The Cage Match That Wasn’t, Trouble At Goldman Sachs, Social Algorithms Reality Check

0:00All that cage match buildup and nothing to show for it. Goldman Sachs is in a rut just as its partnership with Apple is taking off. And have we been overplaying the impact of social media algorithms all this time? All that and more coming up right after this. The truth is AI security is identity security. An AI agent isn't just a piece of code. It's a first class citizen in your digital ecosystem and it needs to be treated like one. That's why Okta is taking the lead to secure these AI agents. The key to unlocking this new layer of protection? An identity security fabric. Organizations need a unified, comprehensive approach that protects every identity, human or machine, with consistent policies and oversight.

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1:18Advanced, intuitive, and deployed. That's how they stack. That's technology at Capital One. Welcome to Big Technology Podcast Friday edition, where we break down the news in our traditional cool-headed and nuanced format. We have a number of very interesting stories that we plan to go deep on this week, and we're so glad you're here with us. Speaking of which, returning from his vacation, here with us today is Ranjan Roy. Ranjan, welcome back. It is great to be back. I'm excited to talk. Let's get to the cage match soon, because I have been waiting probably three weeks to talk about this. So, fresh off the plane from Taiwan, he wants to talk about the cage match.

1:57We're going to talk about your reflections on Taiwan at the very end of this show. But first, let's talk about the cage match. So it turns out that this thing is now likely not going to happen at all. Elon Musk has been playing some games. Zuck basically said he's not serious and is now saying, I'm going to move on. Ranjan, you said you've been wanting to speak about this for a while. I think most people are talked out on the cage match. Why are you still eager to discuss it? I am eager to discuss it because if you remember, and if listeners remember, over the last few months, every time we do bring it up, I definitely have to shake my head and say, I don't want to talk about it.

2:35We shouldn't be talking about it. The reason I'm now ready to talk about it is we are all getting to see another beautiful cycle of Elon Musk. Everyone is a part of it now. Mark Zuckerberg is a part of it. Walter Isaacson, which we'll get to in his new book, is a part of it. This whole idea of, and we've talked about it a lot, you know, is Elon Musk just trying to take, test out different messaging and then run with the ones that he knows will stick. And clearly everyone got hyped up around this cage match. But I think what we're starting to see is him releasing private text messages with Mark Zuckerberg, Walter Isaacson sharing them.

3:15Then Elon Musk tweeting about leading a self-driving horde of cars to Mark Zuckerberg's front door. I mean, we've escalated and moved past the point of fun to discomfort, I think, for everyone. And that's actually my favorite part to watch of this whole cycle because this is always where it ends. This is always where it ends. Well, not always. because, and this is kind of what I always think about with these Musk cycles we've gone through over the past couple of years, is that, you know, yes, like he's outlandish and has these wild ideas and doesn't fall through on a lot of things, but he's still running SpaceX and Tesla and doing a pretty good job with those companies.

3:56And maybe he has some others on the way, Neuralink. And, you know, there was this article in the New York Times about how like, oh, it's such a big problem that Elon Musk runs Starlink because now the Ukrainians can only rely on him. And it's like, if he didn't build Starlink, the Ukrainians wouldn't have this service. So what are we complaining about here? So I always wonder with these type of situations, is this part of this, this whole personality part of what enabled Elon to sort of press the limits and think about things that he wouldn't, that most entrepreneurs and governments for that matter, wouldn't otherwise?

4:29And B, like the second side of this is, is some of the things that we're seeing with him and Twitter, the same stuff that got him to where he is? Or is it sort of that inflection point of like, oh God, now Elon might be in trouble. What do you think? No, I think it is exactly the same type of thing that got him to where it is because this cage match saga, to me has always essentially been capital raising arbitrage for Elon Musk. He has been able to build... Explain that, yeah. Okay, he has been able to build these businesses. Think about Tesla. its growth trajectory, it becoming at one point, you know, a trillion dollar company, him becoming at times the world's richest man, are all like able to be done because of the narrative he has created around himself and the attention he commands.

5:18And I think that was his biggest insight is understanding that the more attention he's able to bring to himself and the more he can kind of just command the entire state of conversation in the world, that's what allows him to raise the money that he needs or run Tesla in the way he wants to run it or build a new factory and make heads of state want to work with him and give him all the incentives and subsidies possible. Again, like every head of state fawning over bringing Tesla to their country and bragging about when it does appear. That's all because it's called a personality. And how is this cage match going to pay off for him then oh i think okay where this all ends up i'm not trying to predict just yet but i think in terms of other than there won't be a cage match right i think but it he's had so many of these moments i think this is just he you know his profile only continues to grow but this is the way he's been acting ever since again for me and i've written about this many times.

6:23I was a big Elon Musk fanboy in the early days of, or call it the middle days of Tesla in the early 2010s. It was really the 420 tweet back, it was at 2018, when he said he was going to take Tesla private and starting to see just how reckless a lot of the behavior was. And it was. And again, think about that. Again, like tweeting that he's going to take the company private, getting a slap on the hand from the SEC, and then bringing more attention to self, and then turning Tesla into a trillion-dollar company based on just insane stock valuations. He has been able to do all of that over and over again.

7:01So the cage match, it's a bet for him, I'm sure, that maybe I'll get away with it again. Okay, but here's the question then. If this is the same behavior that's enabled him to build, which I think most people would agree are pretty impressive companies, then what's the problem? He's just doing it again. Oh, because it's going to run out at some point. At some point, this runs out. This is five years running since the 420 tweet, and Tesla's building more cars than ever before. SpaceX has been able to basically own low-Earth orbit and get those Starlink satellites in. So with this, and I'm just kind of talking it out with you, right?

7:38I want to sort of understand, but with all this attention, he's actually been able to use that for good. So it's sort of like, is this really a problem? No, I think we're going to see, again, the idea of like the narrative, SpaceX, Tesla, shooting rockets to Mars and, you know, electrifying the entire motor vehicle industry. That shine, already you're starting to see cracks. I remember I was reading, I think it was Felix Salmon had a piece recently around a lot of the new data and narratives that are coming out around. Was Tesla or has it been overall a net positive for electrification of the automotive industry?

8:19We take that as an unadulterated truth, right? Like everyone's like, yeah, Tesla, without it, nothing happens. But could hybrids have been a better way to approach this? could smaller vehicles and making range the central part of the entire discussion has distracted us and potentially made us build batteries that aren't the optimal way and build transportation infrastructure that isn't the optimal one. So I think there's going to be a lot more questioning of that narrative because it's that narrative and that unquestioning acceptance of it that has allowed him to build these companies in that way.

8:58And I think, I mean, I don't want to call the turning point ever with Elon Musk because You never know. But again, the cage match, I think, is exposing that kind of behavior to more and more people in more and more ways. Well, I think we'll just have to wait and see on this one. I mean, I think that Elon, this entire chapter has not been, let's say, impressive. But if it's going to take the same path that it's taken with Tesla and SpaceX and he's just going to command more capital to build more companies, actually, you know, he's figured out the system well. Oh, he has. Over the last four to five years, he figured out the system better than anyone else.

9:38I definitely agree with that. And the person who's going to, speaking to figure out the system, right, the person who's going to go and write a biography of him is none other than Walter Isaacson. He of the Steve Jobs biography. And it has been interesting watching Walter Isaacson, who's this, like, luminary author, go out and speak about Elon during this entire process. because he's almost become, he has become Elon's de facto PR person. Elon doesn't have a lot of, or any public relations officials pretty much. I mean, there is one guy at Twitter who keeps emailing out the stuff from Linda Iaccarino.

10:13So I'm thinking like, okay, maybe PR in function, if not in name. But Elon doesn't really use PR people. But Walter Isaacson has effectively been functioning as that person. And he did tweet out the private messages between Musk and Zuckerberg about the fight in a way that served Musk's interests. There was some debate about that, right, where people were like, well, he should not have tweeted those or shared those texts. And I'm like, come on, you're a reporter. You share the text with the appropriate context. But just the total tone of Isaacson towards Musk has been that of as publicist. And this book that he has that's going to come out about Elon, which is coming out in about a month, might put his credibility on the line.

10:58Yeah, I think I really am curious how this plays out for Walter Isaacson's legacy as a venerated biographer. I mean, the idea that, again, 30 days must feel like an eternity for Walter Isaacson right now, because what will Elon Musk do within those 30 days? And what could that mean for when that book comes out and it's glowing and it's praising and it's saying that this is – And again, if anyone who's read the biographies of Steve Jobs or Leonardo da Vinci, which are excellent, they again, they paint a very, very clear picture of people who are changing the world for good. It might be a little complex, but overall, as you said, it's not quite fawning, but it's certainly complimentary, let's say.

11:48And what Elon Musk does before that, I'm very curious to see. But then also, as you said, again, for listeners, Walter Isaacson tweeted the text messages between Elon Musk and Mark Zuckerberg where he's talking about, you know, let's have a cage match practice at your house or something. Or I don't know exactly which ones they were, but he is mixing himself in this, whether he wants to or not. So to me, I don't think there's any kind of like journalistic duty to tweet the text messages. I think he's doing that, as you said, more on the publicist side. I don't know. Would you prefer reporters who had texts between Zuckerberg and Musk or powerful people in the tech industry keep those close to the vest as opposed to share them to the public?

12:31I mean, I know if I got a hold of those text messages, I'm tweeting those immediately. Wait, but that's any source, right? Someone feeds you some bit of information. Why are they doing it? And should I share it or should I not? So it's the context around it. Yeah, it's the context. And clearly Elon Musk is doing that to jab Mark Zuckerberg and using Walter Isaacson as his vessel to jab Mark Zuckerberg. So I think he has to be more cognizant of that. He spent however many hours and days and months with Elon Musk. He's got to know him a little better than that. I don't know. I would definitely be sharing those messages.

13:08And maybe with the context, like, all right, this is what is going on here. But it is interesting when we talk a little bit about like, you know, is Isaacson going to write this book that makes people, you know, that's effusive about Musk? And it's like, well, what do people want to read in some ways, right? Like is a book that's balanced or a book that's like a total hagiography of Elon Musk going to sell better and going to be appreciated by the public more? And it almost seems as if the public would rather read a book that's almost entirely positive about a business hero. Like, you know, however much criticism we have of the media, like actually readers, they kind of want to read the book that like, ah, this person, you know, faced tough circumstances and look at what all the good they did in the world.

13:52You know, it's one of the categories of books that you want to write is, you know, you want to have something that's aspirational to the reader that's going to make them part with the 30 bucks. Yeah. So I'm curious what you think about that. That's exactly. And is Walter Isaacson functioning as a journalist here or a biographer who's trying to sell books? And clearly it'll be the latter. and yeah I think that's but you know exactly exactly you could be both and I think a lot of people are but I get to to write the bestsellers that are remembered I mean maybe that is the way that is I agree that's what people want to read and it's kind of interesting to be discussing this in the same week that Michael Lewis's great book called a great in retrospect who knows book called The Blind Side which is about uh you know a boy who was adopted um and went on to play football and the adopted family like raised him and it was this very sentimental beautiful story and he went on to play for the Baltimore Ravens and now he's come out and said like you know they took him out of tough circumstances and the family now has tried to claim undue control over his finances and awards from the story due to a conservatorship versus adoption and it's like this michael lewis story this beautiful thread that he's he's put together starting to unravel um and it just goes to show you it's like it's one of those things where i like i do wonder if michael lewis actually and many authors just you know did he actually want to find the real story or was he content telling the story that was you know almost i think they call it in the business too good to check it's very interesting yeah i think it's tough because that's where kind of like the things that border between fiction and non-fictional narrative it's tough because like the blinds and i say this i am a huge fan of michael lewis and i really hope like more of this does not come to light and and it was a troubling one because again the uh the football player uh michael oher i believe he had uh yeah or yeah he i mean and it's kind of sad too again he came out and has said the family tried to control his finances, but also that the movie and his portrayal while he was in the NFL actually negatively impacted him because it portrayed him to not to be...

16:16It exaggerated his mental capacities. And of course, on the football field, that'll be something that's held against you. And it's kind of like sad that... And I loved the movie. I loved the book. but remembering that it's happening while he is alive and while he's playing and no and uh yeah and it's a beautiful story but a lot of the times the story yeah it's yeah go ahead it's too too good to check he came into the nfl and there were players that were wondering whether he could read the playbook because of the way that this movie portrayed him as this like you know guy who had been just sort of i mean he's like remember like i was an all-american before i came into the nfl But because of this, the way that this story was told, and again, I think that there's a commercial aspect to it, you know, that's how it impacted his real life.

17:10However, the one thing I can say again, Liars Poker, having worked on a trading floor for eight years, not during that time in the 80s with Salomon Brothers, feels and is as real as it can get about capturing an industry and an environment. yeah look we're not gonna come on here and say that michael lewis and walter isaacson are you know amateurs like they obviously have skill and talent but it is kind of interesting in terms of the commercialization and the way that these things are shaped you know the directions that the work go and part of that's writer part of that story but part of that is also audience which doesn't get talked about very often speaking of yeah sorry one thing on that though i think is interesting is it's also a reminder.

17:57And again, the positive side of whether it's social media, whether it's just more people have a voice right now is in the past, it's very likely that, you know, the, that book is written and then Michael Ower's narrative never really makes it out into the world. Obviously his was not from like a viral tweet or anything like that, but you do feel there is more accountability in general around these kinds of things versus in the past. And I think that's a good thing. Yeah, I agree. And a lot of it happens on podcasts. I mean, I was watching or on a podcast. So we're doing good for the world, Ranjan, is what I'm trying to say.

18:34We're doing good for the world. Speaking of doing good for the world, Goldman Sachs. No, I'm just kidding. But, you know, they're an interesting institution. And in the run-up to this week's show, they have a very interesting partnership with Apple. They've really been trying to make ways into the consumer world. and in the run-up to this show you dropped like a few links in our we have this uh collaborative doc that we like trying to drop stories and through the week to talk about them on this show and you had dropped like a couple goldman uh links and i was like i don't know it's a little far afield so they do have that apple partnership but as i got deeper into the story i was like oh yeah this is definitely you know something that we need to talk about on the podcast so not only is their partnership with Apple starting to struggle.

19:20But their CEO, David Salomon, has really come under fire inside the company. And it is kind of interesting as to like why the folks at Goldman don't like him. It's not necessarily performance, but it's more just like his work on their reputation. I'm just going to tee you up here, Ranjan. What about the Goldman news? And do you find interesting? And how do you think we should view its push into the consumer world, given that its program with Apple is so important, yet they've lost a lot of money there? Yeah. So, OK, so to step back, remembering why and when Goldman Sachs got into consumer banking, I think is important here, because in 2016, they launched Marcus, which is named after the founder, Marcus Goldman.

20:11And this was like the first really consumer facing product. This is the idea that Goldman Sachs before only for the ultra wealthy and exclusive and only for, you know, Wall Street firms and banking and trading suddenly is going to try to appeal to at least some larger portion of the entire like consumer industry. and it was it was at a time again remember fintech is probably like the promise of fintech mid 2010s is it's going to change everything it's going to be like in a revolutionary business banking will change so consumer banking will change it's a wide open market so they should get into it it even from like a standpoint of recruiting engineering talent to have these kind of like really digital first offerings.

21:00It was part of it. This is when they were losing lots and lots of talent to investment, sorry, to big tech companies and wanting to make themselves appear to be more technology forward. So there's so many different elements. Then you throw in the Apple card, which I'm assuming the discussions would have started around that time as well. You know, like having such a public facing partnership, having your logo imprinted on a credit card that's going to be in the wallet of probably a pretty good consumer profile for you. Again, still tech forward, like probably good credit or reasonable credit. So that's like, and it started under Lloyd Blankfein.

21:42Then David Solomon comes in and makes it really one of his kind of marquee strategic efforts. And he's like, we are going to, consumer is going to be an area of growth. And then another area I'd forgotten is this is also when, because of post-financial crisis regulatory reasons, banking, especially trading within an investment bank, starts to feel like it might become a little more restrained in terms of profit potential. So where do you find growth? It's going to be in consumer and kind of digital forward consumer offerings. so all this is happening and basically like a lot i think it's interesting how it reflects the lost promise of a lot of other fintech offerings and companies and unicorns it's similar they they the same growing pains the same inability to actually realize whatever potential was sold in the mid-2010s then you have from like a pure loan book standing they've been losing a ton of money on the loans that they actually underwrote on the consumer side and the credit that they issued so all of this is happening but why this story gets even better is you have david solomon you know as the face of this push that he is the one and for those unfamiliar david solomon has a dj name d soul um he's he flies around he djs i think the chain smokers concert during COVID was one of the big and most controversial ones, but he's created this persona for him in front of everyone, totally publicly.

23:21And it's been okay, but it's one of those that when it's working, and that's good for you, the moment any kind of hiccup comes around, you can imagine everyone is going to be coming for you. And that's what we started to see. There was an insane profile While in New York Magazine, I recommend everyone reads. It's like, it's a long one, but it's so good. And you can see it happening that all these kind of intersecting trends are coming together right now. Again, like the lost promise of FinTech, people who are executives who over the last few years might've kind of gone a little too far on the personal branding and promotion and being the cool guy side.

24:02And now it needing to be just getting back to business. So I think this is one definitely to watch. Right. So just going over the story, so they basically needed to get into consumer stuff because profits on investment banking side might not have been what they would have been pre-regulation. And they also saw an opportunity with fintech, like thinking about like maybe like a SoFi as a competition. So that's why they decided to expand into consumer. Yeah, exactly. think sofi betterment wealth front that's one entire area so imagine why did they need that though that's the thing like they are like this prestigious investment bank they have all the big clients they probably could still make a ton of money like even the stories talk about how like goldman can make money when it needs to make money no but so what what is the why does a luxury fashion house ever have like a more mass market sub right that's true but it's not working out for them though so what do you think what do you think has been the cause for them i mean they've lost a billion dollars on the apple cart alone yeah no no i think again i think it's not working out but but if you go back to 2016 i think or probably 2014 when you can imagine they would have been pitching this strategically internally oh this would have been the greatest pitch deck in the world for a senior executive who wants to kind of move their way up and impress people and And then David, even Lloyd Blankfein at the time.

25:32And then David Solomon, like this, it's a dream pitch, right? It just doesn't quite work out. And then you throw in the personal side of jet setting around and DJing with the chain smokers. It's not only the DJing, he's just a jerk internally, according to this profile. I mean, there was this one line that I pulled out where he didn't like what was happening with, you know, some of his employees. And he goes, I can't wait for the markets to turn so I can start firing you. and it's like yeah i guess that's the personality of finance in some ways not all finance houses but goldman in particular seems like one where that's tolerated um and yeah i guess there's there's blowback so so do you think that the things that have caused the blowback have been that like fintech is harder than they expected and then the market did turn yeah i think it's exactly those two things fintech is harder than expected and the market turned and i think and And actually on the subject of he's just kind of a jerk, I kind of smiled when I was reading a lot of the kind of over-the-top comments made by him or things that are being attributed to him about being a bit abrasive, let's say.

26:43It's because, I mean, this is investment banking. This is Wall Street. This is like that stuff. That's just the culture. That stuff feels. It's been over a decade that I have not been directly working in it. But like, I mean, that stuff seems pretty tame or peaceful compared to a lot of things you would see. But it's a reminder. Wait, what did you see? Are you able to talk about it? Oh, no. I mean, just being berated in front of people and yelled at. That happened to you? Oh, yeah. Yeah. Wow. That's easy. Yeah. In front of the whole floor, people, your boss screaming at you. Then those are the bad ones.

27:22There's good ones, too. One of my bosses really loved them. and still talk to them regularly now. But that stuff, it was honestly very normal in a weird way to talk about. And again, 2023 trading floor culture, I imagine it's a bit different now. But I think on that side, but again, and David Solomon is kind of like falling into the trap of being allowed to be an asshole for a bit. You're allowed to until you stop performing. right and then the knives come out and you can see it's not like being a nice guy would you know would have saved him on this one obviously just the numbers but the interesting thing is i mean i think it's worth talking about this apple card in particular so i'm curious why you think they've lost so much money on it i mean more than a billion dollars and then there was another like really interesting part of the story where they talk about like um who their customers are now So they went from like the highest end type customers.

28:23And this is, you know, what's happened recently talking about what went wrong. Straight from the New York Mag story. Rising interest rates caused defaults on Apple cards to spike. More than a quarter of its credit card borrowers had FICO scores under 660. Most of its personal loan customers were using the money to pay down other debt. Goldman Sachs suddenly had millions of customers who not only weren't as rich as the bank's long-time clients, but were struggling to make ends meet. And I think that's sort of the crux of it, right? It just talks exactly about how tough it is for a long-time bank to come in and start to take on some of the down-the-line risk that fintech companies are willing to take on to grow.

29:06Yeah. So as you said, it's actually estimated$1 to$3 billion over the life of the partnership. It's just, it's bad issuance of credit, essentially. It's like, it's not, it's not. And I could also, I could almost imagine, because remember, in the mid 2010s, like, there was that promise that you should be able to using data evaluation, like, understand a credit score. and a credit worthiness of an individual consumer at a far more granular level than a FICO score. Like, you know, using, there's even stuff I remember where it was like using social media, we will be able to issue credit based on, uh, on like who someone is and what they're talking about.

29:52And, you know, like imagine you're like posting about your vacation somewhere and that makes you seem more wealthy. So that's going to give you more credit access to credit. So, So there is a lot of promise around being able to issue credit more rapidly to a wider group of customers, but they did not execute well. I think that was the actual quote I read in one of the articles where it was, we did not execute well. I think they're paying for it now. And now they're thinking about passing that partnership on to American Express. So quite interesting. All right. Let's take a break. Come back. Talk a little bit about these new studies about social media.

30:31Ranjan Roy is here with us back from Taiwan off of vacation. And now it's time for us to get back into the swing of things. So thanks, everybody who's been listening here. And we'll be back after this with a discussion of those two topics. Shape the future of enterprise AI with Agency. A-G-N-T-C-Y. Now an open source Linux Foundation project. Agency is leading the way in establishing trusted identity and access management for the Internet of Agents, a collaboration layer that ensures AI agents can securely discover, connect, and work across any framework. With Agency, your organization gains open, standardized tools and seamless integration, including robust identity management to be able to identify, authenticate, and interact across any platform, empowering you to deploy multi-agent systems with confidence.

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32:16Advanced, intuitive, and deployed. That's how they stack. that's technology at Capital One and we're back here on Big Technology Podcast Ranjan Roy is back from vacation we're going to talk a little bit in this section about what he saw in Taiwan actually maybe we can just start with that Ranjan do you have any like reflections of like the Taiwanese tech culture anything that you saw just by osmosis there and then we can move on to these interesting studies about social media algorithms yeah the first one I got two that like really stuck out first one a lot of places did not take credit cards as in visa or amex visa mastercard or amex but it wasn't cash it was all line pay not wechat pay but line for those unfamiliar another messaging app messaging app slash super app that elon musk wants to create and for me it was it was pretty fascinating to watch because everything even like like roadside vendors and stuff everyone took line pay uh you know like everyone the call to action is connect with us online so seeing the behavior of the super app in you know in person did it make you have more faith in elon's plan um no okay i tried yeah um the other one this was one of my favorite so in terms of delivery They had something called Lala Move, which apparently is in the Philippines and Southeast Asia, East Asia.