The Enshittifinancial Crisis: Part One

0:00This is an iHeart Podcast. Guaranteed human. Call Zone Media. Hello and welcome to Better Offline. I'm your host, Ed Zitron.

0:22Better Offline. That's right, folks. I am back. It's, well, we've gone past CES. you've had your Steve Burke episodes. As ever, buy the merchandise, subscribe to the newsletter. It's all in the notes. And you are here for the first of a multi-part series about the final and terminal stage of inshittification, when the companies that turned on their individual users, then turned on their business customers, finally turn on the markets and investors themselves. Now, it's important to start this with a point, and that's a good friend of mine once told me that the more I learned about finance, the more pissed off I'd get.

0:58And I cannot think of anyone who has made a more egregious understatement in my life. I've spent the last two years basically teaching myself economics and all of this good stuff that I find genuinely really interesting. It's enriched my life. And it's also driven me a little insane, as I'm sure many of you are well aware. The more I learn, the more frustrated I get because I'm not a genius by any extension. I don't even know if I think I'm that smart, but like this stuff is just sitting there. You can see it. There are many other people writing like Edward and Grace O 'Junior, Molly White, of course, Brian Merchant as well.

1:36These people have dug into these types of things, but nevertheless, the mainstream, they're kind of missing something. And this four-parter is about that. And it has, of course, a companion newsletter where I will have most of the links that you'd usually see in the link document. I feel like nobody likes that document anyway, so I'm going to find a better way of doing things. But let's get to it. Because there's this echoing melancholy to this entire era, and we're watching the end of Silicon Valley's hyper-growth epoch. And I'd say it's a horrifying result of 15 plus years of steering the tech industry away from solving actual problems, and only really looking for eternal growth.

2:15Everything's more expensive, and every tech product has gotten worse, all so that every company can, I quote, do AI, whatever the fuck that means. We're watching one of the greatest wastes of money in history, all as people are told that there just isn't the money to build things like housing, or provide Americans with universal healthcare, or better schools, or create the means for the average person to accumulate wealth in any way, shape or form. The money does exist. It just exists for those that want to gamble. Private equity firms, business development companies that exist to give money to other companies that are risky, yet regular people are too risky, venture capitalists and banks that are getting desperate and need an overnight shot of capital from the Federal Reserve's overnight repurchase facility or discount window.

2:58Two worrying indicators of bank stress I need to get into in the future. No, no, no. The money does not exist for you or me or a person even. Money is for entities that could potentially funnel more money into the economy, even if the ways that these entities use the money are reckless and foolhardy, because the system's intent on keeping entities alive incentivizes it. We are in an era where the average person is told to pull up their bootstraps, to work harder, to struggle more, because, as Martin Luther King Jr. once said, it's socialism for the rich and rugged free market capitalism for the poor.

3:30The free market is a fucking con. When you or I run out of money, our things are taken from us. We receive increasingly panicked letters with bigger fonts. We get phone calls and texts and emails and demands. We are told that all will be lost if we don't work it out somehow. Because the financial system is not about an exchange of value, but whether or not you can enter into the currently agreed upon con. By letting neoliberalism and the scourge of the free markets rule, modern society has created the conditions of what I call the Enshitter Financial Crisis, the place at which my friend Corey Doctorow and star of CES 2026 and his theory in shitification meets my own rot economy thesis in a fourth stage of in shitification.

4:09And I'm going to quote an explanation of what in shitification is from the New Yorker. And shitification unfolds in three phases. First, the company is, and I quote, good to users. Drawing people in droves as funnel traps do Japanese Beatles with a promise of connection or convenience. Second, with that mass audience consolidated, the company is, and I quote, good to business customers, compromising some of its features so that the most lucrative clients, usually advertisers, can thrive on the platform. This second phase is the point at which, say, our Facebook feeds fill with ads and posts from brands.

4:42Third, the company turns the experience into, and I quote again, a giant pile of shit, making the platform worse for users and businesses alike in order to further enrich the company's owners and executives. Now I'm going to give you a more direct example and kind of bridge on some of the things said there. Facebook was at one point a huge free platform, much like Instagram, that offered fast and easy access to basically everybody you knew. It acquired Instagram, of course, in 2012 to kill off a likely competitor, and over time would start making both products worse. Clickbait notifications, a mandatory algorithmic feed that deliberately emotionally manipulated hundreds of thousands of people and stoked massive political division, eventually becoming full of AI slop and videos, all so that Meta could continue to sell billions of dollars of ads a quarter.

5:26Per Kyle Chaker of The New Yorker, Facebook's feed, now choked with AI-generated garbage and short-form videos, is well into the third act of initiatification. The third stage is critical, in that it's when the company also turns on its business customers. A marketing brew story from September of 2024 told the tale of multiple advertisers who found their campaigns switching to different audiences, wasting their money and getting questionable results. A New York Times story from 2021 described companies losing upwards of 70 % of their revenue during a Facebook ads outage. Another from 2018 described how Meta, then Facebook, deliberately hit issues with its measurement of engagement on videos from advertisers for over a year.

6:04That's their pivot to video. And more recently, Meta's ads tools started switching out top-performing ads with AI-generated ones, in one case targeting men aged 30 to 45 with an AI-generated grandma, all without warning the advertiser. Meta doesn't give a shit, because investors and analysts don't give a shit either. I could say sell-side analysts here too, and those are the ones that are trying to get you to buy a stock, by the way, but based on every analyst report I've read from a major bank or hedge fund about a tech company, I truly think everybody is complicit. In November 2025, Reuters revealed that Meta projected in late 2024 that 10 % of its annual revenue, which was$16 billion at the time, would come from advertisements for scams or banned goods.

6:43Mere weeks after Meta announced the ridiculous$27 billion data center debt package, one that used deep accountancy magic to keep it off of its balance sheet, despite Meta guaranteeing the entirety of the loan. It's completely insane. And one would think this would horrify investors for two reasons. One, Meta's business is both supporting and profiting from organized crime and that 10 % of its revenue, it's also kind of dependent on it. And also, number two, Meta is using deliberate and insidious accounting tricks to act like a data center that it is paying to build and will be the sole tenant of is somehow an off-balance sheet operation.

7:19One will be wrong. Morgan Stanley said in mid-December that it is one of the handful of companies that can leverage its leading data, distribution, and investments in AI, and raised Morgan Stanley's target to$750, with a$1 ,000 a share bull case, meaning like, they think if things go well it'll be a thousand dollars a share wedbush raised metas price to 920 and bank of america staunchly held firm at 810 dollars which is hundreds of dollars more than where we are today i can find no analyst commentary on meta making 16 billion dollars on fucking fraud because it doesn't matter to them because this is the rot economy and all that matters is number go up and this is this is going to be it's going to be a tough for part of folks i'm i'm my blood pressure is going to go through the fucking reality, such as whether there's any revenue in AI or whether it's a good idea that Meta is spending$70 billion this year on CapEx, even though the product generates no revenue.

8:17And by the way, if you say to me, Meta's AI ads play, that whole story is nonsense. And I love 404, but they got it wrong too. They are using bullshit metrics. They're not proving anything. Anyway, none of this matters to analysts because stocks are thoroughly, inextricably inshittified, and analysts don't even realize that it's happening. Or if they do, they're just really craven and horrible fucking people that deserve to not have a job, let alone the job they currently have. Now, let's go back to the whole inshittification thing. The stages of inshittification usually involve some kind of devil's deal, which I actually think analysts are in on, but let's get going.

8:53In stage one, things are good for the users. The platform is free, things are easy to use, and thus it's really simple for you and your friends to adopt and become dependent on it. You don't really trade anything quite yet, other than the fact that you're going to use this easy, good platform that people like and all your friends are on. In stage two, things become bad for customers, but good for business customers. The platform begins forcing users to do profitable things, like show them advertisements by making search results worse, such as with Google, or while making it difficult to migrate to another one, either through locking in your data or the tacit knowledge that moving platforms is hard and your friends are usually in one place.

9:30Take Instagram for example. No one's leaving Instagram right now because there is no other competitor, kind of by design. Businesses sink tons of money into the platform knowing that users are unlikely to leave and make good money buying ads against the populace that increasingly stays because it has to as there are no other options. In stage three things become bad for consumers and businesses, but good for shareholders. The platforms begin to deteriorate to the point that usability is pushed to the brink. And businesses, who are now dependent on the platform because monopolies have pushed out every alternative platform to advertise or reach customers on, begin to see their product crumble, all in favor of shareholder capital, which only cares about stock value, net income, and buybacks.

10:10You've probably seen where we're going, folks.

10:22We're now entering in shitification stage four, where businesses turn on shareholders. Analysts and investors have become trapped in the same kind of loathsome platform players, consumers and businesses, and face exactly the same kind of punishments through the devaluation of the stock itself. Where platforms have prioritized profits over the health and happiness of users or business customers, they're now prioritizing stock value over literally anything and have, through the remarkable growth of tech stocks in particular, created a placated and thoroughly whipped investor and analyst sect that never asked questions and always celebrates whatever the next big thing is meant to be.

10:58And I hate to dunk on one guy, but go look up Daniel Newman on Twitter if you want to see what I mean. Someone just oinking at every fucking thing that a company says like, whoa, Nvidia's going up. These people are very popular and people make stock decisions based on what they say. They're a problem. And the value of a stock is not based on whether the business is healthy or its future even certain, but on its potential price to grow. And analysts have, thanks to an incredible bull run of tech stocks going on over a decade, been able to say, I bet software will be big for most of the time going on CNBC or Bloomberg, and gladly repeating whatever it is that a tech CEO just said, all without any worries about responsibility or the truth.

11:39And I just want to say, any analyst who might hear this, I'm taking a lot of screenshots. I've been taking screenshots for several years. And this is because big tech stocks, and many other big stocks, if I'm honest, have made their lives easy as long as they don't ask questions. Numball always seems to be going up for software companies, and all you need to do is provide a vociferous defense of the next big thing and come up with a smart-sounding model that justifies eternal growth. This is entirely disconnected from the products themselves, which don't matter as long as, like I've said, number go up.

12:12If net income is high, meaning profit, and the company estimates it will continue to grow, then the company can do whatever the fuck it wants with the product it sells or the things that it buys. Software has eaten the world in the sense that Andreessen, Mark Andreessen who wrote it of course, got his wish, with investors now caring more about the intrinsic value of software companies rather than the businesses or the products themselves. And because that's happening, investors aren't bothering to think too hard about the tech itself or the deteriorating products underlying these tech companies, because these guys have always worked it out, and these companies have always managed to keep growing.

12:46As a result, nobody really looks too deep. Minute changes to accounting and earnings filings are ignored, egregious amounts of debt are waved off, and hundreds of billions of dollars of capital expenditures are seen as the new AI revolution versus a big huge waste of money. By incentivizing the rot economy, making stocks disconnected from the value of the company beyond net income and future earnings guidance, companies have found ways to incentivize their own stocks, and shareholders will be the ones to suffer, all thanks to the very downstream pressure that they've chosen to ignore for decades.

13:18You see, while one might correctly say that the deterioration of products like Facebook and Google search was a sign of desperation, it's important to also see it as the companies themselves orienting around what they believe analysts and investors want to see. You can also interpret this as a weakness, but I see it another way. Stock manipulation, and a deliberate attempt to reshape what value means in the eyes of customers and investors. If the true value of a stock is meant to be based on the value of its business, cash flow and earnings, and of course future growth, a company deliberately changing its products is an intentional interference with value itself, as are any and all deceptive accounting practices used to boost valuations.

13:58but the real problem well one of them is that analysts don't well they don't seem to analyze not at least if it goes against market consensus that's why goldman sachs and jp morgan and futurum group and gartner and forrester and mckinsey and morgan stanley all said that the metaverse was inevitable because they do not actually care about the underlying businesses themselves just their ability to grow on paper now i'm just going to click through to the futurum groups thing. Let's see. Contemplating market criticism of Zuckerberg's metaverse focus. Now, this is a really funny piece because you read it.

14:32Analysts take, in some parallel universe, Zuckerberg would be credited as an entrepreneurial hero, an executive willing to invest in something big in order to create something bigger. Unfortunately for Zuckerberg, he lives here with us in this universe where$15 billion in investment so far has created a nerdy cyber wasteland that few people seem interested in visiting. The numbers are undeniably ugly. blah blah blah blah blah and of course we would have hoped for more progress blah blah blah meta's most deadly sin in managing the metaverse initiative has nothing to do with adoption metrics of the money that has been allocated to these efforts rather meta's failure stems from its inability to communicate its vision properly it's an ironic twist given the company's heritage and creating social media platforms designed to help billions of people communicate worldwide this was written to defend the metaverse and i just want to be clear the defense appears to be give Zuck a chance.

15:19Now, the metaverse is quite fucking dead, I should be clear. And many of you have emailed me about this. And I'm kind of calling one person out because I see these sell-side analysts as genuinely harmful to society. I think people going out there and misleading, well, in articles... Actually, let me take an aside here. You're going to love this. This is not in the script, Matt. I apologize. But analysts have two customers. They have investors, and then they have you. Sell-side analysts, they burp and fart on CNBC or Bloomberg, and they say, hey, I will be big. Then behind the scenes, they have a completely different set of institutional investors they give the real info to.

15:57That should bother you. You ever read an analyst in an article, I'd be a little bit suspicious. I like Gil Luria of DA Davidson, except even Gil just raised the target for CoreWeave. Nothing has changed. Things have actually got worse with the economics. but because the bullshit of the markets exist, analysts are tweaking things in public. In private, I don't know what they're saying because you need to pay, well, I think tens of thousands, if not more, to get those reports. Anyway, that all aside, regular retail investors are the first to get in shitified in stage four. And by the way, if you ever need proof that none of these people actually give a fuck about value, it really was the metaverse and the$77 billion that Mark Zuckerberg burned on it and they create little revenue or shareholder value and burned all that money without any real explanation as to where it went.

16:44No, really. Does anyone know where the money went? $77 billion went nowhere. You think it went into fucking glasses? Are you crazy? Even if they made hundreds of thousands of those glasses and they took, I don't know, $5 billion for Orion and the Meta Ray-Bans, I'm still having trouble working out where this cash when? I think one day we're going to find out. I think we're going to find out something dodgy happened there. But nevertheless, the street didn't give a shit about the Metaverse because Meta's existing ads business continued to grow. Same as it didn't give a shit that Mark Zuckerberg burned those$70 billion on CapEx, even though we also don't really know where that's going either.

17:24In fact, that really is the story of the GPU era. We don't know where the money is going. These companies don't tell us anything. They don't tell us how many GPUs they have, or where those GPUs are, or how many of them are installed, or what their IT load capacity is, or how much money they cost to run, or how much money they even make. Why would we? Why would we know that? Analysts don't even look at earnings beyond making sure they beat on estimates. They've been whipped, trained for 20 years to take a puddle-deep look at the numbers to make sure things vaguely look okay, look around at their peers and make sure nobody else is saying something bad and go on and collect fees and go on fucking CNBC.

18:00And the same goes for hedge funds and banks propping up these stocks rather than asking meaningful questions or demanding even more meaningful answers. In the last two years, every major hyperscaler has extended the useful life of its servers from three years to either five and a half or six years. And in simple terms, this allowed them to incur a smaller depreciation expense each quarter as a result, boosting their income. To explain really simply, when you depreciate something, you say, okay, the useful life of this is six years and I'll spread the cost of that across six years. Or in this case, you'd probably say three years for a GPU.

18:34But no, they've just said due to the magic of math, it's six. So they get to spread it out for longer and claim it's more useful for longer so they don't have to do an impairment, which is when you admit the real cost of something anytime soon. It's wank. Nobody seems to cares. Nobody seems to cares. I'm keeping that. Anyway, those who are meant to be critical, analysts and investors sinking money into these stocks, had effectively no reaction, despite the fact that Meta used, per the Wall Street Journal, this adjustment to reduce its expenses by$2.3 billion in the first three quarters of 2025.

19:05This is quite literally disconnected from reality, and done based on internal accounting that we are not party to. Every single tech firm buying GPUs did this and benefited to the tune of billions of dollars in decreased expenses, which bumped their revenues, and analysts thought it was fine and dandy because number went up and they don't fucking care shareholders are now subordinate to the shares themselves reacting in the way that the shares demand they do being happy for what the companies behind the shares give them and analysts investors and even the media spend far more energy fighting the doubters than they do showing these companies scrutiny much like the user of an shitified platform investors and analysts are frogs in a pot the experience of owning a stock deteriorating since Jack Welch and General Electric taught corporations that the markets are run with the kind of simplistic mindset built for grifter exploitation.

19:56And much like those platforms, corporations have found as many ways as possible to abuse shareholders, seeing what they can get away with, seeing how far they can push things as long as the numbers look right, because analysts are no longer working in any sort of rational headspace, nor are they looking for sensible ideas. Let me give you an example I've used before. Back in November 1998, Winstar Communications signed, and I quote, a$2 billion equipment and finance agreement with Lucent Technologies where Winstar would borrow money from Lucent to buy stuff from Lucent, all to create, and I shit you not,$100 million in revenue over five years.

20:34Now, we're going to go even further back in time now to december 1999 to a piece in barons called in 1999 tech ruled allow me to quote a few paragraphs from it ahem ha okay here we go george gilbert who manages the northern technology fund predicts the web-centric worlds of consumer services and software will fare well next year too a lot of people are increasing their access to the internet says gilbert and e-commerce and business networking are very high priorities for the Fortune 100. Lawrence York, leading portfolio manager of the WWW Internet Fund, is bullish on semiconductors, telecommunications, and business to business, or B2B e-commerce software.

21:18But he's wary of online retailers. That model won't work long term, he asserts. His top B2B picks? Ariba and official payments. In wireless, he likes Winstar, Siena, and Airnet Communications, which went public earlier this month. So, what do you think Larry's scoreboard is? Do you think Larry did well or did he do badly? Let's find out. Airnet, bankrupt. Winstar, horribly bankrupt. Had to sue Lucent. While Siena survived, it had spent over a billion dollars to acquire other companies, all in stock, of course, only to see its revenue dwindle basically overnight from$1.6 billion to$300 million as the optical cable industry collapsed.

21:56Now, one would have been able to work out that Winstar was a dog or that all of these companies were dogs if you were to look at the numbers, such as how much they made versus how much they are spending and the demand for their services. I mean, I just put out a piece, a premium piece about the dot-com bubble that I'll inevitably turn into a long one like this. But basically, the signs were all blatant and obvious. but instead analysts the media and banks chose to pump up these stocks because the numbers kept getting bigger and when the collapse happened rationalizations were immediately created there were a few bad apples enron winstar worldcom the fiber was useful and thus laying it was worthwhile and otherwise everything was fine and just to be clear some of those statements were true it doesn't mean that any of these companies should have existed or that this growth should have happened at that speed the problem in everybody else's mind at the time was that everybody had got a bit distracted and some companies that weren't good would die.

22:51All of that lost money was only a problem because it didn't pay off. This was a misplaced gambling. It taught tech executives one powerful lesson. Earnings must be good without fail by any means necessary. Otherwise, nothing else matters to Wall Street. I mean, companies like Glucent did this. Winstar did this. Global Crossing did this. Outright frauds like Enron did this. They proved it again and again and again.

23:28It's all about incentives. A sell-side analyst that tells you not to buy something is a problem. A journalist that is skeptical or critical of an industry in the midst of a growth or hype cycle is considered a hater, and God don't I fucking know that. Analysts that do not sing the same tune as everybody else are marginalized, mocked and aggressively policed and I don't fucking care stop being fucking cowards if you're an analyst listen to this stop being a fucking coward go read the fucking numbers man I've been doing it I'm reading the numbers I'm reading them to you on this episode go read the numbers there's a reason that people want to fucking talk to me there's a reason that only the same fucking people want to talk to you you're useless you're fucking useless if you're still saying this is a big, my frustration, I'm going off topic again, is that people are going to get hurt here.

24:16Retail investors who believe what they read in CNBC and Bloomberg about the AI bubble are going to get hurt. And the cowardice is what's going to hurt them. Now, the dot-com bubble was actually a great time to start re-evaluating how and why we value stocks the way that we do. To say, hey, wait, that$2 billion deal will only make$100 million in revenue. That's a pretty big minus, Frito. or this company spends five dollars for every dollar it makes that's not good but nobody it appears remained particularly suspicious of the tech industry or a stock market that was increasingly orienting itself around conning shareholders and because shareholders analysts and the media alike refused to retain a single shred of suspicion leaving the dot-com era the media never actually subsided financial publications still found themselves dedicated to explaining why the latest hype cycle was real.

25:05Journalists still found themselves told by editors that they had to cover the latest fad, even if it was nonsensical or clearly rotten. Analysts still grab their swords and rush to protect the very companies that had spent decades misleading them and would continue to do so for decades more. Much like we spent years saying that Facebook was a good deal because it was free, analysts and investors say tech stocks are great to hold because they keep growing, even if the reason they keep growing was a series of interlocking monopolies, difficult to leave platforms, and impossible to fight traction and pricing, all of which have an eventual sell-by date.