Three Eras of Facebook (and the Internet), The Problems with FTC v. Meta, The Realities of Perfect Competition

Tracing the history of Facebook to understand the challenges for the government in this month's FTC v. Meta trial, and thoughts on the nature of competition on the Internet and its impact on the economy at large.

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

• 0:04Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:15Ben Thompson?

  I'm doing fine. The question is, how are you doing? We just passed April 15th, tax season. I saw a pretty funny tweet about someone saying, "Accountants just stop whining. Sorry, you have to actually work once a year," or something along those lines. A lot of people got pretty upset about that one.

• 0:34Andrew Sharp?

  Listen, I love my accountant, but emailing back and forth with him, it did occur to me, like, "What do you do the other 11 months a year?" But he did a great job for me this year, so no shots.

• 0:44Ben Thompson?

  They file taxes for people like me.

• 0:45Andrew Sharp?

  Love you, Bob.

• 0:46Ben Thompson?

  Because what we do is we file extensions and then the actual deadline is like in October. But of course, you still have to pay now. But anyhow, so that's number one, what they do. Number two, we are basically entering tax season for you as a basketball podcaster. Are you ready?

• 1:04Andrew Sharp?

  Well, a lot of 2 a.m. nights over the next couple of weeks. I'm feeling just general anxiety about the Timberwolves Lakers series that begins on Saturday night in Los Angeles.

• 1:16Ben Thompson?

  Five on eight, it's always tough.

• 1:17Andrew Sharp?

  Lot on the line. Exactly. Everyone in the world is picking the Lakers. We're going to be playing five on eight for the next two weeks. The Wolves are my adopted favorite team since the Wizards have fallen off the face of the earth. So right now, I'm just waiting for Saturday, but waiting uneasily because Luka Doncic and LeBron James are on the other side.

• 1:38Ben Thompson?

  Well, I will join you in supporting the Timberwolves. Small markets unite. I already know, may I say "we," we as the small markets are going to get screwed, so you're just going to have to win despite it all.

• 1:50Andrew Sharp?

  Middle America always ends up taking it on the chin. As for the show, a programming note at the top, '03 and '04 Mini were both released Wednesday afternoon. Ben, you haven't had a chance to really dive in and play with those models yet, is that right?

• 2:08Ben Thompson?

  Well, I mean, I use deep research all the time, which is 03 powered and is amazing. So I do, I do have high expectations. We should also note, we haven't really talked about Gemini 2.5, which is apparently incredible.

• 2:19Andrew Sharp?

  Mm hmm.

• 2:19Ben Thompson?

  I have noted that I, there's been more, I feel like more chatter is coming online realizing how much better the overall sort of experience and way it is to use like chat GPT compared to almost everything else.

• 2:32Andrew Sharp?

  Yep.

• 2:33Ben Thompson?

  Which I think is, is an important point. But yeah, there, we, we, we can always talk about AI. I think we're not going to do it today, but um, but yes, I, I, I have not used them directly.

• 2:43Andrew Sharp?

  Yes, so we'll reserve comment until perhaps next week and perhaps every week for the next 10 years as AI takes over the world here. Instead, we are going to begin with a note from the Wall Street Journal who wrote this week, Meta Platforms and the Federal Trade Commission squared off Monday in a trial that could shape the future of antitrust enforcement and force the tech giant to break itself up by selling Instagram and WhatsApp. The FTC called Meta Chief Executive Mark Zuckerberg as the first witness on Monday in the case, which is seeking to compel the company to undo its acquisitions of Instagram and WhatsApp, alleging it wields an illegal monopoly in social media.

• 3:26Andrew Sharp?

  Forcing Meta to get rid of those two popular applications would devastate the company's business, which relies heavily on serving ads to users of Instagram and Facebook. So those are the basics. We could talk about the case more generally later in the podcast, but you wrote specifically about the market definition for this case, which is elemental to any antitrust trial because in order to prove that someone is wielding monopoly power, you first have to establish the market that they have allegedly monopolized. So as far as Facebook's market, you wrote about Facebook's three eras. I want to talk through those eras and sort of trace the history here.

• 4:08Andrew Sharp?

  We can start with era one, 2004 to 2013. In the beginning then, there was a website, thefacebook.com. I remember going on thefacebook.com. What happened next?

• 4:21Ben Thompson?

  Well, the dates are a little fuzzy, but I think they're sort of generally, generally correct. 2013 is convenient because it happens to align with when I started Stratechery. But it was funny thinking through this case because they're arguing like what I have documented over the years. And I, I think the fundamental issue I have with the FTC's case, and there's like beyond broader, I think concerns raised about antitrust is you have this scenario where they're talking about a company, they're pulling emails from one era of a company to complain about dominance in another era of the company that has not much to do with the present era of the company.

• 5:05Ben Thompson?

  And that's why I think these eras were sort of important to pull apart. A lot of the emails are, not all of them, but a lot of them are from, obviously, you know, the, this early era. And you start out and yes, you have the Facebook.com. I always forget that Facebook started in 2004. I always want to say 2006. And the reason I always come back to 2006 is because it was in 2006 they introduced the feed. And to me, that's like, that's the real Facebook, right? Like before you just had-

• 5:33Andrew Sharp?

  That was the revolution. That was Dylan going electric in 06.

• 5:36Ben Thompson?

  No, it transformed the internet. Like that, that, that is like this single, that's more important than stories. It's more important than reels. All of that stuff is downstream from the feed. And we talk about the feed again and again and again. That's what changed the internet from being a pastiche, is that the word? Of like the print world and the advertising all sucked. You didn't, couldn't make any money on there and it was print dollars and digital dimes. To suddenly actually know this is astronomically more valuable because it was a format that was native to the internet. It was only possible on the internet. It had two key things. Number one, you had an infinite amount of content. It never ran out. And number two, it could be, it was personalized to you. That is the internet. The internet is infinite and it's personalized.

• 6:21Ben Thompson?

  And the feed was the first manifestation of that. So Facebook starts out, it's just individual profile pages. You had to click around, then you get the feed. And the feed, the introduction of the feed is the seminal culture forming moment for Facebook.

• 6:36Andrew Sharp?

  Okay.

• 6:37Ben Thompson?

  In that- Everyone hated it. Everyone was like, this is terrible. They had like literal protests outside their offices in Palo Alto, I think it was in Palo Alto at the time, of people mad about this. People are signing petitions all online. And what Facebook saw was there's a lot of people upset. There's a lot of media going on about this, all these stories, it's all negative. And usage has like, gone up 100x.

• 7:06Andrew Sharp?

  I can't remember how I felt in 2006. I mean, I was in college. All the memories are pretty foggy from my first few years in college there. However, given my Luddite predilections, generally speaking, I can imagine that in 2006, I was a chief feed hater. And ultimately, everybody bought in over time.

• 7:29Ben Thompson?

  Yeah, I mean, this idea, instead of clicking around to all your friends' pages to see if there's an update, and maybe there was, and maybe there wasn't, you could just have a feed that had all the updates, all the updates right there. And it's funny, because the utility is so obvious in retrospect. And, and what the cultural impact on Facebook was that immediate reaction and public PR are not indicative of whether or not we're doing the right thing. Like, look at the data. And, and that is characterized a lot of their decisions over time. And, you know, that was, it was a very traumatic moment for the company, but they sort of held the course. And like I said, it's, it transformed the internet,

• 8:12Ben Thompson?

  transformed history. Now, for better or worse, is a different discussion, but there's no question the feed was transformative.

• 8:19Andrew Sharp?

  Okay.

• 8:19Ben Thompson?

  So anyhow, you have Facebook, this, this is the core of the company. It, it took the company a while to get this and figure it out. So they're in the browser, you have the right, they, they really wanted to be a platform. Mark Zuckerberg has always looked up to, I think, Bill Gates in particular.

• 8:34Andrew Sharp?

  What was the vision for what Facebook would be as a platform?

• 8:38Ben Thompson?

  Well, so you remember things like Farmville, for example. So you had this idea that there were applications that would actually run on Facebook. And this was the era of like flash games and like all these sorts of things. I can't remember if Farmville was fly, it might have been HTML5. But regardless, the idea was Mark Zuckerberg has always, and I think this is arguably a weak point, or a blind, a gendering of blind spots, has been focused on being a platform. A platform, and a platform in the traditional sense, in the operating system sense, where you are the layer on which other companies build. And these are the most amazing businesses in the world, right? Because you have a two-sided lock-in, or multiple-sided. You have users, you have developers.

• 9:23Ben Thompson?

  If you're an actual operating system, you have hardware makers. Like Windows was incredible. Like Windows is still around. Right. Because, you know, even though it's not, just because it didn't shift to mobile, doesn't mean it still hasn't been and continues to be an amazing business that still throws off a ton, a ton of money for Microsoft. So he wanted to be a platform. We're gonna be a platform, in this case, in the browser. And so you can run other, you can run applications on Facebook. And so you get things like, again, mentioned, like Farmville. And then, well, these companies are making all this money. We're gonna provide payments. And you could see like the prototypes of things like app stores back in the day. That, you know, I'm sure they wished they had been as, uh, figured out it would be as, as clever as Apple about it.

• 10:06Ben Thompson?

  But, but the reason they could do that is in the browser, you could do anything. You could do anything within limits. You couldn't like run apps on your computer, but you could wink out to the games and XYZ and, but you could also, you couldn't have walls on it like Apple does with the App Store. So they could have done that because they, it's not controlling the, the operating system environment. Openness is a double-sided sword in that regard. But that was the goal, was to be a platform. And part of this was, mobile comes along, and of course, Facebook has an app. But the app was just a wrapper around the website. It was all done in like HTML5. It wasn't using all the native stuff on the other thing. And part of that was, number one, that was an easier, faster way to do it. And you could have, you know, right once, run anywhere theoretically across different

• 10:51Ben Thompson?

  things. But also that could preserve the platform aspects where at least in theory over time, if we're running this basically as a glorified browser, we can keep up with all these different bits and pieces. And what people forget, and again, this is, this case is probably one of the all time examples of it, but it comes up again and again, is people look back and they only see, they can't remember the way things were at the time, right? Like, I mean, people can't be empathetic to people in the present. They really can't be empathetic to people in the past and like what were the constraints and things that they were facing?

• 11:31Ben Thompson?

  And beyond the overall overarching skepticism of Facebook that is just the next MySpace, was this sense that actually going to mobile, they're, they're really screwed. They're, they're gonna lose this platform. People are going to, you know, new paradigms, people are gonna find new networks. And there was a, they IPO'd in 2012, and I think at the end of the first day, their stock was like $38. Within three months, it was down to $19. Like, people were, they, they just didn't buy it. They had their first earnings call was disastrous and they were losing all, again, they were, you could see this, all their monies on the browser, all their ads units were mostly

• 12:14Ben Thompson?

  like, like browser-based ad units that were kind of on the side rail and stuff like that. They hadn't quite really mastered the in-feed ad, ad aspects here. And the platform was obviously going away on mobile. And by the way, the app sucked. This is Facebook in 2012, when they bought Instagram.

• 12:31Andrew Sharp?

  It is really hard to remember that. Facebook was so dominant in the mid 2000s and has been so dominant since 2012 that it's hard to remember that there was a valley there.

• 12:42Ben Thompson?

  Dominant in the mid 2000s for a college student.

• 12:44Andrew Sharp?

  Well, yes and no. I mean, it took, it took the nation by storm like nothing that internet users had really seen before. So, I mean, it, it wasn't some, you know, mom and pop shop in 2009.

• 12:58Ben Thompson?

  It wasn't guaranteed they would get to where they are today. Look at Snap. If you looked at Snap in the mid 2010s, you would assume they would be as large as Facebook, you know, 10 years on, and they're not. They totally flatlined. Like, like the, now, you- Facebook was part of that story. Sure, but that's why when like when Google Plus came out, they were like, oh yeah, there's a lot of people, again- Yeah. I'm not putting myself in this bucket. I, at the time, so in 2012, I was not running Strategery at the time. Fortunately, I was tweeting, and so I have some tweets. I'm like, this is like Microsoft buying Netscape in 20- or two, or 1993 or four, or whatever it was. I'm like, this is going to be a problem.

• 13:41Ben Thompson?

  And that obviously turned out to be correct, but again, there's a reason there's clips everywhere, and you can go back and dig up analyst reports, and you can look at the stock price. Facebook's stock went out the IPO at 38 and went down to $19. That $19 a year was the same month the FTC gave their final approval of the Instagram acquisition. Like this, there is, if, if the FTC was so smart, and if this was all so obvious, and if everyone looking back says, duh, how could they approve this? Then why are you not a multimillionaire today because you bought up all this Facebook stock in August of 2012?

• 14:21Ben Thompson?

  I guess so, yeah. No, so, no, I'm dead serious. There's all these people that sit here- No, but there's people that, that look back, and look, I didn't buy it either. I was also like $100,000 in debt from business school, or more than that. But there's a lot of people out there that are acting like this was all so obvious. Who, sorry, you had the op- you had the opportunity to show you knew what was going on, and you didn't. Yes. Again, I can't fully put myself in my vote. All I have are tweets, but like, it was seeable, it was doable, and the vast majority of the market did not see it, did not agree with it, and their stock was down on- Yeah. the approval of, of Instagram.

• 15:06Andrew Sharp?

  Well, and the problems with the Obama era FTC are legion. This is just one of many, but I also think in general, there's a collective understanding.

• 15:17Ben Thompson?

  There was no world where buying a million dollar app with no revenue was not going to be approved. Now, so you can, again, this is arguably a fundamental problem with the approval process. And I, and we can get into this.

• 15:35Andrew Sharp?

  Well, and I also just think that we understand tech power differently today than we did in 2012. Would you agree with that, that ultimately, a lot of people have been reading Ben Thompson and understand the power of aggregators today? So the calculus is a little bit different.

• 15:50Ben Thompson?

  Right. So I've written extensively about this, and I think seeing some of the feedback from me writing about this on Tuesday. People have a hard time following, um, uh, there's a very subtlety in my description of this problem and what should be done. So I would say, so you move to Facebook's, this is the first era where Facebook is basically at its nadir. And you fast forward, I wrote a lot about Facebook in 2013 when I started your techery. The article I always go back to is mobile makes Facebook just an app. That's good news. And basically my argument in that article was Mark Zuckerberg's platform ambitions is the biggest thing holding Facebook back. It's not meant to be a platform. It's meant to be an ad-supported attention mechanism.

• 16:35Ben Thompson?

  That was before I coined the word aggregator, but I was basically trying to say they're meant to be an aggregator, not a platform. Aggregators are not platforms. They're, they're, they're attention garnering devices. Platforms are meant to fade into the background. It's the infrastructure on which you serve the app that has your attention. When you're in Photoshop, you're using Photoshop, like you're, you're, yes, you're in macOS or you're in Windows, but it's about the application that you're, you're, you're in at the time. When you're a platform, you're fading into the background. If you're an ad-supported company, which it was clear Facebook was and needed to be, and this whole payments thing and all this sort of stuff was. Was a waste of time.

• 17:18Andrew Sharp?

  Yeah.

• 17:19Ben Thompson?

  Distraction. You need to own attention. You need to be front and center. Your job isn't to serve up other people and give them opportunities. It's to be selfish and own the opportunities for yourself. And mobile forced Facebook to do that. They couldn't be a platform because of Apple's rules. They were just an app. This is where Apple's rules helped Facebook. When you're using Facebook, it took up the whole screen. When you're scrolling that feed, at times you're looking at content and at times you're looking at ads and that ad takes over the whole screen. It's like, and it's funny because the nature of the feed and the nature of mobile actually made

• 18:01Ben Thompson?

  a vastly more disruptive and in-your-face ad unit feel better than ad units of the past, right? When you were reading an article online in the browser and there was ads on the side, it sucked. And in Facebook, when an ad literally took over the whole screen, it didn't suck. Like, that's kind of amazing if you think about it.

• 18:22Andrew Sharp?

  Yeah, I mean, all of this is an interesting little window into how we've come to use and interact with the internet over the last 15 years. It's one of the reasons I wanted to start with the three eras here because you could trace these little shifts in user behavior through the Facebook experience. And it's so true. If I'm on a desktop computer and an ad takes over the desktop screen, it's like, how do I click out? How quickly can I click out of this website? What the fuck is going on? But on a phone, it's totally natural. So yes, it all worked to Facebook's benefit. And Facebook was ultimately forced to focus because of Apple.

• 19:02Ben Thompson?

  That kicks off the monopoly era. Yeah, like, and, and again, I think a question for people like you is if a monopoly era was only five years long, is this actually worth, uh, and I trust you. But I get, I wrote an article, I think, 2016, I marked as the peak of the era. And I did this for self-serving reasons because I think I wrote two articles in that year that happened. To be very, uh, there was some fidget with the years arguably the first era should ended in 2012. Like that was the last year when they bought Instagram and when they realized they needed to rebuild their mobile app. I think the rebuilding of the mobile app happened in 2013. So I chose 2013. I also chose 2013 because that's when I started.

• 19:47Ben Thompson?

  Um, so, uh, a little bit, a little bit of self-serving fudging on here, but 2016, uh, there's two articles I wrote that, that I mentioned the update that I would point to. Number one, I wrote an article about the, the reality of missing out or something along those lines in early 2016. And I, I looked around, you looked at, uh, you looked at all these companies, you looked at Twitter, you looked at, uh, uh, Pinterest, you looked at LinkedIn. Like all these companies were flatlining Yelp, uh, I think was one like, and they all wanted, everyone was like looking, all these investors looking, where's the next Facebook? Like, like, man, we missed out on that one. I could have bought it for $18. I'm so dumb to miss that one. I'm going to be smart enough to catch this one, right?

• 20:27Andrew Sharp?

  Can you do the rest of the podcast in that voice? It's a challenge.

• 20:32Ben Thompson?

  It's pretty funny. Like if you didn't see it the first time, uh, and now you're sure you're going to catch it the next time, what you're going to do is buy a bunch of crappy companies. Cause you actually didn't know what you were looking for the first time around, um, which they bought, uh, like Twitter is probably the all time example. And my point of the article is like, it's over the like Facebook and Google dominate this market. They like, it is what it is, like day one, like, like all these other ad supported businesses. Stop hoping for a Facebook multiple, stop hoping for a Facebook growth curve. It's not going to happen. Um, the one company that people had hoped for was this startup called Snap and or Snapchat, I believe was called at the time before they changed their name.

• 21:15Ben Thompson?

  And then in August of that year, Facebook blatantly rips off the story's idea from Snapchat and puts it in Instagram.

• 21:23Andrew Sharp?

  Yep.

• 21:24Ben Thompson?

  And what was compelling about that, and I wrote, I wrote at the time, this is one of my like, I don't know, there's some articles I've read, I can remember where I was, I was sitting at my kitchen table in Wisconsin. So I remember this one, I appreciated, it was such a blatant ripoff that like Facebook didn't even attempt to hide it. Like you had like Kevin Systrom and Mark Zuckerberg like doing interviews saying, yeah, they came up with a great concept. Why wouldn't we do it? And then like, and of course they tried to do other apps and stuff and they like poke and things along those lines. But basically what they did with stories was they realized that Snap had something and still has something with chat. Like there's, Snap is still big with like high schoolers and things like that for the private messaging.

• 22:09Ben Thompson?

  The threat was this stories because for people like you and me who didn't have any friends on Snap and thus no one to chat with, and so it wasn't, they weren't going to lose users. They were maybe not going to gain as many young people as they wanted to, so that was a problem. The worry with stories is this is great and it's a reason for people like you and me to download Snapchat and give it a try. And once we've downloaded Snapchat and given it a try, then maybe we'll start using the messaging feature. And then Facebook is going to have a real problem on their hands. So they dropped stories in Instagram, which by the way, stories are awesome. And so it became an immediate hit because it's a great product. And it had all the content from my friends and family already in it because they were already on Instagram.

• 22:51Andrew Sharp?

  Right.

• 22:52Ben Thompson?

  This was the peak of leveraging their social network into winning this market. And what's funny is I feel like a lot of the competitive angst and anger with Facebook stems from this moment specifically.

• 23:10Andrew Sharp?

  It does feel unseemly. They tried to buy Snap, Snap said no. And so Facebook said, okay, cool, we're just going to nuke your growth forever. And you've plateaued and there's nowhere to go but down.

• 23:24Ben Thompson?

  But didn't they do what we want them to do?

• 23:27Andrew Sharp?

  Uh, what's that?

• 23:28Ben Thompson?

  They competed. They built, they, they, they built the feature and they won. And like, this is, I think, one of the, like, my overall thrust on here is there's a temporal mismatch between a lot of the pieces of this case that make, that, that makes it look good and actually I think is a terrible case. I think this is another, this is like a motivational mismatch where people are upset at Facebook.

• 23:54Ben Thompson?

  And the other thing about Facebook doing Stories is Stories from day one was better engineered and better than the Snap one. The performance was better. It worked great.

• 24:01Andrew Sharp?

  I mean, it's brilliant across the board. It appeals to guys like you and me because I'm not really posting. I don't want things to be on the internet forever, but I'll post a photo if I know it's going to delete 24 hours from now. Number one. Number two, it also was a wonderful way to serve ads for Facebook and Meta. And they've made just boatloads of money doing it that way.

• 24:27Ben Thompson?

  I mean, I'm going to pick on you because this is another example of looking backwards and actually missing what happened.

• 24:34Andrew Sharp?

  Okay.

• 24:35Ben Thompson?

  Stories were a bad way to serve ads because there was no way to measure them, keep track of what they were. And so what happened was you had the largest stock price decline in one day in US history in, I think, 2017. Because what happened was people were spending so much time on Stories because it was so good. They were not yet monetizing well, so Facebook's earnings were not missed expectations. Another moment I can remember, because it happened this summer, I was in Wisconsin. I remember walking down the street. I wrote an article called Facebook Lenses, which was basically the first version of Facebook myths. And was basically the same take, which is no one understands this company. This is dumb.

• 25:15Ben Thompson?

  You're actually looking at one of the greatest opportunities of all time because they've massively increased the inventory of ads. They will figure out how to monetize Stories well, and when they will, it's going to be this massive growth thing. The reality is everyone is like, Facebook's doomed. It's over. It's done. This is a real thing that happened. By the way, that didn't keep its crown as the biggest one day decline. Because we had to fast forward to the huge decline that predicated Facebook Meta myths. Which was, by the way, the exact same story where Reels is taking up a lot of time. It's not monetizing well, so they have this mismatch of time being spent and the monetization happening, which was the exact same thing that happened with Stories.

• 26:00Ben Thompson?

  And again, the reason I'm picking on you is because This is the problem with the case in a nutshell. People look back at history as a 2D image. They see it as what existed based on where they are today. And it's not a 2D image, it's a 4D image, because there's a temporal aspect to it. And this is, and I think this, there's a bit where what they did to Snap, oh, so dirty, they ripped off their product innovation and then because applied their social network together and killed them. It's also what all the antitrust advocates, if you follow their arguments, want to do. They innovated, they didn't buy. They like, like, it would have been better for Snap.

• 26:42Ben Thompson?

  Everyone involved with Snap would be better off, especially their investors, if Facebook had bought Snap. That would like, that would be like, so we, we kept a competitor. It's out there and they stink because Facebook is better. Like, like, so, so the, there's a refusal to understand history, to understand how these markets operate, to understand why Facebook has succeeded where Snap doesn't. And to, everything is the fault of regulators for approving XYZ. And, and again, I think it's just so striking that the thing that the, the, the number one anti-competitive thing that Facebook did in the context of destroying a competitor was actually competing.

• 27:26Ben Thompson?

  It wasn't actually buying someone.

• 27:28Andrew Sharp?

  Well, I don't think anybody is saying that is illegal.

• 27:31Ben Thompson?

  They're not saying it because they're forced to think about it. But I think in their subconscious, this all gets conflated. Pete, like, I, I think that that's the episode that I think really irks people, what Instagram did to Snapchat. And intellectually, they know that wasn't anti-competitive. But I think it foments a sense of Facebook being unfair. When actually the, the, what, what irks them is the one time they did it the way you wanted them to do it.

• 27:56Andrew Sharp?

  Well, Instagram stories did eventually become an unbelievable way to serve ads. Is that right?

• 28:03Ben Thompson?

  Yes.

• 28:03Andrew Sharp?

  Okay.

• 28:04Ben Thompson?

  I'm just.

• 28:04Andrew Sharp?

  Just making sure.

• 28:06Ben Thompson?

  Yeah, no, they made a, no, just like, they made a ton of money off that. And by the way, there was, it was funny because there was like two year period where if you were an advertiser, you could make, there was a huge arbitrage opportunity because the problem wasn't that it wasn't a great ad product, it was that the measurement was poor.

• 28:21Andrew Sharp?

  Yeah, yeah, yeah.

• 28:22Ben Thompson?

  And so, and so established advertisers wouldn't use it because they couldn't get the, the, the, but if you were able to, if you took a chance and like, I'm throwing a bunch of money at this and I, I don't, I can't guarantee it's going to work, you could act, it would work. And so your return on advertising spend, your ROAS on stories was like astronomical for like two years before Facebook's measurement got really good and all the big players came in. And then that's when Facebook started really taking margin from it.

• 28:48Andrew Sharp?

  There you go. Well, I was just clarifying since you were picking on me that I wasn't wrong when I said it turned into a phenomenal business for Facebook.

• 28:56Ben Thompson?

  No, you didn't say it turned into, you said it was. That's my whole point. There's a, no, but, but I.

• 29:01Andrew Sharp?

  No, I, I hear you. I was a useful rhetorical crush for you to make your point.

• 29:06Ben Thompson?

  Sorry. You are the stand in for, for all these folks. Yeah, sorry.

• 29:10Andrew Sharp?

  Yeah. Well, and my thoughts on this case are actually a little bit more nuanced. Uh, but in terms of Facebook's monopoly era.

• 29:17Ben Thompson?

  All right. You need to get number three. Let me, well, let me.

• 29:19Andrew Sharp?

  Wait, wait, wait, wait. There's one point on Facebook's monopoly era that I thought was pretty interesting because in like 2017, 2018, Zuckerberg feeling the heat, Facebook is public enemy number one after the first Trump election. And then he starts making all these changes to reduce some of the slop that you would see on Facebook, for lack of a better word, which is ultimately a testament to Facebook's dominance at that point and Instagram's dominance. Um, because they didn't have to worry about engagement. Is that right?

• 29:57Ben Thompson?

  Exactly. No, this is, this is the classic, what's the downside of a monopoly? Is they, they can artificially restrict supply because they have control, right? Like that, that, like you go through like the economic theory of monopoly. It's actually. Facebook's deck at the beginning, they're like, the current market shows no size monopoly. They're a big expansion, like no one's restricting supply. Actually, the reason why you can call this the monopoly era is they were restricting supply. What, what, the, what the numbers showed is people wanted video slop. That's what they want. That's what they've always wanted. It's what they were, they're, what they're getting today, which we'll get to in a moment.

• 30:34Andrew Sharp?

  And so at this point, Facebook was basically like, no, we're going to show you more from your friends and family. We're going to reduce the noise that you're encountering, basically trying to win over critics at that point. And so it's just this wonderful bit of irony baked into the story because one way to prove that a company has a monopoly is that company has the ability to unilaterally impose changes that make the product crappier for customers.

• 31:03Ben Thompson?

  Right, right. And by crappier, like we, we'd say, oh, that normatively that was better. It's better to not have slop and to be connected with friends and family. But from an economic perspective, yeah, it was worse. Like people.

• 31:14Andrew Sharp?

  It was worse for Facebook. Yeah. But the, the inverse is true here where now Facebook has to roll up its sleeves and serve slop like everybody else because the market is a lot more interesting and crowded. So.

• 31:27Ben Thompson?

  This is why the Snapchat bit was so, it was, the Snapchat episode is super important to this story. Because they killed Snapchat or completely cut their knees off by bringing to bear their personal network. Where stories are great. Wouldn't it be better if your friends and family were already there? Here you go in Instagram. In the running for my most prescient article ever, and I didn't get everything totally right, but I think the overall framework was right was in 2015. I wrote an article called Facebook and the Feed. And the point of that article was Facebook's long-term risk is they're overly indexed on social networking. What people actually want, what is beyond, what's beyond social networking?

• 32:11Ben Thompson?

  It's just entertainment. It's TV on your phone. It's mindlessly sitting back, consuming slop. And my argument was Facebook is, is too stuck on social networking because it's where they started. And they need to transform the feed into being generalized entertainment.

• 32:30Ben Thompson?

  By the way, 100% correct, as we found out over a decade later. That's what TikTok did. Now, the mistake I made in that article is I didn't imagine the TikTok style algo- like, where would all be user-generated content? I assumed that they needed to push more, like, professional content, because like- but my point was, your friends and family- there's that famous Paul Krugman quote, where the internet's not gonna be any bigger than the fax machine, because people don't have much interesting to say. That's right in a narrow sense. Your friends and family actually don't generate enough interesting content to keep you locked onto Facebook. But guess what? Guess who does? Eight billion people. If you- if they will make it up in volume, like, in the aggregate, right? It's like the Moneyball quote, right?

• 33:13Ben Thompson?

  Like, we can't replace Jason Giambino, whatever. We can make him up for the area. And so, that's what TikTok did. TikTok said, "We're not a social nu-" Yeah, you can follow people. It basically has no impact on your experience. What we're going to do is we're going to algorithmically figure out what's the videos you watch again? What are the ones you linger on? And we're going to quickly tune this algorithm, and we're gonna pull videos from across the entire TikTok network. And the network here, it's a video network. It's not a social media network. It's not a network. It's not people you know. It's, "We just think you'll like this kind of video, and we're going to surface it to you." And guess what? That wa- I was totally right. That was way more compelling than what you got from your friends and family.

• 33:56Ben Thompson?

  And, and people started spending more and more time on TikTok, and Facebook just ignored it. And they ignored it, and they not only ignored it, TikTok bought like billions of dollars- I think it's billions of dollars worth of ads on Facebook and on Snap, to build their business, to get people to go to TikTok. And it was this massive blind spot. Because the blind spot was Zuckerberg actually meant it when he said he wanted to build a social network, that he wanted to connect people. He, that- Monopoly evidentiary power to not give people what they wanted, but to give them more friends and family content was driven, I think, by a real motivation that that's what he wanted

• 34:41Ben Thompson?

  to build. They ignored it for way too long. And then suddenly, and this is the next era, they dramatically had to pivot. And they were like, and that's been the era. And we've been in this era for five or six years. And again, I was writing about this at the time. I've written, I linked to a few articles in there. Like, and you look at the changes have been so extreme. And you look at the total abdication of the, we want people to have a good feeling on our networks, to just absolute garbage that is incredibly addicting and impossible to break away from. And just the skyrocketing video on here, and the fact that all the apps do, all apps everywhere increasingly look the same. People just want this video

• 35:24Ben Thompson?

  slot. That's what they want. And it's just a competition to give it to them. I see people mocking the fact that Facebook raised YouTube Shorts as a competitor. And I'm like, are you, what are you talking about? And this, by the way, the reason is, if you're going to monopolize something, it has to be scarce, right? Like, and what is scarce? The only thing that's scarce is time and attention. And, and so the idea that Facebook is not in a competitive market today, it, it just doesn't hold water. And that's, and that, and it's not just that this is suddenly a new thing in 2025. This has been clear for at least five years. And it's, Facebook's pivot's been ongoing for five years. It's

• 36:09Ben Thompson?

  been happening for seven or eight years.

• 36:12Andrew Sharp?

  So your take on the case is essentially, the market is so big that you can't establish that Facebook and Meta have monopoly power in this market?

• 36:23Ben Thompson?

  The market definition of personal social networking is dumb. It's stupid. Like, there's a reason why the only competitors they have are Snap and MeWe, which I had never heard of.

• 36:31Andrew Sharp?

  Me neither. I, I was Googling MeWe earlier on Wednesday and still don't really understand what's going on there.

• 36:39Ben Thompson?

  Honestly, I actually think Facebook understated the case. Cause you know who's real, like, they, they put like a boxing ring with all the different apps that they compete with and has all the apps on your phone, YouTube and Twitter and LinkedIn and blah, blah, blah. You know who wasn't in there? Netflix.

• 36:53Andrew Sharp?

  Um, yeah.

• 36:54Ben Thompson?

  I'll tell you what Netflix.

• 36:55Andrew Sharp?

  Text messages, iMessage.

• 36:55Ben Thompson?

  Netflix sees TikTok as a competitor. I'll promise you that. Why? Because its time and attention is the only scarce resource. And this is my, the irritation with these cases in general. So you go back to my evolution. I wrote a lot in the mid 2010s that we need to change the way we view guidelines because it was obvious to people who understood these markets that Facebook buying Instagram was a bad idea. It shouldn't have been allowed.

• 37:23Andrew Sharp?

  Right. And just for the record, that's why when I call out the 2012 FTC, I mean, there were people, you being one of them, who would say, this is a bad idea. It's going to lead to more consolidation than we want in a market like this.

• 37:38Ben Thompson?

  But the defense is there was no guidelines about how you know, what's the difference between Apple buying PA Semi, which undergirds Apple silicon, which has been tremendously, I think, beneficial to the world. Like, there's a huge benefit from these large companies buying technologies because those technologies get diffused immediately everywhere. Like, that's, you have to consider the consumer benefits, right? Versus a Facebook buying Instagram. And I've written so many articles trying to tease out this distinction about what's the sort of acquisition that, that it should, it's basically an aggregator buying a potential aggregator.

• 38:17Andrew Sharp?

  Can I just interject to say that I'm glad that Facebook bought Instagram because it made it easier for me to use Instagram and connect with all my Facebook friends on Instagram. And I'm glad that they adopted Stories because I never had to download Snapchat. So like, as a user, this has actually worked out fairly well, as far as I'm concerned.

• 38:38Ben Thompson?

  Well, it's better for advertisers too, because like, you have one platform, it's easy to use. And, and there, again, there's an infinite amount of space for advertising. It's not like they've constrained the number of advertising opportunities. They've consolidated it. But the nature of internet advertising is not, Facebook's not pricing the ads. It's all auction. It's all market-based. The, the, if Instagram were large, the burden would be on advertisers to now have to go to two places. And you're still on that probably paying, you know, some, some more prices. Now. There's another, you know, there's, so yeah, let's, let's, let's step back for a moment though. In defense of Obama's FTC, there weren't clear, there weren't any reasons, codified reasons or guidelines or any reason to reject this.

• 39:21Andrew Sharp?

  Mm hmm.

• 39:22Ben Thompson?

  So I spent a few years trying to articulate those reasons. And then I think it was in, it was in 2020, because it was right before COVID. I went to this, uh, this conference or something other was at Stanford. And like the Justice Department was there and they gave a speech and there was a lot of debate. And I suddenly had like a come to Jesus moment where I'm like, the mistake, and this is arguably, this is an applicable lesson to what's happened the last few weeks. The reality of politics is you don't get subtlety and you don't get carefulness. You get blunt instruments.

• 40:02Ben Thompson?

  And what I realized was, yes, it was problematic that Facebook was smart enough to acquire Instagram when it was small and could see where it was going and how that skirted. You know, Facebook would not have been allowed to buy Instagram even a year later, probably. Cause Instagram would have been so large by that point that it would, it would have been clear. And so that was, you know, so the problem with trying to come up with these very subtle statutory style arguments and distinctions about how to break this apart. What you're actually going to get is a blanket ban on acquisitions.

• 40:41Andrew Sharp?

  All or nothing.

• 40:42Ben Thompson?

  And that's going to be really bad for Silicon Valley. The entire nature of the valley is predicated on, most companies fail and it's okay. Cause Google or Facebook or whatever will acquire you and you'll go put, basically you get to go to prison for four years, which is sitting in a corporate office in Menlo Park, earning out your four years. And then you go and try again, like that's how like that, that, and guess what that means? That spurs. A ton of startups, a ton of going for it because you're you're kind of eliminating the downside, not just for it. It's really less about VCs and more about the the founders in some respects like, and by the way, there's a lot of startups and a lot of technologies that they need to get into big companies. So they get that diffusal, the the PA semi

• 41:24Ben Thompson?

  example, right? PA semi stuck by itself, trying to make chips is not useful to anyone. PA semi being acquired by Apple changes the world, right? So there's a lot of times where a company and so what I've realized, and this is my shift. So number one, I've always, well, I understood why Instagram was allowed to be acquired. You could see the problem in the wall. I tried to draw a distinct framework on how you could stop just that one acquisition and not in the other ones. And I've come to realize that's not possible. And I'd rather preserve the system, even if it means the occasional Instagram acquisition getting through because of sort of Facebook's foresight. And to your point, there are positives

• 42:07Ben Thompson?

  of Facebook being of Instagram being acquired by Facebook.

• 42:10Andrew Sharp?

  Mm hmm.

• 42:11Ben Thompson?

  Overarching all this, though, is it's been 13 years or no, it's been 15. No, it's been, yeah, 13 years. Like Instagram is what it is. And Mark Zuckerberg yesterday was right to point at Snap. Snap stuck at 500 billion, 500 million people. They can't make money. Like, yeah, why would Instagram be it? Why would they be what they are today if we hadn't built it? If we hadn't done all the advertising for it? If we hadn't eventually sort of moved the founders aside because they weren't, you know, they they couldn't take it.

• 42:39Andrew Sharp?

  It's an interesting counterfactual to wonder about what would the landscape look like if Meta had not bought Instagram, then Facebook bought Instagram? I mean, because like, Facebook has really become a grind to use over the last 10 years or so. And it's just a wasteland, at least in my life. And so does Instagram become more and more powerful as the years pass? Does Snap fill the vacuum? Like, I really don't know what that world looks like. I don't have any answer here as I raise this hypothetical. But it's one of the things that I've been thinking about as this trial proceeds here.

• 43:17Ben Thompson?

  I think things by and large look, I don't think they look that much different. I mean, the, I think you have a race to the bottom arguably even more quickly for the for the points we talked about before. Um, maybe TikTok is actually even more dominant because.

• 43:33Ben Thompson?

  Instagram, even though it was late to pivot, it pivoted hard because that order came down from the top. Like, there's a reason Kevin Systrom left before they went slop, they got all slopified, right? Um, and, you know, so, uh, so, yeah, it is an interesting hypothetical, but Facebook would have also evolved differently if it was.

• 43:58Andrew Sharp?

  Yeah, exactly. Like, do they pay more attention to the user experience and try to make it stickier in the app? And maybe I'm using Facebook the last 10 years.

• 44:06Ben Thompson?

  Well, what happened was Facebook came to the utility tool, right? Like, like, Facebook Marketplace is like a gazillion times better than like Craigslist ever was. And that's something you could do in Facebook because Facebook is just, it's like a utility. It's like you're, what, we have people connected, we have messaging, we do all these sorts of things. Yeah, if they want to, if they want to see, like, if they want to have an immersive vid image experience, go to Instagram, right? Again, I, I totally think it's reasonable, and I've argued the point that they shouldn't have been acquired to Instagram, that all these things should have been different. I don't think you can go back in 13 years, particularly when your case, and this is the, what I mean, the, the FTC's case is a 2D image looking at a 4D past. It's taking emails from era one to complain about dominance in era two,

• 44:52Ben Thompson?

  to seek a breakup in era three. And more broadly, the fact that despite this acquisition,

• 45:00Ben Thompson?

  despite the fact that Zuckerberg is smart and ruthless, Facebook still has real meaningful competition today, raises the question of what are we actually trying to accomplish here? Like, this isn't the railroads, this isn't the, the, the, the telephone company, where you have wires in the ground and it's locked that way and the use case is not evolving forever. Things change. The internet is incredibly dynamic and there's no better example than you can, I will grant you the argument, Facebook shouldn't have been acquired to Instagram in the first place. Facebook leveraged that into. Basically, if you, again, you look at the fact they didn't do video as much as they should

• 45:42Ben Thompson?

  have from an economic perspective and their dominance of the ad markets basically have monopoly

• 45:47Andrew Sharp?

  Just trying to be good stewards of the internet, you know?

• 45:50Ben Thompson?

  And then the market, the market, the market took care of it. They don't, there's no argument they have a monopoly today. Are they large and powerful? Absolutely.

• 45:58Andrew Sharp?

  Well, and that's, that would be my issue with it. I mean, I, I mentioned earlier, I have some nuanced thoughts on the case. I don't know how nuanced they are, but just in general, like on Monday, when you and I were on the podcast, talking about the perception that there's been a death of upward mobility in America. There are less possibilities in American society today. I think a huge part of that story is not necessarily outsourcing jobs, but moving huge portions of the economy online where now everyone has to pay massive tolls

• 46:37Andrew Sharp?

  to Amazon, Apple, Google, or Meta, just to operate small and medium sized businesses. And you have these essentially utility companies that make it possible to operate online or operate successfully online. And I can buy that, the idea that the internet works better if there are a handful of aggregators serving that role. But there has to be a limit on the margins that they can take from other businesses that are actually creating value. And so for me, as I've come to think about this more, podcasting with you over the last couple of years, as opposed to antitrust cases

• 47:19Andrew Sharp?

  that may or may not deal with that core problem, I would prefer to have laws written to rein in the use and sometimes abuse of market power by a company like Meta or Amazon or Apple or Google, whatever it may be. I don't know if trying to break up Meta really solves the core issue that we have. And that's been at least what's on my mind through the first couple of days of the trial here. Does that make sense to you?

• 47:49Ben Thompson?

  No, because I don't know what market power Meta is abusing.

• 47:52Andrew Sharp?

  Well, they have the ability to charge huge fees for advertisers that work on their platform. And people can't really go anybody, anywhere else to get anywhere near the same reach.

• 48:06Ben Thompson?

  Who sets the fees?

• 48:07Andrew Sharp?

  Uh, Facebook?

• 48:11Ben Thompson?

  No, it's an auction. The fees are 100% liquid. The reason the fees are what they are, you say you and I want, want to, want to buy something. It, the, and this is, by the way, this is relevant right now because Shimu, uh, or Shein.

• 48:26Andrew Sharp?

  I can never pronounce it. I butcher it every time I'm sharp China. Shein and Timu is how I do it.

• 48:32Ben Thompson?

  So as I predicted 10 days ago, and no one paid attention to.

• 48:36Andrew Sharp?

  As, by the way, I predicted it multiple times on this podcast at Sharp China, but I probably got it from you. So, fair enough.

• 48:44Ben Thompson?

  Yeah, well, we could, we collectively predicted it. How's that? So there, there are, there are advertising going to zero on Google and Facebook. What that means is the price that everyone else pays on Google and Facebook is going to go down. And the reason it's going to go down is because there is a decrease in demand for meta ads. If there's a decrease in demand, the price of ads is 100% liquid. It's completely set by supply and demand. So if demand decreases, then, and the supply of inventory stays the same, the price per ad on Facebook is going to go down. Now, the amazing thing about a Facebook or a Google is those dips, and you saw this with COVID very distinctly,

• 49:29Ben Thompson?

  where there's this drop for a couple of days, then it popped back up. You had all these companies who they know, if I acquire a customer for X amount of dollars, I can make this much in the long run. They immediately start buying. It's all like, and so they say, oh wow, the price is, is at a level where we can buy more ads. So they bring more demand into the market to respond to this, which brings the price back up. I kind of set you up like this, but I'm setting you up as a stand-in for, I think, a huge number of people commenting about this case that are missing a really fundamental fact, which is Facebook does not set ad prices. The reason ads on Facebook are expensive is because they're good ads that work and a lot of people want them. And you absolutely can go elsewhere. Go buy ads on Twitter. Go buy ads on Snapchat.

• 50:14Ben Thompson?

  The reason you buy them on Facebook. Because they work better and you can understand them and measure them. There is no market power in ad pricing. Period. It doesn't exist.

• 50:24Andrew Sharp?

  So the concern though is that in that scenario, you're basically forcing people to buy ads that are more effective and then fork over like a huge portion of their margins.

• 50:37Ben Thompson?

  The problem's competition. The problem like

• 50:39Andrew Sharp?

  But it's not, the problem is that ultimately the economy that you get when it's shaped like that is not optimal. That's my problem. It's not.

• 50:48Ben Thompson?

  Well, I thought, no, sorry. Can I pick on you directly?

• 50:51Andrew Sharp?

  Okay.

• 50:52Ben Thompson?

  I'm pre-warning you to not get your, your, your, uh.

• 50:57Andrew Sharp?

  I'm not worked up. I worked up about the Lakers and Wolves. I don't want to be sitting here talking about antitrust again.

• 51:04Ben Thompson?

  I know, I've heard, no, but, but I think this is actually really important. The, and this goes back to my bit about the Snapchat making people annoyed, even though that was theoretically what they wanted. People say they want competition. The problem with being someone online who needs to buy ads is not Facebook. It's that Facebook created perfect competition. And so you are competing with everyone in the world to serve ads on Facebook. They've made the market so large and so liquid that it feels unfair. But the unfairness is actually a function of perfect competition. Guess what? If you're a supplier, perfect competition sucks. Like that's the problem with newspapers online. They're competing with all writing on the internet.

• 51:47Ben Thompson?

  When you were the only newspaper in a city, life was great. When you started a small business and you were the only, guess what was really hard? Getting your stuff onto the shelf of a Best Buy or your stuff on the shelf of a Circuit City or getting, or opening up a storefront and acquiring customers. Facebook, wow, you can now access the whole world. You can reach everyone. The problem is that that privilege extends to every single person on earth. And, and people are ascribing to Facebook.

• 52:16Ben Thompson?

  The challenges of competing with the world. That's not market power. It's the exact opposite. It's creating perfect competition. And guess what? Perfect competition sucks.

• 52:26Andrew Sharp?

  And perfect competition, you could argue also ultimately sucks for consumers. Because if I know that.

• 52:34Ben Thompson?

  Yeah, you get a race to the bottom.

• 52:35Andrew Sharp?

  Exactly. And so that's the concern. When I talk about this not being optimal for the economy long term, the more we do business online, that's where it wouldn't bother me if somebody stepped in and said, these companies can only take X percentage of the sale that they are facilitating. There's no argument that most of these sales on Facebook wouldn't exist if not for Facebook connecting businesses with customers. But also, most of what you buy through Meta, whether it's Facebook or Instagram, is kinda crappy because the people selling on there aren't incentivized to build great products and try to use the Facebook funnel.

• 53:18Andrew Sharp?

  They're incentivized to keep their costs as low as possible and just churn out crap and connect with customers.

• 53:24Ben Thompson?

  To be clear, I completely disagree with you.

• 53:25Andrew Sharp?

  Okay.

• 53:25Ben Thompson?

  Wait, all right, sorry. I completely agree with you about all these bad outcomes.

• 53:32Ben Thompson?

  You're girding your loins.

• 53:33Andrew Sharp?

  I've been down that road before, it's fine.

• 53:36Ben Thompson?

  No, I agree with you. I just, the counterpoint is what you're asking for is basically, like you put price, you're asking for price controls. Like, you're going to get scarcity. You're encouraging corruption, ways to go around the line. It's not necessarily going to spur more quality. Like, again, so I'm being devil's, I'm acknowledging your position. There's a lot of problems with the internet. There's a lot of problems with perfect competition. There's also a lot of problems with the solution. But what it sounds like we can shake our hands on is the issue here is actually not antitrust. It's the exact opposite.

• 54:13Andrew Sharp?

  Yeah, exactly. And as I've come to understand the issues, that's been my personal evolution. You were talking about your evolution earlier. I just don't think antitrust solves this.

• 54:26Ben Thompson?

  My evolution has been that most people in DC are not like you. And so I need to.

• 54:32Andrew Sharp?

  Give up.

• 54:32Ben Thompson?

  I cannot walk them down a narrow road.

• 54:34Andrew Sharp?

  That's right. And then the one other note on regulation, you wrote about feeling queasy and kind of depressed when you get sucked into an Instagram reels wormhole. Is that right?

• 54:47Ben Thompson?

  Oh, it's terrible. It's awful. And like, number one, it's so addictive and you just waste so much time. And number two, the speed with which it goes to just the worst, just, it's, it's disgusting.

• 55:01Andrew Sharp?

  Yeah.

• 55:01Ben Thompson?

  It really, it really is.

• 55:02Andrew Sharp?

  I don't have that experience on Instagram reels, but boy, do I have that experience on X. It is really rough. Um, every now and then I get 30 minutes in, I'm like, what am I doing with my life?

• 55:14Ben Thompson?

  Oh, see, X is so bad, it can't keep my attention for longer than like two videos. I'm like, wait, why am I showing videos on that?

• 55:20Andrew Sharp?

  It's really, it's tough. And it's not all videos for me. I'm not a big video watcher generally, but the text alone, uh, can take me to that dark place that you described.

• 55:30Ben Thompson?

  Oh, for sure. For sure. For sure. Yeah. No, it, it's all, it's all, it's all terrible. It's, it's really not great.

• 55:36Andrew Sharp?

  And what came to mind when I was reading your experience and you cited somebody else who was talking about how degraded.

• 55:43Ben Thompson?

  Yeah. Karen, Karen X. Chang, who's incredible. Like you should look at her Instagram. She does this crazy stuff.

• 55:47Andrew Sharp?

  Well, I'll have to check it out.

• 55:48Ben Thompson?

  She's, yeah, I've, I've, I've linked to her years and years ago. Um, she kind of started doing this stuff around the same time I started Shekery. So, uh, I've, I feel a, a kidship with her. But, uh, but yeah, I thought her point was basically, it's a weird thing. It's too good, right? Like I, I'm, I'm consistently wasting time I don't want to spend. And that's good for the business up until the point, you know, people bail on the platform.

• 56:11Andrew Sharp?

  Yeah. Well, and I was reading that and thought about this tweet from Ross Duthat at the New York Times. I'm almost certainly pronouncing his last name wrong there, but in October of last year, he said, yes, of course, regulations and restrictions on building things naturally leads to fewer things being built. But historically, moral regulation is more likely to increase achievement via discipline and sublimation than to impede it. That's a very simple idea, not all that groundbreaking, but it feels like a principle to keep in mind as society deals with all this technology and the market compels various companies to race to the bottom.

• 56:53Andrew Sharp?

  The idea that all of it should be permanently unregulated feels a little psychotic now. And 25 to 30 years from now, when we look back at this era, after guardrails have been put in place, I would guess that it will look totally psychotic, that it was unregulated for as long as it was. And I don't know how you would possibly regulate it from a product standpoint, but it just feels like so many people have the experience that you described on Strategery on Tuesday, that there has to be some way to make it less depressing and less productivity killing. I don't know, but I just wanted to raise that.

• 57:32Ben Thompson?

  Well, I think you're not digging deep enough in some respects, because I would say there's two factors that have led us to where we are. You have this simulta-- maybe there's interaction effects between the two. There probably is, where they've driven them both. So number one, you have this overall decrease in friction. Things like this just weren't possible before. And I think defenders would say, oh, there was all these scary things about the TV and blah, blah, blah. I think people like you would say, yeah, the TV also sucked. It wasn't good or whatever it might be. But even beyond the TV, you still had to go to a room and sit down and turn it on. And now it's just there and it's with you all the time.

• 58:13Ben Thompson?

  And the decrease in friction makes possible a lot of things. And a lot of those things sound good in theory, until you realize you follow them all the way to their logical conclusion, right? Like, I think a lot of people who say they are pro-competition actually are anti-perfect competition because they realize it's not so great, right? Whereas being pro-competition in the context of moving from a muddled monopolistic framework to a somewhat more open one, oh, yeah, I'm pro-competition. But like, the internet pushes things all the way to its logical extreme. So that's number one. You have this lack of friction emerging. Number two is--

• 58:56Ben Thompson?

  This is a much more deep, again, even maybe even beyond the dorm, you know, high in the dorm room discussion. This is more of like a sitting in church sort of discussion. But when you have a decline of a shared sort of moral framework, you start having to legislate. And when you're, once you start legislating, you get all the problems that go with it, right? Like the, the ideal society is one in which people self-police, where they, they do, they don't do things that's not the right thing to do. It's a society where Mark Zuckerberg is not criticized for, say, we're going to decrease videos because it doesn't, we want to connect people, but actually that's praise, right?

• 59:39Ben Thompson?

  And, and, and I always point to, this is sort of a,

• 59:43Andrew Sharp?

  Well, was he criticized for that? Or was he penalized by the market when he did that?

• 59:49Ben Thompson?

  Well, he was criticized by stock analysts.

• 59:53Andrew Sharp?

  And the people who might have criticized him hated Facebook so much that they weren't willing to acknowledge any of his good faith in that.

• 59:59Ben Thompson?

  Well, all the people who are mad about the monopoly right now, like that, that, that, again, that's a pretty clear manifestation of monopoly power, like, like that, that, that they, that they could even entertain doing that. And, you know, I always point to, because this is more of a traditional, like, right, right wing conservative argument, like, it sounds, again, this is the argument that I make that sounds the most like my dad, which really sort of concerns me.

• 1:00:20Andrew Sharp?

  Always a red flag for any of us.

• 1:00:23Ben Thompson?

  Exactly. I point to a traditional right wing constituency, which is sort of like, I think, Wall Street in the 80s is, is I think, an area where this, this became prevalent, this idea that as long as it's not illegal, it's right, where, where legality became substituted for right and wrong. And, and that is a very dangerous place to be, because that is asking for either depravity.

• 1:00:52Ben Thompson?

  Or way more red tape. And, and the reality is, is the, it's the organic nature of a collective self policing that, that gives like, this is my, you know, lets you have liberty. Because you don't have to legislate everything. You can strictly enforce the laws that you do have because there's not that many of them. And, and most of the problems of society are handled by the citizens themselves. And we, we, and even in your, your call, we're gonna need regulation for that is implicit a decline, a certain civilizational decline that I think is, that I think is unfortunate. And again, it's probably tied in part and parcel with this increase in friction and

• 1:01:37Ben Thompson?

  all these sorts of things. And, um, and yeah, so I, I don't know what we do about that. It's just, it's, it is sort of a bummer.

• 1:01:45Andrew Sharp?

  A trade off to be mindful of if there were ever regulation.

• 1:01:48Ben Thompson?

  Well, it, it's, it's, this is arguably the core of the argument of why technology leads to totalitarianism is it enables a lot of bad behaviors and also gives the tools which citizens start demanding be used to stop the bad behaviors. And, you know, China is probably a good manifestation of this, like, like with, with the great firewall and with all the surveillance and things along those side. And as all this exists, a lot of people in the US are like, yeah, they've figured out industrial policy and guess what? They don't let people's, you know, play, they crack down on video games and like all the, like these, these various bits and pieces.

• 1:02:29Ben Thompson?

  And if people make all these disparate observations without appreciating the extent to which they're actually all deeply involved.

• 1:02:38Andrew Sharp?

  Well, and I look at China and I'm like, well, they may have some good ideas on how the apps are used.

• 1:02:44Ben Thompson?

  It's like, imagine if China, imagine if China, if we could get everything they have.

• 1:02:49Andrew Sharp?

  Get this without that.

• 1:02:50Ben Thompson?

  With freedom. And it's like, I'm not sure, not sure all possible.

• 1:02:54Andrew Sharp?

  Yeah, I don't know. I think there's probably some middle ground between the US today and China over the last 25 years, but.

• 1:03:03Ben Thompson?

  Yeah, but no, no. Oh, there's massive ground because we've got, we've completely bifurcated. Like, people, friction was an unseeable, yet very effective wall on a lot of bad behavior and a lot of good behavior, right? We, we look at the good part, say, wow, without friction, we can have a podcast. I'm sitting in Taipei, you're sitting in Washington DC, and we can reach the whole world. That's amazing. And also, it unleashed a lot of stuff we don't like. We can pull videos from across the entire network and serve people slop, and they will just sit there and mindlessly consume it and feel crappy about themselves and do the exact same thing tomorrow.

• 1:03:42Andrew Sharp?

  Let's start with just banning the phones in school. I don't know what else we can regulate over the next 20 years or so. I am pretty confident that one day we're gonna look back and be like, whoa, nobody was ready for that. And I'm glad we did this, this, and this to help society cope with this technology. But, uh, final notes here. You mentioned tech leading to totalitarianism. Let's close with this email on AirPods. Adam says, Ben and Andrew, regarding the praise to Tim Cook for saving Andrew's iPhone by removing the headphone jack, you don't have to sacrifice ports for waterproofing, which I believe you said on Monday, Ben. I've been an Android user since the Galaxy S5 came

• 1:04:25Andrew Sharp?

  out years ago, and that phone not only had a user replaceable battery, key charging, and.

• 1:04:32Ben Thompson?

  I think it's key.

• 1:04:33Andrew Sharp?

  Key charging, I should know that from Sharp China, and a headphone jack, but it was fully waterproof as well. As evidence, I can offer a personal anecdote. I was out hiking with my wife, and while taking pictures, I dropped my phone from the top of the rock. It bounced several times, landed face down in the creek below me. I climbed down, retrieved the phone from the water, and resumed taking pictures. The area was filled with iPhone users, and they were all shocked that my phone wasn't destroyed. It can be done, folks. It's just more profitable to sell you glass phones with fewer features. Note, Samsung is guilty of this too. So don't think I'm just hating on iPhones.

• 1:05:13Andrew Sharp?

  So there you go, Ben. I recant my praise to Tim Cook for saving the iPhone earlier in the week, sitting there on his mountain of AirPods cash, grinning.

• 1:05:22Ben Thompson?

  It's not just glass. It's thinner. It's like better battery life. Like, anything that is modular is going to diminish performance. So like you have a replaceable battery, for example, it's you're gonna have much less battery life and you're going to have a larger phone. Like, like, nothing is for free. These are all trade-offs. Now, you might be willing to make that trade-off and be in wish that Apple offered that option, but all this stuff does have trade-offs. I just looked up the S5. It's a chunky boy.

• 1:05:52Andrew Sharp?

  I'm okay with a chunky boy, you know? I never understand the obsession with a thinner cellphone. But, final note, Matt says, "Andrew, longtime listener, first-time caller, big fan, I love the mispronunciation call-outs. I feel it's a badge of honor in a certain way when a person mispronounces a word in a way that makes clear they've read it more times than they've heard it. Nerd street cred." Just want to say, that is the proper way to understand us mispronouncing words on this show. We're cool nerds. We're not idiots that can't pronounce words correctly. Thank you, Matt, for getting it.

• 1:06:32Ben Thompson?

  I mean, everyone says this and brings it up, but I'm not really, I don't embrace, I don't know, I have mixed feelings about the word nerd.

• 1:06:39Andrew Sharp?

  You just want to be a cool guy who is too cool to ever learn how to pronounce words correctly?

• 1:06:45Ben Thompson?

  I've surpassed the need for pronunciation as a podcaster. I don't know. I don't know what I think. I just think I have mixed feelings.

• 1:06:52Andrew Sharp?

  That's for somebody else. Well, he wanted to point this out, and, look, Matt, you are not the only person who wanted to point this out. We got a lot of emails about this. At 5615, on Monday's podcast, Andrew says, "Solder, but here in America, it's pronounced solder. Ben is not the only one mangling the language." So there you go. I have been reading it as solder for years and years, and now I know that when Intel was out there in the lab, Fairchild Semiconductor...

• 1:07:26Andrew Sharp?

  Everybody was soldering. They weren't soldering. Is that correct?

• 1:07:30Ben Thompson?

  Uh, yes. Well, there's also this, uh, this is actually part of like the, the, the chip control skirting. Like there's, there's this company that they, they have like a 45 nanometer chip, like a super old one that no one uses on a board that's loaded with like a hundred gigabytes of high bandwidth memory. And then they sell it into China and it's because it's such an underpowered chip, it doesn't violate any chip controls. And now it's in China and they desolder the high bandwidth memory from the chip and then they can use it sort of somewhere else. So, uh, you could solder well or you could solder poorly is, uh, is, is also a thing. I like the I'm beyond pronunciation take. Uh, it's really arrogant. It's just, uh, it's,

• 1:08:13Ben Thompson?

  it's very distasteful. Um, but yeah.

• 1:08:17Andrew Sharp?

  I think that was our, that was our official stance on however Nadir is correctly pronounced is we were beyond pronouncing it correctly.

• 1:08:26Ben Thompson?

  Yeah. Well, I mean, I have to lean into it because I've long used the joke that I have a site that grows via word of mouth, named a word that nobody can pronounce. And, um, so I just have to lean into the, that, that level of accidental arrogance, if you will. Um, I'm beyond pronunciation.

• 1:08:45Andrew Sharp?

  Well, thank you because now I too have to explain stratechery, stratechery to all sorts of people in my life as well. Um, on that note, we will be back next week and, uh, we will keep it rolling. Ben, please pull for my T Wolves on Saturday night. Anthony Edwards, Dante DiVincenzo and Andrew Sharp. We're all going to shock the world together over the next couple of weeks against the Lakers.

• 1:09:13Ben Thompson?

  Good luck.

• 1:09:14Andrew Sharp?

  Here we go.