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Episode 24: Skype

Episode 24: Skype

Wed, 02 Nov 2016 05:28

An acquisition so wild and crazy, they had to do it again. And again. Ben & David cover tech’s perhaps most-traded asset, Skype (which also happens to be a fantastic business). How do we even know which deal to grade? Tune in to find out…
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Um, I got one sec. I'll lost my place in my notes. Oh wait, actually, can we go back? Uh, I wish I was compared to I think I see time Warner to uh, I love it. I love it. Is it you? Is it you? Is it you sitting down? Say it straight another story on the way. Welcome back to episode 24 of acquired the podcast about technology acquisitions. I'm Ben Gilberts. I'm David Rosenthal and we are your hosts. Today's episode is Microsoft's 2011 acquisition of Skype and the Wild Crazy Journey that it took to get there. Ben, you mean Ebay's 2005 acquisition of Skype and the Wild Crazy Journey it took to get there. Or perhaps the Silver Lake partners private equity takeover with Andrison Horowitz in 2009 acquisition of Skype and the crazy path it took to get there. All that and more as we as we dive into the show. Before we get started today, we want to do a community spotlight. User in Slack swix, SWIX pointed us at his company. I believe it is sentio They are the kind of future of Wall Street analysts. So they they have a software platform where you can save time on research, join thousands of investment professionals on a modern and intuitive platform built by former Wall Street analysts and he lets us know that they just launched their their Alexa skills. So check that out if you have an Alexa or go to their website to check it out if you're interested. Our presenting sponsor for this episode is not a sponsor but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founders so we knew there's a natural fit. We know the host of founders well David Senra. Hi David. Hey Ben. Hey David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for founders and executives. It really is we use your show for research a lot. I listened to your episode of the story of Akiyama Rita before we did our Sony episodes this incredible primer. You know he's actually a good example of why people listen to founders and so acquired because all of his greatest entrepreneurs and investors they had deep historical knowledge about the work that came before them. So like the founder of Sony who did he influence Steve Jobs talked about him over and over again if you do the research and him. But I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired we focus on company histories. You tell the histories of the individual people. You're the people version of acquired and where the company version of founders listeners. The other fun thing to note is David will hit a topic from a bunch of different angles. So I just listened to an episode on Edwin Land from a biography that David did. David it was the third fourth time you've done Polaroid. I've read five biographies of Edwin Land and I think I've made eight episodes of them because in my opinion the greatest such a printer to ever do it my favorite entrepreneur personally is Steve Jobs and if you go back and listen to like a 20 year old Steve Jobs he's talking about Edwin lands my hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes and the beauty of this is the people may die but the ideas never do. And so Edwin Land had passed away way before the apex of Apple but Steve was still able to use those ideas and now he's gone and we can use his ideas and so I think what acquired is doing what a founder trying to do as well is find the best ideas in history and push them down to generations make sure they're not lost history. I love that. Well listeners go check out the founders podcast after this episode you can search for it in any podcast player. Lots of companies that David covers that we have yet to dive into here on acquired. So for more indulgence on companies and founders go check it out. Cool. Shall we dive into the show? There's a long and rich and let's stay in this one. There is this story has more drama than something with a lot of drama. Yeah. A whole lot of drama. I don't know. Will and Grace episode. Yeah. Sounds good. Bravo. Whatever. All right. So our drama filled story starts all the way back in 1999 when two guys Nicholas Zenstrom who lived in Sweden and Janice Freese who lived in Denmark were both working at the Swedish Telecom company Tella 2. This was early days of the late days of the internet bubble but very much internet 1.0 bubble and this Tella 2 that's T-E-L-E number two. They wanted to launch a web portal because everybody in those days had to have a web portal and they wanted to call it every day. I don't know if it's every or whatever the Swedish domain term ending was at that point in time but they had just one problem and that was that nobody could develop software at the company and or at least nobody could develop good web software. And so they had a department in Estonia. Do you know where Estonia has been? I do. I do. I was a well we'll totally dive into this but when I was at Microsoft I was fortunate to spend a bunch of time at Skype offices and spend a week in Tallinn at the Skype headquarters there. Skype headquarters in Tallinn, Estonia. Beautiful city. Former Soviet block nation on the Baltic Sea? Yeah and it is wild being there because it is this incredible dichotomy of old and new where you have total Soviet block buildings and even the real old kind of the old city from before the Soviet era in Tallinn and then these companies like Skype and a lot of this sort of new revitalization in Estonia is a totally imagine if you had the opportunity to intelligently start a new country today all the decisions you would make and they kind of learned from the best and looked at what's working in. Yeah I mean this is a company that was part of the country that was part of the Soviet Union until the late 1989. Yeah and so like there's so much if you ever get a chance to check out there's a lot of really interesting things that they do as a government that are totally tech enabled. Like they have every citizen has a smart card that they can put into their computer and you can vote online because you have a uniquely identifiable that's also an electronic thing that identifies you as a citizen. It's super cool. Wow. So 1999 the whole country is 10 years old. This sweetest telecom wants to make a web portal. So what do they do? They take out an ad in the local newspaper saying advertising contract job to build this web portal for them and they're going to pay 5,000 Estonian crunes per day which is about $330 at the time and that was more than the average Estonian earned in a month apparently and they were going to pay that every day. So they get a lot of interest and they end up hiring three developers Jan Tallinn. We're going to butcher these names we apologize. Ati Heinja and Prit Kanslou. We totally butchered that and we apologize. They end up hiring them and there's just one more problem though. They're very talented programmers but they don't know PHP which is the language of the web at the time. Yeah I mean that that my problem was that I didn't know PHP like sophomore year of high school. I remember that that would have been like 2004 or 5 and I wanted to make like this it's totally irrelevant but like that was that was totally the language of the day right if you wanted to do anything on the web it was like well you know you can if you have a PHP server running you can drop these fancy tags into do dynamic stuff inside your HTML and wow everyone. Yeah I mean for the longest time Facebook was all ran in PHP. Yep. No longer those days are over but back in the day PHP was how the internet ran. So no problem these guys are super talented. They just learned PHP in a weekend and they build or whatever it was that tell a two wanted it to be called. It was awesome. So a couple of years I'm not even a couple years go by but but Zenstrom and Freese the the guy in Sweden and the guy in Denmark they decide they want to leave tell it to and they want to become entrepreneurs as you know internet bubble and this is the heyday of Napster so folks probably remember Napster I certainly do. Yep. Won't comment on whether I whether I participated in the file sharing or not. I heard it was great. Yep. Although I was definitely under 18 at the time so whatever. And so they decide that they want to start a competitor to Napster and it's not going to be just for music you're also going to be able to share files of any type so movies you know AVIs and software programs you be able to basically share and you know read pirate anything and so they decide that they're going to call this Kazah. Oh my god yeah I when I was doing the research I could not believe these were like the same guys that did the Kazah. Literally the same guys so so again but like they're not software developers so what do they do? Well they call up the Estonian guys. So they call up the Estonian guys are like we're doing this we're building an Appster competitor you're in they they come on board they build Kazah it's awesome and it was indeed quite awesome. Yeah I remember I I was in always like got an epic war with my friends on what was better lime wire or Kazah because they were both sort of the they both the successors to Napster and now to get shut down and so Kazah and lime wire become like the Arab parent and and Kazah actually becomes pretty quickly the most popular application in the world. Really like not like the biggest like the most popular application period. Yeah it's like the biggest thing on the internet. I mean the internet is quite small at this point time but but Kazah basically owns the internet they're like they're like Facebook which which is hilarious to make that that analogy because like thinking about you know Facebook's brief detour and Mark Zuckerberg and those guys ended doing a wire hog and there really is a Facebook and actually being a competing priority they almost didn't do Facebook because they were focused on wire hog yeah. P to P file sharing was the thing which sounds totally crazy now but I mean this there actually was some justification for this. I mean because I just because I launched in September 2000 and like I said super quickly becomes the most popular program on the internet and along with that massive massive legal issues you know playing out once again just like they did with Napster which that I mean this will be the the foreshadowing for all of the legal issues that they would go through with Skyplater on. Oh yeah much more to come. So Zenstrom and Freese I mean they're they're writing high right like they have the biggest you know biggest company on the internet but they're also terrified that they're gonna get arrested and so they actually sell Kazah on paper to some Australian businessmen with yeah that's that's all I was able to find they find they sell it to some Australian business. There's just no like price or yeah it's I don't know exactly what happened. Go I lost this answer time. Yeah lost in the sands of time. If you know actually we would love to hear about that in in the Slack channel email us acquired FM at and be good to follow on. And it may be out there somewhere in the internet there's so much out there about Kazah and nearly did Skype. This was this show was so much fun to research. So they sell the company but they keep the technology behind it and that becomes foreshadows what will happen in a few years with Skype but so they keep the technology and they start casting about for well what else could we do with this incredible peer-to-peer file sharing technology that that we developed and it might be worth a quick detour to just talk about how peer-to-peer technology and file sharing actually works at this point in time. So the basic structure is that whoever's on the network is connected to everyone else on the network and so if you have a file or any kind of piece of data that you need to be transferring rather than going and downloading that from one server in one location which is how traditionally the internet networking have worked and and actually once again works mostly this way today but this was before the cloud quote unquote the cloud existed. You could just download pieces of that file from everybody else every other node on the network so this is why on Napster and on Kazah you know songs that were really popular were super super fast to download because if thousands and thousands or millions of users all had that same file on their computers and they were connected to the network you could just download little pieces of it from many thousands of different people instead of downloading everybody going to one spot and downloading the whole file. And that's so much more effective because you know then you're bandwidth constrained by that one single server in those days you know you had CDNs that weren't you know that we're not as established and well built out yet you know the bandwidth issues and performance issues getting it from that one single server so suffice to say peer to peer was this total revolution in maybe not the highest availability there were kind of issues with reliability and some spottingness with it but in a full distributed peer to peer network amazing if your neighbor had something that you wanted that you could just one off grab from them. And so sentiment and freeze at this point have sold quote unquote sold Kazah but they've retained this technology and they're casting about for what else they can do with it and they they realize actually of this ingenious realization that this same peer to peer technology can be used for a bunch of stuff but for transmitting voice over the internet and if a whole bunch of computers all running the same peer to peer software just like Napster or like Kazah were were online in various geographies around the world as long as you had enough density in particular you know starting points and ending points of calls that were happening you could transfer packets that contained voice you know across this peer to peer network instead of like you know in singular you know kind of routes between one computer and another over the internet and it actually enabled really clear high quality voice calls to be done just for free over the internet. Right and they would eventually they actually develop their own protocol for this you know that's formally known as the Skype protocol that endured until I think 2014 and from there would sort of establish this hybrid model where they had the these direct peer to peer nodes were like like we're talking about and super nodes so you know established servers that were always on and meant to handle that kind of traffic. Yep so this is this is now kind of late 2002 early 2003 so they team up with the Estonians again and they start working on an early alpha for what would become Skype and they wanted they decided they wanted to call it sky peer to peer catching name super catching name but they wanted to abbreviate it to Skipper which I think is cool I wish they'd stuck with it but I think the issue was they couldn't get the dot com name yeah they couldn't get Skipper dot com so instead they decided to just drop the R at the end and thus Skype was totally so clean incredible at that time that that Skipper was not available but you know Skype a one syllable five letter word yeah like how often like that would never happen today that you would go down a letter and that that domain name would be available versus a higher higher number of letter domain name. Pining for the old days but they do something really right at the beginning too so we talked about how the technology was pretty amazing and and that enabled them you know it enabled people to do voice calls over the internet as long as there was a density of people online in both where the call was starting and and ending you know around the whole world way better than traditional telephone networks but the other thing they got really right is they made it really simple in the beginning they realized that kind of just like Kazan like Napster if you were out gonna build a huge network of people doing this you had to get you couldn't just have tech geeks doing this you had to make the software so easy that that everyday people would do it and so there's actually an interview I quote from early Skype employee Laurie Tapandi at the time and she says right from the start we sit out to write a program simple enough to be installed and used by a soccer mom with no knowledge of firewalls IP addresses or other technological terms and and and because of that and also probably because it was free and enabled you to call people in other countries for free when you used to pay a lot of money to do that even domestically was super expensive then yep yeah even domestically long distance calling was expensive but think about you know in Europe where Skype is is based like calling between countries and people of friends and family better in other countries and they have to pay exorbitant amounts to call them yeah and the telecoms were highly highly regulated had a very inflated price scheme where there was you know not necessarily collusion but at least a set expectation of how much you would charge for for long distance and routing between networks and by you know pioneering VoIP really coming up with this idea that like you go around all that entirely and I think I think the funniest thing to think about is in in the history of networked computing you know everybody that had a dial-up modem we started with our data flowing over voice lines and the way that it would communicate is literally making sound over those lines so it was like IP over voice and then you have the advent of this and where we are today and and how every office mostly has phones that are actually IP phones and now all of our voice goes over IP yeah it's kind of hilarious yeah I mean it's like this technology is so much better than the traditional phone system that now the traditional phone system runs on this technology right which is pretty amusing yeah we're actually we're sitting here in Pioneer Square Labs we moved into a new office a couple months ago and all of our you know hard wired phones that are like our desk phones are all IP phones so like we didn't even think to you know why would we like reach out to AT&T and have them set up a yeah totally so like I said super simple free really compelling value prop so Skype launches officially in August 2003 on the very first day remember this is August 2003 so like the internet is orders multiple orders of magnitude smaller than it is today on the very first day they get 10,000 downloads of first day they launch get 10,000 downloads escape by the end of the first month they have a million users by the I'm so curious how they like on the first day so how do they get the word out I think that that's a little lost to history but yeah it's like there's an app store to be featured on the front page of they did like super early growth hacking you know emailed their you know friends and friends of friends and got the word I mean they also had some benefit in that these were like the Kazaga guys so you know there was they were known quality quantities but still this is incredible 10,000 downloads on day one a million users by the end of the first month 4.1 million users by the end of the first quarter and just a hair under 20 million users 19.8 million users that they get in their first year which is I mean those are like pretty decent numbers for even like a mobile startup today like there are no mobile phones at this point yeah and the fascinating thing about peer to peer I mean there are no smartphones at this point it's cheaper to yeah good point it's cheaper to start a company with the advent of of you know cloud hosting then it was in those days when you need a really expensive data centers but with the advent of peer to peer they could support 20 million users without those insane infrastructure costs that it would you know any other company saying like oh it's you know 2001 and we're launching a company and we quickly have 20 million users it's like well how many millions of venture capital did they raise yeah and they did raise a small amount of venture capital before they launched interestingly from Bill Draper the legendary venture capitalists and Howard Hardenbaum who's now at August capital they were working together at a different firm at the time and they went over and they had heard that the the Kazan guys were starting a new company and they're like we're gonna give you some money like we don't care what you're doing we're just gonna invest in you because like you're the Kazan guys so they were the first investors but then they launched in this growth is incredible and so as as this growth is happening of course every VC you know now in the world wants to invest and so they raise 18 million dollars from index, bessamer and dft after they launched and have this growth but but things are still pretty crazy so like most of the companies in Estonia where these original developers are and Estonians are crazy like that I've learned one thing was there I mean I was there in February so it's like you know negative 20 degrees and like people are still like going out drinking and you know just like like they get used to it like it's nothing they cross country ski miles and miles and miles everywhere all the time like I walked away with this impression that like you do not mess with an Estonian yeah so you know startups like there's lots of you know fun and pressure and crazy times in startups you know still but like this kind of took it to a new level so I think still even to this day every new employee at Skype has to undergo an initiation and the initiation is you have to do a shot of tequila, sambuca and Tabasco sauce. I did this. You did this? Yes there's this bar right outside the old city in town. Yeah this is every from day one every Skype employee did this. Oh wait this is on the internet. This is on the internet. Do you see what the shot was called? Yeah there's like a name for it I didn't write it down. I don't think like English speakers can't it's hard to pronounce. I'll see if I can look it up while you're um so the other thing that they do is they install a pool in the boardroom in the office in Estonia not a not a pool table a pool. What yeah and apparently they have to like negotiate with the building about like yeah building management like whether the floor is going to be able to support this you know I think it was a kiddie pool but it was still like a ton a ton or two of water that was installed in the boardroom. Jesus okay the drink was it's either mille melacos or mille melacos I heard it differently from different people but it's like I as soon as I saw it on Google it's like oh yeah that's amazing you've been initiated. I have. So so the growth just continues as we were talking about things are growing like gangbusters in June of 2005 they add video calling which is funny when we think of like when I say to somebody I'm gonna Skype them today instead of doing a call like I mean I'm going to video chat you. Right it's the next video until two years after it launched. Yeah oh five it's interesting to think like um fast forward today where like they're they're making forays into text chat and I mean they've had text chat all along but trying to make that more part of the core experience started with you know audio then got into video became you bit with ubiquitous with video yeah and a lot of other kind of chat platforms are competing against today there are our text and photo based like that's that's not their kind of core and starting place at all and it's funny to think about like how much like with phones how primitive text seams and how complicated voice and video seam but like there was calling on cell phones before there was texting on cell phones yeah and you know Skype text was the third feature of Skype. I think this is I'm sure this is something we'll get into more and tech themes and you know grading but it is pretty funny to think about that that text is now the dominant medium of communication not calling even though it's more complicated and more bandwidth heavy these days on smartphones. So they launched video calling that grows also enormously and so a couple months later September of 2005 there is lots of interest in Skype and from multiple acquires big companies are interested in buying the company they end up deciding to sell to eBay for $2.6 billion E-bay and that was the heyday for eBay too. Well it was slightly post-hate day I mean this was after the couple years after the bubble internet bubble burst but eBay is still a very large company and people like why is eBay acquiring Skype and one of the rationales that they give for the deal is well people will be able to call each other and verify transactions you know the mind blowing thing here with this is like when we covered PayPal the PayPal eBay acquisition that made so much sense because people were already using PayPal as a major source of payment on eBay and I'm very curious like were did they observe behavior where people were using Skype to do this already or was it literally hard to imagine like I have no idea why you would call somebody after they wanted eBay auction yeah like it almost to me it seems sort of like eBay's foray and to try and to become a conglomerate and like private equity style take on this high growth business that you know has a very pioneering technology and see if they can just you know grow that as an asset inside their organization and like theoretical synergies happen with their other product but to me you know hindsight's 2020 and we can look all smart here being like that was a dumb acquisition but yeah I don't see it yeah I agree I mean it would be hard to see this being a smart acquisition regardless however it was definitely a dumb acquisition because they made one key mistake as part of the acquisition and that was much like when when the when the cuz I guys sold Kazaa and they kept the technology once again they kept the technology and so they had a I think it was a company called Skype technology is that literally was just licensing it to eBay it was actually a company called I don't know if it's Jolt ID or Jolted it's J-O-L-T-I-D and that was then Sherman Freese's company and they kept that the core peer-to-peer networking technology in that company and then licensed it to eBay and Skype and so as we'll see in a minute that that definitely comes back to bite eBay and Skype too so the transaction happens Skype which is this crazy European company is now part of eBay based in San Jose you know run by I think Meg Whitman was still CEO at that point in time yeah this is September of O5 yep September of O5 you know very you know Silicon Valley but like very corporate as far as Silicon Valley goes has been through the dot com crash and now emerged and is a very large public company so to say there was culture clash is is an understatement and in fact in 2006 most of the eBay management goes over to Estonia to go you know visit visit the Skype team there and you know go through kind of like the roadmap and the feature development and the integration plans and you know that doesn't doesn't go you know this the Skypeers aren't too excited about that but then in the evening they they decide they're going to throw out the Skype team's going to throw a huge party for this for the eBay guys coming over and and so they throw this huge party at the hotel where where everybody where the eBay team is staying and the party and apparently Nicholas Zendstrom we read this on the internet so it must be true he gets behind the bar starts pouring everybody shots unclear if they included Tabasco or not and and then he gets on the bar and he's he's still you know he's pouring shots for everybody and he yells out what happens in Estonia stays in Estonia and and the ends up like everybody eBay Skypeers they'll jump in the pool they're all like fully closed at this point in the end of the night well it turns out it gets caught by news crews in Estonia and it's on like local television like eBay and Skype like management basically trashing this hotel so then of course they have to pay for it all and you know this is not like the corporate culture that that eBay signed up for so yeah sounds like a pretty good party kind of wish I was there but but the eBay management did not so a couple years go by you know Skype is still growing super super fast we get to 2009 and Wall Street so Skype is at this point the fastest growing part of eBay division within eBay they have but that's a story we've heard before PayPal yeah exactly the Skype has over over half a billion users around the world at this point and is quite profitable and making a lot of revenue in the third quarter of 2009 they made Skype itself did 185 million in revenue and but but it's just not a fit with any bay and Wall Street is is is saying that they should spin it out or do something this makes no sense and and and so they start working on a transaction that we referenced earlier where a consortium of private equity firms and in recent Horowitz which had just been founded by Mark and Ben are going to invest in directly in Skype spin it out of eBay eBay I'll retain a stake and and end up valuing the company about at what eBay bought it for a few years earlier because I think somewhere in the middle there October of 2007 eBay did a write down internally of of the value of of Skype yep and but there's still one problem again which is that Skype doesn't own the IP and and they're they're just licensing it back from from jolted from from Zenstrom and freeze and so what happens Zenstrom and freeze actually sue both eBay and the investor consortium sue to stop them using the technology and there's this whole big and this is all playing out in public eBay as a public company so that's totally road blocking any of the totally road blocking you know there's a chance that Skype could just die like one one very real path was that they couldn't use the technology anymore that they would just have to shut the whole thing down and like I don't that's not realistic right they're going to settle well right so the other another potential path with that the eBay and the Skype team was furiously working on is develop an alternative technology to power Skype but again really hard to do that because the peer-to-peer technology is kind of the core of how this works and and then the third option is settle with them and that's really I think you know what was going on was was the founders were basically trying to trying to you know they they wanted to invest in the deal and they did end up investing in the spin-out but so they do eventually end up settling and it's interesting what happens so they give jolted 10% in Skype as part of the settlement Skype gets so they get 10% equity stake Skype gets the technology so finally the actual technology becomes part of Skype the company and and the founders also get an $85 million cash payment but what's interesting is they then also invest $80 million into the spin-out so I guess net the cash comes out about even for them but they again then get another roughly 4% of the company so they end up with 14% of Skype post-spin-out eBay retains 30% and the investor group gets 56% of Skype also interesting as part of the deal Skype itself at this point Nicholas and has a venture firm in Europe which is quite good venture firm called Atomico Skype ends up investing in Atomico's second fund and investing in audio the streaming music service that was also started by them both of these as part of the settlement wait was audio an Atomico company or it was audio who started what's the connection there is instrument-free started audio no way yeah they had a third act without yeah they had a third act and they had a fourth act a company called juiced which was going to be appeared appear video streaming you know tele basically disrupting television and Skype didn't invest in that but they agreed as part of the settlement to promote juiced on Skype I don't know how that they would promote juiced on Skype but there's a part of the settlement wow super interesting this is a crazy deal but it works out so the spin-out happens October of 2010 Skype hires Tony Bates who was a star at Cisco to come in and be the CEO and and before that in June of 2020 and Mark Gillette who was an operating partner at Silver Lake became the chief development officer so those guys you know this is where the folks at Microsoft at Microsoft start to become familiar with these names people who are there now and for the the last five years or so both played huge roles in sort of the integration and leading the Skype division inside Microsoft yeah huge roles and and so in these couple years in the interim Tony and and and the new management team basically focuses on like totally restructuring Skype so integrating the technology that is now finally part of Skype into the company modernizing it go go go go classic and super well executed private equity play incredibly well executed um I mean I don't know if we're going to disaggregate the grades of all of these acquisitions here but you know I think this definitely uh is making a case for for getting the highest marks um they also uh realize at this point it's obvious that mobile is going to be a thing so they really push Skype for mobile getting on iOS getting on Android um and uh the business does great and and then just a couple years later in May of 2011 um so actually less than two years after the spinout happens for me Bay Microsoft shows up and finally we get to the end of the story eight and a half billion dollars acquisition uh Microsoft announces in May of 2011 that their acquiring Skype uh at that point was their largest acquisition ever uh just just until linked in just until linked in um and and looking um looking at just to recap September of 2009 their valued Skype is valued at 2.75 billion in the private equity takeover and then when you look at this Microsoft acquisition May of 2011 so what two under two years under two years later essentially six billion dollars almost six billion dollars of value creation um now granted I mean there was a lot of pain that they had to go to to get that but hey that's a pretty good payout for everybody yeah and I mean value creation defined in the terms of which I guess is how you define value but um value is whatever the highest bidder is willing to pay um because if you truly look at the intrinsic value I mean it grew tremendously in terms of user growth under uh under um silver lake but boy you know Microsoft paid 32 times Skype's operating profits yeah so when Microsoft acquired Skype uh had 700 million users and in 2010 the full year of 2010 uh had done 860 million in revenue and 264 million in operating profit um so it's still I mean a very rich price paid by Microsoft right boy it's something that I think kind of gets lost in this all the ups and downs and roller coasters of this story and um all of these transactions were reported so much in the press is Skype is actually a really really good business yeah absolutely I mean we we focus on this you know the valuation play of like basically eBay sold it for what they bought it for after some tumultuous years um you know the private equity days they they tripled it in less than two years um but you're right you know as an independent business uh you know I don't know if it's actually worth $8.5 billion dollars and in um in 2011 but like fantastic business yep fantastic business and and eBay you know um we've been pretty hard on them I think justifiably so as thus far but but they did make quite a bit of money on Skype um because they they sold a 65% share uh at the spin-out but then they retained 30% great point and so when Microsoft bought um when Microsoft bought Skype they made uh roughly back you know the same value that they even just from that pretty close to the same value that they paid for Skype in 2005 that's totally lost to the narrative I mean the intelligence of of eBay to hold on to that much that it had had future growth ahead of it outside of eBay yeah I mean it was never a question that a this was a great business and b was growing super fast mm-hmm even through all of this tumult yep um and so might uh to be clear there's no more partial ownership after this Microsoft really I mean they they clean out the clap the cap table they're the the full owner they have in which usually is what happens in an acquisition but I guess third time is the charm for Skype yeah yeah well I mean we're used to um yeah kind of shocking what happened with eBay I was gonna say like what we normally see with the tech company is they want full and complete control because they're gonna integrate the product and it's gonna become like you know you as we're doing research we look into Skype today and it's it's impossible to get clear numbers on how the Skype business is doing because it's been so integrated into every fiber of what Microsoft's doing and that's kind of the the normal story people look at it like an asset that they've acquired that they move into all these pieces of their business not this like independent private equity own thing that another tech company kind of owns and the founder is kind of own yep like there's management put in place to clean it up and get it ready for one I think that's why you know part of the reason why Wall Street was clamoring so hard for eBay to spin Skype off uh in the late 2000s because you know they reported it as a separate division like it was a completely separate company there were no synergies with eBay despite whatever uh whatever they may have said at the time of the deal um but it was really clear that there was a lot of value locked up in that company yep yep so at this point uh Skype's former CEO Tony Bates is now the the uh president of Skype reporting directly to Microsoft CEO Steve Balmer they have 663 million global users and uh you know it's it's time to do the integration it's uh this is in the the um I remember this vividly when the month one Microsoft memo came out that um we the the company was going to reorient to more of a functional organization under uh yeah under Steve under Steve um since then obviously Satya has come in Microsoft taking a little bit of a different or tremendously different direction um and uh but what's interesting um you know and then we'll move on to I feel like we've talked a little bit about acquisition category already but um I don't know if you remember you know there was a lot of when Balmer announced that he was going to retire there was um a lot of speculation about who the next CEO of Microsoft was going to be oh Tony Bates was Tony Bates was pretty at the top of the list you know it was Tony Bates uh it was Alan Malali from Ford until he went and joined the board of Google yeah right good way to disqualify yourself from becoming CEO of Microsoft uh and unclear that he ever wanted the job maybe that was how he stated he did more stuff yep um and and Satya uh but Tony was a very uh very legitimate candidate to potentially you know become the next CEO of Microsoft yeah that's right uh he's actually a GoPro now really the president of GoPro huh yeah um it's it's probably worth talking a little bit about what's happened at Microsoft since uh since the acquisition um so for a long time you know um let's talk about what's going on at Microsoft during the period of the Skype years so they had office communicator uh that was part of the uh the office suite when you subscribed and and you entered an enterprise engagement and uh you know you you got word excel power point uh you know viso the entire Microsoft office suite there's obviously varying levels of that um that would come with communicator which I believe in 20 I'm gonna get the date wrong but at some point was rebranded as link which was uh something that never I mean that that was a an enterprise offering that um people who had a communicator in their workplace then knew okay we got link um and that was not never a brand that was on on consumers the typical consumers tongues and um in acquiring Skype then there was this like very interesting you know dichotomy of well we've we've been building this thing called MSN messenger which was our consumer offering for a while there was office communicator which became link now we have Skype yeah so there's sort of these like three different chat looking things that all seem to sort of do the same thing and it's taken probably three or four years um to really start to narrow that so MSN messenger has been killed um link is dead uh is formally uh you know changed into and then using kind of a mesh code base but um Skype for business so there's Skype for consumers and Skype for business for businesses and uh you know this is in when you log into your your consumer mail offering you see uh Skype automatically is there there's all sorts of apps for every platform it's baked into windows um it's it's really kind of like across the whole Microsoft ecosystem at this point yep and let's not forget a year later Microsoft acquires Yammer yes and then all of its glory all of its glory you know enterprise um social or enterprise mask communication uh that transcends email is and will be a thing it just was not in the form of Yammer yeah that was just is it yeah it's kind of an interesting product in the early days well it's interesting go for it um you know I feel like we're bleeding a little bit into this is probably another right teams here but um you know Skype was really uh well I'm just gonna say we'll talk about a more in tech names later um Skype was really the first both business and consumer internet product you know and really um really in many ways both foreshadowed and uh was the wrong instantiation of slack uh to come you know I mean slack is a business product um but very uh also used by consumers super user friendly super super user friendly and Skype is very similar um I think was more a consumer product and the business model was more for consumers than enterprises but it was the first I don't know if it was the first but it was a great example of a crossover product that uh businesses I mean I do many calls with you know with startups uh I do is as Skype video chats yep yeah it's uh I wouldn't say that uh it was the wrong product like I think that video audio um serve a different purpose than than what slack is or glorified the IRC chat um you know slack is expanding to become communication and the fiber that that um you know exists between employees that's more than just just chat but that's really their core competency and the question is who will own um communication in enterprise is going forward and what form will it be and will these things be combined yeah like are we going to see uh you know a Skype like product and a slack like product merge and are we gonna see you know uh that happened you know we're gonna see like let me see this right slack get skype-ified and Skype get slackified at the same time well I think like these things are both happening um but it's interesting you know the the path that Microsoft has kind of taken since the acquisition with Skype we were talking about this before the show is not a unified path I mean there's Skype for X Skype for Y Skype product derivative Z um it's very confusing whereas like unclear what exact what product that Microsoft and Skype are offering today that I would use for what use case whereas you look at slack on the other hand it's just slack like there is one product there is there's no slack for one front door uh and everything is integrated into slack but it is one user experience and then you can do everything from within that one user experience um and I think that is uh just speaking on personal preference but I think also um you know speaking for most users out there oh it's so much rather have one superior user interface and customer experience that I can accomplish many things from then I would oh am I stealing your thunder here I'm just like this is it always comes back to vent housing it's it's integrated versus modular and like like it just like it's going to ebb and flow and it's going to be advantageous to be bundled and then it's going to be advantageous to be unbundled and then it's going to bundle in a new way and it's going to keep going back and forth and like we're about to see bundling I think and these you know we'll see this this stuff get recombined and then we'll see get rebroken out again when that's appropriate but I yeah I want to move on to acquisition category okay let's move on to acquisition acquisition category so I'm going to call this a product acquisition um there is technology in there well it very definitively was not a technology acquisition a couple times yes yeah it certainly was more of a technology acquisition this time than it was the eBay time around um I don't the reason I don't think it's business line is because they bought it at such a high multiple of what their operating profit was that they weren't just going to buy and cash flow this thing yep they were buying a product to integrate into the rest of their ecosystem and create a stronger um you know a stronger offering across the board this was an acquisition done where this product was being greatly sought after by by both Google and Facebook there were acquisition rumors swirling for about half the price of uh yep what they got bought by Microsoft for months before this and so you know in a competitive environment where um video streaming technology is not yet or video chat technology is not yet commoditized we're still two years away from Google launching hangouts you know this is a product that that has a lot of users is growing fast and uh and can really be integrated to beef up somebody's offering and Microsoft decided it needed to be them yep um I totally agree uh it's interesting you know I think the eBay acquisition really was a business line acquisition I mean it was totally separate it was reported separate it was a very different product um but uh but the Microsoft acquisition I think is very clearly a product acquisition and now with the integration that you've seen into all parts of the office suite and other areas within the business yep um okay what would have happened otherwise sort of is interesting to look at like the rise of hangouts and like uh competing video chat and void products like it doesn't feel like Skype is the sort of one and only the way that it used to be yep I don't know if you you feel that way too I definitely feel that way anecdotal but like I I'm when someone says like we should hop on a Skype call it ends up being a Google hangout pretty often or in an enterprise case often a zoom uh call um oh yeah blue jeans yeah blue jeans or zoom um I found that zoom actually tends to work the best out of everything um but uh I think this is interesting and I want to talk about this in the context of what would have happened otherwise because yes you're right there were lots of rumors that Google and Facebook were looking at Skype as well when Microsoft bought them which I just think is super interesting and also comes back to this crossover nature of Skype um Microsoft primarily acquired Skype I think for the enterprise side of the business more so than the consumer side of Microsoft's business um and uh and and you see that you know it was actually it was our our friend Kurt Delbeni who uh when he was president of office who who led the acquisition so it was actually being done through office um at Microsoft and then think about like what if Facebook had acquired Skype like and then it would be primarily a you know a consumer facing product and the fascinating thing about it is Facebook had just launched like a Skype a white label version of Skype inside um inside of uh Facebook Messenger so Philip Sue I think led this project which is like the the overlapping people and this is incredible so when I um was doing the garage at Microsoft Philip had started one of the most legendary projects of all time and he was like a you know constant garage tinker or guy and it worked on all kinds of cool stuff he ended up leaving to go to Facebook um he's he runs uh engineering in the Facebook London office now but before that um did a led the project to integrate Skype calling which wasn't called Skype calling it was just like video video calling I remember this yeah into newsfeed but it was like the power to Messenger yes yes and so then I mean that left all these questions of like well is this their first like are they just doing a little bit of a deal now so that you know that they can acquire them which you know didn't didn't quite end up happening but interesting proof of concept there totally um now that we're here in what would have happened otherwise I think it's worth bringing up the issue of repatriating of capital and what that currently looks like for uh US corporations um we've been hearing a lot about it in the news recently um in this kind of political race that we're in about companies can't bring you know this national travesty that we're in yes um god I can't even think picture sorry about that so in thinking about you know what could have Microsoft done with a lot of this capital that had overseas it had been a long climate of not being able to to bring it back to the US without paying huge taxes um Skype is a Luxembourg corporation it's a pretty it's a great point pretty great way to um you know and looking at like what foreign businesses could we buy that would integrate well into our products and give us like you know uh this boost into communication like they they needed a consumer and to boost their enterprise offering in in video chat and calling like that it makes total sense when there's not a lot of better things you can do with that capital yeah I think this is a great point and also um you know something uh we don't know exactly how Microsoft thought about this and how much this played into it but Ben as you pointed out some of the rumors that were circling about other players google and Facebook acquiring Skype the rumors were at a much lower price right um was Microsoft willing to pay a lot more because they had all this cash overseas that they needed to uh that they needed to put to work certainly at a much healthier balance sheet and then uh then Facebook at least at that point yeah that but I mean this is uh was Facebook public if Facebook was public at this point I think it was just been let's see what was the Facebook guy it's an easy uh no Facebook was yeah Facebook was a private company at this point um not public uh so uh would have been certainly possible for them to do an acquisition of this size uh but quite difficult right and and and honestly that's one thing I'm going to keep in mind with when grading this acquisition I mean I think that um it's the the the super skeptical lens that I had on uh coming into today was Microsoft spent 8.5 billion dollars with Skype and seriously like how are they gonna earn that back yeah like all right you know it's it's so far from being something that they can just cash flow uh it's um growing but like it was already a pretty huge business with you know a uh a massive percent of the uh uh VoIP calls that were made um globally going through it it wasn't something that that you know I thought had that much more like growth left in it and nor could I nor did I believe Microsoft was gonna accelerate that and you know it's it's done well like it's it's grown you know the way that you would expect it to grow but like when you think about like in the context of what else could they do with that cash and was this the best thing they or one of the better things they could have done with it certainly better than uh by intrasory bills yep great point really great point um I guess the other thing we should we should cover on before we move out of what what happened otherwise um you know I think there was the path in a very viable path for Skype to go public um and be a standalone public company again that's right that's right and then what is this uh in 2010 uh Skype filed with the SEC to raise a hundred million yep they had actually filed to go public um filed an S1 uh and I think that was probably the plan at uh spin out when when silver lake and uh andrison and the other folks uh invested in Skype at a spin out was was that you know with some cleanup uh led by Tony Bates and others um that that this could be a standalone public company yeah on detect trends uh I think that it's interesting that there's a good foray if from what we were just talking about um it's interesting to know it for listeners that we keep seeing this pattern over and over again where a company gets bought right when it was about to raise a bunch of money like Instagram or um somebody's looking out looking to do a roll-up strategy and then they get bought because an offer was put down on the table to stop them from doing that roll-up strategy and in this case it was they were preparing an IPO and that made made them a really great takeover target and it's really interesting to see um that's my first my first uh tech theme is that a lot of times whether it's you're about to make acquisitions you're about to IPO or you're about to get bought um um there's a uh there's a little bit of like a leverage game going on where you pursue concurrent tracks at the same time in order to make sure that the pressure is on for whichever one you want to happen to happen back when I was uh an investment banker we used to call this a quote dual track process dual track being one track an IPO and one track being an acquisition and you're absolutely right these things totally play off one another and um the fact that you are it is known that you are preparing to go public you filed your s1 it's out there that has a way of drawing buyers out of the woodwork um yeah um another tech trend is the rise of the mega acquisition so yes yes this seemed absolutely insane at the time I mean 8.5 like it was uh I worked around a lot of um there were a lot of cynical people in my group and uh when I worked at Microsoft and I like a lot of lunch conversation was the people like counting the number of things that like how many skips something was like oh this is an eighth of a Skype or you know putting out like like making like crazy jokes about um what a huge number this was and how it was never going to pay off for the company and it turns out it's actually less than half of a WhatsApp it that it's so true it's less than half of what's a WhatsApp um you know consumer consumer chat broadly defined also includes uh Snapchat and you know like yeah they weren't going to become Snapchat they run a very different path for that but like could they have become WhatsApp I mean WhatsApp's value prop is that you could very inexpensively communicate across um it's amazing it's it's the exact same value prop yeah it's just for text not for voice exactly inexpensively communicated cross political boundaries and avoid the tax of the telecom and like it is exactly that and you look at you know that that what 22 billion dollar uh get just um just fully valued given everything that went into that deal future episode coming soon at some point WhatsApp I just don't think we have enough to decide yeah WhatsApp I think we need to wait a little bit but anyway like looking at like could could Skype have become WhatsApp like did they did they falter by not becoming WhatsApp or was it just a different era yeah I mean um it was totally a different era I mean I think so my tech theme this maybe a good second to it um it is uh you know Skype on the one hand it's it's kind of sad that I feel like this is a company that has never fully realized its potential um given this crazy corporate history that it has uh however the growth of this company and the like product market fit um that happened is pretty incredible especially when you go back to the context of when Skype was started in 2003 and launched in 2003 and the kind of growth that it experienced and like what were you doing until like I was in I was uh I was uh graduating from high school and starting my freshman year of college in 2003 and I owned a tablet PC like you know nobody had ever heard like there were palm pilots you know like but there was no there were no smartphones you know the global internet most people in America didn't even you know I don't know if it was most but certainly a large portion didn't even have broadband right now and so you couldn't use Skype if you didn't have broadband um and like think about that and did addressable market and yet how fast it still clearly grew um and so the the tech theme that I had is uh there was a really great actually ironically right at the same time that the Microsoft acquisition of Skype happened uh Bill Gurley wrote this great blog post called the um I believe the title is uh all revenue is not created equal the keys to the 10x revenue club and uh it's great post it's a great post and it goes through 10 points of like what is it that makes companies that are valued highly by public companies valued by Wall Street um at 10 times revenues or higher uh sort of these elite companies like what are the factors that separate them from other companies and he includes a slide from an early Skype pitch deck uh in uh in one of his points and um this slide is just amazing uh the the point that Gurley is making is um that companies that tend to be valued very highly they grow on the back of organic demand versus heavy marketing demand is what he says and so you know a lot of companies you think about this and we see it and start ups all the time um you know your unit economics quote-unquote maybe working but if you're paying a lot of money to acquire every user that you're um that you get to your product you're going to have to pay spend a lot of money to build that market and win that market. Skype never spent any money on customer acquisition uh it was all organic it was just pure product market fit and so the slide from the Skype pitch deck uh they're comparing themselves to Vonage and if you remember Vonage you know was the Skype competitor in the day um and Vonage advertised all over you know national television in the US um and then and this slide just compares Skype's uh cost cack to acquire a new user and Vonage Vonage is $400 that they were spending per new user and uh Skype was one tenth of one cent and uh because they had they had no costs for every call it was it was a complete peer-to-peer model they had no server costs um and they were spending no marketing and so this thing could just grow and grow and grow and there were no limits to it um which is pretty amazing it's it's super rare to find these kind of businesses um and again like I said you know Skype uh kind of I don't think it's the credit it deserves as a product and as a business uh because of this corporate history but um but but the growth is just impressive yeah yeah yeah all right on to grade the acquisition um I'm giving it a B minus I thought I was going to be much more efficient are we grading here I'm grading the Microsoft acquisition yeah I thought I was going to be way way way harsher like I um and in fact yeah I didn't know I was going to do this episode years ago but like I would have called it like a D in in 2012 and it seems like um over time it actually is getting integrate it takes a long time because it's a big ship to maneuver but like it's the right move to have Skype and Skype for business and not have you know version link and etc and totally deprecate communicator like it's it's the right move it was an amazing use of that capital considering other options that they they could have done with it um and unless of course we see some kind of like big break where all the US companies in the next few years are allowed to bring the cash home but I don't really foresee that happening um bring home and a reduced tax rate um and on top of all that I think having this consumer offering and a little bit of that consumer DNA with all the all the Skype teams um that that have built this product leaves them fairly well positioned for whatever's about to happen in the enterprise communication market that that slack has pioneered um you know I'm sure they uh wish it looked more like slack right now and less like the kind of like slow saidy growth of of Skype but um you know if Skype teams is a real thing I'm excited to see it yep yep um I definitely agree with that um yeah it's interesting to think about you know think back to one of our early episodes with Kurt Delbenny uh talking about a complete and wonder list and sort of recreating the office suite and in particular outlook on mobile um and I got a wonder if you know and Kurt led the Skype Skype acquisition when he was at Microsoft the first time um I got a wonder if the experience with Skype informed some of the things they did differently with a complete um and in particular you know making Javier uh who is the CEO of a complete head of all of outlook not just outlook mobile but empowering him within the organization to really remake and and it's still a work in progress and will be for a long time but I think outlook has made huge strides from the massively bloated super old school piece of software it was yep before the acquisition to the still really bloated but you know much nicer designed and clearly making strides and you know it's my most open-dap on my iPhone um where it is today uh and and to compare that to Skype where yes Tony uh stayed at Microsoft for a little while and wasn't the running to perhaps become CEO but then he left and also ultimately not like a product guy right also also ultimately not a product yeah he plays from the PE yeah he was like a turnaround guy yeah um and uh and I think the lack of any real leaders you know corporate leaders um within Skype that could come in and champion that and and champion a product division for Skype as part of Microsoft um has really hurt them yeah oh the heroes of Skype are gone and the heroes that are talked about and Skype and the talent offices and other where otherwise are the the original founders yeah and like that the dudes from the newspaper ad yeah and I mean you even go yeah right you even go and you look at the the way that it's structured in the org now like it's it's under redmond leadership I mean it's it's all over it's that these distributed offices in like six or eight places around the globe but like longtime Microsoft people yeah they report up to that um you know they're they're running it like the the next evolution of link which you know makes a lot of sense but it's it's uh you know it's very different than the Accompli acquisition yeah so and and thinking back to what Kurt was saying um you know that realizing that ultimately a lot of these things really are about the people um you know that's what was not there in the Skype acquisition uh as good as the product is and the product market fit and even the financials um so I think I actually net out at the same B- like um would have been a bad acquisition but for some of these other factors we mentioned like finding a use for foreign cash um it actually being a good business but just so relative to the potential that it has um not yet realized yep okay uh let's move on do some quick follow-ups and hot takes uh so follow-ups from our Android episode uh google recently held a big event and launched the Google iPhone otherwise known as the Google Pixel and it uh sort of unapologetically so like they're they're marketing copy mentions like the iPhone or at least their press release copy does and it's it's um it looks really good like all the reviews are super encouraging yeah someone someone here at PSL got one uh earlier today so I'm excited to like play around with it tomorrow but like looking at the pictures the comparing it against the iPhone 7 um not counting the portrait mode stuff all the flaws that I notice in the iPhone photography over the years where it like it flattens things too much and it like loses some details and it doesn't have like the the incredible high contrast in the textures like the pixels phone looks really really good yeah I'm excited to play around with it and aside from all that there there's like um there's a niceness to that hardware that we haven't seen in um non-Apple devices yeah and all the time it's interesting uh a couple things for me one we in our Android episode you know we're like the mobile wars are over google and apple you know are not fighting each other anymore and then a month later you know google comes out with like the most direct shot at Apple that they've taken in a long time um but I still think the mobile wars are over um the but it's interesting in that episode we talked about the days when Samsung was just like unabashedly copying the iPhone and the design wise I'm ripping this off from everybody needs to go listen to the most recent episode of the talk show with John Gruber with host bent or with guest Ben Thompson of course we can't go an episode without mentioning Ben Thompson of course um but this is John Gruber's line but it's like it's like Samsung always acted like Apple never exists like oh Apple never heard of them but look at the new phone that we invented like and look at this like a beautiful new design that we came up with yeah and google is just not treating it like that yeah yeah and the the really interesting thing and again totally um totally go listen to the that podcast episode but um Ben and John point out this really great point that um this is a potential change in business model for google not only because like they're selling hardware and they normally are the you know they just they just make the software and then the OEMs make the hardware but um google assistant right now appears to be only available on yes pixel and not on not it's it's actually not part of android the google assistant is part of the phone and not part of android so yeah this is by far the most interesting part of yeah so so walk through this um in a world where there are you use an AI the AI is there to give you answers not options and google's business model is predicated upon giving you options some of which are sponsored options and in this voice world like the user experience of this we're we're shifting to you know when banner ads didn't work on mobile and we had to figure out what we're like now we're shifting to this world where like search result ads don't work when people are asking their phone stuff so google had this incredibly profitable business model and now they there's a chance they might need a new one if this thing that they happen to be very good at which like this is like the Google is piece of technology of all time is creating this this Google assistant um this thing they happen to be incredibly good at is incredibly bad for their business model yeah man this is technology cycle disruption at work here right right so then they look to apple for like okay what's a good business model where we can leverage the things that we're good at and it just so happens that it might be that the things are good at being Google Assistant um maybe they just have a really high marginal phone that include the google assistant yeah super interesting so go listen to that podcast because I'm totally ripping those ideas from there and that is like such a good astute analysis various student analysis hot takes um um interestingly to me I think the the interestingly the least interesting thing to me that we are going to talk about today is a tnt and time Warner yeah I mean it's 1999 again uh what's all this new and uh my senior research paper was about net neutrality 42 pages of arguing why that is the most relevant and terrifying uh aspect of this it just keeps coming back and I every time we get closer to you know um the the telecom and the content and a gigantic content provider being aligned like this you know it scares the crap out of me yeah but I mean I think a little bit like that I hope uh knocking on wood um you know it's a little bit like this election cycle like it's actually like you can't fight the forces of history and like you have these um wait same more about that how does that well like uh that um politically like we're moving towards uh a much more progressive society like that's the direction that history is moving um and if you're gonna fight that you're gonna be on the wrong side of history uh and just like that in this case you know net neutrality is the future and content will be unbundled and Facebook is worth more than every uh old traditional media company combined and that is the future uh but what's interesting is that even though you know we can sit here and say like that's the you know the right side of history at times like these these forces pop up that are total reactionary conservative um you know go back in time make America great again um and like hopefully they will lose right but uh that you just compared like AT&T and time works merger to Donald Trump I did that I just did that yes yeah the slogan of this like year long process of FCC approval of this thing is gonna be make America great again yes all right all right we should just leave it at that um let's talk about the wire cutter oh wait that um uh we'll link to this in the show notes but I um I tweeted a link to this article the other day that uh had an awesome graphic of baby uh basically the baby bells getting built back together it is so interesting to look at like the the AT&T breakup and um kind of the reassembly of the um terminator two robot into it's it's form our glory and it's it's super interesting to see how that's all worked I feel like I should say one more word about what I meant by yeah make America great again um like time Warner has many good businesses within it and it will continue to be decent businesses especially HBO probably a really good one but like by the minute so good yeah by the minute um that world just becomes less and less relevant like who watches linear television programming anymore um you know movies are also undersea like there's the old world media companies and the types of content they produce like just don't have as important a place in a snapchat world you know I like it okay the wire cutter the york times yeah great for them god the wire cutter is awesome and I don't think I've bought anything of significance that was not researched on the wire cutter of the sweet home in years um so it's so great and I'm an unabashed you know fan of the New York Times and it's such it's great to see them land in one of the media institutions that has figured out how to come into the modern era and like to your point earlier go with the the version of the future and I think like um the New York Times had it a lot easier than many smaller regional papers because they were truly a destination site they had a brand built up people were gonna go there without um having someone without someone needing to share content with them they you just go to the New York Times because it's the freaking New York Times but like love seeing how progressive they are in you know the experimenting in VR and buying sites like the wire cutter and there's um we're just watching before we were diving into the show there's a great interview uh with it's it's Brian Lamb right yeah yeah with Brian Lamb um talking about how he loves doing what they do with the wire cutter because rather than writing news he's writing something that just helps people he's like this this is a thing that people find continual value in over and over again we figured out when to refresh it what to refresh it with went how to tell people that we've refreshed the guides and we just build a solid long like many multiples of hours longer than anybody would ever take to write a piece and um it's it's a it's a it's a phenomenal piece of content that's super engaging that actually helps people and um you know I think it's it's interesting we'll see as they start to bundle it in more within New York Times coupling some of these buyers guides with um more investigatory pieces and the example he uses is like um it's like why can't anyone make a good Wi-Fi router is the the investigatory piece that someone writes happened with the Samsung Galaxy Note 7 right right but then coupling that with a buyer's guide for wireless routers or phones like what is actually the the one that you should go by and I think we're going to see um you know the continued evolution of of digital journalism all right with that should we do a carve out we should um although I feel like I'm just sitting here doing carve outs for the last few minutes uh a red uh finally got around to reading the super long form piece from the New Yorker called Sam Altman's manifest destiny oh it's a great article yeah it's like it's interesting so for a little background uh Sam took over a Y-combinator from Paul Graham um and sort of like revamped the whole thing made it significantly larger opened up new divisions hired a whole bunch more people and um frankly expanded the scope of the ambition significantly hugely yeah and it's you you either really buy into it or you think the pieces of mega puff piece but no matter what reading it leaves you with this mindset of a widened ambition and thinking about like uh oh I've been thinking too small and it's uh I love when things reset my perspective like that so highly recommend it yeah really really good piece also highly recommended regardless of what you think about YC or about Sam and I fall on the side of like I think um everything Sam's done is is um I'm on team Sam so yeah I agree like um the not everything he's doing will work and that's the point um right that you can't be to have that scale of ambition you know you need to be comfortable with failure and that's eminently lotable may the failures be colossal and the success is even more so yeah totally um great piece go read it uh my car about for the week super fun one one of my really good friends uh from business school uh Jake Saiper who is a venture capitalist at emergency capital is the star of the hottest thing to hit the Bay Area and Silicon Valley uh since Silicon Valley and that is so much the musical no way yes which ironically Jake is the star of the show and he plays the entrepreneur in in the musical um opened and ran in San Francisco uh last week and was a huge success so big shout out to lots lots of articles you can go read about it we'll link to some big shout out to Jake and uh very very well done hopefully coming to a Broadway stage near you soon that's awesome yeah if you want to see a great show or you know talk about enterprise sass go talk to Jake yeah totally well that's all we've got today if you aren't subscribed and want to hear more you can subscribe from your favorite podcast client um if you feel so inclined with love or review on iTunes or please tweet Facebook share with your friends and uh we are acquired FM on Twitter we'll see you next time see you