, revision.

• 8:51David Rosenthal?

  Yep. And, you know, now we have virtual reality. So maybe, maybe the next great entrepreneurs will meet, you know, in, on an Oculus or on a Vive.

• 9:01Ben Gilbert?

  Yep.

• 9:02David Rosenthal?

  So he's on, he's, he's posting progress as he's, he's building these prototypes in his garage on the, on the meant to be seen forums. And turns out that there are, among the other posters on the forum, or lurkers on the forum, is a guy named John Carmack. And that might ring, that name might ring some bells for some of our listeners. John is probably one of the most famous people in the video game world. He was the co-founder of id Software and id created, and John in particular pioneered a lot of the techniques.

• 9:39Ben Gilbert?

  Doom, Quake?

• 9:41David Rosenthal?

  Yeah, Quake, Doom, Wolfenstein 3D, you know, all of the first generation of first-person shooter PC games.

• 9:48Ben Gilbert?

  Yeah, I think his, like, one of his greatest contributions was the, um, the algorithms to do the shading of shadows. So that things look appropriately far away and appropriately lit as you, you know, approach them or turn corners. Or, you know, the things we take incredibly for granted today, but were actually required a lot of complexity.

• 10:08David Rosenthal?

  Yeah, and I mean, I remember, gosh, I was probably in middle school when those games were coming out and like, it was, they were so far advanced versus anything else on, on the PC at the time. Even the PC or like the NES.

• 10:21Ben Gilbert?

  Yeah, yeah.

• 10:23David Rosenthal?

  So Carmack is on the forums and he sees, and he's, and he's on the forums because he is also interested in VR. And he kind of shares Palmer's dream that playing video games in VR is going to be a totally new paradigm and really, really compelling. And actually his Carmack's dream, he had, id had released Doom 3 recently. He wanted to port Doom 3 into VR. And so he sees, uh, he sees all the progress that Palmer's making and he reaches out to him.

• 11:00Ben Gilbert?

  And there's no, there's no great hardware out for VR, right? Like if anybody wanted to port to VR at this point, it's like, you know, highly specialized installations in science centers and stuff, right?

• 11:10David Rosenthal?

  Yeah, I mean, basically, you know, it's the kind of stuff that USC is doing at the ICT for the military or science applications. You know, you're talking hundreds of thousands of dollars for a room scale installation. You know, nothing like what the Rift becomes, which was you could go on Oculus's website and order a development kit for $300. So Carmack reaches out to Palmer, asks if he can buy a Rift. And Palmer apparently says, he says in an interview later, he decided he was just gonna play it cool. And he's like, oh, I'll just give you one.

• 11:48David Rosenthal?

  So, so he does. And, and it's fortunate for, for him and for the future of VR that he did. This was, we're now into 2012. And John Carmack goes to E3, which is the big, one of the two big industry conferences for video games. The other one is GDC, which we're going to talk about in a minute. But John goes to E3 in 2012, which is in June. And he gives, he gives a big talk and he talks about how excited he is about VR. And he shows, he demonstrates a version of Doom 3 that he's created that is running on the Rift. And the Rift is like a totally hacked, duct taped together prototype that Palmer had

• 12:33David Rosenthal?

  sent him.

• 12:34Ben Gilbert?

  It was actually duct taped, right? Like there's some, I read about a meeting with them where like he actually duct taped the, the display to the head mounting piece?

• 12:44David Rosenthal?

  Yeah, there are great videos online. And of course, you know, after this, all the tech and video game press covers this and, and then goes and tries, tries it out and where's it like the unit is actually duct taped together.

• 12:57Ben Gilbert?

  Yeah, and just like ridiculous watershed moment when when John Carmack is demoing on your hardware at E3, you know, it's a this is pre Kickstarter, is that right? Or is this?

• 13:08David Rosenthal?

  So this is pre Kickstarter. There's not even a company yet. It's literally just Palmer working on this stuff. And and he's at this point, I believe, either 18 or 19 years old.

• 13:17Ben Gilbert?

  Crazy.

• 13:18David Rosenthal?

  Totally crazy. So E3 2012 is the big moment for what would the artist that would become known as Oculus? And a few other folks, you know, in addition to the entire video game industry sort of take notice and two of the folks who reach out to Palmer when they hear the story about this are two guys named Brendan Arribay and Michael Antonov, who also were in the LA area. They had been co-founders of a company called Scaleform, which was a sort of a video game UI technology company that Adobe had acquired several years earlier. They'd worked at Adobe for a while and then Brendan actually had left and he joined a

• 14:03David Rosenthal?

  company called GAIKAI, which folks in the video game industry might remember was a streaming video game company that Sony acquired a couple of years earlier. And the idea being and actually, a lot of consoles use this today, that rather than buying a game on a, you know, a physical media or downloading it, you can play a game just by streaming it over the internet.

• 14:26Ben Gilbert?

  Oh, yeah, I remember. Man, I remember Microsoft showing off some some tech like this, too, where the whole idea was that, you know, you're done with downloading the bits to your device. And in fact, on this is actually a Windows phone demo, the device hardware constraint, but we have all this amazing cloud computing and we're going to, in a low latency way, stream your interactions back up to the cloud. The game computation is going to happen in the cloud and then stream it back down to your device and it'll feel native. I feel like I've seen a lot of those demos and the trend seems to be toward powerful clients still, like we haven't gone to this where gaming is happening.

• 15:05David Rosenthal?

  It's never totally worked, right? Yeah, I mean, the dream is really cool, right? That like on any on any client, as long as you have a fast enough internet connection, you don't actually have to do all the hard rendering on the on the client. It can all be done in the cloud and just streamed as video, but it's never quite lived up to the promise.

• 15:24Ben Gilbert?

  Yeah, and I think this is kind of a tech trend for me later, but I think to quickly derail into it, it's, we continue to pursue this dual track of pushing the envelope on desktop grade, or even, yeah, let's call it desktop grade gamer PCs. So you see the Oculus hooked up to really, you know, really crazy towers. And then simultaneously, what we were trying to do in a low-power way on phones, like phones keep getting more powerful. And the processors in phones keep getting better at originally, you know, apps and then casual games, and now a little bit more, more serious games on mobile. And we're definitely seeing the, the trend of, you know, anyone who is interested in pushing all the intense compute up to the cloud

• 16:05Ben Gilbert?

  for games that are played on mobile, well, mobile got good enough to largely just play them themselves. And then the ones that require better experiences, the intense sort of R&D, push the envelope of what can be done is, is really still being done on, on towers. And that's not, you know, that, that's not going away anytime soon.

• 16:22David Rosenthal?

  Yep, and especially in VR.

• 16:24Ben Gilbert?

  Yep.

• 16:25David Rosenthal?

  You need, one of the things limiting the market right now, which we'll get into, is you need a super powerful PC to make this stuff work, which not that many people have anymore.

• 16:35Ben Gilbert?

  Yeah, I remember, we're interrupting a lot, but as a quick aside for listeners, I remember going into David's office like a few years ago at, at Madrona, and he's like putting together this like crazy tower to hook up his, his dev kit Oculus to, and telling me about how like VR is here, like we're looking seriously at this now, like it's the future, like people are maybe not consumer adoption right away. And I remember thinking like, maybe not consumer adoption right away? Like, nobody has a tower, nobody's gonna buy a $4,000 gaming rig. And like, that's still kind of the state of good VR right now.

• 17:09David Rosenthal?

  Yeah, I mean, we're gonna get into it, but we still have that at Madrona. It's, uh, the thing weighs about 50 pounds, it's huge.

• 17:18David Rosenthal?

  But anyway, so Brendan and Michael, coming from Scaleform and Brendan then immediately from GAI GAI, they reach out to, they're really excited about this. You know, they're game guys and business guys in the game industry, reach out to Palmer and basically convince him that there's a big company to be started here and that they want to start the company together. So the three of them get together with a few other folks who are the initial engineers. Brendan's the CEO of the company. They found the company kind of in June, July 2012. And then immediately afterwards, they launched the Kickstarter in August 2012, which Palmer had been planning to do beforehand, but and right after E3, but got delayed as they were

• 18:01David Rosenthal?

  starting the company. And the Kickstarter becomes hugely successful. And I actually went and rewatched it right before we recorded this and like, it is, it's great to watch, but so funny knowing the history of what happens immediately thereafter. So Car Mac is featured heavily in the video, as are folks from Valve, including Gabe Newell, who's the founder of Valve. Go watch the video. We'll link to it in the show notes. He gives a kind of glowing discussion of Palmer and the future of VR. And he says, quote, "We strongly encourage you to support this Kickstarter." We, meaning, you know, him and Valve.

• 18:45Ben Gilbert?

  Oh my God, that's awesome.

• 18:46David Rosenthal?

  It's so awesome. So on the strength of this.

• 18:50Ben Gilbert?

  And for listeners that don't know why we're saying that's awesome, like Valve and HTC would go on to create the only serious competitor to the Oculus right now, and arguably better. Anyway, leaving that aside, the Vive, and it's hilarious to see him on Team Oculus at the start.

• 19:06David Rosenthal?

  Yeah, well, and Valve's had such a long history with trying to get into VR, but they finally do it right after the Facebook acquisition. So the Kickstarter is hugely successful. They had set an initial goal of $250,000. They end up raising 10 times that. There is almost $2.5 million. And then they do something really smart, which is after the Kickstarter ends, they basically just continue it on the Oculus website and anybody can go there and order, order a developer kit for $300.

• 19:36Ben Gilbert?

  And this was like earlier in the crowdfunding era and it's like amazing to see, you know, if you're an entrepreneur and you're trying to just put together around a 250K like you don't want to raise 2.4 million because you give up your whole company. But like in the, isn't crowdfunding great where, you know, there's, there's no equity. So it's just like money for you to play around with. And sure, you have to fulfill those pre-orders and that's the biggest issue with, with Kickstarter's. But like, what an amazing, what an amazing model to bootstrap a company and get some cash in there, you know, long ahead of when you're going to ship the units.

• 20:04David Rosenthal?

  Yeah, totally. And, um, you know, and they turn it around pretty quickly, but, but when they, when they put the pre-orders up on the website after the Kickstarter campaign, there's so much momentum continuing that they're selling, supposedly for the first couple of days that it's up on the website, they're selling four to five developer kits, DK1s as they come to be known, quote, quote DK for developer kit, the first one, at four to five every minute at 300 bucks a pop, which is pretty impressive.

• 20:33Ben Gilbert?

  Wow. Yeah.

• 20:34David Rosenthal?

  So they go along and they're, they're working on shipping the developer kit. They start shipping it. And by the summer of next year, June 2013, uh, the VCs, you know, start to get, us VCs start to get wind of what's going on down there in Southern California. And the company ends up raising a $16 million Series A co-led by Spark and Matrix. And then, and that's in June of 2013. And then right after the first, well, the company wise, the first really big victory happens. The, the John Carmack actually decides to leave ID and join Oculus as the CTO. And this is a huge, huge moment in the gaming world for the company.

• 21:17Ben Gilbert?

  Yep. And actually, as someone who wasn't following it that closely at the time, this was the first time that I took Oculus seriously. And I didn't realize that Carmack was in the video or presenting on stage. This is the first time I had heard his name associated with it. And suddenly it was like, okay, this company is serious. Like the, you know, the creator of Doom and Quake is, is joining as their CTO.

• 21:36David Rosenthal?

  Yeah. So, and you weren't, weren't the only person to notice this. They had obviously raised the Series A that summer, but Marc Andreessen and Andreessen Horowitz also noticed that John Carmack has just gone and joined this, left it and joined this, this baby, baby virtual reality company based down in Southern California. And in December, a couple of months later, Andreessen Horowitz ends up leading a $75 million Series B in the company and Marc Andreessen joins the board.

• 22:07Ben Gilbert?

  So what was the time between that Series A and Series B?

• 22:11David Rosenthal?

  It was six months or less.

• 22:13Ben Gilbert?

  Wow.

• 22:14David Rosenthal?

  And the other, you know, sort of foreshadowing of the future here, you know, Marc, of course, and why this is important to the story, also happens to be on the board of another company that's going to get involved here, which is Facebook.

• 22:28Ben Gilbert?

  Yeah. Yeah, that's convenient.

• 22:30David Rosenthal?

  Yes. So that was December 2013. Couple of months later at GDC, which as I mentioned, is the other big industry conference in the video game industry, and that happens in San Francisco. That's at the beginning of March. And Oculus announces that they've been successful with the DK1 and they're coming out with a new version of the developer kit. So it's still focused on shipping these to developers. They're not ready to release a consumer device yet, but they announced the DK2 and that that's going to begin shipping in July 2014. And the DK2 is vastly improved over the DK1.

• 23:07Ben Gilbert?

  Yeah, I think, I think, yeah, DK2 was the first one I had tried. And I remember putting it on being like, okay, this is very different. Like this is, you know, I understand what the hype is about now, but I still wasn't like, this is, this is the next tidal wave. But then the one after that, I think the Crescent Bay, which I don't know if they, like how many different presents?

• 23:27David Rosenthal?

  They never sold, they never actually sold the Crescent Bay. That was sort of like the, the, the first iteration of what would become the consumer version that they'd ship in 2016.

• 23:37Ben Gilbert?

  Yeah, I think I tried that at 2015 ETH, or no, 2015 CES. And they'd take you into this private room and you have like a 15 minute little demo with it. And that, that was the one, the Crescent Bay was the one where I was like, okay, this is the next tidal wave of technology.

• 23:52David Rosenthal?

  Yeah, it's a, and it really, you know, the DK two, the DK one was, was, you know, still had a lot of the duct tape heritage in it. And I'd say the DK two did from a like software perspective, but from a hardware perspective, it was pretty good and had solid components in it. And, and when you used it, it really enabled the average person, the average person couldn't, you know, I think just buy one off the internet and set it up on their laptop. However, if you had a friend or knew somebody who had a, had a setup with the DK two, you could put it on and it would kind of just work and you could see what was so amazing and how different and immersive VR was versus just playing a regular video game.

• 24:36Ben Gilbert?

  Yep.

• 24:36David Rosenthal?

  So that was the beginning of March. And then very shortly thereafter, our recurring character on a, on a, on acquired, Mark Zuckerberg comes, comes knocking and he gets in touch with the company and says, hey, heard some really cool things about what you're doing. I'd love to get a demo.

• 24:57Ben Gilbert?

  Yeah. Do you know how that introduction was brokered? Like, was that through Andreessen? Or like, do you just get an email from Zuck at Facebook that's like, hey?

• 25:07David Rosenthal?

  I don't, I don't know. It may be out there. Listeners, if you know, hit us up on Slack or shoot us an email. I assume that there were easy channels to, to make that introduction happen.

• 25:18Ben Gilbert?

  Yeah.

• 25:18David Rosenthal?

  But somewhat like the, like the snap or original Snapchat episode, Zuck, I believe as, as the story goes, you know, asked for them to come up to, come up to Facebook's campus and do a demo up there. And Brendan responds and says, hey, and this is from an interview with Brendan after the acquisition, hey, you know, actually it'd be better if, if you come down here because we have a better setup here. So just like he did with Evan Spiegel.

• 25:45Ben Gilbert?

  So get on your private plane and fly down to Irvine.

• 25:48David Rosenthal?

  Mark flies down to Irvine, meets with Oculus, is really impressed with what he sees. And And it says, hey, what can Facebook do to help you? And that quickly leads into acquisition discussions. So by the end of the month, the deal's done. It gets announced. Facebook acquires Oculus for 2.3 billion in total, of which interestingly, only 400 million in cash, 1.6 billion in Facebook stock, and then there was an additional earn out of 300 million. But this was similar to the Instagram deal and the failed Snapchat deal from the year before and WhatsApp.

• 26:29David Rosenthal?

  This is sort of cementing Facebook and Mark Zuckerberg's reputation as a very aggressive acquirer.

• 26:37Ben Gilbert?

  Yeah, yeah. And I think, again, we always bleed into tech themes here, but it's really exemplifying Facebook's FOMO. I mean, their fear of missing out, where they see something that they're not currently working on that is either something with an existing strong network effect like a WhatsApp or an Instagram that could unseat them, or a powerful new piece of technology that could become the next wave of computing. And if they're not on it, they're kind of screwed. So they've very masterfully had an M&A strategy to kind of make sure that they stay on top and don't act like the social networks of years past.

• 27:16David Rosenthal?

  Yeah, and we're going to get into this in the rest of the show, but I think what's so cool, given how often Facebook has showed up on a acquired and all the, both the IPO and the acquisitions we've talked about, you can really see how and why this philosophy came to sort of rule the day with Mark and at the company through the IPO when they had the huge disaster with mobile and Mark realizing as a CEO and the company realizing that they had missed that wave and they needed to paddle over to it with all strength ASAP. And that included acquiring Instagram.

• 27:59Ben Gilbert?

  I saw a fascinating stat that I didn't even think about is that so Facebook was constantly referred to as a website when they when they launched and for years after and in 2008 they launched a mobile app but nobody referred to them like as an app company and it really took them like four whole years after so that you know they founded in 2004 app launched in 2008 still largely a website even though they had an app and it took them all the way until 2012 to be taken seriously as a mobile company and you know now 84 plus percent of their revenue comes from from mobile advertising and I think that it's interesting to note that like it takes time even though you are on a platform or have a technology to make

• 28:42Ben Gilbert?

  that the competency of your company and I think that Facebook saw an opportunity here to you know not let VR evolve around them and then have to play catch up and get on that platform and then like turn the company to be centered around that platform this is an opportunity to say you know we don't know exactly what it is yet if if you know Oculus by Facebook is the platform and other people are on it or if Facebook is delivered over VR through Oculus that much is unclear but what is important is they can't afford a four-year lag before starting to play on a platform and and turning the company to be centrally oriented around that platform when that's the one that everybody's on.

• 29:22David Rosenthal?

  Yeah and it's interesting I mean you look at you know the billion dollars they spent for Instagram the 19 billion dollars they spent for WhatsApp the $3 billion they offered Snapchat you know those were all examples of they were they were too late and they needed to come in and and and take out these unsuccessfully in Snapchat's case take out these threats that were popping up in their you know within their current domain but $2.3 billion was a lot of money to spend for for a wave and a technology and a modality that was

• 29:56David Rosenthal?

  Even then, you know, I think if rational, cooler heads prevailed at that moment, looking at the company, it was still a long way away. I mean, we're here in 2017 and it's still a ways away, even three years later.

• 30:08Ben Gilbert?

  Yeah. Yeah. So, okay. What was the date of the acquisition? It was, uh?

• 30:12David Rosenthal?

  It was March 2014.

• 30:14Ben Gilbert?

  Okay. So that 75 million Series B was in December of 2013. So, uh, moving away from the Facebook side a little bit and looking over at the Andreessen side of this, they invested 75 million and then just a little over three months later, got, let's see.

• 30:32David Rosenthal?

  Yeah. Well, and I think, I believe, I don't know if it's official, but in research, I believe the valuation of the Andreessen round was between 300 and 400 million.

• 30:43Ben Gilbert?

  Wow. So that's, uh, call it a 10x? I mean, somewhere, somewhere in that.

• 30:50David Rosenthal?

  Slightly less than, less than 10x, but still, that's on a lot of money.

• 30:55Ben Gilbert?

  Yeah. Well, good for them.

• 30:58David Rosenthal?

  Yeah. Great for them.

• 30:59Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team and deploying them is no longer the hard part.

• 31:13David Rosenthal?

  Yeah. The hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 31:27Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 31:37David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent visible and secure in one place.

• 31:55Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise. The workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 32:11David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 32:28Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 32:37David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. We'll get into acquisition category in a minute here, but the story doesn't quite end, unfortunately, for Facebook when they acquire the company, because two things happen over, well, starting immediately, but play out over the next couple of years. One, it turns out that Carmack is as important as he was, and I really think Oculus, the company, and the technology wouldn't exist without him. Unfortunately, his former employer, Id Software, which itself had been acquired a couple of years before by a video game conglomerate

• 33:20David Rosenthal?

  called Zenimax, they also agreed that Oculus wouldn't exist without Carmack and his contributions. And they end up suing Oculus and Facebook alleging Carmack, a couple of things. One, that Carmack had stolen critical IP from his work at Id and taken it to Oculus. And two, actually, in 2012, Palmer Lucky had met, I don't know if it was when he was meeting with Carmack or with other folks at Id, had signed an NDA with the company. And as a result of everything that happens, Zenimax is alleging that he had violated that NDA.

• 34:03Ben Gilbert?

  Hmm. And alleged and then, and then you know.

• 34:08David Rosenthal?

  And so, so that, that lawsuit hits almost immediately after the acquisition. And then only just a month ago, as we're recording this in February of 2017, a jury in Texas, which id Software was based in Texas, is based in Texas, actually rules in favor of Zenimax, a $500 million judgment against Facebook and Oculus. And, and Facebook has said that they're going to appeal, but still that's not good.

• 34:33Ben Gilbert?

  Yeah, I mean, that takes it from a 2.3.

• 34:37David Rosenthal?

  2.3 up to 2.8.

• 34:39Ben Gilbert?

  Yeah.

• 34:39David Rosenthal?

  But it gets even potentially worse in that Zenimax has also filed a court injunction arguing that the court should halt sales of the Rift, which would just be terrible.

• 34:51Ben Gilbert?

  Wow. Yeah, that's, that's a far more serious blow.

• 34:55David Rosenthal?

  Yeah. Hasn't happened yet, but is potential clearly they're posturing and trying to bargain between the parties here.

• 35:02Ben Gilbert?

  Yeah.

• 35:03David Rosenthal?

  I did some research on, on Zenimax for, for this and yeah, it's actually, it's quite a large video game conglomerate. They, they own a bunch of studios, including the one that makes, um, video game fans among our listeners will know the Elder Scrolls, the Fallout series. But guess who is on the board of Zenimax?

• 35:23Ben Gilbert?

  Uh, the only, the only thing that wouldn't surprise me is Carl Icahn.

• 35:27David Rosenthal?

  No, but almost as good. So they, they have quite the cast of characters. They have Cal Ripken Jr., the, uh, the Iron Man.

• 35:35Ben Gilbert?

  The Iron Man.

• 35:36David Rosenthal?

  Baseball player. Yeah. Jerry Bruckheimer, the, uh, the movie producer. And, um, uh, in addition to Les, Les Moonves, who's, who is the CEO of CBS. But this is really the kicker. I just couldn't believe it when I read this. Robert Trump, Donald Trump's brother is on the board of Zenimax.

• 35:58David Rosenthal?

  The internet says it's true.

• 36:02Ben Gilbert?

  Boy, what a weird company. God, conglomerates are weird, man.

• 36:05David Rosenthal?

  Yeah, totally weird. So you can't, you can't make this stuff up. Truth is, in fact, sometimes more stranger than virtual reality.

• 36:14Ben Gilbert?

  Yeah. And you know, we'll have a follow up. I'm sure probably not an episode, but this will be in follow up in future episode. But I suspect you're right that the injunction to stop selling the Rift is just posturing and trying to get potentially a settlement or more out of the current ruling or something. And it would shock me if they, they stopped shipping the Rift because of this, but it does feel like Facebook's gonna, gonna pay some more money there.

• 36:40David Rosenthal?

  Yeah. Or at least it's, it's posturing, perhaps trying to get Facebook to drop their appeal. But the other major thing that happens after the acquisition that, that we've alluded to on the show is that Valve and Gabe Newell decide that rather than, rather than just supporting Oculus, they actually want to get into virtual reality themselves. So the next year at GDC in 2015, Valve unveils in collaboration with HTC, the Chinese consumer electronics company, they unveil the Vive, which is in many ways a superior product to Oculus and the Rift. And the Vive has two key innovations that the Rift doesn't have at that point.

• 37:24David Rosenthal?

  One are true hand touch controllers. So when you would play the experiences or games on Oculus before Valve came out with the Vive, you would have to use either a keyboard and a mouse or a video game controller, an Xbox controller. And that's just totally-

• 37:45Ben Gilbert?

  Boy, does that pull you out of the experience.

• 37:46David Rosenthal?

  Really pulls you out of the presence, which is the whole point of VR. Valve ships these controllers that enable you to move your hands around and grab things and pick things up and, and interact much more naturally with the environment. And then they also have the, the, while it's still tethered, the headset that you wear still has a cable coming out of it and attaches to the PC. There are, they're called lighthouses that are laser positional tracking boxes that you put in the room and that allow you to walk around the room. So you're no longer just sitting in a chair with your hands on a video game controller like the old video game paradigms, but it really changes this into a much more immersive experience.

• 38:28Ben Gilbert?

  And boy, what a, what a brilliant freaking end around by, uh, by Valve. Like they're a software company. For, for listeners that don't know a bunch about Valve, uh, they're a software company. They make games and they make a platform called Steam and they make, I think they make most of their money from Steam and they get a, a cut of all the distribution of the games that go out over Steam and, uh, and Steam's sort of the default way if you're a PC gamer to, uh, to go and get new games that come out. So basically they own the pipe and you know, they're a super wacky company, brilliant, brilliant engineers. They're brilliant game designers that, um, of course are interested in VR, but like they're not going to make hardware. That, that, that's not in their core competency at all. And they've been, as David alluded to, trying for years to figure out what the

• 39:10Ben Gilbert?

  right way to get into VR was. And for them to be able to, you know, closely track and, and be a fan of, of Oculus, see that fall into Facebook's hands, which loosely competitors, right? At the very least, you don't want to put too much of your, your company's stake on, uh, on, in Facebook's control. And to be able to, in that tight of a window, turn around, find a hardware partner like HTC and get into market with a superior product. Like it, there's a lot of things that we'll conclude out of this episode, but one of them is that there are people at, at Valve and HTC that are executionally brilliant.

• 39:47David Rosenthal?

  Yeah. And Valve is, we'll link to this in the show notes. Uh, I suspect a lot of our listeners are, are know the company well, but for those that don't, it is a fascinating place. Their employee handbook leaked, leaked on the internet a few years ago and it's, it's more like a manifesto. There's, uh, there's no hierarchy. Nobody reports to anyone else there. Everybody decides what they work on. They're, everybody's desk is on wheels. And if you decide you want to work on something else with another team, you just... Pick you move your desk over to wherever that team is and you start working on whatever they're working on.

• 40:23Ben Gilbert?

  And I believe it's 100% owned by Gabe Dool, so there's no, I mean, there's not a lot of leaks of stuff from shareholders or public disclosures or any, or really even like no market cap of the company. It's a very.

• 40:37David Rosenthal?

  Yeah, it's very, very closely held. I don't believe Gabe owns exactly 100%, but he definitely controls the company. Just one person and they make, you know, nobody knows outside of Valve the exact number, but, but a lot of money, I mean, billions of dollars of revenue from, mostly from Steam, as Ben mentioned.

• 40:58Ben Gilbert?

  Yep. And if there's an opposite podcast to acquired, it's like, so in the acquired or in the corp dev parlance, you know, acquired is often about the buy, not the build. If there was a podcast that was about the build decision instead of the buy decision, we would really want to like examine what Valve does here and what their existing business with Steam sort of allowed them to do in going into VR and taking this like very expensive risk on something that has, you know, super unclear business value, especially when they start the venture.

• 41:32David Rosenthal?

  Yeah. And they, you know, they really, you know, I don't think there's really any two ways about it. They out execute Facebook and Oculus over the next two years. Facebook ends up shipping the consumer version of, of the Oculus Rift before Valve by, by a week. So the, the consumer version of the Rift comes out in, at the very end of March 2016. And then at the beginning of April, Valve ships the Vive. But again, with these two key innovations that Oculus doesn't have, and it's not until December 2016, so just a few months ago now, that Oculus finally brings out their touch controllers, which brings them closer to parity with, with the hand controllers of, of the Vive.

• 42:15Ben Gilbert?

  Yeah. And you know what? I mentioned earlier that the Crescent Bay woke me up to the idea that VR is the next tidal wave in technology. I'd say the next step function was that was the first time I tried the Vive. I think that there was a thing, I think Google might have even made it, but it was a thing where you could paint and you use the controllers to-

• 42:33David Rosenthal?

  Tilt Brush, yes.

• 42:34Ben Gilbert?

  Tilt Brush, yeah.

• 42:35David Rosenthal?

  Super cool. It's like MS Paint in VR is the only way to describe it. It was an independent company, a couple of developers, and Google ended up acquiring it.

• 42:44Ben Gilbert?

  Oh, nice. Nice, nice. So there's that demo, and then there's one in a kitchen where like you go in and you're supposed to like-

• 42:50David Rosenthal?

  Yeah, the job simulator.

• 42:51Ben Gilbert?

  Yeah, but really what ends up happening is like you can just mess every, like you can just pick up pans and heave it at a wall and knock the, like this is incredibly thrilling experience of like throwing an entire rolling cart full of dishes on the ground and having no consequences. And I'd say that was the first time where like, I think I was in that thing for like a half hour. It felt like five to 10 minutes, and that was the first time where like I legitimately didn't want to leave. Like that was the first time where I was like, oh, people are going to get real addicted to this.

• 43:21David Rosenthal?

  Yeah. And that's, you know, I'd say for our listeners that aren't into VR, maybe haven't even tried it yet, you know, go find, it's worth it. You owe it to yourself. If you care about technology and thinking about where waves are going to, you know, break in the future, go find a friend or go to your local venture capital firm that has a Vive installed and try out a few things. Try out Tilt Brush. It's really, you know, it'll take you back to the first time you used MS Paint on a PC. If you're old like me and Ben, try out, there's this, my favorite, favorite app and game is in VR these days is by our

• 44:01David Rosenthal?

  friends over at Rec Room, which is a really amazing company in Seattle. And the best I can describe Rec Room is you just have to play it yourself and you'll, you'll be a believer about the potential of VR. But that's like the first time I played Golden Eye 64 as a kid and had my first, you know, like shooter 3D video game experience. And Rec Room's so much more than that, but just that pure fun, it's, it's great.

• 44:28Ben Gilbert?

  Yeah. And the reason is, and we'll get into this, and I think this is part of Facebook's bet is, you know, Facebook, I think Zuckerberg, let me read the quote real quick. He, uh, he's over and over again, said VR is going to be the most social platform. And I think the super cool thing about Rec Room is like, you're in there just hanging out. You're doing all sorts, you're in a room, you're playing paintball, you're, there's like all these different activities you can do, but it's all centered around like, you're just like hanging out with other people as if it was sort of real life. And one thing I want to dissect later in the tech themes is like, does that like, do, do you agree that the, the, you know, killer, killer app of VR is, is a social one. But the cool thing about Rec Room is like, when you, when you try it, you're like, wow, I really am just like hanging out in here. I could do this for hours with other people.

• 45:12David Rosenthal?

  Yeah. And that's what, you know, when I said it, it reminded me, it reminds me of what it was like playing GoldenEye the first time. Like the single player campaign in GoldenEye, like, you know, it's fine. It's whatever. It's good. But like GoldenEye was all about playing with your friends and everything, like all the talking smack and, and you know, the hours and hours and hours I spent in high school and college with my friends playing that, you know, that's what Rec Room is like. And it really feels like a glimpse into the future.

• 45:39Ben Gilbert?

  Yep. All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 45:53David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 46:10Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 46:25David Rosenthal?

  And that's how you get features that customers love like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Legora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 46:49Ben Gilbert?

  And they recently launched Legora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 47:08David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 47:38Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at legora.com/acquired and just tell them that Ben and David sent you. Hey, Acquired listeners. I'm jumping in with a quick update. In the next section, we talk about where Oculus is today and recent events involving the team. There was some pretty big news between recording and releasing this episode, so I'm here to tell you Oculus founder Palmer Lucky has left Facebook.

• 48:20Ben Gilbert?

  On March 30th, Facebook confirmed his departure following a long stretch of Facebook being very quiet about Palmer. This came after he denied and then confirmed reports of funding a pro-Trump organization called Nimble America and then did not appear at Oculus's developer conference. Now, back to our regularly scheduled programming. Okay, so let's finish up history and facts. David, you want to take us to like the recent events of the last six months to a year and then we'll go on to acquisition category?

• 48:48David Rosenthal?

  Well, I think we've kind of done that.

• 48:51Ben Gilbert?

  I guess I mean personnel wise. So Facebook, yeah, I mean, there's been some really interesting things that have happened as Oculus starts to merge more into Facebook. So Palmer Lucky is no longer the CEO of Oculus, but is still at Facebook working on things.

• 49:07David Rosenthal?

  That's actually Brendan. So Palmer was never the CEO.

• 49:09Ben Gilbert?

  Oh, right. Sorry, sorry.

• 49:11David Rosenthal?

  Brendan Uribe, yep, stepped down as CEO. He's now managing Oculus's quote PC division, which is basically the Rift.

• 49:18Ben Gilbert?

  Right, right. And then Palmer similarly is at Facebook, kind of titleless. And so the way you can kind of think of what's going on at Facebook right now is Oculus is getting more integrated. There's still the Oculus group that makes the Oculus Rift. Facebook has more independent VR teams. There's a PC VR, mobile VR, and, you know, obviously we've seen the, there's been demos on stage of these incredibly social experiences that may be the future of what Facebook looks like in VR. And, you know, they're shipping

• 49:58Ben Gilbert?

  the Rift, but it's very clear that whereas with Instagram and WhatsApp, they stay very separate, Oculus is an acquisition where they're getting much tighter integration with the company. And, and it looks a lot more like a division than it does a separate company. And one huge marker of that is the whole team, or at least a good chunk of the team, moved from Irvine up to Menlo.

• 50:23David Rosenthal?

  Yep. Oculus's headquarters is now in Menlo Park with the rest of the Facebook campus. But I think that's a perfect transition to acquisition category. And I think for me, clearly this is, well, you're curious what you will say, Ben, but to me, it's clearly a business line acquisition. I mean, this is a new product, a new platform, not part of the existing wave that Facebook is on, that they're buying. And, and I think, you know, it was interesting that they initially kept, they tried to run the playbook of keeping the team totally separate and totally autonomous, and in particular, you know, kind of at arm's length away down in Southern California. But then

• 51:07David Rosenthal?

  That didn't work out quite so well as they got ended rounded by Valve. And now they're moving it much more, you know, moving to integrate it much more deeply into the rest of Facebook, the company.

• 51:18Ben Gilbert?

  Disagree entirely.

• 51:20David Rosenthal?

  I love it.

• 51:22Ben Gilbert?

  It's, I think it's a technology acquisition. I would, I would say that the signaling initially could, could lead more to our business line of keeping it separate, of it being its own revenue generator. But to me, this is a defensive play on protecting the, the network that Facebook has and their existing business model. I think that for them, they looked at this and said, okay, VR is clearly the future. We need to make sure that we have a position on the dominant technology platform of the future. And we are right now at risk of other people building all the hardware and the platforms and us being, having nothing to do with it. And then having no leverage and making sure that we have a dominant position on that platform. And Facebook has seen, they've seen, like, I guess the point I'm making is they don't

• 52:06Ben Gilbert?

  care about the business line of selling Oculus Rifts to people. And I think that they've looked around and seen crap. We don't actually own the direct relationship with any of our users. They're in a slightly tenuous position where, you know, the, people are, you know, into Facebook, they're, they're on it all the time, they're on it every day. It's an essential part of people's lives and provides a ton of utility, but they access it through either their Apple device, their Android device. They, Facebook desperately tried to make their own phone, that didn't work. Like, Facebook is in a little bit of a tenuous position in not directly owning their customers and, or at least not directly owning the users that their advertising customers monetize. And I think what Oculus is, is them trying to get out ahead and making sure that with

• 52:50Ben Gilbert?

  this technology that clearly evolves to be the future of computing, that they aren't going to be upended by, by someone else who decides that, eh, we're not going to prioritize Facebook on the platform where all the users are.

• 53:01David Rosenthal?

  Ben, I think you hit the nail on the head. It's about owning the customer relationship at the point of access in the next wave, which they don't right now. You know, it's, it's fun doing this episode right now, and in particular after the Snapchat IPO, but it's hard to judge right now. Like, I think if they had kept in, fully in that, like, oh, we're going to keep it separate mindset, this would be a failure. But now that they're starting to integrate it more deeply, that feels like the right approach to me at this point.

• 53:30Ben Gilbert?

  Yeah, so let me. This is the third time I've dangerously danced into tech themes ahead of schedule, but let me throw something out there that I think Facebook would be much better off keeping them separate and keeping it like its own little division with a kind of a firewall between Oculus and Facebook because as they, so Facebook is a horizontal company. Facebook needs to make sure that they are on every single platform in the same way so that the most users, in the same way that Google needs the most users, they need scale, can get access to it. And the closer they start to integrate these things, the more the danger comes up of them prioritizing Facebook features to be Oculus only and

• 54:14Ben Gilbert?

  not putting them on the Vive or whatever other platforms come to be. And I think that's a really, when you're an employee at a company like that, you start to get confused as to what the priorities are. Like I remember being at Microsoft-

• 54:26David Rosenthal?

  You end up with an iMessage situation, right?

• 54:29Ben Gilbert?

  Totally. And the one that I've experienced personally is like, you know, when you're at Microsoft, like at least a few years ago, it wasn't, if you're in Office, you hear the message that Office is an important business on its own, maybe the most important. But then things happen where like, we don't ship Office for iPad because we want to give the Surface a head start and be the only platform with, you know, with Office on it. And so with Office being horizontal, Windows being a vertical, we take this over to Facebook and say Facebook is the horizontal and Oculus is the vertical. It seems like unless Facebook is, believes that the Oculus will be, or the, you know, Facebook VR will be the only VR platform where they will need to reach users, it seems really dangerous to start

• 55:13Ben Gilbert?

  doing integration. And I would argue that they, they really need to figure out how to make sure that they're not prioritizing Facebook for Oculus.

• 55:21David Rosenthal?

  This gets into the really interesting part of the show, which is, you know, we talked about how Snap is clearly thinking about their future and what that's going to look like in a whatever augmented, virtual, mixed, whatever you want to call it, reality perspective. Total aside, I might talk about this in tech themes, but as long as we're like, as long as people are debating what to call something, it's not a wave yet. The wave has not yet broken until like phones are just phones. When you're talking about like PDAs or smartphones, like- No, you know, once they're just phones, once it's just like your glasses, then we'll be there.

• 56:03Ben Gilbert?

  But David, the wave is V R A R M R slash slash slash.

• 56:09David Rosenthal?

  Slash slash slash. But the breaking of the wave is clearly coming and Snap's working on it. Apple's working on it. Valve has a very successful, arguably more successful than Oculus product in the market. So what should Facebook do?

• 56:26Ben Gilbert?

  Yeah, I mean, well, one thing you could, you could argue they could do is what if they didn't? Actually, let's, let's move into what would have happened otherwise. What if they didn't buy Oculus? But they found a way to make sure that Facebook was great on all of these platforms. Like, how do they get the leverage to make sure that they have a first-class relationship with customers of VR? Or do they actually have to own one of them to like have an insurance policy that, you know, they're going to invest a ton of money in making this single VR platform really great. But somehow they're going to have the restraint to never prioritize the Oculus business.

• 57:05David Rosenthal?

  Yeah, I don't know. I mean, I think it's the question you were asking, which I feel like we need to get Ben Thompson on this show to discuss. Like, can Facebook be a horizontal and a vertical business at the same time? I mean, I don't know anybody that's ever succeeded at that.

• 57:19Ben Gilbert?

  Dude, with, with great restraint, man. Like, you just got to make it so clear to all of your employees that like Oculus is an insurance policy. And like Oculus needs to be really great, but we, but like the main business is Facebook. Like it, it mints money and it's going to continue to make money as long as we don't screw it up.

• 57:36David Rosenthal?

  Yeah, I mean, easy to say in theory, right? Like, I've literally never seen that happen before.

• 57:44Ben Gilbert?

  And I don't know that you could sell great employees on that, right? Like, if you're, if you're the best VR developer. Screw that, I'm going to Valve.

• 57:52David Rosenthal?

  Yeah. Well, okay, here's a, here's a potential counterfactual, one we've covered on this show, Android. So, Google's a horizontal company. Google Search and Google Services, Gmail, Maps, whatnot, work great on iOS, as on Android, obviously. And I think it's pretty clear at this point, you know, like we talked about on that episode, the mobile wars are over, and that everybody within Google is aligned on making those services work great across all platforms, and yet they still have Android. But now, here's what's key about Android, I think, to my mind. Google doesn't make Android phones. I mean, that's changing a little bit, but right, but like, the whole strategy was, get the software out there,

• 58:35David Rosenthal?

  get the operating system, let other people, let other ecosystem partners, build a great hardware and get it in the hands of people, and that, use Android as a way to make sure that we are going to be able to continue to deliver these great Google services to everybody across all platforms. A, do you think that's, that was the, you know, that that's a viable strategy? B, can Facebook do that?

• 59:04Ben Gilbert?

  Totally a viable strategy. Very interesting to, like, the main takeaway for me is Android itself doesn't make money. It prevents Google from having to give money to other people like Apple, out of its-

• 59:16David Rosenthal?

  Well, they do give, as we talked about, a lot of money to Apple.

• 59:19Ben Gilbert?

  Yes, but they could give many times more money to Apple if Android didn't exist. And, and for listeners, that's the, of the, uh, search engine affiliate revenues that they, they pay out to wherever the search originates from.

• 59:31David Rosenthal?

  Yeah. So, Google pays on the order of a billion dollars or more every year to Apple, in order that Google remains the default search engine on the iPhone. And, and they actually, it's not just like a straight payment, it's that, hey, Apple actually gets a cut of AdWords revenue, so it's like a variable rev share for AdWords that are served on searches on the iPhone.

• 59:57Ben Gilbert?

  Yeah. Good, good to be Apple there. So, I think that-

• 1:00:00David Rosenthal?

  Hey, it's good to be Google. You've got the best business model of all time.

• 1:00:04Ben Gilbert?

  Yeah. So the Android strategy, I mean, Facebook totally could build Oculus OS and then have reference design and then do the same thing that Android did and have have third parties build the hardware. I mean, is that what Daydream is? Is Google sort of taking that approach with Daydream VR?

• 1:00:21David Rosenthal?

  Yeah, I don't know enough about it to say for sure, but I believe it is similar, except that it's on Android phones that are powering it. So there is that wrinkle. It's not like it's a, it's not like Daydream, as far as I know, I could be wrong, but I don't believe Daydream is going to work on iOS.

• 1:00:42Ben Gilbert?

  I think you're right. So getting back to the other point that you're making, though, like, I'm not sure it actually buys Google or Facebook much to build the sort of VR software layer and then let someone else do the hardware. I mean, that, maybe it does. I don't know. I haven't actually really thought through that. I mean, clearly, that's the approach that Valve is sort of taking, that like, they're going to continue to make money from Steam, and Steam is going to be on all of the vibes and like HTC, you take on all that, that hardware difficulty and risk and cost for making the hardware.

• 1:01:14David Rosenthal?

  Well, it reminds me a little bit, I hadn't thought about this until you brought it up a couple of minutes ago, but I think it kind of comes back to Microsoft, too, right? Like, that's what Microsoft did with the PC.

• 1:01:27Ben Gilbert?

  Yeah.

• 1:01:27David Rosenthal?

  Which was build the operating system, give it to everybody, get it out there. You know, and Apple wasn't, you know, it's great that Apple exists, right? Like, we'll make, we'll make Office for Mac, too, you know, and we'll cripple it, you know. But I think, you know, there are plenty of examples, whether it's Microsoft and Windows or Google and Android, of that type of approach working. It's when you then cross over into trying to be both. Vertical and horizontal that you get the office for iPad situation.

• 1:02:02Ben Gilbert?

  Yeah, I mean, I think it keeps coming down to this. They just have to figure out a way and Google took years to do this to be clear that Android exists to power the search advertising business. And it has to be first class and a great OS on its own to have people use it because it's in a competitive landscape, but like it doesn't exist on its own to be Google's main revenue stream and Facebook's just going to have to do the same thing with Oculus and hopefully there's less tumult on the way to get there.

• 1:02:27David Rosenthal?

  Totally.

• 1:02:28Ben Gilbert?

  So what would have happened otherwise? I mean, we're kind of in this section right now, but where, you know, if Oculus doesn't land at Facebook, what happens to it?

• 1:02:34David Rosenthal?

  Well, it's a really good question because they'd raised a lot of money really quickly, but it was going to take a lot more money to get to where we are now. And clearly, I mean, I think if, if Facebook doesn't acquire Oculus, there's a chance that maybe Valve continues to partner with Oculus and doesn't go off on its own. However, if, given that they did, and if they had, and Oculus was still alone and independent, you know, they would have had to do something because we saw with the execution that Valve had,

• 1:03:13David Rosenthal?

  when you bring the resources and the huge amounts of money that a corporation like them can to building new technology like that, they, they were just going to blow Oculus out of the water. You know, Oculus probably only was able to hang on because it had Facebook's resources. So I think it's, it's hard to imagine Oculus remaining an independent company, a fully independent company.

• 1:03:39Ben Gilbert?

  Yeah.

• 1:03:39David Rosenthal?

  Without needing to, I mean, I guess as we've talked about with both Snapchat and Uber and Didi, it is possible to raise huge sums of money these days, but I think it's not just about the money too. It's about being able to get the right OEM partnerships, you know, the right, think about how much, how many years and how much effort Apple has invested in creating their supply chain.

• 1:04:06David Rosenthal?

  You know, the idea that a startup would be able to do that in a, within a competitive landscape is, is hard to imagine these days.

• 1:04:13Ben Gilbert?

  Yep, yep. And actually, here's a great quote from, from Palmer Lucky. He said, "I'd say we are five years ahead of where we would have been without the acquisition, pointing to the resources needed to improve the hardware technology as well as encourage software developers to build games and videos to watch on it. There's a strong argument to be made, we would never have gotten there in five or even 10 years." And there's a great point that like the Facebook brand boosted the, the network effect of developers making stuff for it, too.

• 1:04:41David Rosenthal?

  Yeah. And the, we've sort of talked about the evolution of the Rift hardware. You know, the DK1 was like one step past duct tape, but the DK, the DK2, but then, you know, the consumer version, like these are true, good consumer products, like

• 1:04:56Ben Gilbert?

  Totally.

• 1:04:56David Rosenthal?

  even with a lot of money, would they have been able to create that?

• 1:04:59Ben Gilbert?

  Yep.

• 1:05:00David Rosenthal?

  Okay.

• 1:05:00Ben Gilbert?

  So what would, what would, real quick, uh, what about the flip side of that? What would Facebook have done in VR without Oculus?

• 1:05:07David Rosenthal?

  Hmm. Well, Facebook still hasn't done much in VR. But I mean, and that's the other thing that, you know, um, it's just so early, right? Even three years later, after the acquisition, best guesses are it's growing and growing quickly, but I bet there, you know, there are certainly still well less than a million active, you know, daily active VR users out there in the whole world.

• 1:05:32Ben Gilbert?

  Yeah.

• 1:05:32David Rosenthal?

  You know, compare that to like 6 billion daily active users, 6 billion with a B,

• 1:05:40David Rosenthal?

  you know, in mobile. Uh, so I think Facebook is still totally fine.

• 1:05:44Ben Gilbert?

  Yeah. I think so, too. Which is interesting to think about in grading the acquisition is, uh, they've, they've so far paid $2.8 billion for a thing that they would have been completely fine without, but it's a long bet.

• 1:05:56David Rosenthal?

  Yep.

• 1:05:57Ben Gilbert?

  Okay.

• 1:05:58David Rosenthal?

  Tech themes.

• 1:05:59Ben Gilbert?

  So the, running through my list of, I'll just say like, check next to the ones we've really already talked about, but you know, Facebook doesn't want to get left behind like they did with mobile, check, already talked about that, you know, owning the customer relationship. Okay, here's the one that I really want to posit to you. So Zuckerberg often says that Facebook is going to be, or VR is going to be the most social platform. And I'm curious, do you think that that's actually where VR is headed? Or is Zuckerberg saying this because it's like a mash of like, Facebook is the company that connects people and it makes the world a more open and connected place. Also, VR is the future. So we therefore must mash these things together because, you know, our business must survive in the world where

• 1:06:42Ben Gilbert?

  VR is the future. Or is it, do they actually have a good confluence and work together well?

• 1:06:49David Rosenthal?

  I think he's, this is maybe foreshadowing my greeting. I think he is both 100% right and Facebook and Oculus have executed poorly on it. You know, I think if you look at the vision that Snapchat is putting, that Snap is putting forward of, you know, a camera company, right? Which is the closest that I have seen to anything resembling, you know, normalcy and a true wave in what we're talking about. Cause like I said, you know, the wave is not quote unquote VR or AR or MR. It's glasses or a camera. It's something that real people everywhere are going to use, people who don't listen to this podcast. And so I think he's right. And I think if you just look at Snapchat or look at Rec Room,

• 1:07:32David Rosenthal?

  honestly, you know, I mean, that to me is, is what is the example of what's most compelling in this medium is actually being there and playing with people or doing things together with people. So I think he's right. On the other hand, I think if you look at the product strategy and the history over the last couple of years of what Oculus and Facebook have done, you know, they're, they're behind because it's natural hand movements that are so important to that. It's walking around. It's the types of things that Valve has done with the Vive. But it's also what Snapchat's done, which is like, to really make this mainstream, you

• 1:08:13David Rosenthal?

  need to get out of the PC entirely. You need to make this something that people are going to be open with in the real world, you know, interacting with other people. Okay, so my, I think we've talked about a bunch of my themes too. The only one I would say, you know, that we just got a brief mention earlier in the episode, but really came out for me thinking about this and doing the research is Kickstarter, right? Like Oculus and the Rift being one of the first, not the first, but one of the first really breakout companies slash products slash ideas to come out of, you know, creative

• 1:08:53David Rosenthal?

  endeavors to come out of the Kickstarter platform. And that reminds me of what I think is a deep theme in technology that anytime you can build a platform that enables other people's creativity in kind of ways that you would never imagine, that's a recipe for something special. Whether that's an operating system enabling software developers to create and distribute anything like the App Store or like Windows or like Apple, whether that's Facebook, enabling anybody to share, you know, anything that they want to write or say. You know, I think Kickstarter is just a really cool example of that and led to Oculus.

• 1:09:37Ben Gilbert?

  Yep. I think it's a great point. Should we grade it?

• 1:09:41David Rosenthal?

  Let's do it.

• 1:09:42Ben Gilbert?

  All right. So I, I think you're, you foreshadowed this a little bit, but like the strategy of Facebook acquiring the preeminent VR company and paying a lot for that, I think is great. Like that, you know, I, so far, if we're, you know, at the date of acquisition, I'm like, this should be an A. Like I really feel this makes lots of sense to me. Facebook needs to be here. I think in the last couple of years of where it's ended up, I'm, I'm going to go with a C for this acquisition with, you know, as, as we've said before, a high level of variance. So when we revisit this acquisition in years to come, very open to changing that. And I think it's very likely it will change, but like, holy crap,

• 1:10:22Ben Gilbert?

  they, they, they bought Oculus and then a year later, a far superior, you know, piece of technology comes out and it didn't seem that hard for, for someone else to pounce on it. And especially someone that was so So interested in the Oculus in its development. And then on top of that all, I really disagree with Facebook integrating VR tighter. Like, I really think that, that I think they're potentially at risk of not making sure that they understand that Facebook needs to be a horizontal platform that, that doesn't prioritize anything on Oculus. People that work at Oculus should view themselves as working on a thing that is, that makes sure

• 1:11:03Ben Gilbert?

  Facebook doesn't get unseated in the future, but ultimately, you know, Facebook is the business. Like, they should look at their competition as Snapchat, even though they work at Oculus.

• 1:11:12David Rosenthal?

  Yep. Totally agree. I think you've nailed it on this one. You know, the only, I'm tempted to quote Tom from our, Tom Alberg from our Amazon IPO episode, himself quoting Jeff, which is just such a great line in tech that Jeff's saying, Bezos is saying that, you know, it's okay to fail at things. It's not okay not to try. So I want to give Facebook and Mark Zuckerberg a ton of credit for, you know, trying here and seeing, you know, the potential in VR as a future medium and pouncing on it early.

• 1:11:51David Rosenthal?

  On the other hand, like, he pounced really early and execution has not been great since then. So for the same reasons as you've been, I'm going with a C on this one so far.

• 1:12:03Ben Gilbert?

  Yeah. And maybe there's a, there's an abstraction here where we need to say like, huh, it turns out if you're a horizontal that needs to have scale and reach every internet-connected user in the world, then maybe you don't own the hardware platform. And like, a risk of your business of reaching everyone is that you don't, you know, you don't necessarily own that direct customer relationship. And that just has to be okay. Like, that just has to be baked into these like mega horizontal scale models.

• 1:12:27David Rosenthal?

  Yep.

• 1:12:28Ben Gilbert?

  Cause there's no way, like, could Facebook have its cake and eat it too? Could, is there a world where the, the technology behind Oculus was so breakthrough? Or any, anything that they acquire is so breakthrough that it is the only hardware platform? And then they reach everyone and get to own the hardware? Like, I just don't see a world where that's possible.

• 1:12:45David Rosenthal?

  Well, what you're talking about is a monopoly on a direct customer relationship. And monopoly is a word that gets thrown around in tech a lot, usually in conjunction with network effects and the power there. But what's interesting about network effects, at least in the companies, we've seen them expressed powerfully so far, very few, if any, of those companies actually own the means of ingress, so to speak. They own it in a sense in that Facebook owns the app that people come to and spend most of their time in, but they don't own the phone. And Google owns where people find their information, but they don't own the computer or even necessarily the phone, even if it's Android.

• 1:13:30Ben Gilbert?

  Right.

• 1:13:31David Rosenthal?

  I think it's just maybe hard or maybe impossible. It's unlikely to believe that Facebook would be able to do that with VR in the future.

• 1:13:43Ben Gilbert?

  Yep, agreed.

• 1:13:45David Rosenthal?

  Okay, quick follow-ups. So one, Snap, they're still a public company.

• 1:13:52Ben Gilbert?

  They are. They are still a public company. They have not completely imploded. Their stock is trading below IPO price.

• 1:13:58David Rosenthal?

  Yeah. Well, their stock is trading up from where they priced the IPO, but it is trading down from where it closed on the first day of trading, which is fine. The real story will come after they release their first quarter and probably a couple quarters of earnings and we see whether they're able to reignite growth.

• 1:14:18Ben Gilbert?

  Yep. Yep. Yep. Let's just hope that everyone that bought in a very excited way on that first day does not become extremely pessimistic right now. And, you know, in my, whatever, we're not picking stocks, we're not forecasting, we never time the market, blah, blah, blah. I think it's going to bounce back a little bit. And let's hope for Snap's sake that the people that bought in are sort of in it for the long haul and understand that, too. Because I think one interesting point that a friend brought up the other day is tons and tons of millennials bought Snap because it's the first kind of accessible IPO to them that was both large and something they were super familiar with. And people bought on a motion of, I like this company. And you don't want to see all

• 1:15:02Ben Gilbert?

  those people have a super negative experience and lose out.

• 1:15:06David Rosenthal?

  Yep. Well. Echoes of the Facebook IPO episode. Go listen to that one if you haven't already. I think that is some of our best work here on acquired. Okay. Other hot take. Intel acquiring Mobileye. Ben, I hear autonomous cars are a thing. Forget VR.

• 1:15:25Ben Gilbert?

  Yeah. Boy, sure seems like it, huh? I think.

• 1:15:29David Rosenthal?

  Wait, is Mobileye a camera company?

• 1:15:31Ben Gilbert?

  Hmm. In a sense, in a sense. It's more like an applied machine learning company. It's really fascinating to me that, you know, so Mobilize, Israeli company, they build self-driving car technology and they were bought by Intel for about 15 billion dollars.

• 1:15:46David Rosenthal?

  A little less than 15 billion dollars. Yeah.

• 1:15:47Ben Gilbert?

  Yeah. And, you know, what they're really doing is applied machine learning. Like, to me, this is a company that is, their core competency is, is the collecting and synthesizing of the, all of the training data and building a pipeline out of that so that they can appropriately hook into all of the systems of someone else that makes the car and make that car self-driving. And it's so fascinating to me that as this market gets, you know, so much attention so quickly and it's so clear that this thing is going to happen, that, you know, by pointing your, your technology in the right direction and really starting to get market traction with the makers of these, these cars, like if this company was a machine learning company, they would have sold for a 15th of what they sold for.

• 1:16:31David Rosenthal?

  Yep. It's interesting. I'm, I think we might have unexpectedly on this episode touched on a really, really deep theme in technology, which is this vertical versus horizontal idea. Ever since we talked about it a couple of minutes ago, I can't stop thinking about it and thinking about Intel acquiring Mobileye and like, okay, yeah, we're going to be, you know, we're now going to sell this horizontal platform to all the car companies to enable them to be, to compete in the, in the autonomous market. Contrast that with a Tesla, which actually used to use mobile eye components, ended their relationship, took it in-house, is vertically integrating, taking an Apple-like approach.

• 1:17:12Ben Gilbert?

  I mean, dude.

• 1:17:13David Rosenthal?

  Be very interesting to see this, how this plays out.

• 1:17:15Ben Gilbert?

  Rewind 20 years ago, like Tesla is Apple, they're like,

• 1:17:18David Rosenthal?

  Yep, totally.

• 1:17:20Ben Gilbert?

  They're vertically integrating, they're selling a, you know, a high-end, premium consumer product that's, that's priced and experienced in a premium way, and that they, they capture a lot of value, and the rest of the value is captured by an ecosystem that is based on Intel, that are basically component makers, and it's like, you know, history repeats itself.

• 1:17:42David Rosenthal?

  Yeah, well, I think the question is, and actually Ben Thompson wrote a great piece.

• 1:17:45Ben Gilbert?

  The smiling curve.

• 1:17:46David Rosenthal?

  Last week, I believe, the smiling curve about this. Question is, can a combination of Intel be the Microsoft, not just the Intel?

• 1:17:54Ben Gilbert?

  Yeah, yeah, yeah, and could Intel be the Microsoft, right? Like, can they, is that what they're trying to do here, is sort of like level up the stack?

• 1:18:01David Rosenthal?

  Yep.

• 1:18:02Ben Gilbert?

  Fascinating.

• 1:18:02David Rosenthal?

  Yep, yep, fun stuff, future episode.

• 1:18:05Ben Gilbert?

  Intel self-driving OS, we will see, see if that happens.

• 1:18:08David Rosenthal?

  Coming soon to a podcast client near you.

• 1:18:11Ben Gilbert?

  Indeed, speaking of podcast clients, one that you can listen to on your podcast client, my carve-out this week is the Pod Save America with Kara Swisher interviewing the, the gang from Pod Save America at South by Southwest. So Pod Save America is the, the guys that used to do Keeping it 1600 on the Ringer Podcast Network.

• 1:18:33David Rosenthal?

  Yeah.

• 1:18:33Ben Gilbert?

  After this election, moved over to start their own media company called Crooked Media, Pod Save America, Pod Save the World, and other left-leaning, highly cynical, very funny podcasts, and if you're into keeping up on, on all the stuff that's going on, and you want some insights from the people that held those jobs in the Obama administration, it's, it's an awesome podcast, like Pod Save America is incredibly entertaining, and the Kara Swisher interview is phenomenal, because she, she might be the best interviewer alive, like she is so good at- Yeah, like thinking about like, what do I want to know? What do I think my listeners want to know? I'm going to abuse you until I get those things out of you.

• 1:19:15Ben Gilbert?

  And you're going to like it because I do it in such a fun and entertaining way and let you tell your story and give you the respect as the person being interviewed and the and starting from a place of like, look, I think you're really smart and I think you have a lot to share. Why don't you share those things with us? And there's, there's this incredible mutual respect between the interviewer and the interviewees. And I just, I highly recommend it.

• 1:19:36David Rosenthal?

  We look up to her on acquired and a lot that we can learn and hope to keep learning as interviewers and podcast hosts and journalists in our, in our own random internet way, kind of sense ourselves. Mine, real quick for the week, speaking of left-leaning liberal folks, great article in the New Yorker this week that really made me think by Adam Gopnik, who several years ago wrote this great book called Paris to the Moon, which is just hilarious, being in Paris as I am right now for the next month or two. Great satire of the French and of Paris. But he wrote a, wrote a piece called, "Asking the Question: Are Liberals on the Wrong Side of History?"

• 1:20:21David Rosenthal?

  in, in the New Yorker and we'll link to it. It's really good, but one of my, one of my favorite elements of the piece, of which there are several, is sort of asking this question, like, what does the course of history have to say about whether, you know, what the themes are behind it, which, which reminds me, of course, of our podcast and, you know, what we do on acquired. But Gopnik kind of makes the point that like, because events turned out a certain way, because Trump won the election, because Brexit happened, et cetera, or other things deeper in history. Like, the human mind is such a, you know, this is Kahneman and Tversky classic stuff, is such a like storytelling machine that we seize on to that narrative that like, oh, well, that was inevitable and it reflects this deep truth.

• 1:21:07David Rosenthal?

  But the reality is like, maybe it wasn't inevitable. Maybe, you know, it was a probabilistic thing. Maybe it was even a low probability thing that just happened to happen.

• 1:21:16David Rosenthal?

  And I love thinking about stuff like that.

• 1:21:18Ben Gilbert?

  Interesting. Just because it happened, it doesn't mean it was destined to.

• 1:21:21David Rosenthal?

  Exactly. And it doesn't mean that like, that you should create or accept a gospel about like the truth behind it, because the truth is complicated.

• 1:21:30Ben Gilbert?

  Yeah. Sounds very cool.

• 1:21:33David Rosenthal?

  Cool.

• 1:21:35David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 1:21:41Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 1:21:52David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 1:22:12Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 1:22:24David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.

• 1:22:35Ben Gilbert?

  Well, that's all we've got. Listeners, thank you so much for joining us as always. If you've been a longtime subscriber, as we mentioned in the beginning, and you appreciate the show, we'd love a review on iTunes. Make it something stupid, make it something funny. We'd love to read it on air. And it helps us grow the show, get more guests, and really bring Acquired to more people. So yeah, feel free to, if this is your first show, subscribe from your podcast client of choice. You can shoot us an email at [email protected]. Go to acquired.fm, join us in the Slack. Gosh, I don't know what more I could plug, so I'm just gonna call it here.

• 1:23:12David Rosenthal?

  Find us in VR.

• 1:23:14Ben Gilbert?

  Yes. Signing off. Have a good one.

• 1:23:16David Rosenthal?

  Talk to you guys soon.