The tech trials keep coming

Today on the flagship podcast of anti-steering provisions: 02:57 - The Verge's David Pierce and Makena Kelly discuss Epic v. Google, a trial about the future of app stores. The Epic v. Google trial may come down to simple v. complicated Epic v. Google: a battle over Fortnite fees goes to court 28:49 - Liz Lopatto joins the show to detail her experience covering the Sam Bankman-Fried trial from start to finish. FTX founder Sam Bankman-Fried is guilty of fraud Sam Bankman-Fried gambled on a trial and his parents lost 58:27 - Richard Lawler helps answer this week's Vergecast Hotline question. Disney’s new vision for ESPN might include part ownership by the NBA, NFL Disney finally revealed how many billions ESPN pulls in. Email us at [email protected] or leave a voicemail at 866-VERGE11, we love hearing from you. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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

• 0:02David Pierce?

  Welcome to The Vergecast, the flagship podcast of anti-steering provisions. I'm your friend David Pierce and I am currently getting ready to travel. It's 6:47 PM on Monday night. I have a flight Tuesday morning. We're recording all of this a little bit early as a result. I'm going to San Francisco and what that means is I'm about to spend five or so hours on a plane. So I'm doing, of course, what you always have to do, which is bring 45 different devices to use on the plane. I have an iPad, I have a Switch, I have my laptop, I have my phone. I have another iPad that I'm just now realizing I don't need to bring. I have a Kindle, did I mention my Kindle? All of that is full of content. I'm downloading stuff, I'm charging everything.

• 0:46David Pierce?

  I have Super Mario Wonder to play on the plane, which is the only thing I'm going to do for the whole flight. And I know that already, and yet I'm doing all of this other work. I also have to charge all my gadgets. I have to make sure I have all of the cables that I need, which is a lot easier than it used to be. But there's always still one stray lightning cable or micro USB thing I have to bring. It's just a lot. And it turns out that whenever I travel, half the stuff in my bag is gadgets and the other half is just like one pair of jeans, no matter how long I'm traveling for. Listen, this is not the life anyone should live, but it's the one I've signed up for. So here we go. Anyway, we have an awesome show coming up for you today. We are going to talk almost entirely about trials. Because like we've been talking about on this show, all fall.

• 1:30David Pierce?

  We're in the midst of a couple of really interesting, really important, potentially really consequential things happening in court around the tech industry. Today, we're going to talk about two in particular. Epic v. Google, the latest antitrust trial against Google. Not to be confused with the other antitrust trial that's happening against Google. And then we're going to talk about SBF. The trial of Sam Bankman-Fried is finally over. He was convicted and we're going to talk about how we got there and what it means going forward. All that is coming up in just a sec. But first, I have to find the charger for my Kindle because I have two Kindles with two different chargers and I'm just going to bring whichever one is least dead. There's just a lot going on. This is The Vergecast. We'll be right back.

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• 3:17David Pierce?

  Welcome back. I have like 65 different things plugged in right now. Two different devices are doing software updates, and I think I'm downloading like half of Netflix to my iPad. I am ready for this flight, y'all. All right, let's get into the trials. The first one I want to talk about today is Epic v. Google, which is a trial fundamentally about the future of app stores. Epic says, basically, that Google charging a 30% commission on in-app purchases is anti-competitive, and it wants to blow up the app store model altogether. Google says, you know, no thanks to all of that. If this is ringing déjà vu bells in your brain, there is a good reason for that. In 2021, Epic went to trial against Apple alleging pretty much the exact same stuff. This trial has a lot in common with that one,

• 4:02David Pierce?

  but also some important differences. And there's a decent chance that we're going to get a different kind of outcome here. The trial is already a couple of days old as you're hearing this. We're covering it really closely. Sean Hollister is in the courtroom, and The Verge's Makena Kelly is here now to help me figure out what to make of all of it. Hi, McKenna. Hi. I don't know where to start with this trial. I was going back and trying to figure out where Where do we need to start to catch people up on what is going on between Epic and Google? And I feel like to some extent, the answer is we have to go all the way back to the beginning of Epic versus everybody, right? Which is like 2020, mid pandemic, everybody's out of their minds. Life is pure chaos and Epic just sort of decides to pull the ripcord and pick a giant fight with the two biggest companies in tech all at once.

• 4:46David Pierce?

  Can you just give us like the 60 second backstory, kind of starting there and what happened between these companies?

• 4:53Speaker 03

  Sure. So what happened in 2020, like you're describing is Epic Games, the Fortnite maker, decided that they were going to just say, screw you to Google and Apple in their app stores.

• 5:05David Pierce?

  That was like the official plan, by the way. That was not, that's not really editorializing. Like that is what they were attempting to do.

• 5:11Speaker 03

  It totally was. And Sweeney, I mean, that is so like Tim Sweeney, like to do anyways. And so he said, screw you. We are going to allow people to make in-app purchases in our game without it going through the app stores and being subject to this like 15 to 30% tax. And immediately, Google and Apple pulled Fortnite from their app stores. And so as a result, Epic Games sued them for that, alleging that they hold these monopolies in the app store markets. And that these, you know, 30% taxes are unlawful and should be challenged. And so we're three years from that and the Google one is just going to trial right now.

• 5:51David Pierce?

  Yeah, it's been, it's been a long three years. So, and then in between we had Epic versus Apple, which is I think not exactly the same thing as the trial we're about to have. And we should talk about the differences, but in a lot of ways, the bones of the trial are very similar. One side is the app store and one side is Epic trying to say the app store is illegal. And I would say Epic didn't completely lose the Apple trial. It won the sort of anti-steering provision, which says you can now link to other ways to make payments. But in general, its fight against app store monopolies pretty much came up short. So if I'm Epic, why on earth do I keep picking this fight after more or less losing it the first time?

• 6:31Speaker 03

  Well, to look at Tim Sweeney, I think he really does like to tick these people off. He's kind of a hard-headed CEO. I don't think he's worried about losing face in these at all, to be honest with you. And so for them, these like taxes that these app stores put on software requires them to raise, well, what they'll say is it requires them to raise prices for consumers. And it makes whatever it is, V bucks or whatever, more expensive in Fortnite. It makes it more expensive for you to, I don't know, get Tinder Gold or whatever they're calling it nowadays and all that kind of stuff. So they continue to push this because they don't want to give any of these profits, any of this money to Apple or Google. They're just operating an app store in their opinion and it should

• 7:16Speaker 03

  be, you know, free for people to access and use as an open marketplace.

• 7:21David Pierce?

  What's your sense of what's different about this case? Sort of at a very high level, the two sides of the fight, like we were saying, are more or less the same thing. Is there anything different about Google as an opponent, as Apple as opponent a couple of years ago?

• 7:35Speaker 03

  Sure. So, I mean, looking at Google, the Play Store is so huge.

• 7:41David Pierce?

  Yeah.

• 7:42Speaker 03

  As much as we talk about, you know, iPhones being like the elite whatever device to be using, more people use Android. Like, it really is just everywhere. And so I think that lends itself more to Epic's argument here. And then also, we already had the ruling and the anti-steering provision, and that's in appeals right now with having to be able to link out. So another decision similar to that would really offer some more precedent in whatever appeal comes from the Apple case as well.

• 8:10David Pierce?

  Yeah, the Play Store thing is so interesting to me because I think if I'm remembering back, Apple basically tried to make a security argument about iOS, that like if you allow people to sideload apps on their phone, bad things will happen. People will install malware, all kinds of awful things will happen to your phone. And essentially, users and developers cannot be trusted to do things outside of the App Store. And it seems like Google is making a similar case in this case, which is sort of funny because the Play Store is like notoriously kind of a disaster. But also, Google is slightly different because like you can kind of get around the Play Store. Like, you can sort of sideload apps on Android. The Samsung Store exists, which

• 8:52David Pierce?

  seems like a really weird sort of wrench in this trial. So even at a platform level, it just seems to me that the case against Google is stronger because the Play Store, like you said, is so big and so important on this platform, but also is so much sort of messier and easier to get around than like the unbelievably tight fist that Apple has on the App Store. Does that feel different to you going into this?

• 9:18Speaker 03

  Oh, yeah. I mean, because it's easier. You can just download another App Store, you know, or use like the Samsung Play Store, or be able to. It's so much easier. People talk about customization and having more control of your devices. Google has let you do that for a very long time on Android. And so people do, of course, have more options. And I, you know, it'll be interesting to see how that plays out.

• 9:38David Pierce?

  And this goes back to, I think, one of the things we learned from the Apple case is so much of this is about the fight we end up having, which is part of the thing I think this is that's going to be so interesting about this case is like, every time you and I talk, I feel like we end up talking about market definitions, because all anybody ever wants to talk about in these cases is market definitions, because the market you define is so important. And it was some like, it was the last time there were questions about like, is it mobile apps? Is it games? And we ended up talking about the market was like, mobile digital transactions or something goofy. And in this case, it feels like we're about to just re-litigate all the same stuff, right? Like, what is it that we're actually fighting about here? And I wonder if I'm Epic, if I've learned anything from that first

• 10:20David Pierce?

  fight that is going to make them do a better job in this case.

• 10:25Speaker 03

  Yeah. And I mean, when you talk about continuing to pick this fight, last week, Match.com and, you know, other plaintiffs on this case dropped out, seemingly, you know, settling with Apple. It's interesting how Tim Sweeney and Epic Games is continuing to pursue this, especially with whatever settlements, you know, Google is trying to make behind closed doors right now.

• 10:45David Pierce?

  Yeah. What do you make of the Match thing? They were the other company that has been really loud in this fight. I feel like it's been Epic, Spotify, and Match have been the three companies sort of most aggressively fighting these App Store monopolies. And Match in particular seems to have just kind of given up the fight. What do you make of that?

• 11:01Speaker 03

  Yeah, I think this case, like you're saying, is going to be a bit more challenging for these companies to take on. And I'm sure, you know, whatever agreement they were able to get from Google on this was enough to satisfy, you know, their concerns with this. And that kind of, you know, lends to the question of what is Epic Games? What is their opening argument going to look like this week? What is it that they're, you know, continuing to push and to continue to fight for that they probably couldn't have gotten, you know, in a settlement? And it's probably that challenging that monopoly.

• 11:29David Pierce?

  Do you believe Tim Sweeney when he makes these sort of grand pronouncements? I mean, I think one way to look at this is just two very greedy companies fighting over money, right? Like, big company wants to keep its money, other big company wants to take some. Who wins? Like, the Occam's razor version of this argument is that. But the flip side of this is that Tim Sweeney has said resolutely, and for years at this point, that this is bigger than Epic, this is bigger than money, this is about like, principles and software development, and who gets to win in society. And normally, I would find that to be nonsense. But at this point, Tim Sweeney seems maybe more likely than most to not be full of it when he says that. I don't know. What do you think?

• 12:11Speaker 03

  Yeah, it's hard to read into the hearts and minds of people like this. But if I was Tim Sweeney, and I brought this case, these cases, three years ago, even if I didn't buy it in the first place, I definitely had convinced myself by now. I have internalized these arguments in a way that I literally cannot give them up after being so loud, and so like, at the forefront of this issue for so long.

• 12:34David Pierce?

  Yeah, that is fair. And I think at some point, you've said it enough times that you just kind of have to keep saying it. Like, at some point, if he just testifies, and he's like, "Look, I just want to keep our 30%. I want more money for my shareholders." Like, the whole courtroom is just going to start booing at him. And it's, he can't, he can't do that now.

• 12:49Speaker 03

  Yeah, the thing about this case that I found really interesting, back when it was first announced, and we had that big, like, Apple 1984 Epic Games thing, is that for the past, you know, how many years, I have been waiting for the tech policy arguments that were having an antitrust, content moderation, or whatever, to have its like, net neutrality moment, like, it's 2015 net neutrality, 2017 net neutrality moment.

• 13:13Speaker 03

  And when I saw that video and I thought about, you know, how big Fortnite was and think about the player base and the people behind it, I really, I really was like, okay, if it's gonna happen, you know, in any case, in antitrust, it's gonna happen right now. And it didn't necessarily happen. I was waiting to see, because you know, if you remember like the old net neutrality stuff, like Google's website, you know, Reddit's website was plastered with all this stuff. And just to have like, I mean, Epic Games, you know, Fortnite, the biggest game, you know, that so many young people are playing. I was really hoping that we were going to see that. And it just, it never grew to that size. It makes me think about, you know, what would happen like if we actually did have a bunch of like, young kids and teenagers

• 13:55Speaker 03

  and young people like riled up over App Store markets and like, how different this would look right now. But yeah, I, I'm always wait, I'm always looking for that kind of, you know, emergence of like this as like a, I don't know, like a public protest movement.

• 14:08David Pierce?

  Yeah, I mean, it's really interesting because I think the thing in recent times that has gotten the closest to that was the, the like would be TikTok ban. Uh, in terms of like real sort of grassroots rage among young people, that's the closest one I've seen is a lot of people fighting about the TikTok ban and for creators and for free expression and all this stuff. But the antitrust thing is really interesting to me because it feels like this right now should be the moment. You have the US versus Google antitrust trial ongoing, like as we speak right now, you have Epic versus Google, another antitrust trial starting right now. You have this suit filed against Amazon that is increasingly, the more we learn about it, the weirder and sketchier and more problematic and all consuming

• 14:52David Pierce?

  it seems. This should be the moment where antitrust becomes this like big mainstream, everybody's talking about it issue. I certainly don't see that like in the world. Like the people I talk to are not interested in antitrust legislation at this moment. But also, I don't even necessarily get the sense that there's a ton of energy like among politicians and in Washington right now about this. What is going on here?

• 15:15Speaker 03

  Yeah, so when I'm going back to 2019, 2020, in the heat of that election cycle, when we were in the heat of the Democratic primary, and we had Elizabeth Warren and whoever putting out these giant antitrust packages saying that big tech needs to be broken up. All of a sudden, we have people who are taking the thoughts of like Lena Khan and Tim Wu and mainstreaming it in a way that was getting people really, really excited. And as legislation got introduced, and as that continued to move in Congress, I think there was one bill that got passed, and it was just like a merger filing fee thing. And so it wasn't that major.

• 15:54David Pierce?

  Progress.

• 15:55Speaker 03

  And then a lot of the conversations around this has been, okay, well, we will wait and see what the courts do, you know, to see what legislation is necessary for this. You know, you would think that people would be paying maybe a bit more closer attention, you know, to this and maybe talking about it a bit more. But it seems like people are just kind of getting ready to see what happens and what steps that they should take. I know I've been trying to check in, and there's like bills, like the Open Apps Market Act, and that would open up the marketplaces. This was something that came out of, you know, all of these app store suits. There was that piece of legislation. It didn't really go anywhere. I've heard some stuff about them reworking that and then reintroducing it at some point in time. But again, maybe they're waiting to see what happens in the

• 16:38Speaker 03

  Google case. It's really unclear to me right now.

• 16:41David Pierce?

  Yeah, it does seem like there was this underlying argument for a while that Lena Khan in particular was ready to lose some of these antitrust fights in order to make broader, longer term legislative changes, that it's like you need a different kind of precedent and a different kind of case if we're going to start to make Congress make laws in order to win these fights that the FTC can't win based on like 100 year old law that had nothing to do with tech companies. And so far, it doesn't seem to have happened. I understand that it's a long game. And I feel like one thing you've drilled into my head on this show over and over is that there's just only so much time and energy in Congress to do things and getting anything in tech to be the most important thing at the moment in order for

• 17:25David Pierce?

  People to actually get something done takes a lot of work. Like, I was thinking about this over this weekend because it was daylight saving time. And there was the, was it the Sunshine Protection Act?

• 17:33Speaker 03

  Every year.

• 17:34David Pierce?

  Yeah, like, and as far as I can tell, no one is against this. It's just like, no one cares enough to bring it up in Congress and do something about it, even though they would be a national hero and they should do something about it. This feels in a certain way like kind of the same thing. And more and more people, I think, in politics and in the government, agree that something should be done and that changes need to be made. But even right now, there's so much more heat on like AI regulation, that it just feels like, yet again, we've bumped, what do we do about big tech, down the pecking order of tech issues? And it just, it feels like, as long as it is never the most interesting thing, which, if it's not right now, I don't know how it's ever gonna be. It's hard to see what happens there in the immediate future.

• 18:14Speaker 03

  Yeah, and I do think that there might be a turning point. I was listening to this, funny enough, AI hearing in the House a couple of weeks ago. And in it, Republicans and Democrats were both talking about, well, okay, AI regulation, we need that. But how do we even start thinking about that without a nationwide federal privacy framework? You know, some lawmakers are reconsidering, like, okay, maybe we need to go back to basics. Things are getting too complicated. We have too many issues. Why don't we attack something that will have maybe the best outcome for our consumers and for Americans by like going back and looking at an American, you know, a federal data privacy law? And then maybe going back and like rethinking antitrust more holistically,

• 18:57Speaker 03

  instead of doing these, you know, these bills that just attack little pieces of this, rather than just going after AI. Like Chuck Schumer and all these AI summits, they've been targeting different things. So there's been like innovation ones and work, you know, labor and workforce ones. And it just, that almost feels like it's making the issue like too complicated at the same time. Like, you're trying to teach lawmakers, you know, about AI, and then you're just completely inundating them with all this information. And like, how do you make sense of that and turn, you know, legislation into that? And like, decide exactly what to focus on? Of course, when it comes to AI regulation, then it seems like OpenAI and all the companies are a bit more concerned with Congress going after election-focused stuff.

• 19:42Speaker 03

  And like political ads, maybe, but at some point, and I think we're starting to see it now, picking these little fights is not going to be enough. They're going to have to decide to like, come back, lay the foundation, and then maybe think about those things later.

• 19:56David Pierce?

  I totally agree with that, but it does seem like there is a certain element of the perfect being the enemy of the good in all of that, where it feels like with so many of these conversations, I think data privacy probably chief among them. We've had this debate over and over, and it just seems like we land in this place where it's like, well, if you can't solve the whole problem, we don't have anything. And so we've gotten to this point where the only solution is just like, we have to rewrite the American Constitution to explicitly reference Apple and Google. It's like, well, we're not, that's not going to happen. And so nothing happens. And it just feels like at some point, one of the things I have thought over the last couple of years is that maybe some of these antitrust fights might be a thing where you can actually pick one chunk of what's going on and do something about it.

• 20:40David Pierce?

  And part of me, like, one of the reasons I've been so interested in this US versus Google search defaults thing is like, that is a finite sized thing that you could regulate, right? And I think like Benedict Evans, the venture capitalist, said this to me years ago, and I think he's right, that it's like, we don't regulate cars. We regulate every single thing inside of a car, and that's how we regulate cars. His case was that's how we should regulate privacy and the internet. We shouldn't regulate the internet. We should regulate all of the things that happen piece by piece, because regulating the internet or technology is impossible and it's too big. And I think with all this antitrust stuff, and I think the epic Apple thing is a good example, because anti-steering is another tiny sort of finite piece that you can break off and make decisions about that has real meaningful change for the industry.

• 21:26David Pierce?

  And I guess the question is like, can you build up a bunch of those over time? Or are we eventually going to need this sort of one big giant sweeping something that just like blows everything up and then we see what happens? Which tends to be like every 25 years, it seems like we get one of those from the government.

• 21:41Speaker 03

  Well, also, when it comes to enforcement, I think people have been waiting for that, too. Like, I think that's why we're waiting on legislation. That's why we're waiting on a lot of things. The problem with enforcement. Is that our enforcers don't have that many resources.

• 21:53David Pierce?

  Yeah, they're on like Windows 98 computers trying to figure this out.

• 21:56Speaker 03

  Exactly. So that's one problem. And then even if they do go ahead and win a case, that is one company. You know, look at, I like to think about all the stuff Facebook had to agree to, you know, after Cambridge Analytica. There was some AI stuff in there, if I remember correctly, and all this kind of stuff in this, you know, agreement with the FTC. The same thing with Twitter. Twitter with the security and safety practices, the reason why the FTC is investigating Elon Musk's Twitter right now is because of this 2011 consent decree with the agency, you know, about these things. And it gives them the leverage and the authority to go ahead and reinvestigate. But of course, you know, it's these specific agreements with specific companies.

• 22:37Speaker 03

  And it's a lot harder, right, to do something new or like to continue and like investigate everyone. You have to kind of target the people who you feel are the worst actors and then fix things there. But it, you know, it's, it's one company, it's maybe setting a standard and like a precedent for how other companies can act. But they're not going to be, you know, breaking the law if they act similarly later.

• 23:00David Pierce?

  Yeah, that's, that's very fair. One of the things I think is different about a lot of these fights and Epic versus Google is that this is a jury trial, which strikes me as very different from a lot of the stuff that we've seen, which is not essentially the government arguing one side and the company arguing another side and a judge having to decide who's right. Like, that's a, that's a thing we've come to understand. There have been a lot of those. This is just going to be like a dozen random people off the street who are deciding what's going on here. Is, is that potentially as different a thing as it seems like it might be to me in terms of how this case might go?

• 23:33Speaker 03

  Yeah, I mean, like you're saying, antitrust trials are typically bench trials. Like, it is the judge making the decision. And I can't remember really anything else in recent history where we've seen this with people being forced to reckon with.

• 23:48Speaker 03

  Like, Congress can't even make sense of like, old antitrust laws and how we should apply them to technology companies right now. And hell, I have issues with it sometimes, too. I'm just like, having faith that, you know, these attorneys make the proper case, and these folks can make the right decision. But again, like, your average person is not stupid, either. I think what Epic really wants here is to not get into the weeds on the numbers, and, you know, the sheer size and all of these, you know, very like, granular arguments we can have. And they probably want to see, you know, the grander argument, the bigger argument, how these app markets should operate, and what these, you know, taxes and fees and all these things mean, and how, you know, the average person, like

• 24:33Speaker 03

  me and you, the average consumer, wants to interact with these, you know, platforms day in and day out. And I think that lends itself better to this, I think it's like a 10-person, yeah, jury, that will start hearing these arguments on Monday.

• 24:46David Pierce?

  It seems to me, and this is based on nothing but just the gut feeling that I'm having, that the fact that it's a jury trial would stand to benefit Epic a lot more than it would stand to benefit Google. Because I feel like, if I'm the prosecutor, all I have to do now is tell a convincing story, basically about David and Goliath, right? About a gigantic tech company that is preventing not just me, but I'm fighting on behalf of every small developer everywhere who is having to essentially give a portion of our earnings to the king, right? Like, that is borderline un-American. That's how we have to do this. And I feel like, again, I think you're right, we're going to get away from a lot of the technicalities. And like, being in the courtroom for USP Google, it is all about technicalities.

• 25:30David Pierce?

  Like, all they talk about is deal structure, and revenue sharing, and the like, tiny little mechanical economic details of how this stuff works. I would assume, and it's totally possible I end up being wrong, that this ends up being a much less technical trial, because what they have to do, like you were saying, is essentially tell a story to a jury, that is going to have to then apply it to 100-year-old precedent that arguably doesn't make any sense in the current context. And I assume, whatever way this goes, it is going to be absolutely ripe for appeal, and everything's going to get weird, even more so than most of these cases, because it's a jury trial. But it just seems like we're going to get much more feelings and sort of grand storytelling, as opposed to like, a parade of expert witnesses telling you how contracts work.

• 26:13Speaker 03

  Right. I mean, it makes the most sense. If I was Epic's attorney right now, that would be my, my approach is focus more on storytelling than like overwhelming people with these ridiculous, you know, numbers and economic data and everything.

• 26:28David Pierce?

  Yeah, it's gonna be really interesting to see. I'm sort of sad we're not gonna get as much access to this one as we did Epic v. Apple, which you could like, because it was COVID, it was ironically more publicly available. This one, we're back to much more closed down, but Sean Hollister is gonna be in the courtroom, so we're gonna see a bunch of stuff. What are you looking for in this one? Like, is there, are we looking to see if Epic can get another version of kind of the small wins it got in Apple? Is this gonna be a much bigger win or lose? Like, how would you sort of handicap the odds here?

• 26:59Speaker 03

  Yeah, I'd want to first hear the arguments on like you were bringing up earlier about the Samsung Store, the ability to load apps and stuff on outside of the Play Store. I'm curious how those arguments are made, what we hear from the judge, you know, and the, you know, the mind reading of the jury on that of reporters in the room. And I think that will really color what we can expect. Because if we're right here and we're talking about, you know, something that is focused more on storytelling than, you know, this like granular evidence, I think that is where we are going to get the best idea of what, you know, this end result will look like.

• 27:36David Pierce?

  All right. Sean Hollister is gonna be in the courtroom, so we'll grab him on this show at some point in the next, I think this is supposed to be five weeks is the plan for this one?

• 27:43Speaker 03

  Yeah, it's supposed to end right before Christmas.

• 27:46David Pierce?

  Okay, well, God help us all for the next five weeks, but yeah, we'll check back in and keep it locked on the site. Sean's gonna be covering it for us. McKenna, thank you as always.

• 27:55Speaker 03

  Yeah, no problem.

• 27:57David Pierce?

  All right, we gotta take a break, and then we will be back to talk Sam Bankman-Fried. We'll be right back.

• 28:06Speaker 01

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• 29:09David Pierce?

  All right, we're back. Last week, after a truly wild trial that lasted more than a month and a saga in general that lasted almost exactly to the day, a year, FTX founder Sam Bankman-Fried was found guilty on seven counts, which included wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. The short version of a really long story is that SBF was accused and convicted of using FTX's customer deposits to shore up his crypto trading firm called Alameda Research. Throughout the whole trial, his former colleagues testified that FTX falsified numbers, gave Alameda special privileges, including to lose billions of dollars, and that he lied to the public and users about where their money was.

• 29:52David Pierce?

  Prosecutors said FTX was a fraud from the start, and a jury agreed. In a certain sense, the SBF story is now over. Or at least, almost over, given that he's set to be sentenced in March. And The Verge's Liz Lopatto has watched it all go down. She was in the courtroom for the entire trial, watching the whole thing unravel. So I brought her in to see what she saw, how it felt, and what happens next. Liz, hello.

• 30:15Speaker 04

  Hi David, how's it going?

• 30:16David Pierce?

  You survived. I'm so proud of you.

• 30:18Speaker 04

  I made it.

• 30:20David Pierce?

  How do you, how is your like headspace after, what, six weeks of sitting in a courtroom?

• 30:24Speaker 04

  Oh, man. Well, I'm very ready to do something else.

• 30:29David Pierce?

  Fair.

• 30:29Speaker 04

  But it was intense. I mean, it was like a, you know, I wasn't just sitting in the courtroom. I was also standing outside the courtroom at the wee hours of the morning, many mornings.

• 30:39David Pierce?

  Yeah.

• 30:39Speaker 04

  So I, I'm excited to have a life again because this was like sort of an aesthetic experience for about a month.

• 30:45David Pierce?

  Yeah, I do actually want to talk about the sort of spectacle of this because I remember one of the things we talked about, I think on the show before it started, was how much kind of outside interest there was going to be. Like we, it was obviously going to be a very high profile trial, but the question of like, are there going to be crypto fanboys outside the courtroom every morning? Or like, are there going to be, there were like the Elizabeth Holmes cosplayers at the Theranos trial. Are we going to get some of that? The only bit of story that I heard was that we literally had to hire a line sitter for you at one point because the line for the Sam bits of testimony was so early that it was like untenable for you to be there early enough to get in line. So like, was it like that the whole trial? How crazy did it get?

• 31:29Speaker 04

  So the Sam testimony was the peak, especially the Sam cross. And the way that line sitter thing worked was like, I got in line on Sunday night for Monday. Like I got in line at like, I don't know, 11:45 on Sunday night.

• 31:45David Pierce?

  Good lord.

• 31:46Speaker 04

  Because I knew there was going to be a lot of interest and I was, to be clear, like, fourth.

• 31:51David Pierce?

  Wow.

• 31:52Speaker 04

  Yeah. So the first person who had gotten there had gotten there around 10:30. And, you know, the day ended, I was like so tired, I felt drunk and I still had a story to write. And I remember going in to, like, because nobody's up yet. Like, we're going into the building, it's 7:30, the editors haven't logged on. And I was just texting them like, I can't do this Tuesday. Like Tuesday, you know, I'm gonna, I'm gonna write and then I, I don't have enough time to like have dinner and sleep.

• 32:18David Pierce?

  Because you would literally have to walk out of the courtroom, file your story and then walk back to the courtroom.

• 32:23Speaker 04

  That's right. So that's how we ended up with a line sitter on Tuesday. I got like six hours of sleep and it was like the best six hours of sleep I've ever had in my life. It was so rewarding. It felt amazing.

• 32:33David Pierce?

  That's very good. So it wasn't like that the whole time. That was just the Sam bits.

• 32:37Speaker 04

  Oh, yeah. I mean, like, you know, Caroline Ellison was the other sort of big draw and that was like, that was a much more reasonable 4 a.m. time to get in line. There was just, there were a lot of people there. It was, um, especially for the Sam testimony, there are a lot of people who were, you know, they worked in tech or they worked in finance or they like had an interest in crypto, a lot of reporters, obviously. So there was just a, it was a pretty big draw from the general public. And there were like a couple of people who were in town from London or from Ireland who had stopped by the trial. And so that was like, pretty remarkable to me.

• 33:14David Pierce?

  Like a tourist attraction.

• 33:15Speaker 04

  Yeah. So there was, absolutely, there was a certain amount of like spectacle. There weren't any cosplayers like there were at the Holmes trial. We didn't see like, you know, the art students who were setting up like Theranos themed like gift shops or anything like that. But there was some very, very intense interest from a lot of people who had been following this.

• 33:36David Pierce?

  That's just nuts. So, and I'm particularly curious, we've obviously, we know how the trial ended, uh, which we're going to get to in a minute. But I'm, I'm super curious about the vibes in the courtroom, which I feel like is one of the things you wrote a lot about was you spent a lot of time watching one person's testimony while watching somebody else just sort of be in the courtroom.

• 33:55Speaker 04

  That's right.

• 33:56David Pierce?

  And especially Sam and Caroline for a chunk of it and Sam's parents. I feel like were kind of your main characters for obvious reasons throughout the whole trial. And I'm really curious how the kind of vibes shifted from the beginning of the trial to the end of the trial, just as like a person in the room in the courtroom.

• 34:13Speaker 04

  So this is why I wanted to be in the courtroom, is that there are things that play really differently in the courtroom than they do even in the overflow rooms or in the transcript or on Twitter. And I was really struck by that throughout this trial. You know, we had moments of levity that like people didn't think were funny outside of the courtroom, for instance. So like, the best example was when Sam was testifying. And his lawyer successfully objected to a question and Sam responded anyway that he thought, you know, embezzling money was not protecting customer assets. And his lawyer was kind of like, Sam, you've been here for a couple of weeks. You know, you don't have to answer that. And so I was like, yeah, but I felt like it was important. And that was like a big laugh line in the courtroom. And the way that it seemed to play elsewhere was that he was getting scolded, which like, it was like a little bit of a scolding, but

• 34:58Speaker 04

  it was it was playful, you know. So there were these moments that I that's part of the reason why I was getting up at those kind of insane hours was I wanted to really sort of describe what was happening in the room, because the text only version of that doesn't give you how people are feeling. And part of it was that I wanted to keep an eye on the jury. And by the end of the prosecution's case, the jury was really fed up with Sam Bankman Freed. And this was before he took the stand. I want to be clear. Like, you know, we have, we have Caroline testifying to, you know, the sort of arc of her, her time at Alameda and ending with this all hands meeting where she essentially confesses to her staff what has happened. And then immediately afterwards, we have

• 35:41Speaker 04

  Christian Drapi getting up on the stand. He's a former employee. He's got the recording of her, you know, doing it. And the jury was really rapt for that. I know that it played a little differently, again, for other people who like, was like, oh, she's like giggling, you know. But the jury was absolutely locked in, you know, this was something that they took very seriously. And part of the reason he had been called was to talk about the way that she was speaking on the tape. He noted that she has a habit of giggling nervously, like when there are times of tension, she she tends to laugh uncomfortably. And like, so that was part of the reason, I think, that he was giving the that testimony was to to say, like, she's not laughing, like, out of joy or anything. Like, this is a very uncomfortable moment for her. Right.

• 36:25Speaker 04

  As that tape was playing, I was watching members of the jury, like shaking their heads. Like, no. And like, I saw them shake their heads again at the sort of towards the end of the prosecution's case, where Khan Sun, who was one of the FTX lawyers, was testifying that Sam Bankman Freed had come to him and talked about wanting to find an excuse to give Apollo, the private equity group he was trying to raise money from, an explanation legally for how all of this money had gone missing. And Khan Sun like ran through three explanations. It was like, none of them, none of them do it. Like, and then he quit. Oh, boy. And

• 37:02Speaker 04

  This is sort of a recurring theme.

• 37:04David Pierce?

  Yeah.

• 37:04Speaker 04

  You know, we immediately saw Sam Bankman Fried in a December interview with George Stephanopoulos running through one of these explanations and saying, oh, it was the margin lending program, which Khan Sun had been very clear with him. Like, it was so much more money than was in the margin lending program. There is no good explanation for this. And again, during this video clip, you could see members of the jury like shaking their heads. Like, no, like, this, this is, this is ridiculous. So there was sort of, you know, this sense of almost absurdity by the end of the prosecution's case, because every day I would come in and then there would be like a new crime. And like, at one point, I remember turning to another reporter, like when we were standing in line and be like, look, I knew he was guilty, but I didn't know he was like guilty guilty.

• 37:49Speaker 04

  He's like guiltier than I thought. The prosecution easily could have rested their case after the second week. And we had two more weeks. So it was, it was a lot of evidence. It was really like an overwhelming amount of evidence. And, you know, by the end, we had a pretty good idea of what had happened. And then I guess the idea behind Sam testifying is sort of something that you get in these white collar cases where intent really matters. You may remember that Elizabeth Holmes testified in her own trial, too.

• 38:15David Pierce?

  Yep.

• 38:15Speaker 04

  And who can speak to the intent better than the person who is, is there?

• 38:20David Pierce?

  And the defense, just to button on that, the, the defense in that case basically is either, I didn't know, or I didn't mean to, essentially, right? Because it kind of boils down to like, did you do this on purpose or not? And if you can convincingly say you didn't do it on purpose, you might get away with it.

• 38:37Speaker 04

  That's right. Good intentions are a complete defense. Like, it's not illegal to be an idiot, which is lucky for me. The lying is the illegal part. It's not that he lost all this money. It's that he lied to people. That's the fraud piece of it. So if he had believed what he was saying, if he hadn't known that it was untrue, that would be a complete defense. That would be enough. And the problem with putting your defendant on the stand in that way is you open them up to cross examination. And that can be really gnarly. And that was really gnarly. Like, that was, I've seen a lot of cross examinations and that was probably the nastiest, I think, I've ever seen.

• 39:12David Pierce?

  Wow.

• 39:13Speaker 04

  Danielle Sassoon, who was the prosecutor, she clearly knew just backwards and forwards everything Sam Bankman Fried had ever said in public. Just like all indexed in her brain.

• 39:23David Pierce?

  Which is a lot, by the way. That man has talked in public so much.

• 39:27Speaker 04

  So much.

• 39:28David Pierce?

  Yeah.

• 39:28Speaker 04

  So we had, we had like a long section of her saying, did you say this? And him being like, I don't recall. And then her playing it. And then her saying, did you say this? And him saying, I don't recall. And her playing it.

• 39:39David Pierce?

  Oh, boy.

• 39:40Speaker 04

  You know, it was like a couple of hours of this. And it really established him as like an unreliable narrator, particularly because he wasn't saying something like, I don't remember saying that specifically, but it sounds like something I would have said. It was just like, I don't recall, I don't recall, I don't recall. And like after a certain point, again, you see like the jury starting to make like prolonged eye contact with each other. Like, you know, when somebody's misbehaving on the subway? And you make eye contact with a stranger, like, do you see this shit? Like, it was very that. So that was not great. And it's not what you want.

• 40:11David Pierce?

  It's not. Well, and it also seemed like that specific thing is part of the shift, I think, that you covered in a lot of your stories is like at the beginning of the trial. Sam thought, and a big part of his whole shtick had been that you can get an awfully long way with this kind of mopy haired, slightly spacey genius weirdo. And that that affectation, ironically, like you and I have been covering this space a long time. Like, there's no better way to be a billionaire than to have that specific deal. People will just throw money at you if you seem like you don't care how you dress or what you look like or whatever. But then at some point over the course of that trial, that went from being like his greatest asset, or at least what he thought was his asset, to like the thing that destroyed him in a lot of ways.

• 40:54Speaker 04

  So I want to put a little button on that. It's not people that will give you a lot of money. It's specifically VCs that will give you a lot of money.

• 41:02David Pierce?

  That's a very good distinction. Yes.

• 41:04Speaker 04

  VCs have like a specific model of what they think a genius looks like. And he played very much into that. The problem is, if you are marketing yourself as a genius, if you're saying you're brilliant, if you, you know, are putting yourself forth as like someone who is really, really smart, you have a harder time showing yourself to be stupid. Like, I mean, that's like part of what's going on here, right? Like, he doesn't have a CFO at this company, even though it's a financial company, and that's like very important. He doesn't have any risk management, which you're running a futures exchange. Risk is what you do.

• 41:38David Pierce?

  Yeah.

• 41:38Speaker 04

  And trying to, to hold those two things together in your mind, that this guy's a genius and that there's no risk management, there's no CFO, there are no adults in the room. That starts to look damning. That starts to look like you did something on purpose. It starts to look like you don't want risk management because you think risk management won't approve of what you did. And so that's sort of, I think, one of the specific ways where this backfired. Like, I think that there could have been a lot more understanding if he had been an ordinary person, ironically, you know, where it's like, oh, yeah, ordinarily, ordinary people like misplace things. Like, they sometimes do dumb stuff. But, you know, if you're presenting yourself as like this genius, and he was, you know, he was leaning

• 42:22Speaker 04

  very heavily on like, having gone to MIT, having worked at Jane Street, which is a pretty exclusive firm on Wall Street, having been this like startup founder, having done this incredible like arbitrage trade to get his money. Like, if your whole story is that you're brilliant, and then $8 billion goes missing, people are not going to think you lost it.

• 42:44David Pierce?

  Yeah. And then a bunch of people get up on the stand and testify how you did it.

• 42:49Speaker 04

  In fact, you did not lose it. That's right.

• 42:51David Pierce?

  Yeah. And I think so much of what it seems that he thought, and I am curious, like, I generally am not interested in trying to like psychoanalyze people in his position, but like, my guy just like got up on the stand for three days and did it, so we're gonna do it to him. You got the sense he felt like through this whole process, he could sort of smart guy his way out of everything. And like, again, not to keep coming back to the Theranos thing, but I think it's like, there was this sense of, if we can just get away with it long enough, we'll eventually get where we're going and everything will be fine and it'll be worth it. And like, that's not even to bring in all of the effective altruism, I'm gonna save the world stuff, which like, I'm just, I'm done with that. Like, I don't think, I don't care anymore that he was an effective altruist. I'm no longer interested in that fact about him. But I do think he thought he could just like

• 43:35David Pierce?

  smart guy his way through these troubles, and he was so smart that everything was gonna be fine. And that just, it just doesn't work. And I think even in this trial, you get the sense that he thought he could just get up there and smart guy his way through it, and that he would win in the end. And that was so spectacularly the wrong call in this trial, it seems.

• 43:56Speaker 04

  I mean, watching his parents during the cross-examination was sad.

• 44:01David Pierce?

  I'm sure.

• 44:01Speaker 04

  And they, they left for the end of it. And I don't blame them, because it was, it was really nasty. It was obvious what was happening. It was obvious what the outcome was going to be. And I wouldn't want to watch that happen to my child either. But it felt like- Throughout the course of the trial, there was like a delusion almost on at least Sam's part and maybe the part of his parents as well, that, you know, everything was going to be okay because Sam was a really good guy and he never would have done anything wrong. And that was, as far as I could tell, the entire defense was like, you know, Sam talked about how he didn't drink when he was in college

• 44:41Speaker 04

  and he, you know, liked to play board games and he was very wholesome. And like, you know, he was, he's a good boy. And I think there was an understanding that Bankman Fried has of himself and that his parents have of him that ran pretty much headlong into the rest of the world and the way the rest of the world understood him to be working. And certainly by the time of the closing statements, I think everybody understood what was going to happen.

• 45:09David Pierce?

  I was just about to ask that. Like, at what point did the whole room sort of realize, oh, he's going to be convicted? Was it closing arguments? I kind of felt like, reading your stories, it felt like it might have happened before that.

• 45:21Speaker 04

  It definitely happened before that for me.

• 45:23David Pierce?

  Okay.

• 45:24Speaker 04

  I think it happened before that for several members of the jury. They weren't out very long. They were out for four and a half hours. It's not a long time.

• 45:30David Pierce?

  No, that's long enough to like, have a coffee, look around the room and be like, we good? And then go back in. Like, that's not, that's not a group of people who had a lot to talk about for four hours.

• 45:40Speaker 04

  I mean, they did, they did send in for like a couple of questions. They had some questions around the investor testimony. They wanted portions of that sent in. But that was fast, you know? Something like this, a complicated trial like this. I actually wasn't expecting a verdict until the next week. I was expecting a verdict the following, like Monday or Tuesday. And we just went right through and that was it. So 8 p.m., like we had a verdict. But the reason I come back to the, the closing statements was that I was really struck by Sam, who had turned towards the jury. And so I could see the side of his face. And he looked like he either had been crying or was about to cry. You know, his nose was red. He, he looked devastated, basically. And so I think that's why I think he knew.

• 46:24Speaker 04

  There was this very emotional moment from him of... His attorney reading this closing statement and him just looking terrified and perhaps crying. You know, and his parents throughout seemed really horrified by the testimony. At times, you know, I could see his mother with her, her head in her hands. It was rough and you know, one of the sort of recurring themes throughout my cover, like coverage is I just couldn't figure out why we were there. Like, I don't know why you, you wouldn't just plead. Like, that's the part that's wild to me, right? Like, okay, maybe you're not going to get a deal, but if you plead guilty and you throw yourself on the mercy of the judge and you say, I'm very, very sorry. I hurt a lot of people. Uh, I did wrong. I want to be punished. Maybe you get a shorter sentence that way.

• 47:08Speaker 04

  And even if you don't, you haven't dragged everybody you love through this spectacle of a trial. Because if you think about it, like the scale of destruction here is unusual. I mean, there's, um, obviously all of these customers who've lost money and many of whom maybe don't want to go public about how much money they've lost because they feel silly about it. But like, those people, you know, they deserve our sympathy, I think. The investors who've lost money, the lenders who lost money, like one of them, BlockFi, ended up going bankrupt. And it wasn't, this wasn't the only thing that pushed them into bankruptcy, but it sure didn't help, you know?

• 47:46Speaker 04

  And then on top of sort of all of that, like destruction, you know, a lot of the FTX employees kept their money on the exchange. So they're the people who are also wrapped up in this bankruptcy. Like they, they, they had no idea, most of them, that anything was going wrong. Then you think about Adam Yedidia's testimony and like, there was this horrible sort of moment towards the end of it, where one of the text messages he had read to, was read aloud. You know, he was telling Sam he loved him, he would stand by him, he would try to like fix FTX. And then he found out what had actually happened and he immediately quit.

• 48:18David Pierce?

  Wow.

• 48:19Speaker 04

  I want you to think about this. This is like one of Sam's best friends from college. They were like frat boys together. They shared, they were roommates in college, they were roommates in the Bahamas. Like, this is like one of his closest friends. I want you to just hold that in your mind for a minute. Think about your closest friend and how pissed off they would have to be at you, how betrayed they would have to feel to testify against you at trial.

• 48:43David Pierce?

  Yeah, and there was so much of that. I mean, I think the extent to which, and you wrote about this at one point, that like, I think you called it like, summer camp syndrome, that it's just a group of friends who all essentially turned all at once on Sam at the end of this. I think you're right, it is sort of unusual that everybody told the exact same story, which I think in the end made it really easy in a lot of ways. Like, the prosecutor's story was so simple and so straightforward and so corroborated by so many people. And then Sam's story was like, the same story, but he just said he didn't know about any of it.

• 49:21Speaker 04

  Right.

• 49:22David Pierce?

  He clearly deserved to be convicted because all the evidence said so, but it also just seemed like he was, the weight of the evidence against him was so sort of uniquely pointed and strong in that sense.

• 49:35Speaker 04

  Well, and even assuming there hadn't been testimony from his conspirators, you know, his co-conspirators, all of whom were like, yeah, we worked together with Sam on this. Just looking at where the money went and who benefited from that money, Sam benefited more than anyone, you know? These were investments that he wanted to make. His parents got a home in the Bahamas, and that was traced back to FTX investor money. He got a bunch of Robinhood shares and a personally owned vehicle. Like, just looking at, you know, who benefits, like, not even thinking about like, the blow by blow of how it happened, it's kind of open and shut. And so, to me, you know, there were all of these moments

• 50:19Speaker 04

  where I kept being like, why are we here? Like, literally, why are we here? You know, like, plead guilty and spare, you know, your family and friends this humiliation, and maybe they'll come visit you in jail.

• 50:30David Pierce?

  So, speaking of the ramifications of all of this, I feel like I've seen two narratives over the last few days start to come out. One is that Silicon Valley, as it does, will just move on. The VC class is not going to do the self-introspection that everybody always wants them to do in moments like this. They didn't do it with their nose, they're not going to do it now. You just move on to the next thing, they're all pouring money into AI stuff. On the flip side, there is this sense that this is kind of a broader crypto reckoning. One of the things we talked about at the beginning of the trial was how much crypto industry dirt was going to come out of this one way or the other about how kind of unwatched and unmanaged a lot of this space is.

• 51:10David Pierce?

  I have a hard time figuring out kind of what the macro legacy of this trial is going to be. Do you have a sense, even just a few days out?

• 51:19Speaker 04

  I think I do, and part of it is because there were crypto industry people who were coming to the trial. And so during Gary Wong's testimony about the faked insurance fund, because like this was just like Russian nesting dolls of crime. But there was a random number generator that they had that was their insurance fund. There was no insurance fund. Alameda was paying stuff out. One of the people who I was talking to, who was a crypto investor, was like, oh, Binance has an insurance fund. I wonder if that's real too. Some things that are different, right? Like, for instance, there are exchanges where you know which ones are the omnibus wallets. You can watch them. You can sort of see on-chain what's going on.

• 52:00Speaker 04

  But there are going to be, I think, larger questions of who's telling the truth. Because Sam said all the right things in terms of wanting regulation, in terms of trying to be safe and trustworthy for customers. And there is going to be, because the scale of this fraud was so enormous, I think there is going to be a question for regulators, for customers, for everyone. The next time someone says something like, oh, yeah, we want regulation, like, is that true? Sam said that. Is that real? And so I think that that's sort of going to be one of the lingering things from this trial, more so than anything else, is this question of like, how trustworthy is the crypto industry?

• 52:42Speaker 04

  And, you know, this is an industry that is like, very, I think proudly, full of pirates. These are people who have been operating in sort of legal gray areas, many of whom were excited about that. And that was like part of the joy, almost, of the industry for a long time. And now it's cutting the other way where it's like, okay, but like, do you want to give your money to pirates? So I think that that's certainly going to be a long-term ramification. As for the VCs, I don't know. I would like to say that I think it might be different. And part of the reason I might say that is that interest rates have been going up. And that means that there's less money sloshing into VC than there used to be. And there was this whole period where they had so much money, they had to figure out how to invest it somehow.

• 53:26Speaker 04

  And so like, you had mattress companies that were suddenly tech companies because they were selling stuff online. Right? You had WeWork, which to Adam Newman's credit, like, that was not a fraud. He told everybody that he was planning to benefit, disperforctly, from WeWork. Like that. And they funded it anyway. So there was this period where like, the balance of power had really shifted to founders. There was a real sense of FOMO in the investing community. Then you could sort of pressure them into doing deals without due diligence. And so I think as the money is receding, which it has been, and as the valuations are getting cut, and as like, the tide is kind of going out, I think that, as well as the sort of profound embarrassments

• 54:07Speaker 04

  of these major fraud trials, may contribute to more careful evaluation. Do I think that that's a guarantee? No, I don't. You know, I certainly have heard a lot of wild VC talk about like, how Elizabeth Holmes wasn't really a product of Silicon Valley, and they didn't really do anything wrong. And FTX is a standalone fraud. And like, you know, I think there's a lot of denial. But I certainly think that among the people who are using VC as an investment vehicle, you know, whether those are family offices, retirement funds, endowments, whatever, if they provide enough pressure, that will change things. And so the question is sort of, you know, who's upstream from the VCs?

• 54:52Speaker 04

  And how much pressure are they putting on? Especially now that we are out of this low-interest rate environment, and there are less risky places for you to make money.

• 55:00David Pierce?

  Yeah, my only worry about that outcome would be that we've been through this in smaller ways a bunch of times now, right? Like, I think if you're still a crypto believer, your tolerance for chaos and risk and fraud is so high at this point that I wonder what would possibly turn you off. If you're a person who like earnestly believes that crypto is the future of everything, what on earth is left to convince you? This one's a pretty big one. And I think what it might do, to your point, is it might instill worry in a lot of people like two concentric circles out from the believers. There were kinds of people who were like setting up Coinbase accounts two years ago, right? Who were like,

• 55:42David Pierce?

  what's this? I'm not like a diamond hands crypto maniac, but I'm just like a person who wants to invest my money. And I think you're definitely right that those people are going to remember FTX in a in a pretty real and pretty damning way for the crypto industry.

• 55:56Speaker 04

  Yeah, I think the true believers, I mean, the true believers are the true believers. They're still going to be there. This is an internet subculture that I think we're going to continue to see for a long time. You know, they're already talking about the next cycle.

• 56:08David Pierce?

  Yeah, this is just crypto winter.

• 56:09Speaker 04

  That's right. So, you know, I don't, I don't know that crypto is gone forever. I certainly don't think that's true. And I also think the approval of a Bitcoin ETF, which is something that the crypto community has really been keeping an eye on, that might potentially be a help to them. Like, that might be something that gets institutional investors involved, you know, your BlackRocks and so on. Is that a guarantee? I don't know. Again, we're in a different investing environment now where there are easier ways, less risky ways to make money. Because part of what really fueled the last boom was that VCs were able to cash out much more quickly in crypto than they were in a lot of other investments. And so that gave them a pretty quick return and that gave them an incentive to work with

• 56:53Speaker 04

  a lot of crypto companies. And I think that's less true now. So we'll see. You know, and I don't, and I don't necessarily mind weird internet subcultures.

• 57:03David Pierce?

  Those are your people. Yeah.

• 57:04Speaker 04

  Yeah, I love the crypto true believers. They're a lot of fun to hang out with. I don't necessarily agree with them, but they're a great time. You know, these people, they're not stupid. They're not. They're smart and thoughtful and they don't like the current financial system.

• 57:17David Pierce?

  Totally. All right, we have to go and you have to go on vacation. But thank you for coming on. You did truly ridiculous work over the last four weeks. So, thank you for all of that and for coming on the show. And I have a feeling we're going to be doing this again. What is it in March when sentencing happens?

• 57:32Speaker 04

  March is when sentencing happens, that's right.

• 57:34David Pierce?

  We are not done with this story just yet. So, we'll do this again. But thanks, guys.

• 57:39Speaker 04

  All right. Thank you, David.

• 57:41David Pierce?

  All right. We gotta take one more break, and then we'll get to the hotline.

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• 58:54David Pierce?

  All right, we're back. Let's get to the Vergecast hotline. As always, the number is 866-VERGE11. Call and ask us all of your weirdest, deepest, darkest secrets and questions about technology. I don't know how to ask us a secret, but you can do it if you want to. This week, we have a question about sports. Sir Richard Lawler is here to help me answer. Hi, Richard.

• 59:11Speaker 05

  Always love to talk sports.

• 59:13David Pierce?

  Yeah, man. We don't get to do it that often. So, when it's just us, we get to talk about sports. This is going to be a six-hour-long segment. It's going to be great. All right, let me just play the question, which I think is a very fun one, and then we're going to get into it.

• 59:25Speaker 06

  Hey David, this is Jeff from North Carolina. I recently listened to your Friday episode where you were talking about the Hulu deal with Disney and Comcast. And I'm wondering, you mentioned that you think Disney wants to sell ESPN. And I'm curious if you think that Disney would potentially not sell ESPN and instead look for a strategic partnership like Apple to run ESPN with them? Or do you think ESPN would ever get sold to Apple altogether? Thanks so much for the show. Bye.

• 59:57David Pierce?

  Okay, I love this question because A, it's about ESPN, which I very much enjoy talking about. But B, it brings up, I think, a thing you and I have talked a bunch about, which is why ESPN is kind of a harbinger of the whole streaming universe. We talked about Disney and Hulu last week. Disney is going to be required to pay somewhere north of eight and a half billion dollars to buy the rest of Hulu. That's very expensive. Disney is not a company that is full of cash right now. But I'm curious, hearing this question, what if Disney doesn't sell ESPN? Could it sell to Apple? Could it partner with Apple? What do you think?

• 1:00:29Speaker 05

  Apple is the always, oh, they could buy it for every question you ever have.

• 1:00:34David Pierce?

  They just have all the money.

• 1:00:35Speaker 05

  Because they have all of the money. Every bit of money that there is belongs to Apple. Tim Cook is just sitting on it, presumably in a cave like Small. I assume. Will they buy it? The answer is almost always no. And I think for ESPN, the answer is probably no. You can never rule it out. But it's an interesting question. Okay, so like, what is Disney going to do? But I don't think they have an answer. That's why we got these weird rumors about they want to partner with different sports leagues, maybe. Because I don't know how that works with the sports leagues owning part of the broadcasters that they sell broadcasts to. That seems strange. And I don't know where the money comes from. But Apple buying them is just one of those things where, yes, it could technically happen. And yes, it would open up all of these things with Apple TV that they would love to do.

• 1:01:19Speaker 05

  And it would give them something that everyone needs to have. But they don't actually do those things. It's just, it's just generally not the way that Apple operates. For Disney, it would narrow the availability of ESPN if it were suddenly somehow exclusive. Maybe even if they could still sell it to cable operators, it would be weird. And I think that what we've seen, like we saw with their, their deal with, I think, cable vision, they kind of worked it out so that you have streaming and you have cable. And that's, it seems like that's the way that they're going, at least for the future. Because the other thing that we know now is exactly how profitable ESPN is. And that answer to that is a lot. It makes a ton of money.

• 1:01:52David Pierce?

  So profitable. I think that's the thing that actually gets lost in a lot of this because Disney has made fairly clear that it would like to find some more money for ESPN, which people make out to be because ESPN is not a good business. That's not true. ESPN is such an unbelievably good business. They just started breaking out how much money ESPN makes because it is so much money that like Disney is trying to make the point.

• 1:02:16Speaker 05

  And that's now, that's now after everyone has cut the cord, after everyone you know has stopped subscribing to cable, ESPN is still making just absolute billions and billions and billions of dollars.

• 1:02:25David Pierce?

  Yeah. And I do think it's true that if you cast out far enough, you can see where ESPN gets harder because the, the rights deals that ESPN is fighting for are getting more and more expensive. The number of cable subscribers who are essentially paying for ESPN twice are going down. So like you cast out another, what, 10, 15 years and ESPN is maybe a less good business. Right now is still an unbelievably great business. I, I'm with you. I don't think it would be Apple because like, I was thinking a lot about the, the deal that Apple made with the MLS and the deal that Apple didn't make to get Sunday Ticket. And it seems like what Apple is all about, and this makes sense given what Apple is, is control, right? Apple wants a thing it can do itself.

• 1:03:08David Pierce?

  So the idea of having a thing that is fundamentally about making a million different partnerships with a million different people or being like a minority owner in a thing it doesn't actually control all of feels very un-Apple-y to me. But like, Amazon, I can absolutely imagine making roughly that exact deal where Amazon is like, we're going to put all the sports on Prime, you can subscribe to ESPN through Prime, you get ESPN if you're a Prime subscriber, we're going to make Prime $8 a month more expensive, there's your cable difference right there. Like, I can totally imagine a world in which that happens. I don't think it would be Apple. I agree with you. I think Apple's much more likely to like buy a sports league than it is to buy ESPN.

• 1:03:44Speaker 05

  Yeah, something where they actually can control. And I think that's the the number one most important word for what Apple likes is control. And the other part of ESPN is their deals with the different leagues means that Apple would have no control because all of these arrangements have are old and have been made in different ways and have a lot of compromises and all the leagues have different things. Like, people talk about Apple will buy Formula One rights. It's one of those things that people say, but I think is unlikely. Formula One broadcasts itself. It does all of it through its own broadcast center and sends it around the world. Apple doesn't really want to deal with Formula One telling it what to do. And I think as you go down the line, that's just really what you run into. And that's what makes it less and less and less likely. But yes, like a company like Amazon, what if Microsoft is like, you know what, we should combine

• 1:04:28Speaker 05

  ESPN and Game Pass. Let's do it.

• 1:04:30David Pierce?

  Yeah.

• 1:04:31Speaker 05

  ESPN, Game Pass Bing Bundle, done.

• 1:04:33David Pierce?

  The weirdest way to spend $20 a month that you've ever encountered. I love it. The reason I continue to think ESPN is so interesting is because it is right smack in the middle of this thing where what ESPN wants is to be everywhere, right? Because the crazy part about this is ESPN isn't going to get the rights deals that it wants if it doesn't have the distribution that you get through cable. This is why CBS and Fox keep getting deals because they're everywhere. Like, no one but old people watches CBS anymore, but CBS keeps getting football deals because it's free over the air television that absolutely everybody can get, which means you can charge more for ads, which means you get more reach. Like, everybody wins. So ESPN needs that, but it also needs

• 1:05:16David Pierce?

  to figure out what a streaming only world looks like because it's coming. But if ESPN in 10 years, that world comes and ESPN doesn't have any rights deals, ESPN is dead anyway. So it's caught in in this transition that we're in. Nobody has a harder time of navigating it than ESPN, even as it continues to just throw off billions and billions of dollars for Disney.

• 1:05:36Speaker 05

  Yeah, being in the lead means that making a decision about changing something is so much more difficult.

• 1:05:41David Pierce?

  Totally. So, okay, real quick before we go, 12 months from now, you have to answer, does Disney still own ESPN?

• 1:05:48Speaker 05

  Yes, majority.

• 1:05:50David Pierce?

  See, that's good. That's good. I think I'm with you. I think if I put the number at like five years, I think I'd have a hard time answering the question. I think 12 months, it's just too big a thing to change in that period of time. And I think people really underrate how messy sports deals are. And just like the paperwork involved in selling ESPN will, I think, just like blow people's minds.

• 1:06:14Speaker 05

  And I think the money that it brings in simply makes a lot of things that Disney wants to do a lot easier. It is something that we know now that we always suspected, but we know now. Like, all those Marvel movies are like ESPN paid for those. You're welcome.

• 1:06:26David Pierce?

  In like a very real way ESPN paid for all of that stuff. And now, the question is going to be, can Disney find another way to pay for all that stuff without ESPN? And is it going to have to? And all of that is so unknown, which is why it's very weird to be Disney right now, because it's dealing in like a thousand concurrent hypotheticals that none of which are true. Like, right now, Disney's fine. Wall Street doesn't think so, because they're terrified about like some future streaming universe that doesn't actually exist yet. But like, right now, as a business, Disney's doing great.

• 1:06:57Speaker 05

  Bringing in just tons of money.

• 1:06:59David Pierce?

  It's just hosed in so many ways it doesn't yet understand. It makes it very complicated.

• 1:07:05Speaker 05

  What that future looks like is something that, you know, if you have an answer, I'm sure Bob Iger will take your call.

• 1:07:10David Pierce?

  Yeah, yeah, hit him up. Bob at Disney.com. I'm sure he'll take your email. All right, Richard, thank you as always. Appreciate it, bud. All right, that's it for the Vergecast today. Thanks to everybody who was on the show, and thank you as always for listening. There's lots more from everything we talked about. All of Liz's SBF coverage is amazing. You should go back and read it all. Everything Sean is doing from the courtroom for Epic v. Google has been great so far. We'll put some links in the show notes, but also keep an eye on the website. There's all kinds of stuff still going down. And as always, if you have thoughts, questions, feelings, or curiosities about the jury in these trials, let us know. You can always email us at [email protected], or keep calling the hotline, 866-VERGE11. Like I said before, I love hearing from you.

• 1:07:53David Pierce?

  It is one of my favorite things we get to do on the Vergecast. This show is produced by Andrew Moreno and Liam James. The Vergecast is a Verge production and part of the Vox Media Podcast Network. Neelai, Alex, and I will be back on Friday to talk about everything happening at OpenAI, the new MacBook, the PS5 Slim, and a whole bunch more. We'll see you then. Rock and roll.

• 1:08:20Speaker 07

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